<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
-----------------------------------
SUDBURY, INC.
(Name of Subject Company)
-----------------------------------
SUDBURY, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
864635206
(CUSIP Number of Class of Securities)
MARK E. BRODY
VICE PRESIDENT & CHIEF FINANCIAL OFFICER
SUDBURY, INC.
30100 CHAGRIN BOULEVARD, SUITE 203
CLEVELAND, OHIO 44124
(216) 464-7026
(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:
IRV BERLINER, ESQ.
BENESCH, FRIEDLANDER, COPLAN & ARONOFF P.L.L.
2300 BP AMERICA BUILDING
200 PUBLIC SQUARE
CLEVELAND, OHIO 44114
(216) 363-4500
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Sudbury, Inc., a Delaware corporation
(the "Company"), and the address of the principal executive offices of the
Company is 30100 Chagrin Boulevard, Suite 203, Cleveland, Ohio 44124. The title
of the class of equity securities to which this statement relates is the common
stock, par value $.01 per share, of the Company (the "Shares").
ITEM 2. TENDER OFFER OF THE PURCHASER.
This statement relates to a tender offer by I M Acquisition Corp., a
Delaware corporation (the "Purchaser") and a wholly-owned subsidiary of Intermet
Corporation, a Georgia corporation ("Parent"), disclosed in a Tender Offer
Statement on Schedule 14D-1, dated November 22, 1996, to purchase all the issued
and outstanding Shares at a price of $12.50 per Share, net to the seller in
cash, upon the terms and subject to the conditions set forth in the Offer to
Purchase dated November 22, 1996 (the "Offer to Purchase") and the related
Letter of Transmittal (which, as amended from time to time, together constitute
the "Offer"). The Offer is conditioned upon, among other things, 7,800,000
Shares being validly tendered and not withdrawn prior to the expiration of the
Offer. The Offer is scheduled to expire at 12:00 Midnight, New York City time,
on Friday, December 20, 1996, unless extended by the Purchaser.
The Merger Agreement. The Offer is being made pursuant to an Agreement and
Plan of Merger dated as of November 18, 1996 (the "Merger Agreement") by and
among Parent, the Purchaser and the Company. The Merger Agreement provides for,
among other things, the making of the Offer by the Purchaser and further
provides that, after the consummation of the Offer and satisfaction or waiver of
all conditions, the Purchaser will be merged with and into the Company (the
"Merger"), and the Company will continue as the
surviving corporation (the "Surviving Corporation") and will be a wholly owned
subsidiary of Parent.
At the effective time of the Merger (the "Effective Time"), each issued and
outstanding Share (other than any Shares held in the treasury of the Company or
owned by Parent, the Purchaser or any other direct or indirect wholly owned
subsidiary of Parent and other than Dissenting Shares) shall be cancelled and
converted automatically into the right to receive, upon the surrender of the
certificate formerly representing such Share, $12.50 in cash without interest
(the "Merger Consideration").
A copy of the Merger Agreement has been filed as Exhibit 3 to this Schedule
14D-9 and is incorporated herein by reference. Unless otherwise noted,
capitalized terms not defined in this Schedule 14D-9 shall have the meaning
given to them in the Merger Agreement.
Conditions of the Offer. Notwithstanding any other provision of the Offer
and provided that the Purchaser shall not be obligated to accept for payment any
Shares until expiration of all applicable waiting periods under the H-S-R Act,
the Purchaser shall not be required to accept for payment or pay for, or may
delay the acceptance for payment of or payment for, any tendered Shares, or may,
in its sole discretion, terminate or amend the Offer as to any Shares not then
paid for if 7,800,000 Shares shall not have been properly and validly tendered
pursuant to the Offer and not withdrawn prior to the expiration of the Offer,
or, if on or after November 18, 1996, (or as to clause (j) below at any time)
and at or before the time of payment for any of the Shares (whether or not any
of the Shares have theretofore been accepted for payment), any of the following
events shall occur:
(a) there shall have occurred (i) any general suspension of trading in
securities on the NYSE or in the over-the-counter market, (ii) a
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States, (iii) a commencement or escalation
of a war, armed hostilities or other international or national calamity
directly or indirectly involving the United States, (iv) any limitation
(whether or not mandatory) by any governmental or regulatory authority,
agency, Commission or other entity, domestic or foreign ("Governmental
Entity"), on, or any other event which might affect, the extension of
credit by banks or other lending institutions, or (v) or in the case of any
of the foregoing existing at the time of the commencement of the Offer, a
material acceleration or worsening thereof;
<PAGE> 3
(b) the Company shall have breached or failed to perform in any
material respect any of its obligations, covenants or agreements under the
Merger Agreement or any representation or warranty of the Company set forth
in the Merger Agreement shall have been inaccurate or incomplete in any
material respect when made or thereafter shall become inaccurate or
incomplete in any material respect except (i) for changes contemplated by
the Merger Agreement and (ii) those representations or warranties that
address matters only as of a particular date which are true and correct as
of such date;
(c) there shall be instituted or pending any action, litigation,
proceeding, investigation or other application (hereinafter, an "Action"),
(including a worsening of any existing Action) before any United States
court or other Governmental Entity by any United States Governmental
Entity: (i) challenging the acquisition by Parent or the Purchaser of the
Shares, seeking to restrain or prohibit the consummation of the
transactions contemplated by the Offer or the Merger seeking to obtain any
damages which damages are material to the Company and its Subsidiaries
taken as a whole; (ii) seeking to prohibit, or impose any material
limitations on, Parent's or the Purchaser's ownership or operation of all
the Company's business or assets or to compel Parent or the Purchaser to
dispose of or hold separate all or any portion of the Company's business or
assets (including the business or assets of its Subsidiaries) as a result
of the transactions contemplated by the Offer of the Merger which
limitations would have a material adverse effect with respect to the value
of the Company and its Subsidiaries taken as a whole to Parent; (iii)
seeking to make the acceptance for payment, purchase of, or payment for,
some or all of the Shares illegal or render the Purchaser unable to, or
result in a material delay in, or materially restrict, the ability of the
Purchaser to accept for payment, purchase or pay for some or all of the
Shares; (iv) seeking to impose material limitations on the ability of
Parent or the Purchaser effectively to acquire or hold or to exercise full
rights of ownership of the Shares including, without limitation, the right
to vote the Shares purchased by them on an equal basis with all other
Shares on all matters properly presented to the stockholders; or (v) that
in any event is reasonably likely to have a material adverse effect on the
financial condition, properties, business or operations of the Company and
its Subsidiaries taken as a whole or the value of the Shares to Parent or
the Purchaser as a result of consummation of the transactions contemplated
by the Offer and the Merger;
(d) any statute, rule, regulation, order or injunction shall be
enacted, promulgated, entered, enforced or deemed or become applicable to
the Offer or the Merger, or any other action shall have been taken,
proposed or threatened, by any United States court or other Governmental
Entity other than the application to the Offer or the Merger of waiting
periods under the H-S-R Act, that, directly or indirectly, can reasonably
be expected to result in any of the effects of, or have any of the
consequences sought to be obtained or achieved in, any Action referred to
in clauses (i) through (v) of paragraph (c) above;
(e) a tender or exchange offer for some portion or all of the Shares
shall have been commenced or publicly proposed to be made by another person
(including the Company or its Subsidiaries), or it shall have been publicly
disclosed that (i) any person (including the Company or its Subsidiaries),
entity or "group" (as defined in Section 13(d) of the Exchange Act and the
rules promulgated thereunder), other than employees of the Company through
exercise of Options, shall have become the beneficial owner (as defined in
Section 13(d) of the Exchange Act and the rules promulgated thereunder) of
more than 20% of the shares of Company Common Stock; or (ii) any person,
entity or group shall have entered into a definitive agreement or an
agreement in principle with respect to an acquisition proposal with or
involving the Company;
(f) any change shall have occurred in the financial condition,
properties, businesses or results of operations of the Company and any of
its Subsidiaries that is or is reasonably likely to be materially adverse
to the Company and its Subsidiaries taken as a whole;
(g) the Board of Directors of the Company (or a special committee
thereof) shall have amended, modified or withdrawn its recommendation of
the Offer or the Merger, or shall have failed to publicly reconfirm such
recommendation upon request by Parent or the Purchaser, or shall have
endorsed, approved or recommended any other Acquisition Proposal, or shall
have resolved to do any of the foregoing;
2
<PAGE> 4
(h) the Merger Agreement shall have been terminated by the Company or
Parent or the Purchaser in accordance with its terms or Parent or the
Purchaser shall have reached an agreement or understanding in writing with
the Company providing for termination or amendment of the Offer or delay in
payment for the Shares;
(i) any Action is instituted or pending by a non-governmental person
or entity (or there shall be a worsening of an existing Action) which, in
the reasonable judgment of Parent, has a reasonable likelihood of success,
and if successful on the merits, is more likely than not to have a Material
Adverse Effect on the financial condition, properties, business or
operations of the Company and its Subsidiaries taken as a whole or the
value of the Shares to Parent as a result of the consummation of the
transactions contemplated by the Offer and the Merger; or
(j) if there has been any (y) Release of Hazardous Substances in, on,
under or affecting any properties currently or formerly owned or operated
by the Company or any of its Subsidiaries in violation of, or as would
reasonably be anticipated to result in liability under, applicable
Environmental Laws or (z) disposal of Hazardous Substances or any other
substance in a manner that has led to, or could reasonably be anticipated
to lead to, a Release in violation of applicable Environmental Laws except,
in either case, as previously disclosed by the Company to Parent in writing
and the Purchaser and except in either case for those which, individually
or in the aggregate, are not reasonably likely to have a Material Adverse
Effect on the Company.
which, in the sole judgment of Parent or the Purchaser, in any such case, and
regardless of the circumstances (including any action or inaction by Parent or
the Purchaser giving rise to any such conditions) makes it unadvisable to
proceed with the Offer and/or with acceptance for payment of or payment for
Shares.
The foregoing conditions are for the sole benefit of Parent and the
Purchaser and may be asserted by Parent and the Purchaser regardless of the
circumstances (including any action or inaction by Parent and the Purchaser)
giving rise to such condition or may be waived by Parent and the Purchaser, by
express and specific action to that effect, in whole or in part at any time and
from time to time in its sole discretion.
Other Terms of the Offer. If, prior to the Expiration Date, the Purchaser,
in its sole discretion, shall, subject to the limitations contained in the
Merger Agreement, decrease the percentage of Shares being sought or increase the
consideration offered to holders of Shares, such increase or decrease shall be
applicable to all holders whose Shares are accepted for payment pursuant to the
Offer. If at the time notice of any increase or decrease is first published,
sent or given to holders of Shares, the Offer is scheduled to expire at any time
earlier than the tenth business day from and including the date that such notice
is first so published, set or given, the Offer will be extended until the
expiration of such ten business-day period. For purposes of the Offer, a
"business day" means any day other than a Saturday, Sunday or federal holiday
and consists of the time period from 12:01 A.M. through 12:00 Midnight, New York
City time.
Pursuant to the Merger Agreement, the Purchaser shall not, without the
written consent of the Company, decrease the per Share price to be paid in the
Offer, change the number of Shares sought in the Offer to less than 50.1% of the
outstanding Shares, change the form of consideration to be paid pursuant to the
Offer, impose conditions to the Offer in addition to those set forth above or
amend any other term or condition of the Offer in any manner, except as may be
required pursuant to the Commission's rules with respect to the extension of
time periods, which is adverse to the holders of Shares, provided, however, that
if on a scheduled Expiration Date all conditions to the Offer shall not have
been satisfied or waived, the Offer may be extended from time to time without
consent of the Company for such period of time as is reasonably expected to be
necessary to satisfy the unsatisfied conditions, and provided, further, that if
as of a scheduled Expiration Date all of the conditions to the Offer have been
satisfied and in excess of 80% but less than 90% of the Shares have been
tendered, the Purchaser may extend the Offer up to an additional seven business
days.
Based on information included in the Offer to Purchase, the principal
executive offices of Parent and the Purchaser are located at 5445 Corporate
Drive, Suite 200, Troy, Michigan 48098.
3
<PAGE> 5
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) Except as described below or incorporated herein by reference, to
the knowledge of the Company, as of the date hereof, there exists no
material contract, agreement, arrangement or understanding and no actual or
potential conflict of interest between the Company or its affiliates and
(i) the Company, its executive officers, directors or affiliates, or (ii)
the Purchaser, its executive officers, directors or affiliates.
EMPLOYEE MATTERS
Employment Agreements. The Merger Agreement provides that Parent or the
Purchaser shall cause the Surviving Corporation to honor pursuant to the terms
of such agreements all employment, severance and termination agreements
(including change in control provisions) of the employees of the Company and its
Subsidiaries, all of which are disclosed in Section 5.11(a) of the Company
Disclosure Schedules. Any bonus compensation required to be paid to any employee
of the Company on a pro rata or similar basis as a result of a termination of
employment pursuant to any such employment, severance or termination agreements
will be paid based upon the actual results of the Company as of the end of the
month next preceding the date of termination of such employment. The bonus
compensation will be paid within thirty days after the end of such month
notwithstanding anything in such agreements to the contrary.
Pursuant to the terms of an employment agreement dated July 28, 1995
between the Company and Jacques R. Sardas, Chairman, Chief Executive Officer,
President and Treasurer of the Company, in the event that Mr. Sardas is
terminated by the Company other than for "cause" (as defined in the employment
agreement) prior to January 12, 1998, the Company is required to pay Mr.
Sardas's base salary and bonus under the terms of the employment agreement. A
copy of Mr. Sardas's employment agreement has been filed as Exhibit 10 to the
Schedule 14D-9.
Pursuant to the terms of an employment agreement dated October 12, 1995 (as
interpreted by letter dated October 8, 1996) between the Company and Mark E.
Brody, Vice President and Chief Financial Officer of the Company, in the event
that Mr. Brody is terminated other than for "cause" (as defined in the
employment agreement) or is "constructively terminated" (as hereinafter defined)
within one year after the Effective Time, Mr. Brody will be entitled to a lump
sum payment equal to two years base salary, any annual bonus payment earned for
prior periods but unpaid and the pro rata portion of any annual bonus for the
Surviving Company's fiscal year in which he is terminated. Mr. Brody's base
salary for fiscal 1997 is $150,000. Mr. Brody also is entitled to annual bonus
compensation under the Company's Incentive Bonus Plan equal to a percentage of
his base salary ranging from 15% to 45% if certain financial objectives are
achieved. In addition, Mr. Brody will be entitled to one year's base salary, any
earned but unpaid bonus for previous fiscal years and the pro rata portion of
any annual bonus for the Surviving Company's then current fiscal year in the
event he is terminated for other than "cause" more than one year after the
Effective Time. For purposes of Mr. Brody's employment agreement, "constructive
termination" means, among other things, a reduction in Mr. Brody's base salary
without the substitution of comparable economic value or a reduction similarly
affecting senior management of the Company generally, required relocation
outside of the greater Cleveland area or a significant diminution in Mr. Brody's
duties and responsibilities. A copy of Mr. Brody's employment agreement has been
filed as Exhibit 11 to this Schedule 14D-9.
With respect to each Eligible Employee (as defined below) who terminates or
otherwise loses employment within one (1) year following the Effective Time: (i)
medical coverage will be provided by Parent or the Surviving Corporation (A) for
the period of time, if any, used in determining the amount of the employee's
severance or termination pay but shall cease upon such Eligible Employee's
reemployment and (B) on terms (including costs to the participant) not less
favorable to the employee as in effect immediately prior to such termination or
other loss of employment; and (ii) the duration of medical coverage made
available with respect to the employee pursuant to Code Section 4980B and/or
ERISA Section 601 et. seq. ("COBRA") after termination of the coverage provided
under clause (i) shall be reduced for the period of
4
<PAGE> 6
such coverage under clause (i). The term "Eligible Employee" means: (x) each
employee of the Company immediately prior to the Effective Time who receives
severance or termination pay as a result of termination or loss of employment
during such one-year period; and (y) each person identified on Schedule
5.8(v)(Z) of the Merger Agreement who, immediately prior to the Effective Time,
is an employee of a Company Subsidiary who receives severance or termination pay
as a result of termination or loss of employment during such one-year period.
Company Stock Option Plans. Prior to the Effective Time, the Company will
take such action as may be necessary so that at the Effective Time, each
outstanding option to purchase Shares under the Company's 1990 Stock Option
Plan, 1995 Stock Option Plan and the Sardas Options (collectively, the "Company
Stock Option Plans"), whether or not then vested or exercisable in accordance
with its terms (collectively, the "Options"), will be canceled and entitle the
holder thereof, upon surrender to the Company, to receive an amount of cash
equal to the product of (x) the amount by which the Merger Consideration exceeds
the exercise price per share of the Shares subject to such Option (whether
vested or unvested) and (y) the number of Shares issuable pursuant to the
unexercised portion of such Option (whether vested or unvested), less any
required withholding of taxes (the "Option Consideration"). The surrender of an
Option to the Company in exchange for the Option Consideration will be deemed a
release of any and all rights the holder had or may have had in respect of such
Option. All Company Stock Option Plans and Options will terminate as of the
Effective Time and the provisions in any other plan, program or arrangement
providing for the issuance or grant of any other interest in respect of the
capital stock of the Company or any of its Subsidiaries will be canceled as of
the Effective Time. Copies of the Company's 1990 Stock Option Plan and 1995
Stock Option Plan have been filed as Exhibit 6 and Exhibit 7, respectively, to
this Schedule 14D-9.
The estimated cost of purchasing the Options held by Mr. Sardas and Mr.
Brody for the Option Consideration is $25,712,652 and $361,250, respectively.
The estimated cost of purchasing the Options held by all other officers of the
Company and its Subsidiaries for the Option Consideration is $1,993,250.
Directors' Deferral Plan. The Company has adopted the Sudbury, Inc.
Directors' Deferral Plan (the "Deferral Plan") which permits outside directors
of the Company to defer, until a specified date or retirement from the Company's
Board of Directors, all or any part of their retainer or meeting fees into a
cash and/or stock equivalent account established by the Company for their
benefit.
The Company pays interest on compensation deferred into the cash account at
a rate based on the rate of interest paid by the Company on its senior revolving
credit facility. Compensation deferred to the stock account ("Stock Account")
during any calendar quarter is converted into stock equivalent units by dividing
the total amount of deferred compensation by the market price, as defined in the
Deferral Plan, of the Shares on the last business day of that quarter. At the
end of the deferral period, the Company will pay to the director an amount in
cash equal to the number of accumulated stock equivalent units multiplied by the
market price of the Shares on the last business day of the calendar quarter
immediately prior to the day on which the deferral period ends (the "Valuation
Date"). A copy of the Deferral Plan has been filed as Exhibit 8 to this Schedule
14D-9.
The Company will take such action as may be necessary so that as of the
Effective Time, pursuant to the Merger Agreement, the Deferral Plan will be
terminated and, as soon as practicable after the Effective Time, each
participant's "Deferred Account" (as defined under the Deferral Plan) shall be
paid to the participant in one lump sum cash payment. For purposes of the
preceding sentence, the portion of a participant's "Deferred Account"
representing the participant's Stock Account (as defined under the Deferral
Plan) shall be valued on a per share basis using the Merger Consideration.
The estimated cost to the Company of paying the Deferred Account of each
participant in the Deferral Plan who is at present on the Company's Board of
Directors is as follows:
<TABLE>
<S> <C>
Cloyd J. Abruzzo................ $ 50,342
Preston Heller, Jr.............. 116,936
-------
$ 167,278
=======
</TABLE>
5
<PAGE> 7
The estimated benefit received by the Company's non-employee directors
based on the amount by which the Merger Consideration exceeds the valuation per
share of the Shares in their Stock Account at September 30, 1996, the most
recent Valuation Date of the Deferral Plan, is approximately $5,000.
Additional Information. Certain additional information with respect to
executive compensation and related employee benefits and other information
concerning the Company's executive officers and directors, as modified by the
foregoing discussion set forth in this Item 3(b), is set forth in the Company's
Notice of 1996 Annual Meeting of Stockholders and Proxy Statement dated August
23, 1996 (the "1996 Proxy Statement") under the sections titled "Beneficial
Ownership of Securities," "Additional Information Concerning the Board of
Directors -- Director Compensation" and "Executive Compensation" and is
incorporated herein by reference. A copy of the pertinent sections of the 1996
Proxy Statement has been filed as Exhibit 9 to this Schedule 14D-9 and is
incorporated herein by reference.
CERTAIN OTHER MATTERS
Confidentiality Agreement. The Company delivered certain confidential
information to Parent in order to allow Parent to evaluate a proposed business
combination with the Company. As a condition to the delivery by the Company of
the confidential information, Parent entered into a Confidentiality Agreement
(the "Confidentiality Agreement"), dated September 5, 1996, pursuant to which
Parent has agreed, among other things, to keep confidential certain non-public
confidential or proprietary information of the Company furnished to Parent by or
on behalf of the Company. A copy of this Confidentiality Agreement has been
filed as Exhibit 4 to this Schedule 14D-9 and is incorporated herein by
reference.
Takeover Proposals. The Merger Agreement provides that the Company, and
any of its officers, directors, employees, agents, investment bankers,
attorneys, financial advisors or other representatives (collectively, "Company
Representatives") may not (i) solicit, initiate or knowingly encourage the
submission of, any proposal or offer from any person relating to (x) any direct
or indirect acquisition or purchase of more than 20% of either the capital stock
of the Company or the consolidated assets of the Company and its Subsidiaries
taken as a whole, (y) any tender offer or exchange offer that if consummated
would result in any person beneficially owning 20% or more of the capital stock
of the Company or (z) any merger, consolidation or business combination,
involving the Company other than the transactions contemplated by the Merger
Agreement (collectively, an "Acquisition Proposal"), (ii) enter into any
agreement with respect to any Acquisition Proposal, or (iii) participate in any
discussions or negotiations regarding, or furnish to any Person any non-public
information with respect to, or take any other action to knowingly facilitate
any inquiries or the making of any proposal that constitutes or would reasonably
be expected to lead to, an Acquisition Proposal; provided, however, that (i) the
Company may participate in discussions or negotiations with, and may furnish
information concerning the Company and its business, properties and assets to, a
Third Party who, without any solicitation by the Company or any Company
Representatives after the date of the Merger Agreement, seeks to engage in such
discussions or negotiations or requests such information, if (1) the Board of
Directors of the Company determines, based on the advice of the Company's
outside legal counsel, that failing to engage in such discussion or negotiations
or provide such information would reasonably be expected to violate the
fiduciary duties of the Board of Directors of the Company to its stockholders,
(2) prior to engaging in discussions or negotiations with, or furnishing
information to, such Third Party, the Company shall receive from such Third
Party an executed confidentiality agreement in reasonably customary form on
terms not more favorable to such Person or entity than the terms contained in
the Confidentiality Agreement, and (3) the Acquisition Proposal would result in
the holders of the Shares being entitled to receive consideration which, in the
aggregate, would be greater than $12.50 per share (collectively, a "Permitted
Acquisition Proposal"), and (ii) the Board of Directors of the Company may take
and disclose to the Company's stockholders a position with regard to a tender
offer or exchange offer contemplated by Rules 14d-9 and 14e-2(a) promulgated
under the Exchange Act and may make such disclosure to the stockholders of the
Company as may be required under Applicable Law.
The Company is required to immediately notify Parent and the Purchaser of
any Acquisition Proposal, including the identity of the Third Party making any
such Acquisition Proposal and the material terms and conditions of any
Acquisition Proposal.
6
<PAGE> 8
Notwithstanding anything to the contrary in the Merger Agreement, the Board
of Directors of the Company is permitted from time to time to take the following
actions in the circumstances described below: (i) to withdraw or modify its
approval or recommendation of the Merger Agreement, the Offer or the Merger in a
manner adverse to Parent and the Purchaser; or (ii) to approve or recommend or
enter into an agreement with respect to a Permitted Acquisition Proposal; if, in
each such case, (A) a Permitted Acquisition Proposal is publicly proposed,
publicly disclosed or communicated to the Company and (B) the Board of Directors
of the Company determines, based on the advice of the Company's outside legal
counsel, that such action is required in order to comply with its fiduciary
duties to the stockholders of the Company. No action by the Board of Directors
of the Company permitted by the preceding sentence (each, a "Permitted Action")
constitutes a breach of the Merger Agreement by the Company.
The Merger Agreement provides that if the Board of Directors of the Company
terminates the Merger Agreement pursuant to a Permitted Action, or if Parent
terminates the Merger Agreement due to the Company engaging in a Permitted
Action, then the Company shall, not later than the Termination Date after the
first of such events shall occur, pay Parent a fee of $5 million. If the Company
fails to promptly pay such amount, and, in order to obtain such payment, Parent
or the Purchaser commences a suit which results in a judgment against the
Company for the fee set forth above, the Company shall pay to Parent or the
Purchaser its cost and expenses (including attorneys' fees) in connection with
such suit, together with interest on the amount of the fee at the annual rate of
interest charged to Parent under its senior credit facility.
Subject to the applicable provisions of the Delaware General Corporation
Law (the "DGCL"), the Merger Agreement may be amended by action taken by the
Company, Parent and the Purchaser at any time prior to the Effective Time.
Fees and Expenses. The Company, Parent and the Purchaser will pay the fees
and expenses of its respective counsel, accountants and other experts and all
other costs incurred by it in connection with the Merger Agreement and the
consummation of the transactions contemplated thereby. The Company has agreed to
pay any Transfer Taxes that become payable in connection with the transaction
contemplated by the Merger Agreement.
Supplemental Disclosure. The Company is required to confer on a regular
basis with Parent or the Purchaser, report on operational matters and promptly
notify Parent or the Purchaser of, and furnish Parent or the Purchaser with, any
information it may reasonably request with respect to, any event or condition or
the existence of any fact that would cause any of the conditions to Parent's or
Purchaser's obligation to consummate the Offer or the Merger not to be
completed, and Parent and the Purchaser shall promptly notify the Company of,
and furnish the Company any information it may reasonably request with respect
to, any event or condition or the existence of any fact that would cause any of
the conditions to the Company's obligation to consummate the Merger not to be
completed.
Agreement to Advance Funds. Parent has agreed that, if requested by the
Company, it will advance to the Company, immediately prior to the Effective
Time, up to $30 million (the "Advance"). The Advance will bear interest at the
rate per annum charged to Parent under its senior credit facility. Principal and
interest will be due and payable three months after the Advance is made and the
Advance will be evidenced by a promissory note that is mutually acceptable to
Parent and the Company.
INDEMNIFICATION UNDER DELAWARE LAW, THE COMPANY'S CHARTER,
BY-LAWS AND THE MERGER AGREEMENT
The Company is a Delaware corporation. Section 145 of the DGCL, provides
that a corporation may indemnify any person who was or is, or is threatened to
be made, a party to any threatened, pending or completed legal action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of such corporation), by reason of the fact that
such person is or was an officer, director, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise (an
"Indemnified Party"). The indemnity may include expenses (including attorney's
fees), judgments, fines and amounts paid in settlement
7
<PAGE> 9
actually and reasonably incurred by the indemnified person in connection with
such action, suit or proceeding, provided such officer, director, employee or
agent acted in good faith and in a manner he or she reasonably believed to be in
or not opposed to the corporation's best interest and, for criminal proceedings,
had no reasonable cause to believe that his or her conduct was unlawful. A
Delaware corporation may indemnify officers and directors in an action by or in
the right of the corporation under the same conditions, except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him or her against the
expenses that such officer or director actually and reasonably incurred.
Reference is also made to Section 102(b)(7) of the DGCL, which enables a
corporation in its original certificate of incorporation or an amendment thereto
to eliminate or limit the personal liability of a director to the corporation or
its stockholders for violations of the director's fiduciary duty, except (i) for
any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant to Section
174 of the DGCL (providing for liability of directors for unlawful payment of
dividends or unlawful stock purchases or redemptions), or (iv) for any
transaction from which a director derived an improper personal benefit.
The By-laws of the Company provide for the indemnification, to the extent
permitted by Section 145 of the DGCL, of directors, officers, employees or
agents of the Company against expenses reasonably incurred with respect to
civil, criminal, administrative or investigative actions, suits or proceedings.
The Company has directors' and officers' liability insurance covering certain
liabilities incurred by the officers and directors of the Company in connection
with the performance of their duties.
Article Seventh of the Second Certificate of Incorporation of the Company
provides that, to the fullest extent permitted by the DGCL, a director of the
Company shall not be liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director. Any repeal or modification
of Article Seventh by the stockholders of the Company shall be prospective only
and shall not adversely affect any right or protection of a director of the
Company existing at the time of such repeal or modification.
The Merger Agreement provides that, after the Effective Time, the surviving
corporation in the Merger will maintain the Company's existing directors' and
officers' primary liability insurance coverage for a period of four years after
the Effective Time, provided that there shall be no obligation to pay annual
premiums in excess of two times the annual premium paid prior to the date of the
Merger Agreement. If the insurance premium exceeds such amounts, the surviving
corporation will obtain as much insurance as can be obtained for the remainder
of such period for such amount. The Merger Agreement also provides that, after
the Effective Time, Parent and the surviving corporation will indemnify each
present and former director and officer of the Company to the fullest extent the
Company would have been permitted to do so under the DGCL and requires the
Purchaser and the surviving corporation to maintain for six years after the
Effective Time provisions in the Company's Certificate of Incorporation and
By-laws relating to exculpation and indemnification of directors and officers to
the fullest extent permitted under the DGCL.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation of the Board of Directors. The Board of Directors
has determined that the Merger Agreement and the transactions contemplated
thereby, including, without limitation, the Offer, the Merger and the
transactions contemplated thereby, are fair to and in the best interest of
the stockholders of the Company. In addition, the Board of Directors has
approved the Merger Agreement and the transactions contemplated thereby,
including, without limitation, the Offer and the Merger. The Board of
Directors recommends that all holders accept the Offer and tender their
Shares pursuant to the Offer.
(b) The Company's Board of Directors and senior management regularly
review the current and future state of the Company's strategic position.
8
<PAGE> 10
In 1993, the Company and Parent discussed the possible acquisition by
Parent of the Company's 35% interest in General Products Delaware Corporation.
On a couple of occasions in 1995 and, in January 1996, Parent and the Company
met to discuss the two companies and the possibility of a business combination.
No specific terms were discussed and no actions were taken following those
meetings to pursue a business combination. On September 4, 1996, John Doddridge,
chief executive officer of Parent, called Jacques R. Sardas, chief executive
officer of the Company after seeing the announcement by Park-Ohio Industries
Inc. that it had made a proposal to acquire the Company at $11.00 a share.
Parent signed a confidentiality agreement with the Company on September 5, 1996
and commenced due diligence on October 9, 1996. On November 18, 1996, the
Company, Parent and the Purchaser entered into the Merger Agreement.
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:
(i) the terms of the Merger Agreement;
(ii) presentations by management of the Company (at Board meetings
held on November 18, 1996, November 13, 1996, November 7, 1996 and at
previous Board meetings) regarding the financial condition, results of
operations, business and prospects of the Company, including the
prospects of the Company if it remained independent;
(iii) the fact that the Company with the assistance of Alex. Brown
& Sons Incorporated ("Alex. Brown") had solicited interest from other
parties that the Company believed would have an interest in acquiring
the Company;
(iv) the fact that the proposed structure of the Offer and the
Merger involves an immediate cash tender offer for all of the
outstanding Shares, thereby enabling the stockholders of the Company to
obtain cash for their Shares at the earliest possible time;
(v) the historical market prices for the Shares, particularly the
fact that the $12.50 per Share price in the Offer represents (x) a
premium of approximately 25% over the closing price on the NASDAQ/NMS of
$10 for the Shares on November 18, 1996, the last trading day prior to
the public announcement of the Offer and the Merger, and (y) a premium
of 18% over the closing price of $10.625 for the Shares on September 3,
1996, the last full trading day prior to the public announcement by
Park-Ohio Industries, Inc. that it had offered to buy the Company at $11
per share;
(vi) the expected future trading values of the Shares in light of,
among other things, the historical trading multiples of other companies
in the Company's line of business;
(vii) the presentation of Alex. Brown to the Board of Directors on
November 18, 1996 and the written opinion of Alex. Brown dated November
18, 1996 to the effect that as of such date and based upon and subject
to certain matters in such opinion, the cash consideration to be
received by holders of Shares (other than Intermet and its affiliates)
in the Offer and the Merger was fair, from a financial point of view, to
such holders. The full text of Alex. Brown's written opinion, which sets
forth the assumptions made, matters considered and limitations on the
review undertaken by Alex. Brown, is attached hereto as Exhibit 5 and is
incorporated herein by reference. Alex. Brown's opinion is directed only
to the fairness, from a financial point of view, of the cash
consideration to be received in the Offer and the Merger by holders of
Shares (other than Intermet and its affiliates) and is not intended to
constitute, and does not constitute, a recommendation as to whether any
stockholder should tender Shares pursuant to the Offer. Stockholders are
urged to read such opinion carefully in its entirety.
(viii) the fact that the Offer and the Merger are not conditioned
on the availability of financing;
(ix) 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
9
<PAGE> 11
Company to furnish information to and participate in discussions or
negotiations with any third party if the conditions described above in
Item 3(b) under "Certain Other Matters -- Takeover Proposals" are
satisfied;
(x) the fact that if the Board decided to accept an acquisition
proposal by a third party, the Board may terminate the Merger Agreement
and pay Parent a termination fee of $5 million (as described above in
Item 3 under "Certain Other Matters -- Termination Fee"), which the
Board did not believe would be a significant deterrent to a higher offer
by a third party interested in acquiring the Company; and
(xi) the regulatory antitrust approval required to consummate the
Merger and the prospect of receiving such approval.
The Board of Directors did not assign relative weights to the 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.
The Company has retained Alex. Brown as its financial advisor in connection
with the Offer and the Merger. Pursuant to the terms of Alex. Brown's
engagement, the Company has agreed to pay Alex. Brown for its services an
aggregate financial advisory fee based on the total consideration (including
liabilities assumed) payable in connection with the Offer and the Merger. The
fee payable to Alex. Brown is currently estimated to be approximately
$1,492,167. The Company also has agreed to reimburse Alex. Brown for reasonable
out-of-pocket expenses, including legal fees and expenses, and to indemnify
Alex. Brown and certain related parties against certain liabilities, including
liabilities under the federal securities laws, arising out of Alex. Brown's
engagement. In the ordinary course of business, Alex. Brown and its affiliates
may actively trade the securities of the Company and Intermet for their own
account or for the account of customers and, accordingly, may at any time hold a
long or short position in such securities.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transactions in shares of the Company Common Stock have been
effected during the past sixty (60) days by the Company or, to the best of
the Company's knowledge, by any executive officer, director, affiliate or
subsidiary of the Company.
(b) The Company is not aware that any executive officer, director or
affiliate presently intends not to tender its unrestricted Shares.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE COMPANY.
(a) Except as set forth above or in Items 3(b) and 4(b), the Company
is not engaged in any negotiation 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 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 set forth above or in Items 3(b) or 4 above, there are
no transactions, Board of Directors resolutions, agreements in principle or
signed contracts in response to the Offer that would result in one or more
of the events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The Information Statement attached as Schedule I hereto 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 stockholders.
10
<PAGE> 12
No appraisal rights are available in connection with the Offer.
Stockholders who do not tender their Shares in connection with the Offer and who
do not vote in favor of the Merger may exercise dissenters rights under the
DGCL, provided, however, that no dissenters rights will be exercisable under the
DGCL in the event that in connection with the Offer the Purchaser acquires an
amount of Shares equal to or greater than 90% of the issued and outstanding
Shares.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<S> <C>
Exhibit 1 Letter to Stockholders of the Company dated November 22, 1996.*
Exhibit 2 Press Release issued by Parent dated November 18, 1996.
Exhibit 3 Agreement and Plan of Merger dated as of November 18, 1996, by and among
Parent, the Purchaser and the Company.
Exhibit 4 Confidentiality Agreement dated September 5, 1996, executed by Parent.
Exhibit 5 Opinion of Alex. Brown & Sons Incorporated dated November 18, 1996.*
Exhibit 6 1990 Sudbury, Inc. Stock Option Plan.
Exhibit 7 1995 Sudbury, Inc. Stock Option Plan.
Exhibit 8 Sudbury, Inc. Directors' Deferral Plan.
Exhibit 9 Pages 2-3 and 6-12 of the Company's Notice of 1996 Annual Meeting of
Stockholders and Proxy Statement dated August 23, 1996 containing the pertinent
sections thereof referred to in Item 3(b) of this Schedule 14d-9.
Exhibit 10 Employment Agreement dated July 28, 1995 between the Company and Jacques R.
Sardas.
Exhibit 11 Employment Agreement dated October 12, 1995 between the Company and Mark E.
Brody and accompanying letter of interpretation dated October 8, 1996.
</TABLE>
- ---------------
*Included in copies of the Schedule 14D-9 mailed to stockholders.
11
<PAGE> 13
SIGNATURE
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 22, 1996
SUDBURY, INC.
By: /s/ Mark E. Brody
------------------------------
Name: Mark E. Brody
Title: Vice President and
Chief Financial Officer
<PAGE> 14
SCHEDULE 1
SUDBURY, INC.
30100 CHAGRIN BOULEVARD, SUITE 203
CLEVELAND, OHIO 44124
---------------------
INFORMATION STATEMENT PURSUANT TO SECTION 14(F) OF THE
SECURITIES EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
---------------------
NO VOTE OR OTHER ACTION OF THE COMPANY'S STOCKHOLDERS
IS REQUIRED IN CONNECTION WITH THIS INFORMATION STATEMENT.
NO PROXIES ARE BEING SOLICITED, AND YOU ARE REQUESTED
NOT TO SEND THE COMPANY A PROXY.
---------------------
INTRODUCTION
General. This Information Statement, which is being mailed on or about
November 22, 1996 to holders of record on November 18, 1996 of shares of Common
Stock, par value $0.01 per share (the "Shares"), of Sudbury, Inc., a Delaware
corporation (the "Company"), is being furnished in connection with the possible
election to the Board of Directors of the Company (the "Board of Directors" or
the "Board") of persons (the "Designees") designated by Intermet Corporation, a
Georgia corporation ("Parent"). Such designation would be made pursuant to an
Agreement and Plan of Merger among Parent, I M Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Parent (the "Purchaser"), and the
Company, dated November 18, 1996 (the "Merger Agreement"). This information
statement is required by Section 14(f) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and Rule 14f-1 thereunder. You are urged to
read this information statement carefully. However, you are not required to take
any action.
