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[LOGO] ULTRA PAC, INC. LETTERHEAD
March 26, 1998
Dear Fellow Shareholders:
I am pleased to inform you that Ultra Pac, Inc. has entered into an
Agreement and Plan of Merger with Ivex Packaging Corporation and Package
Acquisition, Inc., an indirect wholly-owned subsidiary of Ivex. Under the Merger
Agreement, Package Acquisition, Inc. has today commenced a cash tender offer to
purchase all of the outstanding shares of common stock of Ultra Pac at a
purchase price of $15.50 per share, net to the seller in cash. The Merger
Agreement provides that if the offer is consummated, Ultra Pac will be a
subsidiary of Ivex.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE
OFFER AND THE MERGER AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER
ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF ULTRA PAC. YOUR
BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF ULTRA PAC ACCEPT THE
OFFER AND TENDER ALL OF THEIR SHARES.
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 of Wasserstein Perella & Co., Inc., Ultra Pac's
financial advisors, that the consideration to be offered to the holders of
common stock in the offer and the merger pursuant to the Merger Agreement is
fair to such shareholders from a financial point of view.
In the merger, shares not purchased in the offer will be converted into the
right to receive $15.50 per share in cash, without interest thereon.
In addition to the attached Schedule 14D-9, enclosed is the Offer to
Purchase dated March 26, 1998, 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 the
merger, provide detailed information about the transactions and include
instructions as to how to tender your shares. We urge you to read these
documents carefully.
I appreciate very much the opportunity I have had to serve as the Chairman,
Chief Executive Officer and President of Ultra Pac. I hope you are as pleased as
I am that your investment in Ultra Pac has led to the opportunity afforded by
the Ivex offer.
Very truly yours,
Calvin S. Krupa
Calvin S. Krupa
Chairman, Chief Executive Officer
and President
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================================================================================
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
---------------------------
ULTRA PAC, INC.
(Name of Subject Company)
ULTRA PAC, INC.
(Names of Person(s) Filing Statement)
COMMON STOCK, NO PAR VALUE (INCLUDING THE
ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
(Title of Class of Securities)
903886
(Cusip Number of Class of Securities)
CALVIN S. KRUPA
CHAIRMAN, CHIEF EXECUTIVE OFFICER, AND PRESIDENT
21925 INDUSTRIAL BOULEVARD
ROGERS, MINNESOTA 55374
(612) 428-8340
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of the Person(s) Filing Statement)
---------------------------
WITH A COPY TO:
<TABLE>
<S> <C>
FRANK I. HARVEY, ESQ. HERBERT S. WANDER, ESQ.
LARKIN HOFFMAN DALY DAVID J. KAUFMAN, ESQ.
& LINDGREN, LTD. KATTEN MUCHIN & ZAVIS
7900 XERXES AVENUE SOUTH 525 WEST MONROE
SUITE 1500 SUITE 1600
BLOOMINGTON, MINNESOTA 55431 CHICAGO, ILLINOIS 60661-3693
(612) 835-3800 (312) 902-5200
</TABLE>
================================================================================
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ITEM 1. SECURITY AND SUBJECT COMPANY.
Ultra Pac, Inc., a Minnesota corporation ("Ultra Pac" or the "Company"), is
the subject company. The address of the principal executive offices of Ultra Pac
is 21925 Industrial Boulevard, Rogers, Minnesota 55374. The title of the class
of equity securities to which this Statement relates is the common stock, no par
value per share (the "Common Stock"), of Ultra Pac, including the associated
preferred stock purchase rights (the "Rights") issued pursuant to the Rights
Agreement, dated as of February 27, 1998 as amended (the "Rights Agreement"),
between Ultra Pac and Norwest Bank Minnesota, N.A., as Rights Agent. References
herein to the "Shares" mean shares of the Common Stock and shall, unless the
context requires otherwise, include the Rights.
ITEM 2. TENDER OFFER OF THE BIDDER.
The Offer. This Statement relates to a tender offer by Package Acquisition,
Inc. (the "Purchaser"), a Minnesota corporation and an indirect wholly-owned
subsidiary of Ivex Packaging Corporation, a Delaware corporation ("Ivex" or
"Parent"), to purchase all of the outstanding Shares at a purchase price of
$15.50 per share, net to the seller in cash (the "Offer Price"), upon the terms
and subject to the conditions set forth in the Offer to Purchase dated March 26,
1998 (the "Offer to Purchase") and the related Letter of Transmittal (which
together, with the Offer to Purchase and any amendments or supplements thereto
collectively constitute the "Offer"). The Offer is disclosed in the Tender Offer
Statement on Schedule 14D-1, dated March 26, 1998 (the "Schedule 14D-1"), as
filed by the Purchaser and Ivex with the Securities and Exchange Commission (the
"Commission"). The Schedule 14D-1 states that the address of the principal
executive offices of Ivex and the Purchaser are located at 100 Tri-State Drive,
Lincolnshire, Illinois 60069.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of March 23, 1998, among the Purchaser, Ivex and Ultra Pac (the "Merger
Agreement"). The Merger Agreement provides for the making of the Offer and the
terms and conditions thereof. The Merger Agreement further provides that if the
Offer is consummated, then upon the terms and subject to the conditions
contained therein, and in accordance with the Minnesota Business Corporation Act
(the "MBCA"), the Purchaser will be merged with and into Ultra Pac (the "Merger"
and, together with the Offer, the "Transaction"), with Ultra Pac surviving the
Merger (Ultra Pac following the Merger is sometimes referred to as the
"Surviving Corporation"). In the Merger, the holders of Shares as of the
effective time of the Merger will receive an amount in cash equal to the Offer
Price, without interest thereon. The shares of common stock of the Purchaser
outstanding immediately prior to the Merger shall be converted into shares of
common stock of the Surviving Corporation and Ultra Pac will become an indirect
wholly-owned subsidiary of Ivex.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of Ultra Pac, which is the person filing
this Statement, are set forth in Item 1 above.
