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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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PRATT & LAMBERT UNITED, INC.
(Name of Subject Company)
PRATT & LAMBERT UNITED, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
739732 10 5
(CUSIP Number of Class of Securities)
JOSEPH J. CASTIGLIA
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PRATT & LAMBERT UNITED, INC.
75 TONAWANDA STREET
BUFFALO, NEW YORK 14207
(716) 873-6000
(Name, address and telephone number of person authorized
to receive notice and communications on behalf of the person(s) filing
statement)
WITH A COPY TO:
<TABLE>
<S> <C>
FREDERICK G. ATTEA, ESQ. STEPHEN M BANKER, ESQ.
PHILLIPS, LYTLE, HITCHCOCK, BLAINE & HUBER SKADDEN, ARPS, SLATE, MEAGHER & FLOM
3400 MARINE MIDLAND CENTER 919 THIRD AVENUE
BUFFALO, NEW YORK 14203 NEW YORK, NEW YORK 10022
(716) 847-8400 (212) 735-3000
</TABLE>
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Pratt & Lambert United, Inc., a New York
corporation (the "Company"). The address of the principal executive offices of
the Company is 75 Tonawanda Street, Buffalo, New York 14207. The title of the
class of equity securities to which this statement relates is the Company's
common stock, par value $.01 per share (the "Common Stock"), together with the
associated common share purchase rights (the "Rights" and, together with the
Common Stock, the "Shares") issued pursuant to the Rights Agreement, dated as of
January 31, 1989, as amended, between the Company and Mellon Securities Trust
Company, as Rights Agent (the "Rights Agreement").
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to the cash tender offer made by SWACQ, Inc., a New
York corporation ("Purchaser") and a wholly-owned subsidiary of The
Sherwin-Williams Company, an Ohio corporation ("Parent"), to purchase all
outstanding Shares at a price of $35.00 per Share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set forth
in the Offer to Purchase dated November 9, 1995 of Purchaser (the "Offer to
Purchase") and the related Letter of Transmittal (which together constitute the
"Offer"), disclosed in a tender offer statement on Schedule 14D-1 filed with the
Securities and Exchange Commission (the "Commission") on November 9, 1995 (the
"Schedule 14D-1").
The Offer is made pursuant to an Agreement and Plan of Merger, dated as of
November 4, 1995 (the "Merger Agreement"), among Parent, Purchaser and the
Company. The Merger Agreement provides, among other things, that as soon as
practicable after the consummation of the Offer and satisfaction or waiver of
all remaining conditions to the Merger, Purchaser will be merged with and into
the Company, and the Company will continue as the surviving corporation (the
"Surviving Corporation").
Based on the information in the Schedule 14D-1, the principal executive
offices of Purchaser and Parent are located at 101 Prospect Avenue, N.W.,
Cleveland, Ohio 44115-1075.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Each material contract, agreement, arrangement and understanding or any
actual or potential conflicts of interest between the Company or its affiliates
and (i) the Company, its executive officers, directors or affiliates or (ii)
Purchaser, Parent, their executive officers, directors or affiliates, is set
forth below or described in the Company's Information Statement pursuant to
Section 14(f) of the Securities Exchange Act of 1934, as amended, which is
attached as Schedule I hereto and incorporated herein by reference.
ARRANGEMENTS WITH EXECUTIVE OFFICERS, DIRECTORS OR AFFILIATES OF THE COMPANY.
Employment Agreements. The Company has entered into employment agreements
with Joseph J. Castiglia, President, Chief Executive Officer, Vice Chairman and
director of the Company, and with James R. Boldt and Randall L. Clark, executive
officers of the Company, and United Coatings, Inc., a wholly owned subsidiary of
the Company ("United Coatings"), has entered into employment agreements with
Jules F. Knapp, Vice Chairman and director of the Company and President of
United Coatings, and Joy Knapp, director of the Company and Vice President,
Marketing, of United Coatings (each, an "Employment Agreement").
The Employment Agreement with Joseph J. Castiglia (entered into effective
as of January 1, 1983) is for a term presently expiring on July 20, 1999 (the
"Initial Expiration Date"). The Employment Agreement may be terminated by Mr.
Castiglia or by the Company for cause at any time upon 90 days written notice or
by the Company without cause at any time on or after the Initial Expiration Date
or such earlier date designated by the Company in a written notice to Mr.
Castiglia, which date may not be earlier than three years after the date on
which such notice is given. The Employment Agreement provides that in the event
of a Change in Control (as defined in his Employment Agreement) during the term
of his employment, Mr. Castiglia may terminate
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his employment at any time prior to the termination of his Employment Agreement,
but in no event later than three years after such Change in Control, upon 30
days written notice, in which case he would be bound by a covenant of
non-competition for 36 months following such termination and would be entitled
to receive (i) an initial fee in the amount of two times his annual total
compensation (based on his highest annual total compensation earned with respect
to the five year period preceding the termination) and (ii) a monthly fee for 36
months equal to 1/24 of his annual total compensation or, at his request, a lump
sum payment equal to the present value of such fees discounted at the rate of 6%
per annum. The merger of the Company with United Coatings, Inc., predecessor to
United Coatings ("UCI"), consummated on August 4, 1994, constituted, and the
consummation of the Offer or the exercise of the Option (as defined below) will
constitute, a Change in Control for purposes of Mr. Castiglia's Employment
Agreement. Mr. Castiglia would receive approximately $1,606,000 upon a
qualifying termination of employment following the exercise of the Option or the
consummation of the Offer in 1996.
The Employment Agreement between United Coatings and Jules Knapp (entered
into as of February 19, 1994) provides that Mr. Knapp will serve as a director,
president and chief executive officer of United Coatings for a term expiring on
June 30, 1999, which term is subject to automatic annual renewal unless notice
of non-renewal is given by United Coatings or Mr. Knapp at least 90 days prior
to the scheduled expiration date. Mr. Knapp's annual compensation under his
Employment Agreement includes a $500,000 annual salary, certain perquisites and
a performance bonus of $100,000 for each year in which United Coatings has
EBITDA in excess of $10,000,000. Mr. Knapp's Employment Agreement provides that
if his employment is terminated by United Coatings other than for Cause (as
defined in his Employment Agreement) or by Mr. Knapp for Good Reason (including
a Change in Control, as defined in his Employment Agreement), Mr. Knapp would be
entitled to a lump-sum termination payment equal to his salary and $100,000 per
year until the later of the expiration date or twenty-four months from the
termination date, plus a $100,000 bonus for the year in which the termination
occurred, prorated through the termination date. Mr. Knapp's Employment
Agreement further provides that in no case, however, may Mr. Knapp receive any
payment or benefit in excess of 2.99 times his Base Amount (as such term is
defined in Section 280G of the Internal Revenue Code, as amended, and hereafter
referred to as the "Code"). The consummation of the Offer or the exercise of the
Option will constitute a Change in Control as defined in Mr. Knapp's Employment
Agreement. It is estimated that Mr. Knapp would receive approximately $1,790,000
upon a qualifying termination of employment following the exercise of the Option
or the consummation of the Offer in 1996.
The Employment Agreement between United Coatings and Joy Knapp (entered
into as of August 4, 1994) provides that in the event of termination of Ms.
Knapp's employment after a Change in Control (as defined in her Employment
Agreement), Ms. Knapp would be entitled to a lump sum payment equal to two times
the highest total salary payments made to her in any year plus bonus earned with
respect to services rendered to United Coatings during such year. In no case,
however, may Ms. Knapp receive any payment or benefit in excess of 2.99 times
her Base Amount. The consummation of the Offer or the exercise of the Option
will constitute a Change in Control as defined in Ms. Knapp's Employment
Agreement. It is estimated that Ms. Knapp would receive approximately $438,000
upon a qualifying termination of employment following the exercise of the Option
or the consummation of the Offer in 1996.
The Employment Agreement with James Boldt (entered into as of December 3,
1992 and amended as of October 30, 1995) provides that Mr. Boldt will serve as
Vice President of Finance and Secretary and an employee of the Company. In the
event of the termination of employment by the Company without cause, Mr. Boldt
will be entitled to receive a monthly payment for two years after the
termination equal to 1/12 of the sum of the salary (based on the highest salary
paid by the Company to Mr. Boldt in any calendar year) and bonus earned by Mr.
Boldt with respect to services rendered to the Company during such calendar
year. If Mr. Boldt terminates his employment within two years after a Change in
Control of the Company, Mr. Boldt will be entitled to receive a lump sum payment
equal in amount to three times the sum of his salary (based upon the highest
salary paid by the Company to Mr. Boldt in any calendar year) and bonus earned
by Mr. Boldt with respect to services rendered to the Company during such
calendar year, less any amounts paid as set forth in the preceding sentence. In
no case, however, may Mr. Boldt receive any payment or benefit in excess of 2.99
times his Base Amount. The consummation of the Offer or the exercise of the
Option will
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constitute a Change in Control as defined in the Employment Agreement. It is
estimated that Mr. Boldt would receive approximately $406,000 upon a qualifying
termination of employment following the exercise of the Option or the
consummation of the Offer in 1996.
The Employment Agreement with Randall Clark (entered into as of June 16,
1992) provides that Mr. Clark will serve as Executive Vice President and Chief
Operating Officer and an employee of the Company. In the event of the
termination of employment by the Company without cause or if Mr. Clark
terminates his Employment Agreement on his failure to succeed Mr. Castiglia as
President and Chief Executive Officer, Mr. Clark will be entitled to receive
either (i) a monthly payment for two years after the termination equal to 1/12
of the sum of the salary (based on the highest salary paid by the Company to Mr.
Clark in any calendar year) and bonus earned by Mr. Clark with respect to
services rendered to the Company during such calendar year, or (ii) a lump sum
payment of the amounts described in (i) above. In no case, however, may Mr.
Clark receive any payment or benefit in excess of 2.99 times his Base Amount.
The consummation of the Offer or the exercise of the Option will constitute a
Change in Control as defined in the Employment Agreement. It is estimated that
Mr. Clark would receive approximately $573,000 upon a qualifying termination of
employment following the exercise of the Option or the consummation of the Offer
in 1996.
Severance Agreements. The Company currently is a party to severance
agreements ("Severance Agreements") with approximately 21 employees. The
Severance Agreements were adopted by the Board of Directors on October 30, 1995,
including adoption of severance agreements for five executive officers of the
Company who are not directors of the Company. The Severance Agreements provide
for the payment of special severance benefits to employees who are terminated
within two years after a Change in Control of the Company (as defined in the
Severance Agreements). In the event of the termination of employment (including
termination by the employee for Good Reason, as defined in the Severance
Agreement) within two years after a Change in Control (as defined in the
Severance Agreements) of the Company, the employee will (except if termination
is for Disability or Cause, both as defined in the Severance Agreements) be
entitled to receive a lump sum payment equal in amount to his salary and bonuses
(based upon the highest salary earned by the employee in any calendar year) less
applicable employment taxes multiplied by the number specified in the applicable
Severance Agreement. In no case, however, may the employee receive any payment
or benefit in connection with the consummation of the Offer in excess of 2.99
times his Base Amount. The consummation of the Offer or the exercise of the
Option will constitute a Change in Control as defined in the Severance
Agreements.
Stock Options. The Company maintains the 1980 Stock Option/Stock
Appreciation Plan (the "1980 Plan"), the 1990 Stock Option/Stock Appreciation
Rights Plan (the "1990 Plan," together with the 1980 Plan, the "Option Plans")
and the 1994 Award and Option Plan (the "1994 Plan"). No options have been
granted under the 1994 Plan.
The Option Plans provide for the granting of non-qualified and incentive
stock options ("Employee Options") as well as associated stock appreciation
rights ("SARs"), to certain key employees (including officers and salaried
employee or officer directors) of the Company and its Subsidiaries (as defined
in the Option Plans). The aggregate number of authorized Shares available
pursuant to the 1980 Plan and the 1990 Plan is 0 and 33,250, respectively. The
exercise price of the Shares covered by each Employee Option under the Option
Plans may not be less than 100% of the Fair Market Value (as defined in the
Option Plans) and not less than the par or stated value of such Shares at the
time such Employee Option is granted. The Option Plans provide that if the
employee ceases to be employed by the Company or a Subsidiary of the Company for
any reason other than death, permanent disability or retirement, his Employee
Option and associated SARs will terminate immediately.
In accordance with the terms of the Merger Agreement, each Employee Option
which is outstanding immediately prior to the consummation of the Merger,
whether or not then vested or exercisable, will be cancelled and the holder of
such Employee Option will receive an amount (subject to applicable withholding
taxes) in cash equal to the product of (a) the excess, if any, of the price per
Share to be paid in the Offer over the exercise price per Share of such Employee
Option, and (b) the number of Shares subject to such
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Employee Option immediately prior to the consummation of the Merger. The Merger
Agreement further provides that in the event any holder of an Employee Option is
terminated by the Company subsequent to the time a majority of the Board of
Directors of the Company consists of designees of Parent, the Company shall
provide to such employee the same payment specified above, as if such employee
had continued his employment through the consummation of the Merger, unless a
majority of directors of the Company determines that such employee has been
terminated for being convicted of a felony involving moral turpitude or theft of
Company assets.
Set forth below is a table indicating the treatment in the transaction of
currently outstanding Employee Options under the Option Plans held by executive
officers and directors of the Company. For purposes of the table, it has been
assumed that outstanding Employee Options will not be exercised.
<TABLE>
<CAPTION>
AMOUNTS PAYABLE WITH RESPECT TO
EMPLOYEE OPTIONS IN THE MERGER
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NUMBER OF EMPLOYEE OPTIONS/ AMOUNT PAYABLE UPON CANCELLATION
WEIGHTED AVERAGE EXERCISE PRICE OF EMPLOYEE OPTIONS
------------------------------- --------------------------------
<S> <C> <C>
R.D. Stevens, Jr......................... 72,000/$14.42 $1,482,000
J.J. Castiglia........................... 123,000/$15.28 2,425,187
W.F. Bensman............................. 27,000/$13.59 578,125
J.M. Culligan............................ 6,000/$15.60 116,374
A.E. Floyd............................... 30,000/$14.78 606,749
E.H. Hoerster............................ 14,000/$17.06 251,124
D.W. Smith............................... 27,000/$13.59 578,125
R.L. Clark............................... 24,000/$17.48 420,500
J.R. Boldt............................... 49,000/$14.35 1,011,685
</TABLE>
The United Coatings Shareholder Agreement and Related Agreements. Pursuant
to an Agreement and Plan of Merger dated February 25, 1994, UCI was merged into
the Company (the "United Coatings Merger") on August 4, 1994 (the "United
Coatings Merger Effective Time"). Former UCI shareholders became shareholders of
the Company, and a new wholly owned subsidiary of the Company named United
Coatings was established, to which the assets and business of the former UCI
were transferred.
In connection with the United Coatings Merger, the Company, most of the
former UCI shareholders, who are now shareholders of the Company ("UC
Shareholders"), and Raymond D. Stevens, Jr., Joseph J. Castiglia and James R.
Boldt ("PL Shareholders"), entered into a Shareholder Agreement on February 25,
1994 (the "Shareholder Agreement"). The Shareholder Agreement, among other
things, (a) restricts the exercise of voting and other rights of ownership of
Shares held by UC Shareholders (and certain permitted, related transferees), (b)
requires that UC Shareholders and PL Shareholders vote for certain nominees for
director chosen by directors of the Company that are not designees of UC
Shareholders ("Non-Designee Directors"), and vote on a number of other matters
as recommended by the Non-Designee Directors, and (c) imposes certain
restrictions on the transfer of Shares by UC Shareholders. The Shareholder
Agreement also requires the Company and PL Shareholders to use their best
efforts to cause designees of UC Shareholders ("UC Designees") to be appointed
to the Board of Directors. The number of UC Designees, set at a maximum of six,
will depend on the number of Shares retained by UC Shareholders. The Board of
Directors of the Company has approved the transfer of Shares by UC Shareholders
pursuant to the Stock Option Agreement (as defined below), and such transfer is
no longer subject to the transfer restrictions set forth in the Shareholder
Agreement. The Shareholder Agreement will terminate as a result of the
consummation of the transactions contemplated in the Merger Agreement and the
Stock Option Agreement (as defined below).
The Company also entered into a Registration Rights Agreement (the
"Registration Rights Agreement") with the UC Shareholders, pursuant to which the
Company is required to prepare and file and use its best efforts to cause to
become effective up to four registration statements to register under the
Securities Act of 1933 for distribution to the public the Shares specified in a
written request from UC Shareholders, upon the terms and subject to the
conditions set forth in the Registration Rights Agreement. The Registration
Rights
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Agreement will terminate upon the consummation of the transactions contemplated
in the Merger Agreement and the Stock Option Agreement.
In addition, the Company entered into a Right of First Offer Agreement with
Jules Knapp. Pursuant to this agreement, in the event that the Company proposes
to sell 50% or more of the voting securities of United Coatings, all or a
substantial portion of the assets of United Coatings or otherwise transfer
control of United Coatings (other than pursuant to a change in control of the
Company), to a person or entity not controlled by the Company, Jules Knapp shall
first be given the opportunity to purchase all, but not less than all, of such
voting securities or assets. In connection with the execution of the Merger
Agreement, on November 4, 1995, the Company and Jules Knapp agreed to amend the
Right of First Offer Agreement providing for the expiration of Jules Knapp's
right to purchase such securities or assets upon the earlier of (i) three years
from November 4, 1995, (ii) the termination of the Shareholder Agreement and
(iii) the consummation of the Offer and the payment for all the Shares tendered
and not withdrawn pursuant to the Offer.
The UC Shareholders also entered into an Intershareholder Agreement (the
"Intershareholder Agreement"), pursuant to which the UC Shareholders allocated
their rights under the Shareholder Agreement. The Intershareholder Agreement
provides for, among other things, the selection of the UC Designees and the
exercise of the rights under the Shareholder Agreement and the Registration
Rights Agreement. The Intershareholder Agreement will terminate upon
consummation of the transactions contemplated in the Merger Agreement and the
Stock Option Agreement.
Rights Agreement. On October 30, 1995, the Rights Agreement was amended to
the effect that neither the execution nor the delivery of the Merger Agreement
or the Stock Option Agreement nor the consummation of the transactions
contemplated thereby will trigger the exercisability of the Rights, the
separation of the Rights from the stock certificates to which they are attached,
or any other provisions of the Rights Agreement, including causing the
occurrence of a Distribution Date (as defined in the Rights Agreement).
Joy Knapp Loan. In connection with the United Coatings Merger, certain
outstanding United Coatings loans to employees were cancelled and replaced by
promissory notes dated August 4, 1994 (in the case of Joy Knapp, in the amount
of $159,783). The notes bear interest at a rate equal to 5.6% per annum and are
secured by a pledge on all the Shares owned by each United Coatings employee.
UCI Leases. United Coatings leases substantially all of its manufacturing
and office facilities under noncancelable operating leases expiring at various
dates through December 1998. Several of such leases are with Jules Knapp or his
affiliates and trusts for the benefit of his family (the "UCI Leases"). United
Coatings has paid $417,000 and $834,000 under the UCI Leases for the period from
August 4, 1994 to December 31, 1994, and for the ten-month period ended October
31, 1995, respectively. Parent and Purchaser have requested as a condition to
the consummation of the Merger that four of the UCI Leases be amended as of the
consummation of the Merger to provide for an option for United Coatings to
terminate the UCI Leases upon 90 days prior notice. Such amendments will provide
that in the event United Coatings terminates any of the UCI Leases, United
Coatings is required to return the property leased under such UCI Lease and pay
to the respective landlord the lesser of (i) the monthly rental payments due
under such UCI Lease for the six month period following the termination of such
UCI Lease and (ii) the monthly rental payments under such UCI Lease for the
period commencing on the termination of such UCI Lease until the end of the
primary term of such UCI Lease.
Jules Knapp Noncompetition Agreement. At the insistence of Parent and to
induce Parent to enter into the Merger Agreement, Jules Knapp has agreed to
enter into a Noncompetition Agreement with the Company pursuant to which Jules
Knapp will agree, during the term of his employment with the Company, Parent or
any of their affiliates and for a period of 24 months from the termination of
any such employment, not to (i) own, manage, operate, control or participate in
the ownership, management, operation or control of, or be connected as an
officer, employee, director, consultant or have any principal financial interest
in, or aid or assist any person or entity other than Parent and its affiliates,
in the conduct of, any business, venture or activity which manufactures,
distributes or sells architectural paints and coatings or (ii) recruit or
otherwise seek to induce any employees of Parent or its affiliates to terminate
their employment or violate any agreement
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with or duty to Parent or any of its affiliates, in the United States, Canada,
Mexico, Central America or South America.
Capital Accumulation Program. In connection with the execution of the
Merger Agreement, the Company amended its capital accumulation program to permit
its Annual Employer Stock Contribution (as defined in such program), to be made
prior to year end based on estimated covered compensation, to permit matching
contributions to be made with consideration other than Shares, and to permit
such funds to be invested in any of the other investment media available under
such program. The Company also intends to make a discretionary contribution of
up to $400,000 to the payroll-based employee stock ownership plan ("PAYSOP")
portion of such program by December 31, 1995.
ARRANGEMENTS WITH PARENT, PURCHASER OR THEIR AFFILIATES.
The Merger Agreement.
The following is a summary of the material terms of the Merger Agreement. A
copy of the Merger Agreement is filed as Exhibit 1 to this Schedule 14D-9 and is
incorporated herein by reference. This summary is not a complete description of
the terms and conditions of the Merger Agreement and is qualified in its
entirety by reference to the full text thereof. Capitalized terms not defined
herein have the meaning given to them by the Merger Agreement.
The Offer. The Merger Agreement provides that Purchaser will commence the
Offer and that, upon the terms and subject to the prior satisfaction or waiver
of the conditions of the Offer, Purchaser will purchase all Shares validly
tendered pursuant to the Offer. The Merger Agreement provides that Purchaser may
modify the terms of the Offer, including without limitation, except as provided
below, extending the Offer beyond any scheduled Expiration Date, except that,
without the written consent of the Company, Purchaser will not decrease the
purchase price paid in the Offer, decrease the number of Shares sought in the
Offer, change the form of consideration payable in the Offer, make any other
change which is materially adverse to the holders of Shares or modify or add to
the conditions of the Offer specified in Section 14 of the Offer to Purchase.
Notwithstanding the foregoing, except for one discretionary ten business day
extension, the Offer may not be extended beyond any scheduled Expiration Date
unless any of the conditions specified in Section 14 of the Offer to Purchase
shall not have been satisfied; provided, however, that the Offer may not be
extended beyond January 31, 1996 unless (i) the FTC or the Antitrust Division
shall have requested additional information from Parent or the Company or any of
their respective affiliates, in which case the Offer may be extended as
necessary to comply with such request up to, but in no event later than, June
30, 1996, or (ii) at the time of extension an Acquisition Proposal (as defined
below) exists. During any such extension, all Shares previously tendered and not
withdrawn will remain subject to the Offer, subject to the rights of a tendering
shareholder to withdraw its Shares.
The Merger. The Merger Agreement provides that, subject to the terms and
conditions thereof, and in accordance with New York Law, Purchaser shall be
merged with and into the Company as soon as practicable after satisfaction or
waiver of the conditions set forth in the Merger Agreement (the "Effective
Time"). The Merger shall become effective upon the filing of a Certificate of
Merger with the Department of State of the State of New York (or such later date
as is specified in the Certificate of Merger). As a result of the Merger, the
separate corporate existence of Purchaser will cease and the Company will
continue as the Surviving Corporation. In the Merger, each issued and
outstanding Share (other than Shares owned directly or indirectly by Parent or
any of its subsidiaries or by the Company as treasury stock, and other than
Shares owned by shareholders who have properly exercised rights of appraisal
under Sections 623 and 910 of New York Law) will be converted into the right to
receive $35.00 per Share, without interest, and each issued and outstanding
share of common stock of Purchaser will be converted into one fully paid and
non-assessable share of common stock of the Surviving Corporation (which will
constitute the only issued and outstanding capital stock of the Surviving
Corporation).
The Merger Agreement provides that the certificate of incorporation and
by-laws of Purchaser at the Effective Time will be the certificate of
incorporation and by-laws of the Surviving Corporation. The Merger Agreement
also provides that the directors of Purchaser at the Effective Time will be the
directors of the
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Surviving Corporation, and the officers of Purchaser at the Effective Time will
be the officers of the Surviving Corporation.
The Company's Board of Directors. The Merger Agreement provides that,
commencing upon the purchase of Shares pursuant to the Offer or the purchase of
Option Shares (as defined below) pursuant to the Stock Option Agreement (as
defined below), and from time to time thereafter, Parent will be entitled to
designate such number of directors, rounded up to the next whole number, on the
Board of Directors of the Company as is equal to the product of the total number
of directors on the Board multiplied by the percentage that the aggregate number
of Shares beneficially owned by Parent and Purchaser (including the Option
Shares) bears to the total number of Shares then outstanding, and the Company
has agreed to take all action necessary to cause the Parent's designees to be
elected or appointed to the Company's Board of Directors (including to cause
directors to resign). Notwithstanding the foregoing, until the Effective Time,
the Company has agreed to use reasonable efforts to retain as members of the
Board of Directors at least two directors who are directors of the Company on
the date of the Merger Agreement ("Company Designees"). In the event of the
resignation of any or all of the Company Designees, the remaining Company
Designees (or, if no other Company Designee shall remain on the Board, the last
resigning Company Designee) have the right to appoint a successor or successors
to serve as Company Designees. Parent and Purchaser have agreed to cause each
such appointment to become effective. The Company's obligation to appoint
Parent's designees to the Board of Directors is subject to Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder. The Merger Agreement also
provides that following the election or appointment of Parent's designees to the
Company's Board of Directors any amendment of the Merger Agreement, any
termination of the Merger Agreement by the Company, any extension of time for
performance of any of the obligations of Purchaser or Parent under the Merger
Agreement, any waiver of any condition to the obligations of the Company or any
of the Company's rights under the Merger Agreement or other action by the
Company under the Merger Agreement may be effected only by the action of a
majority of the directors of the Company then in office who are Company
Designees; provided, that if there are no such directors, such actions may be
effected by majority vote of the entire Board of Directors.
Shareholders Meeting. Pursuant to the Merger Agreement, the Company will,
if required by applicable law in order to consummate the Merger, duly call and
hold a special meeting of its shareholders (the "Special Meeting") as soon as
practicable following the acceptance for payment and purchase of Shares by the
Purchaser pursuant to the Offer for the purpose of voting upon the Merger
Agreement and the Merger. The Merger Agreement provides that in connection with
the Special Meeting, the Company will (i) promptly after the consummation of the
Offer prepare and file with the Commission a proxy statement and other proxy
materials relating to the Merger and the Merger Agreement and (ii) use its best
efforts to obtain the necessary approvals of the Merger and the Merger Agreement
by its shareholders. In addition, if requested by Parent or Purchaser and in
anticipation of (and prior to) the purchase of Shares by Purchaser pursuant to
the Offer, the Company will (i) file with the Commission a proxy statement and
all other proxy materials, which materials will be prepared by and reasonably
acceptable to the Company, and (ii) call the Special Meeting. If Purchaser
acquires at least two-thirds of the outstanding Shares (or if the number of
Shares acquired by Purchaser together with the number of Option Shares total at
least two-thirds of the outstanding Shares), Purchaser will have sufficient
voting power to approve the Merger, even if no other shareholder votes in favor
of the Merger. The Company has agreed, subject to the limitations described
below under the heading "No Solicitation," to include in the proxy statement the
recommendation of the Board of Directors that shareholders of the Company vote
in favor of the approval of the Merger and the adoption of the Merger Agreement.
Interim Operations. In the Merger Agreement, the Company has agreed that,
except as expressly contemplated by the Merger Agreement or agreed to by Parent,
prior to the Effective Time the business of the Company and its subsidiaries
shall be conducted only in the usual, regular and ordinary course, in
substantially the same manner as previously conducted and in substantial
compliance with all applicable laws and regulations, and, to the extent
consistent therewith, the Company and each of its subsidiaries will use its
reasonable efforts to preserve intact its business organization, keep available
the services of its present officers and employees, and preserve its
relationships with customers, suppliers, licensors, licensees, distributors, and
others having business relationships with it. In addition, except as expressly
contemplated by the Merger
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Agreement or agreed to by Parent, without the prior written consent of each of
the Company and its subsidiaries will not: (i) declare, set aside or pay any
dividends on or make other distributions in respect of any of its capital stock,
except that the Company may continue the declaration and payment of regular
quarterly cash dividends on its Common Stock of not more than $0.16 per share of
Common Stock; (ii) split, combine or reclassify any of its capital stock or
issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock; (iii)
purchase, redeem or otherwise acquire, any shares of its capital stock or any
other securities thereof or any rights, warrants or options to acquire, any such
shares or other securities; (iv) issue, grant, deliver or sell, or authorize or
propose the issuance, delivery or sale of, pledge or otherwise encumber any
shares of its capital stock of any class, any voting debt or any securities
convertible into, or any rights, warrants, calls, subscriptions or options to
acquire any such shares, voting debt or convertible securities other than to
Purchaser pursuant to the Merger Agreement and the Offer (other than in
connection with the exercise of Employee Options outstanding on the date of the
Merger Agreement); (v) amend or propose to amend its Restated Certificate of
Incorporation or By-Laws or any other organizational or charter document; (vi)
directly or indirectly, (a) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any person, or (b)
acquire or agree to acquire any assets, in either case other than in the
ordinary course of business and consistent with past practices; (vii) except in
the ordinary course of business and consistent with past practices, sell, lease,
license, encumber or otherwise dispose of any of its assets, other than as may
be required by law or to consummate the transactions contemplated by the Merger
Agreement; (viii) incur any indebtedness for borrowed money under existing
credit facilities exceeding in the aggregate $135,000,000, or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of such party or guarantee any debt securities of
others, other than the extension of trade credit in the ordinary course of
business and consistent with past practices; (ix) enter into, adopt, amend
(except as may be required by law or regulation) or terminate any Benefit Plan
(as defined in the Merger Agreement) or other employee benefit plan, or any
agreement, arrangement, plan or policy between the Company or any of its
subsidiaries and one or more of its directors, officers or employees; (x) except
for normal compensation increases in the ordinary course of business and
consistent with past practices (a) increase in any manner the compensation or
fringe benefits of any director, officer or employee, (b) pay any benefit not
required by any plan and arrangement as in effect as of the date of the Merger
Agreement, (c) grant any options, stock appreciation rights, phantom stock or
performance units, or (d) enter into any contract, agreement, commitment or
arrangement to do any of the foregoing; (xi) make or agree to make any capital
expenditure in excess of $8,000,000; (xii) make any material tax election or
settle or compromise any material tax liability; or (xiii)willfully and/or
knowingly (a) take or agree or commit to take any action that would make any
representation and warranty of the Company contained in the Merger Agreement
inaccurate at, or as of any time prior to, the Effective Time, or (b) omit or
agree to omit to take any action necessary and prudent to prevent any such
representation or warranty from being inaccurate at any such time.
No Solicitation. In the Merger Agreement, the Company has agreed that none
of the Company, any of its subsidiaries or any of their respective officers,
directors, employees, financial advisors, investment bankers, attorneys, or
other advisors or representatives will, directly or indirectly, (i) take any
action to solicit, initiate or encourage any offer or proposal for, or any
indication of interest in, a merger, consolidation or other business combination
involving the Company or any of its subsidiaries or any proposal or offer to
acquire in any manner, directly or indirectly, 10% or more of any class of
voting securities of the Company or any of its subsidiaries or a substantial
portion of the assets of the Company or any of its subsidiaries, other than the
transactions contemplated by the Merger Agreement (an "Acquisition Proposal"),
or (ii) engage in negotiations or discussions regarding or disclose any
information relating to the Company or any of its subsidiaries or afford access
to the properties, books or records of the Company or any of its subsidiaries to
any person that may be considering making, or has made, an Acquisition Proposal.
In addition, the Merger Agreement prohibits the Board of Directors of the
Company (including any committee thereof) from withdrawing or modifying in a
manner adverse to Parent the approval and recommendation of the Offer, the
Merger Agreement, the Merger or the Stock Option Agreement or approve or
recommend any Acquisition Proposal. Notwithstanding the foregoing, the Merger
Agreement provides that (i) the Company may
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participate in discussions or negotiations with or furnish information to any
third party which makes a written Acquisition Proposal which either (x) is not
subject to a financing contingency and involves the purchase for cash of 100% of
the Company's Common Stock at a price per share greater than the purchase price
of the Offer or (y) provides for the acquisition of 100% of the Company's Common
Stock for consideration, not consisting entirely of cash, which the Company's
Board of Directors determines, based on the advice of its financial advisor, is
financially superior to the purchase price of the Offer (in the case of either
(x) or (y), a "Superior Proposal"), and (ii) the Board of Directors or any
committee thereof may withdraw or modify in a manner adverse to Parent the
approval or recommendation of the Merger Agreement, the Offer, the Merger or
Stock Option Agreement and may approve or recommend any such Superior Proposal,
if, in the case of either (i) or (ii), the Board of Directors of the Company
determines (and is advised by its outside legal counsel) that the failure to
take such action would constitute a breach of its fiduciary duties. The Company
has agreed (i) to notify Parent promptly after receipt of any Acquisition
Proposal (or any indication that any person is considering making an Acquisition
Proposal) or any request for non-public information relating to the Company or
any of its subsidiaries or for access to the properties, books or records of the
Company or any of its subsidiaries by any person that may be considering making,
or has made, an Acquisition Proposal, and (ii) to keep Parent fully informed of
the status and details of any such Acquisition Proposal, indication or request.
Directors' and Officers' Insurance; Indemnification. The Merger Agreement
provides that Parent shall maintain in effect, for a period of six years after
the Effective Time, the existing policies of directors' and officers' liability
insurance maintained by the Company and its subsidiaries, covering those persons
who were covered by such policies on the date of the Merger Agreement, with
respect to matters arising before the Effective Time; provided that Parent may
substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are no less advantageous in any material
respect to the parties covered by such policies. The Merger Agreement provides
that Parent shall not be required to pay an annual premium for such insurance in
excess of 150% of the last annual premium paid by the Company prior to the date
of the Merger Agreement, and if the annual premium of such insurance coverage
exceeds that amount, Parent shall purchase as much coverage as possible for such
amount.
The Merger Agreement also provides that from and after the Effective Time,
Parent and the Surviving Corporation shall indemnify, defend and hold harmless
each person who was an officer or director of the Company or any of its
subsidiaries on the date of the Merger Agreement or any time prior to the date
thereof ("Indemnified Parties") against all losses, claims, damages, costs,
expenses (including attorneys' fees and expenses), liabilities or judgments or
amounts that are paid in settlement with the approval of the indemnifying party
(which approval shall not be unreasonably withheld) of or in connection with any
threatened or actual claim, action, suit, proceeding or investigation based in
whole or in part on, or arising in whole or in part out of, the fact that such
person was a director, officer, employee or agent of the Company or any of its
subsidiaries (including service as a fiduciary of any employee benefit plan),
whether (i) pertaining to any matter existing or occurring at or prior to the
Effective Time, to the fullest extent permitted by New York Law, or (ii) based
in whole or in part on the Merger Agreement or the transactions contemplated by
the Merger Agreement.
Company Stock Options. Pursuant to the Merger Agreement, immediately prior
to the Effective Time, each of the then outstanding employee stock options to
purchase Common Stock (the "Employee Options") granted under any employee stock
option or compensation plan or arrangement of the Company (the "Company Stock
Plans"), whether or not then vested or exercisable, shall be cancelled, and each
holder of any such Employee Option shall be paid by the Company at the Effective
Time for each such Employee Option an amount in cash (subject to any applicable
withholding taxes) determined by multiplying (i) the excess, if any, of the
price per Share paid in the Offer over the applicable exercise price of such
Employee Option by (ii) the number of shares of Common Stock such holder could
have purchased (assuming full vesting of all Employee Options) had such holder
exercised such Employee Option in full immediately prior to the Effective Time.
In the event any holder of a Employee Option who is an employee is terminated by
the Company subsequent to the time a majority of the members of the Company's
Board of Directors consists of designees of Parent and prior to the cancellation
of the Employee Options as described above, the Company
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shall provide such employee the same payment described above, as if such
employee had continued employment through the Effective Time, unless a majority
of the directors of the Company determines that the employee was terminated as a
result of being convicted of a felony involving moral turpitude or theft of
Company assets. Prior to the Effective Time, the Company will use its best
efforts to obtain any necessary consents and make any amendments to the terms of
the Company Stock Plans to the extent such consents or amendments are necessary
to give effect to the foregoing. Payment by the Company may be withheld in
respect of any Employee Option until necessary consents are obtained.
Conditions to the Merger. The Merger Agreement provides that the
respective obligations of the Company, Parent and Purchaser to consummate the
Merger are subject to the satisfaction of the following conditions: (i) if
required by New York Law, the Merger Agreement shall have been adopted by the
shareholders of the Company in accordance with New York Law; (ii) any applicable
waiting period under the HSR Act relating to the Merger shall have expired or
have been terminated; (iii) no provision of any applicable law or regulation and
no judgment, injunction, order or decree shall be issued which would prohibit
the consummation of the Merger; and (iv) Parent or Purchaser shall have
purchased Shares pursuant to the Offer or the Stock Option Agreement.
Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to Parent and Purchaser with
respect to, among other things, its organization, capitalization, financial
statements, public filings, labor relations, conduct of business, employee
benefit plans, insurance, compliance with laws, litigation, environmental
matters, tax matters, property, contracts and agreements, consents and
approvals, opinions of financial advisors, undisclosed liabilities and the
absence of certain changes with respect to the Company since December 31, 1994.
Termination; Fees. The Merger Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
shareholders of the Company, (i) by the mutual consent of the Company and
Parent; (ii) by the Company (A) if there has been a material breach of any
representation, warranty, covenant or agreement on the part of Parent set forth
in the Merger Agreement which breach has not been cured, in the case of a
representation or warranty, prior to the Effective Time or, in the case of a
covenant or agreement, within thirty days following receipt by Parent of notice
of such breach (provided that such right to terminate shall expire on the date
on which Parent or Purchaser beneficially owns a majority of the Shares
(including the Option Shares) and Parent's designees constitute the requisite
percentage (but not less than a majority) of the members of the Board of
Directors of the Company specified in the Merger Agreement), or (B) if there
shall be any law or regulation that makes consummation of the Merger illegal or
if any judgment, injunction or other order of a court or other authority having
jurisdiction preventing the consummation of the Merger shall have become final
and non-appealable; (iii) by Parent (A) if there has been a material breach of
any representation, warranty, covenant or agreement on the part of the Company
set forth in the Merger Agreement which breach has not been cured, in the case
of a representation or warranty, prior to the Effective Time or, in the case of
a covenant or agreement, within thirty days following receipt by the Company of
notice of such breach (provided that such right to terminate shall expire on the
date on which Parent or Purchaser beneficially owns a majority of the Shares
(including the Option Shares) and Parent's designees constitute the requisite
percentage (but not less than a majority) of the members of the Board of
Directors of the Company specified in the Merger Agreement), (B) if there shall
be any law or regulation that makes consummation of the Merger illegal or if any
judgment, injunction or other order of a court or other competent authority
preventing the consummation of the Merger shall have become final and
non-appealable, or (C) if Jules F. Knapp, a director of the Company, fails to
execute and deliver to Parent a noncompetition agreement within fifteen business
days following the execution of the Merger Agreement (which agreement was
executed and delivered as of November 5, 1995); (iv) by either the Company or
Parent if the Offer has not been consummated by January 31, 1996 (the "Outside
Termination Date"); provided that if an HSR Authority shall have requested
additional information from any of the parties hereto or any of their affiliates
pursuant to 15 U.S.C. Section 18a(e)(1) or the rules and regulations thereunder
on or prior to January 31, 1996, Parent may elect to change the Outside
Termination Date from time to time, to the extent necessary to satisfy the
requirements of the HSR Act provided that the Outside Termination Date will not
be later than June 30, 1996 and provided further that the Merger Agreement has
not been terminated by the Company
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pursuant to the terms of the Merger Agreement prior to the date of such
election; and further provided that notwithstanding the preceding proviso to the
contrary, if an Acquisition Proposal is made prior to the consummation of the
Offer, Parent may elect to extend the Outside Termination Date in increments of
not more than ten business days, provided that an Acquisition Proposal continues
to exist at the time of any such election and the Agreement has not been
terminated by the Company prior thereto; (v) by Parent upon the occurrence of a
"Trigger Event" (as defined below); provided that such right to terminate shall
expire on the date on which Parent or Purchaser beneficially owns a majority of
the outstanding Shares (including the Option Shares) and Parent's designees
constitute the requisite percentage (but not less than a majority) of the
members of the Board of Directors of the Company specified in the Merger
Agreement; (vi) by Parent, if Parent shall have received any communication from
an HSR Authority (which communication shall be confirmed to the Company) that
causes Parent reasonably to believe that any HSR Authority has authorized the
initiation of litigation or an administrative proceeding challenging the
transactions contemplated by the Merger Agreement under U.S. antitrust laws,
which litigation or administrative proceeding will include a motion seeking an
order or injunction prohibiting the consummation of any of the transactions
contemplated by the Merger Agreement; (vii) by the Company, if Parent does not
commence the Offer within five business days following the public announcement
of the terms of the Merger Agreement or if the Offer expires by its terms and
Purchaser shall not have purchased any Shares pursuant to the Offer; and (viii)
by Parent, if (A) the Stock Option Agreement is breached by an Option
Shareholder or (B) if the Stock Option Agreement (or any material provisions
thereof) is terminated or held by a court to be unenforceable for any reason or
if the Company or any Option Shareholder asserts or states an intention to
assert any such enforceability and, in any such case, as a result thereof,
Parent concludes in its reasonable discretion that its ability to consummate the
transactions contemplated by the Merger Agreement has been materially impaired
or such consummation will be materially delayed or rendered materially more
expensive.
If the Merger Agreement is terminated by Parent (a) pursuant to its right
described in clause (v) or (viii) of the preceding paragraph following the
occurrence of any Trigger Event, or (b) pursuant to its right described in
clause (iii)(A) of the preceding paragraph and within six months after such
termination a Trigger Event (other than an event described in clause (ii) of the
following paragraph) occurs with respect to any person with whom the Company or
any of its directors, officers, employees, financial advisors, investment
bankers, attorneys or other advisors engaged in negotiations, or discussions
regarding, or disclosed any information regarding, a possible Acquisition
Proposal since June 30, 1995, then, in either such case, the Company will be
obligated to pay Parent, in respect of Parent's expenses and lost opportunity
costs, an amount in immediately available funds equal to $15,000,000.
As used herein, the term "Trigger Event" means each of the following
events: (i) the Company shall have entered into, or shall have publicly
announced its intention to enter into, an agreement or agreement in principle
with respect to any Acquisition Proposal or similar business combination or
transaction other than the transactions contemplated by the Merger Agreement;
(ii) the Board of Directors of the Company or any committee thereof shall have
withdrawn or materially and adversely modified its approval or recommendation of
the Offer or the Merger Agreement; (iii) the Board of Directors of the Company
or any committee thereof shall have made any recommendation with respect to an
Acquisition Proposal by any person (other than Parent) other than a
recommendation rejecting or against such Acquisition Proposal; (iv) the Company
receives any Acquisition Proposal by any person (other than Parent), and the
Company's Board of Directors takes a neutral position or makes no recommendation
with respect to such Acquisition Proposal after a reasonable amount of time (and
in no event more than five business days) has elapsed for the Company's Board of
Directors to review and make a recommendation with respect to such Acquisition
Proposal consistent with the Board's fiduciary duties; or (v) any person or
"group" (within the meaning of Section 13(d)(3) of the Exchange Act) other than
Parent or any of its affiliates and the Option Shareholders shall have become
the beneficial owner (determined pursuant to Rule 13d-3 under the Exchange Act)
of at least 20% of any class of shares of capital stock of the Company
(including the Shares) or shall have acquired, directly or indirectly, at least
20% of the assets or earning power of the Company, other than acquisitions of
securities for bona fide arbitrage purposes only.