The Offer. Pursuant to the Merger Agreement, the Purchaser is offering to
purchase all of the outstanding Shares at a price of $12.50 per Share without
interest, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated November 22, 1996, the
related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer"). The offer and
withdrawal rights will expire at 12:00 midnight, New York City time, on Friday,
December 20, 1996, unless the Offer is extended. Following the consummation of
the Offer, the Purchaser will be merged with and into the Company (the
"Surviving Corporation") and each outstanding Share, not owned by Parent or its
direct or indirect subsidiaries (or by stockholders who properly exercise
dissenters' rights, if any), will be converted into the right to receive $12.50
in cash without interest (the "Merger").
As of November 7, 1996, 11,417,396 Shares were issued and outstanding,
which are the only voting securities of the Company. Each Share issued and
outstanding is entitled to one vote per Share on all matters submitted to
stockholders. As of November 7, 1996, 4,173,948 Shares have been reserved for
issuance pursuant to the Company's stock options and its Participation
Certificates.
Parent's Designees to Board of Directors. The Merger Agreement provides,
among other things, that the Company, if requested by Parent, subject to
compliance with applicable law and promptly following the purchase by the
Purchaser of more than 50 percent of the outstanding Shares pursuant to the
Offer, will take all actions necessary to cause persons designated by Parent to
become directors of the Company so that the total number of such persons equals
that number of directors, rounded up to the next whole number, which represents
the product of (x) the total number of directors on the Board of Directors
multiplied by (y) the percentage that the number of Shares outstanding at the
time of such acceptance for payment bears to the number of Shares outstanding at
the time of such acceptance for payment. In furtherance thereof, the Company
will increase the size of the Board, or use its reasonable efforts to secure the
resignation of directors, or both, as is necessary to permit Parent's designees
to be elected to the Company's Board of Directors;
<PAGE> 15
provided, however, that prior to the effective time of the Merger (the
"Effective Time"), the Company's Board of Directors shall always have at least
three members who are neither officers of Parent nor designees, stockholders or
affiliates or Parent. At such time, the Company, if so requested by Parent, will
use its reasonable efforts to cause persons designated by Parent to constitute
the same percentage of each committee of the Company's Board of Directors, each
Board of Directors of subsidiaries of the Company and each committee of each
such Board.
The Company's Board of Directors currently has seven members. If the
Purchaser's beneficial ownership of the outstanding Shares pursuant to the Offer
exceeds 50 percent, Parent will be entitled to designate at least 4 of the 7
members of the Company's Board of Directors pursuant to the above described
provision. Parent expects to designate four persons, Mr. John Doddridge, Ms.
Doretha J. Christoph, Mr. C. James Peterson and Mr. James Rydel (collectively,
the "Designees") to be elected to the Board of Directors promptly from the date
the Purchaser's beneficial ownership of the outstanding Shares exceeds 50
percent pursuant to the Offer (the "Election Date"). See "The Board of Directors
and Designees -- The Designees." The Company has advised Parent that it expects
four current directors (Preston Heller, Jr., James A. Karman, Alan L. Ockene and
David A. Preiser) (collectively, the "Resigning Directors") to submit their
resignations from the Board of Directors, effective as of the Election Date,
while Jacques R. Sardas, Thomas F. Slater and Cloyd J. Abruzzo would continue to
serve on the Board of Directors. See "The Board of Directors and
Designees -- The Current Board of Directors." Effective upon the effectiveness
of the resignations of the Resigning Directors, the Board of Directors expects
to elect the Designees to the Board of Directors to fill the four vacancies
created thereby. As a result of the foregoing, on the Election Date, the Board
of Directors will consist of the four Designees and Mr. Jacques R. Sardas,
Thomas F. Slater and Cloyd J. Abruzzo. The Designees will constitute a majority
of the Board of Directors of the Company.
The purpose of this Information Statement is to provide information
concerning the Designees and the Board of Directors. The information contained
herein concerning Parent, the Purchaser and the Designees has been furnished to
the Company by Parent, and the Company assumes no responsibility for the
accuracy or completeness of such information. The address of Parent is Suite
200, 5445 Corporate Drive, Troy, Michigan 48098.
No action is required by the stockholders of the Company (the
"Stockholders") in connection with the election of the Designees to the Board of
Directors. However, Section 14(f) of the Exchange Act requires the mailing to
the Stockholders of the information set forth in this Information Statement at
least ten days prior to the election of such Designees if such election will
result in a change in the majority of the Company's directors.
THE BOARD OF DIRECTORS OF THE COMPANY
THE DESIGNEES
The following table sets forth the name, business address, position with
Parent or the Purchaser, age, service as a director of other corporations,
principal occupation or employment at the present time and during the last five
years and the name, principal business or other organization in which such
occupation or employment is or was conducted, of the Designees. Each person
listed below is of United States citizenship
2
<PAGE> 16
and, unless otherwise specified, has his/her principal business address at the
offices of Parent, Suite 200, 5445 Corporate Drive, Troy, Michigan, 48098.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; ADDRESS
NAME AGE AND FIVE YEAR EMPLOYMENT HISTORY
- --------------------- --- -------------------------------------------------------------------
<S> <C> <C>
John Doddridge 56 Mr. Doddridge became Chairman of the Board and Chief Executive
Officer in October 1994 and became President in February 1995. Mr.
Doddridge was Vice Chairman and Chief Executive Officer of Magna
International, Inc., a supplier of motor vehicle parts, from
November 1992 until November 1994, where he also served as a
director. From mid-1989 to 1992 he served as President of North
American Operations of Dana Corporation, a motor vehicle parts
manufacturer, and prior to mid-1989 he served as President of
Hayes-Dana Inc., a subsidiary of Dana Corporation. Mr. Doddridge
serves as a director of Detroit Diesel Corporation and The Standard
Products Co.
Doretha J. Christoph 47 Ms. Christoph became Vice President -- Finance in June 1995. Prior
to that time she served as Vice President and Director of Finance
and Information Technology of LNP Engineering Plastics, a worldwide
supplier of engineered plastics across all markets and a subsidiary
of Kawasaki Steel Corporation from November 1991 until May 1995.
From 1989 to 1991, she served as Director of Finance for the
Engineering Plastics Americas operation of ICI plc.
Ms. Christoph is a Vice President and Secretary of Purchaser and
serves as a director.
C. James Peterson 49 Mr. Peterson became Vice President -- Foundry Operations in
February 1995. He served as Director of Manufacturing of Intermet
Foundries, Inc. from 1993 to 1995. Prior to that time he served as
General Manager of Columbus Foundries, Inc.
James W. Rydel 52 Mr. Rydel has served as Vice President -- Administration and
Secretary since February 1995. He served as Vice President -- Human
Resources of Parent from 1991 until February 1995. He served as
Director of Compensation and Benefits of Parent from 1986 until
1990, when he became Director of Human Resources of Parent.
Mr. Rydel is the President of Purchaser and serves as a director.
</TABLE>
To the knowledge of the Company, none of the Designees beneficially owns
any equity securities of the Company, except to the extent they may be deemed to
beneficially own the Shares beneficially owned by the Parent and its affiliates.
Except as set forth in the Offer to Purchase neither the Purchaser nor Parent,
nor, to their knowledge, any of the persons listed in Schedule A thereto nor any
associate or majority-owned subsidiary of any of the foregoing, beneficially
owns or has a right to acquire any equity securities of the Company. Neither the
Purchaser nor Parent, nor, to their knowledge, any of the persons or entities
referred to above, nor any director, executive officer or subsidiary of any of
the foregoing, has effected any transaction in such equity securities during the
past 60 days.
Except as set forth in Section 10 to the Offer to Purchase neither the
Purchaser nor Parent, nor, to their knowledge, any of the persons listed in
Schedule A thereto, has any contract, arrangement, understanding or relationship
with any other person with respect to any securities of the Company, including,
but not limited to, any contract, arrangement, understanding or relationship
concerning the transfer or the voting of any such securities, joint ventures,
loan or option arrangements, puts or calls, guaranties of loans, guaranties
against loss or the giving or withholding of proxies. Except as set forth in
Section 10 to the Offer to Purchase, there have been no contacts, negotiations
or transactions since June 1, 1993 between Parent or the Purchaser, or, to the
best of their knowledge, any of the persons listed in Schedule A hereto, on the
one hand, and the Company or its affiliates, on the other hand, concerning a
merger, consolidation or acquisition, a tender offer or other acquisition of
securities, an election of directors, or a sale or other transfer of a material
amount of assets.
3
<PAGE> 17
Except as described in Section 10 of the Offer to Purchase, neither the
Purchaser nor Parent, nor, to the best of their knowledge, any of the persons
listed in Schedule A thereto, has since June 1, 1993 had any transaction with
the Company or any of its executive officers, directors or affiliates that would
require disclosure under the rules and regulations of the Commission applicable
to the Offer.
During the last five years, neither Parent or the Purchaser, nor, to the
best of Parent's knowledge, any of the directors or executive officers of Parent
or the Purchaser has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or was a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction as a result of which
any such person was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such law.
CURRENT BOARD OF DIRECTORS.
Information with respect to the current members of the Board of Directors
of the Company is set forth below. The Company's By-laws, as amended, provide
that the number of directors of the Company shall number up to seven persons.
The Board of Directors has set the number of directors at seven and the
following seven directors have been elected to serve until the 1997 Annual
Meeting of Stockholders and until their successors are elected and qualified:
Cloyd J. Abruzzo, Preston Heller, Jr., James A. Karman, Alan L. Ockene, David A.
Preiser, Jacques R. Sardas and Thomas F. Slater.
The age, present principal occupation or employment and the material
occupations, positions, offices or employment for the past five years, and
beneficial ownership of Shares of each director are set forth below. The
business address of each such person is 30100 Chagrin Boulevard, Suite 203,
Cleveland, Ohio 44124. Each such person is a citizen of the United States.
Unless otherwise indicated in the footnotes below, the directors have sole
voting and investment power over the shares of Common Stock listed in the table
below under "Shares of Common stock Beneficially Owned on October 31, 1996." The
asterisk opposite the names of certain persons under the column "Percent of
Class" in the table below indicates that the number of shares of Common Stock
owned by each such person does not exceed 1% of the total number of shares of
Common Stock outstanding on such date.
<TABLE>
<CAPTION>
BENEFICIALLY
PRESENT PRINCIPAL OCCUPATION OR MATERIAL OWNED AS OF
POSITIONS OCTOBER 31, 1996 PERCENT
NAME AGE HELD DURING THE PAST FIVE YEARS NUMBER OF SHARES OF CLASS
- -------------------- --- ---------------------------------------------- ---------------- --------
<S> <C> <C> <C> <C>
Cloyd J. Abruzzo 46 Mr. Abruzzo became a Director of the Company 15,000(a) *
in September 1992. Since July 1993, Mr.
Abruzzo has been President of Stoneridge,
Inc., a group of companies whose principal
activities include the design and manufacture
of power and signal distribution systems and
electro-mechanical and electronic components
for the automotive and transportation
industries. Before being elected President,
Mr. Abruzzo served, since 1984, as the Vice
President and Chief Financial Officer of
Stoneridge. Mr. Abruzzo also serves on the
Board of Directors of Second National Bank of
Warren, a financial services company.
</TABLE>
4
<PAGE> 18
<TABLE>
<CAPTION>
BENEFICIALLY
PRESENT PRINCIPAL OCCUPATION OR MATERIAL OWNED AS OF
POSITIONS OCTOBER 31, 1996 PERCENT
NAME AGE HELD DURING THE PAST FIVE YEARS NUMBER OF SHARES OF CLASS
- -------------------- --- ---------------------------------------------- ---------------- --------
<S> <C> <C> <C> <C>
Preston Heller, Jr. 67 Mr. Heller became a Director of the Company in 5,000(a) *
September 1993. Since 1966, Mr. Heller has
been affiliated with Pioneer-Standard
Electronics, Inc., an industrial distributor
of electronic components, computer and
peripheral systems products. Mr. Heller, who
currently serves as a Director of
Pioneer-Standard, held positions with that
company of Chairman, 1983 through March 1996,
and Chief Executive Officer, 1983 through
March 1995. Mr. Heller also serves on the
Board of Directors of National City Bank, a
financial services company.
James A. Karman 59 Mr. Karman became a Director of the Company in 1,000(a) *
October 1993. Since 1978, Mr. Karman has
served as President and Chief Operating
Officer, and since 1963, as a member of the
Board of Directors of RPM, Inc., a worldwide
producer of specialty chemicals, coatings and
sealants for industrial and consumer markets.
Mr. Karman also serves as a Director on the
Boards of McDonald & Company Securities, Inc.,
a regional investment banking company, Shiloh
Industries, Inc., a supplier of steel blanks,
stampings and processed steel to automotive,
appliance and other industrial manufacturers
and A. Schulman, an international supplier and
distributor of plastic compounds and
materials.
Alan L. Ockene 65 Mr. Ockene became a Director of the Company in 0(a) *
August 1996. From 1991 until his retirement in
1994, Mr. Ockene served as President and Chief
Executive Officer of General Tire, Inc., a
world-wide manufacturer and distributor of
tires, as well as a member of the Executive
Board of Directors of Continental AG, parent
company of General Tire. Prior to joining
General Tire, Mr. Ockene was affiliated for 17
years with Goodyear Tire and Rubber Company,
which develops and sells tires domestically
and abroad, serving that company in many
capacities including Vice President, Goodyear
Aerospace, in the area of acquisitions and
divestitures, Vice President, Latin America
and Vice President, Europe and Africa. Mr.
Ockene currently serves as a Director on the
Boards of A. Schulman and Ameron International
Corporation, a producer of fiberglass,
concrete and steel pipe systems, and
high-performance coatings for the building,
construction and industrial markets.
</TABLE>
5
<PAGE> 19
<TABLE>
<CAPTION>
BENEFICIALLY
PRESENT PRINCIPAL OCCUPATION OR MATERIAL OWNED AS OF
POSITIONS OCTOBER 31, 1996 PERCENT
NAME AGE HELD DURING THE PAST FIVE YEARS NUMBER OF SHARES OF CLASS
- -------------------- --- ---------------------------------------------- ---------------- --------
<S> <C> <C> <C> <C>
David A. Preiser 39 Mr. Preiser became a Director of the Company 0(a) *
in September 1992. Since 1990, Mr. Preiser has
been affiliated with Houlihan, Lokey, Howard &
Zukin, a financial advisory and investment
banking firm specializing in financial
restructuring. Mr. Preiser currently holds the
position of Managing Director of that firm.
Mr. Preiser also serves as a Director on the
Boards of NVR, Inc., a home-building firm and
Jos. A Bank Clothiers, Inc., specializing in
men's and women's retail clothing.
Jacques R. Sardas 66 Mr. Sardas became a Director, and the 2,345,406(a)(b) 17.2%
President and Chief Executive Officer of the
Company in January 1992. He was elected
Chairman of the Board of Directors and
Treasurer in January 1993. Mr. Sardas was
affiliated for 34 years with Goodyear Tire and
Rubber Company, serving that company in many
capacities including as a member of its Board
of Directors, Executive Vice President of the
company, President of Goodyear International,
President of North American Operations, and
President and Chief Operating
Officer -- Tires.
Thomas F. Slater 52 Mr. Slater became a Director of the Company in 40,000(a) *
December 1992. Since 1979, Mr. Slater has been
President and Chief Executive Officer of
Actron Manufacturing Company, which designs,
manufactures and markets automotive testing
equipment. Mr. Slater serves as a Director on
the Boards of Oatey Company, a maker of
specialty plumbing and automotive repair
hardware and MJM Industries, Inc., a
manufacturer of specialty electrical
connectors.
Directors and 2,437,718(a) 17.8%
Executive Officers
as a Group
(8 persons)
</TABLE>
- ---------------
(a) Information concerning beneficial ownership of Shares is based in part on
information provided by each director.
(b) Includes 807 Shares held by the Sudbury Savings and Profit Sharing Plan as
of May 31, 1996 for the account of Mr. Sardas and shares Mr. Sardas is
deemed to own by virtue of currently exercisable options to purchase
2,235,329 shares. See also -- "CEO Employment Arrangements".
ADDITIONAL INFORMATION CONCERNING
THE BOARD OF DIRECTORS
Committees and Meetings
The Company's Board of Directors held seven regularly scheduled meetings
during the fiscal year ended May 31, 1996. The Board has designated several
standing Committees described below. Attendance by
6
<PAGE> 20
directors at meetings of the Board and Committees on which they served averaged
over 95%. All directors attended 75% or more of these meetings.
The Audit Committee. The function of the Audit Committee is to provide
assistance in fulfilling the Company's responsibility to stockholders, potential
stockholders and the investment community in matters relating to corporate
accounting, reporting practices of the Company and the quality and integrity of
the financial reports of the Company. The members of the Audit Committee are all
non-employee directors: Cloyd J. Abruzzo, Chairman, James A. Karman and David A.
Preiser. The members held three meetings and consulted informally on other
occasions during fiscal 1996.
The Compensation Committee. The functions of the Compensation Committee are
to provide guidance and approval for all executive compensation and benefit
programs, as well as to designate those employees of the Company who will
receive grants of stock options under the Company's stock option plan. The
members of the Compensation Committee are all non-employee directors: Thomas F.
Slater, Chairman, Cloyd J. Abruzzo, and Preston Heller, Jr. The Compensation
Committee held five meetings and consulted informally on other occasions during
fiscal 1996.
The Nominating Committee. The function of the Nominating Committee is the
selection and nomination of candidates to fill vacancies on the Board as they
occur and to recommend to the Board a slate of nominees for election as
directors at the Company's Annual Meeting of Stockholders. The Nominating
Committee will consider nominations received by security holders in accordance
with procedures to be determined upon any such recommendation. The members of
the Nominating Committee are all non-employee directors: Preston Heller, Jr.,
Chairman, James A. Karman, David A. Preiser and Thomas F. Slater. The members
held one meeting and consulted informally on other occasions during fiscal 1996.
DIRECTOR COMPENSATION
Employee directors receive no additional compensation for service on the
Board of Directors. A director who is not an employee of the Company receives an
annual cash retainer of $20,000 payable in four quarterly installments.
Additionally, non-employee directors receive $1,200 for each Board meeting
attended in person, $600 for participating in formal telephonic meetings of the
Board and reimbursement of expenses incident to their service. Directors who
undertake special consulting projects on behalf of the Company or its Board of
Directors are entitled to receive remuneration for their services at a per diem
rate of $1,000. A total of $33,250 was paid for services rendered pursuant to
such consulting projects in fiscal 1996.
In 1994 the Board of Directors adopted the Sudbury, Inc. Directors'
Deferral Plan (the "Plan") for the benefit of non-employee directors. Pursuant
to the Plan, outside directors may elect to defer, until a specified date or
retirement from the Board, all or any part of their retainer or meeting fees
into a cash and/or stock equivalent account established by the Company for their
benefit.
The Company pays interest on compensation deferred into the cash account at
a rate based on the rate of interest paid by the Company on its senior revolving
credit facility. The interest rate currently paid is 8.5% per year. Compensation
deferred to the stock account during any calendar quarter is converted into
stock equivalent units by dividing the total amount of deferred compensation by
the market price, as defined in the Plan, of the Company's Common Stock on the
last business day of that quarter. At the end of the deferred period, the
Company will pay to the director an amount in cash equal to the number of
accumulated stock equivalent units multiplied by the market price of the
Company's Common Stock on the last business day of the calendar quarter
immediately prior to the day on which the deferral period ends.
Deferred amounts and accrued interest may be paid in a lump sum or
installments commencing upon a date specified by the director or the director's
retirement from the Board. Pursuant to the Merger Agreement, the Company will
take such actions as may be necessary such that as of the Effective Time, the
Plan shall be terminated and, as soon as practicable after the Effective Time,
each participant's "Deferred Account" (as defined in the Plan) will be paid to
the participant in one lump sum cash payment.
7
<PAGE> 21
EXECUTIVE OFFICERS
The names, ages, present principal occupation or employment and the material
occupations, positions, offices or employments for the past five years of each
of the current executive officers of the Company are set forth or referenced
below. The business address of each such person is 30100 Chagrin Boulevard,
Suite 203, Cleveland, Ohio 44124. Unless otherwise indicated, each such person
has held the principal occupation listed below his name for at least five years.
Each such person is a citizen of the United States. The asterisk opposite the
name of an Executive Officer indicates that the number of shares of Common Stock
owned by such person does not exceed 1% of the total number of shares of Common
Stock outstanding on such date.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
PRESENT PRINCIPAL OCCUPATION OR MATERIAL POSITIONS BENEFICIAL PERCENT
NAME AGE HELD DURING THE PAST FIVE YEARS OWNERSHIP OF CLASS
- ------------------- --- --------------------------------------------------- ---------- --------
<S> <C> <C> <C> <C>
Jacques R. Sardas 66 Mr. Sardas became a Director, and the President and 2,345,406 17.2%
Chief Executive Officer of the Company in January
1992. He was elected Chairman of the Board of
Directors and Treasurer in January 1993. Mr. Sardas
was affiliated for 34 years with Goodyear Tire and
Rubber Company, serving that company in many
capacities including as a member of its Board of
Directors, Executive Vice President of the company,
President of Goodyear International, President of
North American Operations, and President and Chief
Operating Officer -- Tires.
Mark E. Brody 35 Vice President and Chief Financial Officer since 1,312 *
October 1994; Vice President of Finance (October
1992 -- October 1994); Controller (September
1991 -- October 1994); Assistant Controller (April
1989 -- September 1991)
</TABLE>
Pursuant to the Merger Agreement, the officers of the Company immediately
prior to the Effective Time shall remain the officers of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly qualified as the case may be.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE MANAGEMENT COMPENSATION
In accordance with its charter and pursuant to authority granted by the
Board, the Compensation Committee of the Board of Directors (the "Committee") is
responsible for approving the Company's cash and non-cash compensation for its
executive officers and making recommendations to the Board of Directors with
respect to the establishment of the Company's executive compensation plans and
programs. The Committee also administers the Company's stock option plans. The
Committee is composed exclusively of independent, non-employee directors (Thomas
F. Slater, Chairman, Cloyd J. Abruzzo, Jerry A. Cooper, who resigned as a member
of the Company's Board of Directors on August 15, 1996, and Preston Heller, Jr.)
who are not eligible to participate in any of the Company's executive
compensation programs. No member of the Compensation Committee has interlocking
relationships with third parties which might be considered conflicts of
interest.
The Company's executive compensation program is designed to provide (i)
fair compensation to executives based on their responsibilities and their
achievements of annually established goals and (ii) incentives which develop a
sense of Company ownership and commitment to attaining long-term profitable
operations of the Company's business. The Committee believes that its policies
are best implemented by providing compensation comprised of separate components,
all of which are designed to motivate
8
<PAGE> 22
executive performance. These components are: base salary, short-term incentive
compensation (bonus) and long-term incentive compensation (stock options).
The information below is provided with respect to the compensation of the
Company's executive officers including the Chief Executive Officer and the Vice
President and Chief Financial Officer, the only executive officers of the
Company designated as "named executive officers" in the Summary Compensation
Table.
CEO Compensation. In July 1995, the Company and Mr. Jacques R. Sardas,
Chairman, President and Chief Executive Officer of the Company, entered into an
employment agreement (the "1996 Employment Agreement") which extended the term
of Mr. Sardas' employment through January 1998 upon the expiration of his 1992
employment agreement with the Company (the "1992 Employment Agreement").
Pursuant to the terms of the 1996 Employment Agreement, which became
effective January 13, 1996, Mr. Sardas continues as the Company's Chairman and
Chief Executive Officer until such time as the Board of Directors selects a new
Chief Executive Officer. Upon the selection of a new Chief Executive Officer,
Mr. Sardas will continue as Chairman of the Company's Board of Directors through
the expiration of the 1996 Employment Agreement on January 12, 1998. Mr. Sardas'
base salary is $500,000 per annum for the longer of the first year of the 1996
Employment Agreement or until such time as a new Chief Executive Officer of the
Company is selected. At such time as a new Chief Executive Officer is selected
(but not before January 13, 1997) Mr. Sardas' base salary will be reduced to
$250,000 per annum.
Under the terms of the 1996 Employment Agreement, the Board of Directors,
upon recommendation of the Committee, established a target bonus under the
Company's Incentive Bonus Plan ("Bonus Plan") tied directly to the Company's
achievement of specific financial objectives. The financial objectives set were
based on minimum and maximum target levels relating to the Company's return on
equity. Under the Bonus Plan and consistent with the 1996 Employment Agreement,
Mr. Sardas was entitled to bonus compensation equal to a percentage of his base
salary ranging from 20% to 60% if the financial objectives were achieved.
However, no awards would be paid if the specified minimum target levels were not
met. All such awards require Committee approval and are submitted by the
Committee to the Board of Directors for the Board's final approval.
Additionally, the terms of the 1992 Employment Agreement included a bonus
payable to Mr. Sardas at the expiration of the agreement in January 1996. The
bonus amount was equal to 5% of the net fair value of the Company in excess of
$35,000,000 based on an appraisal completed by an independent investment banking
firm. The total of such bonus paid to Mr. Sardas in January 1996 was $7,250,000.
Base Salary: In setting the annual salary of Mr. Brody, the Company's Vice
President and Chief Financial Officer and the Company's other executive
officers, the Committee reviewed the salaries recommended by the Chief Executive
Officer. The Committee formally recommended to the Board of Directors, for its
final approval, the appropriate level of cash compensation for fiscal year 1996.
Cash compensation levels were determined upon subjective consideration of scopes
of responsibility and comparison with industry pay practices. In making the
determination, such factors were accorded equal relative importance.
Annual Incentive Bonus: Executive officers, including Mr. Brody, are also
eligible to earn an annual cash incentive bonus under the Bonus Plan. The amount
of each bonus for fiscal 1996 was determined as a fixed percentage of each
executive officer's base salary ranging from a minimum of 15% up to a maximum of
45%. The determination of such bonus percentage for each executive officer for
fiscal 1996 was based upon the Committee's subjective determination of each
individual's level of responsibility and accountability.
The annual incentive bonus is tied directly to the Company's achievement of
specific financial objectives. Each year, usually at its August meeting, the
Committee sets minimum and maximum target levels relating to the Company's
return on equity. No awards are paid if the specified minimum target is not met.
All awards require Committee approval and are submitted by the Committee to the
Board of Directors for the Board's final approval.
At the close of fiscal year 1996, the Company had achieved the target
levels established at the beginning of fiscal 1996. Accordingly, the Committee
made incentive compensation awards to the participating executives based on the
factors described above.
9
<PAGE> 23
Stock Options: The ability to grant options under the Sudbury, Inc. 1990
Stock Option Plan terminated on June 22, 1995. The Sudbury, Inc. 1995 Stock
Option Plan was adopted by the Board of Directors on June 22, 1995 and by the
Company's stockholders on September 28, 1995. Under the Company's 1995 Stock
Option Plan, 215,000 were awarded to named executive officers during fiscal
1996.
The Merger Agreement also provides that each holder of an outstanding
option to purchase Shares (an "Option") granted under any employee stock option
plan of the Company, whether or not exercisable, shall be entitled to receive at
or after the Effective Time, an amount in cash in cancellation of such Option
equal to the difference between the Merger Consideration and the exercise price
per Share of such Option multiplied by the number of Shares subject to such
Option.
Compliance with Section 162(m) of the Internal Revenue Code: Section 162(m)
of the Internal Revenue Code enacted in 1993 generally disallows a tax deduction
to a public corporation for compensation in excess of $1,000,000 paid to a
corporation's chief executive officer and four other most highly compensated
executive officers. Qualifying performance-based compensation will not be
subject to the limitations provided if certain requirements are met. The
Committee and the Board of Directors currently intend to structure the
compensation of its executive officers in a manner that is intended to ensure
that the Company does not lose any tax deductions because of the $1,000,000
compensation limit. However, there can be no assurance that the various
incentive and performance-related elements of the Company's compensation
arrangements with its five highest paid executive officers will, in fact,
qualify under Section 162(m) of the Internal Revenue Code as performance-based
compensation excluded from such limitations.
CEO EMPLOYMENT ARRANGEMENTS
1996 Employment Agreement. In July 1995, the Company and Mr. Sardas entered
into the 1996 Employment Agreement which extended Mr. Sardas' employment for two
years beyond the expiration of the 1992 Employment Agreement through January
1998. The terms of Mr. Sardas' salary and bonus compensation arrangements
pursuant to the 1996 Employment Agreement are detailed above in the section
entitled "Compensation Committee Report on Executive Management
Compensation -- CEO Compensation."
In connection with the 1992 Employment Agreement, confirmed as part of the
Company's Plan of Reorganization, Mr. Sardas was granted 1,764,706 stock options
under a 1992 stock option agreement ("1992 Stock Options"). Under the 1996
Employment Agreement, Mr. Sardas has the right to sell to the Company the Common
Stock underlying the 1992 Stock Options (the "Option Stock") in five separate
approximately semi-annual installments commencing February 7, 1996 and
continuing through January 13, 1998. The purchase price for the Option Stock is
the per share fair market value on the purchase date based on the quoted price
on the principal stock exchange on which the Company's Common Stock is traded
("Fair Market Value"). Mr. Sardas generally may delay his right to sell any
installment of the Option Stock until the next succeeding purchase date. If at
that next succeeding purchase date Mr. Sardas does not tender such shares of
Option Stock, the Company will have no further repurchase obligation for such
shares.
Under the terms of the 1996 Employment Agreement, if Mr. Sardas' employment
is terminated other than for cause, or due to Mr. Sardas' death or disability,
the Company is obligated to pay to Mr. Sardas or his estate, at Mr. Sardas' or
his estate's election at that time or at the next installment purchase date, the
Fair Market Value of the Option Stock. Alternatively, in such event, if Mr.
Sardas does not exercise such election, he or his estate or representative will
maintain the right to sell the Option Stock in installments as noted above. If
the 1996 Employment Agreement is terminated by the Company for cause, then the
Company has the right to purchase the Option Stock for the Fair Market Value
thereof subject to Mr. Sardas' right to decline to tender such shares. In the
event he declines to tender such shares, the Company's obligation to purchase
the Option Stock will terminate. Mr. Sardas has not exercised his right to sell
his Option Stock subject to the February 7, 1996 installment; therefore, the
Company's obligation with respect to such purchase has terminated.
Pursuant to the 1996 Employment Agreement, the Company granted to Mr.
Sardas under the Company's 1995 Stock Option Plan, options to purchase 200,000
shares of Common Stock. Such options were granted at
10
<PAGE> 24
an exercise price of $7.625, the market price on the date of grant and expire on
July 28, 2000. On January 13, 1996, 100,000 of such options vested and the
remainder will vest on January 13, 1997; provided that such vesting will
accelerate pursuant to the terms of such option, upon completion of the Offer.
Other Arrangements. In July 1994, the Company entered into a settlement
agreement with Mr. Sardas providing that under the terms of the 1992 Employment
Agreement and related stock option agreement, Mr. Sardas was entitled to certain
anti-dilution protection arising from the issuance of Participation Certificates
under the Company's Plan of Reorganization. Under the settlement agreement, Mr.
Sardas was issued options evidencing his right to purchase, in the aggregate,
479,893 shares of Common Stock which amount is equivalent to 15% of the total of
the (i) underlying shares of Common Stock reserved for issuance under the
Participation Certificates and (ii) the options issued under the settlement
agreement. Mr. Sardas was issued options, to purchase 109,270 shares of Common
Stock, having an exercise price per share of $3.17 which were exercised by Mr.
Sardas on July 17, 1996. He was also issued options which are currently
exercisable to purchase 115,021 shares of Common Stock, having an exercise price
per share of $5.69 and expiring September 1, 1999 and 255,602 shares of Common
Stock, having an exercise price per share of $5.015, and which expire on
September 1, 2002.
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL AND TERMINATION OF EMPLOYMENT
ARRANGEMENTS
Mr. Brody, the Company's Vice President and Chief Financial Officer is a
party to an employment agreement with the Company. The agreement provides that
employment shall be at will. However, if Mr. Brody is terminated by the Company
(or its successor) without cause or if Mr. Brody is subject to constructive
termination (i.e., a reduction in compensation, a diminution in job
responsibilities, or a required relocation outside of the greater Cleveland
area) within one year after a change of control of the Company, Mr. Brody will
be entitled to twenty-four months' severance compensation. Mr. Brody's agreement
also provides him, under certain circumstances, with twelve months' severance
compensation in the event that his employment is terminated by the Company other
than in the event of a change in control.
As provided in the Merger Agreement, the Surviving Corporation will honor
such agreement, pursuant to its terms (including change in control provisions).
SUMMARY COMPENSATION TABLE
The following table provides a summary of annual and long-term compensation
during the last three fiscal years for the Chief Executive Officer and all other
executive officers of the Company whose annual salary exceeded $100,000
(hereinafter, referred to collectively as the "named executive officers").
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------
AWARDS
----------
ANNUAL COMPENSATION(A) SECURITIES PAYOUTS
---------------------------- UNDERLYING ----------
NAME AND FISCAL OPTIONS/ LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS SARS(B) PAYOUTS($) COMPENSATION
- ------------------------------------------------ ------ -------- -------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Jacques R. Sardas............................... 1996 $424,975 $176,869 200,000 $7,250,000(d) (e)
Chairman, Chief 1995 $369,720 $184,860 479,893(c) -0- (e)
Executive Officer, 1994 $369,720 $184,860 -0- -0- (e)
President and Treasurer
Mark E. Brody................................... 1996 $136,083 $ 43,608 15,000 -0- (e)
Vice President/ 1995 $115,000 $ 51,750 -0- -0- (e)
Chief Financial 1994 $100,000 $ 45,000 -0- -0- (e)
Officer
</TABLE>
- ---------------
(a) Includes amounts earned in the specified fiscal year, whether or not
received during such fiscal year.
(b) The Company has not granted any restricted stock or stock appreciation
rights.
(c) Granted pursuant to an agreement between the Company and Mr. Sardas. See
also -- "CEO Employment Arrangements."
11
<PAGE> 25
(d) Bonus paid pursuant to Mr. Sardas' 1992 employment agreement with the
Company. See also "Compensation Committee Report on Executive Compensation"
and "CEO Employment Arrangements."
(e) The aggregate amount of all other compensation was less than the lesser of
$50,000 or 10% of the annual salary and bonus reported for the named
executive officers.
OPTION GRANTS AND OPTION EXERCISE
The following table shows all options granted to any of the named executive
officers in fiscal 1996 and the potential value at stock price appreciation
rates of 5% and 10%, over the term of the options. The 5% and 10% rates of
appreciation are required to be disclosed by the Commission and are not intended
to forecast possible future actual appreciation, if any, in the Company's stock
prices.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
- ------------------------------------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS MARKET APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR PRICE ON OPTION TERM
OPTIONS/SARS EMPLOYEES IN BASE PRICE DATE OF EXPIRATION ---------------------
NAMES GRANTED(#) FISCAL YEAR ($/SH) GRANT DATE 5% 10%
- --------------------- ------------ ---------------- ----------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Jacques R. Sardas.... 200,000(a) 76.9% $ 7.625 $7.625 7-27-00 $421,329 $931,028
Mark E. Brody........ 15,000(b) 5.8% $ 8.25 $ 8.25 1-08-06 $ 77,826 $197,226
</TABLE>
(a) Non-qualified stock options granted pursuant to the Sudbury, Inc. 1995 Stock
Option Plan (the "Plan"). 100,000 options granted on July 28, 1995 became
exercisable on January 13, 1996 and the remaining 100,000 will become
exercisable on January 13, 1997; provided that such vesting will accelerate
pursuant to the terms of such option, upon completion of the Offer.
(b) Non-qualified stock options granted pursuant to the Plan on January 8, 1996
become exercisable in three equal installments on January 8, 1997, January
8, 1998 and January 8, 1999; provided that such vesting will accelerate
pursuant to the terms of such option, upon completion of the Offer.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 1996
AND FISCAL YEAR END OPTION/SAR VALUES
The following table sets forth information for all exercises of stock
options by each of the named executive officers and the number and value of
unexercised in-the-money options at May 31, 1996. The actual amount, if any,
realized upon exercise of stock options will depend upon the amount by which the
market price of the Company's Common Stock on the date of exercise exceeds the
exercise price. There is no assurance that the values of unexercised
in-the-money stock options reflected in this table will be realized.
<TABLE>
<CAPTION>
VALUE OF SECURITIES
NUMBER OF SECURITIES UNDERLYING
UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT FISCAL OPTIONS/SARS AT
SHARES YEAR END (#) FY-END ($)
ACQUIRED ON VALUE ----------------------------- -----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jacques R. Sardas........... -0- -0- 2,235,329 100,000 $18,164,001 $ 137,500
Mark E. Brody............... -0- -0- 30,000 15,000 $ 157,500 $ 11,250
</TABLE>
PRINCIPAL STOCKHOLDERS
The following table sets forth as of September 30, 1996 (i) the name of
each person known to the Company, based upon filings made by such persons with
the Commission or information provided by such persons to the Company, to be the
beneficial owner of more than five percent of the outstanding shares of
12
<PAGE> 26
Common Stock, (ii) the total number of shares of Common Stock beneficially owned
by such person and (iii) the percentage of the outstanding shares of Common
Stock so owned.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------------------------------------------- -------------------- ----------------
<S> <C> <C>
Pioneering Management Corporation...................... 905,000(a) 7.9%
60 State Street
Boston, MA 02109
T. Rowe Price Associates, Inc. ........................ 891,000(b) 7.8%
100 E. Pratt Street
Baltimore, MD 21202
Jacques R. Sardas, .................................... 2,345,406(c)(d) 17.2%
Chairman, Chief Executive Officer, Director
Sudbury, Inc.
30100 Chagrin Blvd., Suite 203
Cleveland, OH 44124
</TABLE>
- ---------------
(a) Based on information contained in a report on Schedule 13G dated September
30, 1996 and filed with the Commission by Pioneering Management Corporation,
a registered investment advisor.