(b) Each material contract agreement, arrangement or understanding and any
actual or potential conflict of interest between Ultra Pac or its affiliates and
(i) Ultra Pac, its executive officers, directors or affiliates or (ii) Ivex, its
executive officers, directors or affiliates, is set forth below.
THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement.
The summary is qualified in its entirety by reference to the Merger Agreement
which is set forth in full as Annex A hereto and incorporated herein by
reference. Capitalized terms used but not defined in this summary of the Merger
Agreement have the meanings given to such terms in the Merger Agreement.
The Offer. The Merger Agreement provides that the Purchaser will commence
the Offer and that, upon the terms and subject to the prior satisfaction or
waiver of the conditions of the Offer, the Purchaser will purchase all Shares
validly tendered and not properly withdrawn pursuant to the Offer as soon as
legally permitted after the expiration date of the Offer. The Merger Agreement
provides that, without the prior
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written consent of the Company, neither the Purchaser nor Parent may decrease
the price per Share or change the form of consideration payable in the Offer,
decrease the number of Shares sought to be purchased in the Offer, or amend any
other condition of the Offer in any manner adverse to the holders of the Shares;
provided, however, that if on the initial scheduled expiration date of the Offer
which shall be 20 business days after the date of the Offer is commenced, the
sole condition remaining unsatisfied is the failure of the waiting period under
the HSR Act to have expired or been terminated, the Purchaser shall extend the
expiration date from time to time until two business days after the expiration
of the waiting period under the HSR Act. The Purchaser shall, on the terms and
subject to the prior satisfaction or waiver of the conditions of the Offer,
accept for payment and pay for the Shares tendered as soon as it is legally
permitted to do so under applicable law; provided, however, that if, immediately
prior to the initial expiration date of the Offer (as it may be extended), the
Shares tendered and not withdrawn pursuant to the Offer equals less than 90% of
the outstanding Shares, the Purchaser may extend the Offer one time for a period
not to exceed twenty business days, notwithstanding that all conditions to the
Offer are satisfied as of such expiration date of the Offer.
Board of Directors. Promptly upon the purchase of Shares by Parent or any
of its Subsidiaries which represents at least a majority of the outstanding
Shares, the Purchaser will be entitled to designate such number of directors,
rounded up to the next whole number, on the Board of Directors of the Company as
is equal to the number of directors which is the product of (i) the total number
of directors on the Board (giving effect to the directors designated by the
Purchaser pursuant to this sentence) multiplied by (ii) the percentage that the
number of Shares so accepted for payment bears to the total number of Shares
then outstanding. In furtherance thereof, the Company will, upon request of the
Purchaser, use its best reasonable efforts promptly either to increase the size
of its Board or secure the resignations of such number of its incumbent
directors, or both, as is necessary to enable the Purchaser's designees to be so
elected to the Board, and shall take all actions available to the Company to
cause the Purchaser's designees to be so elected. At such time, the Company
will, if requested by the Purchaser, also cause persons designated by the
Purchaser to constitute at least the same percentage (rounded up to the next
whole number) as is on the Board of each committee of the Board. Notwithstanding
the foregoing, the Company shall have at least one independent director until
the Effective Time. In the Merger Agreement, the Company has agreed to promptly
take all actions required pursuant to Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder in order to fulfill its obligations under the
Merger Agreement, including mailing to shareholders the information required by
such Section 14(f) and Rule 14f-1 as is necessary to enable the Purchaser's
designees to be elected to the Board. The Purchaser or Parent will supply the
Company and be solely responsible for any information with respect to either of
them and their nominees, officers, directors and affiliates required by such
Section 14(f) and Rule 14f-1.
The Merger. The Merger Agreement provides that, subject to the terms and
conditions thereof and in accordance with the MBCA, at the Effective Time, the
Purchaser will be merged with and into the Company. Following the Merger, the
separate corporate existence of the Purchaser will cease and the Company will
continue as the surviving corporation (the "Surviving Corporation"). The Merger
shall be effected by the filing at the time of Closing of properly executed
Articles of Merger or other appropriate documents with the Secretary of State of
the State of Minnesota.
The Merger Agreement provides that, at the Effective Time, by virtue of the
Merger and without any action on the part of Parent, the Purchaser, the Company
or the holders thereof the Shares will be converted into the right to receive
the Offer Price in cash, without interest thereon, as soon as is reasonably
practicable upon surrender of the certificate formerly representing such Shares
(other than any Shares in the treasury of the Company, which Shares, by virtue
of the Merger and without any action on the part of the holder thereof, shall be
cancelled and retired and shall cease to exist with no payment being made with
respect thereto, and other than Dissenting Shares). At the Effective Time, each
share of common stock, par value $.01 per share, of the Purchaser issued and
outstanding immediately prior to the Effective Time will, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into and become one validly issued, fully paid and nonassessable share of common
stock, par value $.01 per share, of the Surviving Corporation.
The Merger Agreement provides that the Articles of Incorporation of the
Purchaser, as in effect immediately prior to the Effective Time, will be the
Articles of Incorporation of the Surviving Corporation,
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until thereafter amended in accordance with the provisions thereof and the MBCA.
The By-Laws of the Purchaser in effect at the Effective Time will be the By-Laws
of the Surviving Corporation, until thereafter amended in accordance with the
provisions thereof and the MBCA.