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The Merger Agreement provides that if the Merger Agreement is terminated by
Parent or by the Company, but Parent or Purchaser subsequently purchases Option
Shares pursuant to the Stock Option Agreement, then Parent and Purchaser will,
as soon as reasonably practical following the purchase of such Option Shares,
commence a cash tender offer to purchase all of the Shares not owned by Parent
or Purchaser at a price of $35.00 per Share. Parent and Purchaser have agreed to
accept all Shares tendered into such offer, subject only to the conditions set
forth in paragraphs (a) and (b) of Section 14 of the Offer to Purchase.
The Stock Option Agreement
Simultaneously with the execution of the Merger Agreement, certain
shareholders of the Company, including seven directors of the Company
(collectively, the "Option Shareholders"), entered into a Stock Option, Pledge
and Security Agreement (the "Stock Option Agreement") with Parent and Purchaser.
The following is a summary of the material terms of the Stock Option Agreement.
This summary is not a complete description of the terms and conditions thereof
and is qualified in its entirety by reference to the full text thereof which is
incorporated herein by reference and a copy of which is attached hereto as
Exhibit 2.
Pursuant to the Stock Option Agreement, the Option Shareholders have
irrevocably granted to Parent and Purchaser an option ("Option") to purchase an
aggregate of 4,563,651 outstanding Shares, representing approximately 40% of the
Shares outstanding as of the date of the Merger Agreement on a fully diluted
basis (the "Option Shares"), which Option is exercisable by Parent or Purchaser
at any time on or after January 2, 1996. The Stock Option Agreement provides
that if the Offer is consummated on or prior to December 31, 1995, either Parent
or Purchaser is required to exercise the Option not later than January 4, 1996.
The Stock Option Agreement also provides, however, that if the Expiration Date
is extended to 5:00 p.m., New York City time, on January 5, 1996 or any later
time, the Option Shareholders are required to tender the Option Shares into the
Offer not later than January 3, 1996. The Stock Option Agreement generally does
not prohibit an Option Shareholder from tendering Option Shares into the Offer
prior to any such extension of the Expiration Date. However, the Option
Shareholders have agreed that if the purchase price of the Offer is for any
reason increased, then (i) the Option Shareholders will not tender their Option
Shares into the Offer after the first public announcement of such increase, and
(ii) if any Option Shares were tendered into the Offer prior to the first public
announcement of such increase, the tendering Option Shareholders will promptly
withdraw their tenders of such Option Shares. Parent and Purchaser do not know
if any Option Shares will be tendered in response to the Offer prior to January
2, 1996, although they have been advised that certain of the Option Shareholders
presently do not expect to tender their Shares until 1996.
In connection with the Stock Option Agreement, the Option Shareholders have
made certain customary representations, warranties and covenants, including with
respect to (i) ownership of the Shares, (ii) the Option Shareholders' authority
to enter into and perform their obligations under the Stock Option Agreement,
(iii) the ability of the Option Shareholders to enter into the Stock Option
Agreement without violating other agreements to which they are party, (iv) the
absence of liens and encumbrances on and in respect of the Option Shares and (v)
restrictions on the transfer of the Option Shares. In addition, the Option
Shareholders have (i) granted to Parent, its officers and certain other persons
an irrevocable proxy to exercise any and all voting and other rights with
respect to the Option Shares; (ii) irrevocably appointed each of the foregoing
as the Option Shareholders' attorney-in-fact, with irrevocable instructions (a)
validly to tender the Option Shares into the Offer if the Option Shareholders
are so required under the Stock Option Agreement, (b) properly to withdraw the
Option Shares from the Offer if the Option Shareholders are so required under
the Stock Option Agreement and (c) to execute any instrument of transfer and/or
other documents and do all such other acts and things as may in the opinion of
such persons be necessary or expedient for the purpose of, or in connection
with, tendering or withdrawing such Option Shares into or from the Offer, to the
extent required by the Stock Option Agreement; and (iii) agreed not to exercise
or attempt to exercise any rights pertaining to the Option Shares without the
prior consent of Parent. The Option Shareholders have also irrevocably pledged
the Option Shares to Purchaser, and granted Purchaser security interests
therein, to secure the due and prompt performance of the Option Shareholders'
obligations under the Stock Option Agreement.
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Purchaser and Parent have agreed to indemnify, defend and hold harmless,
for a period of not less than six years, each Option Shareholder against all
losses, claims, damages, costs, expenses (including attorneys' fees and
expenses), liabilities or judgments or amounts that are paid in settlement or in
connection with any threatened or actual claim, action, suit, proceeding or
investigation based in whole or in part on, or arising in whole or in part out
of, such Option Shareholder's execution or performance of, or the consummation
of the transactions contemplated by, the Stock Option Agreement. However,
neither Purchaser nor Parent will indemnify any Option Shareholder for any such
losses based in whole or in part on, or arising in whole or in part out of, (i)
the breach of such Option Shareholder's representation, warranty or covenant set
forth in the Stock Option Agreement, other than any challenges to the
enforceability of the Stock Option Agreement based on fiduciary duty arguments,
(ii) any willful act which, to the knowledge of such Option Shareholder,
constituted a violation or breach of any statute, rule, regulation, agreement or
understanding which applies to such Option Shareholder or to which such Option
Shareholder is a party, or (iii) fraud by such Option Shareholder.
The Confidentiality Agreement
On August 22, 1995, the Company and Parent entered into a confidentiality
agreement (the "Confidentiality Agreement"), pursuant to which the Company
agreed to provide certain information to Parent and Parent agreed to treat such
information as confidential and to use such information solely in connection
with the evaluation of a possible transaction with the Company. Parent also
agreed that for a period of three years from the date of execution of the
Confidentiality Agreement, without the prior written consent of the Company, it
would not, among other things, take any action that would cause or facilitate
the acquisition by any person, including the Purchaser or its affiliates, of any
securities or assets of the Company or any of its subsidiaries or solicit for
employment or employ any person who is now employed by the Company or any of its
subsidiaries and who is identified by the Parent as a result of its evaluation
or otherwise in connection with the possible acquisition of the Company. The
foregoing is a summary of the material terms of the Confidentiality Agreement
and is qualified in its entirety by reference to the text of the Confidentiality
Agreement, a copy of which is filed as Exhibit 3 hereto and is incorporated
herein by reference.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation of the Board of Directors.
The Company's Board of Directors has approved the Merger Agreement and the
transactions contemplated thereby and determined that the Offer and the Merger
are fair to, and in the best interest of, the shareholders of the Company. The
Board of Directors recommends that (i) all holders of Shares who wish to receive
cash for their Shares during 1995 tender their Shares pursuant to the Offer and
(ii) all holders of Shares tender their Shares in the event the Offer is
extended beyond December 31, 1995. See Item 8 -- Federal Income Tax
Considerations.
(b) Background; Reasons for the Recommendation.
Starting in March 1995, the Board of Directors began to give consideration
to a public offering of Shares for the purpose of (i) gaining an alternative
source of financing, (ii) increasing the public float of the Shares with the
goals of increasing liquidity and favorably impacting the price of the Shares
and (iii) responding to the request of certain shareholders of the Company that
they were interested in selling a portion of their Shares pursuant to the
Registration Rights Agreement. The Company commenced discussions with Merrill
Lynch & Co. ("Merrill Lynch"), which would act as underwriter for such public
offering. Over the next several months, the Company continued to prepare for
such public offering.
As a result of the trend toward consolidation in the paint and coatings
industry, including the acquisition of Grow Group, Inc. ("Grow") at a price
which the Company deemed favorable to Grow's shareholders, the Company
determined to explore whether it might be able to achieve substantial value for
its shareholders. On June 26, 1995, the Board of Directors determined that,
before proceeding with the public offering, it would engage Merrill Lynch for
the purpose of exploring such opportunities.
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On July 14, 1995, the Company engaged Merrill Lynch to act as its financial
advisor, with the following understanding: (i) Merrill Lynch understood that the
Company was not for sale and had not determined to seek a buyer for all or any
part of the Company; (ii) the initial purpose of Merrill Lynch's engagement was
to conduct a limited inquiry to determine whether there would be any interest on
the part of three companies identified by the Company (the "Candidates"),
including Parent, to acquire the Company in a transaction which would provide a
high level of consideration to shareholders; and (iii) in the event the Company
determined to pursue such a transaction, to act as its exclusive financial
advisor.
On behalf of the Company, Merrill Lynch thereafter contacted the three
Candidates, and furnished publicly available information regarding the Company
to all of them. In addition, two other companies approached Merrill Lynch to
explore the possibility of acquiring the Company. Two of the Candidates, as well
as the two other interested parties, declined to make proposals to acquire the
Company.
On August 22, 1995, Parent and the Company executed the Confidentiality
Agreement and Parent subsequently received certain proprietary information
concerning the Company. Thereafter, representatives of the Company and Merrill
Lynch met with representatives of Parent to discuss the Company's business, and
the Company and Merrill Lynch furnished Parent with various public and
non-public information concerning the Company and its business operations.
On October 25, 1995, Parent submitted to the Company a proposal to acquire
all the Shares of the Company pursuant to a cash tender offer of $32 per Share,
followed by a cash merger in which any non-tendering shareholders would receive
the same cash price. Parent's proposal was subject to several conditions,
including the negotiation and execution of a definitive merger agreement with
the Company, an accelerated due diligence review of additional confidential
business information of the Company and the agreement of certain shareholders of
the Company (the "Optionees") to (i) tender their shares and (ii) grant to
Parent an option to purchase their Shares.
On October 26, 1995, representatives of Merrill Lynch informed
representatives of Parent that neither the Company's management nor its
principal shareholders would be prepared to recommend the $32 per Share price to
the Board of Directors of the Company. Furthermore, the Company did not know
whether its principal shareholders would enter into the required tender and
option agreement.
On October 26, 1995, representatives of Parent informed representatives of
Merrill Lynch that Parent had increased its offer to $35 per Share. They also
stated that Parent's willingness to increase its offer was conditioned on
receipt of assurances that the Company's principal shareholders would support
the offer by entering into a tender and option agreement. Parent advised that it
would begin negotiations immediately, with a goal of executing definitive
acquisition agreements, but only if the Company indicated its support of the
offer. Following informal discussions among directors, in which they generally
indicated their support, Parent was advised of such support and negotiations
commenced on October 28, 1995.
Over the course of the next several days the parties discussed the terms of
the proposed Merger Agreement and Stock Option Agreement. Several of the
Optionees indicated their desire for a structure which would not require the
payment of taxes, or which would result in taxable income being realized in
1996. Parent agreed to a structure which could permit some shareholders to
receive cash in 1995 (in the event Purchaser purchases Shares pursuant to the
Offer in 1995), yet would permit all shareholders to receive cash in 1996
(either pursuant to an extended tender offer, the exercise of the Option (in the
case of the Optionees) or the consummation of the Merger). See Item 8 below.
On October 30, 1995, the Board of Directors of the Company met to discuss
the proposed transaction, and was apprised of the progress in the negotiations
with Parent. Negotiations between and among the Company, Parent and the
Optionees continued on various matters, including economic terms, and Parent
continued its due diligence review.
On November 3, 1995, the Board of Directors of the Company met to consider
the terms of the proposed transaction and to approve the forms of agreements.
Representatives of Merrill Lynch made a presentation to the Board of Directors
and delivered its oral opinion (which it subsequently confirmed in writing)
that, as of that date and based upon its review and analysis and subject to the
limitations set forth therein, the $35 per
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<PAGE> 16
Share cash consideration to be received by the holders of the Shares pursuant to
the Offer and the Merger was fair to such holders from a financial point of
view. The Company's legal counsel reviewed the principal aspects of the Merger
Agreement. The Board of Directors, as a whole, then analyzed and discussed the
Offer, the Merger Agreement, the Stock Option Agreement and the Merger. The
Board of Directors, by a vote of 10 to 2 (with Joseph J. Castiglia and David
Newcomb dissenting and one director absent), determined that the transactions
contemplated by the Merger Agreement are fair to, and in the best interests of,
the Company's shareholders, approved the Merger Agreement, the Stock Option
Agreement and the transactions contemplated thereby and resolved to recommend
acceptance of the Offer and approval and adoption of the Merger and the Merger
Agreement by the Company's shareholders. The Merger Agreement and the Stock
Option Agreement were executed on November 5, 1995.
A copy of the joint press release of the Company and the Purchaser
announcing the execution of the Merger Agreement and the Stock Option Agreement
is attached hereto as Exhibit 4 and is incorporated herein by reference. A copy
of a letter to shareholders of the Company, which accompanies this Schedule
14D-9, is attached hereto as Exhibit 5 and is incorporated herein by reference.
In reaching its conclusion to approve the Merger Agreement and recommend
that holders of Shares tender their Shares pursuant to the Offer, the Board of
Directors considered a number of factors, including, without limitation, the
following:
(1) the terms of the Merger Agreement, the Stock Option Agreement and
the other documents to be executed in connection therewith;
(2) the financial condition, results of operations, business and
prospects of the Company;
(3) the historical market prices for the Shares, particularly the fact
that the $35 per Share price in the Offer represents (x) a premium of
approximately 69% over the closing price of $20 3/4 for the Shares on
November 3, 1995, the last trading day prior to the approval of the Merger
Agreement, and (y) a higher price than the Shares have ever traded;
(4) the oral opinion of Merrill Lynch delivered to the Board of
Directors on November 3 that, as of such date and based upon its review and
analysis and subject to the limitations set forth therein, the $35 per
Share cash consideration to be received by the holders of Shares pursuant
to the Offer and the Merger is fair to such holders from a financial point
of view. A copy of the written opinion dated November 3, 1995 of Merrill
Lynch, setting forth the assumptions made, factors considered and scope of
the review undertaken by Merrill Lynch, is attached hereto as Exhibit 6 and
incorporated herein by reference. SHAREHOLDERS ARE URGED TO READ THE
OPINION OF MERRILL LYNCH IN ITS ENTIRETY;
(5) the fact that the holders of 40% of the Shares were prepared to
support the Merger Agreement by entering into the Stock Option Agreement;
(6) the fact that the Offer and the Merger are not conditioned on the
availability of financing;
(7) the availability of dissenters' appraisal rights in the Merger;
(8) the fact that the Merger Agreement, which prohibits the Company,
its subsidiaries or its affiliates from initiating, soliciting or
encouraging any potential acquisition proposal, does permit the Company to
furnish information to and participate in discussions or negotiations with
any third party satisfying the conditions described above in Item 3 under
"The Merger Agreement -- No Solicitation."
(9) the provisions of the Merger Agreement that require the Company to
pay Purchaser a termination fee of $15 million under certain circumstances
as described above in Item 3 under "The Merger Agreement -- Termination;
Fees";
(10) the structure of the Offer and the Merger, including (a) the fact
that the Offer will permit shareholders to receive cash for their Shares
promptly, assuming the minimum condition and the other conditions to the
Offer are satisfied, (b) the fact that shareholders who wish to defer
receipt of cash for their Shares until 1996 can accomplish their goal by
tendering their Shares into the Offer (if it is extended into 1996) or by
not tendering and receiving cash for their Shares in the Merger (see Item 8
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<PAGE> 17
below) and (c) the fact that the Stock Option Agreement may increase the
likelihood that the Merger will be effected; and
(11) the results of the process undertaken to solicit proposals from
third parties to acquire the Company.
The Board of Directors did not assign relative weights to the foregoing
factors or determine that any factor was of particular importance. Rather, the
Board of Directors viewed its position and recommendations as being based on the
totality of the information presented to and considered by it.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to a letter agreement dated July 14, 1995 with the Company (the
"Engagement Letter"), Merrill Lynch was engaged to act as exclusive financial
advisor to the Company (see Item 4(b) above). Pursuant to the Engagement Letter,
the Company has agreed to pay Merrill Lynch for its services (i) a fee of
$100,000 in cash, payable on the date of execution of the Confidentiality
Agreement, (ii) a fee of $400,000 in cash, payable upon the execution of the
Merger Agreement, and (iii) if, during the period in which Merrill Lynch is
engaged by the Company or within one year thereafter, a Transaction (as defined
in the Engagement Letter) with a Candidate is consummated or the Company enters
into an agreement with a Candidate which subsequently results in a Transaction
with such Candidate, or a Transaction is consummated with a third party or the
Company enters into an agreement with a third party which subsequently results
in a Transaction with such party (provided such third party was not directly or
indirectly solicited by Merrill Lynch without the Company's written consent and
discussions between the Company or Merrill Lynch and the third party commenced
during the period Merrill Lynch is engaged by the Company), a fee equal to 1% of
the aggregate purchase price paid in such Transaction, payable in cash upon the
closing of such Transaction, less any fees paid pursuant to (i) and (ii) above.
The Company has also agreed to reimburse Merrill Lynch for its reasonable
out-of-pocket expenses (including reasonable counsel fees and expenses), and to
indemnify Merrill Lynch for certain liabilities related to or arising out of any
Transaction or Merrill Lynch's provision of services to the Company pursuant to
the Letter Agreement.
In the ordinary course of its business, Merrill Lynch may actively trade
the securities of the Company and Parent for its own account and for the
accounts of its customers and, accordingly, may at any time hold a long or short
position in such securities.
Except as described above, neither the Company nor any person acting on its
behalf has retained any other person to make solicitations or recommendations to
shareholders on its behalf concerning the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transactions in the Shares have been effected during the past 60
days by the Company or, to the best of the Company's knowledge, by any executive
officer, director or affiliate or subsidiary of the Company except for (i) the
Stock Option Agreement and (ii) the following transactions: (a) Franklin H.
Fitch, who retired as an executive officer of the Company on July 28, 1995,
exercised Employee Options on October 6 and 12, 1995 for a total of 23,000
Shares and sold 3,900 of such Shares in the open market, (b) Mr. Stevens' spouse
gifted 3,000 Shares to a charity on November 4, 1995, and (c) in October, 1995
JFK Annuity Trusts No. II and III transferred a total of 80,059 Shares to Jules
F. Knapp Family Trust No. IV.
(b) To the best of the Company's knowledge, except as described above in
Item 3(b) -- Stock Option Agreement, to the extent permitted by applicable
securities laws, rules or regulations, all of the Company's executive officers,
directors and affiliates who own Shares presently intend to tender such Shares
to Purchaser pursuant to the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as described under Items 3(b) and 4 above, the Company is not
engaged in any negotiations in response to the Offer which relates to or would
result in: (i) an extraordinary transaction such as a merger or reorganization,
involving the Company or any subsidiary of the Company; (ii) a purchase, sale or
transfer of
16
<PAGE> 18
a material amount of assets by the Company or any subsidiary of the Company;
(iii) a tender offer for or other acquisition of securities by or of the
Company; or (iv) any material change in the present capitalization or dividend
policy of the Company.
(b) Except as otherwise set forth in response to Item 4 above, there is no
transaction, Board resolution, agreement in principle or signed contract in
response to the Offer that relates to or would result in one or more of the
events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
(a) Federal Income Tax Considerations. The receipt of cash for Shares
pursuant to the Offer (or the Merger) will be a taxable transaction for federal
income tax purposes under the Internal Revenue Code of 1986, as amended (the
"Code") and also may be a taxable transaction under applicable state, local and
other tax laws. In general, a shareholder will recognize gain or loss equal to
the difference between the tax basis for the Shares sold and the amount of cash
received in exchange therefor. Gain or loss is computed separately for each
block of Shares (Shares which were purchased at the same time and price) sold.
Such gain or loss will be capital gain or loss if the Shares are capital assets
in the hands of the shareholder. A capital gain or loss will be long-term
capital gain or loss if, as of the date of such sale, the Shares have been held
more than twelve months. There are limitations on the deductibility of capital
losses.
Under present law, long-term capital gains recognized in 1995 are taxable
at a maximum rate of 28% for individuals and 35% for corporations, while
ordinary income is taxable at a maximum rate of 39.6% for individuals and 35%
for corporations. Legislation is currently pending before both houses of
Congress (the "Pending Legislation") which would, if enacted in current form,
reduce the tax rate applicable to long-term capital gains recognized by
individuals and corporations. Additionally, the Pending Legislation would
further limit the deduction for long-term capital losses. The Pending
Legislation is only proposed, however, and there can be no assurance that such
legislation will be enacted or, if enacted, that the legislation will be enacted
in its present form.
Under the proposal before the U.S. House of Representatives, the Pending
Legislation would apply retroactively to sales of capital assets occurring on or
after January 1, 1995; a similar proposal before the U.S. Senate would apply the
Pending Legislation retroactively to sales of capital assets occurring on or
after October 13, 1995. Thus, the Pending Legislation would, if enacted in its
current form, apply to sales of Shares occurring pursuant to the Offer as well
as pursuant to the Merger. There can be no assurance that the Pending
Legislation, if enacted, would be enacted with either of the above effective
dates, however, and it is possible that the Pending Legislation would apply
prospectively only to sales of capital assets that occur after a time that (i)
precedes both the close of the Offer and the Effective Time of the Merger, (ii)
precedes the Effective Time of the Merger but comes after the close of the Offer
or (iii) comes after both the close of the Offer and the Effective Time of the
Merger.
The Offer is currently scheduled to close in 1995, while the Effective Time
of the Merger would occur sometime in 1996. Accordingly, shareholders wishing to
optimize their chances that the Pending Legislation, if enacted, would apply to
any long-term capital gains recognized upon the sale of their Shares may wish to
choose not to tender their Shares at this time.
The foregoing discussion is for general information only and is based on
existing tax laws as of the date of the Offer, which may differ on the date of
consummation of the Offer or the Effective Time. The tax treatment of each
shareholder will depend in part upon his particular situation. ALL SHAREHOLDERS
SHOULD CONSULT WITH THEIR TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF
THE OFFER AND THE MERGER TO THEM, INCLUDING THE POSSIBLE EFFECTS TO THEM UNDER
THE PENDING LEGISLATION, AND THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL
AND FOREIGN TAX LAWS.
(b) Parent's Designation of Persons to be Elected to the Company's Board
of Directors. The Information Statement attached hereto as Annex I is being
furnished in connection with the possible designation by Parent, pursuant to the
Merger Agreement, of certain persons to be appointed to the Board of Directors
of the Company other than at a meeting of the Company's shareholders.
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<PAGE> 19
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C> <C>
Exhibit 1 -- Agreement and Plan of Merger, dated as of November 4, 1995, among the Company,
Parent and Purchaser.
Exhibit 2 -- Stock Option, Pledge and Security Agreement, dated as of November 4, 1995, among
Parent, Purchaser and certain shareholders of the Company.
Exhibit 3 -- Confidentiality Agreement, dated August 22, 1995, between Parent and Company.
Exhibit 4 -- Joint Press Release of the Company and Parent issued on November 6, 1995.
Exhibit 5* -- Letter to Shareholders of the Company, dated November 9, 1995.
Exhibit 6* -- Opinion of Merrill Lynch & Co., dated November 3, 1995.
Exhibit 7 -- Employment Agreement, effective as of January 1, 1983, between the Company and
Joseph J. Castiglia.
Exhibit 8 -- Employment Agreement, dated as of February 19, 1994, between United Coatings and
Jules F. Knapp (incorporated by reference to Exhibit 10.1 to the Company's
Registration Statement on Form S-4, File No. 33-78966).
Exhibit 9 -- Noncompetition Agreement, dated as of November 5, 1995, between the Company and
Jules F. Knapp.
Exhibit 10 -- Employment Agreement, dated as of August 4, 1994, between United Coatings and
Joy F. Knapp.
Exhibit 11 -- Amended and Restated Employment Agreement, dated as of October 30, 1995, between
the Company and James R. Boldt.
Exhibit 12 -- Employment Agreement, dated as of June 16, 1992, between the Company and Randall
L. Clark (incorporated by reference to Exhibit 10(d) to the Company's 1992 Form
10-K, File No. 1-994).
Exhibit 13 -- Form of Severance Agreement, dated as of October 30, 1995 between the Company
and certain employees of the Company.
Exhibit 14 -- 1990 Stock Option/Stock Appreciation Rights Plan, as amended (incorporated by
reference to Appendix N to the Company's Registration Statement on Form S-4,
File No. 33-78966).
Exhibit 15 -- 1980 Stock Option/Stock Appreciation Rights Plan (incorporated by reference to
Appendix M to the Company's Registration Statement on Form S-4, File No.
33-78966).
Exhibit 16 -- Shareholders Agreement, dated February 25, 1994, among the Company and certain
shareholders of the Company (incorporated by reference to Exhibit 2.2 to the
Company's Registration Statement on Form S-4, File No. 33-28966).
Exhibit 17 -- Registration Rights Agreement, dated August 4, 1994, between the Company and
certain shareholders of the Company (incorporated by reference to Exhibit 2.4 to
Exhibit 2.2 to the Company's Registration Statement on Form S-4, File No.
33-28966).
Exhibit 18 -- Right of First Offer Agreement, dated August 4, 1994, between the Company and
Jules F. Knapp (incorporated by reference to Exhibit 2.5 to the Company's
Registration Statement on Form S-4, File No. 33-78966).
Exhibit 19 -- Amendment, dated as of November 4, 1995, to Right of First Offer Agreement,
dated as of August 4, 1994, between the Company and Jules F. Knapp.
Exhibit 20 -- Intershareholder Agreement between certain shareholders of the Company
(incorporated by reference to Appendix F to the Company's Registration Statement
on Form S-4, File No. 33-78966).
Exhibit 21 -- Rights Agreement, dated as of January 31, 1989, between the Company and Mellon
Securities Trust Company (incorporated by reference to Exhibit 1 to the
Company's Form 8-A Registration Statement dated February 10, 1989, File No.
1-994).
Exhibit 22 -- Amendment No. 1, dated as of February 25, 1994, to Rights Agreement, dated as of
January 31, 1989, between the Company and Mellon Securities Trust Company
(incorporated by reference to Exhibit 4 to the Company's Form 8-A/A Registration
Statement dated March 8, 1994, File No. 1-994).
Exhibit 23 -- Amendment No. 2, dated as of October 30, 1995, to Rights Agreement, dated as of
January 31, 1989, between the Company and Mellon Securities Trust Company.
</TABLE>
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<TABLE>
<S> <C> <C>
Exhibit 24 -- Substituted Note, dated August 4, 1994 made by Joy F. Knapp to the Company.
Exhibit -- Pledge Agreement, dated as of August 4, 1994, by Joy F. Knapp in favor of the
25....... Company.
Exhibit -- Form of Amendment to Lease Agreement to be entered between United Coatings Inc.
26....... and various lessors.
Exhibit -- Amendment No. 1 to Pratt & Lambert United's Capital Accumulation Program, dated
27....... as of November 3, 1995.
</TABLE>
- ---------------
* Included in copies of the Schedule 14D-9 mailed to shareholders.
19
<PAGE> 21
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: November 9, 1995
Pratt & Lambert United, Inc.
By: /s/ JOSEPH J. CASTIGLIA
Name: Joseph J. Castiglia
Title: President and Chief
Executive Officer
20
<PAGE> 22
SCHEDULE I
PRATT & LAMBERT UNITED, INC.
75 TONAWANDA STREET
BUFFALO, NEW YORK 14207
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about November 9, 1995 as
a part of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of Pratt & Lambert United, Inc. (the "Company") to the holders
of record of shares of Common Stock, par value $.01 per share, of the Company
(the "Shares"). You are receiving this Information Statement in connection with
the possible election of persons designated by Parent (as defined below) to a
majority of the seats on the Board of Directors of the Company.
The Company, SWACQ, Inc., a New York corporation ("Purchaser"), and The
Sherwin-Williams Company, an Ohio corporation ("Parent"), entered into an
Agreement and Plan of Merger dated as of November 4, 1995 (the "Merger
Agreement") in accordance with the terms and subject to the conditions of which
(i) Parent will cause Purchaser to commence a tender offer (the "Offer") for all
outstanding Shares at a price of $35.00 per Share, net to the seller in cash,
and (ii) Purchaser will be merged with and into the Company (the "Merger"). As a
result of the Offer and the Merger, the Company will become a wholly owned
subsidiary of Parent.
The Merger Agreement requires the Company to take such action to cause the
Parent Designees (as defined below) to be elected to the Board of Directors
under the circumstances described therein. See "Right to Designate Directors;
Parent Designees."
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used herein and not
otherwise defined herein shall have the meaning set forth in the Schedule 14D-9.
Pursuant to the Merger Agreement, Purchaser commenced the Offer on November
9, 1995. The Offer is scheduled to expire at 12:00 midnight, New York time, on
Friday, December 8, 1995, unless the Offer is extended.
The information contained in this Information Statement (including
information incorporated by reference) concerning Parent and Purchaser and the
Parent Designees has been furnished to the Company by Parent, and the Company
assumes no responsibility for the accuracy or completeness of such information.
RIGHT TO DESIGNATE DIRECTORS; PARENT DESIGNEES
The Merger Agreement provides that from time to time upon the purchase of
Shares pursuant to the Offer or the Stock Option Agreement (as defined in the
Schedule 14D-9), Parent shall be entitled to designate the number of directors
("Parent Designees"), rounded up to the next whole number, on the Board of
Directors of the Company that equals the product of (i) the total number of
directors on the Company's Board of Directors (giving effect to the election of
any additional directors designated by Parent pursuant to this sentence) and
(ii) the percentage that (A) the sum of (x) the number of Shares owned by Parent
and Purchaser (including Shares accepted for payment in the Offer, provided
funds therefor have been deposited with the Depositary (as defined in the Merger
Agreement)) and (y) the number of Shares subject to the Stock Option Agreement,
represents of (B) the total number of Shares outstanding. The Merger Agreement
requires that the Company take any and all such action to cause the Parent
Designees to be appointed to the Company's Board of Directors, including without
limitation, increasing the number of directors and seeking and accepting
resignations of incumbent directors. The Merger Agreement provides that the
Company will
I-1
<PAGE> 23
use its best efforts to cause individuals designated by Parent to constitute the
same percentage as such individuals represent on Company's Board of Directors on
each committee of the Board, and each board of directors, and each committee
thereof, of each Subsidiary.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of November 1, 1995, there were
10,704,276 Shares outstanding and 704,850 Shares reserved for issuance upon the
exercise of certain options outstanding. The Board of Directors currently
consists of thirteen members. At each Annual Meeting of Shareholders, directors
are elected to hold office until the next Annual Meeting of Shareholders and
until their respective successors have been elected and have qualified.
DIRECTORS OF THE COMPANY
The names of the current directors, their ages as of November 1, 1995 and
certain other information about them are set forth below. There are no family
relationships among any of the directors or executive officers of the Company
except as indicated below. As indicated above, some of the current directors may
resign effective immediately following the purchase of Shares by Purchaser
pursuant to the Offer.
Andrew M. Boas............. Mr. Boas, 40, is a member of the Audit Committee of
the Company. He has been a director since 1994.
Mr. Boas is a managing director, Merchant Banking,
of Carl Marks & Co., Inc. ("CMCO"), a diversified
merchant bank specializing in leveraged buyouts,
real estate, venture capital, money management and
management consulting. He is a general partner of
Carl Marks Management Co., L.P., a registered
investment advisor. He is a director of Herman's
Sporting Goods, Inc., and U.S. Trails, Inc., a
membership-based campground company and Sport and
Health, Inc., a health and fitness chain. Mr. Boas
was a director of American Corp. Ltd., an
Australian based closed-end fund which invested in
American securities, until January 1993 when the
fund was liquidated. Mr. Boas is the brother-in-law
of Mark L. Claster.
Joseph J. Castiglia........ Mr. Castiglia, 61, is vice chairman, president and
chief executive officer of the Company. He is a
member of the Executive Committee of the Company
and has been a director since 1971.
Mr. Castiglia is a director of the Vision Group of
Funds, Inc., a registered investment company, and
Sevenson Environmental Services, Inc. He is
chairman and director of the Buffalo Branch of the
Federal Reserve Bank of New York. He is also a
director and executive committee member of the
National Paint & Coatings Association.
Mark L. Claster............ Mr. Claster, 42, is a member of the Audit and
Compensation Committees of the Company. He has been
a director since 1994.
Mr. Claster is a managing director and chief
operating officer of CMCO. He is the managing
director of CM Capital Co., an affiliate of CMCO,
and is the chief executive officer of its realty
and consulting division. He is a director of Bulk
Materials, Inc. and a trustee of North Shore
University Hospital Medical Center. Mr. Claster is
the brother-in-law of Mr. Boas.
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<PAGE> 24
Alvin L. Gorman............ Mr. Gorman, 61, is a member of the Audit and
Compensation Committee of the Company. He has been
a director since 1994.
Mr. Gorman was a director of United Coatings, Inc.,
which merged into the Company in 1994 ("UCI"), from
May 1991 to January 1992. Mr. Gorman is chairman of
the Board of Power Contracting and Engineering
Corp. He is a member of the Board of Trustees of
the Illinois Institute of Technology and an
overseer of the Stuart School of Business of the
Illinois Institute of Technology. He is also a
member of the Advisory Board of the McCormick
School of Engineering at Northwestern University.
Jeffrey L. Kenner.......... Mr. Kenner, 52, is a member of the Executive and
Compensation Committees of the Company. He has been
a director since 1994.
Mr. Kenner has served as president of Kenner &
Company, Inc. ("Kenner") since 1986. Kenner is a
New York investment firm specializing in
acquisitions and private equity investments. From
1982 to 1986, Mr. Kenner was president of CM
Capital Co. From 1979 to 1982, Mr. Kenner was a
vice president of Carl Marks & Co. Mr. Kenner
currently serves on the Board of Directors of Pace
Industries, Inc.
Jules F. Knapp............. Mr. Knapp, 67, is a member of the Executive
Committee of the Company. He has been a director
since 1994.
Mr. Knapp is vice chairman of the Company and
president and chief executive officer of United
Coatings, Inc., a wholly owned subsidiary of the
Company and the successor to UCI ("United
Coatings"). Mr. Knapp is the co-founder of UCI, and
has been a director and its principal executive
operating officer since its formation. Mr. Knapp
also serves as a trustee of the University of
Chicago Hospitals, as an advisor to the Kellogg
School of Business at Northwestern University and
as an overseer at the Stuart School of Business of
the Illinois Institute of Technology. Mr. Knapp is
the father of Ms. Knapp.
Joy F. Knapp............... Ms. Knapp, 31, is a member of the Executive
Committee of the Company. She has been a director
since 1994.
Ms. Knapp is vice president, Marketing, of United
Coatings. Ms. Knapp was appointed a director of
United Coatings in 1994. She has been responsible
for the overall marketing strategy of United
Coatings. Ms. Knapp is the daughter of Mr. Knapp.
Seymour H. Knox, III....... Mr. Knox, 69, is a member of the Executive and
Audit Committees and chairman of the Compensation
Committee of the Company. He has been a director
since 1966.
Mr. Knox is chairman of the Board of the Buffalo
Sabres Hockey Club, and president and director of
the Buffalo Fine Arts Academy and a director of the
Woolworth Corporation. He is a member of the Board
of Trustees of the YMCA of Greater Buffalo and The
Buffalo General Hospital. Mr. Knox is a former vice
president of Kidder, Peabody & Co., Inc., member of
the New York Stock Exchange.
Wilfred J. Larson.......... Mr. Larson, 67, is a member of the Compensation
Committee of the Company. He has been a director
since 1988.
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<PAGE> 25
Mr. Larson is a director of First Empire State
Corporation and its subsidiary, Manufacturers and
Traders Trust Company, Horus Therapeutics, Inc. and
the Bryant & Stratton Business Institute, Inc. He
also serves as a member of the Board of Trustees of
Children's Hospital of Buffalo. Mr. Larson is a
retired president and chief executive officer of
Westwood-Squibb Pharmaceuticals Inc.
Randolph A. Marks.......... Mr. Marks, 60, is a member of the Audit Committee
of the Company. He has been a director since 1988.
Mr. Marks is a private investor and a director of
Computer Task Group, Inc., Columbus McKinnon Corp.
and the Buffalo Fine Arts Academy. Mr. Marks also
serves on the Board of Trustees of The Buffalo
General Hospital and is a member of the Western
Regional Board of Directors of Marine Midland Bank,
N.A. Mr. Marks is a former chairman of the Board of
American Brass Company.
David R. Newcomb........... Mr. Newcomb, 71, is chairman of the Audit Committee
and is a member of the Executive and Compensation
Committees of the Company. He has been a director
since 1975.
Mr. Newcomb is a director of Utica Mutual Insurance
Co., Utica National Life Insurance Co., New York
State Electric and Gas Corp. and Rigidized Metals,
Inc. He serves as a trustee of The Buffalo General
Hospital. Mr. Newcomb was president and chief
executive officer of Buffalo Forge Co.
Raymond D. Stevens, Jr..... Mr. Stevens, 68, is chairman of the Board of the
Company. Mr. Stevens is chairman of the Executive
Committee and has been a director since 1967.
Mr. Stevens is a director of First Empire State
Corporation and its subsidiary, Manufacturers and
Traders Trust Company. He serves as a trustee of
The Buffalo General Hospital. Mr. Stevens is also a
former director, executive committee member and
chairman of the National Paint & Coatings
Association.
Robert O. Swados........... Mr. Swados, 75, is a member of the Audit and
Compensation Committees of the Company. He has been
a director since 1994.
Mr. Swados is counsel to the law firm of Cohen
Swados Wright Hanifin Bradford & Brett, vice
chairman and counsel to the Buffalo Sabres Hockey
Club, and a commissioner of the New York State
Department of Probation. He serves as honorary vice
chairman and trustee of the Studio Arena Theatre.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the names and ages of the Company's
executive officers, together with all positions and offices held with the
Company, and their business experience during the last five years. Officers are
appointed to serve until the meeting of the Board of Directors following the
next annual meeting of shareholders and until their successors have been elected
and qualified.
<TABLE>
<CAPTION>
NAME AGE POSITION(S) HELD
- ---------------------------- --- --------------------------------------------------------
<S> <C> <C>
Joseph J. Castiglia......... 61 President and Chief Executive Officer
Jules F. Knapp.............. 67 President and Chief Executive Officer, United Coatings,
Inc.
</TABLE>
I-4
<PAGE> 26
<TABLE>
<CAPTION>
NAME AGE POSITION(S) HELD
- ---------------------------- --- --------------------------------------------------------
<S> <C> <C>
Randall L. Clark............ 52 Executive Vice President and Chief Operating Officer
William F. Bensman.......... 50 Vice President, Materials Management
James R. Boldt.............. 44 Vice President, Finance, Secretary and Chief Financial
Officer.
James M. Culligan........... 41 Treasurer; prior to January 1, 1991, Mr. Culligan was
the Corporate Manager of Financial Services of the
Company.
Austin E. Floyd............. 53 President, Southern Coatings, Inc.
Ewald H. Hoerster........... 54 President, Industrial Coatings Division; prior to
January 1, 1992, Mr. Hoerster was Vice President of
Marketing of the Industrial Coatings Division; prior
to July 1, 1991, he was a consultant; prior to
November 1, 1990, he was the General Manager of the
Aerospace and Paper Coatings Division of DeSoto, Inc.
Donald W. Smith............. 56 Vice President, Safety and Environmental Affairs
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
GENERAL
In 1994 the following nonemployee directors served on the Compensation
Committee throughout the year: Messrs. Knox (chairman), Larson and Newcomb. Mr.
Robert S. Scheu did not stand for re-election to the Board at the Special
Meeting held in connection with the 1994 merger with UCI, in lieu of an Annual
Meeting, and was replaced on the Board and the Compensation Committee by Mr.
Swados. Messrs. Claster, Gorman and Kenner joined the Compensation Committee as
representatives of the former UCI shareholders as a result of the merger with
UCI. Under the Company's By-laws, Mr. Stevens, the chairman of the Board, is an
ex-officio (non-voting) member of all committees of the Board, including the
Compensation Committee. Messrs. Stevens and Larson are directors of the
Manufacturers & Traders Trust Company with which the Company maintained
revolving credit and term loan agreements during 1994. Loans made pursuant
thereto are subject to various formula interest rates consisting of the Federal
funds rates plus 1%, 1% in excess of the average secondary market certificate of
deposit rate after reserve requirements, LIBOR plus 1 1/2%, the prime lending
rate plus 1/4%, or a rate quoted by the bank. During 1994, amounts borrowed
under the above agreements ranged from $17,700,000 to $56,800,000 and total
interest charges incurred by the Company with respect to the loans amounted to
$1,981,691. On August 11, 1995, the Company entered into a new five year
revolving credit agreement. Loans made pursuant thereto are subject to various
interest rates ranging from LIBOR plus 4/10% to LIBOR plus 5/8%. During 1995,
amounts borrowed from Manufacturers & Traders Trust Company ranged from
$30,000,000 to $63,800,000 and interest incurred by the Company with respect to
such loans amounted to $3,078,738 through October 31, 1995. The consummation of
the Merger would cause the Company to be in default with respect to certain
covenants, possibly causing a termination of the Company's credit facilities. In
addition, the Company utilizes other customary services provided by the bank at
its standard fees.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
United Coatings leases substantially all of its manufacturing and office
facilities under noncancelable operating leases expiring at various dates
through December 1998. Several of the leases are between United Coatings and
affiliates of United Coatings, including Mr. Knapp and Ellis/United Coatings
Associates, a New York limited partnership formed by Mr. Knapp and certain other
investors to finance the development of United Coatings' Ennis, Texas, facility.
The lessors of the facilities in Kankakee, Illinois; Indianapolis, Indiana;
Memphis, Tennessee; and Los Angles, California are trusts for the benefit of Mr.
Knapp's family. United Coatings has paid $417,000 and $834,000 under its leases
to related parties for the period from August 4, 1994 to December 31, 1994, and
for the ten-month period ended October 31, 1995, respectively.
I-5
<PAGE> 27
Mr. Castiglia is a director of investment fund subsidiaries of the
Manufacturers and Traders Trust Company in which funds of the Company's
retirement plans may be temporarily invested from time to time.
Mr. Marks is a director of Computer Task Group, Inc. whose consulting
services the company utilizes from time to time. In 1994, and for the ten-month
period ended October 31, 1995, the Company paid Computer Task Group
approximately $644,000 and $808,000, respectively, for such services.
Mr. Swados is counsel to the law firm of Cohen Swados Wright Hanifin
Bradford & Brett which, during 1994, and for the ten-month period ended October
31, 1995, provided certain legal services to the Company.
In the opinion of management, these transactions were on terms no less
favorable than would have been available from unaffiliated parties.
Pursuant to an Agreement and Plan of Merger dated February 25, 1994, UCI
was merged into the Company on August 4, 1994 (the "United Coatings Merger").
Former UCI shareholders became shareholders of the Company, and a new wholly
owned subsidiary of the Company named United Coatings was established, to which
the assets and business of the former UCI were transferred.
In connection with the United Coatings Merger, on February 25, 1994, the
Company, most of the former UCI shareholders ("UC Shareholders"), and Raymond D.