(b) In a report on Schedule 13G dated February 14, 1996 and filed with the
Commission, T. Rowe Price Associates, Inc., a registered investment advisor,
reported sole power to dispose of 891,000 shares and sole voting power over
60,000 shares.
(c) Information concerning beneficial ownership of shares is based in part on
information provided by each executive officer and director.
(d) Includes 807 shares held by the Sudbury Savings and Profit Sharing Plan as
of May 31, 1996 for the account of Mr. Sardas and shares Mr. Sardas is
deemed to own by virtue of currently exercisable options to purchase
2,235,329 shares. See also --"CEO Employment Arrangements".
OTHER MATTERS
Compliance with Section 16(a) of the Exchange Act. Section 16(a) of the
Exchange Act requires the Company's directors and executive officers, and person
who own more than ten percent of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership with the
Commission. Directors, executive officers and greater than ten percent
beneficial owners are required by the Commission regulation to furnish the
Company with copies of all Section 16(a) forms that they file. Based solely on a
review of the copies of such forms received by the Company and/or written
representations from certain reporting persons, the Company believes that during
the period June 1, 1995 to May 31, 1996, all filing requirements applicable to
its directors, executive officers and greater than ten percent beneficial owners
were complied with.
AVAILABLE INFORMATION
The Company is subject to the informational filing requirements of the
Exchange Act and in accordance therewith is required to file periodic reports,
proxy statements and other information with the Commission under the Exchange
Act relating to its business, financial condition and other matters. The Company
is required to disclose in such proxy statements certain information, as of
particular dates, concerning the Company's directors and officers, their
remuneration, stock options granted to them, the principal holders of the
Company's securities and any material interests of such persons in transactions
with the Company. Such reports, proxy statements and other information may be
inspected at the Commission's office at 450 Fifth Street, N.W., Washington, D.C.
20449, and should also be available for inspection and copying at the regional
offices of the Commission located in Room 1204, Everett McKinley Dirksen
Building, 219 South Dearborn
13
<PAGE> 27
Street, Chicago, Illinois 60604; and Room 1102, Jacob K. Javits Federal
Building, 26 Federal Plaza, New York, New York 10278. Copies may be obtained on
payment of the Commission's customary fees by writing to its principal office at
450 Fifth Street, N.W., Washington, D.C. 20549. Such material should also be
available for inspection at the library of the New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10005.
Certain additional information relating to the Offer, the Agreement, the
acquisition by Parent of a controlling equity in the Company and the financing
thereof and related matters are contained in the Purchaser's Offer to Purchase,
dated November 22, 1996, the Schedule 14D-1 and the Solicitation/Recommendation
Statement on Schedule 14D-9 filed by the Company with the Commission, copies of
which are available for inspection (and copies of which may be obtained) at the
places and in the manner set forth above (except that such copies will not be
available at the regional offices of the Commission).
14
<PAGE> 28
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<S> <C>
Exhibit 1 Letter to Stockholders of the Company dated November 22, 1996.*
Exhibit 2 Press Release issued by Parent dated November 18, 1996.
Exhibit 3 Agreement and Plan of Merger dated as of November 18, 1996, by and among
Parent, the Purchaser and the Company.
Exhibit 4 Confidentiality Agreement dated September 5, 1996, executed by Parent.
Exhibit 5 Opinion of Alex. Brown & Sons Incorporated dated November 18, 1996.*
Exhibit 6 1990 Sudbury, Inc. Stock Option Plan.
Exhibit 7 1995 Sudbury, Inc. Stock Option Plan.
Exhibit 8 Sudbury, Inc. Directors' Deferral Plan.
Exhibit 9 Pages 2-3 and 6-12 of the Company's Notice of 1996 Annual Meeting of
Stockholders and Proxy Statement dated August 23, 1996 containing the pertinent
sections thereof referred to in Item 3(b) of this Schedule 14d-9.
Exhibit 10 Employment Agreement dated July 28, 1995 between the Company and Jacques R.
Sardas.
Exhibit 11 Employment Agreement dated October 12, 1995 between the Company and Mark E.
Brody and accompanying letter of interpretation dated October 8, 1996.
</TABLE>
- ---------------
*Included in copies of the Schedule 14D-9 mailed to stockholders.
<PAGE> 1
Exhibit 1
[SUDBURY, INC. LETTERHEAD]
To Our Stockholders: November 22, 1996
On behalf of the Board of Directors of Sudbury, Inc. (the "Company"), I wish to
inform you that the Company has entered into an Agreement and Plan of Merger
dated as of November 18, 1996 (the "Merger Agreement") with Intermet Corporation
("Parent") and I M Acquisition Corp., its wholly owned subsidiary (the
"Purchaser"), pursuant to which the Purchaser has today commenced a cash tender
offer (the "Offer") to purchase all of the issued and outstanding shares of
common stock, par value $.01 per share (the "Shares"), of the Company for $12.50
net per share in cash without interest. 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 $12.50 net per share in cash without
interest.
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO
AND IN THE BEST INTEREST OF THE COMPANY'S STOCKHOLDERS AND ALL DIRECTORS PRESENT
AT THE MEETING TO CONSIDER THE OFFER AND THE MERGER APPROVED THE OFFER AND THE
MERGER. THE BOARD OF DIRECTORS RECOMMENDS THAT ALL STOCKHOLDERS ACCEPT THE OFFER
AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
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 18, 1996, of Alex. Brown & Sons
Incorporated, to the effect that, as of such date and based upon and subject to
certain matters stated in such opinion, the cash consideration to be received by
the holders of the Shares (other than Parent and its affiliates) pursuant to the
Offer and the Merger, taken together, was fair from a financial point of view,
to such holders.
In addition to the attached Schedule 14D-9 relating to the Offer, also enclosed
is the Offer to Purchase dated November 22, 1996, of the Purchaser, together
with related materials, including a Letter of Transmittal, to be used for
tendering your Shares pursuant to 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,
/s/ Jacques R. Sardas
------------------------------------
Jacques R. Sardas
Chairman and Chief Executive Officer
<PAGE> 1
Exhibit 2
INTERMET CORPORATION
5445 Corporate Drive, Suite 200
Troy, MI 48098 2683
Phone: (810) 952-2500
Fax: (810) 952-2501
[INTERMET LOGO]
November 18, 1996
For IMMEDIATE Release
Contact: James W. Rydel, Intermet
(810) 952-2500
Mark E. Brody, Sudbury
(216)464-7026 x 125
Intermet Corporation and Sudbury, Inc. Enter Into Definitive Merger Agreement.
Detroit, Michigan, November 18, 1996 - Intermet Corporation (Nasdaq: INMT) and
Sudbury, Inc. (Nasdaq: SUDS) announced today they have entered into a definitive
merger agreement whereby Intermet will acquire all of the outstanding shares of
Sudbury common stock for $12.50 per share in cash. Sudbury has approximately
15.6 million shares outstanding on a fully diluted basis; 4.2 million shares are
represented by stock options and participation certificates. Under the merger
agreement, a wholly owned subsidiary of Intermet will promptly commence a cash
tender offer for all shares of Sudbury common stock at $12.50 per share in cash.
Following the tender offer, the Intermet subsidiary would be merged into Sudbury
and holders of any remaining Sudbury common stock would receive the same
consideration.
The combined company, with estimated annual sales of $845 million, is a major
supplier of castings to original-equipment manufacturers (OEMs) of automobiles,
light trucks and commercial highway vehicles in the U.S. and overseas.
Intermet's goal is to continue its leadership in meeting the increasingly global
sourcing and productivity requirements of its customers.
Commenting on the acquisition, John Doddridge, Chairman and CEO of Intermet
stated, "The combination of the two companies will provide greater strength to
serve our customers with added technical support and flexibility. Sudbury has
turned into a solid performer and most of Sudbury's products are complementary
to Intermet's products. Sudbury shares a similar corporate culture and operating
philosophy which should help expedite the integration of our two companies."
<PAGE> 2
Jacques R. Sardas, Chairman, President and CEO of Sudbury, Inc. commented, "It
has always been our mission and goal to maximize value for our stockholders. In
light of that goal, Sudbury's Board of Directors believes this offer is fair and
reasonable and in the best interests of our stockholders. Moreover, a stronger
combined organization will emerge with excellent opportunities for growth. This
transaction represents the culmination of what has been an exceptional
turnaround of Sudbury We are proud of the Company that was built by our
employees, each of whom should take pride in Sudbury's accomplishments."
Consummation of the acquisition is conditioned, among other things, upon the
tender of 7.8 million Sudbury shares and the expiration or termination of any
applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements
Act.
Intermet is the largest independent ferrous casting foundry company in North
America and reported sales for fiscal year 1995 of $542 million with over 90% of
its sales to the vehicular industry. Detroit-based Intermet designs,
manufactures and machines precision iron and aluminum parts for automotive and
industrial markets in North America and Europe. The Company's ductile iron, gray
Iron and lost foam aluminum castings are used in many makes of automobiles and
light trucks, as well as industrial engine, marine, railroad, construction end
municipal applications. Intermet employs more than 4,000 employees at nine
operating locations worldwide.
Sudbury is a leading Tier I supplier of parts and services to OEMs in the
automotive industry. Sudbury also manufactures and supplies specialized products
and services to other industrial sectors, including consumer durables and
construction. In addition, Sudbury is a 35% stockholder in General Products
Delaware Corporation, a supplier of metal products to the automotive industry.
Through its five operating businesses which employ more than 2,300 employees,
Sudbury is engaged in the manufacture of metal castings, precision machined
components, cranes and specialty service vehicles and provides custom coating
applications.
#
(To participate in a conference call to be held at 1:30 p.m. E.S.T. on Tuesday,
November 19, call 1 (800)553-0326 to make a reservation. Ask for the Intermet
press release.)
<PAGE> 1
AGREEMENT AND PLAN OF MERGER
among
INTERMET CORPORATION,
I M ACQUISITION CORP.
and
SUDBURY, INC.
Dated as of November 18, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I DEFINITIONS................................................................................1
1.1 Definitions...................................................................1
1.2 Other Terms...................................................................6
1.3 Other Definitional Provisions.................................................6
ARTICLE II THE TENDER OFFER...........................................................................6
2.1 Tender Offer..................................................................6
ARTICLE III THE MERGER.................................................................................8
3.1 Merger........................................................................8
3.2 Closing.......................................................................8
3.3 Effective Time................................................................9
3.4 Effects of the Merger.........................................................9
3.5 Certificate of Incorporation and By-laws......................................9
3.6 Directors.....................................................................9
3.7 Officers......................................................................9
3.8 Boards of Directors; Committees...............................................9
3.9 Actions by Directors.........................................................10
ARTICLE IV EFFECT OF THE MERGER ON THE CAPITAL
STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES..................................................................10
4.1 Effect on Capital Stock......................................................10
4.2 Exchange of Certificates.....................................................11
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................................13
5.1 Organization, Standing and Corporate Power...................................13
5.2 Subsidiaries.................................................................13
5.3 Capitalization...............................................................13
5.4 Authority; Enforceability; No Conflicts; and Consents........................14
5.5 Vote Required; State Takeover Statutes; Rights Agreement.....................15
5.6 Compliance with Applicable Laws..............................................16
5.7 Company SEC Documents; Undisclosed Liabilities...............................17
5.8 Absence of Changes or Events.................................................17
5.9 Litigation...................................................................18
5.10 Taxes........................................................................18
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C> <C>
5.11 Employee Benefits............................................................20
5.12 Title to Properties..........................................................22
5.13 Insurance....................................................................22
5.14 Labor Matters................................................................23
5.15 Intellectual Property........................................................23
5.16 Takeover Statutes............................................................24
5.17 Dispositions.................................................................24
5.18 Brokers and Intermediaries...................................................24
5.19 Opinion of Financial Advisor.................................................25
5.20 Transactions With Affiliates.................................................25
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF
ACQUIROR AND MERGER SUB...................................................................25
6.1 Organization, Standing and Corporate Power
of Acquiror and Merger Sub..................................................25
6.2 Authority; Enforceability; No Conflicts and Consents.........................25
6.3 Brokers......................................................................26
6.4 Financing....................................................................26
ARTICLE VII COVENANTS RELATING TO CONDUCT OF BUSINESS.................................................27
7.1 Conduct of Business of the Company...........................................27
7.2 Access to Information........................................................30
ARTICLE VIII ADDITIONAL AGREEMENTS.....................................................................30
8.1 Preparation of Proxy Statement; Stockholders' Meeting........................30
8.2 Efforts; Notification........................................................31
8.3 Supplemental Disclosure......................................................32
8.4 Announcements................................................................32
8.5 No Solicitation..............................................................32
8.6 Indemnification; Directors' and Officers Insurance...........................34
8.7 Employee Benefits............................................................35
8.8 Transfer Taxes...............................................................37
8.9 Vote of Company Stock.......................................................38
8.10 Agreement to Advance Funds...................................................38
ARTICLE IX CONDITIONS PRECEDENT......................................................................38
9.1 Conditions to Each Party's Obligation to Effect the Merger...................38
9.2 Conditions of Obligations of Acquiror........................................38
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE X TERMINATION...............................................................................39
10.1 Termination..................................................................39
10.2 Effect of Termination........................................................41
10.3 Termination Fee..............................................................41
ARTICLE XI GENERAL PROVISIONS........................................................................42
11.1 Effectiveness of Representations, Warranties and Agreements..................42
11.2 Expenses.....................................................................42
11.3 Governing Law................................................................42
11.4 Notices......................................................................42
11.5 Entire Agreement.............................................................43
11.6 Disclosure Schedule..........................................................43
11.7 Headings; References.........................................................44
11.8 Counterparts.................................................................44
11.9 Parties in Interest; Assignment..............................................44
11.10 Severability; Enforcement....................................................45
ANNEX A...................................................................................................
</TABLE>
iii
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 18, 1996, among
Intermet Corporation, a Georgia corporation ("Acquiror"), I M Acquisition Corp.,
a Delaware corporation and wholly-owned subsidiary of Acquiror ("Merger Sub"),
and SUDBURY, INC., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the boards of directors of Acquiror and the Company have
approved, and deem it advisable and in the best interests of their respective
stockholders to consummate the acquisition of the Company by Acquiror upon the
terms and subject to the conditions set forth herein;
WHEREAS, it is intended that the acquisition be accomplished by a
merger of Merger Sub with and into the Company ("Merger"), with the Company
continuing as the surviving corporation (the "Surviving Corporation"); and
WHEREAS, Acquiror, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
"Acquisition Proposal" shall have the meaning set forth in Section
8.5(c).
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with
such other Person.
"Applicable Laws" shall mean, with respect to any Person, all statutes,
laws, ordinances, rules, orders, judgments, decrees, arbitration awards and
regulations of any Governmental Authority applicable to such Person and its
business, properties and assets.
"Business Day" shall mean a day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to close.
"Certificate of Merger" shall have the meaning set forth in Section
3.3.
"Certificates" shall have the meaning set forth in Section 4.2 (b).
<PAGE> 6
"Closing" shall have the meaning set forth in Section 3.2.
"Closing Date" shall have the meaning set forth in Section 3.2.
"Code" shall mean the Internal Revenue Code of 1986, as amended and the
rules and regulations promulgated thereunder.
"Company Common Stock" shall have the meaning set forth in Section
4.1(c).
"Company Disclosure Schedule" shall have the meaning set forth in
Section 11.6.
"Company Representatives" shall have the meaning set forth in Section
8.5.
"Company SEC Documents" shall have the meaning set forth in Section
5.7.
"Company Stock Option Plans" shall have the meaning set forth in
Section 8.7(e).
"Company Stockholder Approval" shall have the meaning set forth in
Section 5.4(a).
"Company Stockholders' Meeting" shall have the meaning set forth in
Section 8.1(d).
"Confidentiality Agreement" shall have the meaning set forth in Section
7.2.
"Dissenting Shares" shall have the meaning set forth in Section 4.2(d).
"DGCL" shall mean the Delaware General Corporation Law.
"DOJ" shall mean the Department of Justice.
"Effective Time" shall have the meaning set forth in Section 3.3.
"Employee Benefit Plans" shall have the meaning set forth in Section
5.11(a).
"Encumbrances" shall mean any and all mortgages, security interests,
liens, claims, pledges, restrictions, leases, title exceptions, rights of
others, charges or other encumbrances.
"Environmental Laws" shall mean all applicable United States, foreign,
state, provincial, and local laws, regulations, ordinances or orders relating to
the protection of the environment, including but not limited to the Clean Air
Act, 42 U.S.C. Section 7401 et. seq., the Clean Water Act ("CWA"), 33 U.S.C.
Section 1251 et. seq., the Resource Conservation Recovery Act ("RCRA"), 42
U.S.C. Section 6901 et. seq., the Toxic Substances Control Act ("TSCA"), 15
U.S.C. Section 2601 et. seq., the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et. seq., the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et. seq., any
administrative or judicial
2
<PAGE> 7
judgment, order or decree; and any other state, federal or local law,
regulation, rule, ordinance or order, currently in existence which govern:
(a) the existence, cleanup and/or remedy of contamination
on property;
(b) the emission or discharge of Hazardous Substances
into the environment;
(c) the control of hazardous waste;
(d) the use, generation, transport, treatment, storage,
disposal, removal or recovery of Hazardous
Substances, including building materials; or
(e) the protection of health and safety.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended and the applicable regulations promulgated thereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Exchange Agent" shall have the meaning set forth in Section 4.2(a).
"Exchange Fund" shall have the meaning set forth in Section 4.2(a).
"FTC" shall mean the Federal Trade Commission.
"GAAP" shall mean generally accepted accounting principles in effect in
the United States of America as of the date of the applicable determination.
"General Products" shall mean General Products Delaware Corporation, a
Delaware corporation.
"Governmental Authority" shall mean any foreign, Federal, state,
municipal or other governmental authority, department, commission, board,
bureau, agency or instrumentality.
"Hazardous Substances" shall mean (A) any oil, flammable substances,
explosives, radioactive materials, hazardous wastes or substances, toxic wastes
or substances or any other wastes, materials or pollutants which (1) pose a
hazard to the Real Property or to persons on or about the Real Property or (2)
cause the Real Property to be in violation of any Environmental Law; (B)
asbestos in any form which is or could become friable, urea formaldehyde foam
insulation, transformers or other equipment which contain dielectric fluid
containing levels of polychlorinated biphenyls, or radon gas; (C) any chemical,
material or substance defined as, or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
waste," "restricted hazardous waste," or "toxic substances" or words of similar
import under any applicable local, state or federal law or under the regulations
adopted pursuant thereto,
3
<PAGE> 8
including but not limited to Environmental Laws; (D) any other chemical,
material or substance, exposure to which is prohibited, limited or regulated by
a governmental authority.
"HSR Act" shall have the meaning set forth in Section 5.4(c).
"Improvements" shall mean, with respect to any Real Property, all
buildings, fixtures, improvements and facilities located on or attached to such
Real Property or owned or leased by the Company or any of its Subsidiaries and
used in, on or at such Real Property, together with any and all loading docks,
parking lots, garages, and other facilities serving any such buildings; and
landscaping and site improvements.
"Indemnified Liabilities" shall have the meaning set forth in Section
8.6(a).
"Indemnified Parties" shall have the meaning set forth in Section
8.6(a).
"IRS" means the United States Internal Revenue Service.
"Legal Proceedings" means any civil or criminal judicial,
administrative or arbitral actions, suits, proceedings, hearings (public or
private) or governmental proceedings.
"Material Adverse Effect" shall mean, with respect to any Person, any
change, occurrence or effect that is or is reasonably likely to be materially
adverse to the assets, business, results of operations or condition (financial
or otherwise) of such Person and its Subsidiaries taken as a whole.
"Merger" shall have the meaning set forth in the second recital to this
Agreement.
"Merger Consideration" shall have the meaning set forth in Section
4.1(c).
"Offer" shall have the meaning set forth in Section 2.1(a).
"Options" shall have the meaning set forth in Section 8.7(e).
"Participation Agreement" shall mean the Participation Certificate
Agreement dated September 1, 1992.
"Participation Certificates" shall have the meaning set forth in
Section 5.3.
"Permits" shall have the meaning set forth in Section 5.6(a).
"Permitted Encumbrances" shall mean only the following title
exceptions: (a) taxes either not delinquent or being diligently contested; (b)
mechanics', materialmen's or similar statutory liens being diligently contested;
(c) other exceptions that do not and would not, individually or in the
aggregate, have a Material Adverse Effect with respect to the Company; and (d)
Encumbrances related to indebtedness disclosed in the Company SEC Documents
filed and publicly available prior
4
<PAGE> 9
to the date of this Agreement, provided that all Permitted Encumbrances set
forth in (a), (b), (c) and (d) shall not in the aggregate have a Material
Adverse Effect on the Company.
"Person" shall mean an individual, corporation, partnership, trust or
unincorporated organization or a government or any agency or political
subdivision thereof.
"Proxy Statement" shall mean the proxy or information statement
relating to the Company Stockholder Approval in connection with the consummation
of the transactions contemplated by this Agreement, as such proxy statement may
be amended or supplemented from time to time.
"Real Property" shall have the meaning set forth in Section 5.12.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, placing, discharging, injecting, escaping, leaching, dumping, or
disposing into the environment, whether intentional or unintentional.
"Sardas Options" mean the stock options granted to Jacques R. Sardas by
the Company pursuant to his Amended and Restated Employment Agreement with the
Company dated January 13, 1992 and his stock option agreement with the Company
dated July 29, 1994.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"SEC" shall mean the Securities and Exchange Commission.
"Subsidiary" shall mean, with respect to any Person, (i) each
corporation, partnership, joint venture, limited liability company or other
legal entity of which such Person owns, either directly or indirectly, 50% or
more of the stock or other equity interests the holders of which are generally
entitled to vote for the election of the board of directors or similar governing
body of such corporation, partnership, joint venture or other legal entity and
(ii) each partnership or limited liability company in which such Person or
another Subsidiary of such Person is the general partner, managing partner or
otherwise controls.
"Surviving Corporation" shall have the meaning set forth in the second
recital of this Agreement.
"Tax" or "Taxes" shall mean all taxes, charges, fees, imposts, levies,
assessments, including, without limitation, all net income, gross receipts,
capital, sales, use, ad valorem, value added, transfer, franchise, profits,
inventory, capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation, property and
estimated taxes, customs duties, fees, assessments and charges of any kind
whatsoever, together with any interest and any penalties, fines, additions to
tax or additional amounts imposed by any taxing authority (domestic or foreign)
and shall include any transferee liability in respect of Taxes, any liability in
respect of Taxes imposed by contract, tax sharing agreement, tax indemnity
agreement or any similar agreement.
5
<PAGE> 10
"Tax Return" shall mean any report, return, document, declaration or
any other information or filing required to be supplied to any taxing authority
or jurisdiction (foreign or domestic) with respect to Taxes, including without
limitation, information returns, any document with respect to or accompanying
payments or estimated Taxes, or with respect to or accompanying requests for the
extension of time in which to file any such report, return document, declaration
or other information.
"Third Party" shall mean a party or parties unaffiliated with either
the Company or Acquiror.
"Wagner" shall mean Wagner Castings Company, a Delaware corporation.
1.2 Other Terms. Other terms may be defined elsewhere in the text of
this Agreement and, unless otherwise indicated, shall have such meaning
throughout this Agreement.
1.3 Other Definitional Provisions.
(a) The words "hereof," "herein," and "hereunder" and words
of similar import, when used in this Agreement, shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement.
(b) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) The terms "dollars" and "$"shall mean United States
dollars.
ARTICLE II
THE TENDER OFFER
2.1 Tender Offer.
(a) Provided that this Agreement shall not have been
terminated in accordance with Article X hereof and none of the events
set forth in Annex A hereto shall have occurred or be existing, within
five business days of the date hereof, Merger Sub will commence a
tender offer (the "Offer") for all of the outstanding shares of Company
Common Stock at a price of $12.50 per share in cash, net to the seller
("Offer Price"), subject only to the conditions set forth in Annex A
hereto. Subject to the terms and conditions of the Offer, Merger Sub
will accept for payment and promptly pay for all shares of Company
Common Stock duly tendered that it is obligated to purchase thereunder.
The Offer shall be made by means of an offer to purchase (the "Offer to
Purchase") containing the terms set forth in this Agreement and the
conditions set forth in Annex A hereto. Without the written consent of
the Company, Merger Sub shall not decrease the Offer Price, change the
number of shares of Company Common Stock sought to an amount less than
50.1% of the outstanding shares of Company Common Stock, change the
form of consideration to be paid pursuant to the Offer or impose
conditions to the Offer in addition to those set forth in Annex A
hereto, or
6
<PAGE> 11
amend any other term or condition of the Offer in any manner, except as
may be required pursuant to the SEC's rules with respect to the
extension of time periods, which is adverse to the holders of shares of
Company Common Stock; provided, however, that if on a scheduled
expiration date of the Offer (as it may be extended in accordance with
the terms hereof), all conditions to the Offer shall not have been
satisfied or waived, the Offer may be extended from time to time
without the consent of the Company for such period of time as is
reasonably expected to be necessary to satisfy the unsatisfied
conditions and provided further that if as of a scheduled expiration
date all of the conditions to the Offer have been satisfied and in
excess of 80% but less than 90% of the outstanding shares of Company
Common Stock have been tendered, Merger Sub may extend the Offer up to
an additional seven business days.
(b) Acquiror and Merger Sub shall file with the SEC on the
date the Offer is commenced a Tender Offer Statement on Schedule 14D-1
with respect to the Offer (together with all amendments and supplements
thereto and including the exhibits thereto, the "Schedule 14D-1") which
will include, as exhibits, the Offer to Purchase and a form of letter
of transmittal and summary advertisement. The Company's Board of
Directors shall recommend acceptance of the Offer to its stockholders
in a Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") to be filed with the SEC upon commencement of the
Offer; provided, however, that if the Company's Board of Directors
determines to amend or withdraw its recommendation in accordance with
Section 8.5 hereof, such amendment or withdrawal shall not constitute a
breach of this Agreement. Acquiror and Merger Sub represent that the
Schedule 14D-1, and the Company represents that the Schedule 14D-9,
will comply in all material respects with the provisions of applicable
federal securities laws and, on the date filed with the SEC and on the
date first published, sent or given to the Company's stockholders, will
not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order
to make the statement therein, in light of the circumstances under
which they were made, not misleading, except that no representation is
made by Acquiror or Merger Sub with respect to information supplied by
the Company in writing for inclusion in the Schedule 14D-1. The
information supplied by the Company for inclusion in the Schedule 14D-1
will not, on the date filed with the SEC and on the date first
published, sent or given to the Company's stockholders, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading. Each of Acquiror and Merger Sub further agrees to
take all steps necessary to cause the Schedule 14D-1, and the Company
agrees to take all steps necessary to cause the Schedule 14D-9, to be
filed with the SEC and to be disseminated to holders of shares of
Company Common Stock, in each case as and to the extent required by
applicable federal securities laws. Each of Acquiror and Merger Sub, on
the one hand, and the Company, on the other hand, agrees promptly to
correct any information in the Schedule 14D-1 or Schedule 14D-9, as
applicable, if and to the extent that it shall have become false or
misleading in any material respect, and Acquiror, Merger Sub and the
Company further agree to take all steps necessary to cause the Schedule
14D-1 or Schedule 14D-9, as applicable, as so corrected to be filed
with the SEC and to be disseminated to holders of shares of Company
Common Stock, in each case as and
7
<PAGE> 12
to the extent required by applicable federal securities laws. The
Company and its counsel shall be given the opportunity to review the
Schedule 14D-1 before it is filed with the SEC and Acquiror and its
counsel shall be given the opportunity to review the Schedule 14D-9
before it is filed with the SEC. In addition, Acquiror and the Company
agree to provide each other and its counsel in writing with any
comments it or its counsel may receive from time to time from the SEC
or its staff with respect to the Schedule 14D-1 or Schedule 14D-9, as
applicable, promptly after the receipt of such comments.
(c) In connection with the Offer, the Company will cause its
Transfer Agent to furnish promptly to Merger Sub a list, as of a recent
date, of the record holders of shares of Company Common Stock and their
addresses, as well as mailing labels containing the names and addresses
of all record holders of shares of Company Common Stock and lists of
security positions of shares of Company Common Stock held in stock
depositories. The Company will furnish Merger Sub with such additional
information (including, but not limited to, updated lists of holders of
shares of Company Common Stock and their addresses, mailing labels and
lists of security positions) and such other assistance as Acquiror or
Merger Sub or their agents may reasonably request in communicating the
Offer to the record and beneficial holders of shares of Company Common
Stock.
(d) Immediately following the execution hereof, the Company
shall give notice to the holders of Participation Certificates of the
Offer, the form and substance of which will be mutually acceptable to
the Company and Acquiror.
ARTICLE III
THE MERGER
3.1 Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the DGCL, Merger Sub shall be merged with
and into Company at the Effective Time. Following the Merger, the separate
corporate existence of Merger Sub shall cease and the Company shall continue as
the Surviving Corporation and shall continue to be governed by the laws of the
State of Delaware in accordance with the DGCL and the separate corporate
existence of the Company with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger.
3.2 Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
10.1, the closing of the Merger (the "Closing") will take place at 9:00 a.m.,
Cleveland time, on the later of the first Business Day following the date on
which the last of the conditions set forth in Article IX is fulfilled or waived
or January 2, 1997 (the "Closing Date"), at the offices of Benesch, Friedlander,
Coplan and Aronoff P.L.L., 200 Public Square, Cleveland, Ohio 44114-2378, unless
another date, time or place is agreed to by the parties hereto.
8
<PAGE> 13
3.3 Effective Time. On the Closing Date, or as soon as practicable
thereafter, the parties hereto shall cause the Merger to be consummated by
filing a certificate of merger (the "Certificate of Merger") executed in
accordance with the relevant provisions of the DGCL with the Secretary of State
of the State of Delaware. The Merger shall become effective at such time as the
Certificate of Merger is so duly filed or at such time thereafter as is provided
in the Certificate of Merger (the "Effective Time").
3.4 Effects of the Merger. The Merger shall have the effects as set
forth in Section 259 of the DGCL.
3.5 Certificate of Incorporation and By-laws.
(a) The Certificate of Incorporation of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation after the
Effective Time, until duly amended in accordance with its terms and the
DGCL.
(b) The By-laws of Merger Sub, as in effect immediately prior
to the Effective Time, shall be the By-laws of the Surviving
Corporation after the Effective Time until duly amended as provided
therein, by the DGCL or the Certificate of Incorporation of the
Surviving Corporation.
3.6 Directors. The directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation, until the
earlier of their resignations or removal or until their respective successors
are duly elected and qualified, as the case may be.
3.7 Officers. The officers of the Company immediately prior to the
Effective Time shall remain the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
3.8 Boards of Directors; Committees. (a) If requested by Acquiror, the
Company will, subject to compliance with applicable law and promptly following
the purchase by Merger Sub of more than 50 percent of the outstanding Company
Common Stock pursuant to the Offer, take all actions necessary to cause persons
designated by Acquiror to become directors of the Company so that the total
number of such persons equals that number of directors, rounded up to the next
whole number, which represents the product of (x) the total number of directors
on the Board of Directors multiplied by (y) the percentage that the number of
shares of Company Common Stock so accepted for payment bears to the number of
shares of Company Common Stock outstanding at the time of such acceptance for
payment. In furtherance thereof, the Company will increase the size of the
Board, or use its reasonable efforts to secure the resignation of directors, or
both, as is necessary to permit Acquiror's designees to be elected to the
Company's Board of Directors; provided, however, that prior to the Effective
Time, the Company's Board of Directors shall always have at least three members
who are neither officers of Acquiror nor designees, stockholders or affiliates
of Acquiror. At such time, the Company, if so requested, will use its reasonable
efforts to cause persons designated by Acquiror to constitute the same
percentage of each committee of such board, each board of directors of each
Subsidiary of the Company and each committee of each such board, (in
9
<PAGE> 14
each case to the extent of the Company's ability to elect such persons). The
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 (the "Exchange
Act") and Rule 14f-1 thereunder. The Company shall promptly take all actions
required pursuant to such Section and Rule in order to fulfill its obligations
under this Section 3.8 and shall provide for inclusion in Acquiror's Schedule
14D-1 being mailed to stockholders contemporaneously with the commencement of
the Offer such information with respect to the Company and its officers and
directors as is required under such Section and Rule in order to fulfill its
obligations under this Section 3.8.
3.9 Actions by Directors. For purposes of Article X, no action taken by
the Board of Directors of the Company prior to the Merger shall be effective
unless such action is approved by the affirmative vote of at least a majority of
the directors of the Company which are not officers of Acquiror or designees,
stockholders or affiliates of Acquiror.
ARTICLE IV
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
4.1 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of Company
Common Stock or the holder of any shares of the capital stock of Merger Sub, the
Merger shall have the following effects on such shares of capital stock:
(a) Capital Stock of Merger Sub. Each share of the capital
stock of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into one share of Company Common
Stock.
(b) Cancellation of Treasury Stock and Acquiror-Owned Stock.
Each share of Company Common Stock that is directly owned by the
Company and each share of Company Common Stock that is directly owned
by Merger Sub or Acquiror or any subsidiary of Acquiror shall be
canceled and retired and shall cease to exist and no consideration
shall be delivered or deliverable in exchange therefor.
(c) Conversion of Company Common Stock. Other than shares
canceled in accordance with subsection (b) above, each share of Common
Stock, par value $0.01 per share ("Company Common Stock"), of the
Company, issued and outstanding immediately prior to the Effective Time
(excluding Dissenting Shares, if any), shall be converted into the
right to receive $12.50 in cash without interest (the "Merger
Consideration"). All such shares, by virtue of the Merger, shall no
longer be outstanding and shall be canceled and retired and shall cease
to exist.
(d) No Rights as Stockholders After Effective Time. On and
after the Effective Time, holders of certificates which immediately
prior to the Effective Time represented
10
<PAGE> 15
outstanding shares of Company Common Stock shall cease to have any
rights as stockholders of the Company except the right to receive the
consideration set forth in this Article IV for each such share held by
them or, if applicable, payments due to holders of Dissenting Shares,
if any, in accordance with Section 4.2(d).
4.2 Exchange of Certificates.
(a) Exchange Agent. Prior to the Effective Time, Acquiror
shall designate a bank or trust company to act as exchange agent in the
Merger which shall be reasonably satisfactory to the Company (the
"Exchange Agent"), and Acquiror shall make available to the Exchange
Agent for the benefit of the holders of shares of Company Common Stock
for exchange in accordance with this Article IV, through the Exchange
Agent, the Merger Consideration deliverable pursuant to Section 4.1(c)
in exchange for outstanding shares of Company Common Stock (the
"Exchange Fund"). The Exchange Agent shall, pursuant to irrevocable
instructions, deliver the Merger Consideration deliverable pursuant to
Section 4.1(c) out of the Exchange Fund upon the holder's satisfaction
of the exchange procedures set forth in subsection (b) below.
(b) Exchange Procedures. As soon as reasonably practicable
after the Effective Time, Acquiror shall instruct the Exchange Agent to
mail to each holder of record of a certificate or certificates that
immediately prior to the Effective Time evidenced outstanding shares of
Company Common Stock (the "Certificates"), (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss
and title to the Certificates shall pass, only upon proper delivery of
the Certificates to the Exchange Agent and shall be in such form and
have such other provisions as Acquiror reasonably may specify) and (ii)
instructions for use in effecting the surrender of the Certificates in
exchange for payment of the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with such
letter of transmittal, duly executed and completed in accordance with
the instructions thereto, and such other customary documents as may be
required by the Exchange Agent, the holder of such Certificate shall be
entitled to receive in exchange therefor payment evidencing the Merger
Consideration, less any required tax withholdings, and the Certificates
so surrendered shall forthwith be canceled. No interest will be paid or
will accrue on the amount payable upon the surrender of any such
certificate. If payment is to be made to a person other than the
registered holder of the certificate surrendered, it shall be a
condition of such payment that the certificate so surrendered shall be
properly endorsed or otherwise in proper form for transfer and that the
person requesting such payment shall pay any transfer or other taxes
required by reason of the payment to a person other than the registered
holder of the certificate surrendered or establish to the satisfaction
of the Surviving Corporation or the Exchange Agent that such tax has
been paid or is not applicable. One hundred and eighty days following
the Effective Time, the Surviving Corporation shall be entitled to
cause the Exchange Agent to deliver to it any funds (including any
interest received with respect thereto) made available to the Exchange
Agent which have not been disbursed to holders of certificates formerly
representing Shares outstanding on the Effective Time or Options
outstanding, and thereafter such holders shall be entitled to look to
the Surviving Corporation only as general creditors thereof with
respect to the cash payable upon
11
<PAGE> 16
due surrender of their Certificates. The Surviving Corporation shall
pay all charges and expenses, including those of the Exchange Agent, in
connection with the exchange of cash for Shares.
(c) Transfer Books. After the Effective Time, there shall be
no transfers on the stock transfer books of the Surviving Corporation
of any shares of Company Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
certificates for such shares of Company Common Stock are presented to
the Surviving Corporation, they shall be canceled and exchanged as
provided in this Section 4.2 subject to the satisfaction of the
exchange procedures set forth above and the DGCL in the case of
Dissenting Shares.
(d) Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, shares of Company Common Stock which
immediately prior to the Effective Time are held by stockholders who
have properly exercised and perfected appraisal rights under Section
262 of the DGCL (the "Dissenting Shares"), shall not be converted into
the right to receive the Merger Consideration, but the holders of
Dissenting Shares shall be entitled to receive such consideration as
shall be determined pursuant to Section 262 of the DGCL; provided,
however, that if any such holder shall have failed to perfect or shall
withdraw or lose his right to appraisal and payment under the DGCL,
such holder's shares of Company Common Stock shall thereupon be deemed
to have been converted as of the Effective Time into the right to
receive the Merger Consideration, without any interest thereon, and
such shares of Company Common Stock shall no longer be Dissenting
Shares. The Company shall give Acquiror notice of any Dissenting Shares
and Acquiror shall have the right to participate in all negotiations
and proceedings with respect to any such demands. Neither the Company
nor the Surviving Corporation shall, except with the prior written
consent of Acquiror, voluntarily make any payment with respect to, or
settle or offer to settle, any such demand for payment.