Vote Required to Approve the Merger. Pursuant to the Merger Agreement, the
Company will, if required by applicable law in order to consummate the Merger,
duly call, give notice of, convene and hold a special meeting of its
shareholders (the "Special Meeting") as soon as practicable following the
acceptance for payment and purchase of Shares by Parent or its affiliates
pursuant to the Offer for the purpose of considering and taking action upon the
Merger Agreement. The Merger Agreement provides that the Company will, if
required by applicable law in order to consummate the Merger, prepare and file
with the Commission a definitive proxy statement (the "Proxy Statement")
relating to the Merger and the Merger Agreement and cause such Proxy Statement
to be mailed to its shareholders, provided that no amendment or supplement to
the Proxy Statement will be made by the Company without consultation with Parent
and its counsel. If the Purchaser acquires at least a majority of the
outstanding Shares, the Purchaser will have sufficient voting power to approve
the Merger, even if no other shareholder votes in favor of the Merger.
The Merger Agreement provides that in the event that Parent, the Purchaser
or any other subsidiary of Parent acquires at least 90% of the outstanding
Shares pursuant to the Offer, the Tender Agreements or otherwise, the Purchaser
and the Company will take all necessary and appropriate action to cause the
Merger to become effective as soon as practicable after such acquisition,
without a meeting of shareholders of the Company, in accordance with the MBCA.
Conditions to the Merger. The respective obligations of Parent, the
Purchaser and the Company to consummate the Merger and the transactions
contemplated thereby are subject to the satisfaction, at or before the Effective
Time, of certain conditions, including: (i) if required by the MBCA, the
shareholders of the Company shall have duly approved the transactions
contemplated by the Merger Agreement; (ii) the consummation of the Merger shall
not be restrained, enjoined or prohibited by any order, judgment, decree,
injunction or ruling of a court of competent jurisdiction or any Governmental
Entity and there shall not have been any statute, rule or regulation enacted,
promulgated or deemed applicable to the Merger by any Governmental Entity which
prevents the consummation of the Merger; and (iii) Parent and/or the Purchaser
shall have purchased all Shares validly tendered and not withdrawn pursuant to
the Offer (however, this condition is not applicable to the obligations of
Parent or the Purchaser if Parent and/or the Purchaser fails to purchase Shares
tendered pursuant to the Offer in violation of the terms of the Merger Agreement
or the Offer).
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties thereto, including representations
by the Company as to, among other things, (i) organization, qualification,
charter and bylaws; (ii) capitalization; (iii) enforceability, authorization of
the Company relative to the Merger Agreement and the transactions contemplated
thereby; (iv) no violation or conflict of the Merger Agreement and the
transactions contemplated thereby with the Company's organizational documents,
certain contracts and applicable law; (v) title to assets; (vi) litigation;
(vii) accounting records; (viii) company financial statements; (ix) absence of
certain changes; (x) buildings and equipment; (xi) performance of contracts;
(xii) employee benefit plans; (xiii) brokers; (xiv) taxes; (xv) real estate;
(xvi) governmental approvals; (xvii) no pending acquisitions; (xviii) labor
matters; (xix) existing permits and violations of law; (xx) intangible assets;
(xxi) customers and suppliers; (xxii) environmental protection; (xxiii) vote
required; (xxiv) returns; (xxv) SEC reports; (xxvi) content of proxy statement;
(xxvii) opinion of financial advisor; (xxviii) certain agreements; and (xxix)
the Rights Agreement.
Covenants. The Merger Agreement contains various covenants of the parties
thereto, including covenants as to, among other things, the conduct of the
business of the Company, as described in further detail below, during the period
from the date of the Merger Agreement to the Closing Date or termination of the
Merger Agreement.
Interim Covenants. Pursuant to the Merger Agreement, the Company has agreed
that during the period from the date of the Merger Agreement to the Closing Date
or termination of the Merger Agreement, the Company will (a) carry on its
business in the usual, regular and ordinary course substantially in the same
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manner as heretofore carried on; (b) not (i) make payments or distributions
(other than normal salaries) to any Affiliate of the Company except for
transactions in the ordinary course of business upon commercially reasonable
terms; (ii) sell, lease, transfer or assign any of its assets, tangible or
intangible, other than for a fair consideration in the ordinary course of
business and other than the disposition of obsolete or unusable property; (iii)
enter into any Contract (other than purchase and sales orders in the ordinary
course of business in accordance with past practice) involving either more than
$50,000 or outside the ordinary course of business without the consent of the
Parent (which consent shall not be unreasonably withheld); (iv) accelerate,
terminate, modify in any material respect, or cancel any Contract (other than
purchase and sales orders in the ordinary course of business in accordance with
past practice) involving more than $50,000 to which the Company is a party or by
which any of them is bound without the consent of the Parent (which consent
shall not be unreasonably withheld); (v) make any capital expenditure (or series
of related capital expenditures) involving either more than $50,000 (unless such
expenditure is identified in the current business plan of the Company as
disclosed to Parent) or outside the ordinary course of business; (vi) delay or
postpone the payment of accounts payable and other liabilities outside the
ordinary course of business; (vii) cancel, compromise, waive or release any
right or claim (or series of related rights and claims) not covered by the
reserves or accruals relating to such claim in the Company Financial Statements
either involving more than $50,000 or outside the ordinary course of business
without the consent of the Parent (which consent shall not be unreasonably
withheld); (viii) grant any license or sublicense of any rights under or with
respect to any Intangible Assets; or (ix) make any loan to, or enter into any
other transaction with, any of its Affiliates, directors, officers and employees
outside the ordinary course of business; (c) use, operate, maintain and repair
all of its assets and properties in a normal business manner consistent with its
past practices; (d) use commercially reasonable efforts to preserve in all
material respects its business organization intact, to retain the services of
the Employees and to conduct business with suppliers, customers, creditors and
others having business relationships with the Company in the best interests of
the Company; (e) not knowingly do any act or knowingly omit to do any act or, to
the extent within the Company's reasonable control, knowingly permit any act or
omission to act, which will cause a breach of any of the Contracts that would
have a Material Adverse Effect; (f) use reasonable efforts to maintain all of
the Existing Insurance Policies (or policies substantially equivalent thereto)
in full force and effect; (g) not (i) except as required by any Contract or in a
manner consistent with past practice, grant any increase in the rate of pay of
any of the Employees; (ii) institute or amend any Employee Benefit Plan unless
required by Law; (iii) enter into or modify any written employment agreement
with any Person; or (iv) pay or accrue any bonus or incentive compensation to
any Person; (h) other than in the ordinary course of business, not create, incur
or assume any Indebtedness or make any Investment; (i) not amend the Company
Charter Documents; (j) not (i) issue any additional shares of stock of any class
(except pursuant to the Existing Options) or grant any warrants, options or
rights to subscribe for or acquire any additional shares of stock of any class;
(ii) declare or pay any dividend or make any capital, surplus or other
distributions (other than normal salaries) of any nature to the Shareholders; or
(iii) directly or indirectly redeem, purchase or otherwise acquire, recapitalize
or reclassify any of its capital stock or liquidate in whole or in part; (k)
timely and properly file, or timely and properly file requests for extensions to
file, all federal, state, local and foreign tax returns which are required to be
filed, and pay or make provision for the payment of all taxes owed by it; and
(l) not knowingly do any act or omit to do any act that would result in a breach
of any representation by the Company set forth in the Merger Agreement.