Stevens, Jr., Joseph J. Castiglia and James R. Boldt ("PL Shareholders"),
entered into a Shareholder Agreement (the "Shareholder Agreement"). The
Shareholder Agreement, among other things, (a) restricts the exercise of voting
and other rights of ownership of Shares held by UC Shareholders (and certain
permitted, related transferees), (b) requires that UC Shareholders and PL
Shareholders vote for certain nominees for director chosen by directors of the
Company that are not designees of UC Shareholders (the "Non-Designee
Directors"), and vote on a number of other matters as recommended by the
Non-Designee Directors, and (c) imposes certain restrictions on the transfer of
Shares by UC Shareholders. The Shareholder Agreement also requires the Company
and PL Shareholders to use their best efforts to cause designees (the "UC
Designees") of UC Shareholders to be appointed to the Board of Directors. The
number of such Designees, set at a maximum of six, will depend on the number of
Shares retained by UC Shareholders. The transfer of Shares by the UC
Shareholders pursuant to the Stock Option Agreement and the Offer is not subject
to the transfer restrictions set forth in the Shareholder Agreement. The Board
of Directors of the Company has approved the transfer of Shares by UC
Shareholders pursuant to the Stock Option Agreement, and such transfer is no
longer subject to the transfer restrictions set forth in the Shareholder
Agreement. The Shareholder Agreement will terminate as a result of the
consummation of the transactions contemplated in the Merger Agreement and the
Stock Option Agreement.
In addition, the UC Shareholders entered into an Intershareholder Agreement
(the "Intershareholder Agreement"), pursuant to which the UC Shareholders
allocated their rights under the Shareholder Agreement. Under the
Intershareholder Agreement, the Knapp Group and the Marks Group (both as defined
in the Shareholder Agreement) select the UC Designees. The initial group of UC
Designees included four individuals designated by the Knapp Group (Jules F.
Knapp, Alvin L. Gorman, Jeffrey L. Kenner and Joy Knapp) (the "Knapp Designees")
and two individuals designated by the Marks Group (Andrew M. Boas and Mark L.
Claster) (the "Marks Designees"). During the term of the Shareholder Agreement,
and so long as the UC Shareholders can designate six designees, they shall
designate the Knapp Designees and Marks Designees. To the extent any of the
Knapp Designees or Marks Designees are unable to serve as a director for any
reason, the Knapp Group or Marks Group, shall select a new Knapp Designee or
Marks Designee, as the case may be, which decision shall be made by a vote of
the holders of a majority of the Shares held by such group at the time of such
selection. During the term of the Shareholder Agreement, if the UC Shareholders
are allocated less than six Designees, they shall determine the Designees in
accordance with the provisions of the Intershareholder Agreement. Presently, the
UC Shareholders are entitled under the Shareholder Agreement to six Designees.
The Intershareholder Agreement will terminate as a result of the consummation of
the transactions contemplated in the Merger Agreement and in the Stock Option
Agreement.
The disclosure set forth under "Arrangements with Executive Officers,
Directors or Affiliates of the Company" in Item 3 of Schedule 14D-9 is
incorporated by reference herein.
I-6
<PAGE> 28
COMMITTEES OF DIRECTORS; ATTENDANCE AT BOARD MEETINGS
The Board of Directors of the Company has an Executive Committee, an Audit
Committee and a Compensation Committee. The Board of Directors does not have a
standing nominating committee.
The Executive Committee consists of Messrs. Stevens (Chairman), Castiglia,
Kenner, Knapp, Knox and Newcomb and Ms. Knapp. During the interval between
meetings of the Board of Directors, the Executive Committee possesses and may
exercise all of the authority of the Board of Directors except as prohibited by
law or precluded by prior actions of the Board of Directors. The Executive
Committee did not meet in 1994 and met once during the ten-month period ended
October 31, 1995.
The Audit Committee consists of non-employee directors, Messrs. Newcomb
(chairman), Boas, Claster, Gorman, Knox, Marks and Swados. Its functions include
recommending the selection of the independent auditors each year, considering
the proposed scope and cost of the annual audit, reviewing the results of the
annual audit and the limited reviews of quarterly financial information by the
independent auditors, the review of the recommendations of the independent
auditors with respect to internal controls and accounting procedures, and any
other matters it deems appropriate. In 1994, the Audit Committee met three times
with representatives of the Company's independent auditors, and three times
during the ten-month period ended October 31, 1995.
The Compensation Committee consists of non-employee directors, Messrs. Knox
(chairman), Claster, Gorman, Kenner, Larson, Newcomb and Swados. It is charged
with the responsibility of maintaining a comprehensive remuneration plan for top
and middle management personnel. The Compensation Committee met two times in
1994 and once during the ten-month period ended October 31, 1995.
The Board of Directors met ten times in 1994 and six times during the
ten-month period ended October 31, 1995. All directors attended at least 75% of
the total meetings of directors and committees of which they were members during
1994. All directors except Mr. Gorman attended at least 75% of the total
meetings of directors and committees of which they were members during the
ten-month period ended October 31, 1995.
COMPENSATION OF DIRECTORS
In 1994, non-employee directors received a retainer of $10,000 per year,
payable quarterly, $1,000 for each board meeting and $1,000 per committee
meeting attended. In 1995, non-employee directors receive a retainer of $15,000
per year, payable quarterly, $1,000 for each board meeting and $1,000 per
committee meeting attended. Employee directors are not compensated for board or
committee services. All or any portion of the payments made to directors may be
deferred under the Pratt & Lambert United, Inc. Plan for Deferral of Directors'
Fees.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation received by the Company's
principal executive officers for the three fiscal years ended December 31, 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION ALL
COMPENSATION AWARDS OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION*
- ----------------------------------------- ---- ------------ -------- ------------ -------------
<S> <C> <C> <C> <C> <C>
J.R. Boldt............................... 1994 $142,000 $49,123 5,000 $ 3,740
Vice President of Finance and 1993 129,250 28,228 5,000 3,665
Secretary -- Pratt & Lambert United 1992 126,500 18,676 5,000 3,511
</TABLE>
I-7
<PAGE> 29
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION ALL
COMPENSATION AWARDS OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION*
- ----------------------------------------- ---- ------------ -------- ------------ -------------
<S> <C> <C> <C> <C> <C>
J.J. Castiglia........................... 1994 310,000 74,493 22,000 4,179
President and Chief Executive 1993 257,000 56,129 10,000 5,722
Officer -- Pratt & Lambert United 1992 252,000 55,969 10,000 5,688
R.L. Clark**............................. 1994 221,000 53,106 8,000 3,000
Executive Vice President and Chief 1993 204,000 44,554 8,000 --
Operating Officer -- Pratt & Lambert 1992 90,769 20,159 8,000 --
United
F.H. Fitch***............................ 1994 193,670 -- 4,000 12,630
President, Pierce & Stevens 1993 178,958 53,743 4,000 16,315
1992 175,480 30,849 3,000 15,613
J.F. Knapp****........................... 1994 206,182 41,667 -- --
President and Chief Executive
Officer -- United Coatings
</TABLE>
- ---------------
* Represents amounts contributed by the Company to the payroll-based employee
stock ownership plan and the savings plan under Internal Revenue Code
Section 401(k), including, for 1994, $740, $1,179, $0 and $1,049 under the
employee stock ownership plan and $3,000, $3,000, $3,000 and $3,000 under
the savings plan for Messrs. Boldt, Castiglia, Clark and Fitch,
respectively. In the case of Mr. Fitch, this amount also represents
contributions by Pierce & Stevens Corporation, a wholly owned subsidiary of
the Company ("Pierce & Stevens"), under the Pierce & Stevens Deferred
Profit Sharing Plan, including $6,886 for 1994, as well as interest earned
by Mr. Fitch in the Pratt & Lambert United, Inc. Plan for Deferral of
Officers' Salaries, including $1,695 in 1994.
** Mr. Clark was employed by the Company on July 20, 1992.
*** Mr. Fitch retired effective July 28, 1995.
**** Mr. Knapp was employed by the Company on August 4, 1994.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants during 1994 to
the named executive officers.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
% OF AT ASSUMED ANNUAL
TOTAL RATES OF STOCK
OPTIONS PRICE
GRANTED TO EXERCISE APPRECIATION
OPTIONS EMPLOYEES OR BASE FOR OPTION TERM(D)
GRANTED IN FISCAL PRICE EXPIRATION -------------------
NAME (#)(A) YEAR ($/SH)(B) DATE(C) 5%($) 10%($)
- ------------------------------------ ------- ---------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
J.R. Boldt.......................... 5,000 3.7% $ 19.63 11/30/04 $ 61,710 $156,386
J.J. Castiglia...................... 22,000(e) 16.4 19.63 11/30/04 271,525 688,098
R.L. Clark.......................... 8,000 6.0 19.63 11/30/04 98,736 250,218
F.H. Fitch(f)....................... 4,000 3.0 19.63 11/30/04 49,368 125,109
</TABLE>
- ---------------
(a) The options become exercisable in 25% increments each year beginning one
year after grant.
(b) The exercise price may be paid by the delivery of already-owned Shares.
(c) Options expire upon termination of employment other than in the event of
death, disability or retirement.
(d) Based on actual option term and annual compounding. The Securities and
Exchange Commission requires that registered corporations use this method
or an option pricing model to indicate the value of options. The Company
has no way of determining that any such method can properly establish the
value of an option.
(e) Includes options for 10,000 Shares granted to Mr. Castiglia pursuant to his
efforts in the United Coatings merger transaction.
(f) Mr. Fitch retired effective July 28, 1995.
I-8
<PAGE> 30
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR,
AND FISCAL YEAR END OPTION VALUE
The following table provides information on option exercises in 1994 by the
named executive officers and the value of such officers' unexercised options at
December 31, 1994.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END(#) FY-END($)
VALUE ------------- ---------------
SHARES ACQUIRED REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) ($)* UNEXERCISABLE UNEXERCISABLE*
- --------------------------------------- --------------- -------- ------------- ---------------
<S> <C> <C> <C> <C>
J.R. Boldt............................. -- -- 37,000/12,000 $206,891/14,172
J.J. Castiglia......................... -- -- 77,600/45,400 393,056/55,131
R.L. Clark............................. -- -- 6,000/18,000 19,750/19,750
F.H. Fitch**........................... -- -- 31,750/9,250 156,703/ 9,234
</TABLE>
- ---------------
* Market value of underlying securities at exercise or year-end, minus the
exercise or base price.
** Mr. Fitch retired effective July 28, 1995.
PENSION PLANS
The Pratt & Lambert United Retirement Plan is a noncontributory defined
benefit pension plan which covers the majority of all nonbargaining unit
employees of the Company and its subsidiaries. Until January 1, 1989, the plan
provided pension benefits in an amount which is the greater of a participant's
"basic benefit" or "minimum benefit" as determined under separate formulas. The
annual basic benefit was the sum of the applicable percentages times the
participant's compensation received for each year of plan participation to a
maximum of 35 years. For service prior to January 1, 1984, the applicable
percentages were 1% of the first $3,000 of compensation and 1 2/3% of
compensation in excess of $3,000; for service from January 1, 1984, to December
31, 1988, the applicable percentages were 1 2/3% of compensation up to the
Social Security wage base and 2 1/3% of compensation in excess of the base. The
annual minimum benefit determined as of a normal retirement date of December 31,
1988, for a participant with 25 or more years of service is equal to 50% of his
final 5-year average compensation, less 80% of his estimated Social Security
benefits. The minimum benefit for participants with less than 25 years of
service is proportionately reduced. The Tax Reform Act of 1986 required changes
in the plan's benefit structure, effective January 1, 1989, and the plan was
amended to preserve benefits accrued as of December 31, 1988, under the existing
formulas, and to provide a revised benefit formula for service after January 1,
1989. The revised formula provides each participant an annual pension benefit
(in addition to the benefit accrued at December 31, 1988) equal to 1 2/3% of his
compensation for each year it is in effect.
Normal retirement under the plan is age 65. Early retirement with reduced
benefits is available at age 55 after at least 10 years of service. The plan
also provides vested benefits after 5 years of service and spouse's death
benefits. Compensation counted for the plan includes salary, bonus, overtime,
commissions and salary deferred under a Section 401(k) plan.
The Company and its affiliates have unfunded plans which will pay a
participant any pension benefits which cannot be paid from the plan because of
Internal Revenue Code limitations or deferrals under an unqualified plan for
deferral of officers' salaries. Effective January 1, 1993, the Company and its
subsidiaries adopted the Pratt & Lambert United Minimum Benefit Plan (the
"Minimum Benefit Plan"), an unfunded plan which assures that designated
management employees will receive a pension benefit at least equal to the
pension benefit they would have received had the minimum benefit formula under
the plan continued in effect after 1988.
I-9
<PAGE> 31
The following table shows estimated annual benefits payable upon normal
retirement at age 65 (including amounts attributable to the Minimum Benefit Plan
and other unfunded plans) in the indicated compensation and years of service
classifications. The benefits shown are calculated under the Minimum Benefit
Plan.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT
BENEFITS FOR THE NUMBER OF
YEARS OF CREDITED SERVICE SHOWN
AVERAGE ANNUALIZED COMPENSATION FOR ----------------------------------------
LAST 60 MONTHS OF CREDITED SERVICE 10 15 20 25
- ------------------------------------------------------- ------- -------- -------- --------
<S> <C> <C> <C> <C>
$100,000............................................... $15,596 $ 23,393 $ 31,191 $ 38,989
125,000............................................... 20,596 30,893 41,191 51,489
150,000............................................... 25,596 38,393 51,191 63,989
175,000............................................... 30,596 45,893 61,191 76,489
200,000............................................... 35,596 53,393 71,191 88,989
225,000............................................... 40,596 60,893 81,191 101,489
250,000............................................... 45,596 68,393 91,191 113,989
275,000............................................... 50,596 75,893 101,191 126,489
300,000............................................... 55,596 83,393 111,191 138,989
325,000............................................... 60,596 90,893 121,191 151,489
350,000............................................... 65,596 98,393 131,191 163,989
375,000............................................... 70,596 105,893 141,191 176,489
400,000............................................... 75,596 113,393 151,191 188,989
</TABLE>
Compensation counted for the plans includes salary, bonuses, overtime,
commissions and salary deferred under a Section 401(k) plan and under a
non-qualified plan for deferral of officers' salaries. The salary and bonuses
reported in the table under the heading "Compensation of Executive Officers" are
substantially the compensation used for purposes of the plans for 1994 for
Messrs. Castiglia, Clark and Boldt. Messrs. Castiglia, Clark and Boldt had
credited service under the plans as of December 31, 1994, of 25, 1.42 and 17.75
years, respectively.
The benefits shown in the table are calculated as a straight life annuity
and are subject to offset by 80% of the employee's Social Security benefit if
the employee has 25 or more years of credited service, and by a proportionate
part of such benefit if the employee's credited service is less than 25 years.
The participants of the Minimum Benefit Plan receive the greater of the
benefit calculated under that plan, or the basic benefit as previously
described. While it is expected that Messrs. Castiglia, Clark and Boldt will be
entitled to benefits under the Minimum Benefit Plan, the estimated annual basic
benefits payable to these individuals under the Pratt & Lambert United
Retirement Plan and unfunded plans are $136,305, $69,112 and $95,090,
respectively, payable on a straight life basis commencing at age 65. These
estimates reflect benefits accrued at December 31, 1994, plus projected benefits
to normal retirement date, assuming continued employment to age 65 and no change
in compensation after 1994.
EMPLOYMENT CONTRACTS, SEVERANCE AGREEMENTS,
TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS
Mr. Stevens, who retired as an executive officer and employee of the
Company on December 31, 1992, is receiving $188,562 annually over a seven-year
period pursuant to the noncompetition and consulting provisions of his
employment contract which is substantially identical to the Employment Agreement
with Mr. Castiglia.
The disclosure set forth under "Arrangements with Executive Officers,
Directors or Affiliates of the Company" in Item 3 of Schedule 14D-9 is
incorporated by reference herein.
I-10
<PAGE> 32
REPORT OF THE COMPENSATION COMMITTEE
Compensation Policy. The Company's compensation policy is designed to
ensure that a proper relationship exists between executive remuneration and
corporate performance as well as to attract, retain and motivate executive
officers. The Compensation Committee currently intends that, whenever reasonably
possible, compensation paid to executive officers should be tax deductible to
the Company. The compensation of executive officers takes three forms: base
salary, bonuses and equity-based compensation. All recommendations of the
Compensation Committee with respect to executive compensation are subject to
ratification by the Company's Board of Directors.
Executive Officers. The compensation of executive officers is based on
individual and corporate performance. Base salary and incentive compensation of
executive officers are reviewed to assure that they are comparable with
compensation paid by other companies to employees with commensurate
responsibility, capability, experience and achievement. Generally, compensation
paid by the Company corresponds to the median of the range of compensation paid
by the surveyed companies. The companies surveyed differ from the companies
comprising the peer group index plotted in the performance graphs under the
heading "Performance Graphs" because the Company's competitors for executive
talent are not necessarily the same companies against which it compares it
stock's performance.
The bonuses of executive officers, other than Mr. Knapp and the senior
executive officers described below, are based on the actual earnings of the
Company compared to budgeted earnings. In the case of executive officers who are
presidents of business units, other than Mr. Knapp, bonuses are based 75% on the
earnings of their unit to budget and 25% on Company consolidated earnings to
budget. In general, the Compensation Committee assessed the overall performance
of the Company and its executive officers as good during 1994. In 1994 bonuses
constituted 5.8% of the total cash compensation of all executive officers other
than the three senior executive officers.
The compensation of Jules F. Knapp was negotiated on an arm's length basis
in connection with the Company's United Coatings Merger.
The three senior executive officers of the Company during 1994 were the
president and chief executive officer (the "CEO"), the executive vice president
and chief operating officer and the vice president, finance and chief financial
officer. The bonus component of compensation of senior executive officers is
calculated on the basis of corporate return on invested capital. Base salaries
of the senior executive officers are reviewed annually. In determining the base
salary of the senior executive officers for 1994 pursuant to their employment
contracts, the Compensation Committee considered the salaries of comparable
executives in the surveyed companies. The Compensation Committee also considered
the net earnings of the Company before and after taxes, inflation, the amount
generated for distribution to shareholders, the general performance of the
Company and the responsibilities and performance of the executives. The
Compensation Committee did not deem it appropriate to, and did not, assign
relative weights to these factors, given their nature and number.
The CEO and the two other senior executive officers received a bonus with
respect to 1994 pursuant to their employment contracts which provide for an
incentive bonus (not to exceed 75% of base salary), determined by a formula
using a moving three-year average of the Company's rate of return on invested
capital. This bonus is discretionary unless a specified minimum return on
invested capital is achieved. In 1994 bonuses paid under the formula were not
discretionary, and constituted 19.4% of the total cash compensation of each
senior executive officer, including the CEO. In addition, Mr. Boldt received a
one-time additional bonus of $15,000 in 1994 pursuant to his efforts in the
United Coatings merger transaction.
Equity-Based Compensation. The equity-based compensation is designed to
link the interests of the employees with those of the Company's shareholders.
Equity-based compensation consists of stock option plans and a capital
accumulation program.
The purpose of the Company's stock option plans is to provide selected key
employees of the Company with additional incentive to promote the continued
success and profitable growth of the Company and the best interests of its
shareholders. Under a 1994 Award and Option Plan and 1990 Stock Option/Stock
Appreciation Rights Plan, in determining who shall receive option grants and the
number of the Company's
I-11
<PAGE> 33
Shares subject to each grant, the Committee and the Board of Directors weigh the
positions and responsibilities of the grantees, the nature of their services and
their present and potential contributions to the success of the Company. In
addition, the merger agreement with UCI requires the Company to use its best
efforts to cause an additional 300,000 Shares to be made available for the
issuance of options to United Coatings employees as a form of incentive
compensation to be granted over time following the United Coatings Merger.
Accordingly, in 1994, on the recommendation of the Committee, the Board granted
options for 134,000 shares to 51 employees of the Company, including options for
22,000 shares to the CEO, which includes options for 10,000 shares granted
pursuant to his efforts in the United Coatings Merger transaction, and options
for 27,000 shares to eight other executive officers.
The capital accumulation program, which covers substantially all
nonbargaining employees of the Company including the CEO, is composed of a
payroll-based employee stock ownership plan ("PAYSOP") and a savings plan
structured under Section 401(k) of the Internal Revenue Code. Under the PAYSOP
the Company contributes an amount equal to .5% of each eligible employees's
compensation up to $150,000 as indexed, which is invested in the Company's
Shares. The 401(k) savings plan allows eligible employees to contribute on a
before-tax basis up to 7% of compensation to a maximum deferral of $9,240, as
indexed. The Company makes a matching contribution equal to the participant's
contributions, up to 2% of compensation. Although employees may contribute up to
10% of compensation on an after-tax basis, there is no match by the Company on
these contributions. Employee contributions are invested in one or both of two
investment funds as selected by the employee; the Company's contributions are
invested in Shares.
The Compensation Committee believes that its compensation decisions during
1994 effectively related corporate performance to executive compensation and
provided adequate incentives to the Company's executive officers.
Seymour H. Knox, III, Chairman
Mark L. Claster
Alvin L. Gorman
Jeffrey L. Kenner
Wilfred J. Larson
David R. Newcomb
Robert O. Swados
I-12
<PAGE> 34
PERFORMANCE GRAPHS
The graph below compares the performance of the Company with that of the
American Stock Exchange Market Value Index, the Standard & Poor's 500 Stock
Index and a group of peer companies. All investments have been weighted based
upon market capitalization. Companies in the peer group are as follows: The
Dexter Corporation; H.B. Fuller Company; Grow Group, Inc.; Guardsman Products,
Inc.; Lilly Industries, Inc.; Loctite Corporation; PPG Industries, Inc.; RPM,
Inc.; The Sherwin-Williams Company; SICO, Inc.; Standard Brands Paint Company
and The Valspar Corporation. The selection of companies for inclusion in the
peer group was approved by the Company's Board of Directors.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
<TABLE>
<S> <C> <C> <C> <C>
PRATT & LAMBERT AMEX MARKET S&P 500
VALUE AT YEAR END* UNITED INC. VALUE INDEX INDEX PEER GROUP
89 100 100 100 100
90 72 85 97 116
91 101 104 126 156
92 103 106 136 190
93 120 126 150 212
94 139 111 152 217
</TABLE>
*Assumes a $100 investment on December 31, 1989, and reinvestment of all
dividends.
I-13
<PAGE> 35
The following graphs compare the performance of the Company with that of
the Standard & Poor's 500 Stock Index for 10 and 15 year periods. These graphs
have been included to provide additional information concerning the Company's
total return relative to a broad market index over longer periods of time,
because the Company's business focus has been and continues to be long term.
COMPARISON OF TEN-YEAR CUMULATIVE TOTAL RETURN
<TABLE>
<S> <C> <C> <C> <C>
PRATT & LAMBERT S&P 500
YEAR UNITED, INC. INDEX
84 100 100
85 187 132
86 227 156
87 271 164
88 278 191
89 284 252
90 205 244
91 286 318
92 292 343
93 340 377
94 394 382
</TABLE>
COMPARISON OF FIFTEEN-YEAR CUMULATIVE TOTAL RETURN
<TABLE>
<S> <C> <C> <C> <C>
PRATT & LAMBERT S&P 500
YEAR UNITED, INC. INDEX
79 100 100
80 149 132
81 155 126
82 200 153
83 298 187
84 294 198
85 552 261
86 668 309
87 797 325
88 818 379
89 837 499
90 604 483
91 843 631
92 859 679
93 1001 747
94 1160 757
</TABLE>
I-14
<PAGE> 36
SECURITY OWNERSHIP OF PRINCIPAL HOLDERS OF VOTING SECURITIES
The following information is provided with respect to persons who are known
to the Company to be the beneficial owners, as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, of more than 5% of the Company's Shares as of
November 1, 1995.
Generally, Rule 13d-3 provides that, for certain limited purposes, a person
is considered to be the beneficial owner of Shares with respect to which such
person, directly or indirectly, has or shares voting power or investment power.
Thus, more than one person may be considered to be the beneficial owner of the
same Shares. The fact that a person is considered to be the beneficial owner of
Shares does not necessarily mean that such person has any economic interest in
those Shares.
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
<TABLE>
<CAPTION>
SHARED VOTING &
INVESTMENT OTHER SHARED
SOLE VOTING AND POWER, VOTING AND PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER INVESTMENT POWER RETIREMENT PLANS INVESTMENT POWER SHARES
- ------------------------------------ ---------------- ---------------- ---------------- ------------
<S> <C> <C> <C> <C>
Jules F. Knapp...................... 1,493,835 -- 575,226 19.3%
980 North Michigan Avenue (See Note 1)
Suite 1120
Chicago, IL 60011
Joseph J. Castiglia................. 224,094 407,813 -- 5.9%
75 Tonawanda Street (See Note 2)
Buffalo, New York 14207
</TABLE>
- ---------------
(1) Of the 1,493,835 Shares disclosed as to which Mr. Knapp has sole voting and
investment power, 1,420,023 are shares held by a trust of which he serves as
trustee. The 575,226 Shares shown as to which Mr. Knapp has other shared
voting and investment power are held by a trust as to which his wife has
sole voting power and as to which he disclaims having any economic interest.
(2) Of the 224,094 Shares disclosed as to which Mr. Castiglia has sole voting
and investment power, 94,300 are shares which he may acquire through options
exercisable on or before January 8, 1996. The Shares shown as shared voting
and investment power, retirement plans, are shares as to which Mr. Castiglia
has shared voting and investment power as an administrator under a deferred
profit sharing plan at Pierce & Stevens Corp., a wholly owned subsidiary of
the Company and the Pratt & Lambert United Capital Accumulation Program
("Retirement Plans"). Of the Shares included in the Company's Retirement
Plans, 3,911 are held for the account of Mr. Castiglia.
I-15
<PAGE> 37
SECURITY OWNERSHIP BY DIRECTORS AND OFFICERS
Beneficial ownership, as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, of Shares, as of November 1, 1995, by each of the
Company's directors and by its directors and officers as a group, together with
the percentage of total outstanding Shares represented by such ownership, is set
forth below. This information does not reflect the effects of the Shareholder
Agreement, the Intershareholder Agreement or the Stock Option Agreement upon
beneficial ownership. See "The United Coatings Merger and Related Matters"
herein and "Stock Option Agreement" in Item 3 of Schedule 14D-9.
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
<TABLE>
<CAPTION>
SHARED VOTING & OTHER SHARED
SOLE VOTING AND INVESTMENT POWER, VOTING AND PERCENT OF
NAME OF INDIVIDUAL OR GROUP INVESTMENT POWER RETIREMENT PLANS INVESTMENT POWER COMMON SHARES
- ------------------------------------ ---------------- ----------------- ---------------- -------------
<S> <C> <C> <C> <C>
A.M. Boas........................... 109,766 -- -- 1.0%
J.R. Boldt(a)....................... 53,415 407,813 -- 4.3%
J.J. Castiglia(b)................... 224,094 407,813 -- 5.9%
R.L. Clark(c)....................... 26,200 -- -- *
M.L. Claster........................ 60,233 -- -- .6%
A.L. Gorman......................... 2,000 -- -- *
J.L. Kenner......................... 475,000 -- -- 4.4%
J.F. Knapp(d)....................... 1,493,835 -- 575,226 19.3%
J. Knapp............................ 22,783 -- -- *
S.H. Knox, III(e)................... 22,100 -- 8,800 *
W.J. Larson......................... 4,000 -- -- *
R.A. Marks.......................... 5,000 -- -- *
D.R. Newcomb........................ 3,600 -- -- *
R.D. Stevens, Jr.(f)................ 150,004 106,630 183,446 4.1%
R.O. Swados......................... 2,050 -- -- *
All directors and officers as a
group (20
persons)(a)(b)(c)(d)(e)(f)........ 2,770,160 407,813 767,472 35.8%
</TABLE>
- ---------------
(a) Includes 41,500 Shares which Mr. Boldt may acquire through options
exercisable on or before January 8, 1996, and shares as to which Messrs.
Castiglia and Boldt have shared voting and investment power as
administrators under the Retirement Plans, including 2,139 shares held in
the Pratt & Lambert United Capital Accumulation Program for the account of
Mr. Boldt.
(b) See "Security Ownership of Principal Holders of Voting Securities" for
information regarding Shares owned by Mr. Castiglia.
(c) Includes 12,000 Shares which Mr. Clark may acquire through options
exercisable on or before January 8, 1996.
(d) See "Security Ownership of Principal Holders of Voting Securities" for
information regarding Shares owned by Mr. Knapp.
(e) The 8,800 Shares shown as other shared voting and investment power are
shares held in trust for the benefit of family members as to which Mr. Knox
has shared voting and investment powers. Mr. Knox disclaims any economic
interest in such shares.
(f) Of the 150,004 Shares disclosed as to which Mr. Stevens has sole voting and
investment power, 72,000 are shares which he may acquire through options
exercisable on or before January 8, 1996. The 106,630 Shares shown as shared
voting and investment power, retirement plans, are shares as to which Mr.
Stevens has shared voting and investment power as an administrator under the
Deferred Profit Sharing Plan of Pierce & Stevens. Of the 183,446 Shares
shown as to which Mr. Stevens has other shared voting and investment power,
146,905 are held by him as co-trustee for certain of his relatives as to
which he shares voting and investment power and as to which he disclaims
having any economic interest. The Shares shown opposite Mr. Stevens' name
exclude 137,472 Shares owned by Mr. Stevens' wife and adult
I-16
<PAGE> 38
children and trusts for such children and 323,906 Shares owned by other
relatives, or held in trusts for their benefit, as to which he disclaims
beneficial ownership.
* Less than .5% of the Shares outstanding.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors and persons owning more than 10% of the outstanding
Shares to file reports of ownership and changes in ownership with the Securities
and Exchange Commission. Officers, directors and greater than 10% holders of
Shares are required to furnish the Company with copies of all Section 16(a)
forms they file.
Based solely on copies of such forms furnished as provided above, or
written representations that no Forms 5 were required, the Company believes that
through the date hereof, all Section 16(a) filing requirements applicable to its
officers, directors and owners of greater than 10% of its Shares were complied
with.
INFORMATION WITH RESPECT TO PARENT DESIGNEES
As of the date of this Information Statement, the Parent has not determined
who will be Parent Designees. However, Parent Designees shall be selected from
among the following persons.
Set forth below is the name, business address, principal occupation or
employment and five year employment history of the persons who may be Parent
Designees. Unless otherwise indicated, each such person has held the occupation
listed opposite his name for at least the past five years and each occupation
refers to employment with the Parent. The principal business address of each
Parent Designee is 101 Prospect Avenue, N.W., Cleveland, Ohio 44115-1075. All
persons listed below are citizens of the United States. None of the persons
listed below owns any Shares.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND FIVE-YEAR
NAME EMPLOYMENT HISTORY
- ------------------------------ -------------------------------------------------------------
<S> <C>
William P. Antonace Mr. Antonace has served as Vice President & Director --
Operations, Coatings Division since March 1993, prior to
which he served as Director -- Materials Management, Coatings
Division commencing July 1992. From April 1991 to July 1992,
Mr. Antonace served as Vice President & Director -- Sales &
Operations, Transportation Division.
David A. Ayres Mr. Ayres has served as Vice President & Director --
Purchasing, Coatings Division commencing July 1991, prior to
which he served as Director of Purchasing, Coatings Division
commencing October 1979.
Rodney P. Becker Mr. Becker has served as Vice President & Director --
Manufacturing, Coatings Division since February 1992, prior
to which he served as Vice President & Director --
Manufacturing, Consumer Division commencing January 1987.
Charlie M. Johnson Mr. Johnson has served as Vice President & Director --
Research & Development, Coatings Division since May 1992,
prior to which he served as Vice President & Director --
Operations, Automotive Division commencing January 1988.
Michael A. Kilbane Mr. Kilbane has served as Vice President & Director --
Marketing -- National Accounts Group, Consumer Brands
Division since February 1992, prior to which he served as
Unit Director -- National Marketing Group, Consumer Division
commencing February 1991. From January
</TABLE>
I-17
<PAGE> 39
<TABLE>
<S> <C>
1989 to February 1991, Mr. Kilbane served as National Manager
-- Dutch Boy Marketing & Sales.
Michael E. Marinis Mr. Marinis has served as Director -- Human Resources,
Coatings Division since February 1992, prior to which he
served as Director -- Human Resources, Consumer Division
commencing September 1987.
William A. McSwain Mr. McSwain has served as Vice President & Director --
Operations, Consumer Brands Division since February 1992,
prior to which he served as Controller -- Marketing
Administration, Consumer Division commencing August 1989.
Stephen J. Perisutti Mr. Perisutti has served as Attorney since November 1991,
prior to which he served as an Associate Attorney with
Benesch, Friedlander, Coplan & Aronoff commencing September
1988.
Mark A. Smolik Mr. Smolik has served as Corporate Counsel since July 1991,
prior to which he served as Attorney commencing January 1990.
David N. Stefko Mr. Stefko has served as Controller -- Consumer Brands
Division since February 1991, prior to which he served as
Controller -- SW Marketing, Consumer Division commencing
September 1991. From June 1989 to September 1991, Mr. Stefko
served as Director -- Budgets, Consumer Division.
Rochelle F. Walk Ms. Walk has served as Director -- Marketing Communications,
Consumer Brands Division since January 1993, prior to which
she served as Corporate Counsel commencing May 1990.
</TABLE>
I-18
<PAGE> 40
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE
------
<S> <C> <C> <C>
Exhibit 1 -- Agreement and Plan of Merger, dated as of November 4, 1995, among the
Company, Parent and Purchaser.
Exhibit 2 -- Stock Option, Pledge and Security Agreement, dated as of November 4, 1995,
among Parent, Purchaser and certain shareholders of the Company.
Exhibit 3 -- Confidentiality Agreement, dated August 22, 1995, between Parent and
Company.
Exhibit 4 -- Joint Press Release of the Company and Parent issued on November 6, 1995.
Exhibit 5 -- Letter to Shareholders of the Company, dated November 9, 1995.
Exhibit 6 -- Opinion of Merrill Lynch & Co., dated November 3, 1995.
Exhibit 7 -- Employment Agreement, effective as of January 1, 1983, between the Company
and Joseph J. Castiglia.
Exhibit 8 -- Employment Agreement, dated as of February 19, 1994, between United
Coatings and Jules Knapp (incorporated by reference to Exhibit 10.1 to the
Company's Registration Statement on Form S-4, File No. 33-78966).
Exhibit 9 -- Noncompetition Agreement, dated as of November 5, 1995, between the Company
and Jules F. Knapp.
Exhibit 10 -- Employment Agreement, dated as of August 4, 1994, between United Coatings
and Joy F. Knapp.
Exhibit 11 -- Amended and Restated Employment Agreement, dated as of October 30, 1995,
between the Company and James R. Boldt.
Exhibit 12 -- Employment Agreement, dated as of June 16, 1992, between the Company and
Randall L. Clark (incorporated by reference to Exhibit 10(d) to the
Company's 1992 Form 10-K, File No. 1-994).
Exhibit 13 -- Form of Severance Agreement, dated as of October 30, 1995 between the
Company and certain employees of the Company.
Exhibit 14 -- 1990 Stock Option/Stock Appreciation Rights Plan (incorporated by reference
to Appendix N to the Company's Registration Statement on Form S-4, File No.
33-78966).
Exhibit 15 -- 1980 Stock Option/Stock Appreciation Rights Plan, as amended (incorporated
by reference to Appendix M to the Company's Registration Statement on Form
S-4, File No. 33-78966).
Exhibit 16 -- Shareholders Agreement, dated February 25, 1994, among the Company and
certain shareholders of the Company (incorporated by reference to Exhibit
2.2 to the Company's Registration Statement on Form S-4, File No.
33-28966).
Exhibit 17 -- Registration Rights Agreement, dated August 4, 1994, between the Company
and certain shareholders of the Company (incorporated by reference to
Exhibit 2.4 to Exhibit 2.2 to the Company's Registration Statement on Form
S-4, File No. 33-28966).
Exhibit 18 -- Right of First Offer Agreement, dated August 4, 1994, between the Company
and Jules F. Knapp (incorporated by reference to Exhibit 2.5 to the
Company's Registration Statement on Form S-4, File No. 33-78966).
Exhibit 19 -- Amendment, dated as of November 4, 1995, to Right of First Offer Agreement,
dated as of August 4, 1994, between the Company and Jules F. Knapp.
Exhibit 20 -- Intershareholder Agreement between certain shareholders of the Company
(incorporated by reference to Appendix F to the Company's Registration
Statement on Form S-4, File No. 33-78966).
Exhibit 21 -- Rights Agreement, dated as of January 31, 1989, between the Company and
Mellon Securities Trust Company (incorporated by reference to Exhibit 1 to
the Company's Form 8-A Registration Statement dated February 10, 1989, File
No. 1-994).
</TABLE>
<PAGE> 41
<TABLE>
<CAPTION>
PAGE
------
<S> <C> <C> <C>
Exhibit 22 -- Amendment No. 1, dated as of February 25, 1994, to Rights Agreement, dated
as of January 31, 1989, between the Company and Mellon Securities Trust
Company (incorporated by reference to Exhibit 4 to the Company's Form 8-A/A
Registration Statement dated March 8, 1994, File No. 1-994).
Exhibit 23 -- Amendment No. 2, dated as of October 30, 1995, to Rights Agreement, dated
as of January 31, 1989, between the Company and Mellon Securities Trust
Company.
Exhibit 24 -- Substituted Note, dated August 4, 1994 made by Joy F. Knapp to the Company.
Exhibit 25 -- Pledge Agreement, dated as of August 4, 1994, by Joy F. Knapp in favor of
the Company.
Exhibit 26 -- Form of Amendment to Lease Agreement to be entered between United Coatings
and various lessors.
Exhibit 27 -- Amendment No. 1 to Pratt & Lambert United's Capital Accumulation Program,
dated as of November 3, 1995.
</TABLE>
<PAGE> 1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of November 4, 1995
("Agreement") among Pratt & Lambert United, Inc., a New York corporation
("Company") which was formed under the name "Pratt & Lambert", The
Sherwin-Williams Company, an Ohio corporation ("Buyer"), and SWACQ, Inc., a New
York corporation and a wholly-owned subsidiary of Buyer ("Merger Subsidiary").
WHEREAS, the respective Boards of Directors of Buyer, Merger
Subsidiary and Company have each determined that it is in the best interests of
their respective shareholders for Buyer to acquire all of the outstanding
capital stock of Company upon the terms and subject to the conditions set forth
herein; and
WHEREAS, in furtherance of such acquisition, it is proposed that
Buyer, through Merger Subsidiary, shall make a cash tender offer ("Offer") to
acquire all of the issued and outstanding shares of the common stock, par value
$.01 per share, of Company ("Common Stock"), together with the Rights (as such
term is defined in Section 6.07) ("Share(s)") for $35.00 per Share, net to the
seller in cash, upon the terms and subject to the conditions of this Agreement
and the Offer; and
WHEREAS, the Board of Directors of Company has approved the making of
the Offer and resolved and agreed to recommend that holders of Shares tender
their Shares pursuant to the Offer; and
WHEREAS, also in furtherance of such acquisition, the Boards of
Directors of Buyer, Merger Subsidiary and Company have each approved the merger
of Merger Subsidiary with and into Company in accordance with the Business
Corporation Law of the State of New York ("New York Law") following the
consummation of the Offer and upon the terms and subject to the conditions set
forth herein; and
WHEREAS, (a) Buyer and Merger Subsidiary are unwilling to enter into
this Agreement unless, simultaneously with the execution and delivery of this
Agreement, certain shareholders of Company enter into a stock option, pledge
and security agreement ("Stock Option Agreement") among Buyer, Merger
Subsidiary and certain shareholders of Company providing for, among other
things, (i) the grant to Buyer and Merger Subsidiary of an irrevocable option
to purchase the Shares specified in the Stock Option Agreement and all Shares
acquired by those shareholders in the future prior to the Effective Time (as
such term is defined in Section 2.01(b)) ("Option Shares"), and (ii) the tender
by such shareholders, in response to the Offer, of all Option Shares, all upon
the terms and subject to the conditions set forth in the Stock Option
Agreement, and (b) the Board of Directors of Company has approved Buyer and
Merger Subsidiary entering into the Stock Option Agreement, which is to be
executed simultaneously with the execution hereof.
-1-
<PAGE> 2
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, Buyer, Merger Subsidiary and Company
hereby agree as follows:
ARTICLE I
THE OFFER
SECTION 1.01 The Offer. (a) Provided that nothing shall have
occurred that would result in a failure to satisfy any of the conditions set
forth in Annex I hereto, Buyer, through Merger Subsidiary, shall, as promptly as
practicable after the date hereof, but in no event later than five business days
following the public announcement of the terms of this Agreement, commence the
Offer to purchase all of the outstanding Shares at a price of $35.00 per Share
("Offer Price"), net to the seller in cash, subject to any amounts required to
be withheld under applicable federal, state, local or foreign income tax laws
and regulations. The consummation of the Offer shall be subject only to (i) the
condition that there shall be validly tendered and not withdrawn, in accordance
with the terms of the Offer and prior to the expiration date of the Offer, a
number of Shares which represents at least two-thirds of the Shares outstanding
on a fully diluted basis ("Minimum Condition"), and (ii) the other conditions
set forth in Annex I hereto. Buyer expressly reserves the right to waive the
Minimum Condition or any of the other conditions to the Offer and to make any
change in the terms or conditions of the Offer (other than extending the Offer
except as expressly provided below in this Section 1.01(a)); provided that no
change may be made which (i) changes the form of consideration to be paid or
decreases the Offer Price or the number of Shares sought in the Offer, (ii)
imposes conditions to the Offer in addition to those set forth in Annex I or
(iii) is materially adverse to the holders of the Shares. Notwithstanding the
foregoing, Buyer shall extend the Offer at any time up to the Outside
Termination Date (as such term is defined in Section 10.01(iv)) for one or more
periods of not more than ten business days, if at the initial expiration date of
the Offer, or any extension thereof, the condition to the Offer requiring the
expiration or termination of any applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act"), is
not satisfied. Except as set forth in the preceding sentence and the following
sentence or as otherwise may be required by law, Buyer shall either (i) accept
for payment, not later than 5:00 p.m. New York time on December 31, 1995 all
Shares validly tendered and not withdrawn on or prior to such date, or (ii)
cause the Offer to be extended so as to expire not earlier than 5:00 p.m. New
York time on January 5, 1996. In addition: (i) Buyer may extend the Offer, at
any time up to the Outside Termination Date for one or more periods of not more
than ten business days, if any condition of the Offer has not been satisfied;
(ii) Buyer shall have the right to extend the Offer at any time, for any reason,
for a period not to exceed ten business days provided such extension shall not
(y) extend beyond the Outside Termination Date or (z) be permitted if all
conditions to the Offer have been satisfied and at least 90% of the outstanding
Shares, on a fully diluted basis, have been validly tendered and not withdrawn;
and (iii) Buyer may extend the Offer for incremental periods of not more than
ten business days if at the time of any such extension
-2-
<PAGE> 3
an Acquisition Proposal (as such term is defined in Section 6.05) exists. In
addition, the Offer Price may be increased and the Offer may be extended to the
extent required by law in connection with such increase, in each case without
the consent of Company. Subject to the terms and conditions of the Offer,
Buyer shall pay, as promptly as practicable after expiration of the Offer, for
all Shares validly tendered and not withdrawn.