(e) No Liability. None of Company, Acquiror or Merger Sub
shall be liable to any holder of shares of Company Common Stock for
such cash that has been delivered to a public official pursuant to any
applicable abandoned property, escheat or similar laws.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Acquiror and Merger Sub
as follows:
5.1 Organization, Standing and Corporate Power. Each of the Company,
each Subsidiary of the Company with employees, Transnational Indemnity Company,
and General Products is a corporation or partnership duly organized and validly
existing and each Subsidiary of the Company with employees and Transnational
Indemnity Company, and the Company is in good standing under the laws of the
jurisdiction in which it is organized and has the requisite corporate or
partnership
12
<PAGE> 17
power and authority to carry on its business as now being conducted. Each of the
Company and its Subsidiaries is duly qualified or licensed to do business and is
in good standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualifications or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed (individually or in the aggregate) would not have a Material Adverse
Effect on the Company or, as to Wagner's failure to be so qualified or licensed,
as to Wagner. The Company has delivered to Acquiror complete and correct copies
of the certificate of incorporation and by-laws, or similar organizational
documents, of the Company, Wagner, Cast-Matic Corporation, Frisby P.M.C.,
Incorporated, Industrial Powder Coatings, Inc., Iowa Mold Tooling Co., Inc.,
Transnational Indemnity Company, and General Products, in each case as amended
to the date of this Agreement, all of which are in full force and effect.
5.2 Subsidiaries. Section 5.2 of the Company Disclosure Schedule sets
forth all the Subsidiaries of the Company. All the outstanding shares of capital
stock or other equity interests of each Subsidiary of the Company and those
shares of General Products owned by the Company, are duly authorized, validly
issued, fully paid and nonassessable and are owned by the Company, by another
wholly-owned Subsidiary of the Company or by the Company and another
wholly-owned Subsidiary of the Company, free and clear of all Encumbrances.
Neither the respective certificates of incorporation and bylaws nor other
organizational documents of the Company's Subsidiaries and General Products nor
any other agreement, understanding or arrangement contain any provision limiting
or otherwise restricting the ability of Acquiror, following the Effective Time,
from controlling such Subsidiaries and General Products on the same basis as the
Company. The Company does not have any equity interest in any Person other than
its Subsidiaries and General Products, as set forth in Schedule 5.2 of the
Company Disclosure Schedule.
5.3 Capitalization. The authorized capital stock of the Company
consists of 20,000,000 shares of Company Common Stock and no shares of preferred
stock. As of November 7, 1996, (i) 11,417,396 shares of Company Common Stock
were issued and outstanding, (ii) no shares of Company Common Stock were held by
the Company in its treasury, (iii) 2,751,329 shares of Company Common Stock were
reserved for issuance upon exercise of outstanding Options, (iv) 1,422,619
shares of Company Common Stock were reserved for issuance in connection with
rights granted under the Company's Series B Participation Certificates and
Series C Participation Certificates pursuant to the Participation Agreement
("Participation Certificates"). Except as set forth above, no shares of common
stock or other voting or equity securities of the Company are reserved for
issuance. Except as set forth in Section 5.3 of the Company's Disclosure
Schedule, there are no outstanding stock appreciation rights and there are no
other outstanding contractual rights the value of which is derived from the
financial performance of the Company or the value of shares of Company Common
Stock. All outstanding shares of Company Common Stock are duly authorized,
validly issued, fully paid and nonassessable and are not subject to preemptive
rights. There are no bonds, debentures, notes or other indebtedness of the
Company or any of its Subsidiaries having the right to vote (or convertible
into, or exchangeable for, securities having the right to vote) on any matters
on which stockholders of the Company may vote. Except as set forth above there
are no outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which the Company or any
of its Subsidiaries is a party or by which any of them is bound, obligating the
Company or any of its Subsidiaries to issue, deliver
13
<PAGE> 18
or sell or cause to be issued, delivered or sold, additional shares of capital
stock or other voting or equity securities of the Company or any of its
Subsidiaries or obligating the Company or any of its Subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. Except as set forth on
Schedule 5.3 of the Company Disclosure Schedules, there are no outstanding
contractual obligations of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock of the Company or any of
its Subsidiaries.
5.4 Authority; Enforceability; No Conflicts; and Consents.
(a) The Company has the requisite corporate power and
authority to enter into this Agreement and, subject to obtaining the
Company Stockholder Approval, to consummate the transactions
contemplated by this Agreement. The execution and delivery of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated by this Agreement have been duly authorized
by all necessary corporate action on the part of the Company, subject,
in the case of the consummation of the Merger, to adoption of this
Agreement by the holders of a majority of the outstanding shares of
Company Common Stock (the "Company Stockholder Approval"), at a special
meeting of the holders of Company Common Stock. This Agreement has been
duly executed and delivered by the Company and, assuming this Agreement
constitutes the valid and binding obligations of Acquiror and Merger
Sub, constitutes the valid and binding obligations of the Company,
enforceable against the Company in accordance with its terms.
(b) The execution and delivery of this Agreement do not, and
the consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will not, conflict
with, or result in any breach or violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or
cause loss of a material benefit under, or result in the creation or
maturation of any Encumbrance or purchase right upon any of the
properties or assets of the Company or any of its Subsidiaries under,
(i) the Restated Certificate of Incorporation or By-laws of the Company
or the comparable charter or organizational documents of any of its
Subsidiaries or General Products, (ii) other than severance agreements,
severance plans and employment agreements disclosed in the Company SEC
Documents or in Section 5.4 of the Company Disclosure Schedule or
otherwise previously disclosed to Acquiror, the Options and bank credit
agreements and indentures relating to notes and debentures identified
under "Long Term Debt" of the Notes to Consolidated Financial
Statements of the Company included in its 1996 Annual Report or as set
forth in Section 5.4 of the Company Disclosure Schedule and subject to
the governmental filings and other matters referred to in Section
5.4(c), any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, arrangement obligation, instrument,
concession, franchise, permit or license applicable to the Company or
any of its Subsidiaries or their respective properties or assets or
(iii) subject to the governmental filings and other matters referred to
in Section 5.4(c), any judgment, order, award decree, statute, law,
ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries or their respective properties or assets, other than, in
the case of clauses
14
<PAGE> 19
(ii) or (iii), any such conflicts, violations, defaults, rights or
liens that individually or in the aggregate would not (X) have a
Material Adverse Effect on the Company or Wagner, (Y) impair, in any
material respect, the ability of the Company to perform its obligations
under this Agreement or (Z) prevent or significantly delay the
consummation of any of the transactions contemplated by this Agreement.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Authority is
required by the Company or any of its Subsidiaries in connection with
the execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated by this
Agreement, except for (i) the filing of a premerger notification and
report form by the Company under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act"), (ii) as required by the
Exchange Act, (iii) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and appropriate documents
with the relevant authorities of other states in which the Company is
qualified to do business, and (iv) such other consents, approvals,
orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made would not, individually or in
the aggregate, (X) have a Material Adverse Effect on the Company or, to
the extent that any such consent, approval, order, authorization,
registration, declaration or filing pertain to Wagner, on Wagner, (Y)
impair, in any material respect, the ability of the Company to perform
its obligations under this Agreement or (Z) prevent or significantly
delay the consummation of the transactions contemplated by this
Agreement.
5.5 Vote Required; State Takeover Statutes; Rights Agreement.
(a) The Company Stockholder Approval is the only vote of the
holders of the Company's capital stock necessary to approve this
Agreement and the transactions contemplated hereby.
(b) The Board of Directors of the Company has approved the
Merger and this Agreement and such approval is sufficient to render the
provisions of Section 203 of the DGCL inapplicable to the Merger, this
Agreement and the other transactions contemplated by this Agreement.
5.6 Compliance with Applicable Laws.
(a) Each of the Company and its Subsidiaries has in effect all
Federal, state, local and foreign governmental approvals,
authorizations, certificates, filings, franchises, licenses, notices,
permits and rights, including all authorizations under Environmental
Laws ("Permits"), necessary for it to own, lease or operate its
properties and assets and to carry on its business as now conducted
other than such Permits the absence of which would not, individually or
in the aggregate, have a Material Adverse Effect on the Company or, to
the extent such Permits are required of, on Wagner, or have a Material
Adverse Effect on the operations of either of Wagner's foundry
facilities, and there has occurred no default under any such Permit
other than such defaults which, individually or in the aggregate, would
not have a Material Adverse Effect on the Company or, to the extent
such default pertains to Wagner, on Wagner or have a Material Adverse
Effect on the operations of either of Wagner's foundry facilities.
Except as disclosed in the Company SEC Documents filed and publicly
available prior to the date of this Agreement, the Company and its
Subsidiaries are in compliance with all Applicable Laws, except for
such noncompliance which, individually or in the aggregate, would not
15
<PAGE> 20
have a Material Adverse Effect on the Company, or as to any
noncompliance by Wagner, on Wagner. The preceding sentence of this
Section 5.6 does not apply to matters specifically covered by Sections
5.10, 5.11 or 5.6(b) and 5.6(c).
(b) Each of the Company and its Subsidiaries is, and has been,
and each of the Company's former Subsidiaries, while a Subsidiary of
the Company, was in compliance with all applicable Environmental Laws,
except as set forth on Schedule 5.6 and except for such noncompliance
which, individually or in the aggregate, would not have a Material
Adverse Effect on the Company or as to any noncompliance by Wagner, on
Wagner.
(c) To the knowledge of the Company, during the period of
ownership or operation by the Company and its Subsidiaries of any of
their owned or leased properties, (y) there have been no Releases of
Hazardous Substances in, on, under or affecting any properties
currently or formerly owned or operated by the Company or any of its
Subsidiaries in violation of, or as would reasonably be anticipated to
result in liability under, applicable Environmental Laws and (z) none
of the Company or its Subsidiaries have disposed of any Hazardous
Substances or any other substance in a manner that has led to, or could
reasonably be anticipated to lead to, a Release in violation of
applicable Environmental Laws except, in each case, as disclosed on
Schedule 5.6 of the Company Disclosure Schedules and except in each
case for those which, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect on the Company.
5.7 Company SEC Documents; Undisclosed Liabilities.
(a) The Company has delivered to Acquiror each registration
statement, schedule, report, proxy statement or information statement
prepared by it since May 31, 1996, including, without limitation, (i)
the Company's Annual Report on Form 10-K for the year ended May 31,
1996 (ii) the Company's Quarterly Report on Form 10-Q for the period
ended August 31, 1996 and (iii) the Company's Proxy Statement for its
1996 Annual Meeting each in the form (including exhibits and any
amendments thereto) filed with the SEC (collectively, the "Company SEC
Documents") which documents are all filings required to be made by the
Company during such period. As of their respective dates, (i) the
Company SEC Documents (including any financial statements filed as a
part thereof or incorporated by reference therein) complied, and any
Company SEC Documents filed with the SEC subsequent to the date hereof
will comply, in all material respects with the requirements of the
Securities Act or the Exchange Act, as applicable, to such Company SEC
Documents, and (ii) none of the Company SEC Documents contained or will
contain at the time of filing any untrue statement of a material fact
or omitted or will omit at the time of filing to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading. Each of the consolidated balance
16
<PAGE> 21
sheets included in or incorporated by reference into the Company SEC
Documents (including the related notes and schedules) fairly presents
the consolidated financial position of the Company and its Subsidiaries
as of its date and each of the consolidated statements of income, of
stockholders' equity and of cash flows included in or incorporated by
reference into the Company SEC Documents (including the related notes
and schedules) fairly presents the results of operations, retained
earnings and cash flow, as the case may be, of the Company and its
subsidiaries for the periods set forth therein (subject to, in the case
of unaudited statements, normal year-end audit adjustments which will
not be material in amount or effect), in each case in accordance with
GAAP consistently applied during the periods involved, except as may be
noted therein. Other than the Company SEC Documents, the Company has
not filed any other definitive reports or statements with the SEC
between May 31, 1996 and the date hereof.
(b) Except as disclosed in the Company SEC Documents filed and
publicly available prior to the date of this Agreement or in Section
5.8 or 7.1 of this Agreement or the related Sections of the Company
Disclosure Schedule, the Company and its Subsidiaries do not have any
material indebtedness, obligations or liabilities of any kind (whether
accrued, absolute, contingent or otherwise) (i) required by GAAP to be
reflected on a consolidated balance sheet of the Company and its
consolidated Subsidiaries or in the notes, exhibits or schedules
thereto (except for liabilities and obligations incurred in the
ordinary course of business consistent with past practice since August
31, 1996) or (ii) which reasonably could be expected to have a Material
Adverse Effect on the Company.
5.8 Absence of Changes or Events. Except as disclosed in the Company
SEC Documents filed and publicly available prior to the date of this Agreement
or as set forth in Section 5.8 or 7.1 of the Company Disclosure Schedule or
permitted by Section 7.1 of this Agreement, since May 31, 1996, the Company and
its Subsidiaries have conducted their respective businesses only in the ordinary
course, and there has not been (i) any change or occurrence (other than those
which relate to the industries the Company operates in generally or the economy
in general) which resulted in or is reasonably likely to have a Material Adverse
Effect on the Company or, as such change or occurrence relates directly to the
business of Wagner, on Wagner, (ii) any declaration, setting aside or payment of
any dividend or other distribution with respect to the Company Common Stock,
(iii) any issuance of any shares of Company Common Stock or other capital stock
of the Company or any securities convertible into or exchangeable or exercisable
for capital stock of the Company, (iv) any split, combination or
reclassification of any of the capital stock of the Company or any issuance or
the authorization of any issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock of the Company, (v) (X)
any granting by the Company or any of its Subsidiaries to any director or
officer of the Company or any of its Subsidiaries of any increase in
compensation, except as required under employment agreements in effect as of
August 23, 1996 that were included as an exhibit to a Company SEC Document filed
and publicly available prior to the date of this Agreement, (Y) any granting by
the Company or any of its Subsidiaries to any such person of any increase in
severance or termination pay, except as disclosed in Section 5.8 or 7.1 of the
Company Disclosure Schedule or, (Z) any entry by the Company or any of its
Subsidiaries into any employment, severance or termination agreement with any
such person, (vi) other than those listed on Section 5.8 of the Company
Disclosure Schedule, any acquisition of
17
<PAGE> 22
or commitment to purchase or build any property or project involving an
expenditure in excess of $11 million in the aggregate, (vii) any damage,
destruction or loss not covered by insurance, that has or reasonably could be
expected to have a Material Adverse Effect on the Company or (viii) any change
in accounting methods, principles or practices by the Company affecting its
assets, liabilities or business, except insofar as may have been required by a
change in GAAP.
5.9 Litigation. Except as disclosed in Section 5.9 of the Company
Disclosure Schedule or in the Company SEC Documents filed and publicly available
prior to the date of this Agreement, there are no Legal Proceedings pending
against the Company or any of its Subsidiaries or, to the knowledge of the
Company, threatened that, individually or in the aggregate, could reasonably be
expected to (i) have a Material Adverse Effect on the Company or if with respect
to Wagner, on Wagner or (ii) prevent, or significantly delay the consummation of
the transactions contemplated by this Agreement. Except as disclosed in Section
5.9 of the Company Disclosure Schedule or as set forth in the Company SEC
Documents filed and publicly available prior to the date of this Agreement,
there is no judgment, order, injunction or decree of any Governmental Authority
outstanding against the Company.
5.10 Taxes. Except as disclosed in Section 5.10 of the Company
Disclosure Schedule:
(a) The Company and each of its Subsidiaries, and each
affiliated group (as defined in Section 1504(a) of the Code without
regard to the limitations of Section 1504(b) of the Code) of which the
Company or any of its Subsidiaries is or has ever been a member, has
timely filed all Federal income Tax Returns and all other material Tax
Returns and reports required to be filed by it. The Company and each of
its Subsidiaries has paid (or the Company has paid on its Subsidiaries'
behalf) all taxes shown due on such Tax Returns. The most recent
consolidated financial statements contained in the Company SEC
Documents reflect an adequate reserve for all Taxes payable by the
Company and its Subsidiaries for all taxable periods and portions
thereof through the date of such financial statements.
(b) No material deficiencies for any Taxes and no deficiencies
for any federal or state income taxes have been proposed, asserted or
assessed against the Company or any of its Subsidiaries that have not
been fully paid or adequately provided for in the appropriate financial
statements of the Company and its Subsidiaries, no requests for waivers
of the time to assess any Taxes are pending. No material issues
relating to Taxes have been raised in writing by the relevant taxing
authority during any presently pending audit or examination.
(c) No liens for Taxes exist with respect to any assets or
properties of the Company or any of its Subsidiaries, except for
statutory liens for Taxes not yet due.
(d) Other than with respect to contractual tax indemnity
obligations of the Company and its Subsidiaries involving claims for
state and local Taxes which are not material in amount, none of the
Company or any of its Subsidiaries is a party to or is bound by any tax
sharing agreement, tax indemnity obligation or similar agreement,
arrangement
18
<PAGE> 23
or practice with respect to Taxes (including any advance pricing
agreement, closing agreement or other agreement relating to Taxes with
any taxing authority).
(e) As a result, directly or indirectly, of the transactions
contemplated by this Agreement (including, without limitation, as a
result of any termination of employment prior to or following the
Effective Time) none of Acquiror, Merger Sub, the Company or the
Surviving Corporation, or any of their respective Subsidiaries will be
obligated to make a payment to an individual who is a "disqualified
individual", that would be characterized as an "excess parachute
payment" (as such terms are defined in Section 280G of the Code)
without regard to whether such payment is reasonable compensation for
personal services performed or to be performed in the future.
(f) The Company and it Subsidiaries have complied in all
material respects with all applicable laws, rules and regulations
relating to the payment and withholding of Taxes. No tax is required to
be withheld pursuant to Section 1445 of the Code as a result of the
transactions contemplated by this Agreement.
(g) No Federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending
with regard to any Federal income or material state, local or foreign
Taxes or Tax Returns of the Company or its Subsidiaries and neither the
Company nor any of its Subsidiaries has received a written notice of
any material pending audit or proceeding.
(h) Neither the Company nor any of its Subsidiaries has agreed
to make any adjustment under Section 481(a) of the Code.
(i) Neither the Company nor any of its Subsidiaries has, with
regard to any assets or property held or acquired by any of them, filed
a consent to the application of Section 341(f) of the Code or agreed to
have Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as such term is defined in Section 341(f)(4) of
the Code) owned by the Company or any of its Subsidiaries.
(j) No property owned by the Company or any of its
Subsidiaries (i) is property required to be treated as being owned by
another Person pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect immediately
prior to the enactment of the Tax Reform Act of 1986; (ii) constitutes
"tax exempt use property" within the meaning of Section 168(h)(1) of
the Code; or (iii) is tax exempt bond financed property within the
meaning of Section 168(g) of the Code.
5.11 Employee Benefits.
(a) Section 5.11(a) contains a complete and accurate list of
all existing bonus, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, employee stock ownership, stock bonus,
stock purchase, restricted stock, stock option, severance, welfare and
fringe benefit plans, employment or severance agreements and all
similar arrangements in
19
<PAGE> 24
which any employee or former employee or director or former director of
the Company or any of its Subsidiaries (the "Employees") participates
(the "Employee Benefit Plans"). Except as set forth in Schedule
5.11(a), neither the Company nor any of its Subsidiaries has any formal
plan to create any additional material Employee Benefit Plan or to
modify or change any existing Employee Benefit Plan in a material
respect.
(b) Except as set forth in Schedule 5.11(b), each Employee
Benefit Plan has been operated and administered in all material
respects in accordance with its terms and with applicable law,
including, but not limited to, ERISA, and the Code, and all filings,
disclosures and notices required by ERISA or the Code (including
notices under Section 4980B of the Code) have been, in all material
respects, timely made. Each Employee Benefit Plan which is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA (a
"Pension Plan") and which is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from
the Internal Revenue Service for "TRA" (as defined in Rev. Proc.
93-39), or has filed or will file for such a determination letter prior
to the expiration of the remedial amendment period for such Employee
Benefit Plan, and the Company is not aware of any circumstances likely
to result in revocation of any such favorable determination letter.
Except as set forth in Schedule 5.11(b), there is no material pending
or, to the best knowledge of the Company, threatened legal action, suit
or claim relating to the Employee Benefit Plans. Neither the Company
nor any of its Subsidiaries has engaged in a transaction with respect
to any Employee Benefit that, assuming the taxable period of such
transaction expired as of the date hereof, would reasonably be expected
to subject the Company or any of its Subsidiaries to a tax or penalty
imposed by either Section 4975 of the Code or Section 502(i) of ERISA
in an amount which would be material.
(c) No liability to the Pension Benefit Guaranty Corporation
(the "PBGC") or otherwise with respect to the termination of a plan
under Title IV of ERISA has been or is expected to be incurred by the
Company or any of its Subsidiaries with respect to any ongoing, frozen
or terminated "single-employer plan", within the meaning of Section
4001(a)(15) of ERISA, currently or formerly maintained by any of them,
or any single- employer plan of any entity (an "ERISA Affiliate") which
is considered one employer with the Company under Section 4001(b) of
ERISA or Section 414(b) or (c) of the Code (an "ERISA Affiliate Plan"),
other than liability for payment of PBGC premiums. The Company and its
Subsidiaries do not have any liability for and do not expect to incur
any withdrawal liability with respect to a "multiemployer plan" (within
the meaning of Section 3(37) of ERISA) under Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate) or
any liability in connection with the reorganization or termination of
any multiemployer plan. No notice of a "reportable event", within the
meaning of Section 4043 of ERISA for which the 30-day reporting
requirement has not been waived, has been required to be filed for any
Employee Benefit Plan or by any ERISA Affiliate Plan within the
12-month period ending on the date hereof. The PBGC has not instituted
proceedings to terminate any Pension Plan or ERISA Affiliate Plan and,
to the Company's knowledge, no condition exists that presents a
material risk that such proceedings will be instituted.
20
<PAGE> 25
(d) To the best knowledge of the Company, (i) all
contributions required to be made under the terms of any Employee
Benefit Plan or ERISA Affiliate Plan or any collective bargaining
agreement have been timely made or properly reflected on the books of
the Company. To the best knowledge of the Company, (i) neither any
Pension Plan nor any ERISA Affiliate Plan has or reasonably expects to
have an "accumulated funding deficiency" (whether or not waived) within
the meaning of Section 412 of the Code or Section 302 of ERISA; and
(ii) all required payments to the PBGC with respect to each Pension
Plan or ERISA Affiliate Plan have been made on or before their due
dates. Neither the Company nor any of its Subsidiaries has provided, or
is required to provide, security to any Pension Plan or to any ERISA
Affiliate Plan pursuant to Section 401(a)(29) of the Code.
(e) To the knowledge of the Company, with respect to each
Pension Plan which is a single-employer plan covered under Title IV of
ERISA and each ERISA Affiliate Plan (a "Title IV Plan"), the financial
statements of the Company set forth in the most recent Form 10-K of the
Company, as modified by the most recent Quarterly Report on Form 10-Q
of the Company sets forth a true and accurate statement in all material
respects of the funded status of such Title IV Plan as required to be
reflected in such financial statements under Statement 87 of the
Financial Accounting Standards Board. To the knowledge of the Company,
since the date as of which the funded status was determined under the
preceding sentence, there has not been an adverse change in the
financial condition of any such Title IV Plan which would have caused a
material change in the funded status of such Title IV Plan.
(f) Except as set forth on Schedule 5.11(f), neither the
Company nor any of its Subsidiaries has any obligations to provide
retiree health and life benefits under any Employee Benefit Plan, other
than benefits mandated by Section 4980B of the Code.
(g) Except as set forth on Schedule 5.11(g), the Company and
its Subsidiaries do not maintain any Employee Benefit Plans covering
foreign Employees, and all such Employee Benefit Plans are in material
compliance with applicable local law and, to the best knowledge of the
Company, are funded in accordance with applicable law.
(h) With respect to each Employee Benefit Plan, the Company
has provided or will make available to Acquiror upon request, if
applicable, true and complete copies of existing: (a) plan documents
and amendments thereto; (b) trust instruments and insurance contracts;
(c) Forms 5500 filed with the IRS; (d) most recent actuarial report and
financial statement; (e) the most recent summary plan description; (f)
forms filed with the PBGC; (g) most recent determination letter issued
by the IRS; (h) any Form 5310 or Form 5330 filed with the IRS; and (i)
most recent nondiscrimination tests performed under ERISA and the Code
(including 401(k) and 401(m) tests).
(i) Except as set forth on Schedule 5.11(i), the consummation
of the transactions contemplated by this Agreement would not reasonably
be expected to, directly or indirectly, (A) entitle, any Employee to
severance pay, unemployment compensation or any other severance
payment, (B) result in any payment becoming due or increase the amount
of compensation due to any Employee, (C) increase the benefits payable
under any Employee
21
<PAGE> 26
Benefit Plan or (D) result in the acceleration of the time of payment
or the vesting of any benefits under any Employee Benefit Plan.
5.12 Title to Properties. Section 5.12 of the Company Disclosure
Schedule sets forth a complete list of all material real property owned in fee
by the Company or one of its Subsidiaries and sets forth all material real
property leased by the Company or one of its Subsidiaries as lessee as of the
date hereof (such owned and leased material real property, including all
Improvements, referred to collectively as the "Real Property"). Except as set
forth in Section 5.12 of the Company Disclosure Schedule, each of the Company
and its Subsidiaries has good and valid title to, or a valid leasehold interest
in, the Real Property held by it. Except as set forth in Section 5.12 of the
Company Disclosure Schedule, the Real Property is free of Encumbrances, except
for Permitted Encumbrances, and the consummation of the transactions
contemplated by this Agreement will not create any Encumbrance on any of the
Real Property which, individually or in the aggregate, would have a Material
Adverse Effect on the Company or, with respect to the Real Property of Wagner,
on Wagner. Each of the Company and each of its Subsidiaries enjoys peaceful and
undisturbed possession under all leases of Real Property, expect for such
breaches of the right to peaceful and undisturbed possession that do not
materially interfere with the ability of the Company and its Subsidiaries to
conduct their business.
5.13 Insurance. The Company and its subsidiaries have insurance
coverage with insurance companies or associations in such amounts, on such terms
and covering such risks, including fire and other risks insured against by
extended coverage, as is reasonably prudent, and each has public liability
insurance, insurance against claims for personal injury or death or property
damage occurring in connection with any of activities of the Company or any of
its Subsidiaries or of any properties owned, occupied or controlled by the
Company or any of its Subsidiaries, in such amount as is deemed reasonably
necessary by the Company or any of its Subsidiaries.
5.14 Labor Matters. Except as set forth in Schedule 5.14 of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is the
subject of any material proceeding asserting that the Company or any of its
Subsidiaries has committed an unfair labor practice or is seeking to compel it
to bargain with any labor union or labor organization nor is there pending or,
to the knowledge of the management of the Company, threatened, nor has there
been for the past five years, any material labor strike, dispute, walkout, work
stoppage, slow-down or lockout involving the Company or any of its Subsidiaries.
The Company has previously made available to Acquiror correct and complete
copies of all labor and collective bargaining agreements to which the Company or
any of its Subsidiaries is party or by which any of them are otherwise bound.
5.15 Intellectual Property.
(a) The Company and/or each of its Subsidiaries owns, or is
licensed or otherwise possesses legally enforceable rights to use all
patents, trademarks, trade names, service marks, copyrights, and any
applications therefor, technology, know-how, computer software programs
or applications, and tangible or intangible proprietary information or
materials that are used in the business of the Company and its
subsidiaries as currently conducted, except
22
<PAGE> 27
for any such failures to own, be licensed or possess that, individually
or in the aggregate, are not reasonably likely to have a Material
Adverse Effect on the Company.
(b) Except as disclosed in Section 5.15 of the Company
Disclosure Schedule or the Company SEC Documents or as is not
reasonably likely to have a Material Adverse Effect on the Company:
(i) The Company is not, nor will it be as a result of
the execution and delivery of this Agreement or the
performance of its obligations hereunder, in violation of any
licenses, sublicenses and other agreements as to which the
Company is a party and pursuant to which the Company is
authorized to use any third-party patents, trademarks, service
marks, and copyrights ("Third-Party Intellectual Property
Rights");
(ii) no claims with respect to the patents,
registered and material unregistered trademarks and service
marks, registered copyrights, trade names, and any
applications therefor owned by the Company or any its
subsidiaries (the "Company Intellectual Property Rights"), any
trade secret material to the Company, or Third Party
Intellectual Property Rights to the extent arising out of any
use, reproduction, or distribution of such Third Party
Intellectual Property Rights by or through the Company or any
of its subsidiaries, are currently pending or, to the
knowledge of the management of the Company, are overtly
threatened by any person;
(iii) the Company does not know of any valid grounds
for any material bona fide claims (A) to the effect that the
manufacture, sale, licensing or use of any product as now
used, sold or licensed or proposed for use, sale or license by
Company or any of its subsidiaries, infringes on any
copyright, patent, trademark, service mark, or trade secret;
(B) against the use by the Company or any of its subsidiaries,
of any trademarks, trade names, trade secrets, copyrights,
patents, technology, know-how, or computer software programs
and applications used in the business of the Company or any of
its subsidiaries as currently conducted or as proposed to be
conducted; (C) challenging the ownership, validity, or
effectiveness of any of the Company Intellectual Property
Rights or other trade secret material to the Company; or (D)
challenging the license or legally enforceable right to use of
the Third Party Intellectual Rights by the Company or any of
its Subsidiaries;
(iv) to the knowledge of the management of the
Company, all material patents, registered trademarks and
service marks, and copyrights held by the Company are valid,
enforceable and subsisting; and
(v) to the knowledge of the management of the
Company, there is no material unauthorized use, infringement
or misappropriation of any of the Company Intellectual
Property Rights by any third party, including any employee or
former employee of the Company or any of its Subsidiaries.
23
<PAGE> 28
5.16 Takeover Statutes. No "fair price," "moratorium," "control share
acquisition or other similar anti-takeover statute or regulation (each a
"Takeover Statute") or any applicable anti-takeover provision in the Company's
certificate of incorporation and by-laws is, or at the Effective Time will be,
applicable to the Company, the Company Common Stock, the Offer, the Merger or
the other transactions contemplated by this Agreement. The board of directors of
the Company has taken all action so that Acquiror will not become an "Interested
Stockholder" within the meaning of Section 203 of the DGCL.
5.17 Dispositions. Except as set forth in Section 5.17 of the Company
Disclosure Schedules, as of the date hereof the Company has not received any
claims for indemnification, contribution, breach or otherwise that are
unresolved with respect to any businesses, corporations, properties or assets
(other than inventory sold in the ordinary course) sold by it from the beginning
of 1989 to the present.
5.18 Brokers and Intermediaries. No broker, investment banker,
financial advisor or other person, other than Alex. Brown & Sons Incorporated
(whose fee arrangements have been disclosed to Acquiror in writing and will not
be modified subsequent to the date of this Agreement), the fees and expenses of
which will be paid by the Company, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
5.19 Opinion of Financial Advisor. The Board of Directors of the
Company has received the opinion of Alex. Brown & Sons Incorporated to the
effect that, as of the date of this Agreement, the cash consideration to be
received in the Offer and the Merger by the holders of Company Common Stock
(other than Acquiror and its affiliates) is fair to such holders from a
financial point of view.
5.20 Transactions With Affiliates. Other than the transactions
contemplated by this Agreement and except to the extent disclosed in the Company
SEC Documents or as set forth in Schedule 5.20 of the Company Disclosure
Schedule, from January 1, 1995 through the date of this Agreement, there have
been no transactions, agreements, arrangements or understandings between the
Company or its Subsidiaries, on the one hand, and the Company's affiliates
(other than wholly-owned Subsidiaries of the Company) or other Persons, on the
other hand, that would be required to be disclosed under Item 404 of Regulation
S-K under the Securities Act.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB
Acquiror and Merger Sub each hereby represent and warrant to the
Company as follows:
6.1 Organization, Standing and Corporate Power of Acquiror and Merger
Sub. Each of Acquiror and Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized and has the requisite corporate power and
24
<PAGE> 29
authority to carry on its business as now being conducted. Each of Acquiror and
Merger Sub is duly qualified or licensed to do business and is in good standing
in each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualifications or licensing necessary,
other than in such jurisdictions where the failure to be so qualified or
licensed (individually or in the aggregate) would not have a Material Adverse
Effect on Acquiror. Acquiror and Merger Sub each has delivered to the Company
complete and correct copies of its certificate of incorporation and by-laws (or
comparable charter documents) in each case as amended to the date of this
Agreement.
6.2 Authority; Enforceability; No Conflicts and Consents.
(a) Each of Acquiror and Merger Sub has the requisite
corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The
execution and delivery of this Agreement by Acquiror and Merger Sub and
the consummation by Acquiror and Merger Sub of the transactions
contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of Acquiror and Merger Sub. This
Agreement has been duly executed and delivered by Acquiror and Merger
Sub and, assuming this Agreement constitutes the valid and binding
obligations of the Company, constitutes valid and binding obligations
of each of Acquiror and Merger Sub, enforceable against Acquiror and
Merger Sub in accordance with its terms.
(b) The execution and delivery of this Agreement do not, and
the consummation of the transaction contemplated by this Agreement and
compliance with the provisions of this Agreement will not, conflict
with, or result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give rise to a right of
termination, cancellation, or acceleration of any obligation or cause
loss of a material benefit under, or result in the creation or
maturation of any Encumbrance or purchase right upon any of the
properties or assets of Acquiror or Merger Sub under, (i) the
certificate of incorporation or by-laws (or comparable charter
documents) of Acquiror or Merger Sub, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to
Acquiror or Merger Sub or (iii) any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Acquiror or Merger Sub
or their respective properties or assets, other than, in the case of
clauses (ii) or (iii), any such conflicts, violations, defaults, rights
or liens that individually or in the aggregate would not (Y) impair, in
any material respect, the ability of Acquiror or Merger Sub to perform
its obligations under this Agreement or (Z) prevent or significantly
delay the consummation of any of the transactions contemplated by this
Agreement.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Authority is
required by Acquiror or Merger Sub in connection with the execution and
delivery of this Agreement or the consummation by Acquiror of any of
the transactions contemplated by this Agreement, except for (i) the
filing of a premerger notification and report form by Acquiror under
the HSR Act, (ii) such reports and filings under the Exchange Act as
may be required in connection with this Agreement and the transactions
contemplated by this Agreement, (iii) the filing of the Certificate of
25
<PAGE> 30
Merger with the Delaware Secretary of State and appropriate documents
with the relevant authorities of other states in which the Company is
qualified to do business, (iv) such other consents, approvals, orders,
authorizations, registrations, declarations and filings the failure of
which to be obtained or made would not, individually or in the
aggregate, (Y) impair, in any material respect, the ability of Acquiror
or Merger Sub to perform its obligations under this Agreement or (Z)
prevent or significantly delay the consummation of the transactions
contemplated by this Agreement.
6.3 Brokers. No broker, investment banker, financial advisor or other
person, other than Morgan Stanley & Co. Incorporated, the fees and expenses of
which will be paid by Acquiror, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Acquiror.
6.4 Financing. Acquiror has entered into a Third Amended and Restated
Credit Agreement, dated as of November 14, 1996, by and among Acquiror, Sun
Trust Bank, Atlanta, as Agent, NBD Bank and First Union National Bank of North
Carolina, as Co-agents, and the lenders party thereto, pursuant to which
Acquiror has obtained the financing necessary to effect the transactions
described in this Agreement, including the Offer and the Merger. At or prior to
the Effective Time, Acquiror shall fund the Exchange Agent with funds sufficient
to pay the aggregate Merger Consideration.