No Solicitations. Prior to the Effective Time, the Company has agreed that
neither it, any of its Affiliates, nor any of the respective directors,
officers, employees, agents or representatives of the foregoing, will, directly
or indirectly, (i) solicit, initiate, facilitate or encourage (including by way
of furnishing or disclosing non-public information) any inquiries or the making
of any proposal with respect to any merger, consolidation or other business
combination involving the Company or the acquisition of all or any significant
part of the assets or capital stock of the Company (an "Acquisition
Transaction") or (ii) negotiate, explore or otherwise engage in discussions with
any Person (other than the Parent and its representatives) with respect to any
Acquisition Transaction, or which may reasonably be expected to lead to a
proposal for an Acquisition Transaction or enter into any agreement, arrangement
or understanding with respect to any such Acquisition Transaction or which would
require it to abandon, terminate or fail to consummate the Merger or any other
transaction contemplated by the Merger Agreement; provided, however, that the
Company may, in response
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to an unsolicited written proposal from a third party regarding a Superior
Proposal (as hereinafter defined), furnish information to and engage in
discussions and negotiations with such third party, but only if the Board of
Directors of the Company determines in good faith, after consultation with its
financial advisors and based upon the advice of outside independent counsel,
that failing to take such action would result in a breach of the fiduciary
duties of such Board of Directors under applicable Law. Without limitation of
the Company's obligations, any violation of the foregoing restrictions by any
director, officer, Affiliate, investment banker, financial advisor, attorney or
other advisor or representative of the Company, whether or not such Person is
purporting to act on behalf of the Company, or otherwise, shall be deemed to be
a breach of Section 3.4 of the Merger Agreement by the Company.
The Company has agreed that, as of March 23, 1998, it, its Affiliates, and
the respective directors, officers, employees, agents and representatives of the
foregoing, shall immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any Person (other than the Parent
and its representatives) conducted heretofore with respect to any Acquisition
Transaction. The Company has agreed to promptly advise the Parent in writing of
the existence of (x) any inquiries or proposals (or desire to make a proposal)
received by (or indicated to) after the date hereof, any such information
requested from, or any negotiations or discussions sought to be initiated or
continued with, the Company, its Affiliates, or any of the respective directors,
officers, employees, agents or representatives of the foregoing, in each case
from a Person (other than the Parent and its representatives) with respect to an
Acquisition Transaction, and (y) the terms thereof, including the identity of
such third party and the terms of any financing arrangement or commitment in
connection with such Acquisition Transaction, and to update on an ongoing basis
or upon the Parent's reasonable request, the status thereof. As used herein,
"Superior Proposal" means a bona fide, written and unsolicited proposal or offer
made by any Person (or group) (other than the Parent or any of its Subsidiaries)
with respect to an Acquisition Transaction on terms which, as determined by the
Board of Directors of the Company in good faith and in the exercise of
reasonable judgment (based on the advice of independent financial advisors and
Katten Muchin & Zavis or outside independent Minnesota counsel), would
reasonably be likely to be more favorable to the Company and its Shareholders
than the transactions contemplated hereby.
Termination; Termination Fees. The Merger Agreement may be terminated and
the transactions contemplated thereby may be abandoned at any time prior to the
Closing (whether before or after the approval of the Merger Agreement by the
shareholders), as follows: (a) by mutual written agreement of the Parent and the
Company; (b) by either of the Company or Parent: (i) if (x) the Offer shall have
expired without any Shares being purchased therein or (y) the Purchaser shall
not have accepted for payment all Shares tendered pursuant to the Offer by
September 30, 1998; provided, however, that the right to terminate the Merger
Agreement under these provisions shall not be available to any party whose
failure to fulfill any obligation under the Merger Agreement has been the cause
of, or resulted in, the failure of Parent or the Purchaser, as the case may be,
to purchase the Shares pursuant to the Offer on or prior to such date; or (ii)
if any Governmental Entity 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 reasonable efforts to lift), which permanently restrains,
enjoins or otherwise prohibits the acceptance for payment of, or payment for,
Shares pursuant to the Offer or the Merger and such order, decree, ruling or
other action shall have become final and non-appealable; (c) by the Company: (i)
if Parent, the Purchaser or any of their affiliates 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 the Company may not
terminate the Merger Agreement pursuant to this clause of the Merger Agreement
if the Company is at such time in breach of its obligations under the Merger
Agreement; (ii) in connection with entering into a definitive agreement in
connection with an Acquisition Transaction, provided it has complied with all
provisions thereof, including the notice provisions therein, and that it makes
simultaneous payment of the termination fee payment referred to below, plus any
amounts then due as reimbursement of expenses; or (iii) if Parent or the
Purchaser shall have breached in any material respect any of their respective
representations, warranties, covenants or other agreements contained in the
Merger Agreement, which breach cannot be or has not been cured, in all material
respects, within 30 days after the giving of written notice to Parent or the
Purchaser, as applicable; (d) by Parent: (i) if, due to an occurrence, not
involving a breach by Parent or the Purchaser of their obligations hereunder,
which makes it impossible to satisfy any of the conditions set forth in Annex A
the Merger Agreement (which are set forth in Section 14 of
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the Offer to Purchase), Parent, the Purchaser, or any of their affiliates 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; (ii) if prior to the
purchase of Shares pursuant to the Offer, the Company shall have breached any
representation, warranty, covenant or other agreement contained in the Merger
Agreement which (A) would give rise to the failure of a condition set forth in
paragraph (f) or (g) of Annex A the Merger Agreement (which are set forth in
paragraphs (f) and (g) of Section 14 of the Offer to Purchase) and (B) cannot be
or has not been cured, in all material respects, within 30 days after the giving
of written notice to the Company; or (iii) if either Parent or the Purchaser is
entitled to terminate the Offer as a result of the occurrence of any event set
forth in paragraph (e) of Annex A to the Merger Agreement (which are set forth
in paragraph (e) of Section 14 of the Offer to Purchase).