(b) As soon as practicable on the date of commencement of the Offer,
Buyer and Merger Subsidiary shall file (i) with the Securities and Exchange
Commission ("SEC"), a Tender Offer Statement on Schedule 14D-1 with respect to
the Offer which will contain the offer to purchase and form of the related
letter of transmittal and any other ancillary documents pursuant to which the
Offer shall be made (together with any supplements or amendments thereto,
collectively, the "SEC Offer Documents") and (ii) with the Attorney General of
the State of New York, a Registration Statement (together with any supplements
or amendments thereto, collectively, the "New York Disclosure Documents") in
accordance with Article 16 ("Security Takeover Disclosure Act") of the New York
Law. (The SEC Offer Documents and the New York Disclosure Documents are
collectively referred to herein as the "Offer Documents".) Buyer, Merger
Subsidiary and Company agree to correct promptly any information provided by
them for use in the Offer Documents if and to the extent that it shall have
become false or misleading in any material respect. Buyer and Merger
Subsidiary agree to take all steps necessary to cause the Offer Documents as so
amended and corrected to be filed with the SEC and the Attorney General for the
State of New York and to be disseminated to holders of Shares, in each case as
and to the extent required by applicable federal securities laws or the
Security Takeover Disclosure Act. Company and its counsel shall be given a
reasonable opportunity to review and comment on Schedule 14D-1 prior to it
being filed with the SEC and shall be promptly advised of any comments provided
or information requested by the staff of the SEC and afforded the opportunity
to comment on any related correspondence.
SECTION 1.02 Company Action. (a) Company hereby consents to the
Offer and the Merger and represents that its Board of Directors (at meetings
duly called and held ), has: (i) determined that this Agreement and the
transactions contemplated hereby, including the Offer and the Merger (as such
term is defined in Section 2.01), are fair to and in the best interest of
Company and its shareholders; (ii) approved, including by a majority of
Disinterested Directors (as such term is defined in Article Ninth of Company's
Restated Certificate of Incorporation), this Agreement and the transactions
contemplated hereby, including the Offer and the Merger, which approval
satisfies in full the requirements of the New York Law and the provisions of the
Restated Certificate of Incorporation of Company subject to requisite
shareholder approval; (iii) resolved to recommend acceptance of the Offer and
approval and adoption of this Agreement and the Merger by its shareholders; and
(iv) taken all other action necessary to render (x) Section 912 of the New York
Law and any other state takeover statutes and (y) the Rights Agreement dated as
of January 31, 1989 between Company and Mellon Securities Trust Company as
Rights Agent ("Rights Agreement") inapplicable to this Agreement, the Offer, the
Merger, the Stock Option
-3-
<PAGE> 4
Agreement and any purchase of Shares by Buyer or Merger Subsidiary pursuant to
the Stock Option Agreement and this Agreement.
(b) Company represents that its Board of Directors (i) has, in
accordance with the Shareholder Agreement among certain former shareholders of
United Coatings, Inc., Pratt & Lambert, Inc., and Raymond D. Stevens, Jr.,
Joseph J. Castiglia and James R. Boldt dated February 25, 1994 ("Shareholder
Agreement"), adopted a resolution approving the transactions contemplated in
this Agreement and the Stock Option Agreement, and (ii) approved Buyer's
commencement of negotiations with the parties to the Stock Option Agreement
with respect to the Stock Option Agreement and any subsequent purchase of
Option Shares pursuant to that agreement and this Agreement. Company further
represents that Merrill Lynch, Pierce, Fenner & Smith Incorporated, as
financial advisor to Company, has delivered to Company's Board of Directors its
oral opinion that, as of the date of such opinion, the cash consideration to be
received by the Shareholders of the Company pursuant to the Offer and the
Merger is fair to such shareholders from a financial point of view. In
connection with the Offer, Company will promptly furnish Buyer with a list of
Company's shareholders, mailing labels and any available listing or computer
file containing the names and addresses of all holders of record of Shares and
lists of securities positions of Shares held in stock depositories, and any
list of non-objecting beneficial holders of Shares maintained by Company, in
each case true and correct as of the most recent practicable date, and will
provide to Buyer such additional information (including, without limitation,
updated lists of shareholders, mailing labels and lists of securities
positions) and such other assistance as Buyer or Merger Subsidiary may
reasonably request in connection with the Offer.
(c) As soon as practicable on the day that the Offer is
commenced, Company will file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 ("Schedule 14D-9") which, subject to the fiduciary
duties of Company's Board of Directors, shall reflect that Company's Board of
Directors recommends acceptance of the Offer and approval and adoption of this
Agreement and the Merger by its shareholders. Company, Buyer and Merger
Subsidiary agree to correct promptly any information provided by them for use
in the Schedule 14D-9 if and to the extent that such information shall have
become false or misleading in any material respect. Company agrees to take all
steps necessary to cause the Schedule 14D-9 as so corrected to be filed with
the SEC and to be disseminated to holders of Shares, in each case as and to the
extent required by applicable federal securities laws. Buyer and its counsel
shall be given a reasonable opportunity to review and comment on the Schedule
14D-9 prior to its being filed with the SEC, and shall be promptly advised of
any comments provided or information requested by the staff of the SEC and
afforded the opportunity to comment on any related correspondence and
participate in any discussion with the staff of the SEC.
SECTION 1.03 Directors. (a) Commencing upon the purchase of Shares
pursuant to the Offer or the Stock Option Agreement and from time to time
thereafter, Buyer shall be entitled to designate the number of directors,
rounded up to the next whole number, on Company's Board of Directors that equals
the product of (i) the total number of directors on
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Company's Board of Directors (giving effect to the election of any additional
directors pursuant to this Section) and (ii) the percentage that (A) the sum of
(x) the number of Shares owned by Buyer and Merger Subsidiary (including Shares
accepted for payment in the Offer, provided funds therefor have been deposited
with the Depositary (as such term is defined in Section 2.03(a)) and (y) the
number of Option Shares, represents of (B) the total number of Shares
outstanding, and Company shall take all action necessary to cause Buyer's
designees to be elected or appointed to Company's Board of Directors including,
without limitation, increasing the number of directors and seeking and
accepting resignations of incumbent directors. At such times, Company will use
its best efforts to cause individuals designated by Buyer to constitute the
same percentage as such individuals represent on Company's Board of Directors
on each committee of the Board (other than any committee of the Board
established to take action under this Agreement), and each board of directors,
and each committee thereof, of each Subsidiary (as such term is defined in
Section 4.01).
(b) Company's obligations to appoint designees to the Board of
Directors shall be subject to Section 14(f) of the Securities Exchange Act of
1934 and the rules and regulations promulgated thereunder, as amended
("Exchange Act"), and Rule 14f-1 promulgated thereunder. Company shall
promptly take all actions required pursuant to Section 14(f) and Rule 14f-1 in
order to fulfill its obligations under this Section and shall include in the
Schedule 14D-9 such information with respect to Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1 to fulfill its
obligations under this Section 1.03. Buyer will supply to Company in writing
and be solely responsible for any information with respect to itself and its
nominees, officers, directors and affiliates required by Section 14(f) and Rule
14f-1.
(c) From and after the time, if any, that any of Buyer's designees
are appointed to Company's Board of Directors pursuant to this Section 1.03,
any amendment of this Agreement, any termination of this Agreement by Company,
any extension of time for performance of any of the obligations of Buyer or
Merger Subsidiary hereunder, any waiver of any condition to the obligations of
Company or any of Company's rights hereunder or other action by Company
hereunder may be effected only by the action of a majority of the directors of
Company then in office who were directors of Company on the date hereof (or
their successors designated as set forth below), which action shall be deemed
to constitute the action of the full Board of Directors; provided, that if
there shall be no such directors, such actions may be effected by majority vote
of the entire Board of Directors of Company. Notwithstanding the foregoing,
until the Effective Time, Company shall use reasonable efforts to retain as
members of its Board of Directors at least two directors who are directors of
Company on the date hereof ("Company Designees"); in the event of the
resignation of any or all of Company Designees, the remaining Company Designees
(or, if no other Company Designee shall remain on the Board, the last resigning
Company Designee) shall have the right to appoint a successor or successors to
serve as Company Designees. Buyer and Merger Subsidiary shall cause each such
appointment to become effective. Nothing in
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this Section 1.03(c) shall prohibit, or be construed to prohibit, any of
Buyer's designees from voting on any matter described in Section 10.02(b).
ARTICLE II
THE MERGER
SECTION 2.01 The Merger. (a) Upon the terms and subject to the
conditions set forth in this Agreement, at the Effective Time, Merger Subsidiary
shall be merged ("Merger") with and into Company in accordance with the New York
Law, whereupon the separate existence of Merger Subsidiary shall cease, and
Company shall be the surviving corporation ("Surviving Corporation").
(b) As soon as practicable after satisfaction or, to the extent
permitted hereunder, waiver of all conditions to the Merger, Company and Merger
Subsidiary will file a certificate of merger with the Department of State of
the State of New York and make all other filings or recordings required by the
New York Law in connection with the Merger. The Merger shall become effective
on the date the certificate of merger is duly filed with the Department of
State of the State of New York or at such later date as is specified in the
certificate of merger ("Effective Time").
(c) From and after the Effective Time, Surviving Corporation shall
possess all the rights, privileges, powers and franchises and be subject to all
of the restrictions, disabilities, liabilities and duties of Company and Merger
Subsidiary, as provided in the New York Law.
SECTION 2.02 Conversion of Shares. At the Effective Time:
(i) each share of Company treasury stock and each Share
owned by Buyer, Merger Subsidiary or any other
subsidiary of Buyer immediately prior to the
Effective Time shall be cancelled, and no payment
shall be made with respect thereto;
(ii) each Share outstanding immediately prior to the
Effective Time shall, except as otherwise provided in
Section 2.02(i) or as provided in Section 2.04 with
respect to Shares as to which appraisal rights have
been exercised, be converted into the right to
receive $35.00 in cash or any higher price paid for
each Share in the Offer, without interest ("Merger
Consideration"); and
(iii) each share of common stock of Merger Subsidiary
outstanding immediately prior to the Effective Time
shall be converted into and become one share of
common stock of Surviving Corporation with the same
rights, powers and privileges as the shares so
converted and shall
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constitute the only outstanding shares of capital
stock of Surviving Corporation.
SECTION 2.03 Surrender and Payment. (a) Prior to the Effective Time,
Buyer shall appoint a depositary ("Depositary") for the purpose of exchanging
certificates representing Shares for the Merger Consideration. Depositary
shall at all times be a commercial bank having a combined capital and surplus of
at least $100,000,000. Buyer will pay to Depositary, immediately prior to the
Effective Time, the Merger Consideration to be paid in respect of the Shares.
For purposes of determining the Merger Consideration to be so paid, Buyer shall
assume that no holder of Shares will perfect his right to appraisal of his
Shares. Promptly after the Effective Time, Buyer will send, or will cause
Depositary to send, but in no event later than three business days after the
Effective Time, to each holder of Shares at the Effective Time a letter of
transmittal for use in such exchange (which shall specify that the delivery
shall be effected, and risk of loss and title shall pass, only upon proper
delivery of the certificates representing Shares to Depositary).
(b) Each holder of Shares that have been converted into a right to
receive the Merger Consideration, upon surrender to Depositary of a certificate
or certificates properly representing such Shares, together with a properly
completed letter of transmittal covering such Shares, will be entitled to
receive the Merger Consideration payable in respect of such Shares. Until so
surrendered, each such certificate shall, after the Effective Time, represent
for all purposes only the right to receive such Merger Consideration.
(c) If any portion of the Merger Consideration is to be paid to a
Person (as hereinafter defined) other than the registered holder of the Shares
represented by the certificate or certificates surrendered in exchange
therefor, it shall be a condition to such payment that the certificate or
certificates so surrendered shall be properly endorsed or otherwise be in
proper form for transfer and that the Person requesting such payment shall pay
to Depositary any transfer or other taxes required as a result of such payment
to a Person other than the registered holder of such Shares or establish to the
satisfaction of Depositary that such tax has been paid or is not payable. For
purposes of this Agreement, "Person" means an individual, a corporation, a
joint venture, a limited liability company, a partnership, an association, an
unincorporated organization, a group, a trust or any other entity or
organization, including a government or political subdivision or any agency or
instrumentality thereof.
(d) After the Effective Time, there shall be no further
registration of transfers of Shares. If, after the Effective Time,
certificates representing Shares are presented to Surviving Corporation, they
shall be canceled and exchanged for the consideration provided for, and in
accordance with the procedures set forth, in this Article II.
(e) Any portion of the Merger Consideration paid to Depositary
pursuant to Section 2.03(a) that remains unclaimed by the holders of Shares one
year after the Effective Time shall be returned to Surviving Corporation, upon
demand, and any such holder who has
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not exchanged his Shares for the Merger Consideration in accordance with this
Section prior to that time shall thereafter look only to Surviving Corporation
for payment of the Merger Consideration in respect of his Shares.
Notwithstanding the foregoing, Buyer, Merger Subsidiary and Surviving
Corporation shall not be liable to any holder of Shares for any amount paid to
a public official pursuant to applicable abandoned property laws. Any amounts
remaining unclaimed by holder of Shares on the day immediately prior to such
time as such amounts would otherwise escheat to or become property of any
governmental entity shall, to the extent permitted by applicable law, become
the property of Buyer, free and clear of any claims or interest of any Person
previously entitled thereto.
(f) Notwithstanding Section 2.03(e) to the contrary, any portion
of the Merger Consideration paid to Depositary pursuant to Section 2.03(a) in
respect of Shares for which appraisal rights have been perfected shall be
returned to Buyer upon demand.
SECTION 2.04 Dissenting Shares. Shares outstanding immediately prior
to the Effective Time and held by a holder who has not voted in favor of the
Merger or consented thereto in writing and who has demanded appraisal for such
Shares in accordance with the New York Law shall not be converted into the right
to receive the Merger Consideration, unless such holder fails to perfect or
withdraws or otherwise loses his right to appraisal. If after the Effective
Time such holder fails to perfect or withdraws or loses his right to appraisal,
such Shares shall be treated as if they had been converted as of the Effective
Time into the right to receive the Merger Consideration. Company shall give
Buyer prompt notice of any demands received by Company for appraisal of Shares,
and Buyer shall have the right to participate in all negotiations and
proceedings with respect to such demands. Company shall not, except with the
prior written consent of Buyer, make any payment with respect to, or settle or
offer to settle, any such demands.
SECTION 2.05 Stock Options. (a) Immediately prior to the Effective
Time, each outstanding employee stock option ("Option") to purchase Shares
granted under any employee stock option or compensation plan or arrangement of
Company shall be cancelled, and each holder of any such Option, whether or not
then vested or exercisable, shall be paid by Company at the Effective Time for
each such Option an amount (subject to applicable withholding taxes) determined
by multiplying (i) the excess, if any, of the price per Share paid in the Offer
over the applicable exercise price of such Option by (ii) the number of Shares
such holder could have purchased (assuming full vesting of all Options) had such
holder exercised such Option in full immediately prior to the Effective Time. In
the event any holder of an Option is terminated by Company subsequent to the
time a majority of Board of Directors of the Company consists of designees of
Buyer, Company shall provide to such employee the same payment specified above,
as if such employee had continued his employment through the Effective Time,
unless a majority of directors of the Company determines that such employee has
been terminated for Cause. For purposes of this Section 2.05(a), "Cause" shall
mean conviction of a felony involving moral turpitude or theft of Company
assets.
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(b) Prior to the Effective Time, Company shall (i) use its best
efforts to obtain any consents from holders of the Options and (ii) make any
amendments to the terms of such employee stock option or compensation plans or
arrangements, to the extent such consents or amendments are necessary to give
effect to the transactions contemplated by Section 2.05(a). Notwithstanding
any other provision of this Section 2.05 to the contrary, payment may be
withheld in respect of any Option until necessary consents are obtained.
SECTION 2.06 Merger Without Meeting of Shareholders. In the event
that Buyer, Merger Subsidiary or any other subsidiary of Buyer shall acquire at
least 90% of the outstanding Shares, pursuant to the Offer or otherwise, the
parties hereto agree to take all necessary and appropriate action to cause the
Merger to become effective as soon as practicable after such acquisition,
without a meeting of shareholders of Company, in accordance with Section 905 of
the New York Law.
ARTICLE III
THE SURVIVING CORPORATION
SECTION 3.01 Certificate of Incorporation. The certificate of
incorporation of Merger Subsidiary in effect at the Effective Time shall be the
certificate of incorporation of Surviving Corporation until amended in
accordance with applicable law, except that the name of Surviving Corporation
shall be "Pratt & Lambert United, Inc."
SECTION 3.02 Bylaws. The bylaws of Merger Subsidiary in effect at the
Effective Time shall be the bylaws of Surviving Corporation until amended in
accordance with applicable law.
SECTION 3.03 Directors and Officers. From and after the Effective
Time, until successors are duly elected or appointed and qualified in accordance
with applicable law, the directors of Merger Subsidiary at the Effective Time
shall be the directors of Surviving Corporation and the officers of Merger
Subsidiary at the Effective Time shall be the officers of Surviving Corporation.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COMPANY
The Company represents and warrants to Buyer and Merger Subsidiary as
follows:
SECTION 4.01 Organization. Each of Company and the Subsidiaries is
a corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation and has all requisite power and
authority, corporate and other, and all
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necessary governmental approvals, licenses and permits to own, lease and
operate its properties and to carry on its business as now and heretofore being
conducted except where the failure to have any such approvals, licenses or
permits would have a Material Adverse Effect (as such term is defined below)
with respect to Company. Company and each Subsidiary are duly qualified or
licensed to do business and in good standing in each state in which the
property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, other than in
such states where the failure to so qualify would not have a Material Adverse
Effect with respect to Company. As used in this Agreement, a "Subsidiary(ies)"
shall mean (i) any "significant subsidiary" of Company as described in Rule
12b-1 of the Exchange Act and (ii) any corporation or other entity of which
securities or other ownership interests having ordinary voting power to elect
at least fifty percent of the board of directors or other persons performing
similar functions are directly or indirectly owned by Company. True and
complete copies of Company's Restated Certificate of Incorporation and By-Laws
are attached hereto as Schedule 4.01. As used in this Agreement, the term
"Material Adverse Effect" shall mean, with respect to any party, the result of
one or more events, changes or effects which, individually or in the aggregate,
would have a materially adverse effect on the business, operations, assets,
condition (financial or otherwise) or prospects of such party and its
Subsidiaries, taken as a whole.
SECTION 4.02 Capital Stock. The authorized capital stock of Company
consists of: (i) 100,000,000 shares of common stock, par value $.01 per share,
of which, at the date of this Agreement, 10,704,276 shares were issued and
outstanding (each of which is entitled to one vote) and 2,823,113 shares were
held in treasury; and (ii) 1,500,000 shares of preferred stock, par value $10.00
per share, of which none are issued and outstanding. At the date of this
Agreement, 1,038,100 shares of Company common stock were reserved for issuance
upon exercise of outstanding Options pursuant to Company's stock options plans
("Company Stock Plans") and 15,270,339 shares of common stock were reserved for
issuance in accordance with Company's Rights Agreement (as such term is defined
in Section 1.02(a)). At November 3, 1995, 704,850 Options were outstanding. All
outstanding Shares of Company's common stock are duly authorized, validly
issued, fully paid and non-assessable and free of any preemptive rights with
respect thereto. There are no bonds, debentures, notes or other indebtedness
having the right to vote (or convertible into securities having the right to
vote) on any matters on which shareholders of Company may vote ("Voting Debt")
issued or outstanding. Except for: the Shareholder Agreement; that certain
Registration Agreement made as of August 4, 1994 by and among the signing former
shareholders of United Coatings, Inc. and Company; that certain Right of First
Offer Agreement, between Jules F. Knapp and Company, dated August 4, 1994;
certain Affiliate Agreements made as of August 4, 1994 between Company and
certain former shareholders of United Coatings, Inc.; Sections 5.02(b) of the
1994 Merger Agreement (as such term is defined in Section 4.28); the outstanding
Options; certain former United Coatings, Inc. employee notes and stock pledge
agreements dated August 4, 1994; that certain agreement of the Company's Board
dated August 4, 1994 regarding transfers of Shares by certain United Coatings,
Inc. employees; and the Company's Rights Agreement, there are no existing
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options, warrants, calls, subscriptions or other rights or other agreements or
commitments of any character obligating Company or any Subsidiary to issue,
transfer or sell or cause to be issued, transferred or sold any shares of
capital stock or Voting Debt of, or other equity interests in, Company or any
Subsidiary or securities convertible into or exchangeable for such shares or
equity interests or obligating Company or any Subsidiary to grant, extend or
enter into any such option, warrant, call, subscription or other right,
agreement or commitment. Except as indicated on Schedule 4.02, Company has no
agreement, obligation or commitment to purchase or redeem Company common stock.
Except as set forth on Schedule 4.02, all Subsidiaries of Company are
wholly-owned by Company and none of the shares of capital stock of such
Subsidiaries are subject to a pledge. To the best of Company's knowledge and
except as set forth on Schedule 4.02, no shareholder beneficially owns more
than three percent of the Shares.
SECTION 4.03 Corporate Authority. Company has all requisite corporate
power and authority, corporate and other, to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution, delivery
and performance of this Agreement and the consummation of the Merger and of the
other transactions contemplated hereby have been duly and effectively authorized
by all necessary corporate action on the part of Company, and no other corporate
proceedings on the part of Company are necessary to authorize this Agreement or
to consummate the transactions contemplated hereby (other than the "Shareholder
Approval Requirement" as defined in Section 4.09). Assuming due execution and
delivery by other parties hereto, this Agreement constitutes the valid and
binding agreement of Company, enforceable against Company except that
enforcement may be subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws, now or hereafter in effect, affecting
creditor's rights generally.
SECTION 4.04 No Violation. (a) Except as described on Schedule 4.04
or as contemplated by Section 4.05, the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby will not result in
any violation of: (i) any provision of the Restated Certificate of
Incorporation, as amended, or By-Laws, as amended, of Company; or (ii) any
judgment, order or decree.
(b) Except as described on Schedule 4.04 or as contemplated by
Section 4.05, the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not result in any violation of:
(i) any provision of any loan or credit agreement, note, mortgage, indenture,
lease, benefit plan or other agreement, obligation, instrument, permit,
concession, franchise or license applicable to Company or any Subsidiary; (ii)
any statute, law, ordinance, rule or regulation applicable to Company or any
Subsidiary, or their respective properties or assets; (iii) any other
restrictions of any kind or nature nor result in the creation of any lien,
mortgage, pledge, loan, charge or encumbrance on the Shares and/or any assets
of Company or any Subsidiary, nor the loss of any license or contractual right
with respect to Company's or any Subsidiary's business; or (iv) any
acceleration or termination provision of any loan, indenture, note or security
interest agreement to which Company or any Subsidiary is a party or to which
any of their respective
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assets are subject or bound, except where any such violation or loss would not
have a Material Adverse Effect with respect to Company.
SECTION 4.05 Government Authorization. No consent, approval, order or
authorization of, or registration, declaration or filing with, any governmental
entity or regulatory authority is required by or with respect to Company or any
Subsidiary in connection with the execution and delivery of this Agreement or
the consummation by Company of the transactions contemplated hereby, the failure
of which to obtain would have a Material Adverse Effect with respect to Company
or the transactions contemplated hereby, except for: (i) the filing of a
pre-merger notification report by Company under the HSR Act and the expiration
or termination of the applicable waiting period thereunder; (ii) the filing of
the Certificate of Merger with the Department of State of the State of New York
in accordance with the requirements of the New York Law and the filing of
appropriate documents with the relevant authorities of other states in which
Company is qualified to transact business; and (iii) compliance with any
applicable requirements of the Exchange Act or state securities laws.
SECTION 4.06 SEC Reports and Financial Statements. (a) Company has
filed with the SEC and has delivered or made available to Buyer true and
complete copies of all forms, reports, schedules, statements and other documents
required to be filed by it with the SEC since March 1, 1993 under the Exchange
Act or the Securities Act of 1933, as amended ("Securities Act"), including,
without limitation, the annual reports on Form 10-K for its fiscal years ended
December 31, 1992, 1993 and 1994, the quarterly reports on Form 10-Q for its
fiscal quarters ended March 31, June 30 and September 30, 1993, 1994 and 1995
(other than the Form 10-Q for its fiscal quarter ended September 30, 1995), and
the proxy or information statements relating to meetings of, or actions taken
without a meeting by, the shareholders of Company since March 1, 1993 (as such
documents have been amended since the time of their filing, collectively, the
"SEC Documents"). The financial statements of Company included in the SEC
Documents comply with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, and such financial
statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto or, in the case of the unaudited
statements, as permitted by Form 10-Q) and fairly present (subject in the case
of the unaudited statements to normal, recurring audit adjustments) the
consolidated financial position of Company and its consolidated Subsidiaries,
taken as a whole, at the date thereof and the consolidated results of their
operations and cash flows (or changes in financial position prior to the
adoption of FASB 95) for the periods then ended. The books of account and other
financial records of Company have been maintained in accordance with sound
business practices.
(b) In addition, Company has delivered or made available to Buyer
true and complete copies of the audited balance sheets of the former United
Coatings, Inc. (which company was merged with and into Company effective
August 4, 1994, hereinafter "UCI") at December 31, 1990, December 31, 1991,
December 31, 1992 and December 31, 1993 and
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the related statements of earnings, shareholder's investment and changes in
financial position for the years then ended (including the notes thereto),
which present fairly the financial position of UCI as of such dates and the
results of its operations and changes in its financial position for such
periods, and have been prepared in conformity with generally accepted
accounting principles applied on a basis consistent with that of similar
periods for preceding years. The balance sheets and financial statements
identified in this Section 4.06(b) accurately reflect the basis for the
financial condition and results of operations of UCI set forth in such
financial statements.
SECTION 4.07 Absence of Certain Changes or Events. Except as
disclosed on Schedule 4.07 or as otherwise contemplated by this Agreement or
reflected in the SEC Documents, since December 31, 1994, Company and each
Subsidiary have operated only in the ordinary course of business and consistent
with past practices, and there have been no events, changes or circumstances
having, individually or in the aggregate, a Material Adverse Effect with respect
to Company. Specifically, and without limiting the generality of the foregoing,
since December 31, 1994 (except as set forth on Schedule 4.07 or as otherwise
contemplated by this Agreement or reflected in the SEC Documents), neither
Company nor any Subsidiary has: (i) declared, set aside or paid any dividend or
other distribution in respect of its capital stock, other than quarterly
dividends paid by Company on its common stock of not more than $0.16 per share;
(ii) made any payment (other than dividends) to any of its shareholders (in
their capacity as shareholders); (iii) issued or sold any shares of its capital
stock or any options, warrants or other rights to purchase any such shares or
any securities convertible into or exchangeable for such shares or taken any
action to reclassify or recapitalize or split up its capital stock, except for
Shares issued pursuant to the exercise of Options; (iv) mortgaged, pledged or
subjected to any lien, lease, security interest, encumbrance or other
restriction, any of its properties or assets except in the ordinary course of
business; (v) except for compromises of trade accounts receivable in the
ordinary course of business, forgiven or cancelled any debt or claim, waived any
right of material value; (vi) adopted or amended any plan or arrangement
described in Section 4.17 (other than amendments that were made to comply with
laws or regulations) for the benefit of any director, officer or employee, or
changed the compensation (including bonuses) to be paid to any director, officer
or employee, except for changes made in the ordinary course of business and
consistent with past practices, and which are consistent with Company's
corporate policies and procedures; (vii) suffered any damage, destruction or
loss (whether or not covered by insurance) which has a Material Adverse Effect
with respect to Company; (viii) sold, leased or otherwise transferred, or
contracted to sell, lease or otherwise transfer (except as contemplated in this
Agreement), any assets material to the operations or business of Company or any
Subsidiary which has not been replaced with a comparable substitute except for
the sale, lease or transfer of assets in the ordinary course of business; (ix)
sold, licensed, assigned or otherwise transferred exclusive rights to any
material patents, copyrights, trademarks, trade names or other similar
intangible assets; (x) agreed to guarantee, secure or act as a surety with
respect to any debt, liability or obligation of any third party which in the
aggregate does not exceed $ 500,000.00; or (xi) agreed to, permitted
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or suffered any of the acts, transactions or other things described in clauses
(i) through (x) of this Section 4.07.
SECTION 4.08 Taxes. (a)(i) All income and other material Tax (as such
term is defined in Section 4.08(b)) returns, statements, reports and forms
(including estimated Tax returns and reports and information returns and
reports) required to be filed with any taxing authority with respect to any
Pre-Closing Tax Period (as such term is defined in Section 4.08(b)) by or on
behalf of Company or any Subsidiary (including any predecessors of any of them
including, without limitation, UCI) (collectively, the "Return(s)") were filed
when due (including any applicable extension periods) in accordance with all
applicable laws; (ii) as of the time of filing, such Returns correctly reflected
in all material respects the facts regarding the income, business, assets,
operations, activities and status of Company, any Subsidiary and any other
information required to be shown therein; (iii) Company and each Subsidiary has
timely paid, or withheld and remitted to the appropriate taxing authority, all
Taxes (as such term is defined in Section 4.08(b)) shown as due and payable on
the Returns that have been filed; (iv) the charges, accruals and reserves for
Taxes with respect to Company and any Subsidiary for any Pre-Closing Tax Period
(including any Pre-Closing Tax Period for which no Return has yet been filed)
reflected in the financial statements of Company in the SEC Documents are
adequate; (v) since 1976 neither the Company nor any Subsidiary has been a
member of an affiliated group (as defined in Section 1504 of the Internal
Revenue Code of 1986, as amended ("Code")) other than one of which Company or a
Subsidiary was the common parent, or filed or been included in a combined,
consolidated or unitary Return other than one filed by Company or a Subsidiary;
(vi) Company is not and has not been within five years of the date hereof a
"United States real property holding corporation" as defined in Section 897 of
the Code; (vii) there is no claim, action, suit or proceeding now pending or
threatened in writing against or in respect of any Tax or Tax Asset (as such
term is defined in Section 4.08(b)) of Company or any Subsidiary the resolution
of which would as proposed, or audit or investigation now pending or threatened
in writing against or in respect of any Tax or Tax Asset of Company or any
Subsidiary the resolution of which Company believes would (taking into account
any changes, accruals and reserves referred to in clause (iv) above)
individually or in the aggregate, have a material adverse effect on the
financial position of Company and its Subsidiaries taken as a whole, and there
has not occurred any extension or waiver of any applicable statute of
limitations with respect to any Return.
(b) (i) As used in this Agreement, "Tax" or "Taxes" mean: (A)
federal, state, local and foreign income, franchise,
alternative or add-on minimum tax, gross receipts,
transfer, withholding on amounts paid to or by
Company or any Subsidiary, payroll, employment,
license, property, sales, use, excise and other
taxes, tariffs or governmental charges of any nature
whatsoever, together with any interest, penalty or
additional tax attributable to such taxes; (B) any
liability of Company or any Subsidiary for the
payment of any amounts of the type described in
clause (i) of this paragraph (b) as a result of being
a member of an affiliated, consolidated, combined or
unitary group, or being a party to
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any agreement or arrangement whereby liability of
Company or any Subsidiary for payments of such
amounts was determined or taken into account with
reference to the liability of any other person; and
(C) any liability of Company or any Subsidiary for
the payment of any amounts as a result of being party
to any tax sharing agreement or with respect to the
payment of any amounts of the type described in
clauses (A) or (B) of this paragraph as a result of
any express or implied obligation to indemnify any
other person.
(ii) As used in this Agreement, "Pre-Closing Tax Period"
means any Tax period (or portion thereof) ending on
or before the Effective Time.
(iii) As used in this Agreement, "Tax Asset" means any net
operating loss, net capital loss, investment tax
credit, foreign tax credit, charitable deduction or
any other credit or tax attribute which could reduce
Taxes.
SECTION 4.09 Vote Required. Unless the Merger is consummated in
accordance with the provisions of Section 905 of the New York Law, the
affirmative vote of the holders of two-thirds of all outstanding Shares at a
meeting at which there is a quorum approving this Agreement, the Merger and
other transactions contemplated hereby ("Shareholder Approval Requirement") is
the only vote of the holders of any class or series of capital stock necessary
to approve this Agreement, the transactions contemplated hereby and the Merger,
other than approvals already obtained.
SECTION 4.10 Finders' Fees. Except for Merrill Lynch, Pierce, Fenner
& Smith Incorporated, whose fees and expenses will be paid by Company, no person
acting on behalf of Company has claims to, or is entitled to, under any contract
or otherwise, any payment as a broker, finder or intermediary in connection with
the origin, negotiation, execution or consummation of the transactions provided
for in this Agreement.
SECTION 4.11 Transactions with Certain Persons. Except as disclosed
on Schedule 4.11 or in the SEC Documents, to Company's knowledge, no current or
former director, officer, employee or shareholder of Company or any Subsidiary,
or any of their affiliates or family members or trusts for the benefit of any
such person or persons, has any interest in any property, real or personal,
tangible or intangible, material to the business of Company or any Subsidiary,
and since December 31, 1994 there have been no material transactions between
Company or any Subsidiary and any director, officer or shareholder of Company or
any Subsidiary other than employment or compensation arrangements entered into
in the ordinary course of business.
SECTION 4.12 Litigation and Claims. Except as identified on Schedule
4.12 or in the SEC Documents, there is no pending or, to the knowledge of
Company, threatened action, suit, proceeding, claim, investigation or notice by
or against Company or any Subsidiary which, if adversely determined, would have
a Material Adverse Effect with
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respect to Company, whether or not covered by insurance, and there is no
outstanding order, notice, writ, injunction or decree of any court, government
or governmental agency against or, to the knowledge of Company, directly
affecting Company or any Subsidiary. To the best knowledge of Company and
except as identified on Schedule 4.12, there are no claims asserted against
Company or any Subsidiary (whether or not covered by insurance) and no
incidents or occurrences of any kind which Company or any Subsidiary believes
may give rise to any claims against Company or any Subsidiary, whether or not
covered by insurance, which will, in the aggregate, have a Material Adverse
Effect with respect to Company.
SECTION 4.13 Contracts; No Defaults; Major Customers. Except as
disclosed in the SEC Documents and except for the customer contracts described
in clauses (i) - (iv) below which are delivered to Buyer within ten business
days following the execution of this Agreement, Schedule 4.13 contains a
complete and accurate list of all written agreements, contracts and commitments
consisting of any guarantee by Company or any Subsidiary of any obligation(s)
of third parties, loans, mortgages and other financing arrangements under which
Company or any Subsidiary is indebted, as well as all licenses to Company of
proprietary information and/or rights which are related to a significant amount
of sales or significant in the operation of the business, customer contracts
(for each of: (i) the twenty largest customers for 1994 and for the nine month
period ending September 30, 1995 listed on Schedule 4.13, (ii) any customer with
purchases in excess of $750,000, during 1994 and for the nine month period
ending September 30, 1995, (iii) any such contracts with mass merchandisers and
home centers, and (iv) any such contract which provided for cooperative
advertising, merchandising aids and programs, rebates, stock lifts and other
similar incentives where the amount of which exceeded $100,000 in 1994 or is
expected to exceed $100,000 in 1995) and all other agreements, contracts and
commitments entered into by Company or any Subsidiary not usual or customary for
a company engaged in the type of businesses which Company or any Subsidiary
conducts. All such agreements, contracts and commitments are valid, binding and
in full force and effect and neither Company nor any Subsidiary is in material
default or alleged to be in material default thereunder and, to the best
knowledge of Company or any Subsidiary, no other party thereto is in default.
Nothing has occurred which, with or without the passage of time or giving of
notice or both, would constitute a material default by Company or any Subsidiary
or, to the knowledge of Company, any other party under any such agreement,
contract or commitment. Company has no knowledge that any such agreement,
contract or commitment will not be renewed and neither Company nor any
Subsidiary has received any notification that any such agreement, contract or
commitment is not likely to be renewed. Except as otherwise provided on
Schedule 4.13, the Merger contemplated by this Agreement will not create a
material default under or permit the termination of or otherwise adversely
affect any such agreement, contract or commitment in a manner that will have a
Material Adverse Effect with respect to Company. Except as described on
Schedule 4.13, neither Company nor any Subsidiary is required to give any notice
to any party to any such agreement, contract or commitment regarding this
Agreement or the transactions contemplated hereby . Schedule 4.13 includes a
complete and correct list of the twenty largest customers of Company and the
Subsidiaries, on a consolidated basis, in terms of revenue recognized in respect
of such customers during
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the fiscal period ended December 31, 1994 and for the nine month period ending
September 30, 1995, showing the amount of revenue recognized for each such
customer during such period. Except as described on Schedule 4.13, neither
Company nor any Subsidiary has been notified that any of the customers listed
on Schedule 4.13 will terminate or reduce in any material respect, or otherwise
materially and adversely change, the business or relationship between such
customer and Company or any Subsidiary.
SECTION 4.14 Proprietary Rights. Schedule 4.14 lists all significant
U.S. and foreign names, patents, patent applications, marks, symbols, trade
names, trademarks, service marks, copyrights, copyright applications and logos
used in the business of Company or any Subsidiary. Schedule 4.14 identifies
which of the foregoing are owned by either Company or any Subsidiary and which
are owned by any other Person. Except as provided on Schedule 4.14, since
December 31, 1994 neither Buyer nor any Subsidiary has sold or transferred any
exclusive rights to such proprietary rights to any third party.
SECTION 4.15 Title to and Condition of Real Estate. The real property
owned or leased by Company and each Subsidiary is identified on Schedule 4.15
("Real Estate"). With respect to owned Real Estate, either Company or a
Subsidiary owns title to such Real Estate in fee simple. The Real Estate leases
referred to on Schedule 4.15 constitute all of the leases under which Company
and any Subsidiary holds a leasehold interest in real estate and such leases are
valid, binding and in full force and effect. Neither Company, any Subsidiary
nor, to the best of Company's knowledge, any third party is in material breach
or material default of any payments due under such leases or any material term
of such leases. Schedule 4.15 identifies those real estate leases between
Company or any Subsidiary and any affiliated owner or affiliated owners.
SECTION 4.16 Environmental Compliance. Except as disclosed in
Schedule 4.16 and except where the failure to have any of the following would
result in a loss, liability or obligation to Company and the Subsidiaries, taken
as a whole, of less than Five Million and 00/100 Dollars ($5,000,000), in the
aggregate (a) Company and each Subsidiary has in full force and effect, and has
made all necessary filings in relation to, (i) all governmental permits,
licenses, authorizations or approvals necessary or required pursuant to the
Federal Comprehensive Environmental Response Compensation and Liability Act
(CERCLA), the Superfund Amendments and Reauthorization Act (SARA), the Federal
Water Pollution Control Act, the Federal Clean Air Act, the Federal Resource
Conservation and Recovery Act ("RCRA"), the Hazardous and Solid Waste Amendments
to RCRA (HSWA), the Federal Solid Waste Disposal Act, the Federal Toxic
Substances Control Act (TSCA), the Federal Insecticide, Fungicide and
Rodenticide Act (FIFRA), each as amended, and under all statutes enacted by any
state, local and/or foreign governments and authorities (including, but not
limited to, municipal sewage authorities) and under any and all rules,
regulations, ordinances or requirements promulgated thereunder and any other
federal, state, local or foreign laws (codified or common law), executive
orders, ordinances, rules and regulations relating to
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<PAGE> 18
pollution, the preservation of the environment and/or the release of material
into the environment ("Environmental Laws") and (ii) all such permits,
licenses, authorization and approvals are in good standing and Company has made
timely application for renewal of such permits where necessary and (b) there
are no pending or, to the knowledge of Company, threatened proceedings to
revoke, suspend and/or limit any such permit, license, authorization or
approval.
(b) Except as consistent with applicable Environmental Laws and
except as identified on Schedule 4.16, to the best of Company's knowledge, no
Hazardous Substances (as hereinafter defined) are emitted, discharged or
released from the Real Estate, directly or indirectly, into the atmosphere,
soil, ground water or surface water, the effect of which would have a Material
Adverse Effect with respect to Company. Except for those matters identified on
Schedule 4.16, to the best of Company's knowledge, neither Company nor any
Subsidiary, nor any predecessor thereof nor any present or former owner or
operator of all or a portion of the Real Estate, has been determined to be
liable for cleanup or response costs with respect to the emission, discharge,
or release of any Hazardous Substance or for any other matter arising under the
Environmental Laws due to its ownership, lease, use or operation of all or a
portion of the Real Estate or any other premises or the generation, handling,
treatment, storage, transportation or disposal of any Hazardous Substance
which, in the aggregate, would have a Material Adverse Effect with respect to
Company. Any "underground storage tank" (as that term is defined in the
Environmental Laws) that is located in or at the Real Estate is identified on
Schedule 4.16 and, except as identified on such Schedule, all such tanks are in
compliance with the Environmental Laws. Any removal of underground storage
tanks by Company or any Subsidiary prior to the date of this Agreement has been
completed in accordance with applicable Environmental Laws. As used in this
Agreement "Hazardous Substances" shall mean any and all wastes, substances,
materials, pollutants, contaminants, chemical substances, smoke, gas or
particulate matter defined or regulated as hazardous, toxic or dangerous under
any Environmental Law.
(c) Except as set forth on Schedule 4.16, neither Company nor any
Subsidiary has been notified by any regulatory authority that Company or any
Subsidiary was, may be or is in violation of or has liability or potential
liability under the Environmental Laws. Except as set forth on Schedule 4.16,
neither Company nor any Subsidiary is in violation of or has potential
liability under the Environmental Laws which, individually or in the aggregate,
would have a Material Adverse Effect with respect to Company.
(d) Except as set forth on Schedule 4.16, there are no claims,
notices of potential responsibility or violations, demand letters, requests for
information, actions, litigation, proceedings or, to the knowledge of Company,
investigations (including, without limitation, any of such which have been
initiated by private parties), pending or, to the knowledge of Company,
threatened, administrative, governmental or judicial, arising out of, in
connection with or resulting from a violation or alleged violation of, or
related to, the Environmental Laws which, individually or in the aggregate,
would have a Material Adverse Effect with respect to Company.
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<PAGE> 19
(e) (i) Company has not knowingly withheld from Buyer any
environmental investigation, study, audit, test, review or other analysis in
the possession of Company or any Subsidiary conducted in relation to the
business of Company or any Subsidiary or any property or facility now or
previously owned, operated or leased by Company or any Subsidiary; and (ii)
Company has not withheld from Buyer any consent decree, consent order or
similar document in force to which Company or any Subsidiary is a party or
relating to any property currently owned, leased or operated by the Company or
any Subsidiary.
4.17 Employee Benefit Matters. (a) For purposes of this Section
4.17, the following terms shall have the meanings set forth below:
(i) Benefit Arrangement: Any contract (other than the
Employee Agreements), arrangement or policy, or any
plan or arrangement (whether or not written)
providing for severance benefits, insurance coverage
(including any self-insured arrangement), workers'
compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement
benefits, deferred compensation, profit-sharing,
bonuses, stock options, stock appreciation rights or
other forms of incentive compensation or
post-retirement insurance compensation or benefits
that (A) is not an Employee Plan (as such term is
defined in Section 4.17(a)(iii)), (B) is entered into
or maintained, as the case may be, by Company or any
Subsidiary or affiliated entities and (C) covers any
employee or former employee of Company or any
Subsidiary or affiliated entities.
(ii) Employee Agreement: All written employment
agreements and severance agreements with employees of
Company or any Subsidiary or affiliated entities.
(iii) Employee Plan: Any "employee benefit plan" as
defined in Section 3(3) of ERISA that is (A) subject
to any provision of ERISA, (B) is maintained,
administered or contributed to by Company, any
Subsidiary or any of their ERISA Affiliates (as such
term is defined in Section 4.17(a)(v))for employees
or former employees of Company or any Subsidiary or
any of their ERISA Affiliates and (C) covers any
employee or former employee of Company, any
Subsidiary or any of their ERISA Affiliates.
(iv) ERISA: The Employee Retirement Income Security Act
of 1974, as amended, and any successor statute
thereto, and the rules and regulations promulgated
thereunder.
(v) ERISA Affiliate: Any entity which, together with
Company or any Subsidiary or affiliated entities,
would be treated as a single employer
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under Section 4001(b)(1) of ERISA or Section 414(b),
(c), (m) or (o) of the Code.