ARTICLE VII
COVENANTS RELATING TO CONDUCT OF BUSINESS
7.1 Conduct of Business of the Company. Except as otherwise provided by
the terms of this Agreement or as set forth in Section 5.8 of this Agreement or
in Section 5.8 or 7.1 of the Company Disclosure Schedule, from and after the
date hereof to the Effective Time, the Company shall, and shall cause its
Subsidiaries to, carry on their respective businesses in the ordinary course and
use their best efforts to preserve intact their current business organizations,
keep available the services of their current officers and key employees and
preserve their relationships consistent with past practice with customers,
suppliers and others having business dealings with them to the end that their
goodwill and ongoing businesses shall be unimpaired in all material respects at
the Effective Time. Without limiting the generality of the foregoing, prior to
the Effective Time, except as otherwise provided by the terms of this Agreement
or as set forth in Section 5.8 of this Agreement or in Section 5.8 or 7.1 of the
Company Disclosure Schedule, the Company shall not (and shall cause its
Subsidiaries not to), without the written consent of Acquiror, which consent may
not be unreasonably withheld:
(i) (A) declare, set aside or pay any dividends on, or make
any other distributions in respect of, any of its capital stock, other
than dividends and distributions by any direct or indirect wholly-owned
Subsidiary of the Company to its parent, (B) split, combine or
reclassify any of its capital stock or, except pursuant to the exercise
of options or the
26
<PAGE> 31
Participation Certificates existing on the date hereof, issue or
authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock or other equity
interests or (C) purchase, redeem or otherwise acquire or amend any
shares of capital stock or other equity interests of the Company or any
of its Subsidiaries or any other securities thereof or any rights,
warrants or options to acquire any such shares, interests or other
securities;
(ii) issue, deliver, sell, pledge or otherwise encumber or
amend any shares of its capital stock, any other voting securities or
any securities convertible into, or any rights, warrants or options to
acquire, any such shares, interests, voting securities or convertible
securities (other than the issuance of Company Common Stock upon the
exercise of Options outstanding on the date of this Agreement in
accordance with their present terms and the issuance of Company Common
Stock upon exercise of Participation Certificates);
(iii) amend its Restated Certificate of Incorporation, By-laws
or other comparable charter or organizational documents;
(iv) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing all or substantially all of the
assets of, or by any other manner, any business or any corporation,
partnership, joint venture, association or other business organization
or division thereof or (B) any assets except (x) mergers and
consolidations between or among one or more wholly-owned Subsidiaries
of the Company that will not create adverse tax consequences to the
Company or its Subsidiaries, (y) purchases of inventory, furnishings
and equipment in the ordinary course of business consistent in nature
and amount with past practice or (z) expenditures listed on Section 7.1
of the Company Disclosure Schedule;
(v) sell, lease, license, mortgage or otherwise encumber or
subject to any lien or otherwise dispose of any of its properties or
assets, except sales in the ordinary course of business consistent with
past practice;
(vi) (A) other than (1) ordinary course working capital
borrowings, of which not more than $3 million may be outstanding at any
one time plus amounts necessary to make payments to holders of Options
upon cancellation as is provided for in Section 8.7(e) of this
Agreement, (2) borrowings required to finance specific projects listed
on Section 7.1 of the Company Disclosure Schedule, incur any
indebtedness for borrowed money or guarantee any such indebtedness of
another person, issue or sell any debt securities or warrants or other
rights to acquire any debt securities of the Company or any of its
Subsidiaries, guarantee any debt securities of another person, enter
into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement
having the economic effect of any of the foregoing or (B) make any
loans, advances or capital contributions to, or investments in, any
other person other than (x) to the Company or any direct or indirect
wholly-owned Subsidiary of the Company and (y) advances to employees,
suppliers or customers in the ordinary course of business consistent
with past practice;
27
<PAGE> 32
(vii) pay, discharge, settle or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement
or satisfaction, (A) in the ordinary course of business consistent with
past practice or (B) in accordance with their terms of liabilities
reflected or reserved against in the most recent consolidated financial
statements (or the notes thereto) of the Company included in the
Company SEC Documents filed and publicly available prior to the date of
this Agreement or incurred in the ordinary course of business
consistent with past practice since the date of such financial
statements or waive the benefits of, or agree to modify in any manner,
any confidentiality, standstill or similar agreement to which the
Company or any of its Subsidiaries is a party;
(viii) except as required to comply with Applicable Law, (A)
adopt, enter into, terminate or amend any Employee Benefit Plan or
other arrangement for the benefit or welfare of any director, officer
or current or former employee including any collective bargaining
agreements or arrangements, (B) increase in any manner the compensation
or fringe benefits of, or pay any bonus to, any director, officer or
employee (except for normal increases or bonuses as contractually
required pursuant to agreements disclosed in the Company SEC Documents
filed and publicly available prior to the date of this Agreement and in
Section 5.8 of the Company Disclosure Schedule), (C) pay any benefit
subject to the requirements of ERISA that is not provided for under any
Employee Benefit Plan, (D) except for payments or awards in cash
permitted by clause (B), grant any awards under any bonus, incentive,
performance or other compensation plan or arrangement or Employee
Benefit Plan (including the grant of stock options, stock appreciation
rights, stock based or stock related awards, performance units or
restricted stock, or the removal of existing restrictions in any
Employee Benefit Plans or agreements or awards made thereunder) (E)
take any action to fund or in any other way secure the payment of
compensation or benefits under any employee plan, agreement, contract
or arrangement or Employee Benefit Plan other than in the ordinary
course of business consistent with past practice or (F) unless
requested to do so by Acquiror, which the Company agrees to do
following the acquisition of Company Common Stock in the Offer if so
requested, take any action to accelerate the payment or vesting of
compensation or benefits under any employee plan, agreement, contract
or arrangement or Employee Benefit Plan;
(ix) except in the ordinary course of business, modify, amend
or terminate any contract or agreement set forth in the Company SEC
Documents to which the Company or any Subsidiary is a party or waive,
release or assign any material rights or claims;
(x) conduct its business in a manner or take, or cause to be
taken, any other action that would prevent or materially delay the
Company or Acquiror from consummating the transactions contemplated
hereby in accordance with the terms of this Agreement (regardless of
whether such action would otherwise be permitted or not prohibited
hereunder), including, without limitation, any action which may
materially limit the ability of the Company or Acquiror to consummate
the transactions contemplated hereby as a result of antitrust or other
regulatory concerns; or
28
<PAGE> 33
(xi) buy or sell any interest in General Products during 1996;
(xii) grant any severance or termination pay to, or enter into
any employment or severance agreement with any director, officer or
other employee of the Company or its Subsidiaries; and neither the
Company nor any of its Subsidiaries shall establish, adopt, enter into,
make any new grants or awards under or amend, any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, employee stock ownership,
deferred compensation, employment, termination, severance or other
plan, agreement, trust, fund, policy or arrangement for the benefit of
any directors, officers or employees (the "Benefit Plans");
(xiii) make any federal tax election or permit any insurance
policy naming it as a beneficiary or a loss payable payee to be
canceled or terminated without notice to Acquiror, except in the
ordinary and usual course of business; and
(xiv) authorize any of, or commit or agree to take any of, the
foregoing actions.
7.2 Access to Information. The Company shall, and shall cause each of
its respective Subsidiaries to, afford to Acquiror and Merger Sub and to the
officers, employees, accountants, counsel, financial advisors and other
representatives of Acquiror and Merger Sub, reasonable access during normal
business hours (during the period prior to the Effective Time) to all their
respective properties, books, environmental reports, contracts, commitments,
personnel, consultants, attorneys, and records and, during such period, the
Company shall, and shall cause its respective Subsidiaries to, furnish promptly
to the other party (a) a copy of each report, schedule, registration statement
and other document filed by it during such period pursuant to the requirements
of Federal or state securities laws and (b) all other information concerning its
business, properties and personnel as such other party may reasonably request.
Except as required by Applicable Law, Acquiror and Merger Sub will hold, and
will cause its respective officers, employees, accountants, counsel, financial
advisors and other representatives and affiliates to hold, any nonpublic
information in confidence to the extent required by, and in accordance with, the
provisions of the letter, dated September 5, 1996, between the Company and
Acquiror (the "Confidentiality Agreement").
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1 Preparation of Proxy Statement; Stockholders' Meeting.
(a) If required following termination of the Offer, the
Company shall prepare and file with the SEC the Proxy Statement. The
Company shall use reasonable efforts to have the Proxy Statement
cleared by the SEC, as promptly as practicable thereafter. The Proxy
Statement shall not be filed, and no amendment or supplement thereto
will be made by the Company, without consultation with Acquiror and its
counsel.
29
<PAGE> 34
(b) Each of the Company, Acquiror and Merger Sub covenants
that none of the information supplied or to be supplied by it for
inclusion or incorporation by reference in the Proxy Statement will, at
the date it is first mailed to the stockholders of the Company, or at
the time of the Company Stockholders' Meeting, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are
made, not misleading. The Proxy Statement will comply as to form in all
material respects with the requirements of the Exchange Act.
Notwithstanding the foregoing, (i) no representation or covenant is
made by the Company with respect to statements made therein based on
information supplied in writing by Acquiror or Merger Sub specifically
for inclusion. If at any time prior to the Effective Time there shall
occur (i) any event with respect to the Company or any of its
Subsidiaries, or with respect to other information supplied by the
Company for inclusion in the Proxy Statement or (ii) any event with
respect to Acquiror or Merger Sub, or with respect to information
supplied by Acquiror or Merger Sub for inclusion in the Proxy
Statement, in either case which event is required to be described in an
amendment of, or a supplement to, the Proxy Statement, such event shall
be so described, and such amendment or supplement shall be promptly
filed with the SEC and, as required by law, disseminated to the
stockholders of the Company.
(c) The Company shall promptly notify Acquiror and Merger Sub
of the receipt of any comments from the SEC or its staff or any other
appropriate government official and of any requests by the SEC or its
staff or any other appropriate government official for amendments or
supplements to any of the filings with the SEC in connection with the
Merger and other transactions contemplated hereby or for additional
information and shall supply Acquiror and Merger Sub with copies of all
correspondence between the Company or any of its representatives, and
the SEC or its staff or any other appropriate government official, on
the other hand, with respect thereto. The Company shall use reasonable
efforts to respond to any comments of the SEC with respect to the Proxy
Statement, shall provide promptly to Acquiror and Merger Sub any
information such party may obtain that could necessitate amending any
such document and shall consult with counsel to Acquiror with respect
to such comments.
(d) If required following the termination of the Offer, the
Company shall take all action necessary in accordance with Applicable
Law and its Restated Certificate of Incorporation and By-laws to
convene and hold a meeting of its stockholders (the "Company
Stockholders' Meeting") as promptly as practicable for the purpose of
obtaining the Company Stockholder Approval. The Company shall, through
its Board of Directors, recommend to its stockholders the adoption of
this Agreement and the transactions contemplated hereby and shall use
reasonable efforts to solicit from its stockholders proxies in favor of
adoption of this Agreement and to take all other lawful action
necessary to secure the Company Stockholder Approval. Notwithstanding
the foregoing, the Company's obligation to convene and hold the Company
Stockholders' Meeting and to recommend the adoption of this Agreement
and to solicit proxies from its stockholders shall be subject to any
action (including any withdrawal or change of its recommendation) taken
by, or upon authority of, the Board of Directors of the Company which
the Board of Directors
30
<PAGE> 35
determines, based on the advice of outside legal counsel to the
Company, is required in the exercise of its fiduciary duties to the
Company's stockholders under Applicable Law.
8.2 Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, each of the parties agrees to use all reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause
to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and
the other transactions contemplated by this Agreement, including (i)
the obtaining of all necessary actions or nonactions, waivers, consents
and approvals from Governmental Authorities and the making of all
necessary registrations and filings (including filings with
Governmental Authorities, if any) and the taking of all reasonable
steps as may be necessary to obtain an approval or waiver from, or to
avoid an action or proceeding by, any Governmental Authority (including
in respect of any Governing Law), (ii) the obtaining of all necessary
consents, approvals or waivers from third parties, (iii) the defending
of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of any
of the transactions contemplated by this Agreement, including seeking
to have any stay or temporary restraining order entered by any court or
other Governmental Authority vacated or reversed and (iv) the execution
and delivery of any additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of,
this Agreement.
(b) The Company shall give prompt notice to Acquiror and
Merger Sub, and Acquiror and Merger Sub shall give prompt notice to the
Company, of (i) any representation or warranty made by it contained in
this Agreement becoming untrue or inaccurate in any material respect
(including in the case of representations or warranties by the Company
or Acquiror and Merger Sub, as applicable, such party's receiving
knowledge of any fact, event or circumstance which may cause any
representation qualified as to the knowledge of such party to be or
become untrue or inaccurate in any material respect) or (ii) the
failure by it to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it
under this Agreement; provided, however, that no such notification
shall affect the representations, warranties, covenants or agreements
of the parties or the conditions to the obligations of the parties
under this Agreement.
8.3 Supplemental Disclosure. The Company shall confer on a regular
basis with Acquiror or Merger Sub, report on operational matters and promptly
notify Acquiror or Merger Sub of, and furnish Acquiror or Merger Sub with, any
information it may reasonably request with respect to, any event or condition or
the existence of any fact that would cause any of the conditions to Acquiror's
or Merger Sub's obligation to consummate the Offer or the Merger not to be
completed, and Acquiror and Merger Sub shall promptly notify the Company of, and
furnish the Company any information it may reasonably request with respect to,
any event or condition or the existence of any fact that would cause any of the
conditions to the Company's obligation to consummate the Merger not to be
completed.
31
<PAGE> 36
8.4 Announcements. Prior to the Closing, neither the Company, Acquiror
nor Merger Sub will issue any press release or otherwise make any public
statement with respect to this Agreement and the transactions contemplated
hereby without the prior consent of the other (which consent shall not be
unreasonably withheld), except as may be required by Applicable Law or
applicable stock exchange regulations, in which event the party required to make
the release or announcement shall, if possible, allow the other party reasonable
time to comment on such release or announcement in advance of such issuance. The
parties agree that the initial press release to be issued with respect to the
transactions contemplated by this Agreement shall be in the form heretofore
agreed to by the parties.
8.5 No Solicitation.
(a) From and after the date hereof until the Effective Time,
the Company shall not, nor shall it authorize any of its officers,
directors, employees, agents, investment bankers, attorneys, financial
advisors or other representatives (collectively, "Company
Representatives") to (i) solicit, initiate or knowingly encourage the
submission of, any Acquisition Proposal, (ii) enter into any agreement
with respect to any Acquisition Proposal, or (iii) participate in any
discussions or negotiations regarding, or furnish to any Person any
non-public information with respect to, or take any other action to
knowingly facilitate any inquiries or the making of any proposal that
constitutes or would reasonably be expected to lead to, an Acquisition
Proposal; provided, however, that, notwithstanding anything to the
contrary in this Agreement, (i) the Company may participate in
discussions or negotiations with, and may furnish information
concerning the Company and its business, properties and assets to, a
third party who, without any solicitation by the Company or any Company
Representatives after the date of this Agreement, seeks to engage in
such discussions or negotiations or requests such information, if (1)
the Board of Directors of the Company determines, based on the advice
of the Company's outside legal counsel, that failing to engage in such
discussion or negotiations or provide such information would reasonably
be expected to violate the fiduciary duties of the Board of Directors
of the Company to its stockholders, (2) prior to engaging in
discussions or negotiations with, or furnishing information to, such
Third Party, the Company shall receive from such Third Party an
executed confidentiality agreement in reasonably customary form on
terms not more favorable to such Person or entity than the terms
contained in the Confidentiality Agreement, and (3) the Acquisition
Proposal would result in the holders of Company Common Stock being
entitled to receive consideration which, in the aggregate, would be
greater than $12.50 per share (collectively, a "Permitted Acquisition
Proposal"), and (ii) the Board of Directors of the Company may take and
disclose to the Company's stockholders a position with regard to a
tender offer or exchange offer contemplated by Rules 14d-9 and 14e-2(a)
promulgated under the Exchange Act and may make such disclosure to the
stockholders of the Company as may be required under Applicable Law;
provided, that the Board of Directors of the Company shall not
recommend that the stockholders of the Company tender their shares of
Company Common Stock unless such recommendation is permitted by Section
8.5(d).
32
<PAGE> 37
(b) The Company shall immediately notify Acquiror and Merger
Sub of any Acquisition Proposal, including the identity of the Third
Party making any such Acquisition Proposal and the material terms and
conditions of any Acquisition Proposal.
(c) As used in this Agreement, "Acquisition Proposal" shall
mean any proposal or offer from any person relating to (i) any direct
or indirect acquisition or purchase of more than 20% of either the
capital stock of the Company or the consolidated assets of the Company
and its Subsidiaries taken as a whole, (ii) any tender offer or
exchange offer that if consummated would result in any person
beneficially owning 20% or more of the capital stock of the Company or
(iii) any merger, consolidation or business combination, involving the
Company other than the transactions contemplated by this Agreement.
(d) Notwithstanding anything to the contrary in this
Agreement, the Board of Directors of the Company shall be permitted
from time to time to take the following actions in the circumstances
described below: (i) to withdraw or modify its approval or
recommendation of this Agreement, the Offer or the Merger in a manner
adverse to Acquiror and Merger Sub; or (ii) to approve or recommend or
enter into an agreement with respect to a Permitted Acquisition
Proposal; if, in each such case, (A) a Permitted Acquisition Proposal
is publicly proposed, publicly disclosed or communicated to the Company
and (B) the Board of Directors of the Company determines, based on the
advice of the Company's outside legal counsel, that such action is
required in order to comply with its fiduciary duties to the
stockholders of the Company. No action by the Board of Directors of the
Company permitted by the preceding sentence (each, a "Permitted
Action") shall constitute a breach of this Agreement by the Company.
8.6 Indemnification; Directors' and Officers Insurance.
(a) Until the Effective Time the Company shall, and from and
after the Effective Time, Acquiror and Merger Sub shall, indemnify,
defend and hold harmless each person who is now, or has been at any
time prior to the date hereof or who becomes prior to the Effective
Time, an officer or director of the Company or any of its Subsidiaries
(the "Indemnified Parties") against all losses, claims, damages, costs,
expenses (including reasonable attorneys' fees and expenses),
liabilities or judgments or amounts that are paid in settlement of or
in connection with any threatened or actual claim, action, suit,
proceeding or investigation based in whole or substantially on, or
arising in whole or substantially out of the fact that such person is
or was a director or officer of the Company or any of its Subsidiaries,
whether pertaining to any matter existing or occurring at or prior to
the Effective Time and whether asserted or claimed prior to, or at or
after, the Effective Time ("Indemnified Liabilities"), including all
Indemnified Liabilities based in whole or substantially on, or arising
in whole or substantially out of, or pertaining to this Agreement or
the transactions contemplated hereby, in each case to the fullest
extent a corporation is permitted under the DGCL to indemnify its own
directors or officers as the case may be (and the Company or the
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 fullest extent permitted by law), provided the
person to whom expenses are advanced provides an undertaking to repay
such
33
<PAGE> 38
advances if it is ultimately judicially determined that such person is
not entitled to indemnification.
(b) The Acquiror and Surviving Corporation shall and shall
cause the Subsidiaries of the Surviving Corporation to keep in effect
provisions in their respective Certificates of Incorporation and
By-laws providing for exculpation for director, officer and employee
liability and such corporation's indemnification of the Indemnified
Parties to take fullest extent permitted under the DGCL, which
provisions shall not be amended, repealed or otherwise modified for a
period of six years after the Effective Time in any manner that would
adversely affect the rights thereunder of individuals who at any time
prior to the Effective Time were directors, officers or employees of
the Company in respect of actions or omissions occurring at or prior to
the Effective Time (including, without limitation, the transactions
contemplated by this Agreement), unless such modification is required
by law.
(c) For a period of four years after the Effective Time,
Acquiror and Surviving Corporation shall cause to be maintained in
effect the current primary policy of directors and officers liability
insurance maintained by the Company and its Subsidiaries (provided that
Surviving Corporation may substitute therefor policies of at least the
same coverage and amounts containing terms and conditions that are no
less advantageous in any material respect to the Indemnified Parties)
with respect to matters arising before the Effective Time; provided
that Surviving Corporation and Acquiror shall not be required to pay
annual premiums therefor in excess of two times the annual premiums at
present paid for such insurance. If such insurance premium cost exceeds
such amount, Acquiror and Surviving Corporation shall be required to
purchase the maximum amount of such coverage that can be purchased for
such amount.
(d) After the Effective Time, any Indemnified Party wishing to
claim indemnification under this Section, upon learning of any such
action, suit, claim, Proceeding or investigation, shall notify Acquiror
and Surviving Corporation within 30 days thereof; provided, however,
that any failure so to notify Acquiror and Surviving Corporation of any
obligation to indemnify such Indemnified Party or of any other
obligation imposed by this Section shall not affect such obligations
except to the extent Acquiror or Surviving Corporation is materially
prejudiced thereby. Acquiror and Surviving Corporation shall be
entitled to assume the defense of any such action, suit, claim,
proceeding or investigation with counsel of its choice (who shall be
reasonably acceptable to the Indemnified Party), unless there is a
conflict between the positions of Acquiror and Surviving Corporation,
on the one hand, and the Indemnified Party, on the other, in which
event the Indemnified Party, together with all other similarly situated
Indemnified Parties in the proceeding as a group, may retain one law
firm and one local counsel to represent them with respect to such
matter, the reasonable cost of which shall be borne by Acquiror and
Surviving Corporation. Neither Acquiror and Surviving Corporation, on
the one hand, nor any Indemnified Party, on the other hand, may settle
any such action, suit, claim, proceeding or investigation without the
prior written consent of the other party, which consent shall not be
unreasonably withheld or delayed.
34
<PAGE> 39
(e) The provisions of this Section 8.6 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party,
his or her heirs and his or her personal representatives and shall be
binding on all successors and assigns of Acquiror, Merger Sub and the
Company.
8.7 Employee Benefits.
(a) To the extent permitted by law, Acquiror and Merger Sub
shall or shall cause the Surviving Corporation to maintain in effect
employee benefit plans and arrangements which provide benefits which
have a value which is substantially comparable, in the aggregate, to
the benefits provided by the Employee Benefit Plans (not taking into
account the value of any benefits under any such plans which are equity
based) for a period of one year after the Effective Time, other than
benefits provided under collective bargaining agreements; provided,
however, if during this period Acquiror implements any widespread
decrease in benefits under compensation and benefit plans (or in the
costs thereof) to participants under plans applicable to Acquiror and
its Subsidiaries, the benefits for the Surviving Corporation (and costs
thereof) may be similarly adjusted.
(b) The Surviving Corporation shall honor pursuant to the
terms of such agreements all employment, severance and termination
agreements (including change in control provisions) of the employees of
the Company and its Subsidiaries, all of which are disclosed in Section
5.11(a) of the Company Disclosure Schedules. Any bonus compensation
required to be paid to any employee of the Company on a pro rata or
similar basis as a result of a termination of employment pursuant to
any such employment, severance or termination agreements shall be paid
based upon the actual results of the Company as of the end of the month
next preceding the date of termination of such employment. Such bonus
compensation shall be paid within thirty days after the end of such
month notwithstanding anything in such agreements to the contrary.
(c) For purposes of determining eligibility to participate and
vesting, but not accrual or entitlement to benefits (other than
severance benefit accrual) where length of service is relevant under
any employee benefit plan or arrangement of Acquiror or the Surviving
Corporation, employees of the Company and its Subsidiaries immediately
prior to the Effective Time shall receive service credit for service
with the Company and any of its Subsidiaries to the same extent such
service was granted under the Employee Benefit Plans. With respect to
employees of the Company and its Subsidiaries immediately prior to the
Effective Time who are employed by Acquiror or the Surviving
Corporation, the medical coverage provided by the Acquiror or the
Surviving Corporation shall: (i) impose no waiting periods and no
pre-existing condition exclusions, other than as were applicable to the
individuals immediately prior to the Effective Time; and (ii) provide
credit for deductibles, co-payments and out-of-pocket charges paid with
respect to the individuals prior to the Effective Time as if paid under
the medical program provided by the Acquiror or the Surviving
Corporation but only to the extent such payments were paid during the
plan year of such medical program in which the Effective Time occurs.
35
<PAGE> 40
(d) With respect to each Eligible Employee (as defined below)
who terminates or otherwise loses employment within one (1) year
following the Effective Time: (i) medical coverage shall be provided by
the Acquiror or the Surviving Corporation (A) for the period of time,
if any, used in determining the amount of the employee's severance or
termination pay but shall cease upon such Eligible Employee's
reemployment and (B) on terms (including costs to the participant) not
less favorable to the employee as in effect immediately prior to such
termination or other loss of employment; and (ii) the duration of
medical coverage made available with respect to the employee pursuant
to Code Section 4980B and/or ERISA Section 601 et. seq. ("COBRA") after
termination of the coverage provided under clause (i) shall be reduced
for the period of such coverage under clause (i). For purposes of this
Section 8.7(d), the term "Eligible Employee" means: (x) each employee
of the Company immediately prior to the Effective Time who receives
severance or termination pay as a result of termination or loss of
employment during such one-year period; and (y) each person identified
on Schedule 5.8(v)(Z) who, immediately prior to the Effective Time, is
an employee of a Company Subsidiary who receives severance or
termination pay as a result of termination or loss of employment during
such one-year period.
(e) Stock Options. Prior to the Effective Time, the Company
shall take such actions as may be necessary such that at the Effective
Time, each then outstanding option to purchase shares of Company Common
Stock under the Company's 1990 Stock Option Plan, 1995 Stock Option
Plan and the Sardas Options (collectively, the "Company Stock Option
Plans"), whether or not then vested or exercisable in accordance with
its terms (collectively, the "Options"), shall be canceled and entitle
the holder thereof, upon surrender to the Company, to receive an amount
of cash equal to the product of (x) the amount by which the Merger
Consideration exceeds the exercise price per share of Company Common
Stock subject to such Option (whether vested or unvested) and (y) the
number of shares of Company Common Stock issuable pursuant to the
unexercised portion of such Option (whether vested or unvested), less
any required withholding of taxes (such amount being hereinafter
referred to as, the "Option Consideration"). The surrender of an Option
to the Company in exchange for the Option Consideration shall be deemed
a release of any and all rights the holder had or may have had in
respect of such Option. All Company Stock Option Plans and Options
shall terminate as of the Effective Time and the provisions in any
other plan, program or arrangement providing for the issuance or grant
of any other interest in respect of the capital stock of the Company or
any Subsidiary thereof, shall be canceled as of the Effective Time, and
the Company shall take all permitted action necessary, including
receiving applicable consents from optionees, to ensure that following
the Effective Time no participant in any Company Stock Option Plan or
other plans, programs or arrangements shall have any right thereunder
to acquire equity securities of the Company, the Surviving Corporation
or any Subsidiary thereof and to terminate all such plans.
(f) With respect to the Sudbury, Inc. Directors' Deferral Plan
("Deferral Plan"), the Company shall take such actions as may be
necessary such that as of the Effective Time, the Deferral Plan shall
be terminated and, as soon as practicable after the Effective Time,
each participant's "Deferred Account" (as defined under the Deferral
Plan) shall be paid to the participant in one lump sum cash payment.
For purposes of the preceding sentence, the
36
<PAGE> 41
portion of a participant's "Deferred Account" representing the
participant's "Stock Account" (as defined under the Deferral Plan)
shall be valued on a per share basis using the Merger Consideration.
8.8 Transfer Taxes. The Company Acquiror and Merger Sub 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 and stamp taxes, any transfer, recording, registration and
other fees and any similar taxes that become payable in connection with the
transactions contemplated by this Agreement ("Transfer Taxes"). The Company
shall pay or cause to be paid any such Transfer Taxes.
8.9 Vote of Company Stock. Acquiror and Merger Sub shall vote all
shares of Company Common Stock currently owned by them or subsequently acquired
in favor of adoption of this Agreement.
8.10 Agreement to Advance Funds. If requested by the Company,
immediately prior to the Effective Time, Acquiror will advance to the Company up
to $30 million (the "Advance"). The Advance will bear interest at the rate per
annum charged to Acquiror under its senior credit facility. Principal and
interest will be due and payable three months after the Advance is made and the
Advance will be evidenced by a promissory note that is mutually acceptable to
Acquiror and the Company.
ARTICLE IX
CONDITIONS PRECEDENT
9.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction or waiver on or prior to the Closing Date of each of the following
conditions:
(a) Stockholder Approval. The Company shall have obtained the
Company Stockholder Approval.
(b) HSR Act. The applicable waiting period (and any extension
thereof) applicable to the Merger under the HSR Act shall have expired
or been earlier terminated.
(c) No Injunctions or Restraints. Subject to fulfillment by
each party of its obligations under Section 8.2(a) of this Agreement no
statute, rule, regulation, decree, preliminary or permanent injunction,
temporary restraining order or other order of any nature of any court
or Governmental Authority shall be in effect that restrains, prevents
or materially changes the transactions contemplated hereby; provided,
however, that in the case of a decree, injunction or other order, the
party invoking this condition shall have used reasonable efforts to
prevent the entry of any such injunction or other order and to appeal
as promptly as possible any decree, injunction or other order.
37
<PAGE> 42
(d) Merger Sub (or another Subsidiary of Acquiror) shall have
acquired shares of Company Common Stock pursuant to the Offer.
9.2 Conditions of Obligations of Acquiror. The obligations of Acquiror
and Merger Sub to effect the Merger are further subject to the satisfaction of
each of the following conditions, any or all of which may be waived on or prior
to the Closing Date in whole or in part by Acquiror and Merger Sub:
(a) Agreements. The Company shall have performed in all
material respects all obligations required to be performed by it under
this Agreement at or prior to or at the Closing Date and shall have
complied or be in compliance in all material respects with any
agreement or covenant of the Company to be performed by it under this
Agreement at or prior to the Closing Date.
(b) Consents. All necessary approvals or authorizations of any
Governmental Authority in connection with the Merger shall have been
obtained except where the failure to have obtained or made any such
approval or authorization would not have a Material Adverse Effect on
the Company.
(c) Litigation. Subject to fulfillment by each party of its
obligations under Section 8.2(a) there shall not have been entered any
order by any Governmental Authority in any suit, action or proceeding,
which (i) requires the payment of damages by Acquiror, Merger Sub or
the Company in connection with the Offer or the Merger which damages
are material to the value of the Company and its Subsidiaries taken as
a whole, (ii) prohibits or limits the ownership or operation by
Acquiror and its Subsidiaries of, or compels Acquiror or any of its
Subsidiaries to dispose of or hold separate, any business or assets
which are material to Acquiror and its Subsidiaries taken as a whole,
in each case as a result of the Offer or the Merger or any of the other
transactions contemplated by this Agreement, or (iii) imposes
limitations on the ability of Acquiror to acquire or hold, or exercise
full rights of ownership of, shares of capital stock of the
Subsidiaries of the Company, which limitations would have a Material
Adverse Effect with respect to the value of the Company and its
Subsidiaries taken as a whole to the Acquiror.
ARTICLE X
TERMINATION
10.1 Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the Merger contemplated
herein may be abandoned at any time prior to the Effective Time, whether before
or after stockholder approval hereof;
(a) By the mutual consent of the Board of Directors of
Acquiror and the Board of Directors of the Company.
38
<PAGE> 43
(b) By either of the Board of Directors of the Company or the
Board of Directors of Acquiror:
(i) if Acquiror or Merger Sub has not purchased shares
of Company Common Stock in accordance with the terms of the
Offer on or prior to February 14, 1997; provided, however,
that the right to terminate this Agreement under this Section
10.1(b)(i) shall not be available to any party whose failure
to fulfill any obligations under this Agreement has been the
cause of, or resulted in, the failure to satisfy the
conditions to the Offer; provided further, however, that
Acquiror shall not have the right to terminate this Agreement
under this Section 10.1(b)(i) if Acquiror or Merger Sub
purchases any Shares in connection with the Offer after
February 14, 1997; or
(ii) if any Governmental Authority shall have issued an
order, decree or ruling or taken any other action (which
order, decree, ruling or other action the parties hereto shall
use their best efforts to lift), in each case permanently
restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order,
decree, ruling or other action shall have become final and
non-appealable.
(c) By the Board of Directors of the Company:
(i) if, prior to the purchase of shares of Company
Common Stock pursuant to the Offer, the Board of Directors of
the Company shall have taken a Permitted Action; provided that
the fee provided for in Section 10.3 must be paid at or prior
to such termination;
(ii) if prior to the purchase of shares of Company
Common Stock pursuant to the Offer, Acquiror or Merger Sub (y)
breaches or fails in any material respect to perform or comply
with any of its material covenants and agreements contained
herein or (z) breaches its representations and warranties in
any material respect; provided, however, that if any such
breach is cured prior to termination, the Company may not
terminate this Agreement pursuant to this Section 10.1(c)(ii);
(iii) if Acquiror or Merger Sub shall have terminated the
Offer, or the Offer shall have expired, without Merger Sub
purchasing any shares of Company Common Stock pursuant
thereto; provided that the Company may not terminate this
Agreement pursuant to this Section 10.1(c)(iii) if the Company
is in material breach of this Agreement; or
(iv) if, due to an occurrence that if occurring after
the commencement of the Offer would result in a failure to
satisfy any of the conditions set forth in Annex A hereto,
Acquiror or Merger Sub shall have failed to commence the Offer
on or prior to five business days following the date of the
initial public announcement of
39
<PAGE> 44
the Offer; provided, that the Company may not terminate
this Agreement pursuant to this Section 10.1(c)(iv) if the
Company is in material breach of this Agreement.
(d) By the Board of Directors of Acquiror:
(i) if, due to an occurrence that if occurring after
the commencement of the Offer would result in a failure to
satisfy any of the conditions set forth in Annex A hereto,
Acquiror or Merger Sub shall have failed to commence the Offer
on or prior to five business days following the date of the
initial public announcement of the Offer; provided that
Acquiror may not terminate this Agreement pursuant to this
Section 10.1(d)(i) if Acquiror or Merger Sub is in material
breach of this Agreement; or
(ii) if (A) prior to the purchase of shares of Company
Common Stock pursuant to the Offer, the Board of Directors of
the Company takes a Permitted Action, or (B) prior to the
consummation of the Offer, it shall have been publicly
disclosed or Acquiror or Merger Sub shall have learned that
any person, entity or "group" (as that term is defined in
Section 13(d)(3) of the Exchange Act) (an "Acquiring Person"),
other than employees of the Company through exercise of
options, shall have acquired beneficial ownership (determined
pursuant to Rule 13d-3 promulgated under the Exchange Act) of
more than 20% of any class or series of capital stock of the
Company (including the Shares), through the acquisition of
stock, the formation of a group or otherwise, or shall have
been granted any option, right or warrant, conditional or
otherwise, to acquire beneficial ownership of more than 20% of
any class or series of capital stock of the Company (including
the Shares);
(iii) if Acquiror or Merger Sub, as the case may be,
shall have terminated the Offer, or the Offer shall have
expired without Acquiror or Merger Sub, as the case may be,
purchasing any shares of Company Common Stock thereunder,
provided that Acquiror or Merger Sub may not terminate this
Agreement pursuant to this Section 10.1(d)(iii) if Acquiror or
Merger Sub is in material breach of this Agreement; or
(iv) if the Company breaches or fails in any material
respect to perform or comply with any of its material
covenants and agreements contained herein.
10.2 Effect of Termination. In the event of the termination of this
Agreement as provided in Section 10.1, written notice thereof shall forthwith be
given to the other party to parties specifying the provision hereof pursuant to
which such termination is made, and this Agreement shall forthwith become null
and void, and there shall be no liability on the part of Acquiror, Merger Sub or
the Company except (A) for fraud or for material breach of this Agreement and
(B) as set forth in Sections 7.2, 10.3 and 11.2 hereof.
10.3 Termination Fee. If (y) the Board of Directors of the Company
shall terminate this Agreement pursuant to Section 10.1(c)(i) hereof or (z) the
Board of Directors of Acquiror shall
40
<PAGE> 45
terminate this Agreement pursuant to Section 10.1(d)(ii)(A) hereof, the Company
shall pay to Acquiror (not later than the date of termination of this Agreement)
an amount equal to $5 million. The Company acknowledges that the agreements
contained in this Section 10.3 are an integral part of the transactions
contemplated in this Agreement, and that, without these agreements, Acquiror and
Merger Sub would not enter into this Agreement; accordingly, if the Company
fails to promptly pay the amount due pursuant to this Section 10.3, and, in
order to obtain such payment, Acquiror or Merger Sub commences a suit which
results in a judgment against the Company for the amount set forth in this
Section, the Company shall pay to Acquiror or Merger Sub its costs and expenses
(including attorneys' fees) in connection with such suit, together with interest
on the amount of the fee at the annual rate of interest charged to Acquiror
under its senior credit facility.
ARTICLE XI
GENERAL PROVISIONS
11.1 Effectiveness of Representations, Warranties and Agreements. The
representations, warranties and agreements in this Agreement shall terminate at
the Effective Time or upon the termination of this Agreement pursuant to Article
X, except that the agreements set forth in Articles III and IV and Sections 8.6
and 8.7 shall survive the Effective Time and those set forth in Sections 10.2,
10.3 and Article XI hereof shall survive termination.
11.2 Expenses. Each of the parties hereto shall pay the fees and
expenses of its respective counsel, accountants and other experts and shall pay
all other costs and expenses incurred by it in connection with the negotiation,
preparation and execution of this Agreement and the consummation of the
transactions contemplated hereby.
11.3 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware without reference to
choice of law principles, including all matters of construction, validity and
performance.
11.4 Notices. Notices, requests, permissions, waivers, and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if signed by the respective persons giving them (in the case of any
corporation the signature shall be by an officer thereof) and delivered by hand,
deposited in the United States mail (registered or certified, return receipt
requested), properly addressed and postage prepaid, or delivered by telecopy:
If to the Company, to:
Sudbury, Inc.
Suite 203
30100 Chagrin Blvd.
Cleveland, OH 44124
Attention: Jacques R. Sardas
Facsimile: (216) 464-4614
41
<PAGE> 46
with a copy to:
Benesch, Friedlander, Coplan & Aronoff P.L.L.
200 Public Square
Cleveland, OH 44114
Attention: Ira Kaplan
Facsimile: (216) 363-4588
and:
If to Acquiror, to:
Intermet Corporation
5445 Corporate Drive, Suite 200
Troy, MI 48098-2683
Attn: Doretha Christoph
Facsimile: (810) 952-2501
with a copies to:
Sullivan & Cromwell
125 Broad St.
N.Y., N.Y. 10004
Attn: Janet T. Geldzahler
Facsimile: (212)558-3588
and
Dickinson, Wright, Moon, VanDusen & Freeman
500 Woodward, Suite 4000
Detroit, MI 48226
Attn: Steven H. Hilfinger
Facsimile: (313) 223-3598
Such names and addresses may be changed by notice given in accordance with this
Section 10.4.
11.5 Entire Agreement. This Agreement (including the Company Disclosure
Schedule, and the Exhibits attached hereto, all of which are a part hereof) and
the Confidentiality Agreement contain the entire understanding of the parties
hereto and hereto with respect to the subject matter contained herein and
therein, supersede and cancel all prior agreements, negotiations,
correspondence, undertakings and communications of the parties, oral or written,
respecting such subject matter. There are no restrictions, promises,
representations, warranties, agreements or undertakings of any party hereto with
respect to the transactions contemplated by this Agreement other than those set
forth herein or made hereunder.
42
<PAGE> 47
11.6 Disclosure Schedule. The Disclosure Schedule, dated the date
hereof, delivered by the Company to Acquiror (the "Company Disclosure Schedule")
are incorporated into this Agreement by reference and made a part hereof.
Nothing disclosed in the Company Disclosure Schedule shall be deemed to be an
admission that such matters are material or are required to be disclosed herein.
Certain immaterial items or items that are not entirely responsive to
the information required in a Schedule may be included in various Schedules as
further clarification or assistance to the parties in understanding the business
and operations of the parties or in consummating the transactions contemplated
herein.
11.7 Headings; References. The article, Section and paragraph headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. All references
herein to "Articles", "Sections" or "Exhibits" shall be deemed to be references
to Articles or Sections hereof or Exhibits hereto unless otherwise indicated.
11.8 Counterparts. This Agreement may be executed in one or more
counterparts and each counterpart shall be deemed to be an original, but all of
which shall constitute one and the same original.
11.9 Parties in Interest; Assignment. Neither this Agreement nor any of
the rights, interest or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties. Subject
to the preceding sentence this agreement shall inure to the benefit of and be
binding upon the Company, Acquiror and Merger Sub and shall inure to the sole
benefit of the Company Acquiror and Merger Sub and their respective successors
and permitted assigns. Except as set forth in Sections 8.6 nothing in this
Agreement, express or implied, is intended to confer upon any other Person any
rights or remedies under or by reason of this Agreement.