Notwithstanding any provision to the contrary contained in the Merger
Agreement, the Company will immediately pay to the Parent (x) the amount of
$2,500,000 and (y) all reasonably documented out-of-pocket expenses reasonably
incurred by the Parent and the Purchaser in connection with the Merger Agreement
and the Merger in an amount not to exceed $600,000 if the Merger Agreement is
terminated: (1) by the Company pursuant to clause (c)(ii) above, (2) by the
Parent pursuant to clause (d)(iii) above, (3) by Parent pursuant to clause
(d)(ii) above if the breach thereof is due to the Company's intentional or bad
faith acts, or (4) by either the Company or Parent pursuant to clause (b)(i)
above and (a) prior thereto there shall have been publicly announced another
Acquisition Transaction or an event set forth in paragraph (h) of Annex A to the
Merger Agreement (which is set forth in paragraph (h) of Section 14 of the Offer
to Purchase) shall have occurred and (b) an Acquisition Transaction shall be
consummated on or prior to March 31, 1999. The amount in (x) above shall be paid
concurrently with any such termination and the amount in (y) above shall be paid
within five (5) business days after receipt by the Company of reasonably
detailed evidence of the same. Upon receipt of such payments, the Parent shall
not be entitled to and shall waive the right to seek damages or other amounts or
remedies from the Company for breach of, or otherwise in connection with, the
Merger Agreement.
Stock Options and Warrants. The Merger Agreement provides that the Company
will not issue any additional Options and, as of the Effective Time, each
Existing Option which is outstanding at the Effective Time will be exchanged
for, and the holders of each such Existing Option will be entitled to receive at
the Closing (or thereafter, if necessary) upon surrender of such Existing Option
for cancellation, cash equal to (i) the product of (a) the difference between
the Offer Price and the exercise price of each such Existing Option, times (b)
the number of Shares covered by such Existing Option. It is presently
anticipated by the Company that the payment to be made at the Closing to the
Option holders in respect of the Existing Options will be approximately $6.6
million (before any income taxes and other required withholdings).
The Company will take all actions necessary to ensure that, from and after
the Effective Time, the Surviving Corporation will not be bound by any options,
warrants, rights or agreements which would entitle any person, other than Parent
or the Purchaser, to beneficially own shares of Surviving Corporation or Parent
or receive any payments (other than as set forth in the preceding paragraph
hereof) in respect of such options, warrants, rights or agreements. The Company
will take all actions necessary to terminate each plan with respect to Existing
Options as of the Effective Time.
Indemnification; Directors' and Officers' Insurance. Subsequent to the
Effective Time, the Purchaser shall cause the Surviving Corporation to, and the
Surviving Corporation and Parent, jointly and severally, shall, indemnify and
hold harmless each present and former director and officer of the Company
(collectively, the "Indemnified Parties") against all losses in connection with
any claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to any action or
omission in their capacity as director or officer occurring before the Effective
Time, whether asserted or claimed prior to, at or after the Effective Time, for
a period of six years after the Closing Date, in each case to the fullest extent
permitted under applicable Law (and shall pay any expenses in advance of the
final disposition of such action or proceeding to each Indemnified Party to the
fullest extent permitted under applicable Law, upon receipt from the Indemnified
Party to whom expenses are advanced of an undertaking to repay such advances as
required under applicable Law); provided, however, that, if any claim for
indemnification is asserted or made within such six year period, all rights to
indemnification in respect of such
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claim shall continue until the disposition of such claim. Until the Effective
Time, the Company shall keep in effect Article 7 of its Articles of
Incorporation and Article 5 of its Bylaws, and thereafter for a period of four
years the Surviving Corporation shall keep in effect in its Articles of
Incorporation and Bylaws provisions which provide for indemnification
exculpation to the extent provided for in Article 7 and Article 5 of the
Articles of Incorporation and Bylaws, respectively.
Parent and the Purchaser will cause to be maintained in effect for not less
than four years after the Effective Time the current policies, or substantially
similar policies, of directors' and officers' liability insurance maintained by
the Company with respect to matters existing or occurring at or prior to the
Effective Time; provided, however, that Parent and the Purchaser shall not be
required to expend an amount greater than 150% of the annual premium of the
current policy.
THE TENDER AGREEMENTS
The following is a summary of the material terms of the Tender Agreements.
This summary is qualified in its entirety by reference to the Tender Agreements,
the form of which is set forth as Annex B hereto and incorporated herein by
reference.