(vi) Multiemployer Plan: Each Employee Plan that is a
multiemployer plan, as defined in Section 3(37) of
ERISA.
(vii) Title IV Plan: An Employee Plan, other than any
Multiemployer Plan, subject to Title IV of ERISA.
(b) Subject to the last sentence of this paragraph (b), Schedule
4.17 identifies each Employee Plan. Except as permitted by the last sentence
of this paragraph (b), Company has furnished or made available to Buyer copies
of the Employee Plans (and, if applicable, related trust agreements) and all
amendments thereto and written interpretations thereof, together with (i) the
three most recent annual reports prepared in connection with any material
Employee Plan (Form 5500 including, if applicable, Schedule B thereto) and (ii)
the most recent actuarial valuation report prepared in connection with any
Employee Plan. No Employee Plan is, except as set forth on Schedule 4.17, (i)
a Multiemployer Plan, (ii) a Title IV Plan or (iii) maintained in connection
with any trust described in Section 501(c)(9) of the Code. Except as set forth
on Schedule 4.17, no Employee Plan is a plan described in Section 401(a)(1) of
ERISA. With respect to welfare benefit plans as defined in Section 3(1) of
ERISA, Company shall furnish or make available Employee Plan documentation and
annual reports as soon as reasonably possible, and to the extent such Employee
Plans are not listed on Schedule 4.17, a list of such omitted Employee Plans
shall be provided as soon as reasonably possible.
(c) With respect to each Employee Plan, except as disclosed on
Schedule 4.17: (i) no "prohibited transaction", as defined in Section 406 of
ERISA or Section 4975 of the Code, has occurred with respect to any Employee
Plan, (excluding transactions effected pursuant to a statutory or
administrative exemption); (ii) no disputes in the ordinary course, or outside
the ordinary course, of the operation of an Employee Plan, or obligations
imposed on the operation of an Employee Plan or any fiduciary of an Employee
Plan as a result of any governmental audit or action of any court, arbitrator
or other tribunal that might reasonably be expected to have a Material Adverse
Effect with respect to Company are pending or to the knowledge of Company or
any of its ERISA Affiliates threatened; (iii) all contributions required to be
made to each Employee Plan as of the date hereof (taking into account any
extensions permitted by the Code or the Internal Revenue Service) have been
made in full; (iv) all contributions, premiums or claim payments due or owing
with respect to each Employee Plan have been properly accrued and reflected in
Company's or its ERISA Affiliates' (as applicable) financial statements as of
the close of its most recent fiscal year; (v) subject to applicable collective
bargaining agreements, the Employee Plans may be amended or terminated by
Company or its ERISA Affiliates on or at any time after the Effective Time,
without liability to any person or entity; (vi) if the Employee Plan is a Title
IV Plan, it has not been subject to a "reportable event" (as defined in Section
4043(b) of ERISA), the reporting of which has not been waived by regulation;
(vii) if the Employee Plan is a Title IV Plan, all premiums due to the Pension
Benefit Guaranty Corporation for
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plan termination insurance have been paid in full on a timely basis; and (viii)
the funded status of each Employee Plan is not materially different from what
was reflected on the most recent financial statements of such Employee Plan.
(d) No material liability under Title IV of ERISA has been
incurred by Company or any ERISA Affiliate that has not been satisfied in full
and except as disclosed on Schedule 4.17, to the knowledge of Company and its
ERISA Affiliates, no condition exists that presents a material risk to Company
or its ERISA Affiliates of incurring any liability to the Pension Benefit
Guaranty Corporation, the Department of Labor or the plan participants. No
Employee Plan has incurred an accumulated funding deficiency, as defined in
Section 302 of ERISA or Section 312 of the Code, whether or not waived.
(e) Neither Company, any Subsidiary nor any ERISA Affiliate has
incurred, or expects to incur, either directly or indirectly, any withdrawal
liability within the meaning of Title IV of ERISA with respect to any
Multiemployer Plan.
(f) Except as disclosed on Schedule 4.17, each Employee Plan that
is intended to be qualified under Section 401(a) of the Code has been
determined by the Internal Revenue Service to be so qualified and no event has
occurred since the date of such determination that, to the knowledge of
Company, would adversely affect such qualification, and each trust created
under any such Employee Plan has been determined by the Internal Revenue
Service to be exempt from tax under Section 501(a) of the Code and no event has
occurred since the date of such determination that, to the knowledge of
Company, would adversely affect such exemption. Company has provided Buyer
with the most recent determination letter from the Internal Revenue Service
relating to each such Employee Plan. Each Employee Plan and each trust created
under an Employee Plan has been maintained in substantial compliance with its
terms and with the requirements prescribed by any and all applicable statutes,
orders, rules and regulations, including, but not limited to, ERISA and the
Code.
(g) Schedule 4.17 identifies each Benefit Arrangement that
represents a material obligation of the Company. Company has furnished or made
available to Buyer copies or descriptions of each such Benefit Arrangement that
represents a material obligation of the Company. Each such Benefit Arrangement
has been maintained in substantial compliance with its terms and with the
requirements prescribed by any and all applicable statutes, orders, rules and
regulations.
(h) Schedule 4.17 identifies by name all Employee Agreements in
effect or committed to be put in effect as of the Effective Time.
(i) Except as disclosed on Schedule 4.17, neither Company, any
Subsidiary nor any of its ERISA Affiliates has any current or projected
liability with respect to post-employment or post-retirement health or medical
or life insurance benefits for retired or former employees of Company, any
Subsidiary or ERISA Affiliates, except as required to avoid excise tax under
Section 4980B of the Code.
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(j) Except as disclosed on Schedule 4.17, there has been no
amendment or announcement by Company or any of its ERISA Affiliates relating
to, or change in, benefits, employee participation or coverage under, any
Employee Plan or Benefit Arrangement, that would materially increase the
expense of maintaining such Employee Plan or Benefit Arrangement above the
level of expense incurred with respect thereto for the fiscal year ended prior
to the date hereof.
(k) Except as disclosed on Schedule 4.17, Company is not aware of
any Employee Agreement or other contract, agreement, plan or arrangement
covering any employee or former employee of Company or any Subsidiary that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to the terms of Section 280G of the Code.
(l) Except as disclosed on Schedule 4.17, no excise tax of a
material amount under Section 4980B or other provision of the Code has been
incurred by Company or an ERISA Affiliate in respect of any Employee Plan.
SECTION 4.18 Liabilities. Except as reflected on Schedule 4.18 or in
the SEC Documents, neither Company nor any Subsidiary, has incurred or suffered
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) which exist at the date of this Agreement and,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect with respect to Company.
SECTION 4.19 Compliance with Applicable Laws. Except as indicated on
Schedule 4.19 or in the SEC Documents, Company and each Subsidiary holds all
permits, licenses, variances, exemptions, orders and approvals of all
governmental entities which are necessary to the operation of its business
("Permits"), except where the failure to have such Permits would not have a
Material Adverse Effect with respect to Company. Company and each Subsidiary
are in compliance with the terms of the Permits. Except as disclosed on
Schedule 4.19, neither Company nor any Subsidiary is in violation of any law,
ordinance or regulation of any governmental entity to the extent any such
violation reasonably could have a Material Adverse Effect with respect to
Company.
SECTION 4.20 Insurance. Schedule 4.20 is a list of all policies of
property, fire, liability, life (including but not limited to life insurance
contracts within the meaning or intended to be within the meaning of Section
7702 of the Code), and other forms of insurance (including self-insurance), and
indemnity bonds, carried by Company or any Subsidiary (including any
predecessors of any of them including, without limitation, UCI) identifying the
nature of risks covered and the amount of coverage in each case, and specifying
any year or years since 1980 when any such insurance or other similar insurance
was not in effect. Schedule 4.20 shall designate which insurance is currently
in effect. All such policies designated as currently in effect on Schedule 4.20
are in full force and all premiums due and payable on such policies have been
paid or will be paid without causing a lapse of coverage. Company believes it
is adequately insured against the kind of risks usually insured against by
corporations engaged in the same or similar business. No
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insurance policy of Company has been terminated by the insurance carrier during
the past five years.
SECTION 4.21 Labor Matters. As of the date of this Agreement, there
are no union organizational drives or other major labor disputes at any
manufacturing or distribution facility pending or, to the best knowledge of
Company, threatened between Company or any Subsidiary and any of their
respective employees. Except as referred to on Schedule 4.21, neither Company
nor any Subsidiary is a party to any union, collective bargaining or other
similar agreements.
SECTION 4.22 Financial Advisor Advice. Company has received the
opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated to the effect
that, as of a date proximate to the date of this Agreement, the cash
consideration to be received by the shareholders of Company pursuant to the
Offer and the Merger is fair, from a financial point of view, to such
shareholders, and that opinion has not been modified or withdrawn.
SECTION 4.23 Investments. Except as disclosed on Schedule 4.23, (i)
neither Company nor any Subsidiary, directly or indirectly, owns any shares or
has any ownership interest in any other Person or is a partner with any other
Person and (ii) neither Company nor any Subsidiary has an obligation to purchase
any shares of stock, other securities or any other form of investment in any
other Person.
SECTION 4.24 Disclosure Documents. (a) The information with respect
to Company, any Subsidiary and any of their respective subsidiaries that Company
furnishes to Buyer in writing specifically for use in the Offer Documents will
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
(b) Each document required to be filed by Company with the SEC in
connection with the transactions contemplated by this Agreement, including,
without limitation, the Schedule 14D-9 will, when filed, comply as to form in
all material respects with the applicable requirements of all applicable law,
including, without limitation, the Exchange Act.
SECTION 4.25 State Takeover Statutes. The Board of Directors of
Company has approved the Offer, the Merger, this Agreement and the entering
into, and performance, by Buyer and Merger Subsidiary of the Stock Option
Agreement, and such approval is sufficient to render the provisions of Section
912 of the New York Law inapplicable to this Agreement, the Offer, the Merger,
and the entering into, and performance, by Buyer and Merger Subsidiary of the
Stock Option Agreement and the other transactions contemplated by this
Agreement and the Stock Option Agreement.
SECTION 4.26 Rights Agreement. Company and its Board of Directors
have taken and will, until the termination, if any, of this Agreement pursuant
to Section 10.01, maintain
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in effect all necessary action (i) to render the Rights Agreement inapplicable
with respect to the Offer, the Merger, the entering into, and performance, by
Buyer and Merger Subsidiary of the Stock Option Agreement and the other
transactions contemplated by this Agreement and (ii) to ensure that (y) neither
Buyer nor Merger Subsidiary nor any of their Affiliates (as defined in the
Rights Agreement) or Associates (as defined in the Rights Agreement) is
considered to be an Acquiring Person (as defined in the Rights Agreement) and
(z) the provisions of the Rights Agreement, including the occurrence of a
Distribution Date (as defined in the Rights Agreement), are not and shall not
be triggered by reason of the announcement or consummation of the Offer, the
Merger, the Stock Option Agreement or the consummation of any of the other
transactions contemplated by this Agreement. Company has delivered to Buyer a
complete and correct copy of the Rights Agreement, as amended and supplemented
to the date of this Agreement.
SECTION 4.27 General Representation and Warranty. This Agreement, and
the Schedules taken together with the SEC Documents, do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements contained herein or therein not misleading.
SECTION 4.28 1994 Agreement and Plan of Merger. Schedule 4.28 sets
forth all notices, claims and demands ("Claim") for indemnification made by any
party pursuant to ARTICLE X: Survival and Indemnification of that certain
Agreement and Plan of Merger, dated as of February 25, 1994, by and among
Company, UCI and certain shareholders of UCI ("1994 Merger Agreement").
Specifically, Schedule 4.28 identifies: (i) the amount of the Claim; (ii) the
basis upon which such Claim was made (including the provision of the 1994 Merger
Agreement which was alleged to have been breached); (iii) the resolution of
such Claim; and (iv) the dates on which such Claim was made and resolved.
Schedule 4.28 also identifies the aggregate amount of damages which have been
applied against and are subject to the indemnification thresholds and ceiling
amounts described in Sections 10.01 (c) (i) and (ii) of the 1994 Merger
Agreement.
SECTION 4.29 Shareholders' Agreement. The Board of Directors of
Company has taken all action under the Shareholders' Agreement to approve the
Offer, the Merger , this Agreement and the Stock Option Agreement, and the
entering into and performance by Buyer and Merger Subsidiary of the same.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF BUYER AND MERGER SUBSIDIARY
Buyer and Merger Subsidiary represent and warrant to the Company that:
SECTION 5.01 Organization. Each of Buyer and Merger Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation and has all requisite power and authority,
corporate and other, and all
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government approvals to own, lease, and operate its properties and carry on its
business as now and heretofore being conducted except where the failure to have
any such approval would not have a Material Adverse Effect with respect to Buyer
and Merger Subsidiary. The authorized capital stock of Merger Subsidiary
consists of 1,000 shares of common stock, par value $.01 per share, of which, at
the date of this Agreement, 1,000 shares were issued and outstanding, and each
such share is entitled to one vote.
SECTION 5.02 Corporate Authority. Buyer and Merger Subsidiary have all
requisite corporate power and authority, corporate and other, to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement and the consummation
of the Merger and of the transactions contemplated hereby have been duly and
effectively authorized by all necessary corporate action on the part of Buyer
and Merger Subsidiary and no other corporate proceedings on the part of Buyer or
Merger Subsidiary are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. Assuming due execution and delivery by the
other parties hereto, this Agreement constitutes the valid and binding agreement
of each of Buyer and Merger Subsidiary, enforceable against each of them except
that enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in effect,
affecting creditors' rights generally.
SECTION 5.03 Government Authorization. No consent, approval, order or
authorization of, or registration, declaration or filing with, any governmental
entity or regulatory authority is required by or with respect to Buyer or Merger
Subsidiary in connection with the execution and delivery of this Agreement or
the consummation by Buyer and Merger Subsidiary of the transactions contemplated
hereby, the failure to obtain which would have a Material Adverse Effect with
respect to Buyer or the transactions contemplated hereby, except for: (i) the
filing of a pre-merger notification report by Buyer under the HSR Act and the
expiration or termination of the applicable waiting period thereunder; (ii) the
filing of the Certificate of Merger with the Department of State of the State of
New York in accordance with the requirements of the New York Law; (iii) the
filing of the New York Disclosure Documents; and (iv) compliance with any
applicable requirements of the Exchange Act.
SECTION 5.04 Non-Contravention. The execution, delivery and performance
by Buyer and Merger Subsidiary of this Agreement and the consummation by Buyer
and Merger Subsidiary of the transactions contemplated hereby do not and will
not: (i) contravene or conflict with the certificate of incorporation or bylaws
of Merger Subsidiary or similar documents of Buyer; (ii) assuming compliance
with the matters referred to in Section 5.03, contravene or conflict with any
provision of law, regulation, judgment, order or decree binding upon Buyer or
Merger Subsidiary; or (iii) constitute a default under or give rise to any right
of termination, cancellation or acceleration of any right or obligation of Buyer
or Merger Subsidiary or to a loss of any benefit to which Buyer or Merger
Subsidiary is entitled under any agreement, contract or other instrument binding
upon Buyer or Merger Subsidiary,
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except in the case of clauses (ii) and (iii) as would not materially impair the
ability of Buyer and Merger Subsidiary to consummate the Offer or the Merger.
SECTION 5.05 Disclosure Documents. (a) The information with respect to
Buyer and its subsidiaries and Merger Subsidiary that Buyer and Merger
Subsidiary furnish to Company in writing specifically for use in the Schedule
14D-9 or pursuant to Section 14(f) or Rule 14f-1 under the Exchange Act will not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(b) The SEC Offer Documents, when filed, will comply as to form in all
material respects with the applicable requirements of the Exchange Act and the
New York Disclosure Documents, when filed, will comply as to form in all
material respects with the applicable requirements of the New York Law. The
Offer Documents will not at the time of the filing thereof, at the time of any
distribution thereof or at the time of consummation of the Offer contain any
untrue statement of a material act or omit to state any material fact necessary
to make the statements made therein, in the light of the circumstances under
which they were made, not misleading; provided that this representation and
warranty will not apply to statements or omissions in the Offer Documents based
upon information furnished to Buyer or Merger Subsidiary in writing by Company
specifically for use therein.
SECTION 5.06 Finders' Fees. There is no investment banker, broker,
finder or other intermediary who might be entitled to any fee or commission from
the Buyer or Merger Subsidiary upon consummation of the transactions
contemplated by this Agreement.
SECTION 5.07 Financing. Buyer and Merger Subsidiary have or will have,
prior to the expiration of the Offer, sufficient funds available to purchase all
of the Shares outstanding on a fully diluted basis and to pay all related fees
and expenses pursuant to the Offer and this Agreement.
SECTION 5.08 Share Ownership. As of the date hereof, Buyer and Merger
Subsidiary do not beneficially own any Shares.
SECTION 5.09 Merger Subsidiary's Operations. Merger Subsidiary was
formed solely for the purpose of engaging in the transactions contemplated
hereby and has not engaged in any business activities or conducted any
operations other than in connection with the transactions contemplated hereby.
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ARTICLE VI
COVENANTS OF COMPANY
SECTION 6.01 Conduct of Business. During the period from the date of
this Agreement and continuing until the Effective Time, Company and each
Subsidiary shall carry on its business in the usual, regular and ordinary course
in substantially the same manner as heretofore conducted and in substantial
compliance with all applicable laws and regulations and, to the extent
consistent therewith, use all reasonable efforts to preserve intact its present
business organization, keep available the services of its present officers and
employees and preserve its relationships with customers, suppliers, licensors,
licensees, distributors and others having business dealings with it to the end
that its goodwill and ongoing business shall not be adversely impaired at the
Effective Time. Specifically, and without limiting the generality of the
foregoing, except as expressly permitted or contemplated by this Agreement or,
as of the date of this Agreement, set forth on Schedule 6.01, during the period
from the date of this Agreement and continuing to the Effective Time, neither
Company nor any Subsidiary shall, in each case without the prior written consent
of Buyer, which consent (except as regards (v) and (vi) below, which consent
shall not be unreasonably withheld by Buyer subsequent to January 31, 1996
provided any extension beyond January 31, 1996 is not a result of any act or
failure to act on the part of Company or any Subsidiary) may be granted or
withheld in the sole discretion of Buyer:
(i) (A) declare, set aside or pay any dividends on or make other
distributions in respect of any of its capital stock, except
that Company may continue the declaration and payment of
regular quarterly cash dividends on its common stock of not
more than $0.16 per share; (B) split, combine or reclassify any
of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock; or (C)
purchase, redeem or otherwise acquire any shares of capital
stock of Company or any Subsidiary or any other securities
thereof or any rights, warrants or options to acquire any such
shares or other securities;
(ii) issue, grant, deliver or sell, or authorize or propose the
issuance, delivery or sale of, pledge or otherwise encumber any
shares of its capital stock of any class, any Voting Debt or
any securities convertible into, or any rights, warrants,
calls, subscriptions or options to acquire, any such shares,
Voting Debt or convertible securities other than to Merger
Subsidiary pursuant to this Agreement and the Offer, except for
the issuance of shares of common stock upon the exercise of
Options which are outstanding on the date hereof pursuant to
the terms of such Options and the Company Stock Plans;
(iii) amend or propose to amend its Restated Certificate of
Incorporation, as amended, or By-Laws, as amended, or any other
organizational and/or charter documents;
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(iv) directly or indirectly, acquire or agree to acquire by merging
or consolidating with, or by purchasing a substantial equity
interest in or a substantial portion of the assets of, or by
any other manner, any Person or acquire or agree to acquire
any assets other than in the ordinary course of business and
consistent with past practices;
(v) except in the ordinary course of business and consistent with
past practices, neither Company nor any Subsidiary shall sell,
lease, license, encumber or otherwise dispose of any of their
assets, other than as may be required by law or to consummate
the transactions contemplated hereby;
(vi) incur any indebtedness for borrowed money under existing
credit facilities exceeding in the aggregate $135,000,000.00
or guarantee any such indebtedness or issue or sell any debt
securities or warrants or rights to acquire any debt
securities of such party or guarantee any debt securities of
others, other than the extension of trade credit in the
ordinary course of business and consistent with past
practices;
(vii) without the prior written consent of the Buyer, (A) enter
into, adopt, amend (except as may be required by law or
regulation) or terminate any Benefit Plan or other employee
benefit plan, or any agreement, arrangement, plan or policy
between Company or any Subsidiary and one or more of its
directors, officers or employees, or (B) except for normal
compensation increases in the ordinary course of business and
consistent with past practices (1) increase in any manner the
compensation or fringe benefits of any director, officer or
employee, (2) pay any benefit not required by any plan and
arrangement as in effect as of the date hereof, (3) grant any
options, stock appreciation rights, phantom stock or
performance units or (4) enter into any contract, agreement,
commitment or arrangement to do any of the foregoing;
(viii) make or agree to make any capital expenditure in excess of
$8,000,000.00;
(ix) make any material Tax election or settle or compromise any
material Tax liability; or
(x) willfully and or knowingly (A) take or agree or commit to take
any action that would make any representation and warranty of
Company herein inaccurate at, or as of any time prior to, the
Effective Time, or (B) omit or agree to omit to take any
action necessary and prudent to prevent any such
representations or warranty from being inaccurate at any such
time.
SECTION 6.02 Advice of Changes; Filings. Company shall, on a regular
and frequent basis, report to Buyer on operational matters and promptly advise
Buyer orally and in writing of any change or event having or which, insofar as
can reasonably be foreseen,
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would have a material adverse effect on Buyer or Merger Subsidiary. Company
shall promptly provide Buyer (or Buyer's counsel) with copies of all filings
made by Company with any state or federal governmental entity in connection with
this Agreement and the transactions contemplated hereby.
SECTION 6.03 Shareholder Meeting; Proxy Material. Company shall cause a
meeting of its shareholders ("Company Shareholder Meeting") to be duly called
and held as soon as reasonably practicable following the purchase of Shares
pursuant to the Offer for the purpose of voting on the approval and adoption of
this Agreement and the Merger unless a vote of shareholders of Company is not
required by the New York Law. The Board of Directors of Company shall recommend
approval and adoption of this Agreement and the Merger by Company's
shareholders. In connection with such meeting, Company will: (i) promptly after
the consummation of the Offer, prepare and file with the SEC, use its best
effort to have cleared by the SEC, and thereafter mail to its shareholders as
promptly as practicable, a proxy statement and all other proxy materials for
such meeting; (ii) use its best efforts to obtain the necessary approvals by its
shareholders of this Agreement and the transactions contemplated hereby; and
(iii) otherwise comply with all legal requirements. If requested by Buyer or
Merger Subsidiary, Company will file a proxy statement and all other proxy
materials with the SEC that are prepared by Buyer and reasonably acceptable to
Company and call a special meeting of shareholders, in anticipation of (and
prior to) the purchase of Shares in response to the Offer. The actions required
to be taken by Company and its Board of Directors pursuant to this Section 6.03
shall be subject to Company's Board of Director's fiduciary duties.
SECTION 6.04 Access to Information. Company and each Subsidiary: (i)
upon reasonable notice will give Buyer, its counsel, financial advisors,
auditors and other authorized representatives reasonable access during normal
business hours to the offices, properties, books and records of Company and each
Subsidiary; (ii) upon reasonable notice will furnish to Buyer, its counsel,
financial advisors, auditors and other authorized representatives such financial
and operating data and other information as such Persons may reasonably request;
and (iii) will instruct Company's and each Subsidiary's employees, counsel and
financial advisors to cooperate with Buyer in its investigation of the business
of Company and each Subsidiary; provided that no investigation pursuant to this
Section shall affect any representation or warranty given by Company to Buyer or
Merger Subsidiary hereunder and any information received by Buyer or its
representatives shall remain subject to the Confidentiality Agreement dated
August 22, 1995, between Buyer and Company (the "Confidentiality Agreement").
SECTION 6.05 Other Offers. (a) Neither Company, any Subsidiary, nor any
officer, director, employee, financial advisor, investment banker, attorney or
other advisor or representative of Company or any Subsidiary will, directly or
indirectly, (i) take any action to solicit, initiate or encourage any
Acquisition Proposal (as hereinafter defined) or (ii) engage in negotiations or
discussions regarding or disclose any information relating to Company or any
Subsidiary or afford access to the properties, books or records of Company
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or any Subsidiary to any Person that may be considering making, or has made, an
Acquisition Proposal. Company will promptly notify Buyer after receipt of any
Acquisition Proposal or any indication that any Person is considering making an
Acquisition Proposal or any request for nonpublic information relating to
Company or any Subsidiary or for access to the properties, books or records of
Company or any Subsidiary by any Person that may be considering making, or has
made, an Acquisition Proposal and will keep Buyer fully informed of the status
and details of any such Acquisition Proposal, indication or request. For
purposes of this Agreement, "Acquisition Proposal" means any offer or proposal
for, or any indication of interest in, a merger, consolidation or other business
combination involving Company or any Subsidiary or any proposal or offer to
acquire in any manner, directly or indirectly, 10% or more of any class of
voting securities of Company or any Subsidiary or a substantial portion of the
assets of Company or any Subsidiary, other than the transactions contemplated by
this Agreement. Company will immediately cease and cause to be terminated any
existing activities, discussions or negotiations by Company or any of its
directors, officers, employees, financial advisors, investment bankers,
attorneys or other advisors or representatives with any parties conducted
heretofore with respect to any of the foregoing, and Company shall immediately
demand that any such parties return to Company any confidential information
and/or materials such parties may have received from Company during the course
of any such activities, discussions or negotiations. Neither the Board of
Directors of Company nor any Committee thereof shall withdraw or modify in any
manner adverse to Buyer the approval and recommendation of this Agreement, the
Offer, the Merger, the Stock Option Agreement or any of the transactions
contemplated hereby and thereby, or approve or recommend any Acquisition
Proposal.
(b) Notwithstanding the foregoing provisions of Section 6.05(a), (i)
Company may participate in discussions or negotiations with or furnish
information to any third party which makes a written Acquisition Proposal that
either (x), is not subject to a financing contingency and involves the purchase
for cash of 100% of Company's common stock at a price per Share greater than the
Merger Consideration or (y) provides for the acquisition of 100% of Company's
common stock for consideration, not consisting entirely of cash, which Company's
Board of Directors, based on the advice of its financial advisor, determines is
financially superior to the Merger Consideration (in the case of either (x) or
(y), a "Superior Proposal"), and (ii) the Board of Directors of Company or any
Committee thereof may withdraw or modify in a manner adverse to Buyer the
approval or recommendation of this Agreement, the Offer, the Merger, the Stock
Option Agreement or any of the transactions contemplated hereby and thereby, and
may approve or recommend any such Superior Proposal, if, in the case of both (i)
and (ii), the Board of Directors of Company determines (and is advised by its
outside counsel) that failure to take such action would constitute a breach of
its fiduciary duties. Furthermore, nothing contained in Section 6.05(a) shall
prohibit Company or its Board of Directors from taking and disclosing to
Company's shareholders a position with respect to a tender offer or exchange
offer by a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated under
the Exchange Act or from making such disclosure to Company's shareholders or
otherwise which, in the judgment of the Board of Directors with the advice of
independent legal counsel, may be required under applicable law or rules of any
stock exchange.
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SECTION 6.06 Notices of Certain Events. Company shall promptly notify
Buyer of:
(i) any notice or other communication from any Person
alleging that the consent of such Person is or may be
required in connection with the transactions
contemplated by this Agreement;
(ii) any notice or other communication from any
governmental or regulatory agency or authority in
connection with the transactions contemplated by this
Agreement;
(iii) any actions, suits, claims, investigations or
proceedings commenced or, to the best of its
knowledge, threatened against, relating to or
involving or otherwise affecting Company or any
Subsidiary which, if pending on the date of this
Agreement, would have been required to have been
disclosed pursuant to Section 4.12 or which relate to
the consummation of the transactions contemplated by
this Agreement; and
(iv) any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) which, if
existing on the date of this Agreement, would have
been required to be disclosed pursuant to Section
4.18.
SECTION 6.07 Amendment of Rights Agreement. Company agrees that upon
the reasonable request by Buyer or Merger Subsidiary, Company promptly: (i) will
take any and all further action requested by Buyer or Merger Subsidiary to
ensure that (y) neither Buyer nor Merger Subsidiary nor any of their Affiliates
(as defined in the Rights Agreement) or Associates (as defined in the Rights
Agreement) is considered to be an Acquiring Person (as defined in the Rights
Agreement) and (z) the provisions of the Rights Agreement, including the
occurrence of a Distribution Date (as defined in the Rights Agreement), are not
and shall not be triggered by reason of the announcement or consummation of the
Offer, the Merger, the Stock Option Agreement or the consummation of any of the
other transactions contemplated by this Agreement; and (ii) will redeem, in
accordance with the terms of the Rights Agreement, all outstanding rights issued
pursuant to the Rights Agreement ("Rights") at a redemption price of $.01 per
Right, or otherwise take such action as may be requested by Buyer in order to
render the Rights Agreement inapplicable to any of the transactions contemplated
by this Agreement, including the Offer and the Merger.
ARTICLE VII
COVENANTS OF BUYER
During the period from the date of this Agreement and continuing until
the Effective Time, Buyer agrees that:
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SECTION 7.01 Obligations of Merger Subsidiary. Buyer will take all
action necessary to cause Merger Subsidiary to perform its obligations under
this Agreement and to consummate the Merger on the terms and conditions set
forth in this Agreement.
SECTION 7.02 Voting of Shares. Buyer agrees to vote all Shares
beneficially owned by it or by its subsidiaries in favor of adoption of this
Agreement at the Company Shareholder Meeting.
SECTION 7.03 Notice of Certain Events. Buyer shall promptly notify
Company of:
(i) any notice or other communication from any Person
alleging that the consent of such Person is or may be
required in connection with the transactions
contemplated by this Agreement; and
(ii) any notice or other communication from any
governmental or regulatory agency or authority in
connection with the transactions contemplated by this
Agreement.
SECTION 7.04 Indemnification; Directors' and Officers' Insurance. (a)
From and after the Effective Time, Buyer and Surviving Corporation shall
indemnify, defend and hold harmless each person who is now, or has been at any
time prior to the date hereof, an officer or director of Company or any of its
Subsidiaries ("Indemnified Parties") against all losses, claims, damages, costs,
expenses (including attorneys' fees and expenses), liabilities or judgments or
amounts that are paid in settlement with the approval of the indemnifying party
(which approval shall not be unreasonably withheld) of or in connection with any
threatened or actual claim, action, suit, proceeding or investigation based in
whole or in part on, or arising in whole or in part out of, the fact that such
person is or was a director , officer, employee or agent of Company or any of
its Subsidiaries (including service as a fiduciary of any employee benefit plan)
whether pertaining to (i) any matter existing or occurring at or prior to the
Effective Time or (ii) based in whole or in part on, or arising in whole or in
part out of, or pertaining to this Agreement or the transactions contemplated
hereby, and whether asserted or claimed prior to, or at or after, the Effective
Time ("Indemnified Liabilities"), in the case of clause (i) above, to the full
extent a corporation is permitted under the New York Law to indemnify its own
directors or officers as the case may be (and Buyer and Surviving Corporation,
as the case may be, will pay expenses in advance of the final disposition of any
such action or proceeding to each Indemnified Party to the full extent permitted
by law). Without limiting the foregoing, in the event any such claim, action,
suit, proceeding or investigation is brought against any Indemnified Parties
(whether arising before or after the Effective Time), (A) the Indemnified
Parties may retain counsel satisfactory to them and Buyer and Surviving
Corporation and Buyer and Surviving Corporation shall pay all fees and expenses
of such counsel for the Indemnified Parties promptly as statements therefor are
received; and (B) Buyer and Surviving Corporation will use all reasonable
efforts to assist in the defense of any such matter, provided that neither Buyer
nor Surviving
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Corporation shall be liable for any settlement effected without its prior
written consent which consent shall not unreasonably be withheld. Any
Indemnified Party wishing to claim indemnification under this Section 7.04, upon
learning of any such claim, action, suit, proceeding or investigation, shall
notify Buyer and Surviving Corporation (but the failure so to notify shall not
relieve a party from any liability which it may have under this Section 7.04
except to the extent such failure prejudices such party), and shall deliver to
Buyer and Surviving Corporation the undertaking contemplated by Section 723(c)
of the New York Law. The Indemnified Parties as a group may retain only one law
firm to represent them with respect to each such matter unless there is, under
applicable standards of professional conduct, a conflict on any significant
issue between the positions of any two or more Indemnified Parties. Buyer and
Merger Subsidiary agree that all rights to indemnification, including provisions
relating to advances of expenses incurred in defense of any action or suit,
existing in favor of the Indemnified Parties with respect to matters occurring
through the Effective Time, shall survive the Merger and shall continue in full
force and effect for a period of not less than six years from the Effective
Time; provided, however, that all rights to indemnification in respect of any
Indemnified Liabilities asserted or made within such period shall continue until
the disposition of such Indemnified Liabilities.
(b) For a period of six years after the Effective Time, Buyer shall
cause to be maintained in effect the current policies of directors' and
officers' liability insurance maintained by Company and its Subsidiaries
(provided that Buyer may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are no less
advantageous in any material respect to the Indemnified Parties) with respect to
matters arising before the Effective Time, provided that Buyer shall not be
required to pay an annual premium for such insurance in excess of 150% of the
last annual premium paid by Company prior to the date hereof, but in such case
shall purchase as much coverage as possible for such amount ("Maximum Premium").
Company represents to Buyer that the Maximum Premium is $202,944.00.
(c) The provisions of this Section 7.04 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his heirs and
his personal representatives and shall be binding on all successors of Buyer,
Merger Subsidiary, and Surviving Corporation.
SECTION 7.05 Availability of Funds. Buyer agrees to make available to
Merger Subsidiary sufficient funds to enable Merger Subsidiary to consummate the
transactions contemplated hereby.
SECTION 7.06. Notice of Breach. Buyer shall promptly notify Company of
a breach, known to Buyer, of any representation, warranty or covenant of Company
contained herein and permit Company to cure a breach of any representation or
warranty as soon as reasonably practicable from Company's receipt of notice of
such breach and permit Company to cure a breach of a covenant within five
business days from Company's receipt of such notice.
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ARTICLE VIII
COVENANTS OF BUYER AND COMPANY
The parties hereto agree that:
SECTION 8.01 Best Efforts. Subject to the terms and conditions of this
Agreement, each party will use its best efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate the transactions contemplated by this Agreement;
provided that Buyer shall not be required to agree to any consent decree or
order in connection with any objections of the United States Department of
Justice or United States Federal Trade Commission (each an "HSR Authority") to
the transactions contemplated by this Agreement.
SECTION 8.02 Certain Filings. Company and Buyer shall, within five
business days from the date of this Agreement, file Notification and Report
Forms under the HSR Act with the Federal Trade Commission (the "FTC") and the
Antitrust Division of the Department of Justice (the "Antitrust Division") and
shall use their best efforts to respond as promptly as practicable to all
inquiries received from the FTC or the Antitrust Division for additional
information or documentation. In addition, Company and Buyer shall cooperate
with each other (i) in connection with the preparation of the Schedule 14D-9 and
the Offer Documents, (ii) in determining whether any action by or in respect of,
or filing with, any governmental body, agency or official, or authority is
required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts in connection with the
consummation of the transactions contemplated by this Agreement and (iii) in
seeking any such actions, consents, approvals or waivers or making any such
filings, furnishing information required in connection with the preparation of
the Schedule 14D-9 and the Offer Documents and seeking to timely obtain any such
actions, consents, approvals or waivers.
SECTION 8.03 Public Announcements. Buyer and Company will consult with
each other before issuing any press release or making any public statement with
respect to this Agreement and the transactions contemplated hereby and, except
as may be required by applicable law or any listing agreement with any national
securities exchange or foreign securities exchange, will not issue any such
press release or make any such public statement prior to such consultation.
SECTION 8.04 Conveyance Taxes. Buyer and Company shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications,
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes which become payable in
connection with the transactions contemplated hereunder that are required or
permitted to be filed on or before the Effective Time.
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SECTION 8.05 Further Assurances. At and after the Effective Time, the
officers and directors of Surviving Corporation will be authorized to execute
and deliver, in the name and on behalf of Company or Merger Subsidiary, any
deeds, bills of sale, assignments or assurances and to take and do, in the name
and on behalf of Company or Merger Subsidiary, any other actions and things to
vest, perfect or confirm of record or otherwise in Surviving Corporation any and
all right, title and interest in, to and under any of the rights, properties or
assets of Company acquired or to be acquired by Surviving Corporation as a
result of, or in connection with, the Merger.
SECTION 8.06 Leases. Company shall cause the real estate leases
identified on Schedule 8.06 to continue to be in full force and effect at the
Effective Time, except that Company shall cause such leases to be amended to
include the substance of the provisions contained on Schedule 8.06, such
amendments to become effective on or before the Effective Time. Company shall
obtain from each owner and/or lessor of leased Real Estate set forth in Schedule
8.06, an estoppel certificate in form and substance reasonably acceptable to
Buyer.
SECTION 8.07 Employee Loans. Company shall not surrender any stock
certificates, which Company represents and warrants it has in its possession,
pledged by employees to secure the notes from employees identified on Schedule
8.07.
SECTION 8.08 Noncompetition Agreement. Within fifteen business days
following the execution of this Agreement, Jules F. Knapp shall enter into and
deliver the Noncompetition Agreement with Company, in the form attached hereto
as Schedule 8.08.
SECTION 8.09 Expenses. Except as set forth in Section 10.2, whether or
not the Merger is consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expense.
SECTION 8.10 Indemnification. Notwithstanding any provision in this
Agreement to the contrary, Company and Buyer agree that Company shall have the
right to terminate all of the indemnification rights and obligations set forth
in Article X of the 1994 Merger Agreement so long as any such termination is
effective to terminate all of the indemnity obligations for each party obligated
under such Article X.
ARTICLE IX
CONDITIONS TO THE MERGER
SECTION 9.01 Conditions to the Obligations of Each Party. The
obligations of Company, Buyer and Merger Subsidiary to consummate the Merger are
subject to the satisfaction of the following conditions:
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(i) if required by the New York Law, this Agreement shall have
been adopted by the shareholders of Company in accordance with
the New York Law;
(ii) any applicable waiting period under the HSR Act relating to
the Merger shall have expired or have been terminated;
(iii) no provision of any applicable law or regulation and no
judgment, injunction, order or decree shall be issued which
would prohibit the consummation of the Merger; and
(iv) Buyer or Merger Subsidiary shall have purchased Shares
pursuant to (a) the Offer or (b) the Stock Option Agreement.
ARTICLE X
TERMINATION AND AMENDMENT
SECTION 10.01 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the matters
presented in connection with the Merger by the shareholders of Company:
(i) by the mutual consent of Company and Buyer;
(ii) by Company (A) if there has been a material breach of any
representation, warranty, covenant or agreement on the part of
the Buyer set forth in this Agreement which breach has not
been cured, in the case of a representation or warranty, prior
to the Effective Time or, in the case of a covenant or
agreement, within thirty days following receipt by Buyer of
notice of such breach (provided that the right to terminate
hereunder shall expire (x) on the date which Buyer or Merger
Subsidiary beneficially owns a majority of the Shares and (y)
Buyer's designees constitute the percentage required pursuant
to Section 1.03, but in no event less than a majority of the
members, of the Board of Directors of Company), or (B) if
there shall be any law or regulation that makes consummation
of the Merger illegal or if any judgment, injunction or other
order of a court or other authority having jurisdiction
preventing the consummation of the Merger shall have become
final and non-appealable;
(iii) by the Buyer (A) if there has been a material breach of any
representation, warranty, covenant or agreement on the part of
Company set forth in this Agreement which breach has not been
cured, in the case of a representation or warranty, prior to
the Effective Time or, in the case of a covenant or agreement,
within thirty days following receipt by Company of notice of
such breach (provided that the right to terminate hereunder
shall expire (x) on the date which Buyer or Merger Subsidiary
beneficially owns a majority of the
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Shares and (y) Buyer's designees constitute the percentage
required pursuant to Section 1.03, but in no event less than a
majority of the members, of the Board of Directors of
Company), (B) if there shall be any law or regulation that
makes consummation of the Merger illegal or if any judgment,
injunction or other order of a court or other competent
authority preventing the consummation of the Merger shall have
become final and non-appealable, or (C) if the covenant
contained in Section 8.08 has not been performed;
(iv) by either Company or the Buyer if the Offer has not been
consummated by January 31, 1996 ("Outside Termination Date");
provided, that if an HSR Authority shall have requested
additional information from any of the parties hereto or any
of their affiliates pursuant to 15 U.S.C. Section 18a(e)(1) or
the rules and regulations thereunder on or prior to January
31, 1996, Buyer may elect to change the Outside Termination
Date from time to time, to the extent necessary to satisfy the
requirements of the HSR Act, provided that (w) the Outside
Termination Date will not be later than June 30, 1996 and (x)
this Agreement has not been terminated by Company pursuant to
the terms of this Agreement prior to the date of such election
and; further provided that, notwithstanding the preceding
proviso to the contrary, if an Acquisition Proposal is made
prior to the consummation of the Offer, Buyer may elect to
extend the Outside Termination Date in increments of not more
than ten business days, provided that (y) at the time of any
such election an Acquisition Proposal continues to exist and
(z) this Agreement has not been terminated by Company pursuant
to the terms of this Agreement prior to the date of such
election;
(v) by Buyer, upon the occurrence of any Triggering Event (as such
term is defined in Section 10.02(b)) (provided that the right
to terminate hereunder shall expire (x) on the date which
Buyer or Merger Subsidiary beneficially owns a majority of
Shares and (y) Buyer's designees constitute the percentage
required pursuant to Section 1.03, but in no event less than a
majority of the members, of the Board of Directors of the
Company);
(vi) by Buyer, if Buyer shall have received any communication from
an HSR Authority (which communication shall be confirmed to
Company) that causes Buyer to reasonably believe that any HSR
Authority has authorized the initiation of litigation or an
administrative proceeding challenging the transactions
contemplated by this Agreement under U.S. antitrust laws,
which litigation or administrative proceeding will include a
motion seeking an order or injunction prohibiting the
consummation of any of the transactions contemplated by this
Agreement;
(vii) by Company, if Buyer does not commence the Offer within five
business days following the public announcement of the terms
of this Agreement or if the
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Offer expires by its terms and Buyer shall not have purchased
any Shares pursuant hereto; and
(viii) by Buyer, if (A) the Stock Option Agreement is breached by a
shareholder or (B) if the Stock Option Agreement (or any
material provisions thereof) is terminated or held by a court
to be unenforceable for any reason or if Company or any
shareholder asserts or states an intention to assert any such
enforceability and, in any such case, as a result thereof,
Buyer concludes in its reasonable discretion that its ability
to consummate the transactions contemplated by the Merger
Agreement has been materially impaired or such consummation
will be materially delayed or rendered materially more
expensive.
The party desiring to terminate this Agreement pursuant to clauses (ii), (iii),
(iv), (v), (vi), (vii) and (viii) shall give written notice of such termination
to the other party.
SECTION 10.02 Effect of Termination. (a) Except as set forth in Section
10.02(b) and 10.02(c), if this Agreement is terminated pursuant to Section
10.01, this Agreement shall become void and of no effect with no liability on
the part of any party hereto.