11.10 Severability; Enforcement. Except to the extent that the
application of this Section 11.10 would have a Material Adverse Effect with
respect to Acquiror or the Company, the invalidity of any portion hereof shall
not affect the validity, force or effect of the remaining portions hereof. If it
is ever held that any restriction hereunder is too broad to permit enforcement
of such restriction to its fullest extent, each party agrees that a court of
competent jurisdiction may enforce such restriction to the maximum extent
permitted by law, and each party hereby consents and agrees
43
<PAGE> 48
that such scope may be judicially modified accordingly in any proceeding brought
to enforce such restriction.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
INTERMET CORPORATION
By: /s/ Doretha J. Christoph
----------------------------------
Name: Doretha J. Christoph
Title: V.P. Finance & CFO, Treasurer
IM ACQUISITION CORP.
By: /s/ James W. Rydel
------------------------------------
Name: James W. Rydel
Title: President
SUDBURY, INC.
By: /s/ Jacques R. Sardas
_____________________________________
Name: Jacques R. Sardas
Title: Chairman, Chief Executive Officer,
President and Treasurer
44
<PAGE> 49
ANNEX A
Certain Conditions of the Offer. Notwithstanding any other provision of
the Offer and provided that Merger Sub shall not be obligated to accept for
payment any shares of Company Common Stock until expiration of all applicable
waiting periods under the H-S-R Act, Merger Sub shall not be required to accept
for payment or pay for, or may delay the acceptance for payment of or payment
for, any tendered shares of Company Common Stock, or may, in its sole
discretion, terminate or amend the Offer as to any shares of Company Common
Stock not then paid for if 7,800,000 shares of Company Common Stock shall not
have been properly and validly tendered pursuant to the Offer and not withdrawn
prior to the expiration of the Offer, or, if on or after November 18, 1996, (or
as to clause (j) below at anytime) and at or before the time of payment for any
of such shares of Company Common Stock (whether or not any shares of Company
Common Stock have theretofore been accepted for payment), any of the following
events shall occur:
(a) there shall have occurred (i) any general suspension of
trading in securities on the NYSE or in the over-the-counter market,
(ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States, (iii) a commencement
or escalation of a war, armed hostilities or other international or
national calamity directly or indirectly involving the United States,
(iv) any limitation (whether or not mandatory) by any governmental or
regulatory authority, agency, commission or other entity, domestic or
foreign ("Governmental Entity"), on, or any other event which might
affect, the extension of credit by banks or other lending institutions,
or (v) or in the case of any of the foregoing existing at the time of
the commencement of the Offer, a material acceleration or worsening
thereof;
(b) the Company shall have breached or failed to perform in
any material respect any of its obligations, covenants or agreements
under the Merger Agreement or any representation or warranty of the
Company set forth in the Merger Agreement shall have been inaccurate or
incomplete in any material respect when made or thereafter shall become
inaccurate or incomplete in any material respect except (i) for changes
contemplated by the Merger Agreement and (ii) those representations or
warranties that address matters only as of a particular date which are
true and correct as of such date.
(c) there shall be instituted or pending any action,
litigation, proceeding, investigation or other application
(hereinafter, an "Action"), (including a worsening of any exsiting
Action) before any United States court or other Governmental Entity by
any United States Governmental Entity: (i) challenging the acquisition
by Acquiror or Merger Sub of shares of Company Common Stock, seeking to
restrain or prohibit the consummation of the transactions contemplated
by the Offer or the Merger seeking to obtain any damages which damages
are material to the Company and its Subsidiaries taken as a whole; (ii)
seeking to prohibit, or impose any material limitations on, Acquiror's
or Merger Sub's ownership or operation of all the Company's business or
assets or to compel Acquiror or Merger Sub to dispose of or hold
separate all or any portion of the Company's business or assets
(including the business or assets of its Subsidiaries) as a result of
the transactions contemplated by the Offer of the Merger which
limitations would have a material adverse effect with respect to the
value of the Company and its Subsidiaries taken as a whole to Acquiror;
(iii) seeking to make the acceptance for payment, purchase of, or
payment for, some or all of the shares of
<PAGE> 50
Company Common Stock illegal or render Merger Sub unable to, or result
in a material delay in, or materially restrict, the ability of Merger
Sub to accept for payment, purchase or pay for some or all of the
shares of Company Common Stock; (iv) seeking to impose material
limitations on the ability of Acquiror or Merger Sub effectively to
acquire or hold or to exercise full rights of ownership of the shares
of Company Common Stock including, without limitation, the right to
vote the shares of Company Common Stock purchased by them on an equal
basis with all other shares of Company Common Stock on all matters
properly presented to the stockholders; or (v) that in any event is
reasonably likely to have a material adverse effect on the financial
condition, properties, business or operations of the Company and its
Subsidiaries taken as a whole or the value of the shares of Company
Common Stock to Acquiror or Merger Sub as a result of consummation of
the transactions contemplated by the Offer and the Merger;
(d) any statute, rule, regulation, order or injunction shall
be enacted, promulgated, entered, enforced or deemed or become
applicable to the Offer or the Merger, or any other action shall have
been taken, proposed or threatened, by any United States court or other
Governmental Entity other than the application to the Offer or the
Merger of waiting periods under the H-S-R Act, that, directly or
indirectly, can reasonably be expected to result in any of the effects
of, or have any of the consequences sought to be obtained or achieved
in, any Action referred to in clauses (i) through (v) or paragraph (c)
above;
(e) a tender or exchange offer for some portion or all of the
shares of Company Common Stock shall have been commenced or publicly
proposed to be made by another person (including the Company or its
subsidiaries), or it shall have been publicly disclosed that (i) any
person (including the Company or its Subsidiaries), entity or "group"
(as defined in Section 13(d) of the Exchange Act and the rules
promulgated thereunder), other than employees of the Company through
exercise of Options, shall have become the beneficial owner (as defined
in Section 13(d) of the Exchange Act and the rules promulgated
thereunder) of more than 20% of the shares of Company Common Stock; or
(ii) any person, entity or group shall have entered into a definitive
agreement or an agreement in principle with respect to an acquisition
proposal with or involving the Company;
(f) any change shall have occurred in the financial condition,
properties, businesses or results of operations of the Company and any
of its Subsidiaries that is or is reasonably likely to be materially
adverse to the Company and its Subsidiaries taken as a whole;
(g) the Board of Directors of the Company (or a special
committee thereof) shall have amended, modified or withdrawn its
recommendation of the Offer or the Merger, or shall have failed to
publicly reconfirm such recommendation upon request by Acquiror or
Merger Sub, or shall have endorsed, approved or recommended any other
Acquisition Proposal, or shall have resolved to do any of the
foregoing;
(h) the Merger Agreement shall have been terminated by the
Company or Acquiror or Merger Sub in accordance with its terms or
Acquiror or Merger Sub shall have reached an agreement or understanding
in writing with the Company providing for
<PAGE> 51
termination or amendment of the Offer or delay in payment for the
shares of Company Common Stock;
(i) any Action is instituted or pending by a non-governmental
person or entity (or there shall be a worsening of an existing Action)
which, in the reasonable judgment of Acquiror, has a reasonable
likelihood of success, and if successful on the merits, is more likely
than not to have a material adverse effect on the financial condition,
properties, business or operations of the Company and its Subsidiaries
taken as a whole or the value of the shares of Company Common Stock to
Acquiror as a result of the consummation of the transactions
contemplated by the Offer and the Merger; or
(j) if there has been any (y) Release of Hazardous Substances
in, on, under or affecting any properties currently or formerly owned
or operated by the Company or any of its Subsidiaries in violation of,
or as would reasonably be anticipated to result in liability under,
applicable Environmental Laws or (z) disposal of Hazardous Substances
or any other substance in a manner that has led to, or could reasonably
be anticipated to lead to, a Release in violation of applicable
Environmental Laws except, in either case, as disclosed on Schedule 5.6
of the Company Disclosure Schedules and except in either case for those
which, individually or in the aggregate, are not reasonably likely to
have a Material Adverse Effect on the Company,
which, in the sole judgment of Acquiror and Merger Sub, in any such case, and
regardless of the circumstances (including any action or inaction by Acquiror or
Merger Sub giving rise to any such conditions, makes it inadvisable to proceed
with the Offer and/or with such acceptance for payment of or payment for shares
of Company Common Stock.
The foregoing conditions are for the sole benefit of Acquiror and
Merger Sub and may be asserted by Acquiror or Merger Sub regardless of the
circumstances (including any action or inaction by Acquiror or Merger Sub)
giving rise to such condition or may be waived by Acquiror or Merger Sub, by
express and specific action to that effect, in whole or in part at any time and
from time to time in its sole discretion.
<PAGE> 1
Exhibit 4
CONFIDENTIALITY AGREEMENT
-------------------------
Date: September 5, 1996
Alex. Brown & Sons Incorporated
1290 Avenue of the Americas, 10th Floor
New York, NY 10104
Attention: Betty W. Ridings
Dear Ms. Ridings:
In connection with our consideration of a possible transaction with
Sudbury, Inc. ("Sudbury" or the "Company"), we have requested information
concerning the Company. As a condition thereof, we agree to treat any
information concerning the Company and its subsidiaries (whether prepared by the
Company, its advisors, or otherwise) which is furnished to us by or on behalf of
the Company (collectively, the "Evaluation Material") in accordance with the
provisions of this letter and to take or abstain from taking certain other
actions hereto set forth. The term "Evaluation Material" does not include
information which (i) is already in our possession, provided that such
information is not subject to another confidentiality agreement with or other
obligation of secrecy to the Company or another party, (ii) becomes generally
available to the public other than as a result of a disclosure by us or our
directors, officers, employees, agents or advisors, or (iii) becomes available
to us on a non-confidential basis from a source other than the Company or its
advisors, provided that such source is not bound by a confidentiality agreement
with or other obligation of secrecy to the Company or another party.
We hereby agree that the Evaluation Material will be used solely for
the purposes of evaluating a possible transaction between the Company and us,
and that such information will be kept confidential by us and our directors,
officers, employees, agents, and advisors (including attorneys and accountants)
except as required by law or court of competent jurisdiction, provided, however,
that we will promptly notify the Company and Alex. Brown & Sons Incorporated
("Alex. Brown") at any time we are served with any legal process seeking, or we
become obligated to disclose such information by law or by court order (as will
be evidenced by written opinion of our counsel), so that the Company may seek an
appropriate protective order. Furthermore, with regard to the Evaluation
Material, (i) any of such information may be disclosed to our directors,
officers, employees, agents and representatives of our advisors who need to know
such information for the purpose of evaluating any such possible transaction
between the Company and us (it being understood that such directors, officers,
employees, agents and representatives shall be informed by us of the
confidential nature of such information and shall be directed by us to treat
such information confidentially, and we shall be responsible for any
unauthorized disclosure or use of the Evaluation Material by them in a manner
not contemplated by this Agreement), and (ii) any disclosure of such information
may be made to
<PAGE> 2
which the Company consents in writing. In addition, without prior written
consent of the Company, we will not, and will direct such directors, officers,
employees and representatives not to, disclose to any other person either the
fact that discussions or negotiations are taking place concerning a possible
transaction between the Company and us or any of the terms, conditions or facts
with respect to any such possible transaction, including the status thereof.
We understand that, although the Company has endeavored to include in
the Evaluation Material information known to it which it believes to be relevant
for the purposes of our investigation, neither the Company nor any of its
representatives or advisors have made or make any representation or warranty as
to the accuracy or completeness of the Evaluation Material. We agree that
neither the Company nor its representatives or advisors shall have any
liability to us or any of our representatives or advisors resulting from the
use of the Evaluation Material.
We agree that unless and until a definitive agreement between the
Company and us with respect to a possible transaction has been executed and
delivered, neither the Company nor we will be under any legal obligation of any
kind whatsoever with respect to such a transaction by virtue of this letter or
any written or oral expression with respect to such a transaction by any of its
directors, officers, employees, agents or any other representatives or its
advisors or representatives thereof except, in the case of this letter, for the
matters specifically agreed to herein. The agreement set forth in this
paragraph may be modified or waived only by a separate written agreement by the
Company and us expressly modifying or waiving such agreement.
We agree not to initiate or maintain contact (except for those
contracts made in the ordinary course of business) with any officer, director or
employee of the Company except company CEO, or any of its subsidiaries or with
any customer or supplier or any other party with whom the Company or its
subsidiaries does business regarding the Company or its business, operations,
prospects or finances, except with the express written permission of the
Company. It is understood that Alex. Brown will arrange for appropriate
contracts for due diligence purposes and that Alex. Brown will arrange for
appropriate contacts for due diligence purposes and that Alex. Brown will
arrange the time and manner of such due diligence. Unless otherwise agreed in
writing by the Company, all (i) communications regarding this possible
transaction, (ii) requests for additional information, (iii) requests for
facility tours or management meetings, and (iv) discussions or questions
regarding procedures, will be submitted or directed to Alex. Brown. For a
period of one year from the date hereof, we will not solicit for hire or hire
as an employee or independent contractor any person currently employed by the
Company. We agree that upon the request of the Company, we will promptly return
to the Company any and all company provided Evaluation Material and will cause
our directors, officers, employees, agents, representatives and advisors also
to do so. Such material will include copies, summaries, analysis and extracts
thereof.
The Company shall be entitled to equitable relief including injunction
and shall be entitled to a temporary restraining order and to such other
remedies as may be available under applicable law if we or any of our
representatives breach this letter. This letter shall be governed by, and
construed in accordance with, the laws of the State of Ohio. Any action brought
in connection with this letter shall be brought in courts in the Northern
District of Ohio and we consent to the jurisdiction of such courts. It is
further understood and agreed that no failure or delay by the Company 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 of any right, power or privilege hereunder.
<PAGE> 3
This letter constitutes the entire agreement of the parties respecting the
subject matter hereof and may not be amended except in a writing signed by both
parties.
Very truly yours,
INTERMET CORP.
By: /s/ John Doddridge
-------------------------
Title: CEO
----------------------
<PAGE> 1
Exhibit 5
November 18, 1996
Board of Directors
Sudbury, Inc.
30100 Chagrin Boulevard
Cleveland, OH 44124
Members of the Board:
Sudbury, Inc. ("Sudbury"), Intermet Corporation ("Intermet") and I M
Acquisition Corp., a Delaware corporation and wholly owned subsidiary of
Intermet ("Sub"), have proposed to enter into an Agreement and Plan of Merger
dated as of November 18, 1996 (the "Agreement"). Pursuant to the Agreement, Sub
will commence a tender offer to purchase all outstanding shares of the common
stock, par value $0.01 per share, of Sudbury (the "Sudbury Common Stock") at a
purchase price of $12.50 per share, net to the seller in cash (the "Offer"). The
Agreement also provides that, following such Offer, Sub will be merged with and
into Sudbury (the "Merger" and, together with the Offer, the "Transaction")
pursuant to which each outstanding share of Sudbury Common Stock not previously
tendered will be converted into the right to receive $12.50 in cash. You have
requested our opinion as to whether the cash consideration to be received by the
holders of Sudbury Common Stock (other than Intermet and its affiliates) in the
Transaction is fair, from a financial point of view, to such holders.
Alex. Brown & Sons Incorporated ("Alex. Brown"), as a customary part of its
investment banking business, is engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for estate, corporate and other
purposes. We have acted as financial advisor to the Board of Directors of
Sudbury in connection with the Transaction and will receive a fee for our
services, a significant portion of which is contingent upon the consummation of
the Transaction. We have also in the past provided certain valuation services to
Sudbury for which we have received compensation. In the ordinary course of
business, Alex. Brown may actively trade the securities of both Sudbury and
Intermet for our own account and the account of our customers and, accordingly,
may at any time hold a long or short position in securities of Sudbury and
Intermet.
In connection with this opinion, we have reviewed certain publicly
available financial information and other information concerning Sudbury and
certain internal analyses and other information furnished to us by Sudbury. We
have also held discussions with the members of the senior managements of Sudbury
and Intermet regarding the business and prospects of Sudbury. In addition, we
have (i) reviewed the reported prices and trading activity for Sudbury Common
Stock, (ii) compared certain financial and stock market information for Sudbury
with similar information for certain other companies whose securities are
publicly traded, (iii) reviewed the financial terms of certain recent business
combinations which we deemed comparable in whole or in part, (iv) reviewed the
terms of the Agreement, and (v) performed such other studies and analyses and
considered such other factors as we deemed appropriate.
<PAGE> 2
Board of Directors
Sudbury, Inc.
November 18, 1996
Page 2
We have not independently verified the information described above and for
purposes of this opinion have assumed the accuracy, completeness and fairness
thereof. With respect to the information relating to the prospects of Sudbury,
we have assumed that such information reflects the best currently available
judgments and estimates of the management of Sudbury as to the likely future
financial performance of Sudbury. In addition, we have not made nor been
provided with an independent evaluation or appraisal of the assets or
liabilities of Sudbury, nor have we been furnished with any such evaluations or
appraisals. Our opinion is based on market, economic and other conditions as
they exist and can be evaluated as of the date of this letter.
In arriving at our opinion, we were authorized to solicit, and did solicit,
interest from certain third parties with respect to the acquisition of Sudbury.
Our advisory services and the opinion expressed herein were prepared for
the use of the Board of Directors of Sudbury and do not constitute a
recommendation to any stockholder as to whether or not any stockholder should
tender shares of Sudbury Common Stock in the Offer or how such stockholder
should vote on the proposed Merger. We hereby consent to the inclusion of this
opinion in its entirety as an exhibit to any proxy, registration statement or
tender offer document required to be distributed in connection with the
Transaction.
Based upon and subject to the foregoing, it is our opinion that, as of the
date of this letter, the cash consideration to be received by the holders of
Sudbury Common Stock (other than Intermet and its affiliates) in the Transaction
is fair, from a financial point of view, to such holders.
Very truly yours,
/s/ Alex. Brown & Sons Incorporated
--------------------------------------
ALEX. BROWN & SONS INCORPORATED
<PAGE> 1
Exhibit 6
Sudbury, Inc.
1990 Stock Option Plan
1. Purpose of Plan. The purpose of this 1990 Stock Option Plan (the
"Plan") is to advance the interests of Sudbury, Inc. (the "Company") and its
stockholders by allowing the Company to provide to certain of the officers and
key employees of the Company and its subsidiaries an incentive to acquire shares
of the Common Stock (the "shares") of the Company, thereby securing the Company
the benefits inherent in such share ownership. Additionally, the Plan was
adopted by the Board of Directors of the Company to accord the Compensation and
Stock Option Committee of the Company flexibility to grant key employees either
Incentive Stock Options (as defined in Section 422A (b) of the Internal Revenue
Code of 1986, as amended (the "Code")), or options which do not qualify as
Incentive Stock Options. The Plan shall become effective as of June 1, 1990,
subject to approval by the holders of at least a majority of the outstanding
voting stock of the Company, at which time the Company's 1987 Stock Option Plan
shall terminate.
2. Shares Subject to the Plan. The aggregate number of shares of the
Company for which options may be granted under the Plan shall be 600,000;
provided, however, that whatever number of such shares remains reserved for
issuance pursuant to the Plan at the time of any stock split, stock dividend, or
other change in the Company's capitalization shall be appropriately and
proportionately adjusted to reflect such stock split, stock dividend, or other
change in capitalization. Shares issued pursuant to the exercises of options
under the Plan shall be made available from either authorized but unissued or
reacquired shares of the Company. If an option shall expire or terminate for any
reason without being exercised in full, then the shares as to which such option
was not exercised shall become available for other options to be granted under
the Plan.
3. Administration. The Board of Directors of the Company shall appoint
and maintain a stock option committee (the "Committee"), composed of not less
than three members of the Board of Directors who shall be "disinterested
persons" (as defined in Rule 16b-3 of the Securities Exchange Act of 1934, as
amended). The members of the Committee shall not be eligible, and shall not have
been eligible for a period of at least one year prior to their appointment, to
participate in the Plan or any other plan of the Company or of any affiliate (as
defined under the Securities Exchange Act of 1934, as amended) of the Company
entitling the participants therein to acquire stock, stock options, or stock
appreciation rights of the Company or an affiliate thereof. Subject to the
express provisions of the Plan, the Committee shall have conclusive authority to
construe and interpret the Plan and any option agreement entered into thereunder
and to establish, amend, and rescind rules and regulations for administration of
the Plan and shall have such additional authority as the Board of Directors from
time to time may determine to be necessary or desirable.
<PAGE> 2
4. Granting of Options. The Committee shall have full and complete
authority, in its discretion, but subject to the express provisions of the Plan,
to grant from time to time options under the Plan which constitute Incentive
Stock Options, and to grant options under the Plan which do not constitute
Incentive Stock Options (such options being hereinafter referred to as
"Non-Qualified Options"). The Committee from time to time shall designate from
among the full-time employees of the Company, its subsidiaries, or a subsidiary
of its subsidiaries those officers and key employees to whom options to purchase
shares shall be granted under the Plan and the number of shares which shall be
subject to each option so granted. For these purposes, a subsidiary shall be
deemed to include any company as to which the Company owns and/or controls at
least 20% of the outstanding voting equity securities. Notwithstanding the
foregoing, in the case of a grant intended to qualify as an Incentive Stock
Option under Section 422A of the Code, no such option shall be granted hereunder
to any person who, immediately after such option is granted, owns (as defined in
Section 422 and 425 of the Code) stock possessing more than 10% of the total
combined voting power or value of all classes of stock of the Company or its
parent or subsidiary corporations. The aggregate fair market value (determined
on the date of grant) of the shares with respect to which Incentive Stock
Options are exercisable for the first time by any individual during any calendar
year (under this Plan or any other plan of the Company and any subsidiary
corporation that provides for the granting of incentive stock options) shall not
exceed $100,000. The Committee shall direct an appropriate officer of the
Company to execute and deliver option agreements to optionees reflecting the
grant of options. All actions of the Committee under this Paragraph 4 shall be
binding and conclusive on the Company, on optionees under the Plan, and on
employees eligible to receive options under the Plan.
5. Option Period. An option granted under the Plan shall expire on a
date fixed by the Committee which shall be not later than ten years after the
date on which the option is so granted.
6. Option Price. The option price shall be not less than the per share
fair market value of the outstanding shares of the Company on the date the
option is granted, as determined by the Committee, and not less than the par
value of the shares as to which the option is granted. The date on which the
Committee approves the granting of an option shall be deemed the date on which
the option is granted. The purchase price of the shares as to which an option is
exercised shall be payable in full at the time of exercise either (i) in cash
(including check, bank draft, or money order), (ii) by delivering, in
transferable form, that number of shares of the Company's Common Stock which, on
the business day preceding the date of exercise, has an aggregate market value
equal to such purchase price, or (iii) a combination of the foregoing. The
market value of the Company's Common Stock shall be deemed to be the average of
the high and low bid prices for such stock on the over-the-counter market (or
such listed securities market, if applicable) on which such shares are traded.
2
<PAGE> 3
7. Option Agreement. Each grant of an option under the Plan shall be
evidenced by an Option Agreement in a form approved by the Committee, which
Option Agreement shall set forth the option price, the option period, and such
additional terms and conditions as the Committee may prescribe. The Option
Agreement shall be signed on behalf of the Company by the Chairman, the
President, or a Vice President of the Company, other than the employee who is a
party to the agreement, and shall be dated as of the date of the granting of the
option, as determined by Paragraph 6 hereof.
8. Transferability. Options shall not be transferable other than by will
or the laws of descent and distribution and shall not be exercisable except by
the optionee during his lifetime either directly or through his guardian or
legal representative.
9. Amendment, Termination, and Expiration of the Plan. The Company, by
action of its Board of Directors or stockholders, may amend, modify, suspend, or
terminate the Plan at any time; provided, however, that no action by the Board
of Directors or stockholders may alter or impair an optionee's rights under any
outstanding option without such optionee's consent; and further provided, that
the Company may not, without further stockholder approval, (i) increase the
total number of shares as to which options may be granted (except increases
attributable to the adjustments authorized by Paragraph 2 hereof), (ii) reduce
the price at which options may be granted, or (iii) extend the expiration date
of the Plan. Moreover, no action may be taken by the Company (without the
consent of the optionee) which will prevent the Incentive Stock Options issued
under this Plan from being "Incentive Stock Options" under Section 422 of the
Code. Options may be granted under the Plan at any time through April 30, 2000,
on which date the Plan shall expire unless sooner terminated by stockholder
vote. No Plan termination shall affect any options then outstanding.
3
<PAGE> 1
Exhibit 7
SUDBURY, INC.
1995 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN. The purpose of this 1995 Stock Option Plan (the
"Plan") adopted as of the 22nd day of June, 1995 is to advance the interests of
Sudbury, Inc. (the "Company") and its stockholders by allowing the Company to
provide to certain present and future key employees of the Company and its
subsidiaries an incentive to acquire shares of the $.01 par value common stock
(the "Shares") of the Company on reasonable terms, thereby securing for the
Company the benefits inherent in such Share ownership. Additionally, the Plan
was designed to accord the Compensation Committee of the Company flexibility to
grant key employees either Incentive Stock Options (as defined in Section 422(b)
of the Internal Revenue Code of 1986, as amended (the "Code"), or options which
do not qualify as Incentive Stock Options (such options being hereinafter
referred to as "Non-Qualified Stock Options").
2. STOCK SUBJECT TO THE PLAN. The aggregate number of Shares of the
Company for which options may be granted under the Plan shall be 1,000,000 (One
Million). Shares issued pursuant to an exercise of options under the Plan shall
be made available from either authorized but unissued or reacquired Shares of
the Company. If an option shall expire or terminate for any reason without being
exercised in full, then the Shares as to which such option was not exercised
shall become available for other options to be granted under the Plan.
3. ADJUSTMENT. The number of Shares subject to the Plan and to options
granted under the Plan shall be adjusted as follows: (a) in the event that all
of the outstanding Shares are changed by any stock dividend, stock split or
recapitalization or in the event that extraordinary cash or non-cash dividends
are declared with respect to the Shares, the number of Shares subject to the
Plan and to options granted hereunder shall be equitably adjusted; (b) except as
otherwise provided in Section 7.1 hereof, in the event of any merger,
consolidation or reorganization of the Company with any other corporation or
corporations, there shall be substituted, on an equitable basis as determined by
the Committee, for each Share then subject to the Plan, whether or not at the
time subject to outstanding options, the number and kind of Shares or other
securities to which the holders of Shares of the Company will be entitled
pursuant to the transaction; and (c) except as otherwise provided in Section 7.2
hereof, in the event of any other relevant change in the capitalization of the
Company, the Committee shall provide for an equitable adjustment in the number
of Shares then subject to the Plan, whether or not then subject to outstanding
options. In the event of any such adjustment the purchase price per Share shall
be equitably adjusted. Any such adjustment or substitution may provide for the
elimination of any fractional Share which might otherwise become subject to an
option. The adjustment and manner of application of the foregoing provisions
shall be determined by the Committee in its sole discretion.
4. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Compensation Committee, appointed by the Board of Directors and consisting of
not less than two outside directors as defined under Section 162(m) of the Code
(the "Committee") who shall be "disinterested persons" (as defined in Rule 16b-3
of the Securities Exchange Act of 1934, as
1
<PAGE> 2
amended ("Exchange Act")). Except as otherwise provided in Section 16 of the
Exchange Act or Rule 16b-3 thereof, the members of the Committee shall not be
eligible, to participate in the Plan or any other plan of the Company or of any
affiliate (as defined under the Exchange Act) of the Company entitling the
participants therein to acquire stock, stock options, or stock appreciation
rights of the Company or an affiliate thereof so long as they remain a member of
the Committee. Subject to the express provisions of the Plan, the Committee
shall have authority to determine among the full-time employees of the Company,
its subsidiaries or a subsidiary of its subsidiaries to whom options shall be
granted. For these purposes, a subsidiary shall be deemed to include any company
as to which the Company owns and/or controls 50% of the outstanding voting
equity securities. The Committee shall also have authority to determine the
number of shares to be covered by each option grant and the terms of any such
option grant; to amend or cancel options; to accelerate vesting of options; to
require the cancellation or surrender of any previously granted options or other
awards under the Plan or any other plans of the Company as a condition to the
granting of an option; to construe and interpret the Plan and any Option
agreement entered into thereunder; to establish, amend, and rescind rules and
regulations for administration of the Plan; and shall have such additional
authority as the Board of Directors from time to time may determine to be
necessary or desirable.
5. BASIC OPTION TERMS:
5.1 Types of Options. Options granted under the Plan may be (a)
Incentive Stock Options or (b) Non-Qualified Stock Options. Option
agreements reflecting the grant of options shall designate whether an
option is an Incentive Stock Option or a Non-Qualified Stock Option. In
the case of a grant intended to qualify as an Incentive Stock Option
under Section 422 of the Code, no such option shall be granted hereunder
to any person who, immediately after such option is granted, owns (as
defined in Sections 422 and 424 of the Code) stock possessing more than
10% of the total combined voting power or value of all classes of stock
of the Company or its subsidiary corporations. The aggregate fair market
value (determined on the date of grant) of the Shares with respect to
which Incentive Stock Options are exercisable for the first time by any
individual during any calendar year (under this Plan or any other plan
of the Company and any subsidiary corporation that provides for the
granting of incentive stock options) shall not exceed $100,000.
The maximum aggregate number of Shares underlying options that may
be granted to any employee under the Plan during any calendar year is
250,000.
5.2 Option Period. An option grant under the Plan shall expire on a
date fixed by the Committee which shall be not later than ten years
after the date on which the option is so granted.
5.3 Option Price. The option price shall be not less than the per
share fair market value of the outstanding Shares of the Company on the
date the option is granted, and not less than the par value of the
Shares as to which the option is granted. The date on which the
Committee approves the granting of an option shall be deemed the date on
which the option is granted. The purchase price of the Shares as to
which an option is exercised shall be payable in full at the time of
exercise either (a) in cash (including check, bank draft, wire transfer
or money order), (b) by delivering, in transferable form, that number of
2
<PAGE> 3
Shares which, on the business day preceding the date of exercise, has
an aggregate fair market value equal to such purchase price, or (c)
a combination of the foregoing. The fair market value of the Shares
shall be deemed to be (a) the closing price of the Shares on the
principal stock exchange on which the Shares are then traded on the last
business day preceding the date of exercise of the option, or (b) if no
sales take place on such day on any such exchange, the average of the
last reported closing bid and asked prices on such day as officially
quoted on the principal stock exchange on which the Shares are then
traded, or (c) if the Shares are not listed on any such exchange, the
average of the last reported closing bid and asked prices on the
over-the-counter market on the day preceding the date of exercise of the
option. The Nasdaq Stock Market shall be deemed a principal stock
exchange.
5.4 Non-Transferability. Options shall not be transferable other
than by will or the laws of descent and distribution or pursuant to a
qualified domestic relation order as defined by the Code or Title I of
the Employee Retirement Income Security Act of 1974, as amended, or the
rules thereunder; provided that an Incentive Stock Option may not be
transferred pursuant to a qualified domestic relations order unless the
transfer is otherwise permitted pursuant to the Code without affecting
the option's qualification as an Incentive Stock Option. Options shall
not be exercisable except by the optionee during his lifetime either
directly or though his guardian or legal representative.
All actions of the Committee under this Section 5 shall be binding
and conclusive on the Company, on optionees under the Plan, and on
employees eligible to receive options under the Plan.
6. OPTION AGREEMENT. Each grant of an option under the Plan shall be
evidenced by an option agreement in a form approved by the Committee, which
option agreement shall set forth the option price, the option period, and such
additional terms and conditions as the Committee may prescribe. The option
agreement shall be signed on behalf of the Company by the Chairman, the
President, or a Vice President of the Company, other than the employee who is a
party to the agreement, and shall be dated as of the date of the granting of the
option, as determined by Paragraph 5.3 above.
7. CHANGE OF CONTROL:
7.1 If the Company shall liquidate or dissolve, or shall be a party
to a merger, consolidation or other business combination with respect to
which it shall not be the surviving corporation, the Company shall give
written notice thereof to the holders of options not previously
exercised at least thirty days prior thereof, and the optionee shall
have the right within said thirty-day period to exercise all options in
full to the extent not previously exercised. To the extent that an
option shall not have been exercised on or prior to the effective date
of such liquidation, dissolution, merger or consolidation or business
combination, it shall terminate on said date, unless it is assumed by
another corporation.
7.2 Options granted under the Plan shall become exercisable in full
if and when any corporation, partnership, joint venture, person or a
group acting together ("Acquiring Entity") for a similar purpose shall
directly or indirectly acquire or announce an intent to directly or
indirectly acquire control of the Company or any successor or assignee
of the
3
<PAGE> 4
Company. For purposes of this Section 7, control shall mean the
acquisition of, or the formation of a group whose members beneficially
own Shares, which after giving effect thereto, shall permit the
Acquiring Entity to vote 45% or more of the aggregate voting power, as
measured by all Shares then outstanding, in the election of directors of
the Company.
8. AMENDMENT AND TERMINATION OF THE PLAN. The Company, by action of its
Board of Directors or stockholders, may amend, modify, suspend, or terminate the
Plan at any time; provided, however, that no action by the Board of Directors or
stockholders may (a) impair an optionee's rights under any outstanding option
without such optionee's consent, (b) increase the total number of shares as to
which options may be granted (except increases attributable to the adjustments
authorized by Paragraph 3 hereof), (c) reduce the price at which options may be
granted, or (d) extend the expiration date of the Plan. No action may be taken
by the Company (without the consent of the optionee) which will prevent the
Incentive Stock Options issued under this Plan from being "Incentive Stock
Options" under Section 422 of the Code.
Moreover, no amendment without the approval of stockholders of the
Company shall be made if stockholder approval under Section 422 of the Code or
Rule 16b-3 of the Exchange Act would be required.
9. GOVERNANCE BY RULE 16b-3. The Plan is intended to comply with the
provisions of 16b- 3 promulgated under the Exchange Act and shall be interpreted
in a manner consistent therewith.
10. EXPIRATION OF THE PLAN. Options may be granted under the Plan at any
time through June 22, 2005, on which date the Plan shall expire unless sooner
terminated by stockholder vote. No Plan termination shall affect any options
then outstanding.
11. GENERAL PROVISIONS. The Company may establish procedures whereby an
optionee subject to the requirements of Rule 16b-3, Regulation T, of the Code,
and other federal, state and local tax and securities laws, may exercise an
option without making a direct payment of the option price to the Company;
provided, however, that these cashless exercise procedures shall not apply to
Incentive Stock Options which are outstanding on the date the Company
establishes such procedures unless the application of such procedures to such
options is permitted pursuant to the Code and the regulations thereunder,
without affecting the options' qualification under Code Section 422 as Incentive
Stock Options. If the Company elects to establish a cashless exercise program
the Company shall determine administrative procedures and policies it deems
appropriate and these procedures and policies shall be binding on any optionee
wishing to use the cashless exercise program.
Nothing contained in the Plan or in any option granted pursuant thereto
shall confer upon any optionee any right to continue in the employ of the
Company or any subsidiary of the Company, or limit or restrict any right of the
Company or its subsidiaries to terminate the employment of the optionee at any
time.
No optionee shall have any of the rights of a stockholder with respect
to any Shares subject to an option grant until certificates representing those
Shares have been issued to the optionee.
4
<PAGE> 5
At the time of the exercise of any option, the Company may require, as a
condition of the exercise of such option, the optionee to pay the Company an
amount equal to the amount of tax the Company may be required to withhold with
respect to the Shares.
The Plan shall be governed by and construed in accordance with the laws
of the State of Delaware.
12. EFFECTIVENESS OF THE PLAN. The Plan shall be approved by the Board.
The Plan shall thereafter be submitted to the Company's stockholders for
approval and unless the Plan is approved by the affirmative votes of the holders
of shares having a majority of the voting power of all shares represented at a
meeting duly held in accordance with Delaware law within twelve (12) months
after being approved by the Board, the Plan and all options granted under it
shall be void and of no force and effect. The Plan shall become effective on
June 22, 1995 at which time the Company's 1990 Stock Option Plan will terminate.
5
<PAGE> 1
Exhibit 8
SUDBURY, INC.
DIRECTORS' DEFERRAL PLAN
1. PURPOSES OF THIS PLAN
---------------------
This Directors' Deferral Plan of Sudbury, Inc., adopted on this 12th day of
September, 1994 is intended to attract and retain qualified Directors and to
provide incentives to these Directors through the ability to defer their receipt
of Directors' fees and to participate in the Company's growth.
2. DEFINITIONS
-----------
(a) "Board" means the Board of Directors of the Company.
(b) "Cash Account" means an account for deferred Fees established by
the Company for a Director which is valued on the basis of cash as
provided in Paragraph 5.
(c) "Common Shares" means units equivalent in value and dividend
rights to Common Stock, $.O1 par value per share, of the Company.
(d) "Company" means Sudbury, Inc.
(e) "Deferred Account" means the account established by the Company
for each Director who elects to defer the fees payable to him as a
Director. A Director's Deferred Account shall consist of either a
Cash Account or a Stock Account, or both.
(f) "Director" means any Director of the Company who is not an
employee of the Company.
(g) "Election Agreement" means the written election to defer Director
fees signed by the Director and in the form provided by the Chief
Financial Officer (or person performing similar functions) of the
Company.
(h) "Fees" means that amount of the fees payable to a Director by
reason of his serving on the Board either (i) as a retainer
(without regard to attendance at meetings) or (ii) on a per
meeting basis.
(i) "Market Price" for any day shall be the closing price quoted for a
share of Common Stock of the Company on the NASDAQ National Market
System or on such national securities exchange as the Common Stock
may be traded and, if not so traded, then as the Board in its
discretion may determine.
(j) "Member" means any Director who has at any time deferred the
receipt of Director fees in accordance with this Plan.
1
<PAGE> 2
(k) "Plan" means the Directors' Deferral Plan.
(l) "Stock Account" means an account for deferred Fees established by
the Company for a Director which is valued on the basis of the
Company's Common Stock.
(m) "Term" means the duration of the term for which a Director is
elected.
(n) "Full Term" means a term of one (1) year.
(o) "Year" means the calendar year.
(p) Whenever appropriate, words used herein in the singular may be
read as the plural and the plural may be read as the singular.
(q) Masculine pronouns used herein shall be deemed to refer to both
women and men.
3. ELECTION TO DEFER DIRECTORS' FEES
---------------------------------
(a) Eligibility
A Director may elect to defer receipt of all or a portion of his
fees for any Year in accordance with Paragraph 3(b) hereof.