Tender of Shares. On the terms and subject to the conditions set forth in
the Tender Agreements, each of the Executive Shareholders will (i) tender the
Shares owned by him (other than certain Shares pledged to a financial
institution, which Shares will be tendered as soon as practicable) into the
Offer promptly, and in any event no later than the fifth business day following
the commencement of the Offer, or, if the Shareholder has not received the offer
documents by such time, within two business days following receipt of such
documents, and (ii) not withdraw any Shares so tendered (except in the event the
Stock Option (as defined herein) is exercised). The Executive Shareholders will
receive the same price per Share received by other shareholders of the Company
in the Offer with respect to Shares tendered by them in the Offer.
Grant of Stock Option. On the terms and subject to the conditions set forth
in the Tender Agreements, each Executive Shareholder has granted to Parent an
irrevocable option (the "Stock Option") to purchase the Shares owned by such
Executive Shareholder at a price per Share equal to the Offer Price, exercisable
at any time, in whole only, if on or after March 23, 1998: (i) any corporation,
partnership, individual, trust, unincorporated association, or other entity or
"person" (as defined in Section 13(d)(3) of the Exchange Act) other than Parent
or any of its "affiliates" (as defined in the Exchange Act) (a "Third Party"),
will have (A) commenced or announced an intention to commence a bona fide tender
offer or exchange offer for any shares of Common Stock, the consummation of
which would result in "beneficial ownership" (as defined in the Exchange Act) by
such Third Party (together with all such Third Party's affiliates and
"associates" (as defined in the Exchange Act)) of 50% or more of the then
outstanding voting equity of the Company (either on a primary or a fully diluted
basis), (B) acquired beneficial ownership of shares of Common Stock that, when
aggregated with any shares of Common Stock already owned by such Third Party,
its affiliates and associates, would result in the aggregate beneficial
ownership by such Third Party, its affiliates and associates of 15% or more of
the then outstanding voting equity of the Company (either on a primary or a
fully diluted basis); provided, however, that "Third Party" for purposes of this
clause (B) does not include any corporation, partnership, person, other entity
or group that beneficially owns more than 15% of the outstanding voting equity
of the Company (either on a primary or a fully diluted basis) as of the date
hereof and that does not, after the date hereof, increase such ownership
percentage by more than an additional 1% of the outstanding voting equity of the
Company (either on a primary or a fully diluted basis), (C) acquired assets
constituting 15% or more of the total assets or earning power of the Company
taken as a whole or (D) entered into an agreement with the Company that
contemplates the acquisition of (1) assets constituting 15% or more of the total
assets or earning power of the Company taken as a whole or (2) beneficial
ownership of 15% or more of the outstanding voting equity of the Company; or
(ii) any of the events described in Section 9.1(c)(ii) or 9.1(d)(iii) of the
Merger Agreement that would allow the Company or Parent to terminate the Merger
Agreement has occurred (after the passage of any time periods set forth in such
sections but without the necessity of the Company or Parent having terminated
the Merger Agreement).
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Conditions to Closing. The Executive Shareholders' obligations to sell the
Shares owned by them upon exercise of the Stock Option and such shareholders'
obligations under the provisions described in the following paragraph are
subject (at the Executive Shareholder's election) to the further conditions that
there will have been no material breach of the representations, warranties,
covenants or agreements of Parent or the Purchaser contained in the applicable
Tender Agreement or contained in the Merger Agreement, which breach has not been
cured within ten business days of the receipt of written notice thereof from the
Executive Shareholder.
Voting Agreement; Proxy. Pursuant to the Tender Agreements, each of the
Executive Stockholders agreed that, so long as such Agreements are in effect, at
any meeting (whether annual or special and whether or not an adjourned or
postponed meeting) of the holders of Common Stock, however called, or in
connection with any written consent of the holders of Common Stock, such
Executive Shareholder will appear at the meeting or otherwise cause the Shares
owned by such Executive Shareholder to be counted as present thereat for
purposes of establishing a quorum and vote or consent (or cause to be voted or
consented) such Shares (i) in favor of the Merger and (ii) against any action or
agreement that would impede, interfere with or prevent the Merger, including any
other extraordinary corporate transaction, such as a merger, reorganization or
liquidation involving the Company and a third party or any other proposal of a
third party to acquire the Company and (iii) if requested by Parent, in favor of
a shareholder resolution proposed by Parent in accordance with applicable
provisions of the MBCA the purpose of which is to cause the Offer and the Merger
to be consummated and which does not relate to the election of directors.
Each of the Executive Shareholders irrevocably granted to, and appointed,
Parent and any nominee thereof, his proxy and attorney-in-fact (with full power
of substitution) during the term of the applicable Tender Agreement, for and in
the name, place and stead of such Executive Shareholder, to vote the Shares
owned by such Executive Shareholder, or grant a consent or approval in respect
of such Shares, in connection with any meeting of the shareholders of the
Company (i) in favor of the Merger and (ii) against any action or agreement that
would impede, interfere with or prevent the Merger, including any other
extraordinary corporate transaction, such as a merger, reorganization or
liquidation involving the Company and a third party or any other proposal of a
third party to acquire the Company. Such proxy and power of attorney irrevocable
and coupled with an interest and is intended to be irrevocable in accordance
with the provisions of Section 302A.449(2) of the MBCA. Pursuant to the
applicable Tender Agreement, each Executive Shareholder also represented that
all proxies theretofore given by such Executive Shareholder in respect of the
Shares, if any, are not irrevocable, and revoked all such proxies given with
respect to the Shares.
Certain Representations and Warranties. In connection with the Tender
Agreements, the Executive Shareholders each made certain customary
representations and warranties, including with respect to (i) ownership of the
Shares and the absence of encumbrances on and in respect of the Executive
Shareholder's Shares, (ii) the Executive Shareholder's authority to enter into
and perform its obligations under the applicable Tender Agreement, (iii) the
absence of conflicts and requisite governmental consents and approvals, and (iv)
the absence of any broker, finder or investment banker relationship with respect
to the transactions contemplated by the applicable Tender Agreement except for
the engagement of Wasserstein Perella & Co., Inc. ("WP&Co.") by the Company. In
connection with the Tender Agreements, each of Parent and the Purchaser made
certain customary representations and warranties to the Executive Shareholders,
including with respect to (i) authority to enter into and perform its
obligations under the applicable Tender Agreement, (ii) absence of conflicts and
requisite governmental consents and approvals, and (iii) the absence of any
broker, finder of investment banker relationship with respect to the
transactions contemplated by the Tender Agreements.