(b) If this Agreement is terminated pursuant to Section 10.01(iii)(A) ,
10.01(v) or 10.01(viii) following the occurrence of any of the following events
("Triggering Events") or if this Agreement is terminated pursuant to Section
10.01(iii)(A) and within six months thereafter a Triggering Event (other than an
event described in clause (ii)) with respect to any Person with whom Company or
any of its directors, officers, employees, financial advisors, investment
bankers, attorneys or other advisors engaged in negotiations, or discussions
regarding, or disclosed any information regarding, a possible Acquisition
Proposal, since June 30, 1995 occurs, then Company agrees to pay Buyer, not
later than two business days after the termination of this Agreement or, in the
case this Agreement is terminated pursuant to Section 10.01(iii)(A) and such
Triggering Event (other than an event described in clause (ii)) occurs within
six months thereafter, not later than two business days after the occurrence of
such Triggering Event, in respect of Buyer's expenses and lost opportunity
costs, an amount in immediately available funds equal to $ 15,000,000:
(i) Company shall have entered into, or shall have
publicly announced its intention to enter into, an
agreement or agreement in principle with respect to
any Acquisition Proposal or similar business
combination or transaction other than the
transactions contemplated hereby;
(ii) Company's Board of Directors or any Committee thereof
shall have withdrawn or materially and adversely
modified its approval or recommendation of the Offer
or this Agreement;
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<PAGE> 39
(iii) Company's Board of Directors or any Committee thereof
shall have made any recommendation with respect to an
Acquisition Proposal by any Person (other than Buyer)
other than a recommendation rejecting or against such
Acquisition Proposal;
(iv) Company receives any Acquisition Proposal by any
Person (other than Buyer), and Company's Board of
Directors takes a neutral position or makes no
recommendation with respect to such Acquisition
Proposal after a reasonable amount of time (and in no
event more than five business days) has elapsed for
Company's Board of Directors to review and make a
recommendation with respect to such Acquisition
Proposal consistent with its fiduciary duties; or
(v) (A) any person or group (as defined in Section
13(d)(3) of the Exchange Act) (other than Buyer or any
of its affiliates) shall have become the beneficial
owner (as defined in Rule 13d-3 promulgated under the
Exchange Act) of at least 20% of any class or shares
of capital stock of Company (including the Shares), or
shall have acquired, directly or indirectly, at least
20% of the assets or earning power of Company other
than acquisitions of securities for bona fide
arbitrage purposes only and other than the signatories
to the Stock Option Agreement.
(c) In the event this Agreement is terminated and Buyer or Merger
Subsidiary subsequently purchases Shares pursuant to the Stock Option Agreement,
then, Buyer and Merger subsidiary agree to commence a cash tender offer, as soon
as reasonably practical following the purchase of such Shares, at $35.00 per
Share for all of the Shares not owned by Buyer or Merger Subsidiary, and Buyer
and Merger Subsidiary agree to accept all Shares tendered into such offer,
subject only to the conditions set forth in paragraphs (a) and (b) to the
conditions to the Offer attached as Annex I.
SECTION 10.03 Amendments. Any provision of this Agreement may be
amended or waived prior to the Effective Time if, and only if, such amendment or
waiver is in writing and signed, in the case of an amendment, by Company, Buyer
and Merger Subsidiary or in the case of a waiver, by the party against whom the
waiver is to be effective; provided that after the adoption of this Agreement by
the shareholders of Company, no such amendment or waiver shall, without the
further approval of such shareholders, alter or change (i) the amount or kind of
consideration to be received in exchange for any shares of capital stock of
Company or (ii) any of the terms or conditions of this Agreement if such
alteration or change could adversely affect the holders of any shares of capital
stock of Company.
SECTION 10.04 Extension; Waiver. (a) Company. At any time prior to the
Effective Time, Company, by action duly taken, may, to the extent legally
allowed: (i) extend the time for the performance of any of the obligations or
other acts of the other
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<PAGE> 40
parties hereto; (ii) waive any inaccuracies in the representations and
warranties of the other parties hereto contained herein or in any document
delivered pursuant hereto; and (iii) waive compliance of the other parties
hereto with any of the agreements or conditions contained herein.
(b) Buyer. At any time prior to the Effective Time, Buyer, by action
duly taken, may, to the extent legally allowed: (i) extend the time for the
performance of any of the obligations or other acts of Company; (ii) waive any
inaccuracies of the representations and warranties of Company contained herein
or in any document delivered pursuant thereto; and (iii) waive compliance of
Company with respect to any of the agreements or conditions contained herein.
(c) Form of Waiver or Extension. (i) Any agreement on the part of
Company or Buyer hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party and no party
can assert a claim with respect to a matter so waived, (ii) no failure or delay
by any party in exercising any right, power or privilege hereunder shall operate
as a waiver thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies herein provided shall be cumulative and
not exclusive of any other rights or remedies provided by law.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed), delivered by overnight courier (which is
confirmed) or mailed by registered or certified mail (return receipt requested)
to the parties at the following address for a party or such other addresses as
shall be specified by like notice):
if to Company, to:
Pratt & Lambert United, Inc.
P.O. Box 22
Buffalo, New York 14340
Attention: J. J. Castiglia, President and
Chief Executive Officer
Telecopy No.: (716) 877-9646
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<PAGE> 41
with a copy to:
Frederick G. Attea, Esq.
Phillips, Lytle, Hitchcock, Blaine & Huber
3400 Marine Midland Center
Buffalo, New York 14203
Telecopy No.: (716) 852-6100
and
Stephen Banker, Esq.
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Telecopy No.: (212) 735-2000
and
if to the Buyer or Merger Subsidiary, to:
The Sherwin-Williams Company
101 Prospect Avenue, N.W.
Cleveland, Ohio 44115
Attention: Vice President - Corporate Planning and Development
Telecopy No.: (216) 566-2947
with a copy to:
The Sherwin-Williams Company
101 Prospect Avenue, N.W.
Cleveland, Ohio 44115
Attention: Vice President, General Counsel and Secretary
Telecopy No.: (216) 566-1708
SECTION 11.02 Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation". Inclusion of or reference to any information or
item in a Schedule does not constitute an admission of what is material or the
materiality of such matter.
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<PAGE> 42
SECTION 11.03 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
SECTION 11.04 Entire Agreement; No Third Party Beneficiaries;
Schedules. This Agreement (including the schedules, documents and the
instruments referred to herein) and the Confidentiality Agreement dated August
22, 1995: (a) together constitute the entire agreement and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; and (b) are not intended to confer upon
any person other than the parties hereto any rights or remedies hereunder except
for the benefits conferred by Section 7.04.
SECTION 11.05 Governing Law. This Agreement shall be governed and
construed in accordance with the internal laws of the State of New York without
regard to any applicable conflicts of law.
SECTION 11.06 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned or delegated by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Any purported assignment or delegation in
violation of this Section 11.06 shall be null and void. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors.
SECTION 11.07 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other terms and provisions of this Agreement will
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party hereto. Upon any such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto will negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner, to the end that the transactions contemplated by this
Agreement are consummated to the extent possible.
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<PAGE> 43
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement as of the date first above written.
Pratt & Lambert United, Inc.
By: /s/ J. J. Castiglia
-------------------------------------
J. J. Castiglia
Title: President and Chief Executive Officer
The Sherwin-Williams Company
By: /s/ Conway G. Ivy
-------------------------------------
Conway G. Ivy
Title: Vice President - Corporate Planning
& Development
SWACQ, Inc.
By: /s/ Conway G. Ivy
-------------------------------------
Conway G. Ivy
Title: Vice President
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<PAGE> 44
ANNEX I
CONDITIONS TO THE OFFER
Notwithstanding any other provisions of the Offer, and in addition to
(and not in limitation of) Buyer's rights to extend and amend the Offer at any
time in its sole discretion (subject to the provisions of the Merger Agreement),
Buyer shall not be required to accept for payment or, subject to any applicable
rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to the Buyer's obligation to pay for or return tendered Shares
promptly after termination or withdrawal of the Offer), pay for, and may delay
the acceptance for payment of or, subject to the restriction referred to above,
to pay for, any tendered Shares, and may terminate the Offer if (i) any
applicable waiting period under the HSR Act has not expired or terminated prior
to the expiration of the Offer, (ii) the Minimum Condition has not been
satisfied, (iii) the Rights under the Rights Agreement shall have become
exercisable, or (iv) at any time on or after the date of the Merger Agreement
and at or before the time of payment for such Shares (whether or not any Shares
have theretofore been accepted for payment or paid for pursuant to the Offer)
pursuant to the Offer, any of the following conditions shall occur:
(a) (i) there shall be threatened, instituted or pending any
action or proceeding by any government or governmental
authority or agency (A) challenging or seeking to make
illegal, impede, materially delay or otherwise directly or
indirectly restrain, prohibit or make materially more costly
the Offer or the Merger or seeking to obtain material damages
relating to the transactions contemplated under the Offer and
the Merger, (B) seeking to prohibit or materially limit the
ownership or operation by Buyer or Merger Subsidiary of all or
any material portion of the business or assets of Company or
any of its Subsidiaries taken as a whole or to compel Buyer or
Merger Subsidiary to dispose of or hold separately all or any
material portion of the business or assets of Buyer or Merger
Subsidiary or Company or any of its Subsidiaries taken as a
whole, or seeking to impose any material limitation on the
ability of Buyer or Merger Subsidiary to conduct its business
or own such assets, (C) seeking to impose material limitations
on the ability of Buyer or Merger Subsidiary effectively to
exercise full rights of ownership of the Shares, including,
without limitation, the right to vote any Shares acquired or
owned by Merger Subsidiary or Buyer on all matters properly
presented to Company's shareholders, (D) seeking to require
divestiture by Buyer or Merger Subsidiary of any Shares, or
(E) otherwise materially adversely affecting the condition of
Company and its Subsidiaries taken as a whole; or (ii) any
court shall have entered an order which is in effect and which
(A) makes illegal, impedes, materially delays or otherwise
directly or indirectly restrains, prohibits or makes
materially more costly the Offer or the Merger, (B) prohibits
or materially limits the ownership or operation by Buyer or
Merger Subsidiary of all or any material portion of the
business or assets of Company or any of its Subsidiaries taken
as a whole or compels Buyer or Merger Subsidiary to dispose of
or hold separately all or any material portion
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<PAGE> 45
of the business or assets of Buyer or Merger Subsidiary or
Company or any of its Subsidiaries taken as a whole, or
imposes any material limitation on the ability of Buyer or
Merger Subsidiary to conduct its business or own such assets,
(C) imposes material limitations on the ability of Buyer or
Merger Subsidiary effectively to exercise full rights of
ownership of the Shares, including, without limitation, the
right to vote any Shares acquired or owned by Merger
Subsidiary or Buyer on all matters properly presented to
Company's shareholders, (D) requires divestiture by Buyer or
Merger Subsidiary of any Shares, or (E) otherwise materially
adversely affects the condition of the Company and its
Subsidiaries taken as a whole; provided, however, that in the
case of a preliminary injunction to the effect described in
this subparagraph (ii), the provisions of this subparagraph
(ii) shall not be deemed to have been triggered until the
earlier of (y) the date on which such injunction becomes final
or (z) Company ceases its efforts to have such preliminary
injunction dissolved;
(b) there shall be any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or
injunction enacted, enforced, promulgated, amended, issued or
deemed applicable to (i) Buyer, Merger Subsidiary, Company or
any Subsidiary or (ii) the Offer or the Merger, by any
legislative body, court, government or governmental,
administrative or regulatory authority or agency, domestic or
foreign, other than the routine application of the waiting
period provisions of the HSR Act to the Offer or to the
Merger, which could reasonably be expected to directly or
indirectly, result in any of the consequences referred to in
clauses (A) through (E) of paragraph (a) (i) above;
(c) any change shall have occurred (or any condition, event or
development shall have occurred involving a prospective
change), that would have a Material Adverse Effect with
respect to Company;
(d) there shall have occurred any of the following which would
reasonably be expected to have a Material Adverse Effect with
respect to Company (i) any general suspension of trading in,
or limitation on prices for, securities on any national
securities exchange or in the over-the-counter market, (ii)
any decline in either the Dow Jones Industrial Average or the
Standard & Poor's Index of 400 Industrial Companies or in the
New York Stock Exchange Composite Index in excess of 20%
measured from the close of business on the trading day next
preceding the date of the Merger Agreement, (iii) any material
change in United States or any other currency exchange rates
or a suspension of, or limitation on, the markets therefor,
(iv) a declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States, or (v) a
commencement or escalation of a war or armed hostilities or
other national or international calamity directly or
indirectly involving the United States;
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<PAGE> 46
(e) the representations and warranties of Company set forth in the
Merger Agreement shall not be true and correct as of the date
of consummation of the Offer as though made on or as of such
date or Company shall have breached or failed to perform or
comply with any obligation, agreement or covenant, except in
each case, (i) for changes permitted by the Merger Agreement
and (ii) (A) those representations and warranties that address
matters only as of a particular date which are true and
correct as of such date or (B) where the failure of such
representations and warranties to be true and correct, or the
performance or compliance with such obligations, agreements or
covenants, individually or in the aggregate, would not have a
material adverse effect with respect to Company or a Material
Adverse Effect on the ability of Buyer to consummate the Offer
or the Merger;
(f) all consents, registrations, approvals, permits,
authorizations, notices, reports or other filings required to
be obtained or made by Company, Buyer or Merger Subsidiary
with or from any governmental or regulatory entity in
conjunction with the execution, delivery and performance of
the Merger Agreement, the Offer and the consummation of the
transactions contemplated by the Merger Agreement shall not
have been made or obtained and such failure would reasonably
be expected to have a Material Adverse Effect with respect to
Company or would prevent or materially delay consummation of
the transactions contemplated by the Merger Agreement;
(g) the Merger Agreement shall have been terminated in accordance
with its terms;
(h) (i) any person, entity or "group" (as defined in Section
(d)(3) of the Exchange Act), shall have become the beneficial
owner (determined pursuant to Rule 13d-3 promulgated under the
Exchange Act) of at least 20% of any class or series of
capital stock of Company (including the Shares), or shall have
acquired, directly or indirectly, at least 20% of the assets
or earning power of Company other than the signatories to the
Stock Option Agreement, or (ii) Company shall have entered
into, or shall have publicly announced its intention to enter
into, an agreement or agreement in principle with respect to
an Acquisition Proposal or similar business combination other
than the transactions contemplated in the Merger Agreement and
the Offer; or
(i) (i) Company's Board of Directors or any Committee thereof
shall have withdrawn, or modified or changed in a manner
adverse to Buyer or Merger Subsidiary (including by amendment
of the Schedule 14D-9) its recommendation of the Offer, the
Merger Agreement, or the Merger; (ii) Company's Board of
Directors or any Committee thereof shall have made any
recommendation with respect to any Acquisition Proposal by any
Person (other than Buyer or Merger Subsidiary) other than a
recommendation rejecting or against such Acquisition Proposal;
or (iii) Company shall have received any Acquisition Proposal
by any Person (other than Buyer or Merger Subsidiary)
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<PAGE> 47
and Company's Board of Directors is neutral or makes no
recommendation with respect to such Acquisition Proposal after
a reasonable amount time (and in no event more than five
business days) has elapsed for Company's Board of Directors to
review and make a recommendation with respect to such
Acquisition Proposal consistent with its fiduciary duties;
which in the reasonable judgment of Buyer or Merger Subsidiary, in any
such case and regardless of the circumstances giving rise to such
condition, makes it inadvisable to proceed with such acceptance for
payment or payment.
The foregoing conditions are for the sole benefit of Merger
Subsidiary and Buyer and may be waived by Merger Subsidiary in whole or
in part at any time and from time to time in the sole discretion of
Merger Subsidiary. The failure by Merger Subsidiary at any time to
exercise any of the foregoing rights shall not be deemed a waiver of
any such right; the waiver of any such right with respect to particular
facts and other circumstances shall not be deemed a waiver with respect
to any other facts and circumstances; and each such right shall be
deemed an ongoing right that may be asserted at any time and from time
to time. Any determination by Merger Subsidiary concerning the events
described above will be final and binding on all parties.
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<PAGE> 1
STOCK OPTION, PLEDGE AND SECURITY AGREEMENT
AGREEMENT, dated as of November 4, 1995, among The Sherwin-Williams
Company, an Ohio corporation ("Parent"), SWACQ, Inc., a New York corporation and
a wholly-owned subsidiary of Parent ("Merger Subsidiary"), and the other parties
signatory hereto (each a "Shareholder," and collectively, the "Shareholders").
W I T N E S S E T H:
WHEREAS, Parent, Merger Subsidiary and Pratt & Lambert United, Inc.
("Company"), have simultaneously with the execution of this Agreement entered
into an Agreement and Plan of Merger dated as of November 4, 1995 (as such
agreement may hereafter be amended from time to time, the "Merger Agreement"),
pursuant to which Merger Subsidiary will be merged with and into Company
("Merger"); and
WHEREAS, in furtherance of the Merger, Parent, through Merger
Subsidiary, shall, subject to the terms and conditions in the Merger Agreement,
commence a cash tender offer ("Offer") to acquire all of the issued and
outstanding Shares (as such term is defined below), including all of the Option
Shares (as such term is defined below); and
WHEREAS, as a condition to its entering into the Merger Agreement,
Parent has required that the Shareholders agree, and each Shareholder hereby
agrees, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, Parent,
Merger Subsidiary and Shareholders hereby agree as follows:
Section 1. Definitions. For purposes of this Agreement:
(a) "Shares" shall mean the issued and outstanding shares of
common stock, par value $.01 per share, of Company, including the
associated Common Stock Purchase Rights issued pursuant to the Rights
Agreement dated as of January 1, 1989, between Company and Mellon
Securities Trust Company, as Rights Agent.
(b) "Option Shares" shall mean, with respect to each
Shareholder, the Shares specified on Exhibit A and all Shares acquired
by such Shareholder in the future prior to the Effective Time (as such
term is defined in the Merger Agreement) whether through the exercise
of options, warrants or rights, through the conversion of convertible
or exchangeable securities or by means of purchase, gift, dividend,
distribution or otherwise.
<PAGE> 2
(c) "Person" shall mean an individual, a corporation, a joint
venture, a limited liability company, a partnership, an association, an
unincorporated organization, a group trust or any other entity or
organization, including a governmental or political subdivision or any
agency or instrumentality thereof.
(d) All other capitalized terms used but not otherwise defined
herein shall have the respective meanings ascribed to them in the
Merger Agreement.
Section 2. Grant of Option.
(a) Each Shareholder hereby irrevocably grants to Parent and
Merger Subsidiary an exclusive option ("Option") to purchase all Option
Shares of such Shareholder at a price of $35.00 per Option Share, net
to Seller in cash, subject to any amounts required to be withheld under
applicable federal, state, local or foreign income tax laws and
regulations, and subject to adjustment under Section 2(d), which Option
shall be exercisable by Parent or Merger Subsidiary at any time on or
after January 2, 1996. In the event Merger Subsidiary accepts for
payment, on or prior to December 31, 1995, all shares validly tendered
and not withdrawn in the Offer, either Parent or Merger Subsidiary
shall exercise the Options within two business days following January
2, 1996. In the event that the Shareholders are not permitted to tender
(or are required to withdraw) their Option Shares pursuant to the
provisions of Section 3 of this Agreement, either Parent or Merger
Subsidiary shall exercise the Options within two business days
following the consummation of the Offer but in any event not earlier
than January 1, 1996.
(b) To exercise the Option, either Parent or Merger Subsidiary
shall send a written notice ("Exercise Notice") to each Shareholder
specifying the place and the time (which shall be not less than two
business days and not more than four business days after the date of
the Exercise Notice) for the closing of the purchase and sale of the
Option Shares in accordance with the provisions hereof. The closing of
the purchase of the Option Shares ("Closing") shall take place at the
places and at the times designated by Parent or Merger Subsidiary in
the Exercise Notice.
(c) At Closing, each Shareholder shall sell, assign, convey and
transfer to Parent or Merger Subsidiary, to the extent not already
delivered pursuant to Section 6, and its successors or permitted
assigns, each of such Shareholder's Option Shares, free and clear of
any and all liens, claims, security interests (other than the security
interest granted pursuant to Section 6), encumbrances, options or
adverse claims whatsoever, and each Shareholder shall deliver or cause
to be delivered to either Parent or Merger Subsidiary a certificate or
certificates representing the number of Option Shares to be delivered
by such Shareholder at the Closing, duly endorsed, or accompanied by
stock powers duly executed in blank, with all required transfer tax
stamps affixed thereto; and either Parent or Merger Subsidiary shall
deliver to each Shareholder (or the Shareholder's designee) by wire
transfer or certified or bank cashier's check or checks,
2
<PAGE> 3
an amount equal to (i) the product of (x) the number of such
Shareholder's Option Shares purchased at Closing multiplied by (y) the
Offer Price, less (ii) any amounts required to be withheld under
applicable federal, state, local or foreign income tax laws and
regulations.
(d) In the event of any change in Company's capital stock by
reason of any stock dividend, stock split, merger, consolidation,
recapitalization, combination, conversion, exchange of shares, or
dividend (other than the declaration and/or payment of regular
quarterly cash dividends in accordance with Company's past dividend
policy), or other change in the corporate or capital structure of
Company, which would have the effect of diluting or changing Parent's
or Merger Subsidiary's rights hereunder, the number and kind of shares
or securities subject to the Option and the Offer Price shall be
appropriately and equitably adjusted so that (i) Parent or Merger
Subsidiary shall receive, at the Closing, the number and class of
shares or other securities or property that Parent or Merger Subsidiary
would have received and (ii) the Shareholders shall receive, at the
Closing, the consideration they would have received in respect of the
Option Shares purchasable upon exercise of the Option if the Option had
been exercised immediately prior to such event.
Section 3. Tender and Withdrawal of Option Shares. If the Offer is
extended to a time on or after 5:00 p.m. New York time on January 5, 1996, each
Shareholder shall promptly (and in any event not later than January 3, 1996) and
validly tender all of such Shareholder's Option Shares pursuant to the Offer,
and shall not thereafter withdraw the tendered Shares, provided, however, that
if the Offer Price (as defined in the Merger Agreement) is for any reason
increased above $35.00, then each Shareholder hereby agrees that (i) such
Shareholder will not tender such Shareholder's Option Shares pursuant to the
Offer at any time on or after the date of the first public announcement of such
increase in the Offer Price, and (ii) if any of such Shareholder's Option Shares
have been tendered into the Offer prior to the date of the first public
announcement of such increase in the Offer Price, such Shareholder shall
promptly (and in any event not later than three business days after the first
public announcement of such increase) properly withdraw all such Option Shares.
The obligation of the Shareholders under this Section 3 shall be deemed
satisfied, with respect to all Option Shares delivered pursuant to Section 6, by
the appointment and grant pursuant to Section 5.
Section 4. Restriction on Transfer, Proxies and Non-Interference. Except
as otherwise specifically provided in this Agreement and so long as this
Agreement remains in effect, no Shareholder shall, directly or indirectly: (i)
offer for sale, sell, transfer, tender, pledge, encumber, assign or otherwise
dispose of, or enter into any contract, option or other arrangement or
understanding with respect to or otherwise consent to the offer for sale,
transfer, tender, pledge, encumbrance, assignment or other disposition of any or
all of such Shareholder's Option Shares or any interest therein; (ii) grant any
proxies or powers of attorney, deposit any
3
<PAGE> 4
Option Shares into a voting trust or enter into a voting agreement with respect
to any Option Shares; or (iii) vote any Option Shares in favor of a transaction
inconsistent with the Merger.
Section 5. Grant of Irrevocable Proxy; Appointment of Attorneys-in-Fact.
Each Shareholder hereby irrevocably grants to Parent and its officers, and John
A. Healy and Richard A. Legenza, or any of them (each a "Proxyholder"), each
with full power of substitution, a proxy to exercise all voting and other rights
with respect to all of such Shareholder's Option Shares, including without
limitation, with respect to the Merger and the other matters contemplated by the
Merger Agreement. Such proxy shall be considered coupled with an interest in the
Option Shares and supported by the pledge of Option Shares provided in this
Agreement and is irrevocable. All prior proxies and powers given by each
Shareholder with respect to such Shareholder's Option Shares are, without
further action, hereby revoked for so long as this Agreement is in effect, and
no subsequent proxies or powers may be given, and if given will not be
effective. Each Proxyholder will, with respect to the Option Shares, be
empowered to exercise all voting and other rights of the Shareholders with
respect to the Option Shares as such Proxyholder, in his or its sole discretion,
may deem proper at any meeting of the Company's shareholders, by written consent
or otherwise. The foregoing proxy may be exercised by any Proxyholder only to
the extent consistent with the terms of this Agreement and the Merger Agreement.
In addition to and without limiting the generality of the foregoing,
each Shareholder hereby irrevocably (a) appoints each Proxyholder as such
Shareholders' attorneys-in-fact, with an irrevocable instruction to the
Proxyholder (i) validly to tender such Shareholder's Option Shares into the
Offer if such Shareholder is so required by Section 3 of this Agreement, (ii)
properly to withdraw such Shareholder's Option Shares from the Offer if such
Shareholder is so required by Section 3 of this Agreement, and (iii) to execute
any instrument of transfer and/or other documents and do all such other acts and
things as may in the opinion of the Proxyholder be necessary or expedient for
the purpose of, or in connection with, tendering or withdrawing such Option
Shares into or from the Offer, to the extent required in Section 3; and (b)
agrees not to exercise or attempt to exercise any rights pertaining to the
Option Shares without the prior consent of Parent.
Section 6. Grant of Pledge and Security Interest. For the purpose of
securing the due and prompt performance of all the obligations of such
Shareholders under this Agreement, each Shareholder hereby irrevocably grants to
Merger Subsidiary a pledge and security interest in such Shareholder's Option
Shares, together with all proceeds thereof and dividends thereon.
Notwithstanding the provisions of the preceding sentence, unless and until any
Shareholder breaches the provisions of, or defaults in the performance of the
obligations under, this Agreement, Merger Subsidiary shall not have the right to
receive and/or retain any such proceeds and dividends. In order to perfect such
security interests, each Shareholder shall deliver to Merger Subsidiary, not
later than 5:00 p.m. New York time on the fifth business day following the date
of this Agreement, any and all stock certificates evidencing such Shareholder's
Option Shares. Parent shall have all the rights and remedies of a secured party
provided or permitted under the Uniform Commercial Code.
4
<PAGE> 5
Section 7. Other Covenants, Representations and Warranties. Each
Shareholder hereby represents and warrants to each of Parent and Merger
Subsidiary each of the following:
(a) Ownership of Option Shares. On the date hereof,
such Shareholder is the beneficial owner of the number of Option Shares
set forth opposite such Shareholder's name on Exhibit A. On the date
hereof, except as otherwise disclosed on Exhibit A, the number of
Option Shares set forth opposite such Shareholder's name on Exhibit A
constitutes all of the Shares owned by such Shareholder, except for any
Shares which (i) such shareholder intends to dispose of by gift to (x)
an immediate family member of such Shareholder, (y) a trust
substantially all of the beneficiaries of which are immediate family
members of such Shareholder, or (z) an organization described in
Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, or
(ii) are held by such Shareholder in a fiduciary capacity and with
respect to which such Shareholder does not have sole dispositive power.
Except as set forth on Exhibit A and any encumbrances and/or
restrictions identified in the Merger Agreement (none of which will be
violated by the transactions contemplated in this Agreement), such
Shareholder has the exclusive right to vote or dispose of (or exercise
the voting or disposition of) such Shareholder's Option Shares.
(b) Power, Binding Agreement. Each Shareholder and each
person executing this Agreement on behalf of a Shareholder has the
legal capacity, power and authority to enter into and perform all of
such Shareholder's obligations under this Agreement and the Merger
Agreement. The execution, delivery and performance of this Agreement by
such Shareholder or other signatory will not violate any other
agreement to which such Shareholder is a party including, but not
limited to, any voting agreement, Shareholders agreement or voting
trust. This Agreement has been duly and validly executed and delivered
by such Shareholder and constitutes a valid and binding agreement of
such Shareholder, enforceable against such Shareholder in accordance
with its terms. There is no beneficiary or holder of a voting trust
certificate or other interest of any trust of which such Shareholder is
a trustee whose consent is required for the execution and delivery of
this Agreement or the consummation by such Shareholder of the
transactions contemplated hereby. If such Shareholder is married and
such Shareholder's Option Shares constitute community property, this
Agreement has been duly authorized, executed and delivered by, and
constitutes a valid and binding agreement of, such Shareholder's
spouse, enforceable against such person in accordance with its terms.
Each of the Shareholders waives any rights he or she may have under
that certain Shareholders' Agreement, dated as of February 25, 1994, to
the extent the terms thereof are inconsistent with the provisions of
this Agreement, including, without limitation, any notice provisions.
(c) No Encumbrances. Except as applicable in connection
with the transactions contemplated in this Agreement and any
encumbrances and/or restrictions identified in the Merger Agreement or
on Exhibit A (none of which will be violated by the transactions
contemplated in this Agreement), such Shareholder's Option Shares and
5
<PAGE> 6
the certificates representing such shares are, and at all times during
the term hereof will be, free and clear of all liens, claims, security
interests, proxies, voting trusts and/or agreements, understandings or
arrangements and any other encumbrances whatsoever, except for any such
encumbrances or proxies arising hereunder.
Section 8. Shareholder Capacity. No person executing this Agreement who
is or becomes, during the term hereof, a director of Company makes any agreement
or understanding herein in his or her capacity as such director. Each
Shareholder signs solely in his or her capacity as the owner of, or the trustee
of a trust whose beneficiaries are the owners of, such Shareholder's Option
Shares.
Section 9. Indemnification. Subject to the limitations contained in this
Section 9, Parent and Merger Subsidiary shall indemnify, defend and hold
harmless each Shareholder against all losses, claims, damages, costs, expenses
(including attorney's fees and expenses), liabilities or judgments or amounts
that are paid in settlement or in connection with any threatened or actual
claim, action, suit, proceeding or investigation (collectively, "Losses") based
in whole or in part on, or arising in whole or in part out of, such
Shareholder's execution or performance of, or the consummation of the
transactions contemplated under, this Agreement. Notwithstanding any provision
of the preceding sentence to the contrary, neither Parent nor Merger Subsidiary
shall indemnify any Shareholder hereunder for any Losses based in whole or in
part on, or arising in whole or in part out of, (i) the breach of such
Shareholder's representation, warranty or covenant set forth in this Agreement,
other than any challenges to the enforceability of this Agreement based on
fiduciary duty arguments, (ii) any willful act which, to the knowledge of such
Shareholder, constituted a violation or breach of any statute, rule, regulation,
agreement or understanding which applies to such Shareholder or to which such
Shareholder is a party, or (iii) fraud by a Shareholder. Promptly upon any
Shareholder's receipt of written notice of any claim or the service of a summons
or other initial legal process for which indemnification is or could be claimed
hereunder, such Shareholder shall given written notice to Parent and shall
tender the defense of such claim to Parent. If Parent accepts the tender of
defense without a reservation of rights, then Parent shall control all aspects
of the defense and shall indemnify Shareholder in accordance with this Section
9, and shall not settle any such claim unless such settlement provides for a
full release of such Shareholder from such claim. In the event Parent does not
accept the tender of defense without a reservation of rights, then the
Shareholders may retain counsel satisfactory to them and Parent, and Parent
shall pay all reasonable fees and expenses of such counsel for the Shareholders
promptly as statements therefor are received, and Parent will use all reasonable
efforts to assist in the defense of any such matter; provided that Parent shall
not be liable for any settlement effected without its prior written consent,
which consent shall not unreasonably be withheld. The Shareholders as a group
may retain only one law firm to represent them with respect to each such matter
unless there is, under applicable standards of professional conduct, a conflict
which cannot reasonably be resolved on any significant issue between the
positions of any two or more Shareholders, in which event, additional counsel
may be retained to the extent required by such conflict. Parent agrees that all
rights to indemnification, including provisions relating to advances of expenses
incurred in defense of any action or suit, existing in favor of the Shareholders
hereunder shall continue in
6
<PAGE> 7
full force and effect for a period of not less than six years from the later of
the Closing or the termination hereof; provided, however, that all claims for
indemnification hereunder asserted or made within such period shall continue
until the resolution of such claims.
Section 10. Miscellaneous.
(a) Term. Except as otherwise expressly provided in
this Agreement this Agreement shall remain in effect until the first to
occur of (i) the later of (y) June 30, 1996 or (z) five business days
following the expiration or termination of the Offer in the event the
expiration date of the Offer is extended as a result of an Acquisition
Proposal, (ii) the acquisition by Parent, through Merger Subsidiary or
otherwise, of all the Option Shares, (iii) the termination of the
Merger Agreement pursuant to Section 10.01(iii) thereof due to a
material breach of any representation or warranty on the part of
Company set forth in the Merger Agreement or (iv) the termination of
the Merger Agreement pursuant to Sections 10.01(iv) or 10.01(vi)
thereof.
(b) Entire Agreement, No Third Party Beneficiaries;
Schedules. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter hereof and supersedes
all other prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof; and is not
intended to confer upon any Person other than the parties hereto or
thereto any rights or remedies hereunder.
(c) Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned or
delegated by any of the parties hereto (by operation of law or
otherwise) without the prior written consent of the other parties,
provided that Parent may assign, in its sole discretion, its rights and
obligations hereunder to any direct or indirect wholly-owned subsidiary
of Parent, but no such assignment shall relieve Parent of its
obligations hereunder if such assignee does not perform such
obligations.
(d) Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or
terminated with respect to any one or more Shareholders, except upon
the execution and delivery of a written agreement executed by the
relevant parties hereto.
(e) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly received if so given except, in the
case of mail, three days after being sent) by hand delivery, telegram,
telex or confirmed telecopy, or by mail (registered or certified mail,
postage prepaid, return receipt requested) or by any overnight courier,
providing proof of delivery. All communications hereunder shall be
delivered to the respective parties at the following addresses:
7
<PAGE> 8
If to a Shareholder: At such Shareholder's address set forth on
Exhibit A hereto
with a copy to: PHILLIPS, LYTLE, HITCHCOCK, BLAINE & HUBER
3400 Marine Midland Center
Buffalo, New York 14203
Attention: Frederick G. Attea
Telecopy No. (716) 852-6100
and SKADDEN, ARPS, SLATE, MEAGHER & FLOM
919 Third Avenue
New York, New York 10022
Attention: Stephen M. Banker
Telecopy No. (212) 735-2000
If to Parent: THE SHERWIN-WILLIAMS COMPANY
101 Prospect Avenue, N.W.
Cleveland, Ohio 44115
Attention: Vice President - Corporate Planning
and Development
Telecopy No. (216) 566-2947
with a copy to: THE SHERWIN-WILLIAMS COMPANY
101 Prospect Avenue, N.W.
Cleveland, Ohio 44115
Attention: Vice President, General Counsel
and Secretary
Telecopy No. (216) 566-1708
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth
above.
(f) Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by
any rule of law or public policy, all other terms and provisions of
this Agreement will nevertheless remain in full force and effect so
long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to
any party hereto. Upon any such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the
parties hereto will negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as possible
in an acceptable manner, to the end that the transactions contemplated
by this Agreement are consummated to the extent possible.
(g) Specific Performance. Each of the parties hereto
recognizes and acknowledges that a breach by such party of any
covenants or agreements contained in this Agreement will cause the
other party to sustain damages for which it would not have an adequate
remedy at law for money damages, and therefore, each of the parties
hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the
8
<PAGE> 9
remedy of specific performance of such covenants and agreements and
injunctive and other equitable relief in addition to any other remedy
to which it may be entitled at law or in equity.
(h) Remedies Cumulative. All rights, powers and
remedies provided under this Agreement or otherwise available in
respect hereof, whether at law or in equity, shall be cumulative and
not alternative, and the exercise of any thereof by any party shall not
preclude the simultaneous or later exercise of any other such right,
power or remedy by such party.
(i) No Waiver. The failure of any party hereto to
exercise any right, power or remedy provided under this Agreement or
otherwise available in respect hereof, whether at law or in equity, or
to insist upon compliance by any other party hereto with its
obligations hereunder, and any custom or practice of the parties at
variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy
or to demand such compliance.
(j) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York,
without regard to any applicable conflicts of law.
(k) Descriptive Headings. The descriptive headings used
herein are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of
this Agreement.
(l) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all
of which, when taken together, shall constitute one and the same
Agreement.
(m) Expenses. Each party shall pay its own expenses incurred in
connection with this Agreement.
(n) Investment Intent. Merger Subsidiary represents and
warrants that it is acquiring the Option Shares for investment purposes
only and not with a view to resale or distribution thereof in violation
of the Securities Act of 1933, as amended, or the securities laws of
any state.
9
<PAGE> 10
IN WITNESS WHEREOF, Parent and Merger Subsidiary have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
and each Shareholder has executed this Agreement, all as of the date first above
written.
The Sherwin-Williams Company
By: /s/ Conway G. Ivy
-------------------------------------
Conway G. Ivy
Vice President - Corporate Planning
and Development
SWACQ, Inc.
By: /s/ Conway G. Ivy
-------------------------------------
Conway G. Ivy
Vice President
SHAREHOLDER
By: ____________________________________
Name:
10
<PAGE> 11
IN WITNESS WHEREOF, Parent and Merger Subsidiary have caused this
Agreement to be executed by their respective officers thereunto duly
authorized, and each Shareholder has executed this Agreement, all as of the
date first above written.
Parent
By: -------------------------------
Name:
Title:
Merger Subsidiary
By: -------------------------------
Name:
Title:
Marks Group
Edwin Marks
Nancy Marks
Carolyn Marks
Linda Marks
Constance Rubenfein
Marjorie M. Boas
Carol Boas
Mark Claster
Susan Claster
Richard Boas
Elisabeth Boas
Robert Davidoff
David Gruber
Robert Marks
Carl Marks Foundation, Inc.
By: /s/ Mark Claster
- ----------------------------- -------------------------------
Wilfred J. Larson Name: Mark Claster
Title: Attorney-in-Fact
/s/ Robert O. Swados
- ----------------------------- -----------------------------------
Robert O. Swados Jeffrey L. Kenner
IIIea /s/ Andrew Boas
W60832 -----------------------------------
Andrew Boas
<PAGE> 12
IN WITNESS WHEREOF, Parent and Merger Subsidiary have caused this
Agreement to be executed by their respective officers thereunto duly
authorized, and each Shareholder has executed this Agreement, all as of the
date first above written.
/s/ R.D. Stevens, Jr. 75,117
- ------------------------------ -------------------------------
Raymond D. Stevens, Jr. Frank P. Wilton
25,556
- 3,000
--------
/s/ Aline L. Stevens 22,556
- ------------------------------ -------------------------------
Aline L. Stevens Frank S. Wilton
(see attached) 30,044
- ------------------------------ -------------------------------
Raymond D. Stevens, III Annette P. Wilton
- ------------------------------ -------------------------------
Larkin E. Stevens Lucy P. Wilton
- ------------------------------ -------------------------------
Courtney S. Price Katherine P. Wilton
- ------------------------------ -------------------------------
Hunter H. Stevens Benjamin W. Wilton
- ------------------------------ R.D. Stevens, Jr. IRA 2,887
George E. Stevens
By /s/ R.D. Stevens, Jr.
- ------------------------------ -----------------------------
Jill W. Stevens
- ------------------------------ Annie E. Stevens Trust
George E. Stevens, Jr. No. 2.0.1 23,750
- ------------------------------
Scott W. Stevens By /s/ R.D. Stevens, Jr.
-----------------------------
Trustee
- ------------------------------ Annie E. Stevens Trust
John W. Stevens No. 3.0.2 42,840
By /s/ R.D. Stevens, Jr.
- ------------------------------ ----------------------------
Annette S. Wilton Trustee
<PAGE> 13
<TABLE>
<S> <C>
Annie E. Stevens Trust George E. Stevens Trust
No. 4.0.3 No. 3.3.BB 3,924
By By /s/ R.D. Stevens, Jr.
------------------------------ ---------------------------
Trustee Trustee
Annette Wells Stevens Trust George E. Stevens Trust
No. 2.0.4 9,116 No. 3.4.CC 3,924
By /s/ R.D. Stevens, Jr. By /s/ R.D. Stevens
------------------------------ ---------------------------
Trustee Trustee
Annette Wells Stevens Trust Annette Stevens Wilton Trust
No. 3.0.5 55,818 No. 4.2.A
By /s/ R.D. Stevens, Jr. By
------------------------------ ---------------------------
Trustee Trustee
Annette Wells Stevens Trust Annette Stevens Wilton Trust
No. 4.0.6 No. 4.3.B
By By
------------------------------ ---------------------------
Trustee Trustee
R.D. Stevens, Jr. Trust Annette Stevens Wilton Trust
No. 2.2.A 1,358 No. 4.4.C
By /s/ Aline L. Stevens By
------------------------------ ---------------------------
Trustee Trustee
R.D. Stevens, Jr. Trust Annette Stevens Wilton Trust
No. 2.3.B 1,358 No. 4.5.D
By /s/ Aline L. Stevens By
------------------------------ ---------------------------
Trustee Trustee
R.D. Stevens, Jr. Trust Annette Stevens Wilton Trust
No. 2.4.C 1,358 No. 4.6.F
By /s/ Aline L. Stevens By
------------------------------ ----------------------------
Trustee Trustee
George E. Stevens Trust Annette Wells Stevens Trust
No. 3.2.AA 3,924 No. 2.0.W 3,675
By /s/ R.D. Stevens, Jr. By /s/ R.D. Stevens, Jr.
------------------------------ ----------------------------
Trustee Trustee
</TABLE>
<PAGE> 14
Annette Wells Stevens Trust
No. 3.0.W 25,500
By /s/ R.D. Stevens, Jr.
------------------------------
Trustee
Annette Wells Stevens Trust
No. 2.5.W 10,975
By /s/ R.D. Stevens, Jr.
------------------------------
Trustee
<PAGE> 15
IN WITNESS WHEREOF, Parent and Merger Subsidiary have caused this
Agreement to be executed by their respective officers thereunto duly
authorized, and each Shareholder has executed this Agreement, all as of the
date first above written.
Parent
By: ---------------------------------
Name:
Title:
Merger Subsidiary
By: ---------------------------------
Name:
Title:
Marks Group
Edwin Marks
Nancy Marks
Carolyn Marks
Linda Marks
Constance Rubenfein
Marjorie M. Boas
Carol Boas
Mark Claster
Susan Claster
Richard Boas
Elisabeth Boas
Robert Davidoff
David Gruber
Robert Marks
Carl Marks Foundation, Inc.
/s/ Wilfred J. Larson By: /s/ Mark Claster
- --------------------------------- -----------------------------
Wilfred J. Larson Name: Mark Claster
Title: Attorney-in-Fact
- --------------------------------- ---------------------------------
Robert O. Swados Jeffrey L. Kenner
/s/ Andrew Boas
---------------------------------
Andrew Boas
<PAGE> 16
IN WITNESS WHEREOF, Parent and Merger Subsidiary have caused this
Agreement to be executed by their respective officers thereunto duly
authorized, and each Shareholder has executed this Agreement, all as of the
date first above written.
Parent
By: --------------------------------
Name:
Title:
Merger Subsidiary
By: --------------------------------
Name:
Title:
Marks Group
Edwin Marks
Nancy Marks
Carolyn Marks
Linda Marks
Constance Rubenfein
Marjorie M. Boas
Andrew Boas
Carol Boas
Mark Claster
Susan Claster
Richard Boas
Elizabeth Boas
Robert Davidoff
David Gruber
Robert Marks
Carl Marks Foundation, Inc.
By: --------------------------------
Name: Mark Claster
Title: Attorney-in-Fact
/s/ Jeffrey L. Kenner
------------------------------------
Jeffrey L. Kenner
<PAGE> 17
IN WITNESS WHEREOF, Parent and Merger Subsidiary have caused this
Agreement to be executed by their respective officers thereunto duly
authorized, and each Stockholder has executed this Agreement, all as of the
date first above written.