(b) Time of Election
A Director desiring to defer all or a portion of his Fees for the
upcoming Year must submit an Election Agreement to the Chief
Financial Officer (or person performing similar functions) of the
Company no later than the last day of the Year prior to the Year
for which the election is to be effective.
Any Director who was not a Director during the previous Year may
make an election to defer all or a portion of the Fees for the
Year in which the Director is elected to the Board of Directors by
delivering an Election Agreement to the Chief Financial Officer
(or person performing similar functions) of the Company within
thirty (30) days after such election to the Board. A Director
fulfilling the above requirements shall be considered a "Member"
for purposes of this Plan.
(c) Duration of Election
A Member's election to defer Fees shall be effective from Year to
Year unless modified or revoked by the Member through written
notice to the Chief Financial Officer (or person performing
similar functions) of the Company prior to the beginning of the
Year for which the revocation or modification is to apply.
2
<PAGE> 3
(d) Election Irrevocable
Subject to the provisions of Paragraph 3(e), the terms set forth
in an Election Agreement for any particular Year are irrevocable
once the Year has commenced.
(e) Modification of Election
Notwithstanding the provisions of Paragraph 3(d) a Member may
modify or amend an Election Agreement for a prior Year to modify
the payment schedule of distributions covered by such Election
Agreement if such Member is no longer a Director, and he is not
otherwise a reporting person under Section 16 of the Securities
and Exchange Act of 1934, as amended, ("Exchange Act") at the time
of such modification or amendment, and he files a new Election
Agreement with the revised distribution schedule at least one year
in advance of the date such distributions were originally
scheduled to commence.
4. THE AMOUNT AND DATE OF DEFERRAL
-------------------------------
The Election Agreement of the Member shall indicate the amount of Fees to be
deferred and the date to which the Fees are to be deferred. Deferral shall be to
the earlier to occur of (1) the date indicated by the Member; provided, however,
distributions of deferred fees from Stock Accounts may be no sooner than six
months after the Year for which such deferred fees relate, or (2) the date of
the death of the Member. In the case of the death of the Member, distribution of
the deferred fees shall be made in accordance with Paragraph 7. A Member may (i)
select a lump-sum distribution or a series of distributions or installments and
(ii) choose the date on which the lump sum shall be paid or the installments
shall commence. The installments may not be more frequent than annually and may
not consist of more than ten (10) annual installments.
5. DEFERRAL ACCOUNTS
-----------------
(a) Accounts
The Company shall establish and preserve one or more accounts for
each Director. A Member shall designate on the Election Agreement
with respect to each Year's deferred Fees whether to have the
account attributable to such Year's deferred Fees valued on the
basis of the Common Shares of the Company in accordance with
Paragraph 5(b) hereof or on the basis of cash in accordance with
Paragraph 5(c) hereof. A Member may defer a portion of his fees
into each type of account. A Member may not transfer fees from one
account to another after he has made an election for any Year;
except that at the time such Member executes an Election Agreement
with respect to a Year's Fees he may elect to have all amounts
attributable to such Year's Fees in his Stock
3
<PAGE> 4
Accounts, automatically transfer into his Cash Account upon the
termination of his membership on the Board as long as such Member
is not at that time otherwise subject to the provisions of Section
16 of the Exchange Act. The Company may establish separate
accounts for a Member to properly account for amounts deferred
under the two alternatives or during different Years.
(b) Stock Account
There shall be credited to a Member's Stock Account, on the last
day of each quarter, the number of Common Shares (whole or
fractional, rounded to the nearest thousandth of a share) equal to
the quotient obtained by dividing (i) the sum of the Fees he
elects to defer to his Stock Account which otherwise would have
been paid to him during the quarter and the dividends payable
during such quarter on the Common Shares held in the Stock Account
on the first day of such quarter, by (ii) the Market Price of the
Common Stock on the last business day of such quarter.
(c) Cash Account
If a Member elects to have portion of his Fees deferred into a
Cash Account, there will be credited to his Cash Account, on the
last day of each quarter, an amount equal to the sum of (i) the
Fees he elects to defer to his Cash Account which otherwise would
have been paid to him during the quarter and (ii) interest on the
balance in the Cash Account on the first day of such quarter at a
rate based on the rate of interest paid by the Company on its
senior revolving credit facility (the "Interest Rate"). The
Interest Rate applicable to any Year will be set on the first
business day of such Year.
(d) Claims of General Creditors
All compensation deferred and amounts credited to the Cash and
Stock Accounts under this Plan shall remain a part of the general
assets of the Company. Accordingly, the compensation deferred
under this Plan shall be an unsecured claim against the general
assets of the Company and shall be subject to the claims of the
Company's general creditors.
6. PAYMENT OF ACCOUNTS
-------------------
The accounts established and maintained for each Director shall be distributed
in a lump sum or installments. The selection of the distribution date(s) and the
method of distribution are to be indicated on the Election Agreement to be
submitted by the Member. The election as to the method of and time for payment
of the amount of an account relating to Fees deferred for a particular Year may
not thereafter be altered with respect to that particular Year once the Year has
commenced except as provided
4
<PAGE> 5
in Paragraph 3(e). Changes in the method of and time for payment of the amount
of an account may be effected for future Years by notifying the Chief Financial
Officer (or person performing similar functions) in writing prior to the
beginning of the Year for which the modification is to apply in accordance with
Paragraph 3 above.
With respect to all distributions to be made under the Plan, the following rules
shall apply:
(i) All distributions whether from a Stock Account or a Cash Account shall
be paid in cash subject to withholding or deduction by the Company of any
taxes, contributions, payments and assessments which the Company is now or
may hereafter be required or authorized by law to withhold or deduct from
distributions;
(ii) The amount of the distribution from the Stock Account shall be valued
based on the Market Price of the Common Stock on the last business day of
the calendar quarter immediately preceding the distribution date; and
(iii) The amount of the distribution from the Cash Account shall be valued
based on the value of the Cash Account on the last business day of the
quarter immediately preceding the distribution date.
In the event a Member elects to receive installment payments, the following
rules shall apply:
(i) The balance of the Stock Account shall be credited, pursuant to
Paragraph 5(b) above, with additional Common Shares upon the payment of
dividends until the Stock Account is completely distributed;
(ii) The balance of the Cash Account shall be credited, pursuant to
Paragraph 5(c) above, with interest quarterly until the Cash Account is
completely distributed; and
(iii) The amount of each installment shall be determined by dividing the
value of the Stock Account, the value of the Cash Account, or both, by the
number of installments remaining to be paid to the Member.
7. DEATH OF MEMBER
---------------
A Member may, in the Election Agreement provided in Paragraph 3 above, provide
that, in the event of his death prior to the expiration of the period during
which his account balance is distributable, the account balance shall be
distributed to his estate or designated beneficiary in a single distribution or
in the installments contemplated by Paragraph 6 above. This election shall be
made at the time of the election contemplated by Paragraph 3 above. If no such
election is made the account balance shall be distributed in a single
distribution six months after the Member's death to his surviving spouse, or if
there be no surviving spouse, then to his estate.
5
<PAGE> 6
8. VALUATION OF ACCOUNTS
---------------------
Each account shall be valued as of the last day of each calendar quarter until
payment of the account in full to the Member in accordance with Paragraph 6.
Each Member shall receive a statement of his accounts not less than annually.
9. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
-----------------------------------------
In the event of changes in the outstanding Common Shares of the Company by
reason of any stock dividend or split, recapitalization, merger, consolidation,
spin-off, reorganization, combination or exchange of shares or a similar
corporate change, the Board of Directors shall, in its sole discretion,
equitably adjust the number of Common Shares held in the Stock Accounts and such
adjustment shall be made by the Company and shall be conclusive and binding on
all Members of the Plan.
10. VESTING IN DEFERRED DIRECTORS' FEES
-----------------------------------
All amounts deferred by a Director pursuant to the Plan shall be immediately and
fully vested. Notwithstanding the foregoing, all amounts deferred under the Plan
shall be subject to Paragraph 5(b).
11. ADMINISTRATION
--------------
This Plan shall be administered by the Compensation Committee of the Board of
Directors. The Compensation Committee shall have the sole right and authority
to interpret and construe the provisions of this Plan, and its decisions on
disputes arising from the Plan shall be binding and conclusive upon the
Members. If a Member is part of the Compensation Committee that administers the
Plan, he shall not participate in any deliberations or actions of the
Compensation Committee relating exclusively to his membership in this Plan.
12. TERMINATION OR MODIFICATION OF PLAN
-----------------------------------
This Plan may be terminated, modified, or amended at the sole discretion of the
Board of Directors; provided, that no amendment of the Plan shall impair any of
the rights of any Member, without the Member's consent, in his Deferred Account
balance. If this Plan is terminated, the remaining Deferred Account balances
will be distributed pursuant to the terms of this Plan and no additional
deferrals will be permitted.
13. NONTRANSFERABILITY OF ACCOUNTS
------------------------------
Neither any account maintained for a Director under this Plan nor the Director's
right to receive any payment specified herein with respect to any such account
shall be subject in any manner to anticipation, alienation, sale, transfer
(other than by will or the laws of descent or distribution), assignment, pledge,
encumbrance or charge, either voluntary or involuntary, and any attempt to so
alienate, anticipate, sell, transfer, assign, pledge,
6
<PAGE> 7
encumber or charge the same shall be null and void. No amount payable under this
Plan shall be liable for or be subject to the debts, contracts, liabilities,
engagements or torts of any person to whom such payment is or may be payable,
except as required under applicable law.
14. CLAIMS OF OTHER PERSONS
-----------------------
The provisions of the Plan shall in no event be construed as giving any person,
firm or corporation any legal or equitable right as against the Company or any
subsidiary, or the officers, employees, or Directors of the Company or any
subsidiary, except any such rights as are specifically provided for in the Plan
or are hereafter created in accordance with the terms and provisions of the
Plan.
15. SEVERABILITY
------------
The invalidity and unenforceability of any particular provision of the Plan
shall not affect any other provision hereof and the Plan shall be construed in
all respects as if such invalid or unenforceable provisions were omitted
herefrom.
16. CAPTIONS
--------
The captions used in the Plan are for convenience only and shall not affect the
meaning of any provision hereof.
17. GOVERNING LAW
-------------
The provisions of the Plan shall be governed and construed in accordance with
the laws of the State of Ohio.
7
<PAGE> 8
AMENDMENT NO.1
TO
SUDBURY, INC.
DIRECTORS' DEFERRAL PLAN
This Amendment No.1 to the Sudbury, Inc. Directors' Deferral Plan (the "Plan")
is adopted on this 15th day of August, 1996 by the Board of Directors.
The Plan is hereby amended as follows:
1. Paragraph 3(e) is hereby amended to add "(i)" in front of the word
"Notwithstanding" and to add the following at the end of said paragraph:
"(ii) Notwithstanding the provisions of Paragraph 3(d), a Member may elect
on one occasion to modify or amend an Election Agreement for a prior Year
to elect to have all or a portion of the amount attributable to such
Year's fees transferred into the Stock Account or the Cash Account, as the
case may be, if such Director's membership on the Board has terminated,
and he is not otherwise a reporting person under Section 16 of the
Exchange Act at the time of such modification or amendment, and he files a
new Election Agreement reflecting such modification or amendment at least
six months after the date of the original Election Agreement and at least
one year in advance of the date such distributions were originally
scheduled to commence."
2. The fourth sentence of Paragraph 5(a) is hereby amended by adding the
phrase "Subject to the provisions of Paragraph 3(e)(ii) hereof" at the
beginning of said sentence and changing "A" to lower case.
3. Capitalized terms not otherwise defined herein shall have the meaning
ascribed to them in the Plan.
4. This Amendment No.1 to the Plan shall be effective as of August 15, 1996.
5. Except as set forth herein, the Plan shall remain in full force and
effect.
<PAGE> 1
Exhibit 9
QUORUM AND TABULATION OF VOTES
The presence, in person or by proxy, of the holders of record of a
majority of the Company's issued and outstanding Common Stock is necessary to
constitute a quorum at this meeting. An automated system assists the Company's
transfer agent in the tabulation of votes cast.
The By-Laws of the Company provide that directors shall be elected by a
plurality vote. All other matters shall be determined by a majority of the votes
cast, except as otherwise provided by statute, the Company's Certificate of
Incorporation or its By-Laws.
If a share is represented for any purpose at the meeting, it is deemed
to be present for all other matters. Abstentions and shares held of record by a
broker or its nominee ("Broker Shares") that are voted on any matter are
included for purposes of determining whether a quorum is present. Votes
"withheld" from, or Broker Shares not voted for, director-nominee(s) will not
count against the election of such nominee(s). In all other matters, abstentions
will have the same effect as a vote against the proposal to which the abstention
applies, and Broker Shares which are not voted will not be treated as either a
vote for or a vote against any of the proposals to which such broker nonvotes
apply.
BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth information regarding the ownership of
the Company's Common Stock on August 2,1996 of (i) beneficial owners known to
the Company of more than five percent of the outstanding shares of Common Stock;
(ii) each director and executive officer; and (iii) all directors and executive
officers as a group. Except as otherwise indicated, each owner has sole voting
and sole investment powers with respect to the stock listed.
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
------------------- -------------------- ----------------
<TABLE>
<S> <C> <C>
Pioneering Management Corporation
60 State Street
Boston, MA 02109 1,000,000(a) 9.3%
T. Rowe Price Associates, Inc.
100 E. Pratt Street
Baltimore, MD 21202 891,000(b) 8.3%
Cloyd J. Abruzzo, Director 15,000(c) *
Mark E. Brody, Vice President &
Chief Financial Officer 31,312(c)(d) *
Preston Heller, Jr., Director 5,000(c) *
James A. Karman, Director 1,000(c) *
Alan L. Ockene, Director -0-(c) -0-
David A. Preiser, Director -0-(c) -0-
</TABLE>
2
<PAGE> 2
<TABLE>
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
------------------- -------------------- ----------------
<S> <C> <C>
es R. Sardas, Chairman,
f Executive Officer, Director
, Inc.
'0 Chagrin Blvd., Suite 203
eland, OH 44124 2,345,406(c)(e) 18.0%
s F. Slater, Director 40,000(c) *
executive officers and directors
group (8 persons) 2,437,718(c) 18.7%
than 1%
</TABLE>
on information contained in a report on Schedule 13G dated January 26,1996 and
with the Securities and Exchange Commission, ("SEC") by Pioneering Management
ration, a registered investment advisor.
report on Schedule 13G dated February 14,1996 and filed with the SEC, T. Rowe
Price ates, Inc., a registered investment advisor, reported sole power to
dispose of 891,000 and sole voting power over 60,000 shares.
tation concerning beneficial ownership of shares is based in part on
information ed by each executive officer and director.
es 1,312 shares held by the Sudbury Savings and Profit Sharing Plan as of May
31, for the account of Mr. Brody and shares Mr. Brody is deemed to own by
virtue of tly exercisable options to purchase 30,000 shares.
es 807 shares held by the Sudbury Savings and Profit Sharing Plan as of May
31,1996 e account of Mr. Sardas and shares Mr. Sardas is deemed to own by virtue
of currently sable options to purchase 2,235,329 shares. See also --"CEO
Employment gements".
3
<PAGE> 3
ADDITIONAL INFORMATION CONCERNING
THE BOARD OF DIRECTORS
COMMITTEES AND MEETINGS
The Company's Board of Directors held seven regularly scheduled meetings
during the fiscal year ended May 31, 1996. The Board has designated several
standing Committees described below. Attendance by directors at meetings of the
Board and Committees on which they served averaged over 95%. All directors
attended 75% or more of these meetings.
The Audit Committee The function of the Audit Committee is to provide
assistance in fulfilling the Company's responsibility to stockholders, potential
stockholders and the investment community in matters relating to corporate
accounting, reporting practices of the Company and the quality and integrity of
the financial reports of the Company. The members of the Audit Committee are all
non-employee directors: Cloyd J. Abruzzo, Chairman, Jerry A. Cooper, who
resigned as a member of the Company's Board of Directors on August 15, 1996,
James A. Karman and David A. Preiser. The members held three meetings and
consulted informally on other occasions during fiscal 1996.
The Compensation Committee The functions of the Compensation Committee
are to provide guidance and approval for all executive compensation and benefit
programs, as well as to designate those employees of the Company who will
receive grants of stock options under the Company's stock option plan. The
members of the Compensation Committee are all non-employee directors: Thomas F.
Slater, Chairman, Cloyd J. Abruzzo, Jerry A. Cooper, who resigned as a member of
the Company's Board of Directors on August 15,1996, and Preston Heller, Jr. The
Compensation Committee held five meetings and consulted informally on other
occasions during fiscal 1996.
The Nominating Committee The function of the Nominating Committee is the
selection and nomination of candidates to fill vacancies on the Board as they
occur and to recommend to the Board a slate of nominees for election as
directors at the Company's Annual Meeting of Stockholders. The Nominating
Committee will consider nominations received by security holders in accordance
with procedures to be determined upon any such recommendation. The members of
the Nominating Committee are all non-employee directors: Preston Heller, Jr.,
Chairman, James A. Karman, David A. Preiser and Thomas F. Slater. The members
held one meeting and consulted informally on other occasions during fiscal 1996.
DIRECTOR COMPENSATION
Employee directors receive no additional compensation for service on the
Board of Directors. A director who is not an employee of the Company receives an
annual cash retainer of $20,000 payable in four quarterly installments.
Additionally, non-employee Directors receive $1,200 for each Board meeting
attended in person, $600 for participating in formal telephonic meetings of the
Board and reimbursement of expenses incident to their service. Directors who
undertake special consulting projects on behalf of the Company or its Board of
Directors are entitled to receive remuneration for their services at a per diem
rate of $1,000. A total of $33,250 was paid for services rendered pursuant to
such consulting projects in fiscal 1996.
6
<PAGE> 4
In 1994 the Board of Directors adopted the Sudbury, Inc. Directors'
Deferral Plan (the "Plan") for the benefit of non-employee directors. Pursuant
to the Plan, outside directors may elect to defer, until a specified date or
retirement from the Board, all or any part of their retainer or meeting fees
into a cash and/or stock equivalent account established by the Company for their
benefit.
The Company pays interest on compensation deferred into the cash account
at a rate based on the rate of interest paid by the Company on its senior
revolving credit facility. The interest rate currently paid is 8.5% per year.
Compensation deferred to the stock account during any calendar quarter is
converted into stock equivalent units by dividing the total amount of deferred
compensation by the market price, as defined in the Plan, of the Company's
Common Stock on the last business day of that quarter. At the end of the
deferral period, the Company will pay to the director an amount in cash equal to
the number of accumulated stock equivalent units multiplied by the market price
of the Company's Common Stock on the last business day of the calendar quarter
immediately prior to the day on which the deferral period ends.
Deferred amounts and accrued interest may be paid in a lump sum or
installments commencing upon a date specified by the director or the director's
retirement from the Board.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE MANAGEMENT COMPENSATION
In accordance with its charter and pursuant to authority granted by the
Board, the Compensation Committee of the Board of Directors (the "Committee") is
responsible for approving the Company's cash and non-cash compensation for its
executive officers and making recommendations to the Board of Directors with
respect to the establishment of the Company's executive compensation plans and
programs. The Committee also administers the Company's stock option plans. The
Committee is composed exclusively of independent, non-employee directors who are
not eligible to participate in any of the Company's executive compensation
programs.
The Company's executive compensation program is designed to provide (i)
fair compensation to executives based on their responsibilities and their
achievements of annually established goals and (ii) incentives which develop a
sense of Company ownership and commitment to attaining long-term profitable
operations of the Company's business. The Committee believes that its policies
are best implemented by providing compensation comprised of separate components,
all of which are designed to motivate executive performance. These components
are: base salary, short-term incentive compensation (bonus) and long-term
incentive compensation (stock options).
In setting executive compensation practices for the Company, the
Committee compares the executive compensation program with other companies'
compensation programs for executives with similar responsibilities. The
Committee also uses surveys prepared by independent consulting firms to provide
comparative market compensation data. The comparison groups surveyed include (i)
businesses included in the Company's peer group index and (ii) other
manufacturing concerns with comparable business lines and revenue levels.
7
<PAGE> 5
The information below is provided with respect to the compensation of
the Company's executive officers including the Chief Executive Officer and the
Vice President and Chief Financial Officer, the only executive officers of the
Company designated as "named executive officers" in the Summary Compensation
Table.
CEO Compensation: In July 1995, the Company and Mr. Jacques R. Sardas,
Chairman, President and Chief Executive Officer of the Company, entered
into an employment agreement (the "1996 Employment Agreement") which
extended the term of Mr. Sardas' employment through January 1998 upon the
expiration of his 1992 employment agreement with the Company (the "1992
Employment Agreement").
Pursuant to the terms of the 1996 Employment Agreement, which became
effective January 13, 1996, Mr. Sardas continues as the Company's Chairman
and Chief Executive Officer until such time as the Board of Directors
selects a new Chief Executive Officer. Upon the selection of a new Chief
Executive Officer, Mr. Sardas will continue as Chairman of the Company's
Board of Directors through the expiration of the 1996 Employment Agreement
on January 12,1998. Mr. Sardas' base salary is $500,000 per annum for the
longer of the first year of the 1996 Employment Agreement or until such
time as a new Chief Executive Officer of the Company is selected. At such
time as a new Chief Executive Officer is selected (but not before January
13, 1997) Mr. Sardas' base salary will be reduced to $250,000 per annum.
Under the terms of the 1996 Employment Agreement, the Board of
Directors, upon recommendation of the Committee, established a target
bonus under the Company's Incentive Bonus Plan ("Bonus Plan") tied
directly to the Company's achievement of specific financial objectives.
The financial objectives set were based on minimum and maximum target
levels relating to the Company's return on equity. Under the Bonus Plan
and consistent with the 1996 Employment Agreement, Mr. Sardas was entitled
to bonus compensation equal to a percentage of his base salary ranging
from 20% to 60% if the financial objectives were achieved. However, no
awards would be paid if the specified minimum target levels were not met.
All such awards require Committee approval and are submitted by the
Committee to the Board of Directors for the Board's final approval.
Additionally, the terms of the 1992 Employment Agreement included a
bonus payable to Mr. Sardas at the expiration of the agreement in January
1996. The bonus amount was equal to 5% of the net fair value of the
Company in excess of $35,000,000 based on an appraisal completed by an
independent investment banking firm. The total of such bonus paid to Mr.
Sardas in January 1996 was $7,250,000.
Base Salary: In setting the annual salary for Mr. Brody, the Company's
Vice President and Chief Financial Officer and the Company's other
executive officers, the Committee reviewed the salaries recommended by the
Chief Executive Officer. The Committee formally recommended to the Board
of Directors, for its final approval, the appropriate level of cash
compensation for fiscal year 1996. Cash compensation levels were
determined upon subjective consideration of scopes of responsibility and
comparison with industry pay practices. In making the determination, such
factors were accorded equal relative importance.
Annual Incentive Bonus: Executive officers, including Mr. Brody, are
also eligible to earn an annual cash incentive bonus under the Bonus Plan.
The amount of each bonus for
8
<PAGE> 6
fiscal 1996 was determined as a fixed percentage of each executive
officer's base salary ranging from a minimum of 15% up to a maximum of
45%. The determination of such bonus percentage for each executive officer
for fiscal 1996 was based upon the Committee's subjective determination of
each individual's level of responsibility and accountability.
The annual incentive bonus is tied directly to the Company's
achievement of specific financial objectives. Each year, usually at its
August meeting, the Committee sets minimum and maximum target levels
relating to the Company's return on equity. No awards are paid if the
specified minimum target is not met. All awards require Committee approval
and are submitted by the Committee to the Board of Directors for the
Board's final approval.
At the close of fiscal year 1996, the Company had achieved the target
levels established at the beginning of fiscal 1996. Accordingly, the
Committee made incentive compensation awards to the participating
executives based on the factors described above.
Stock Options: The ability to grant options under the Sudbury, Inc.
1990 Stock Option Plan terminated on June 22,1995. The Sudbury, Inc. 1995
Stock Option Plan was adopted by the Board of Directors on June 22, 1995
and by the Company's stockholders on September 28, 1995. Under the
Company's 1995 Stock Option Plan, 215,000 were awarded to named executive
officers during fiscal 1996. The Committee intends to use stock options as
a long-term incentive, having the dual purpose of retaining and attracting
superior- performing executives while, at the same time, aligning the
executives' interests with those of the Company's stockholders.
Compliance with Section 162(m) of the Internal Revenue Code: Section
162(m) of the Internal Revenue Code enacted in 1993 generally disallows a
tax deduction to a public corporation for compensation in excess of
$1,000,000 paid to a corporation's chief executive officer and four other
most highly compensated executive officers. Qualifying performance-based
compensation will not be subject to the limitations provided if certain
requirements are met. The Committee and the Board of Directors currently
intend to structure the compensation of its executive officers in a manner
that is intended to ensure that the Company does not lose any tax
deductions because of the $1,000,000 compensation limit. However, there
can be no assurance that the various incentive and performance-related
elements of the Company's compensation arrangements with its five highest
paid executive officers will, in fact, qualify under Section 162(m) of the
Internal Revenue Code as performance-based compensation excluded from such
limitations.
COMPENSATION COMMITTEE
Thomas F. Slater, Chairman Cloyd J. Abruzzo
Jerry A. Cooper Preston Heller, Jr.
COMPENSATION COMMITTEE INTERLOCKS
No member of the Compensation Committee has interlocking relationships
with third parties which might be considered conflicts of interest.
9
<PAGE> 7
CEO EMPLOYMENT ARRANGEMENTS
1996 Employment Agreement. In July 1995, the Company and Mr. Sardas
entered into the 1996 Employment Agreement which extended Mr. Sardas' employment
for two years beyond the expiration of the 1992 Employment Agreement through
January 1998. The terms of Mr. Sardas' salary and bonus compensation
arrangements pursuant to the 1996 Employment Agreement are detailed above in the
section entitled "Compensation Committee Report on Executive Management
Compensation - CEO Compensation."
In connection with the 1992 Employment Agreement, confirmed as part of
the Company's Plan of Reorganization, Mr. Sardas was granted 1,764,706 stock
options issued under a 1992 stock option agreement ("1992 Stock Options"). Under
the 1996 Employment Agreement, Mr. Sardas has the right to sell to the Company
the Common Stock underlying the 1992 Stock Options (the "Option Stock") in five
separate approximately semi-annual installments commencing February 7, 1996 and
continuing through January 13, 1998. The purchase price for the Option Stock is
the per share fair market value on the purchase date based on the quoted price
on the principal stock exchange on which the Company's Common Stock is traded
("Fair Market Value"). Mr. Sardas generally may delay his right to sell any
installment of the Option Stock until the next succeeding purchase date. If at
that next succeeding purchase date Mr. Sardas does not tender such shares of
Option Stock, the Company will have no further repurchase obligation for such
shares.
Under the terms of the 1996 Employment Agreement, if Mr. Sardas'
employment is terminated other than for cause, or due to Mr. Sardas' death or
disability, the Company is obligated to pay to Mr. Sardas or his estate, at Mr.
Sardas' or his estate's election at that time or at the next installment
purchase date, the Fair Market Value of the Option Stock. Alternately, in such
event, if Mr. Sardas does not exercise such election, he or his estate or
representative will maintain the right to sell the Option Stock in installments
as noted above. If the 1996 Employment Agreement is terminated by the Company
for cause, then the Company has the right to purchase the Option Stock for the
Fair Market Value thereof subject to Mr. Sardas' right to decline to tender such
shares. In the event he declines to tender such shares, the Company's obligation
to purchase the Option Stock will terminate. Mr. Sardas has not exercised his
right to sell his Option Stock subject to the February 7, 1996 installment;
therefore, the Company's obligation with respect to such purchase has
terminated.
Pursuant to the 1996 Employment Agreement, the Company granted to Mr.
Sardas under the Company's 1995 Stock Option Plan, options to purchase 200,000
shares of Common Stock. Such options were granted at an exercise price of
$7.625, the market price on the date of grant and expire on July 28, 2000. On
January 13,1996,100,000 of such options vested and the remainder will vest on
January 13,1997.
Other Arrangements. In July 1994, the Company entered into a settlement
agreement with Mr. Sardas providing that under the terms of the 1992 Employment
Agreement and related stock option agreement, Mr. Sardas was entitled to certain
anti-dilution protection arising from the issuance of Participation Certificates
under the Company's Plan of Reorganization. Under the settlement agreement, Mr.
Sardas was issued options evidencing his right to purchase, in the aggregate,
479,893 shares of Common Stock which amount is equivalent to 15% of the total of
the (i) underlying shares of Common Stock reserved for issuance under the
Participation
10
<PAGE> 8
Certificates and (ii) the options issued under the settlement agreement. Mr.
Sardas was issued options, to purchase 109,270 shares of Common Stock, having an
exercise price per share of $3.17 which were exercised by Mr. Sardas on July
17,1996. He was also issued options which are currently exercisable to purchase
115,021 shares of Common Stock, having an exercise price per share of $5.69 and
expiring September 1,1999 and 255,602 shares of Common Stock, having an exercise
price per share of $5.015, and which expire on September 1, 2002.
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL
AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
Mr. Brody, the Company's Vice President and Chief Financial Officer is a
party to an employment agreement with the Company. The agreement provides that
employment shall be at will, however, if Mr. Brody is terminated by the Company
(or its successor) without cause or if Mr. Brody is subject to constructive
termination (i.e., a reduction in compensation, a diminution in job
responsibilities, or a required relocation outside of the greater Cleveland
area), within one year after a change of control of the Company, Mr. Brody will
be entitled to twenty-four months' severance compensation. Mr. Brody's agreement
also provides him, under certain circumstances, with twelve months' severance
compensation in the event that his employment is terminated by the Company other
than in the event of a change in control.
SUMMARY COMPENSATION TABLE
The following table provides a summary of annual and long-term
compensation during the last three fiscal years for the Chief Executive Officer
and all other executive officers of the Company whose annual salary exceeded
$100,000 (hereinafter, referred to collectively as the "named executive
officers").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION (a) LONG-TERM COMPENSATION
--------------------------- -----------------------
AWARDS PAYOUTS
----------- ---------
SECURITIES LTIP
UNDERLYING PAYOUTS($) ALL OTHER
NAME AND FISCAL OPTIONS/ COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS SARs (b) # SATION
------------------ ------ ------ ----- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Jacques R. Sardas 1996 $424,975 $176,869 200,000 $7,250,000(d) (e)
Chairman, Chief 1995 $369,720 $184,860 479,893(c) -0- (e)
Executive Officer, 1994 $369,720 $184,860 -0- -0- (e)
President and
Treasurer
Mark E. Brody 1996 $136,083 $ 43,608 15,000 -0- (e)
Vice President/ 1995 $115,000 $ 51,750 -0- -0- (e)
Chief Financial 1994 $100,000 $ 45,000 -0- -0- (e)
Officer
<FN>
- -------------
(a) Includes amounts earned in the specified fiscal year, whether or not received during such fiscal year.
(b) The Company has not granted any restricted stock or stock appreciation rights.
(c) Granted pursuant to an agreement between the Company and Mr. Sardas. See also - "CEO Employ-
ment Arrangements."
</TABLE>
11
<PAGE> 9
(d) Bonus paid pursuant to Mr. Sardas' 1992 employment agreement with the
Company. See also "Compensation Committee Report on Executive Compensation"
and "CEO Employment Arrangements."
(e) The aggregate amount of all other compensation was less than the lesser of
$50,000 or 10% of the annual salary and bonus reported for the named
executive officers.
OPTION GRANTS AND OPTION EXERCISES
The following table shows all options granted to any of the named
executive officers in fiscal 1996 and the potential value at stock price
appreciation rates of 5% and 10%, over the term of the options. The 5% and 10%
rates of appreciation are required to be disclosed by the SEC and are not
intended to forecast possible future actual appreciation, if any, in the
Company's stock prices.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------- POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF
NUMBER OF TOTAL STOCK APPRECIATION
SECURITIES OPTIONS/SARs EXERCISE MARKET FOR OPTION TERM
UNDERLYING GRANTED TO OR BASE PRICE ON --------------------
OPTIONS/SARs EMPLOYEES IN PRICE DATE OF EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/SH) GRANT DATE 5% 10%
---- ------------ ------------ ------- ------- ---------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Jacques R. Sardas 200,000(a) 76.9% $7.625 $7.625 7-27-00 $421,329 $931,028
Mark E. Brody 15,000(b) 5.8% $ 8.25 $ 8.25 1-08-06 $77,826 $197,226
<FN>
- ----------------
(a) Non-qualified stock options granted pursuant to the Sudbury, Inc. 1995 Stock Option Plan (the
"Plan"). 100,000 options granted on July 28,1995 became exercisable on January 13,1996 and the
remaining 100,000 will become exercisable on January 13, 1997.
(b) Non-qualified stock options granted pursuant to the Plan on January 8, 1996
become exercisable in three equal installments on January 8, 1997, January
8,1998 and January 8, 1999.
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 1996
AND FISCAL YEAR END OPTION/SAR VALUES
The following table sets forth information for all exercises of stock
options by each of the named executive officers and the number and value of
unexercised in-the-money options at May 31, 1996. The actual amount, if any,
realized upon exercise of stock options will depend upon the amount by which the
market price of the Company's Common Stock on the date of exercise exceeds the
exercise price. There is no assurance that the values of unexercised
in-the-money stock options reflected in this table will be realized.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF SECURITIES
UNDERLYING UNEXERCISED UNDERLYING UNEXERCISED
OPTIONS/SARs AT FISCAL IN-THE-MONEY OPTIONS/SARs
SHARES VALUE YEAR END (#) AT FY-END ($)
ACQUIRED ON REALIZED -------------------------- --------------------------
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jacques R. Sardas -0- -0- 2,235,329 100,000 $18,164,001 $137,500
Mark E. Brody -0- -0- 30,000 15,000 $ 157,500 $ 11,250
</TABLE>
12
<PAGE> 1
Exhibit 10
EMPLOYMENT AGREEMENT
AGREEMENT made this 28th day of July, 1995 between Sudbury, Inc., a
Delaware corporation with its principal office at 30100 Chagrin Blvd., Suite
203, Pepper Pike, Ohio 44124 (the "Company"), and Jacques R. Sardas, whose
residential address is 1287 Country Club Road, Akron, Ohio 44313 ("Sardas").
RECITALS
--------
The Company is a holding company with subsidiaries engaged in the
manufacture and sale of a broad range of industrial products.
The Company and Sardas are currently parties to an amended employment
agreement made January 13, 1992, as amended as of April 16, 1992 (the "Current
Employment Agreement").
The Company and Sardas desire to enter into a new employment agreement
to commence upon the expiration of the Current Employment Agreement.
Now, therefore, the parties agree as follows:
1. Employment
----------
The Company agrees to employ Sardas, and Sardas agrees to be so
employed, in the capacity of Chairman and Chief Executive Officer, with such
duties and authority as are customary for such offices. The Company, by action
of the Company's Board of Directors (the "Board"), may, at any time during the
term of this Agreement, elect or designate a person other than Sardas as Chief
Executive Officer, upon which election or designation, Sardas's employment
pursuant hereto shall not include employment as Chief Executive Officer but
shall include employment as Chairman. From and after the time that Sardas is no
longer Chief Executive Officer of the Company, Sardas's duties and authority as
<PAGE> 2
Chairman shall be in accordance with and subject to the direction and approval
of the Board; provided, however, that Sardas' duties will not be inconsistent
with duties customary for a Chairman.
2. Term
----
Subject to the provisions for termination as hereinafter provided and
except as specifically provided to the contrary herein, the term of this
Agreement shall begin on January 13, 1996 and shall continue for a term of two
(2) years from such date to and including January 12, 1998 unless terminated by
the Company for "Cause" (as defined below), or by Sardas's death or "permanent
disability" (as defined below); provided however, this Agreement shall be null
and void and of no effect if the Current Employment Agreement is validly
terminated prior to January 12, 1996. It is hereby acknowledged that the Current
Employment Agreement will not have been validly terminated for purposes of this
Section 2 if terminated by the Company without Cause (as defined for purposes of
this Section 2 in the Current Employment Agreement). However, it will have been
validly terminated for purposes of this Section 2 if terminated by the Company
for Cause (as defined therein for purposes of this Section 2), if terminated by
Sardas or if terminated as a result of the death or permanent disability (as
defined therein) of Sardas. Therefore, the parties acknowledge and agree that
unless prior to the expiration of the Current Employment Agreement Sardas is
terminated for Cause thereunder, dies, is permanently disabled or Sardas
terminates this Agreement, the provisions of this Agreement will remain in full
force and effect.
2
<PAGE> 3
3. Time and Efforts
----------------
Sardas shall diligently and conscientiously devote his full business
time and attention and best efforts in discharging his duties hereunder, as
specified by the Board, which duties shall be consistent with his position as
set forth in paragraph 1 above; provided, however, that from and after such time
as Sardas is no longer Chief Executive Officer of the Company, Sardas shall be
required to devote not more than fifty percent (50%) of his business time and
attention and best efforts in discharging his duties hereunder. During the
balance of such time, Sardas may engage in other business activities. It is
understood that Sardas may serve as a director of one or more other business
entities upon consent by the Board; provided, however, that such consent shall
no longer be required hereunder from and after such time as Sardas is no longer
Chief Executive Officer of the Company. Notwithstanding anything to the contrary
contained herein, during the term of this Agreement, Sardas shall not be
employed by, invest in or otherwise be affiliated with any entity which is in
competition with the Company if such activity would constitute a violation of
Sardas' fiduciary duty to the Company.
4. Compensation
------------
(a) CASH COMPENSATION. For all services he may render to the
Company, the Company shall pay to Sardas a base salary at a rate of
$500,000 per year, subject to withholding tax, payable at the same
times as payments to other salaried corporate employees. Upon the later
of (i) the date the Board elects or designates someone other than
Sardas as Chief Executive Officer (but Sardas shall remain as Chairman
hereunder) and (ii) January 13, 1997, the base salary rate to be paid
by the Company to Sardas for all services he may render to the Company
shall change to $250,000 per
3
<PAGE> 4
year. Such salary may be increased from time to time at the discretion
of the Board, in conjunction with salary adjustments of other in the
Company's corporate management group.