Certain Covenants. Pursuant to the Tender Agreements, each Executive
Shareholder covenanted and agreed that, except as contemplated by such Agreement
and except pursuant to the Offer, the Executive Shareholder will not offer to
sell, sell, pledge or otherwise dispose of or transfer any interest in or
encumber with any lien any of the Shares owned by such Executive Shareholder,
and will not (i) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of such Shares or any
interest therein, (ii) grant any proxy, power-of-attorney or other authorization
or consent in or with respect to such Shares, (iii) deposit such Shares into a
voting trust or enter into a voting agreement or arrangement with
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<PAGE> 11
respect to such Shares or (iv) take any other action with respect to such Shares
that would in any way restrict, limit or interfere with the performance of the
Executive Shareholder's obligations under the applicable Tender Agreement.
Pursuant to the Tender Agreements, each Executive Shareholder also agreed that
he will notify Parent immediately if any proposals are received by, any
information is requested from, or any negotiations or discussions are sought to
be initiated or continued with the Executive Shareholder or his attorneys,
accountants or other agents (each of such actions, an "Interest"), in each case
in connection with any Acquisition Transaction indicating, in connection with
such notice, the name of the person indicating such Interest and the terms and
conditions of any related proposals or offers. The Executive Shareholders also
agreed to cease immediately and cause to be terminated immediately any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any Acquisition Transaction. In addition, each Executive
Shareholder agreed to keep Parent informed, on a current basis, of the status
and terms of any Acquisition Transaction and to use his best efforts to ensure
that his attorneys, accountants and other agents do not, directly or indirectly:
(i) initiate, solicit or encourage, or take any action to facilitate the making
of, any offer or proposal that constitutes or is reasonably likely to lead to
any Acquisition Transaction, (ii) enter into any agreement with respect to any
Acquisition Transaction or (iii) in the event of an unsolicited written proposal
in respect of a Acquisition Transaction, engage in negotiations or discussions
with, or provide any information or data to, any person (other than Parent, any
of its affiliates or representatives and except for information that has been
previously publicly disseminated by the Company) relating to any Acquisition
Transaction.
Termination. Except as otherwise specifically provided therein, all
obligations under the Tender Agreements terminate on the earliest of (a) the
date the Merger Agreement is terminated in accordance with its terms or the date
the Offer is terminated by Parent or the Purchaser as a result of any failure of
a condition of the Offer; provided, however, that the provisions relating to the
Stock Option shall not terminate until 60 days thereafter (or such later time as
permitted by such provisions if the Merger Agreement was terminated pursuant to
Section 9.1(c)(ii) or 9.1(d)(iii) thereof), (b) the purchase of all the Shares
subject to the Stock Option pursuant to the Offer or pursuant to the Stock
Option, or (c) on September 30, 1998.
POTENTIAL OR ACTUAL CONFLICTS OF INTEREST
The consummation of the Offer will affect the compensation and benefits of
the directors and executive officers of Ultra Pac. For further information
relating to the compensation and benefits of the directors and officers of Ultra
Pac reference is hereby made to the information contained under the captions
"COMPENSATION OF DIRECTORS," "EMPLOYMENT AGREEMENT, TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL ARRANGEMENTS," "COMPENSATION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION," "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" and "SHARE
OWNERSHIP OF MANAGEMENT" in Ultra Pac's Proxy Statement, dated May 12, 1997,
relating to Ultra Pac's Annual Meeting of Shareholders, portions of which are
filed as Exhibit 4 hereto and incorporated herein by reference.
Employment Agreements. In addition to the Employment Agreement described
under the captions "EMPLOYMENT AGREEMENT, TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS" in Exhibit 4 hereto, Ultra Pac entered into an
employment agreement with Thomas F. Rains on March 31, 1997 (the "Rains
Employment Agreement"). The Rains Employment Agreement provides for an annual
salary of $25,000 plus stock options and other benefits. The initial term of the
Rains Employment Agreement ends on August 31, 1998. After the initial 18 month
term, the Rains Employment Agreement will continue month-to-month thereafter
until terminated by either Ultra Pac or Mr. Rains on 30 days' prior written
notice. Pursuant to the Rains Employment Agreement, once terminated Mr. Rains is
subject to a one-year covenant not to compete. In addition, Ultra Pac entered
into an employee confidentiality, non-compete and separation agreement with
William J. Howard on January 31, 1997 (the "Howard Agreement"). Pursuant to the
Howard Agreement, Mr. Howard agreed not to disclose any "confidential
information" or claim any right in any "inventions" made, authored or conceived
by him during the term of his employment. The Howard Agreement provides for
separation payments up to 36 weeks base salary provided he is not terminated for
"cause." If Ultra Pac is sold and Mr. Howard is terminated, Ultra Pac
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<PAGE> 12
will pay the severance amount provided for in Mr. Howard's change of control
agreement (described below) in lieu of the foregoing. Furthermore, Mr. Howard
agrees that during his employment with Ultra Pac and for a period of one year
after his employment with Ultra Pac ends he will not compete with Ultra Pac. The
foregoing summaries of the Rains Employment Agreement and the Howard Agreement
do not purport to be complete and are qualified in their entirely by reference
to the full text of both agreements filed as Exhibits 5 and 6, respectively, to
this Schedule 14D-9.
Krupa Employment Agreement. As of March 22, 1998, Ultra Pac amended Mr.