The JFK Annuity Trust II The Sherwin-Williams Company
By: /s/ Gwen Knapp By:
------------------------------- ------------------------------
Gwen Knapp, as trustee Name: Conway G. Ivy
Title: Vice President - Corporate
Planning & Development
The JFK Annuity Trust III
By: /s/ Gwen Knapp
-------------------------------
Gwen Knapp, as trustee
By:
------------------------------
Name:
The Jules F. Knapp Family Trust No. IV Title:
By: /s/ Jules Knapp
-------------------------------
Jules Knapp, as trustee The 1995 Martin R. Lewis
GRAT #2
/s/ Jules Knapp
- ----------------------------------- By:
Jules Knapp ------------------------------
Trustee
<PAGE> 18
IN WITNESS WHEREOF, Parent and Merger Subsidiary have caused this
Agreement to be executed by their respective officers thereunto duly
authorized, and each Stockholder has executed this Agreement, all as of the
date first above written.
The Sherwin-Williams Company
By:
------------------------------
Name: Conway G. Ivy
Title: Vice President - Corporate
Planning & Development
By:
------------------------------
Name:
Title:
The 1995 Martin R. Lewis
GRAT #2
By: /s/ Martin R. Lewis, TRUSTEE
-------------------------------
Trustee
/s/ TRUSTEE
-------------------------------
Trustee
<PAGE> 19
IN WITNESS WHEREOF, Parent and Merger Subsidiary have caused this
Agreement to be executed by their respective officers thereunto duly
authorized, and each Shareholder has executed this Agreement, all as of the
date first above written.
Parent
By:
---------------------------------
Name:
Title:
Merger Subsidiary
By:
---------------------------------
Name:
Title:
Marks Group
Edwin Marks
Nancy Marks
Carolyn Marks
Linda Marks
Constance Rubenfein
Marjorie M. Boas
Carol Boas
Mark Claster
Susan Claster
Richard Boas
Elisabeth Boas
Robert Davidoff
David Gruber
Robert Marks
Carl Marks Foundation, Inc.
By: /s/ Mark Claster
-----------------------------
Name: Mark Claster
Title: Attorney-in-Fact
---------------------------------
Jeffrey L. Kenner
IIICa /s/ Andrew Boas
W60832 ---------------------------------
Andrew Boas
<PAGE> 20
IN WITNESS WHEREOF, Parent and Merger Subsidiary have caused this
Agreement to be executed by their respective officers thereunto duly
authorized, and such Shareholder has executed this Agreement, all as of the
date first above written.
Parent
By:
--------------------------------
Name:
Title:
Merger Subsidiary
By:
-------------------------------
Name:
Title:
SHAREHOLDER
By: /s/ Raymond D. Stevens III
-------------------------------
Name:
<PAGE> 21
EXHIBIT A
---------
<TABLE>
<CAPTION>
<S> <C>
NAME AND ADDRESS SHARES
- ---------------- ------
JFK Annuity Trust II 254,438
JFK Annuity Trust III 320,788
Jules F. Knapp Family Trust No. IV 1,420,023
Jules F. Knapp 73,812
The address for all the above is: ---------
c/o United Coatings, Inc. 2,069,061
980 North Michigan Ave., Suite 1120
Chicago, ILL 60611
Attention: Jules F. Knapp
Edwin Marks 116,666
Nancy Marks 133,333
Carolyn Marks 116,666
Linda Marks 116,666
Constance Rubenfein 116,666
Marjorie Boas 18,066
Andrew Boas 109,766
Carol Boas 72,216
Mark Claster 60,233
Susan Claster 121,750
Richard Boas 108,750
Robert Davidoff 156,117
David Gruber 125,000
Robert Marks 125,000
Carl Marks Foundation 37,000
Elizabeth Boas 72,216
The address for all the above is: ---------
c/o Carl Marks & Co., Inc. 1,606,111
135 East 57th Street
New York, NY 10022
Attention: Mark Claster
Jeffrey L. Kenner, Kenner & Co., Inc., 437 Madison Ave. 475,000
Suite 2001, New York, NY 10022
The 1995 Martin R. Lewis, GRAT #2, c/o Martin R. Lewis, 89,305
Williamhouse-Regency, Inc., ---------
28 West 23rd St., New York, NY 10010 564,305
R.D. Stevens, Jr. 75,117
R.D. Stevens, Jr. IRA 2,887
Aline L. Stevens 22,556
R.D. Stevens, Jr. III 30,044
Annie E. Stevens Trust No. 2.0.1 23,750
Annie E. Stevens Trust No. 3.0.2 42,840
Annette Wells Stevens Trust No. 2.0.4 9,116
Annette Wells Stevens Trust No. 3.0.5 55,818
R.D. Stevens, Jr. Trust No. 2.2.A 1,358
R.D. Stevens, Jr. Trust No. 2.3.B 1,358
</TABLE>
<PAGE> 22
- 2 -
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES
- ---------------- ------
<S> <C>
R.D. Stevens, Jr. Trust No. 2.4.C 1,358
George E. Stevens Trust No. 3.2.AA 3,924
George E. Stevens Trust No. 3.3.BB 3,924
George E. Stevens Trust No. 3.4.CC 3,924
Annette Wells Stevens Trust No. 2.0.W 3,675
Annette Wells Stevens Trust No. 3.0.W 25,500
Annette Wells Stevens Trust No. 2.5.W 10,975
The address for all the above -------
(except R.D. Stevens III) is: 318,124
c/o Pratt & Lambert United Inc.
75 Tonawanda Street
Buffalo, New York 14207
Attention: R.D. Stevens, Jr.
The address for R.D. Stevens, III is:
748 Magnolia St., Denver, Co. 80220-6037.
Wilfred J. Larson, c/o Pratt & Lambert United Inc., 4,000
75 Tonawanda Street, Buffalo, New York 14207, Attention:
R.D. Stevens, Jr.
Robert O. Swados, Cohen, Swados, Wright, Hanifin, 2,050
Bradford & Brett, 70 Niagara Street, Buffalo, NY 14202
</TABLE>
Exceptions
- ----------
1. Mr. Davidoff owns a total of 475,000 shares
2. List does not include shares beneficially owned as a fiduciary of
employee benefit plans
3. The shares held by the Marks family, Boas family, Claster family,
Ms. Rubenfein, Mr. Davidoff, Mr. Gruber and the Carl Marks
Foundation are subject to a Voting Trust and Power of Attorney.
4. Does not include shares as to which any such person is a
co-trustee.
<PAGE> 1
PRATT & LAMBERT UNITED, INC.
75 Tonawanda Street
Buffalo, NY 14207
August 14, 1995
The Sherwin Williams Company
101 Prospect Avenue N.W.
Cleveland, OH 44115-1075
Attention: Mr. Conway G. Ivy
Vice President - Corporate Planning and Development
Gentlemen:
In order to allow you to evaluate the possible acquisition (the
"Proposed Acquisition") of Pratt & Lambert United, Inc. (the "Company"), we
will deliver to you, upon your execution and delivery to us of this letter
agreement, certain information about the properties and operations of the
Company. All information about the Company furnished by us or our
Representatives (as defined below), whether furnished before or after the date
hereof, whether oral or written, and regardless of the manner in which it is
furnished, is referred to in this letter agreement as "Proprietary
Information". Proprietary Information does not include, however, information
which (a) is or becomes generally available to the public other than as a
result of a disclosure by you or your Representatives, (b) was available to you
on a nonconfidential basis prior to its disclosure by us or our Representatives
or (c) becomes available to you on a nonconfidential basis from a person other
than us or our Representatives who is not otherwise bound by a confidentiality
agreement with us or any Representative of ours, or is otherwise not under an
obligation to us or any Representative of ours not to transmit the information
to you. As used in this letter agreement, the term "Representative" means, as
to any person, such person's affiliates and its and their directors, officers,
employees, agents, advisors (including, without limitation, financial advisors,
counsel and accountants) and controlling persons. As used in this letter
agreement, the term "person" shall be broadly interpreted to include, without
limitation, any corporation, company, partnership, other entity or individual.
Except as required by law, unless otherwise agreed to in writing by
us, you agree for a period of three years from the date hereof (a) to keep all
Proprietary Information confidential and not to disclose or reveal any
Proprietary Information to any person other than your Representatives who are
actively and directly participating in your evaluation of the Proposed
Acquisition or who otherwise need to know the Proprietary Information for the
-1-
<PAGE> 2
purpose of evaluating the Proposed Acquisition and to cause those persons to
observe the terms of this letter agreement, (b) not to use Proprietary
Information for any purpose other than in connection with your evaluation of
the Proposed Acquisition or the consummation of the Proposed Acquisition in a
manner that we have approved and (c) not to disclose to any person (other than
those of your Representatives who are actively and directly participating in
your evaluation of the Proposed Acquisition or who otherwise need to know for
the purpose of evaluating the Proposed Acquisition and, in the case of your
Representatives, whom you will cause to observe the terms of this letter
agreement) any information about the Proposed Acquisition, or the terms or
conditions or any other facts relating thereto, including, without limitation,
the fact that discussions are taking place with respect thereto or the status
thereof, or the fact that Proprietary Information has been made available to
you or your Representatives. You will be responsible for any breach of the
terms of this letter agreement by you or your Representatives.
In the event that you are requested pursuant to, or required by,
applicable law or regulation or by legal process to disclose any Proprietary
Information or any other information concerning the Company or the Proposed
Acquisition, you agree that you will provide us with prompt notice of such
request or requirement in order to enable us to seek an appropriate protective
order or other remedy, to consult with you with respect to our taking steps to
resist or narrow the scope of such request or legal process, or to waive
compliance, in whole or in part, with the terms of this letter agreement. In
any such event you will use your reasonable best efforts to ensure that all
Proprietary Information and other information that is so disclosed will be
accorded confidential treatment.
You also agree that for a period of three years from the date of this
letter agreement, neither you nor any of your Representatives will, without the
prior written consent of the Company or its Board of Directors:
(a) acquire, offer to acquire, or agree to acquire, directly or
indirectly, by purchase or otherwise, any voting securities or
direct or indirect rights to acquire any voting securities of
the Company or any subsidiary thereof, or of any successor to
or person in control of the Company, or any assets of the
Company or any subsidiary or division thereof or of any such
successor or controlling person;
(b) make, or in any way participate, directly or indirectly, in
any "solicitation" of "proxies" to vote (as such terms are
used in the rules of the Securities and Exchange Commission),
or seek to advise or influence any person or entity with
respect to the voting of any voting securities of the Company;
(c) make any proposal or any statement regarding any proposal,
whether written or oral, to the Board of Directors of the
Company, or otherwise make any public announcement with
respect to any extraordinary transaction involving the Company
or any of its securities or assets;
(d) form, join or in any way participate in a "group" as defined
in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, in connection with any of the foregoing, or seek or
propose alone or in concert
- 2 -
<PAGE> 3
with others, to control or influence in any manner the management, the
Board of Directors or the policies of the Company;
(e) enter into any discussions, negotiations, arrangements or
understandings with any person with respect to any of the
foregoing.
You will promptly advise the Company of any inquiry or proposal made to you
with respect to any of the foregoing. Anything to the contrary contained
herein notwithstanding, there shall be no restriction on your purchase of
stock; (i) from any shareholder having at least 5% of the outstanding shares;
or (ii) after an offer has been made by any person to purchase all or
substantially all of the outstanding shares.
If you determine that you do not wish to proceed with the Proposed
Acquisition, you will promptly advise us of that decision. In that case, or in
the event that we, in our sole discretion, so request or the Proposed
Acquisition is not consummated by you, you will, upon our request, promptly
deliver to us all Proprietary Information, including all copies, reproductions,
summaries, analyses or extracts thereof or based thereon in your possession or
in the possession of any Representative of yours.
You acknowledge that none of the Company, Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch") or our other Representatives and
none of the respective officers, directors, employees, agents or controlling
persons of Merrill Lynch or such other Representatives makes any express or
implied representation or warranty as to the accuracy or completeness of any
Proprietary Information, and you agree that none of such persons shall have any
liability to you or any of your Representatives relating to or arising from
your or their use of any Proprietary Information or for any errors therein or
omissions therefrom. You also agree that you are not entitled to rely on the
accuracy or completeness of any Proprietary Information and that you shall be
entitled to rely solely on such representations and warranties regarding
Proprietary Information as may be made to you in any final acquisition
agreement relating to the Proposed Acquisition, subject to the terms and
conditions of such agreement.
You agree that, without our prior written consent, you will not for a
period of three years from the date hereof directly or indirectly solicit for
employment or employ any person who is now employed by us or any of our
subsidiaries and who is identified by you as a result of your evaluation or
otherwise in connection with the Proposed Acquisition; provided, however, that
you shall not be prohibited from employing any such person who contacts you on
his or her own initiative and without any direct or indirect solicitation by
you.
You agree that until a final acquisition agreement regarding the
Proposed Acquisition has been executed by you and us, neither we nor any of our
Representatives are under any legal obligation and shall have no liability to
you of any nature whatsoever with respect to the Proposed Acquisition by virtue
of this letter agreement or otherwise. You also acknowledge and agree that (i)
we and our Representatives may conduct the process that may or may not result
in the Proposed Acquisition in such manner as we, in our sole discretion, may
determine (including, without limitation, negotiating and entering into a final
acquisition agreement with any third party without notice to you) and (ii) we
reserve the right to change (in our sole discretion, at any time and without
notice to you) the procedures relating to our
- 3 -
<PAGE> 4
and your consideration of the Proposed Acquisition (including, without
limitation, terminating all further discussions with you and requesting that
you return all Proprietary Information to us).
Without prejudice to the rights and remedies otherwise available to
us, you agree we may be entitled to equitable relief by way of injunction or
otherwise if you or any of your Representatives breach or threaten to breach
any of the provisions of this letter agreement.
It is further understood and agreed that no failure or delay by us in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any right, power or privilege
hereunder.
This letter agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to contracts executed in and
to be performed in that state.
Any assignment of this letter agreement by you without our prior
written consent shall be void.
This letter agreement contains the entire agreement between you and us
concerning the subject matter hereof, and no modification of this letter
agreement or waiver of the terms and conditions hereof shall be binding upon
you or us, unless approved in writing by each of you and us.
Please confirm your agreement with the foregoing by signing and
returning to the undersigned the duplicate copy of this letter enclosed
herewith.
PRATT & LAMBERT UNITED, INC.
By /s/ JOSEPH J. CASTIGLIA
-------------------------------
Joseph J. Castiglia
President and Chief
Executive Officer
Accepted and Agreed
as of the date
first written above:
THE SHERWIN WILLIAMS COMPANY
By /s/ CONWAY G. IVY
-------------------------------
Title:
- 4 -
<PAGE> 1
NEWS RELEASE
THE SHERWIN-WILLIAMS COMPANY AND
PRATT & LAMBERT UNITED, INC.
REACH MERGER AGREEMENT
CLEVELAND, OHIO, November 6, 1995 - The Sherwin-Williams Company (NYSE; SHW)
and Pratt & Lambert United, Inc. (NYSE; PLU) of Buffalo, New York, today
jointly announced that they had signed a merger agreement providing for
Sherwin-Williams to acquire all of the outstanding shares of Pratt & Lambert
United for a cash price of $35.00 per share, or a total purchase price of
approximately $400 million. Sherwin-Williams also entered into an agreement
with holders of approximately 40 percent of Pratt & Lambert United's common
stock, who have granted an option to Sherwin-Williams to purchase their shares
for $35.00 per share.
Under the terms of the merger agreement, Sherwin-Williams will promptly
commence a cash tender offer for all outstanding common shares of Pratt &
Lambert United. Shares not purchased in the tender offer will be acquired in a
subsequent merger at $35.00 per share as soon as practicable after the
completion of the tender offer.
Pratt & Lambert United is principally engaged in the development, production
and sale of coatings and adhesives to the Dealer, Mass Merchandiser, Home
Center and Specialty markets. Pratt & Lambert merged with United Coatings in
August 1994, creating a company with approximately $500 million in annual
sales. The Company has nearly 2,000 employees.
In announcing the agreement, John G. Breen, the Chairman and Chief Executive
Officer of Sherwin-Williams, said, "We are pleased about the prospect of Pratt
& Lambert United joining The Sherwin-Williams Company. Pratt & Lambert has
been a great quality brand for independent dealers since 1849. United Coatings
has been an excellent supplier to the mass merchant market. The combination of
these two organizations into Sherwin-Williams will enhance our dedication,
abilities and commitment to serving consumers and customers utilizing these
distribution channels. Pratt & Lambert United's specialty business should also
provide new growth opportunities for us. Through the merging of our efforts we
expect this acquisition to add significant shareholder value in years to come."
Joseph J. Castiglia, Pratt & Lambert United's president and chief executive
officer, said, "This transaction will position Pratt & Lambert United as an
important contributor to the nation's most successful paint company."
The information agent for the tender offer will be Beacon Hill Partners, Inc.
(1-800-755-5001).
-1-
<PAGE> 1
November 9, 1995
To Our Shareholders:
On behalf of the Board of Directors of Pratt & Lambert United, Inc. (the
"Company"), we wish to inform you that the Company has entered into an Agreement
and Plan of Merger dated as of November 4, 1995 (the "Merger Agreement") with
The Sherwin-Williams Company ("Parent") and SWACQ, Inc., its wholly owned
subsidiary ("Purchaser"), pursuant to which Purchaser has today commenced a cash
tender offer (the "Offer") to purchase all of the outstanding shares of the
Common Stock of the Company (including the associated Rights, the "Shares") at
$35.00 per Share. Under the Merger Agreement, the Offer will be followed by a
merger (the "Merger") in which any remaining Shares will be converted into the
right to receive $35.00 cash per Share. The Offer and the Merger are not
conditioned upon obtaining any arrangements for financing.
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE OFFER AND THE MERGER ARE
FAIR AND IN THE BEST INTEREST OF THE COMPANY'S SHAREHOLDERS AND HAS APPROVED THE
OFFER AND THE MERGER. THE BOARD OF DIRECTORS RECOMMENDS THAT (I) ALL HOLDERS OF
SHARES WHO WISH TO RECEIVE CASH FOR THEIR SHARES DURING 1995 TENDER THEIR SHARES
PURSUANT TO THE OFFER AND (II) ALL HOLDERS OF SHARES TENDER THEIR SHARES IN THE
EVENT THE OFFER IS EXTENDED BEYOND DECEMBER 31, 1995. (See Item 8 in the
attached Schedule 14D-9 for a description of federal income tax considerations.)
Shareholders owning approximately 40% of the Company's Shares have granted
Parent and Purchaser an option to purchase their Shares at $35.00 per Share.
In arriving at its recommendation, the Board of Directors gave careful
consideration to the factors described in the attached Schedule 14D-9 that is
being filed today with the Securities and Exchange Commission, including, among
other things, the opinion dated November 3, 1995 of Merrill Lynch & Co., the
Company's financial advisor, that the consideration to be received by the
holders of Shares in the Offer and the Merger is fair to such holders from a
financial point of view.
In addition to the attached Schedule 14D-9, enclosed also is the Offer to
Purchase dated November 9, 1995, together with related materials, including a
Letter of Transmittal, to be used for tendering your Shares in the Offer. These
documents state the terms and conditions of the Offer and provide instructions
as to how to tender your Shares. We urge you to read these documents carefully
in making your decision with respect to tendering your Shares pursuant to the
Offer.
On behalf of the Board of Directors,
Joseph J. Castiglia
President and Chief Executive Officer
<PAGE> 1
[MERRILL LYNCH LETTERHEAD]
November 3, 1995
Board of Directors
Pratt & Lambert United, Inc.
75 Tonawanda Street
Buffalo, New York 14207
Ladies and Gentlemen:
Pratt & Lambert United, Inc. (the "Company"), The
Sherwin-Williams Company (the "Acquiror") and SWACQ, Inc., a wholly-owned
subsidiary of the Acquiror (the "Acquisition Subsidiary"), propose to enter
into an agreement (the "Agreement") pursuant to which the Acquisition
Subsidiary will make a tender offer (the "Offer") to acquire all of the
Company's common stock, par value $.01 per share (the "Shares"), at $35.00 per
Share, net to the seller in cash. The Agreement also provides that, following
consummation of the Offer, the Acquisition Subsidiary will be merged with and
into the Company in a transaction (the "Merger") in which each remaining Share
will be converted into the right to receive $35.00 in cash or any higher price
paid for each Share in the Offer, without interest. In connection with the
Offer and the Merger, certain shareholders of the Company who are the
beneficial owners of approximately 40% of the outstanding fully diluted Shares
propose to enter into a stock option, pledge and security agreement (the
"Option, Pledge and Security Agreement") with the Acquiror and the Acquisition
Subsidiary pursuant to which such stockholders will (1) grant to the Acquiror a
proxy to exercise all voting and other rights with respect to the Shares
beneficially owned by them or thereafter acquired prior to the consummation of
the Merger, (2) grant to the Acquiror an option to acquire such Shares at
$35 per Share in certain circumstances, and (3) agree to tender such Shares
at $35.00 per Share in certain circumstances.
You have asked us whether, in our opinion, the proposed cash
consideration to be received by the holders of the Shares in the Offer and the
Merger is fair to such shareholders from a financial point of view.
In arriving at the opinion set forth below, we have, among
other things:
(1) Reviewed the Company's Annual Reports, Forms 10-K and
related financial information for the three fiscal
years ended December 31, 1994 and the Company's Forms
10-Q and the related unaudited financial information
for the quarterly periods ended March 31, 1995 and
June 30, 1995;
(2) Reviewed certain information, including unaudited
financial information for the quarterly period ended
September 30, 1995 and financial forecasts, relating
to the business, earnings, cash flow, assets and
prospects of the Company, furnished to us by the
Company;
(3) Conducted discussions with members of senior
management of the Company concerning its businesses
and prospects;
<PAGE> 2
2
(4) Reviewed the historical market prices and trading
activity for the Shares and compared them with those
of certain publicly traded companies that we deemed
to be reasonably similar to the Company;
(5) Compared the results of operations of the Company
with those of certain companies that we deemed to be
reasonably similar to the Company;
(6) Compared the proposed financial terms of the
transactions contemplated by the Agreement with the
financial terms of certain other mergers and
acquisition which we deemed to be relevant;
(7) Reviewed a draft dated October 29, 1995 of the
Agreement;
(8) Reviewed a draft dated October 29, 1995 of the Option,
Pledge and Security Agreement; and
(9) Reviewed such other financial studies and analyses
and performed such other investigations and took into
account such other matters as we deemed necessary.
In preparing our opinion, we have relied on the accuracy and
completeness of all information supplied or otherwise made available to us by
the Company, and we have not independently verified such information or
undertaken an independent appraisal of the assets of the Company. With respect
to the financial forecasts furnished by the Company, we have assumed that they
have been reasonably prepared and reflect the best currently available
estimates and judgment of the Company's management as to the expected future
financial performance of the Company.
In connection with the preparation of this opinion, we were
authorized by the Company to solicit indications of interest from a limited
number of potential acquirers.
In the ordinary course of our business, we actively trade in
the securities of the Company and the Acquiror for our own account and for the
accounts of our customers and, accordingly, may at any time hold long or short
positions in such securities.
On the basis of, and subject to the foregoing, we are of the
opinion that the proposed cash consideration to be received by the holders of
the Shares pursuant to the Offer and the Merger is fair to such shareholders
from a financial point of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
<PAGE> 1
Date:
Mr. Joseph J. Castiglia
1749 Reading Road
West Falls, New York 14170
Re: Senior Executive's Employment Contract
Dear Mr. Castiglia:
This letter sets forth the terms of the Senior Executive's
Employment Contract between yourself (Executive), and Pratt & Lambert, Inc., (P
& L) under which you are to continue your employment with P & L. This
agreement is effective as of January 1, 1983, and supersedes any prior
employment contract between us.
1. The P & L Guidelines on Compensation of Senior
Executives, adopted by the board of directors of P & L on December 20, 1978 and
amended and restated effective as of January 1, 1983 (the "Guidelines"), form a
part of this agreement as fully as if set forth herein, except to the extent,
if any, otherwise specifically provided in this agreement.
2. The Executive will continue to perform his present
duties as an executive of P & L, and will perform such other and additional
executive duties as may from time to time be assigned to him by or under the
authority of the board of directors of P & L, devoting his full business time
and best efforts to the fulfillment of such duties. This
<PAGE> 2
- 2 -
agreement shall not be construed as assuring to the Executive that he will be
elected or appointed to any particular corporate office by the shareholders
and/or directors of P & L.
3. The Executive's Base Salary for calendar year 1983
shall be _______________, which salary shall be paid on a monthly or
semimonthly basis.
4. The Executive shall continue to participate in the P
& L Pension Plan, and shall also participate in such other present or future
group benefit programs as may be maintained by P & L for the benefit of its
management employees provided that Executive fulfills the eligibility
requirements of each such plan or program in accordance with its terms and
conditions. Executive will be paid or reimbursed for expenses reasonably and
appropriately incurred by him in connection with the performance of his
employment duties.
5. Except as otherwise provided in the Guidelines, the
Executive may not assign, alienate, encumber or otherwise dispose of his right
to receive any amount payable to him under this agreement.
6. The failure of P & L, or the Executive to insist in
any one or more instances upon compliance with any provision of this agreement
shall not be construed as a waiver in whole or in part of any right granted
hereunder or of future compliance with any such provision, and the obligations
of the parties with respect thereto shall continue in full force and effect.
7. Any notice provided for under this agreement may be
given by registered or certified mail addressed as follows:
<PAGE> 3
- 3 -
If to P & L: Pratt & Lambert, Inc.
75 Tonawanda Street
Buffalo, New York 14207
If to the Executive: Mr. Joseph J. Castiglia
1749 Reading Road
West Falls, New York 14170
or to such other address as P & L shall have given written notice of to the
Executive, or the Executive should have given written notice of to P & L. Any
notice given by mail in accordance with this provision shall be deemed to have
been given on the date of mailing.
8. Except as otherwise provided in Section 5.5 of the
Guidelines, any dispute under this agreement shall be determined by arbitration
in accordance with the procedures of the American Arbitration Association.
9. This agreement shall be binding upon and shall inure
to the benefit of any Successor (by merger, liquidation, reorganization,
purchase of assets or otherwise) of P & L, and, except as otherwise provided
herein, shall be binding upon and inure to the benefit of the Executive's
heirs, distributees, legal representatives and assigns.
Dated: _________________ PRATT & LAMBERT, INC.
By
--------------------------
Agreed and Accepted:
- ------------------------
Executive
<PAGE> 1
NONCOMPETITION AGREEMENT
WHEREAS, the undersigned, Jules F. Knapp (the "Executive") is a key
employee of the United Coatings, Inc. (the "Company"), a wholly-owned subsidiary
of Pratt & Lambert United, Inc., which engages in the business of manufacturing,
distributing and selling architectural paints and coatings in the United States,
and various other countries; and
WHEREAS, Executive is the beneficial owner of more than nineteen
percent (19%) of the issued and outstanding capital stock of Pratt & Lambert
United, Inc.; and
WHEREAS, Pratt & Lambert United, Inc., The Sherwin-Williams Company
("Sherwin-Williams") and SWACQ, Inc. have entered into a certain Agreement and
Plan of Merger dated November 4, 1995 (the "Merger Agreement"), for the purchase
by Sherwin-Williams of all the issued and outstanding capital stock of Pratt &
Lambert United, Inc.; and
WHEREAS, Sherwin-Williams was unwilling to enter into the Merger
Agreement unless as a condition entering into such agreement, immediately
following the execution and delivery of the Merger Agreement, Executive entered
into this Noncompetition Agreement; and
WHEREAS, in order for Sherwin-Williams to receive all of the benefits
(competitive and otherwise) of the aforementioned acquisition, it is necessary
that Executive not compete with Sherwin-Williams as set forth below.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Executive covenants with Sherwin-Williams as follows:
1. Executive agrees that during the term of his employment with the
Company, Sherwin-Williams or any affiliate of either, and for a
period of twenty-four months commencing upon the termination of
any such employment, he will not, directly or indirectly (a) own,
manage, operate, control or participate in any manner in the
ownership, management, operation or control of, or be connected as
an officer, employee, partner, director, consultant, agent or
otherwise with, or have any principal financial interest in, or
aid or assist any person or entity other than Sherwin- Williams or
its Affiliates (as defined in Rule 405 promulgated under the
Securities Act of 1933), in the conduct of, any business, venture
or activity which manufactures, distributes or sells architectural
paints and coatings ("Competing Enterprise"), or (b) recruit or
otherwise seek to induce any employees of Sherwin-Williams or its
Affiliates to terminate their employment or violate any agreement
with or duty to Sherwin-Williams or any of its Affiliates, in the
United States, Canada, Mexico, Central America or South America.
-1-
<PAGE> 2
2. Nothing in paragraph 1 shall prevent Executive from: (a) owning
not more than two percent (2%) of the publicly traded equity
securities of any Competing Enterprise (so long as Executive has
no power to manage, operate, advise, consult with or control the
Competing Enterprise and no power, alone or in conjunction with
other affiliated parties, to select a director, general partner or
similar governing official of the Competing Enterprise); (b)
owning not more than ten percent (10%) of the equity interest of
any bona fide investment company registered as such under the
Investment Company Act of 1940 which holds an investment in a
Competing Enterprise; or (c) being a passive investor in a private
investment company serving as a multiple investment vehicle which
holds an investment in a Competing Enterprise (a "Fund") (i.e.,
Executive has no power, nor is he acting, to manage, operate,
advise, consult with, control or otherwise be in any way involved
with the affairs of a Competing Enterprise), provided that
Executive's capital in such Fund does not exceed ten percent (10%)
of all such interest therein, and such Fund is managed by a
registered investment advisor which is independent of Executive.
3. For purposes of this Agreement, the interests of Exeuctive in any
entity shall include, without limitation, the aggregate record and
beneficial ownership (as defined in Rule 13d-3 promulgated under
the Securities Exchange Act of 1934 (the "Exchange Act")) therein
of Executive, all members of his immediate family and his
Associates (as defined in Rule 405 promulgated under the
Securities Act of 1933).
4. Executive expressly agrees and understands that the remedy at law
for any breach by Executive of this Noncompetition Agreement will
be inadequate in that the damages flowing from such breach are not
readily susceptible to being measured in monetary terms.
Accordingly, it is acknowledged that upon adequate proof of a
violation of this Noncompetition Agreement by Executive,
Sherwin-Williams will be entitled to, among other remedies,
immediate injunctive relief and may obtain a temporary restraining
order restraining any threatened or further breach. Nothing in
this paragraph 4 will be deemed to limit Sherwin-Williams'
remedies at law or in equity for any breach by Executive which may
be pursued or availed by Sherwin-Williams.
5. In the event any court of competent jurisdiction determines that
the specified time period or geographical areas set forth in this
Noncompetition Agreement are unreasonable, arbitrary or against
public policy, then a lesser time period or geographical area that
is determined by the court to be reasonable, nonarbitrary and not
against public policy shall be substituted and enforced.
6. In the event that Executive violates any legally enforceable
provision of this Noncompetition Agreement as to which there is a
specified time period during with Executive is prohibited from
taking certain actions or engaging in certain
-2-
<PAGE> 3
activities then, in such event, the violation will toll the
running of the time period from the date of the violation until
the violation ceases.
7. This Noncompetition Agreement shall be governed and construed in
accordance with the laws of the State of Ohio.
Executive
/s/ JULES F. KNAPP
______________________________________
Jules F. Knapp
Date: November 5, 1995
_________________________________
AGREED AND ACCEPTED BY:
The Sherwin-Williams Company
By: /s/ CONWAY G. IVY
__________________________________
Conway G. Ivy,
Vice President, Corporate Planning
and Development
Date: November 5, 1995
_________________________________
-3-
<PAGE> 1
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 4th day of August, 1994 by and between
United Coatings, Inc. with offices at 2850 Festival Drive, Kankakee, Illinois
60901 (the "Company") and Joy F. Knapp who resides at 1040 North Lake Shore
Drive #29B, Chicago, Illinois 60611 ("Employee").
WITNESSETH:
WHEREAS, the Employee has been and is presently in the employ of the
Company and is presently serving as Vice President -- Marketing of the Company;
and
WHEREAS, Employee possesses an intimate knowledge of the business and
affairs of the Company and its policies, procedures, methods and personnel; and
WHEREAS, the Company wishes to secure the continued services and employment
of the Employee and the Employee wishes to continue in the employment of the
Company, upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing premises and of the
promises exchanged herein, the parties agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ Employee as Vice
President -- Marketing and Employee agrees to accept that employment. Employee
shall have such duties as may be assigned to her from time to time by the
appropriate executive officer or officers of the Company, provided that such
duties are generally consistent with her position as Vice President --
Marketing.
2. WELFARE BENEFITS.
(a) During the term of her employment hereunder, the Employee shall be
entitled to participate in or receive (i) as to herself, group disability
insurance and group life insurance to the extent made available to executives of
the Company generally, and such benefits shall not be reduced or adversely
modified after the date hereof without the consent of Employee, and (ii) other
retirement and welfare benefit arrangements made generally available by the
Company to its executives.
(b) At all times during the term of this Agreement and following
termination of Employee's employment hereunder for any reason (including
expiration hereof) until the later of the death of Employee, the Company shall,
at its expense, include Employee in the Company's group health insurance program
and any supplemental programs for executives of the Company as such programs
exist on the date of the Agreement, or any plan later substituted therefor by
the Company for its officers and employees generally (the "Group Health
Program"); provided no such substitute program nor amendment to the existing
plan, program or substitute program shall exclude Employee, or by application of
any pre-existing condition, reduce or adversely modify the amount or nature of
the benefits existing on the date hereof without Employee's consent, nor shall
the plan, program or any substitute therefor be terminated with respect to such
Employee without her consent. In the event the Company shall for any reason be
unable to include Employee in the Group Health Program or any coverage is
excluded for Employee, the Company shall provide equivalent (in amount and
nature) benefits to that of the Group Health Program through the purchase of
private health coverage, which shall also be provided at the Company's expense.
3. COMPENSATION. The Company will pay Employee the salary set forth in
Exhibit A to this Agreement and will provide fringe benefits to Employee as are
provided for all executive employees of the Company from time to time.
4. TERM. This Agreement shall have a continuous term until terminated as
provided in paragraph 4.
5. TERMINATION.
(a) This Agreement will terminate upon Employee's death or retirement.
<PAGE> 2
(b) The Company may terminate this Agreement upon at least thirty (30)
days' written notice in the event of Employee's disability. "Disability" will
exist if Employee, in the good faith determination of the Board of Directors of
the Company ("Board") has been unable to substantially perform her obligations
under this Agreement for a period of four (4) consecutive months or for six (6)
months in any twelve (12) month period on account of physical or mental
incapacity.
(c) The Company may terminate this Agreement for cause. For purposes of
this Agreement, "cause" will be deemed to exist upon: (1) the continued failure
by Employee to substantially perform her duties under this Agreement after
notice of, and a reasonable opportunity to cure, such failure, other than any
such failure resulting from Employee's disability; (2) the engaging by employee
in a course of misconduct which, in the good faith determination of the Board is
materially harmful to the Company after notice of, and a reasonable opportunity
to cure, such misconduct; or (3) an act of moral turpitude, dishonesty or fraud
by or felony conviction of Employee which, in the good faith determination of
the Board, would render her continued employment by the Company damaging or
detrimental to the Company.
(d) The Company may terminate this Agreement without cause by notifying
Employee in writing of its election to terminate at least thirty (30) days
before the effective date of termination. Employee may, on written notice to the
Company, accelerate the effective date of termination to any other date of her
choosing up to the date of notice of acceleration.
(e) Employee may terminate this Agreement for good reason. The term "good
reason" shall mean (1) the Company's failure to continue to assign duties to the
Employee generally consistent with those she has performed for the Company or
its predecessors in the past, (2) any substantial diminution in job rights or
title, (3) any diminution in salary or fringe benefits, (4) the failure of any
successor to the Company to furnish the assurances provided for in Section 7(c),
or (5) any attempted involuntary relocation of Employee to an area outside the
state of Illinois. Employee may notify the Company of the existence of good
reason and the Company shall have thirty (30) days thereafter to remedy the
situation.
(f) The Company will pay Employee on the effective date of termination all
unpaid compensation accrued at the rate set forth on Exhibit A through the
effective date of termination.
(g) This Agreement may be terminated by mutual agreement between the
parties.
(h) Employee may terminate employment at any time upon thirty (30) days'
written notice to the Company, and the Company may accelerate the effective date
of termination to any other date up to the date of notice of acceleration.
6. SEVERANCE PAYMENTS.
(a) The Company will make the severance payments specified in Section 5(b)
or (c) below if this Agreement is terminated pursuant to Sections 4(d) or (e).
The Company will not be obligated for severance payments in any other event.
(b) As severance payments under this Section 5(b), the Company will pay
Employee (or her or her heirs) on the first day of the month following the
effective date of termination of this Agreement, and on the first day of each of
the next succeeding twenty-three (23) months, an amount equal to 1/12th of the
sum of the highest total of salary payments made by the Company to Employee in
any calendar year and bonus earned by Employee (whether or not deferred) with
respect to services rendered to the Company during such calendar year. Each
monthly payment will be reduced by an amount equal to any retirement or
supplemental retirement payment that is paid by the Company or from a
Company-sponsored plan during the month and by an amount equal to any disability
payments Employee or her spouse receive during the month from the Company or
from a Company-sponsored plan; provided, however, that this reduction shall not
apply to any retirement, supplemental retirement or disability payments derived
from Employee's contributions, or interest thereon, to any Company-sponsored
plan. If Employee dies without a spouse or minor children surviving, or if
Employee's surviving spouse and minor children die or all of Employee's
surviving minor children reach age 18 before all severance payments have been
made, the Company's obligations to make any further severance payments under
this Section 5(b) will cease.
<PAGE> 3
(c) If this Agreement is terminated pursuant to Section 4(d) or (e) after a
change in control of the Company has occurred, or if a change in control of the
Company occurs while the Company is making severance payments to the Employee
pursuant to Section 5(b), Employee may elect to receive the severance payments
specified in Section 5(b) (or the remaining balance thereof) in a lump sum. The
reductions that would otherwise be applicable to severance payments under the
second sentence in paragraph 5(b) shall not apply. This lump sum shall be paid
within 30 days after the effective date of termination or, if a change in
control occurs after termination, within 30 days after such change in control.
For the purposes of this Agreement, "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of the Company, whether through the ownership of voting securities, by
contract, or otherwise, except that "control" shall not include power which
derives solely from status as a corporate officer or employee. If the presently
proposed merger of the Company with Pratt & Lambert, Inc. ("P&L") or any of its
subsidiaries shall be consummated, for purposes of this Agreement, such merger
and any of the transactions contemplated in connection therewith or related
thereto shall be deemed not to be a change in control. Without limiting the
generality of the foregoing, a change in control shall be deemed to have
occurred i) if any person (within the meaning of Section 2(2) of the Securities
Act of 1933 or Sections 13(d) and 14(d)(2) of the Securities Exchange Act of
1934) becomes the beneficial owner, directly or indirectly, of securities of the
Company representing twenty-five percent (25%) or more of the combined voting
power of the then outstanding securities of the Company, (ii) if at any time
less than a majority of the Board of Directors of P&L are persons who were
directors of P&L twenty-four (24) months before such time or (iii) more than
fifty percent (50%) of the assets of the Company are sold other than in the
usual course of business.
(d) Notwithstanding anything else provided in this Agreement to the
contrary, the Company will not be obligated to make any monthly severance
payments specified in Section 5(b) after that month in which Employee attains
age sixty-five (65) or would have attained age sixty-five (65) if she dies
before such date.
(e) Notwithstanding anything else in this Agreement to the contrary, if
payments to be made pursuant to this Agreement constitute an "excess parachute
payment" within the meaning of Section 280G(b) of the Internal Revenue Code of
1986, as amended, such payments shall be reduced to the extent necessary so that
they do not constitute an "excess parachute payment".
7. CONFIDENTIALITY AND COVENANT NOT TO COMPETE
(a) Except as required in the course of her employment, Employee shall not
use or disclose to any other person any of the proprietary or confidential
information of the Company or any of its affiliates, including, without
limitation, P&L and its subsidiaries.
Proprietary or confidential information means information used by the
Company or any of its affiliates including, without limitation, P&L and its
subsidiaries and not generally known or used by persons or organizations in the
business in which the Company or any of its affiliates including P&L and its
subsidiaries is engaged, including, without limitation, information about
products, processes, services, research, suppliers and customers of the Company
or any of its affiliates, including, without limitation, P&L and its
subsidiaries.
(b) During the term of this Agreement and for the periods specified as
follows, Employee shall not, directly or indirectly, as principal agent,
employer, employee, shareholder, partner, director or otherwise, engage or be
interested in any business engaged in the manufacture or sale of paint, coatings
or other products that are or are intended to be marketed in competition with
paint, coatings or other products manufactured and sold by the Company or any of
its affiliates including, without limitation, P&L and is subsidiaries (each, a
"Competing Enterprise"):
(i) One Year -- in the event that Employee quits or resigns her
position, other than for "good reason."
(ii) Six Months -- in the event the Company elects to terminate this
Agreement for cause pursuant to Section 4(c).
<PAGE> 4
(iii) None -- in the event this Agreement is terminated under any
circumstances other than those recited in Section (6)(b)(i) or (ii).
(c) Nothing in this Section 6 shall prevent Employee from:
(i) Owning not more than five percent (5%) of the publicly traded
equity securities of any Competing Enterprise listed on a national
securities exchange (so long as Employee has no power to manage, operate,
advise, consult with or control the Competing Enterprise and no power,
alone or in conjunction with other affiliated parties, to select a
director, general partner or similar governing official of the Competing
Enterprise).
(ii) Owning not more than ten percent (10%) of the equity interest of
any bona fide investment company registered as such under the Investment
Company Act of 1940 which holds an investment in a Competing Enterprise.
(iii) Being a passive investor in a private investment company serving
as a multiple investment vehicle which holds an investment in a Competing
Enterprise (a "Fund") (i.e., Employee has no power, nor is she acting, to
manage, operate, advise, consult with, control or otherwise be in any way
involved with the affairs of a Competing Enterprise), provided that
Employee's capital in such Fund does not exceed ten percent (10%) of all
such interests therein, and such Fund is managed by a registered investment
advisor which is independent of Employee.
For purposes of this Section 6(c), the interest of Employee in any entity
shall include, without limitation, the aggregate record and beneficial ownership
(as defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934)
therein of Employee, all members of her immediate family and her Associates (as
defined in Rule 405 promulgated under the Securities Act of 1933).
(d) Employee agrees that the Company will be entitled to injunctive relief
in the event of Employee's breach of Section 6(a) or 6(b) of this Agreement.
(e) If any provision of this Agreement is for any reason held to be
excessively broad as to any activity or subject, it will be construed, by
limiting and reducing it, to be enforceable to the maximum extent compatible
with applicable law.
8. MISCELLANEOUS
(a) This Agreement supersedes and extinguishes all prior employment
agreements and is the entire agreement between the parties, and any addition,
change or modification of this Agreement will be void unless in writing and duly
executed by each party hereto.
(b) Except as provided in Section 6(c), any and all disputes or
controversies concerning this Agreement will be resolved by arbitration in
Chicago, Illinois in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. The arbitrator will be authorized to decree
and award any and all relief of a legal or equitable nature including, but not
limited to, relief in the nature of a temporary restraining order, a temporary
or permanent injunction, and money damages, with or without accounting and
costs.