(b) BONUSES. The Company shall pay to Sardas in a lump sum
payment within ninety (90) calendar days following the end of each
fiscal year of employment an annual target bonus of up to sixty percent
(60%) of his aggregate paid base salary for each such previous fiscal
year during the term of his employment. Each such payment shall be
conditioned on Sardas being employed by the Company at the time of such
fiscal year-end, provided that in the event that Sardas's employment by
the Company is terminated by reason of his death or permanent
disability or by the Company other than for Cause, such bonus payment
shall be made to Sardas or his estate, as the case may be, on a pro
rata basis, determined by reference to the number of days from the
beginning of the then current fiscal year to the date of such
termination as compared to the total number of days in such fiscal
year. Achievement of the full amount of such bonus will depend on
Sardas's performance with respect to corporate bonus plan as set by the
Board after consultation with Sardas no later than August 31 of each
fiscal year.
5. Benefits
--------
Sardas shall be entitled to benefits and perquisites generally provided
by the Company to its executive officers and such benefits and perquisites as
are recommended by the Compensation Committee and approved by the Board.
4
<PAGE> 5
6. Payment Upon Termination
------------------------
(a) In the event of a termination of this Agreement by Sardas
or termination by the Company for "Cause" prior to January 12, 1998,
Sardas shall receive no severance pay or additional compensation other
than the fixed compensation and benefits earned and accrued as of such
termination date pursuant to Paragraphs 4 and 5 herein. For the
purposes of this Agreement, the Company shall have "Cause" to terminate
employment hereunder only (i) if termination shall have been the result
of an act or acts of dishonesty by Sardas constituting a felony and
resulting or intended to result directly or indirectly in substantial
gain or personal enrichment at the expense of the Company; or (ii) upon
the willful and continued failure by Sardas substantially to perform
his duties with the Company (other than any such failure resulting from
incapacity due to mental or physical illness) after a demand in writing
for substantial performance is delivered by the Board, which demand
specifically identifies the manner in which the Board believes that
Sardas has not substantially performed his duties, and such failure
results in demonstrably material injury to the Company. Sardas's
employment shall in no event be considered to have been terminated by
the Company for Cause if such termination took place as the result of
(i) bad judgment or negligence, or (ii) any act or omission without
intent of gaining therefrom directly or indirectly a profit to which
Sardas was not legally entitled, or (iii) any act or omission believed
in good faith to have been in or not opposed to the interest of the
Company, or (iv) any act or omission in respect of which a
determination is made that Sardas met the applicable standard of
conduct prescribed for indemnification or reimbursement or payment of
5
<PAGE> 6
expenses under the by-laws of the Company or the laws of the State of
Delaware, in each case as in effect at the time of such act or
omission. Sardas shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to him a copy of a
resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of
the Board called and held for the purpose (after reasonable notice to
Sardas and an opportunity for him, together with his counsel, to be
heard before the Board), finding that in the good faith opinion of the
Board, Sardas was guilty of conduct set forth above in clauses (i) or
(ii) of the second sentence of this paragraph and specifying the
particulars thereof in detail.
(b) In the event of a termination by the Company without Cause
at any time after the date of execution hereof (even if prior to
January 13, 1996) and prior to January 12, 1998, the Company shall pay
to Sardas his base salary at the rates provided for in this Agreement
(or such higher rate as may have been provided for by the Board during
the term of this Agreement pursuant to Section 4(a) hereof) for the
remainder of the term of this Agreement and any bonus due under Section
4(b) hereof.
(c) In the event of death or permanent disability during the
term of this Agreement, this Agreement shall terminate and Sardas (or
his estate or personal or legal representative) shall receive no
severance pay or additional compensation other than the fixed
compensation and benefits earned and accrued as of the date of such
death or termination for
6
<PAGE> 7
permanent disability, including any bonus due under Paragraph 4(b)
hereunder. For purposes of this Agreement, termination for permanent
disability shall occur on such date and in such circumstance that, as a
result of his incapacity due to physical or mental illness, Sardas were
to have been absent from his duty with the Company on a full-time basis
for a period of six (6) consecutive months, provided that the Company
had given Sardas thirty (30) days written notice of potential
termination, and within said thirty (30) day period after written
notice of termination had been given, Sardas had not returned to the
full-time performance of his duties.
7. Existing Options
----------------
(a) Pursuant to that certain Non-Statutory Stock Option
Agreement dated September 1, 1992 between the Company and Sardas,
Sardas was granted the option to purchase 1,764,706 shares (the "1992
Option Shares") of the Company's common stock, subject to the terms and
conditions set forth therein.
7
<PAGE> 8
(b) (i) Until January 13, 1998 (even if prior thereto Sardas
shall have terminated this Agreement), Sardas, or his estate, as the
case may be, shall have the right to sell to the Company, and the
Company shall be required to purchase from Sardas for cash, the
following amounts of 1992 Option Shares on each of the indicated dates
(individually, an "Option Purchase Date" and collectively, the "Option
Purchase Dates"):
<TABLE>
<CAPTION>
Option Purchase Date Number of 1992 Option Shares
-------------------- ----------------------------
<S> <C>
February 7, 1996 352,942
July 13, 1996 352,941
January 13, 1997 352,941
July 13, 1997 352,941
January 13, 1998 352,941
</TABLE>
(b) (ii) In order to exercise such right, Sardas must deliver
to the Company no later than five (5) business days prior to the
relevant Option Purchase Date a notice stating that he is exercising
his right pursuant to this Section 7(b) of this Agreement and setting
forth the number of 1992 Option Shares as to which such right was being
exercised (e.g. no Option Shares or one or two full installments as
applicable pursuant to the provisions of this Agreement). The purchase
price for each of the 1992 Option Shares so purchased shall be the Fair
Market Value for the Company's common stock on the Option Purchase
Date. For purposes of this Section 7, the "Fair Market Value" for the
Company's common stock on the Option Purchase Date shall mean the
average closing price (or, as to any such day on which
8
<PAGE> 9
no sales of the Company's common stock shall have taken place, then as
to such day, the average of the last reported closing bid and asked
prices) of the Company's common stock on the principal stock exchange
on which the Company's common stock is then traded (or if the Company's
common stock is not then listed on any such exchange, then on the
over-the-counter market) during the period comprising the ten
consecutive trading days immediately preceding the fifth business day
immediately preceding the relevant Option Purchase Date, as such prices
are reported in The Wall Street Journal, or if not so published in such
newspaper, in any other newspaper of general circulation selected by
the Company and reasonably acceptable to Sardas.
(b) (iii) Unless Sardas previously shall have been terminated for Cause
or has terminated this Agreement prior to the expiration of its term,
Sardas may, at his option, delay the exercise of his right pursuant to
Section 7(b)(i) as to the indicated number of 1992 Option Shares until
the next succeeding Option Purchase Date. If at that next succeeding
Option Purchase Date, Sardas does not exercise his right as to the
delayed 1992 Option Shares, then his rights pursuant to this Section 7
as to those delayed 1992 Option Shares shall cease.
(c) If this Agreement is terminated due to the death or
permanent disability of Sardas, then Sardas (or the estate or personal
or legal representative of Sardas, as the case may be) shall have the
right, exercisable by written notice delivered to the Company within
thirty (30) days following such death or disability to sell to the
Company, and the Company shall be required to purchase for cash, all of
the 1992 Option Shares at a purchase price equal to the Fair Market
Value for
9
<PAGE> 10
the Company's common stock on the date of such death or permanent
disability, calculated as if such date was an Option Purchase Date.
Such purchase shall occur within forty-five (45) days following receipt
by the Company of the written notice referred to in the immediately
preceding sentence.
(d) If this Agreement is terminated by the Company other than
for Cause at any time after the date of execution hereof (even if prior
to January 13, 1996) and prior to January 12, 1998, then, in such
event, Sardas shall have the right, exercisable by written notice to
the Company delivered within fifteen (15) days following such
termination, to sell to the Company, and the Company shall be required
to purchase from Sardas for cash, all, but not less than all, of the
then remaining 1992 Option Shares. Such purchase shall occur within
forty-five (45) days following the receipt by the Company of the
written notice referred to in the immediately preceding sentence. The
purchase price for each share purchased pursuant to this Section 7(d)
shall be the Fair Market Value for the Company's common stock on the
date of such termination calculated as if such date was an Option
Purchase Date.
(e) If this Agreement is terminated by the Company other than
for Cause or by reason of Sardas' death or permanent disability, and
Sardas does not exercise the right set forth in Sections 7(c) or 7(d)
above, as applicable, then, in such event, Sardas shall have the right,
exercisable on the Option Purchase Date immediately following such
termination, to specify in his notice to the Company pursuant to
Section 7(b)(ii) above that the number of 1992 Option
10
<PAGE> 11
Shares as to which such right was being exercised is all, but not less
than all, of the then remaining 1992 Option Shares and such purchase
shall occur within forty-five (45) days following the receipt by the
Company of such written notice.
(f) If this Agreement is terminated by the Company other than
for Cause or is terminated by reason of Sardas' death or permanent
disability, and Sardas does not exercise either the right set forth in
Sections 7(c), 7(d) or 7(e) above, as applicable, then, in such event,
the provisions set forth in Section 7(b) shall continue as set forth
therein.
(g) If this Agreement is terminated by the Company for Cause,
then, in such event, the Company shall have the right, exercisable by
written notice to Sardas delivered within fifteen (15) days following
such termination, to purchase from Sardas for cash, and Sardas, subject
to the next sentence of this paragraph, shall be required to sell to
the Company, all, but not less than all, of the then remaining 1992
Option Shares. Such purchase shall occur within forty-five (45) days
following the delivery to Sardas of the written notice referred to in
the immediately preceding sentence, unless within fifteen (15) days
after such notice Mr. Sardas, by written notice to the Company,
declines to tender his 1992 Option Shares. In such event, all of the
Company's obligations hereunder to repurchase the 1992 Option Shares
shall terminate except only for those obligations that shall have
arisen prior to such termination of employment. The purchase price for
each share purchased pursuant to this Section 7(g) shall be the Fair
Market Value for the Company's common stock on the date of such
termination calculated as if such date was an Option Purchase Date.
11
<PAGE> 12
8. New Option
----------
Effective immediately under entering into this Employment Agreement,
the Company and Sardas shall enter into a certain Stock Option Agreement,
substantially in the form of Exhibit A hereto, granting to Sardas the option to
purchase up to 200,000 shares of the Company's common stock, on the terms and
conditions as set forth therein. Such option shall be granted under the Plan (as
defined in the Stock Option Agreement) and subject to stockholder approval of
the Plan.
9. Business Expenses
-----------------
The Company shall reimburse Sardas for all reasonable and necessary
expenses incurred in carrying out his duties under this Agreement. Sardas shall
present to the Company from time to time itemized accounts of such expenses in
the usual form required by the Company.
10. Indemnification
---------------
Sardas shall be covered by the Company's indemnification policies for
Directors and Officers and shall be offered an indemnification agreement in the
form as may from time to time be in effect with other Directors and Officers of
the Company.
11. Confidentiality
---------------
Sardas agrees to be bound by the Company's confidentiality policy.
12. Arbitration
-----------
Any controversy or claim arising out of, or relating to, this Agreement
or the breach thereof shall be settled by a three-member arbitration panel (one
member selected by the Company, one member by Sardas and one member selected by
the other two members, or if not by a court of competent jurisdiction), in
accordance with the governing rules of the
12
<PAGE> 13
American Arbitration Association. Judgment upon the award rendered shall be
final and may be entered in any court of competent jurisdiction in Cleveland,
Ohio.
13. Successors; Binding Agreement
-----------------------------
This Agreement and all rights of Sardas hereunder shall inure to the
benefit of, and be enforceable by Sardas's personal or legal representatives.
14. Modifications and Waivers
-------------------------
No provisions of this Agreement may be modified or discharged unless
such modification or discharge is authorized by the Board and is agreed to in
writing, signed by Sardas and by another executive officer of the Company. No
waiver by either party hereto of any breach by the other party hereto or any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time.
15. Entire Agreement
----------------
This Agreement constitutes the entire agreement of the parties hereto
relating to the subject matter hereof and there are no written or oral terms or
representations made by either party other than those contained herein.
16. Governing Law
-------------
The validity, interpretation, construction, performance and enforcement
of this Agreement shall be governed by the laws of the State of Ohio.
13
<PAGE> 14
17. Invalidity
----------
The invalidity or unenforceability of any term or terms of this
Agreement shall not invalidate, make unenforceable or otherwise affect any other
term of this Agreement which shall remain in full force and effect.
IN WITNESS WHEREOF the parties have executed this Agreement as amended
as of the dates indicated above.
SUDBURY, INC.
By: /s/ Mark E. Brody, Vice President
----------------------------------------
Mark E. Brody, Vice President and
Chief Financial Officer
And: /s/ Thomas F. Slater
---------------------------------------
Thomas F. Slater, Chairman
Compensation Committee of the
Board of Directors
/s/ Jacques R. Sardas
---------------------------------------
Jacques R. Sardas, Individually
14
<PAGE> 15
EXHIBIT A
---------
SUDBURY, INC. NON-QUALIFIED STOCK OPTION AGREEMENT
--------------------------------------------------
This Agreement, dated this 28th day of July, 1995, by and between
Sudbury, Inc., a Delaware corporation with an office at 30100 Chagrin Blvd.,
Suite 203, Pepper Pike, Ohio 44124 (the "Company") and Jacques R. Sardas (the
"Employee"), a full-time employee of the Company or one of its subsidiaries.
SECTION 1. Under the provisions of the Company's 1995 Stock Option Plan
(the "Plan"), the Company hereby grants to the Employee the option of purchasing
an aggregate of 200,000 shares of common stock, par value $.01, of the Company
("Shares") at the price of $________ per share [market price], subject to the
terms and conditions as hereinafter set forth.
SECTION 2. Notwithstanding any other provisions herein, this option
shall expire no later than five (5) years from the date of this Agreement.
SECTION 3. The option granted pursuant to this Agreement shall vest on
the following schedule:
(a) options to purchase 100,000 Shares on January 13, 1996;
and
(b) options to purchase an additional 100,000 Shares on
January 13, 1997.
SECTION 4. This option is not transferable by the Employee other than
(a) by will or by the laws of descent and distribution, and is exercisable,
during the lifetime of the Employee, only by him or her, or in the event of
death, his or her estate, or in the event of disability, his or her personal
representative, or (b) pursuant to a qualified domestic relations order, as
defined in the 1986 Internal Revenue Code, as amended (the "Code") or Title 1 of
the Employee Retirement Income Security Act of 1974, as amended. Except as
otherwise provided in Sections 5, 6, and 9, this option can be exercised only if
the Employee has remained in the employ of the Company continuously from the
date this option is granted.
SECTION 5. In the event of termination of employment of the Employee
for any reason other than death, permanent disability (as defined in that
certain Employment Agreement between the Company and the Employee of even date
herewith (the "Employment Agreement")) or for Cause (as defined in the
Employment Agreement), then (a) the Employee, at any time within the three-month
period following such termination of employment (but within the term specified
in Section 2), may exercise the option rights or any unexercised portion thereof
to the extent such rights were otherwise exercisable by the Employee at the date
of termination of employment, and (b) the portion of the option not vested as of
the date of Employee's termination of employment shall automatically vest as of
the date of such termination. If, however, the Employee is terminated from
employment for Cause (as defined in the Employment Agreement), all option
rights, heretofore unexercised, shall expire.
SECTION 6. If the Employee shall die or become permanently disabled (as
defined in the Employment Agreement) while in the employ of the Company or
within the three-year
<PAGE> 16
period after termination of employment with the Company, (a) the option rights
or any unexercised portion thereof may be exercised within the one-year period
after the Employee's death or permanent disability (but within the term
specified in Section 2), by the person entitled by will or the applicable laws
of descent and distribution to the extent that the Employee was entitled to
exercise the same at the date of his or her death, and (b) the portion of the
option that has not vested as of the earlier of the Employee's (i) death or
permanent disability, as the case may be, or (ii) termination shall
automatically expire.
SECTION 7. Nothing herein contained shall confer upon the Employee any
right to continue in the employ of the Company, or limit or restrict any right
which the Company would otherwise have to terminate the employment of the
Employee with or without cause or to adjust his or her compensation.
SECTION 8. Subject to the provisions of Section 9(a) of this Agreement,
in the event that, during the term hereof and while the option as to any of the
Shares covered hereby shall remain unexercised, the number of Shares subject to
the Plan and to options granted under the Plan shall be adjusted as follows: (a)
in the event that all of the outstanding Shares are changed by any stock
dividend, stock split or recapitalization or in the event that extraordinary
cash or non-cash dividends are declared with respect to the Shares, the number
of Shares subject to the Plan and to options granted hereunder shall be
equitably adjusted; (b) in the event of any merger, consolidation or
reorganization of the Company with any other corporation or corporations, there
shall be substituted, on an equitable basis as determined by the Compensation
Committee of the Board of Directors (the "Committee"), for each Share then
subject to the Plan, whether or not at the time subject to outstanding options,
the number and kind of Shares or other securities to which the holders of Shares
of the Company will be entitled pursuant to the transaction; and (c) subject to
the provisions of Section 9(b) of this Agreement in the event of any other
relevant change in the capitalization of the Company, the Committee shall
provide for an equitable adjustment In the number of Shares then subject to the
Plan, whether or not then subject to outstanding options.
In the event of any such adjustment the purchase price per Share shall be
equitably adjusted. Any such adjustment or substitution may provide for the
elimination of any fractional Share which might otherwise become subject to an
option. The adjustment and manner of application of the foregoing provisions
shall be determined by the Committee in its sole discretion.
SECTION 9.
(a) If the Company shall liquidate or dissolve, or shall be a
party to a merger or consolidation or other business combination with
respect to which it shall not be the surviving corporation, the Company
shall give written notice thereof to the Employee at least thirty days
prior thereto, and notwithstanding the provisions of Section 3, the
Employee shall have the right within said thirty-day period (but within
2
<PAGE> 17
the term specified in Section 2) to exercise this option in full to the
extent not previously exercised. To the extent that this option shall
not have been exercised on or prior to the effective date of such
liquidation, dissolution, merger or consolidation, it shall terminate
on said date, unless it is assumed by another corporation.
(b) Notwithstanding the provisions of Section 3, the option
granted hereby shall become exercisable in full if and when any
corporation, partnership, joint venture, person, or a group acting
together ("Acquiring Entity") for a similar purpose shall directly or
indirectly acquire or announce an intent to directly or indirectly
acquire control of the Company or any successor or assignee of the
Company for purposes of this Section, control shall mean the
acquisition of, or the formation of a group whose members beneficially
own shares of the Company, which after giving effect thereto, shall
permit the Acquiring Entity to vote 45% or more of the aggregate voting
power, as measured by all Shares then outstanding, in the election of
directors of the Company.
SECTION 10. This option shall be exercised by delivering to the Company
at the office of its Secretary (a) a written notice, signed by the person
entitled to exercise the option, stating the number of Shares to be purchased
hereunder, (b) payment in an amount equal to the full purchase price of the
Shares to be purchased, and (c) in the event the option is exercised by a person
other than the Employee, evidence satisfactory to the Company that such person
has the right to exercise the option. Payment may be made, at the election of
the Employee (a) in cash (including check, bank draft, money order, or wire
transfer), (b) by delivering, in transferable form, that number of Shares which,
on the business day preceding the date of exercise, has an aggregate fair market
value equal to such purchase price, or (c) a combination of the foregoing. The
fair market value of the Shares shall be deemed to be (a) the closing price of
the Shares on the principal stock exchange on which the Shares are then traded
on the last business day preceding the date of exercise of the option, or (b) if
no sales take place on such day on any such exchange, the average of the last
reported closing bid and asked prices on such day as officially quoted on the
principal stock exchange on which the Shares are then traded, or (c) if the
Shares are not listed on any such exchange, the average of the last reported
closing bid and asked prices on the over-the-counter market on the day preceding
the date of exercise of the option. The National Association of Securities
Dealers Market System shall be deemed a principal stock exchange. The Employee
shall also pay, within the time period specified by the Company, any amounts
required to be withheld for federal, state, or local tax purposes as a result of
the exercise of the options. Upon due exercise of the option, the Company shall
issue in the name of the person exercising the option and deliver to such person
one or more certificates for the shares in respect of which the option shall
have been exercised. No holder of this option shall have any rights as a
stockholder in respect of any Shares as to which the option shall not have been
duly exercised and no rights as a shareholder shall arise in respect of any
Shares as to which the option shall have been duly exercised until and except to
the extent that a certificate or certificates for such Shares shall have been
issued.
3
<PAGE> 18
SECTION 11. This option shall not be exercisable if such exercise would
violate:
(a) Any applicable state securities law;
(b) Any applicable registration or other requirements under
the Securities Act of 1933, as amended, the Securities Exchange Act of
1934, as amended, or the listing requirements of any stock exchange; or
(c) Any applicable legal requirement of any other governmental
authority.
The Company agrees to make reasonable efforts to comply with the foregoing laws
and requirements so as to permit the exercise of this option. Furthermore, if a
Registration Statement with respect to the Shares to be issued upon the exercise
of this option is not in effect or if counsel for the Company deems it necessary
or desirable in order to avoid possible violation of the Securities Act of 1933,
as amended (the "Act"), the Company may require, as a condition to its issuance
and delivery of certificates for the Shares, the delivery to the Company of a
commitment in writing by the person exercising the option that at the time of
such exercise it is his or her intention to acquire such Shares for his or her
own account for investment only and not with a view to, or for resale in
connection with, the distribution thereof; that such person understands the
Shares may be "restricted securities" as defined in Rule 144 of the Securities
and Exchange Commission; and that any resale, transfer or other disposition of
said Shares will be accomplished only in compliance with Rule 144, of the Act,
or the other Rules and Regulations thereunder. The Company may place on the
certificates evidencing such shares an appropriate legend reflecting the
aforesaid commitment and may refuse to permit transfer of such certificates
until it has been furnished evidence satisfactory to it that no violation of the
Act or the Rules and Regulations thereunder would be involved in such transfer.
SECTION 12. References herein to the Company shall include all parents
and subsidiaries of the Company, and shall be determined consistently with the
definitions of parent and subsidiary in the Code and all relevant Treasury
Department Regulations.
SECTION 13. This option is a non-qualified stock option within the
meaning of Section 422 of the Code and shall not be treated or interpreted for
federal income tax purposes as an Incentive stock option as defined in the Code.
SECTION 14. The Committee shall have authority, subject to the express
provisions of the plan, to construe and interpret this Agreement and the Plan,
to establish, and to make all other determinations in the judgment of the
Committee necessary or desirable for the administration of the Plan. All
determinations of the Committee shall be final and binding upon all persons. The
Board of Directors may at any time or from time to time grant to the Committee
such further powers and authority as the Board shall determine to be necessary
or desirable.
4
<PAGE> 19
SECTION 15. All of the provisions of the Plan are incorporated herein
by reference and are made a part of this Agreement. To the extent any conflict
shall arise between this Agreement and the terms of the Plan, the Plan shall
control.
SECTION 16. This Agreement shall be governed by the laws of the state
of Delaware.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
duplicate as of the day and year first written above.
SUDBURY, INC.
By: /s/ Mark E. Brody, Vice President
______________________________________
EMPLOYEE
/s/ Jacques R. Sardas
_________________________________________
Jacques R. Sardas
5
<PAGE> 1
Exhibit 11
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT is made and entered into this 12th day of
October, 1995, between Sudbury, Inc., a Delaware corporation, with its principal
office located at 30100 Chagrin Blvd., Cleveland, Ohio, 44124, (together with
its successors and assigns permitted under this Agreement, the "Company"), and
Mark E. Brody, who resides at 8985 Oakstone Trail, Chardon, Ohio 44024, (the
"Executive").
W I T N E S S E T H:
--------------------
WHEREAS, the Executive is Vice President and Chief Financial Officer of
the Company and an integral part of its management; and
WHEREAS, the Company has determined that it is in the best interest of
the Company and its stockholders to enter into an employment agreement setting
forth the obligations and duties of both the Company and the Executive (this
"Agreement");
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and for other good and valuable consideration, the receipt of which is
mutually acknowledged, the Company and the Executive agree as follows:
1. DEFINITIONS.
------------
a. "BASE SALARY" shall mean the Executive's annual salary, as adjusted
from time to time.
b. "BOARD" shall mean the Board of Directors of the Company.
c. "CAUSE" shall mean:
i. the Executive's fraud, dishonesty, willful misconduct or
deliberate injury to the Company or its subsidiaries in the performance
of his duties hereunder;
ii. the Executive's intentional and repeated refusal or
failure to perform his duties consistent with his position with the
Company; or
<PAGE> 2
iii. the Executive's material breach of any provision of this
Agreement.
d. "CHANGE IN CONTROL" shall mean a change in control of the Company of
a nature that would be required to be reported in response to Item 6(e) of
Schedule 14A promulgated under the Exchange Act, whether or not the Company is
then subject to such reporting requirement; provided that, without limitation, a
Change in Control shall be deemed to have occurred:
i. if any "person" (as defined in subsection 3(a)(9) of the
Exchange Act and as used in subsections 13(d) and 14(d) of the Exchange
Act), other than a person with which the Executive is affiliated or of
which he is a part and other than any employee benefit plan sponsored
by the Company (including any trustee of such plan), becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 45%
or more of the combined voting power of the Company's then outstanding
securities; or
ii. in the event of a plan of complete liquidation of the
Company or the sale or disposition by the Company of all or
substantially all of the Company's assets. An event or occurrence (or
series of events or occurrences) that would not otherwise constitute a
Change in Control under the foregoing shall be deemed to constitute a
Change in Control for purposes of this Agreement if the Board, by
majority vote, determines that a Change in Control does result
therefrom. A determination by directors under this subsection 1(d)
shall be made solely for purposes of this Agreement and shall not
directly or indirectly affect any determination or analysis of whether
a Change in Control results for any other purpose. Any determination
made with respect to whether a change in control results for purposes
of any other
2
<PAGE> 3
agreement or plan of the Company shall have no effect for purposes of
this Agreement.
e. "CONSTRUCTIVE TERMINATION WITHOUT CAUSE" shall mean a termination of
the Executive's employment at his initiative following the occurrence, without
his prior written consent, of one or more of the following events (except in
connection with a termination of the Executive's employment for one of the other
reasons specified in Section 7 below):
i. a reduction in the Executive's Base Salary or the failure
of the Company to satisfy in all material respects its obligations to
protect the benefits provided for in Section 5 below, unless, in the
case of termination or reduction of such a benefit, (A) there is
substituted a comparable benefit that is economically equivalent to
such benefit prior to its termination or reduction, (B) the termination
or reduction of the benefit affects members of the senior management of
the Company generally or (C) the termination or reduction of the
benefit occurs pursuant to the Executive's direction or consent;
ii. the loss of any of the Executive's titles or positions;
iii. a significant diminution in the Executive's duties and
responsibilities or the assignment to the Executive of duties and
responsibilities inconsistent with his positions;
iv. the relocation of the Executive's principal place of
employment to a location that is more than thirty (30) miles from its
present location; or
v. the failure of the Company to obtain the unconditional
assumption, in writing or by operation of law, of the Company's
obligation to the Executive under
3
<PAGE> 4
this Agreement by any successor prior to or at the time of a
reorganization, merger, consolidation, disposition of all or
substantially all of the assets of the Company or similar transaction.
A Constructive Termination Without Cause shall not take effect
unless:
vi. the Executive has delivered written notice to the Board
within ninety days after he acquires knowledge of one of the events
providing a basis for Constructive Termination Without Cause, stating
which one of those events has occurred;
vii. within 30 days after the receipt of such notice the
Company has not remedied such event and provided him with a written
notice of such remedy; and
viii. if the Company has not remedied such event, the
Executive has notified the Company in writing that he is terminating
his employment.
The failure of the Executive to effect a Constructive Termination
Without Cause as to any one event shall not affect his entitlement to effect a
Constructive Termination Without Cause as to any other such event.
f. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and reference to any specific provisions of the
Exchange Act shall refer to the corresponding provisions of the Act as it may
hereafter be amended or replaced.
g. "TERMINATION WITHOUT CAUSE" shall mean a termination of the
Executive's employment by the Company other than due to Death, Disability or for
Cause.
4
<PAGE> 5
2. TERM OF EMPLOYMENT, POSITIONS AND DUTIES.
-----------------------------------------
Subject to the terms and provisions of this Agreement, the Executive's
employment by the Company may be terminated by either party at any time, with or
without cause, upon notice to the other party. While employed by the Company,
the Executive shall devote his entire business time and all reasonable efforts
to his employment and shall perform such duties as are consistent with the
Executive's position with the Company and as are from time to time assigned or
delegated by the Board and as are set forth in the Company's By-laws.
3. BASE SALARY.
------------
During his employment with the Company, the Executive shall receive a
Base Salary as shall be determined by the Board from time to time.
4. ANNUAL BONUSES.
---------------
The Executive shall be eligible to receive such bonuses during his
employment as may be determined by the Board from time to time. The Executive
shall be entitled to participate in bonus plans that are generally made
available to senior executives of the Company.
5. EXPENSE REIMBURSEMENT.
----------------------
During his employment with the Company, the Executive shall be entitled
to prompt reimbursement by the Company for all reasonable out-of-pocket expenses
incurred by him in performing services under this Agreement, upon his submission
of such accounts and records as may be required under Company policy.
6. EMPLOYEE BENEFIT PLANS.
-----------------------
5
<PAGE> 6
While employed by the Company, the Executive shall be entitled to
participate in all employee benefit plans and programs made available to the
Company's senior executives or to its employees generally, as such plans or
programs may be in effect from time to time.
7. TERMINATION OF EMPLOYMENT.
--------------------------
a. TERMINATION BY THE COMPANY FOR CAUSE. In the event that the
Executive's employment is terminated for Cause, he shall be entitled to:
i. his Base Salary through the date of his termination for
Cause;
ii. any annual bonuses earned for prior years but not yet
paid;
iii. reimbursement in accordance with this Agreement of any
business expenses incurred by the Executive but not yet paid to him on
the date of his termination of employment; and
iv. other benefits accrued and earned by the Executive through
the date of termination in accordance with applicable plans and
programs of the Company.
b. TERMINATION WITHOUT CAUSE. In the event of a Termination Without
Cause, the Executive shall be entitled to:
i. his Base Salary, at the rate in effect on the date of his
termination of employment, for a period of twelve months from such
termination, payable in installments in accordance with past practices;
ii. any annual bonuses earned for prior periods but not yet
paid;
iii. any annual bonus to which the Executive would have been
entitled, had he not been terminated, for the fiscal year during which
he is terminated, which bonus payment shall be made on a pro rata
basis, determined by reference to the
6
<PAGE> 7
number of days from the beginning of the then current fiscal year to
the date of such termination, as compared to the total number of days
in such fiscal year. Such bonus shall be payable when bonuses pursuant
to the bonus plan under which it is earned are paid;
iv. reimbursement in accordance with this Agreement of any
business expenses incurred by the Executive but not yet paid to him on
the date of his termination of employment; and
v. other benefits accrued and earned by the Executive through
the date of termination in accordance with applicable plans and
programs of the Company.
c. TERMINATION WITHOUT CAUSE OR CONSTRUCTIVE TERMINATION WITHOUT CAUSE
FOLLOWING A CHANGE IN CONTROL. In the event of a Termination Without Cause or a
Constructive Termination Without Cause, in each case, within one year following
a Change in Control, the Executive shall be entitled to:
i. a lump-sum payment equal to two times his Base Salary, at
the rate in effect on the date of his termination of employment;
ii. any annual bonuses earned for prior periods but not yet
paid;
iii. any annual bonus to which the Executive would have been
entitled, had he not been terminated, for the fiscal year during which
he is terminated, which bonus payment shall be made on a pro rata
basis, determined by reference to the number of days from the beginning
of the then current fiscal year to the date of such termination, as
compared to the total number of days in such fiscal year. Such bonus
7
<PAGE> 8
shall be payable when bonuses pursuant to the bonus plan under which it
is earned are paid;
iv. reimbursement in accordance with this Agreement of any
business expenses incurred by the Executive but not yet paid to him on
the date of his termination of employment; and
v. other benefits accrued and earned by the Executive through
the date of termination in accordance with applicable plans and
programs of the Company.
d. TIMING OF PAYMENT. Except as otherwise expressly provided in this
Section 7, all payments required to be made to the Executive under this Section
7 shall be made no later than 30 days following the date of termination of
employment.
8. WITHHOLDING TAXES.
------------------
All payments to the Executive or his estate or beneficiaries, as the
case may be, shall be subject to withholding on account of federal, state and
local taxes as required by law. If any payment hereunder is insufficient to
provide the amount of such taxes required to be withheld, the Company may
withhold such taxes from any other payment due hereunder.
9. ASSIGNABILITY; BINDING NATURE.
------------------------------
This Agreement shall be binding upon and inure to the benefit of the
Company and the Executive and their respective successors, heirs (in the case of
the Executive) and assigns. No rights or obligations of the Company under this
Agreement may be assigned or transferred by the Company except that such rights
or obligations may be assigned or transferred pursuant to (i) a merger or
consolidation in which the Company is not the continuing entity or (ii) sale or
liquidation of all or substantially all of the assets of the Company, provided
that the assignee or transferee is the
8
<PAGE> 9
successor to all or substantially all of the assets of the Company and such
assignee or transferee assumes the liabilities, obligations and duties of the
Company, as contained in this Agreement, either contractually or as a matter of
law. The Company further agrees that, in the event of a sale of assets or
liquidation as described in the preceding sentence, it will use its best efforts
to cause such assignee or transferee expressly to assume the liabilities,
obligations and duties of the Company hereunder. No obligations of the Executive
under this Agreement may be assigned or transferred by the Executive.
10. ENTIRE AGREEMENT.
-----------------
Except to the extent otherwise provided herein, this Agreement contains
the entire understanding and agreement between the parties concerning the
subject matter hereof and supersedes any prior agreements, whether written or
oral, between the parties concerning the subject matter hereof.
11. AMENDMENT OR WAIVER.
--------------------
No provision in this Agreement may be amended unless such amendment is
agreed to in writing and signed by both the Executive and an authorized officer
of the Company. No waiver by either party of any breach by the other party of
any condition or provision contained in this Agreement to be performed by such
other party shall be deemed a waiver of a similar or dissimilar condition or
provision at the same or any prior or subsequent time. Any waiver must be in
writing and signed by the Executive or an authorized officer of the Company, as
the case may be.
12. SEVERABILITY.
-------------
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement
9
<PAGE> 10
shall be unaffected thereby and shall remain in full force and effect to the
fullest extent permitted by law.
13. SURVIVORSHIP.
-------------
The respective rights and obligations of the parties hereunder shall
survive any termination of the Executive's employment with the Company to the
extent necessary to the intended preservation of such rights and obligations as
described in this Agreement.
14. BENEFICIARIES/REFERENCES.
-------------------------
The Executive shall be entitled to select (and change, to the extent
permitted under any applicable law) a beneficiary or beneficiaries to receive
any compensation or benefit payable hereunder following the Executive's Death by
giving the Company written notice thereof. In the event of the Executive's Death
or of a judicial determination of his incompetence, reference in this Agreement
to the Executive shall be deemed, as appropriate, to refer to his beneficiary,
estate or other legal representative.
15. GOVERNING LAW/JURISDICTION.
---------------------------
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of Ohio, without reference to principles of conflict of
laws.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the date first above written.
/s/ Mark E. Brody
-------------------------------------
Mark E. Brody
SUDBURY, INC.
By: /s/ Jacques R. Sardas
-----------------------------------
Jacques R. Sardas
Chairman, Chief Executive Officer and
President
10
<PAGE> 11
13. SURVIVORSHIP.
-------------
The respective rights and obligations of the parties hereunder shall
survive any termination of the Executive's employment with the Company to the
extent necessary to the intended preservation of such rights and obligations as
described in this Agreement.
14. BENEFICIARIES/REFERENCES.
-------------------------
The Executive shall be entitled to select (and change, to the extent
permitted under any applicable law) a beneficiary or beneficiaries to receive
any compensation or benefit payable hereunder following the Executive's Death by
giving the Company written notice thereof. In the event of the Executive's Death
or of a judicial determination of his incompetence, reference in this Agreement
to the Executive shall be deemed, as appropriate, to refer to his beneficiary,
estate or other legal representative.
15. GOVERNING LAW/JURISDICTION.
---------------------------
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of Ohio, without reference to principles of conflict of
laws.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the date first above written.
-------------------------------------
Mark E. Brody
SUDBURY, INC.
By:
-----------------------------------
Jacques R. Sardas
Chairman, Chief Executive Officer and
President
11
<PAGE> 12
SUDBURY LETTERHEAD
October 8, 1996
Mr. Mark E. Brody
Vice President of Finance and
Chief Financial Officer
Sudbury, Inc.
30100 Chagrin Blvd.
Suite 203
Cleveland, OH 44124
Re: Employment Agreement Between Sudbury, Inc., (the "Company") and Mark E.
Brody ("You"), dated October 12, 1995, (the "Employment Agreement")
Dear Mark:
You have asked for an interpretation of Section 1.e. of the Employment
Agreement. Defined terms used in this letter have the meanings ascribed to them
in the Employment Agreement.
The purpose of this letter is to describe for You certain circumstances under
which there will be deemed to have been a Constructive Termination Without Cause
under Section 1.e. of the Employment Agreement. The Employment Agreement defines
a Constructive Termination Without Cause, in part, as "a significant diminution
in your duties and responsibilities or the assignment to you of duties and
responsibilities inconsistent with your positions". This is to confirm to You
that in the event there is a Change in Control whereby the person acquiring 45%
or more of the combined voting power of the Company's then outstanding
securities is a public company or a subsidiary of a public company, if your
duties, responsibilities, title and position are not directly for such public
company, then your duties and responsibilities shall be deemed to have been
significantly diminished and your titles and positions lost, and that shall be a
basis for a Constructive Termination Without Cause under the Employment
Agreement.
The provisions of this letter shall constitute a binding interpretation of the
Employment Agreement upon which You may rely and shall be binding upon the
Company and its successors and assigns.
Very truly yours,
SUDBURY, INC.
/s/ Jacques R. Sardas
- ---------------------------------------------
Jacques R. Sardas
Chairman, President and Chief Executive Officer