(c) Any successor (whether direct or indirect, by purchases, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of the Company must, within 10 days after Employee's request, furnish its
written assurance that it is bound to perform this Agreement in the same manner
and to the same extent that the Company would have been required to perform it
if no such succession had taken place.
(d) The obligations specified in Sections 5 and 6 will survive termination
or expiration of this Agreement.
(e) This Agreement shall be governed by and construed in accordance with
the laws of the State of Illinois (regardless of the laws that might otherwise
govern under applicable Illinois principles of conflicts of law).
<PAGE> 5
(f) All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if delivered in person or sent by
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Employer, to:
United Coatings, Inc.
2850 Festival Drive
Kankakee, Illinois 60901
Attention: Chairman of the Board
If to the Employee, to:
Joy F. Knapp
1040 North Lake Shore Drive
#29B
Chicago, Illinois 60611
or to such other address as the party to whom notice is to be given may, from
time to time, designate in writing delivered in a like manner; provided that
notices of changes of address shall be effective only upon receipt thereof.
Notice given by mail as set forth above shall be deemed delivered at the time
and on the date the same is postmarked.
(g) The headings contained herein are solely for the purpose of reference,
are not part of this Agreement and shall not in any way affect the meaning or
interpretation of this Agreement.
(h) This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be in an original but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have signed or caused this Agreement to be
signed as of the date first above written.
UNITED COATINGS, INC.
By:
/s/ JOY F. KNAPP
Joy F. Knapp
Vice President -- Marketing
<PAGE> 1
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made as of October,
30, 1995, to amend and restate in entirety the Employment Agreement dated as of
the 3rd day of December, 1992 by and between PRATT & LAMBERT UNITED, INC. with
offices at 75 Tonawanda Street, Buffalo, New York 14207 (the "Company") and
James R. Boldt who resides at 142 Audubon Drive, Snyder, New York 14226
("Employee").
W I T N E S S E T H:
WHEREAS, the Employee has been and is presently in the employ of the
Company and is presently serving as Corporate Vice President - Finance and
Secretary of the Company; and
WHEREAS, Employee possesses an intimate knowledge of the business and
affairs of the Company and its policies, procedures, methods and personnel; and
WHEREAS, the Company wishes to secure the continued services and
employment of the Employee and the Employee wishes to continue in the employment
of the Company, upon the terms and conditions hereinafter set forth;
WHEREAS, the Company and the Employee entered into an Employment
Agreement dated as of the 3rd day of December, 1992;
NOW, THEREFORE, in consideration of the foregoing premises and of the
promises exchanged herein, the parties agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ Employee as
Corporate Vice President - Finance and Secretary and Employee agrees to accept
that employment.
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<PAGE> 2
Employee shall have such duties as may be assigned to him from time to time by
the appropriate senior executive officer of officers of the Company, provided
that such duties are generally consistent with his position as Corporate
Vice President - Finance and Secretary.
2. COMPENSATION. The Company will pay Employee the salary and bonus
and provide the benefits set forth in Exhibit A to this Agreement.
3. TERM. This Agreement shall have a continuous term until terminated
as provided in Paragraph 4.
4. TERMINATION.
(a) This Agreement will terminate upon Employee's death or
retirement.
(b) The Company may terminate this Agreement upon at least thirty
(30) days' prior written notice in the event of Employee's disability.
"Disability" will exist if Employee, in the good faith determination of the
Board of Directors of the Company ("Board") has been unable to substantially
perform his obligations under this Agreement for a period of four (4)
consecutive months or for six (6) months in any twelve (12) month period on
account of physical or mental incapacity.
(c) The Company may terminate this Agreement for cause. For
purposes of this Agreement, "cause" will be deemed to exist upon: (1) the
continued failure by Employee to substantially perform his duties under this
Agreement after notice of, and a reasonable opportunity to cure, such failure,
other than any such failure resulting from Employee's disability; (2) the
engaging by Employee in a course of misconduct which, in the good faith
determination of the Board, is materially harmful to the Company after notice
of, and
-2-
<PAGE> 3
a reasonable opportunity to cure, such misconduct; or (3) an act of moral
turpitude, dishonesty or fraud by or felony conviction of Employee which, in the
good faith determination of the Board, would render his continued employment by
the Company damaging or detrimental to the Company.
(d) The Company may terminate this Agreement without cause by
notifying Employee in writing of its election to terminate at least thirty (30)
days before the effective date of termination. Employee may, on written notice
to the Company, accelerate the effective date of termination to any other date
of his choosing up to the date of notice of acceleration.
(e) Employee may terminate this Agreement for good reason. The
term "good reason" shall mean (1) the Company's failure to continue to assign
duties to the Employee generally consistent with those he has performed for the
Company or its predecessors in the past, (2) any substantial diminution in job
rights or title, (3) any diminution in salary or fringe benefits, (4) the
failure of any successor to the Company to furnish the assurances provided for
in Section 7(c), or (5) any attempted involuntary relocation of Employee to an
area outside Metropolitan Buffalo, New York. Employee may notify the Company
of the existence of good reason and the Company shall have thirty (30) days
thereafter to remedy the situation.
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<PAGE> 4
(f) The Company will pay Employee on the effective date of
termination all unpaid compensation accrued at the rate set forth on Exhibit A
through the effective date of termination.
(g) This Agreement may be terminated by mutual agreement between
the parties.
(h) Employee may terminate this Agreement without good reason
at any time with sixty (60) days' written notice to the Company, and
the Company may accelerate the effective date of termination to any other date
up to the date of notice of acceleration.
(i) Employee may terminate this Agreement if there has occurred a
change in "control" of the Company (as defined in Section 5(c)) occuring after
October 1, 1995 by giving written notice to the Company within two (2) years
after the date of such change in control. This Agreement may be terminated by
Employee pursuant to this Section 4(i) even if a notice has previously been
given by the Company pursuant to Section 4(b), 4(c) or 4(d).
5. SEVERANCE PAYMENTS
(a) The Company will make the severance payments specified in
Section 5(b) or (c) below if this Agreement is terminated pursuant to Section
4(d) or (e). The Company will make the severance payments specified in
Section 5(f) if this Agreement is terminated pursuant to Section 4(i). The
Company will not be obligated for severance payments in any other event.
(b) As severance payments under this Section 5(b), the Company
will pay Employee on the first day of the month following the effective date of
termination of this Areement, and on the first day of each of the next
succeeding twenty-three (23) months, an amount equal to 1/12th of the sum of the
highest total of salary payments made by the Company to Employee in any calendar
year and bonus earned by Employee (whether or not deferred) with respect to
services rendered to the Company during such calendar year. Each monthly payment
will be reduced by an amount equal to any retirement or supplemental retirement
payment that is paid by the Company or from a Company-sponsored plan during the
month and by an amount
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<PAGE> 5
equal to any disability payments Employee or his spouse receive during the month
from the Company or from a Company-sponsored plan; provided, however, that this
reduction shall not apply to any retirement, supplemental retirement or
disability payments derived from Employee's contributions, or interest thereon,
to any Company-sponsored plan. If Employee dies without a spouse or minor
children surviving, or if Employee's surviving spouse and minor children die or
all of Employee's surviving minor children reach age 18 before all severance
payments have been made, the Company's obligations to make any further severance
payments under this Section 5(b) will cease.
(c) If this Agreement is terminated pursuant to Section 4(d) or
(e) after a change in control of the Company has occurred, or if a change in
control of the Company occurs while the Company is making severance payments to
the Employee pursuant to Section 5(b), Employee may elect to receive the
severance payments specified in Section 5(b) (or the remaining balance thereof)
in a lump sum. The reductions that would otherwise be applicable to severance
payments under the second sentence in paragraph 5(b) shall not apply. This lump
sum shall be paid within 30 days after the effective date of termination or, if
a change in control occurs after termination, within 30 days after such change
in control. For the purposes of this Agreement, "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of the Company, whether through the ownership of voting
securities, by contract, or otherwise, except that "control" shall not include
power which derives solely from status as a corporate officer or employee.
Without limiting the generality of the foregoing, a change in control shall be
deemed to have occurred (i) if any person (within the meaning of Section 2(2) of
the Securities Act of 1933 or
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<PAGE> 6
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing twenty-five percent (25%) or more of the combined voting power of
the then outstanding securities of the Company, (ii) if at any time less than a
majority of the Board of Directors of the Company are persons who were directors
of the Company twenty-four (24) months before such time or (iii) more than fifty
percent (50%) of the assets of the Company are sold other than in the usual
course of business.
(d) Notwithstanding anything else provided in this Agreement to
the contrary, the Company will not be obligated to make any monthly severance
payments specified in Section 5(b) after that month in which Employee attains
age sixty-five (65) or would have attained age sixty-give (65) if he dies before
such date.
(e) Notwithstanding anything else in this Agreement to the
contrary, if payments to be made pursuant to this Agreement, together with
other amounts due the Employee, constitute an "excess parachute payment"
within the meaning of Section 280G(b) of the Internal Revenue Code of 1986,
as amended, such payments shall be reduced to the extent necessary so that
they do not constitute an "excess parachute payment".
(f) If this Agreement is terminated pursuant to Section 4(i),
Employee shall be paid in a lump sum an amount equal to 2.99 times the sum
of the highest total of salary payments made by the Company to the Employee in
any calendar year and bonus earned by Employee (whether or not deferred) with
respect to services rendered to the Company during such calendar year. The
lump sum shall be paid within five (5) days after the effective date of
termination.
-6-
<PAGE> 7
6. CONFIDENTIALITY AND COVENANT NOT TO COMPETE
(a) Except as required in the course of his employment, Employee
shall not use or disclose to any other person any of the Company's proprietary
or confidential information.
Proprietary or confidential information means information used by the
Company and not generally known or used by persons or organizations in the
business in which the Company is engaged, including without limitation,
information about the Company's products, processes, services, research,
suppliers and customers.
(b) During the term of this Agreement and thereafter for the
periods specified as follows, Employee shall not, directly or indirectly, as
principal, agent, employer, employee, shareholder (except ownership of less
than one percent (1%) of the number of shares outstanding of any securities
which are listed for trading on any securities exchange), partner, director or
otherwise, engage or be interested in any business engaged in the manufacture
or sale of paint, coatings or other products that are or are intended to be
marketed in competition with paint, coatings or other products manufactured and
sold by the Company or its subsidiaries:
(i) One Year - in the event that Employee quits, resigns his
position or elects not to renew this Agreement pursuant to Section 4(h).
(ii) Six Months - in the event the Company elects to terminate
this Agreement for cause pursuant to Section 4(c).
(iii) For so long as Employee receives severance payments - in
the event that this Agreement is terminated pursuant to Section 4(d).
(iv) None - in the event this Agreement expires or is
terminated under any circumstances other than those recited in Section 6(b)(i),
(ii) and (iii).
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<PAGE> 8
(c) Employee agrees that the Company will be entitled to
injunctive relief in the event of Employee's breach of Section 6(a) or 6(b) of
this Agreement.
(d) If any provision of this Agreement is for any reason held to
be excessively broad as to any activity or subject, it will be construed, by
limiting and reducing it, to be enforceable to the maximum extent compatible
with applicable law.
7. MISCELLANEOUS
(a) This Agreement supersedes and extinguishes all prior
employment agreements and is the entire agreement between the parties, and any
addition, change or modification of this Agreement will be void unless in
writing and duly executed by each party hereto. Without limiting the
generality of the foregoing, this Agreement amends and restates in entirety,
and therefore supersedes, the Employment Agreement by and between Employee and
the Company dated December 3, 1992, provided, however, that this Agreement
shall not extinguish any rights accrued thereunder.
(b) Except as provided in Section 6(c), any and all disputes or
controversies concerning this Agreement will be resolved by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association in Buffalo, New York. The arbitrator will be authorized to decree
and award any and all relief of a legal or equitable nature including, but not
limited to, relief in the nature of a temporary restraining order, a temporary
or permanent injunction, and money damages, with or without accounting
and costs.
(c) Any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
or assets of the Company must, within 10 days after Employee's request, furnish
its written assurance that it is bound to perform this Agreement in the same
manner and to the same extent that the Company would have been required to
perform it if no such succession had taken place.
-8-
<PAGE> 9
(d) The obligations specified in Sections 5 and 6 and 7(b) will
survive termination or expiration of this Agreement.
(e) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York (regardless of the laws that
might otherwise govern under applicable New York principles of conflicts of
law).
(f) All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered in person or
sent by certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Employer, to:
Pratt & Lambert United, Inc.
75 Tonawanda Street
Buffalo, NY 14207
Attention: Chairman of the Board
If to the Employee, to:
James R. Boldt
142 Audubon Drive
Snyder, New York 14226
or to such other address as the party to whom notice is to be given may, from
time to time, designate in writing delivered in a like manner; provided that
notices of changes of address shall be effective only upon receipt thereof.
Notice given by mail as set forth above shall be deemed delivered at the time
and on the date the same is postmarked.
(g) The headings contained herein are solely for the purpose of
reference, are not part of this Agreement and shall not in any way affect the
meaning or interpretation of this Agreement.
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<PAGE> 10
(h) This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
PRATT & LAMBERT, INC.
/s/ JOSEPH J. CASTIGLIA
BY:__________________________
/s/ JAMES R. BOLDT
_____________________________
EMPLOYEE
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<PAGE> 11
EXHIBIT A
Salary $170,000
Bonus
Bonuses for Senior Executive Officers are calculated as a
percentage of salary. The same bonus percentage for a year which is applied to
other Senior Executive Officers shall be applied to the Employee.
Benefits Benefits comparable to those provided to other Senior Executive
Officers of the Company from time to time shall be provided to the Employee.
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<PAGE> 1
FORM OF
SPECIAL SEVERANCE AGREEMENT
This document outlines the special severance arrangement that will apply to you
if your employment with Pratt & Lambert United, Inc. and Subsidiaries ("P&LU")
is terminated within two (2) years after the effective date of a "change in
control" of P&LU as defined in the Pratt & Lambert Inc. 1994 Award and Option
Plan.
If your employment is terminated within two (2) years after the effective date
of a Sale for any reason other than for "disability" or "cause" or if you
terminate your employment for "good reason", you shall be entitled to a special
severance benefit to be paid on the first day of the month following such
termination in a sum equal to one (1) times the highest total of salary
payments and bonus earned by you from P&LU in any calendar year, less
applicable employment taxes. Your employment will be considered terminated for
"disability" if, in the good faith judgment of P&LU, you have been unable to
substantially perform your obligations as an employee for a period of four (4)
consecutive months or for six (6) months in any twelve (12) month period. You
will be considered terminated for "cause" if your termination results from: (1)
your engaging in a course of misconduct which P&LU reasonably believes to be
materially harmful to P&LU after notice of and a reasonable opportunity to cure
such misconduct; or (2) your act of moral turpitude, dishonesty or fraud or
felony conviction which P&LU reasonably believes will render your continued
employment with P&LU damaging or detrimental to P&LU. You will have "good
reason" to terminate your employment if: (a) you are not assigned duties
consistent with those you have performed in the past; (b) you suffer any
substantial diminution in job rights or title or any diminution in salary or
fringe benefits; or (c) P&LU attempts to involuntarily relocate you to an area
outside of Metropolitan Buffalo, New York.
Notwithstanding anything else herein to the contrary, if severance payments to
be made to you under the terms of this memorandum constitute an "excess
parachute payment" within the meaning of Section 280G(b) of the Internal Revenue
Code of 1986, as amended, such payments shall be reduced to the extent necessary
so they do not constitute an "excess parachute payment".
This agreement is not an employment contract and only sets forth the terms of
P&LU's severance policy for you.
PRATT & LAMBERT UNITED, INC. Accepted and agreed to
By____________________________ ______________________________
President
October 30, 1995
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<PAGE> 1
AMENDMENT
This Amendment to a certain Right of First Offer Agreement made as of
August 4, 1994 by and between Jules F. Knapp ("Knapp") and Pratt & Lambert
United, Inc. ("P&L") (the "Right of First Offer Agreement"), is made as of
November, 1995 by and between Knapp and P&L.
WHEREAS, this Amendment is being entered into in order to induce The
Sherwin-Williams Company ("SW") to enter into a certain Agreement and Plan of
Merger, of even date herewith, among SW, P&L and SWACQ, Inc. ("Merger
Agreement").
NOW, THEREFORE, in consideration of the foregoing and the respective
agreements set forth herein and in the Merger Agreement, Knapp and P&L hereby
agree as follows:
Section 1. Section 2 of the Right of First Offer Agreement is hereby
amended and restated in full to read as follows:
Section 2. Termination of Right to Purchase. Knapp's right of purchase
pursuant to this Agreement shall expire upon the earlier of (i) three years from
the date hereof, (ii) termination of the Shareholder Agreement dated February
25, 1994 by and among P&L, certain shareholders of UCI and certain shareholders
of P&L, and (iii) upon consummation of the Offer, as that term is defined in the
Merger Agreement, and the payment for all Shares, as that term is defined in the
Merger Agreement, tendered in response to the Offer and not withdrawn.
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<PAGE> 2
Section 2. The Right of First Offer Agreement as so amended remains in
full force and effect in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first referred to above.
PRATT & LAMBERT UNITED, INC.
/s/ JULES F. KNAPP
/s/ JOSEPH J. CASTIGLIA
By___________________________ _________________________
President and Chief Jules F. Knapp
Executive Officer
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<PAGE> 1
Amendment No. 2 to Rights Agreement
This Amendment No. 2, dated as of October 30, 1995, to the Rights
Agreement, dated as of January 31, 1989, as amended (the "Agreement") between
Pratt & Lambert, Inc., a New York corporation (the "Company") and Mellon
Securities Trust Company (the "Rights Agent").
WHEREAS, pursuant to the Agreement, the Board of Directors of the
Company declared a dividend of one right (a "Right") for each Common Share of
the Company ("Common Shares") outstanding on February 13, 1989 and authorized
the issuance of one Right for each Common Share that became outstanding
thereafter prior to the Distribution Date (as defined in the Agreement);
WHEREAS, Section 26 of the Agreement provides that at any time when the
Rights are then redeemable the Company may in its sole and absolute discretion
supplement or amend any provision of the Agreement without the approval of any
holders of the Rights or the Common Shares, provided that no supplement or
amendment shall be made which changes the redemption price of the Rights or the
final expiration date of the Rights;
WHEREAS, the Rights are presently redeemable;
WHEREAS, the Board of Directors has determined that it is in the best
interests of the Company and its shareholders to enter into discussions relative
to a proposed Agreement and Plan of Merger (the "Merger Agreement") with respect
to the merger of a wholly-owned subsidiary (the "Subsidiary") of another
corporation with and into the Company (the "Merger");
WHEREAS, in connection with the Merger it is contemplated that certain
shareholders of the Company will enter into an agreement with Acquiror, granting
Acquiror an
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<PAGE> 2
irrevocable option to purchase their Common Shares and agreeing to tender such
Common Shares pursuant to the Offer (as hereinafter defined) or other similar
provisions (the "Stock Tender Agreement");
WHEREAS, by operation of the Merger Agreement, the Stock Tender
Agreement, or both, the signatories thereto could be deemed to have an agreement
or arrangement for the purpose of acquiring, holding, voting or disposing of
Common Shares and thus become an Acquiring Person or Persons under the
Agreement;
WHEREAS, pursuant to the Merger Agreement, subject to certain
conditions to be specified therein, Acquiror, through the Subsidiary, would make
a cash tender offer to acquire all the issued and outstanding Common Shares of
the Company (the "Offer"), and subsequently enter into the Merger;
WHEREAS, the payment for Common Shares pursuant to the Offer, the
Merger, or both, may make Acquiror, the Subsidiary and their Affiliates and
Associates an Acquiring Person or Persons under the Agreement;
NOW, THEREFORE, in consideration of the premises, the parties hereby
agree to amend the Agreement as follows:
1. The defined term "Acquiring Person" is hereby amended to add the
following sentence to the end of such definition:
Notwithstanding the foregoing, none of (i) any Person (an "Acquiror")
with whom the Company enters into an agreement, on or before November
10, 1995 (a "Merger Agreement"), providing for an acquisition by such
person or its Subsidiary of all of the
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<PAGE> 3
Common Shares (an "Acquisition"), (ii) all Subsidiaries, Affiliates and
Associates of an Acquiror and (iii) any shareholder of the Company who
enters into an agreement with an Acquiror, on or before November 10,
1995 (the "Tender and Option Agreement"), agreeing to take certain
actions with respect to the Common Shares owned by them, shall be
deemed to be Acquiring Persons solely by reason of (A) being a party to
or acquiring Common Shares (whether through a tender offer or the
consummation of the merger contemplated by the Merger Agreement)
pursuant to the terms of the Merger Agreement and being the Beneficial
Owner of the Common Shares so acquired, (B) being a party to or selling
or acquiring Common Shares pursuant to the terms of the Tender and
Option Agreement and being the Beneficial Owner of the Common Shares so
acquired, (C) being a party to and complying with the terms of the
Merger Agreement or the Tender and Option Agreement or (D) entering
into any agreement, arrangement or understanding with respect to any of
the foregoing.
3. The defined term "Section 11(a)(ii) Event" is hereby amended to
add the following sentence to the end of such definition:
Notwithstanding anything to the contrary contained in this Agreement,
none of the transactions contemplated by the Merger Agreement or the
Tender and Option Agreement shall constitute a Section 11(a)(ii) Event.
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<PAGE> 4
4. The defined term "Section 13 Event" is hereby amended to add the
following sentence to the end of such definition:
Notwithstanding anything to the contrary contained in this Agreement,
none of the transactions contemplated by the Merger Agreement or the
Tender and Option Agreement shall constitute a Section 13 Event.
5. The defined term "Triggering Event" is hereby amended to add the
following sentence to the end of such definition:
Notwithstanding anything to the contrary contained in this Agreement,
none of the transactions contemplated by the Merger Agreement or the
Tender and Option Agreement shall constitute a Triggering Event.
6. Section 3(a) is hereby amended to add the following sentence to the
end thereof:
Notwithstanding anything to the contrary contained in this Agreement,
neither the announcement nor the consummation of the Merger Agreement
or the Tender and Option Agreement or any of the transactions
contemplated by those agreements shall constitute or result in the
occurrence of a Distribution Date.
7. Section 11(a)(ii)(B) is hereby amended to add the following
immediately preceding the semicolon in the last line thereof:
, provided further, that a Person shall not be deemed to have become
the beneficial owner of 25% or more of the Common Shares then
outstanding for the purpose of this Section 11(a)(ii)(B) solely by
reason of (A) being a party to or acquiring Common Shares pursuant to
the terms of the Merger Agreement, (B) being a party to or selling or
acquiring Common Shares pursuant to the terms of
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<PAGE> 5
the Tender and Option Agreement, (C) being a party to and complying
with the terms of the Merger Agreement or the Tender and Option
Agreement or (D) entering into any agreement, arrangement or
understanding with respect to any of the foregoing.
8. Section 13(a) is hereby amended to add the following sentence to the
end thereof:
Notwithstanding anything to the contrary contained in this Agreement,
this Section 13(a) shall not apply to any merger consummated pursuant
to the terms of the Merger Agreement.
IN WITNESS WHEREOF, the parties hereto have consented to this Amendment
No. 2 to the Rights Agreement to be duly executed, all as of the day and year
first above written.
PRATT & LAMBERT UNITED, INC.
Attest:______________________ By:______________________
MELLON SECURITIES TRUST
COMPANY
Attest:______________________ By:______________________
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<PAGE> 1
SUBSTITUTED NOTE
$159,783 Kankakee, Illinois
August 4, 1994
For value received, the undersigned ("Borrower") promises to pay to the
order of Pratt & Lambert, Inc. at 75 Tonawanda Street, Buffalo, New York or at
such other place as may be designated from time to time by the holder, the sum
of One Hundred Fifty-Nine Thousand Seven Hundred Eighty-Three Dollars ($159,783)
together with interest thereon at a rate equal to five and six-tenths percent
(5.6%) per annum, in lawful money of the United States of America, payable in
eleven (11) installments as follows: (i) one (1) installment of principal in an
amount equal to the Profit Portion Dividend for 1994 due to the undersigned as
provided in Section 6.01(b) and Schedule 6.01(b) of the Agreement and Plan of
Merger dated February 25, 1994 by and among Pratt & Lambert, Inc., United
Coatings, Inc. and certain shareholders of United Coatings, Inc. to be paid
within five (5) days after payment of such Profit Portion Dividend; (ii) nine
(9) installments of interest only commencing on November 4, 1994 and payable on
the 4th day of each calendar quarter thereafter to and including November 4,
1996, and (iii) one (1) final installment in an amount equal to the entire then
unpaid principal balance of this Substituted Note together with all unpaid
interest thereon payable on February 4, 1997.
If any installment of this Substituted Note is not paid when due,
whether because such installment becomes due on a Saturday, Sunday or holiday or
for any other reason, Borrower will pay interest thereon at the aforesaid rate
until the date of actual receipt of such installment by the holder of this
Substituted Note.
This Substituted Note is secured by the collateral described in that
certain Pledge Agreement, of even date herewith, executed and delivered by
Borrower to Pratt & Lambert Inc. (the "Pledge Agreement"). All principal and
interest under this Substituted Note will become immediately due and payable
upon the occurrence of any "Event of Default" as defined in the Pledge
Agreement.
Borrower shall have the right to prepay all or a portion of the
principal indebtedness under this Substituted Note, together with interest on
the principal so prepaid to the date of such prepayment, without penalty or
premium.
No failure by the holder hereof to exercise, and no delay in
exercising, any right or power hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise by the holder of any right or power
hereunder preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the holder as herein specified
are cumulative and not exclusive of any other rights or remedies which the
holder may otherwise have.
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<PAGE> 2
No modification, rescission, waiver, release or amendment of any
provision of this Substituted Note shall be made except by a written agreement
subscribed by Borrower and the holder hereof.
Borrower hereby waives diligence, presentment, protest and demand, and
also notice of protest, demand, dishonor and nonpayment of this Substituted
Note.
Borrower agrees to pay all costs and expenses incurred by the holder in
enforcing this Substituted Note or in collecting the indebtedness evidenced
hereby, including, without limitation, if the holder retains counsel for any
such purpose, actual attorneys' fees and expenses.
This Substituted Note is in substitution and renewal of, but not
payment of, a Promissory Note and Pledge Agreement dated January 1, 1990 between
Borrower and United Coatings, Inc., which Promissory Note and Pledge Agreement
shall be deemed cancelled upon delivery hereby of Borrower.
This Substituted Note shall be governed, construed and enforced in
accordance with the internal laws of the State of New York without regard to
principles of conflict of laws.
/s/ JOY F. KNAPP
___________________________
Borrower: Joy F. Knapp
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<PAGE> 1
PLEDGE AGREEMENT
This Pledge Agreement is made as of August 4, 1994 by Joy F. Knapp, an
individual residing at _______________________ ("Pledgor") in favor of PRATT &
LAMBERT, INC., a New York corporation with its principal office at 75 Tonawanda
Street, Buffalo, New York ("Secured Party").
Pledgor agrees as follows:
i. SECURITY INTEREST.
In consideration of the extension of credit evidenced by the Note
(as defined below), Pledgor hereby pledges, transfers and assigns to Secured
Party and grants to Secured Party a security interest ("Security Interest") in
and to all of the capital stock of Secured Party owned by Pledgor, whether such
stock is now existing or hereafter created or acquired and in all increases or
profits received therefrom, in all substitutions therefor, in all distributions
received in respect thereof and in all Proceeds thereof in any form
("Collateral").
Immediately upon the execution of this Security Agreement, Pledgor
will deliver to Secured Party certificates for all capital stock of Secured
Party now held by Pledgor, together with stock powers attached and endorsed in
blank. Upon Pledgor's acquisition of any additional capital stock of Secured
Party, Pledgor will immediately deliver to Secured Party certificates
representing the same together with stock powers attached and endorsed in blank.
ii. INDEBTEDNESS SECURED.
The Security Interest secures payment of all indebtedness
evidenced by: (a) that certain promissory note of even date herewith in the
principal amount of $159,783 executed and delivered by Pledgor to Secured Party
(the "Note"); and (b) any extensions, amendments, renewals, replacements or
modifications of the Note, (collectively, the "Indebtedness").
iii. REPRESENTATIONS AND WARRANTIES OF PLEDGOR.
Pledgor represents and warrants and, so long as this Security
Agreement is in effect, shall be deemed continuously to represent and warrant
that: (a) Pledgor is the owner of the Collateral free of all security interests
or other encumbrances, except the Security Interest; and (b) Pledgor is
authorized to enter into this Security Agreement.
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<PAGE> 2
iv. CERTAIN COVENANTS OF PLEDGOR.
So long as this Security Agreement is in effect, Pledgor: (a) will
defend the Collateral against the claims and demands of all other parties; will
keep the Collateral free from all security interests or other encumbrances,
except the Security Interest; and will not sell, transfer, assign, deliver or
otherwise dispose of any Collateral or any interest therein without the prior
written consent of Secured Party, provided, however, that, subject to the
provisions of the Shareholder Agreement dated February 25, 1994 to which Pledgor
and Secured Party are parties, Pledgor may sell capital stock of Secured Party
included in the Collateral provided that all proceeds of any such sale, less all
federal and state income taxes resulting from such sale, are immediately paid to
Secured Party in respect of the Note; (b) will notify Secured Party promptly in
writing of any change in Pledgor's address, specified above; (c) in connection
herewith, will execute and deliver to Secured Party such financing statements,
assignments and other documents and do such other things relating to the
Collateral and the Security Interest as Secured Party may reasonably request;
and (d) will pay all taxes, assessments and other charges of every nature which
may be imposed, levied or assessed against the Collateral.
v. REGISTERED HOLDER OF COLLATERAL.
Upon the occurrence of an Event of Default (as hereinafter
defined), Pledgor authorizes Secured Party to transfer the Collateral or any
part thereof into its own name or that of its nominee so that Secured Party or
its nominee may appear on record as the sole owner thereof. After the occurrence
of any Event of Default, Pledgor waives all rights to be advised of or to
receive any notices, statements or communications received by Secured Party or
its nominee as such record owner.
vi. INCREASES, PAYMENTS, DIVIDENDS OR DISTRIBUTIONS.
(i) Except as specifically provided in paragraph vi(ii), whether
or not an Event of Default has occurred, Pledgor authorizes Secured Party: (i)
to receive any increases in the Collateral (including, without limitation, any
stock issued as a result of any stock split or dividend, any capital
distributions and the like), and to hold the same as part of the Collateral; and
(ii) to receive any other payment, distribution or dividend in respect of the
Collateral or any part thereof and hold the same as part of the Collateral. If
Pledgor receives any such increase, payment, dividend or distribution, Pledgor
will receive and hold the same in trust for the benefit of Secured Party and
deliver the same promptly to Secured Party to be held by Secured Party as part
of the Collateral.
(ii) Notwithstanding the foregoing, if there is then no existing
Event of Default, Pledgor shall be entitled to receive all cash dividends paid
with respect to any stock included in the Collateral; provided, however, that
upon and after the occurrence of an Event of Default, Secured Party shall be
entitled to receive and hold any such cash dividends as part
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<PAGE> 3
of the Collateral. If, after the occurrence of an Event of Default, Pledgor
receives any such cash dividend, Pledgor will receive and hold the same in trust
for the benefit of Secured Party and deliver the same promptly to Secured Party
to be held by Secured Party as part of the Collateral.
vii. EVENTS OF DEFAULT.
(i) Any of the following events or conditions shall constitute an
event of default hereunder (each, an "Event of Default"): (i) nonpayment within
five (5) days of the due date of any principal or interest due under the Note or
any extension, amendment, renewal, replacement or modification of the Note; (ii)
default by Pledgor in the performance of any obligation, term, or condition of,
or breach of representation under, this Pledge Agreement; (iii) the filing by or
against Pledgor of a request or petition for liquidation, reorganization,
arrangement, adjustment of debts, adjudication as a bankrupt, relief as a debtor
or relief under the bankruptcy, insolvency or similar laws of the United States
or any state or territory thereof or any foreign jurisdiction, now or
hereinafter in effect; or (iv) Pledgor's death.
(ii) Secured Party, at its sole election, may declare all or any
part of any Indebtedness to be immediately due and payable without demand or
notice of any kind upon the happening of any Event of Default.
(iii) Secured Party's rights and remedies with respect to the
Collateral shall be those of a Secured Party under the Uniform Commercial Code
and under any other applicable law, as the same may from time to time be in
effect, in addition to those rights granted herein and in any other agreement
now or hereafter in effect between Pledgor and Secured Party.
(iv) Without in any way requiring notice to be given in the
following time and manner, Pledgor agrees that any notice by Secured Party of
sale, disposition or other intended action hereunder or in connection herewith,
whether required by the Uniform Commercial Code or otherwise, shall constitute
reasonable notice to Pledgor if such notice is mailed by regular or certified
mail, postage prepaid, at least ten (10) days prior to such action, to Pledgor's
address specified above or to any other address which Pledgor has specified in
writing to Secured Party as the address to which notices hereunder shall be
given to Pledgor.
(v) Pledgor agrees to pay on demand all reasonable costs and
expenses incurred by Secured Party in enforcing this Pledge Agreement, in
realizing upon or protecting any Collateral and in enforcing and collecting any
Indebtedness, including, without limitation, if Secured Party retains counsel
for advice, suit, appeal, insolvency or other proceedings under the federal
Bankruptcy Code or otherwise, or for any of the above purposes, the actual
attorneys' fees incurred by Secured Party. Payment of all moneys hereunder is
secured by the Collateral.
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<PAGE> 4
viii. MISCELLANEOUS.
(i) Pledgor authorizes Secured Party, without notice or demand and
without affecting Pledgor's obligations hereunder, from time to time: (i) to
take from any party and hold collateral (other than the Collateral) for the
payment of the Indebtedness or any part thereof, and to exchange, enforce or
release such collateral or any part thereof; (ii) to accept and hold any
indorsement or guaranty of payment of the Indebtedness or any part thereof and
to release, substitute or modify any such obligation of any such indorser or
guarantor, or any party who has given any security interest in any other
collateral as security for the payment of the Indebtedness or any part thereof,
or any other party in any way obligated to pay the Indebtedness or any part
thereof; (iii) upon the occurrence of any Event of Default as hereinabove
provided, to direct the order or the manner of the disposition of the Collateral
and any and all other collateral and the enforcement of any and all indorsements
and guaranties relating to the Indebtedness or any part thereof as Secured
Party, in its sole discretion, may determine; and (iv) to determine, in its sole
discretion, how, when and what application of payments and credits, if any,
shall be made on the Indebtedness or any part thereof.
(ii) Pledgor hereby appoints Secured Party as Pledgor's
attorney-in-fact (without requiring Secured Party to so act) to perform all acts
which Secured Party deems appropriate to perfect and continue the Security
Interest and to protect, preserve and realize upon the Collateral. This power of
attorney shall not be affected by the subsequent disability or incompetence of
Pledgor.
(iii) No course of dealing between Pledgor and Secured Party and
no delay or omission by Secured Party in exercising any right or remedy
hereunder or with respect to any Indebtedness shall operate as a waiver thereof
or of any other right or remedy, and no single or partial exercise thereof shall
preclude any other or further exercise thereof or the exercise of any other
right or remedy. Secured Party may remedy any default by Pledgor hereunder or
with respect to any Indebtedness in any reasonable manner without waiving the
default remedied and without waiving any other prior or subsequent default by
Pledgor. All rights and remedies of Secured Party hereunder are cumulative.
(iv) Secured Party shall have no obligation to take, and Pledgor
shall have the sole responsibility for taking, any and all steps to preserve
rights against any and all prior parties to any Instrument constituting
Collateral, whether or not in Secured Party's possession. Secured Party shall
not be responsible to Pledgor for loss or damage resulting from Secured Party's
failure to enforce or collect any such Collateral or to collect any moneys due
or to become due thereunder. Pledgor waives protest of any Instrument
constituting Collateral at any time held by Secured Party on which Pledgor is in
any way liable and waives notice of any other action taken by Secured Party.
(v) The rights and benefits of Secured Party hereunder shall, if
Secured Party so directs, inure to any party acquiring any interest in the
Indebtedness or any part thereof.
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<PAGE> 5
(vi) Secured Party and Pledgor as used herein shall include the
heirs, executors or administrators, or successors or assigns, of those parties.
(vii) No modification, rescission, waiver, release or amendment of
any provision of this Pledge Agreement shall be made except by a written
agreement subscribed by Pledgor and Secured Party.
(viii) This Pledge Agreement and the transactions evidenced hereby
shall be governed, construed and enforced under the laws of New York State, as
the same may from time to time be in effect, without regard to principles of
conflicts of law.
(ix) All terms, unless otherwise defined in this Pledge Agreement,
shall have the definitions set forth in the Uniform Commercial Code adopted in
New York State, as the same may from time to time be in effect.
(x) This Pledge Agreement shall remain in full force and effect
until all of the indebtedness evidenced by the Note, and any extensions,
amendments, renewals, replacements or modifications thereof, shall be finally
and irrevocably paid in full. If, after receipt of any payment of all or any
part of the indebtedness evidenced by the Note, Secured Party is for any reason
compelled to surrender such payment to any person or entity, because such
payment is determined to be void or voidable as a preference, impermissible set
off, or a diversion of trust funds, or for any other reason, this Pledge
Agreement shall continue in full force notwithstanding any contrary action which
may have been taken by Secured Party in reliance upon such payment, and any such
contrary action so taken shall be without prejudice to Secured Party's rights
under this Pledge Agreement and shall be deemed to have been conditioned upon
such payment having become final and irrevocable.
/s/ JOY F. KNAPP
-----------------------------
Pledgor: Joy F. Knapp
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<PAGE> 1
FORM OF
AMENDMENT TO LEASE
THIS AMENDMENT TO LEASE ("Amendment") is made and entered into as of
the ____ day of ________, 19__ by and between _________("Landlord") and
________, a Delaware corporation ("Tenant").
RECITALS
WHEREAS, Tenant and Landlord entered into a certain Lease dated as of
___________ ("Lease") for property commonly known as __________________
("Property"); and
WHEREAS, Tenant and Landlord desire to amend and modify the Lease as
set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, Tenant's payment of One Dollar ($1) and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Tenant and Landlord hereby agree to amend the Lease as follows:
1. OPTION TO TERMINATE LEASE.
Landlord hereby agrees that Tenant shall have the option to terminate
the Lease by providing written notice of termination to Landlord at least ninety
(90) days prior to the proposed termination date (the date on which the Lease
terminates shall be referred to herein as the "Termination Date"). If Tenant
terminates the Lease as provided in this Paragraph 1, Tenant shall:
a. surrender the Property on or before the Termination Date in
the condition specified in the Lease; and
b. pay to Landlord the lesser of the following:
(i) the monthly rental payments due under the Lease for the
six (6) month period following the Termination Date, on
the due dates for such monthly rental payments; or
(i) the monthly rental payments due under the Lease for the
period commencing on the Termination Date and continuing
until the end of the primary term of the Lease, on the
due dates for such monthly rental payments;
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<PAGE> 2
(the sum to be paid pursuant to this subparagraph (b)
shall be collectively referred to herein as the
"Termination Payment").
2. NO OTHER FEES, CHARGES OR EXPENSES.
Anything to the contrary contained in the Lease and/or any prior
amendments or modifications notwithstanding, if Tenant terminates the Lease as
provided in Paragraph 1 hereof, Tenant's exclusive liability to Landlord as a
result of such termination shall be the payment of the Termination Payment.
Except as provided herein, Landlord releases and discharges Tenant and Tenant's
parent, subsidiaries, divisions, operating units, officers, directors,
employees, agents, suppliers, heirs, executors, administrators, successors and
assigns (collectively referred to herein as "Tenant's Affiliates") from all
actions, causes of action, suits, debts, dues, sums of money, accounts,
reckonings, bonds, bills, specialties, covenants, contracts, controversies,
agreements, promises, variances, trespasses, damages, judgments, extents,
executions, claims, and demands whatsoever, in law, admiralty or equity, which
against the Tenant and/or Tenant's Affiliates, Landlord and/or Landlord's
parent, subsidiaries, divisions, operating units, officers, directors,
employees, agents, suppliers, shareholders, beneficiaries, heirs, executors,
administrators, predecessors in interest, successors and assigns ever had, now
have or hereafter can, shall or may have, for, upon, or by reason of any matter,
cause or thing whatsoever with regard to Tenant's termination of the Lease as
provided in Paragraph 1 hereof.
3. MISCELLANEOUS.
a. Any provision in the Lease which requires or purports to
require continuous occupancy or use of the Property by Tenant
is hereby deleted.
b. This Amendment shall become effective as of the Effective
Time as such term is defined in that certain Merger Agreement
by and between _________ and _________ ("Merger Agreement").
c. In the event that this Amendment is inconsistent with any
terms and conditions of:
(i) the Lease or any prior amendments and/or modifications
thereto; or
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<PAGE> 3
(ii) the Merger Agreement;
the terms of this Amendment shall control.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as
of the date first written above.
Landlord: Tenant:
By:____________________________ By:___________________________
Title:_________________________ Title:________________________
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<PAGE> 1
PRATT & LAMBERT UNITED
CAPITAL ACCUMULATION PROGRAM
AMENDMENT NO. 1
TO THE
1989 RESTATEMENT
1. In order to permit the Employer Stock Contribution permitted under
Section 3.1 of the Plan to be made at this time for the 1995 Plan Year, Section
3.1 is hereby amended, effective January 1, 1995, by the adoption of new
paragraph (e) at the end thereof.
"(e) Notwithstanding any other provision of Section 3.1, the Board
of Directors may determine in its discretion that the Employer Stock
Contribution to be made pursuant to this Section for a Plan Year may be
contributed to the Plan during that Plan Year. Any Employer Stock
Contribution that is contributed for a Plan Year during that Plan Year
shall be held and allocated in accordance with the following rules:
1. Such Contribution shall be based on a reasonable estimate
of the covered Participants' Base Pay for such Plan Year.
2. Such Contribution shall be held in a suspense account on
an unallocated basis until the end of such Plan Year.
3. Such Contribution (including any dividends received
thereon prior to the end of such Plan Year) shall be allocated on
a pro-rata basis to the Participants in accordance with the
allocation rules provided in paragraph (c) of this Section, and
such allocation may result in each Participant entitled to share
in the Employer Stock Contribution receiving
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an amount that is less than, or more than, 1/2% (0.5%) of each
Participant's Base Pay.
4. Until the allocation provided in this paragraph (e) is
made, such Contribution shall not be vested in accordance with
paragraph (d) of this Section.
5. The Committee in its discretion shall vote all shares held
in suspense pursuant to this paragraph (e).
6. If such Contribution is made in cash, the provisions of
paragraph (b), with respect to the purchase of Pratt & Lambert
United Stock, shall apply."
2. In order to permit the Committee to direct that Matching
Contributions for the remainder of 1995 and future Plan Years may be invested in
investments under the Plan other than Company stock, Section 7.3(b) is amended,
effective November 1, 1995, by the addition of the following sentence at the end
thereof:
"Notwithstanding the foregoing, effective November 1, 1995, the
Committee may direct that any Matching Contribution made for the
remainder of the 1995 Plan Year and future Plan Years shall be
invested, with respect to a Participant, in the same Fund or
Funds, and in the same proportion as investments in such
Participant's Before-tax Contribution Account are made, provided
that if such Participant has not made an appropriate investment
election, his Matching Contribution shall be invested in such
default Investment Fund as the Committee shall determine from time
to time pursuant to Section 7.4(d)."
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<PAGE> 3
IN WITNESS WHEREOF, Pratt & Lambert United, Inc. has caused this
Amendment to be executed this 3rd day of November, 1995.
PRATT & LAMBERT UNITED, INC.
By /s/ JAMES R. BOLDT
_______________________________
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