Krupa's employment agreement, dated as of June 20, 1989, as amended on March 31,
1990 and January 31, 1992. The amendment provides for a three-year employment
term, a five-year non-competition period and three equal payments of $309,000 on
April 23, of each of 1998, 1999 and 2000. In the event Mr. Krupa is terminated
for a reason other than cause before the end of the three year term, he shall
receive whatever salary is due for the remainder of the term. The amendment also
provides that Mr. Krupa shall not receive any change in control payments as a
result of the Merger and the transactions contemplated thereby.
Vesting of Stock Options. All of the outstanding stock options to purchase
Shares granted by Ultra Pac under the 1991 Stock Option Plan, 1996 Stock Option
Plan, 1997 Stock Option Plan and the Outside Director's Stock Option Plan
(collectively, the "Plans") immediately vest and become exercisable if approved
by the Committee (as that term is defined therein) upon a "change of control."
Pursuant to the Plans, the Committee has approved the acceleration and the
options covered by the Plans will immediately vest and become exercisable and
each individual will receive in cash the difference between $15.50 a share and
the exercise price times the number of options held. The Plans are filed as
Exhibits 7 through 10, respectively, to this Schedule 14D-9 and are incorporated
herein by reference.
Change of Control Agreements. In 1997, Ultra Pac entered into Change of
Control Agreements with Thomas V. Bissell, Charles C. Ahern, Jr., Gregory L.
Nelson, Dan Erikstrup and William J. Howard, in addition to the Change of
Control Agreement with Bradley C. Yopp described under "EMPLOYMENT AGREEMENT,
TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS" in Exhibit 4
hereto.
The Change of Control Agreement generally provides that following a "change
in control termination" Ultra Pac will pay the employee a lump sum payment in an
amount equal to two times the employee's annual compensation. A "change in
control termination" means a termination within one year of a change of control
by Ultra Pac or its successors or a termination by the employee for "good
reason" (as defined). The amount payable to the employee under the Change of
Control Agreement is subject to certain limitations set forth in the Internal
Revenue Code. The preceding discussion relating to the typical Change of Control
Agreement is qualified in its entirety by reference to the full text of the
agreements filed as Exhibits 11 through 15 to this Schedule 14D-9.
Except as described herein or incorporated herein by reference, to the
knowledge of Ultra Pac as of the date hereof, there are no contracts,
agreements, arrangements or understandings or any actual or potential conflicts
of interest between Ultra Pac or its affiliates and (i) Ultra Pac, its executive
officers, directors or affiliates or (ii) Ivex or their respective executive
officers, directors or affiliates.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation
The Board of Directors of Ultra Pac and a disinterested committee of the
Board of Directors (as contemplated by Sections 302A.673 and 302A.675 on the
MBCA) have each unanimously approved the Merger Agreement, the Offer and the
Merger and determined that the terms of the Offer and the Merger are fair to,
and in the best interests of, the shareholders of Ultra Pac. The Board of
Directors recommends that all holders of Shares accept the Offer and tender
their Shares pursuant to the Offer.
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(b)(i) Background
Over the last several years, from time to time, George V. Bayly, Chairman
of the Board, President and Chief Executive Officer of Parent, contacted Calvin
S. Krupa, Chairman of the Board, President and Chief Executive Officer of the
Company, to express Parent's interest in exploring the possibility of a business
combination with the Company. On these occasions, Mr. Krupa indicated that the
Company was not for sale. On January 22, 1998, Mr. Bayly called Mr. Krupa to
reiterate Parent's interest in a possible business combination with the Company
and to express his willingness to meet and discuss the terms of such a possible
transaction. Mr. Krupa again advised Mr. Bayly that the Company was not for sale
and declined to meet with Mr. Bayly, but said he would discuss with his Board of
Directors the possibility of having a meeting. On January 27, 1998, Mr. Bruce
Boehm, an advisor to the Company, called Mr. Bayly to inquire as to the nature
of Parent's interest in pursuing an acquisition with the Company. During the
next two weeks, Mr. Boehm and Mr. Tannura, Parent's Chief Financial Officer, had
several telephone conversations regarding the structure, process and valuation
of a possible acquisition and the timing for a possible meeting between the
management of the Company and Parent. Mr. Boehm and Mr. Tannura also discussed a
preliminary valuation for the Company's Common Stock, with Mr. Tannura
suggesting a value of $11.00 per share. On February 9, 1998, Mr. Bayly sent Mr.
Krupa a letter (reprinted below) again expressing an interest regarding a
potential business combination with the Company.
The text of the letter sent by Mr. Bayly to Mr. Krupa on February 9, 1998
is as follows:
Via Federal Express
February 9, 1998
Mr. Calvin S. Krupa
Chairman of the Board, President
and Chief Executive Officer
Ultra Pac, Inc.
21925 Industrial Blvd.
Rogers, Minnesota 55374
Dear Mr. Krupa:
I have believed for quite some time that there is an important strategic role
for PET in Ivex's Consumer Packaging business. As you know from our January 22,
1998 telephone conversation, we are very interested in meeting with you to
discuss the possibility of combining our respective companies. Since our January
22nd telephone call, Frank Tannura, our CFO, and I have, at your request,
attempted to pursue these discussions with your advisor, Bruce Boehm, without
much success. Because of your inability or unwillingness to arrange a meeting
with us, I find it necessary to communicate to you in this letter.
I want you to know that given the success of Ivex's recently completed initial
public offering and the current breadth of our Consumer Packaging business
(various materials and international presence), our interest in significantly
expanding our PET business is greater today than it has ever been.
As you may or may not be aware, Ivex has been investing internally in PET
extrusion and thermoforming over the past few years and expects to invest
significant capital in our PET business (both internally and through
acquisition) during 1998 and 1999.
We believe that there are clear and compelling advantages to both Ivex and Ultra
Pac from the combination of our two companies and that such a transaction would
create significant value for each of our two companies and our respective
stockholders. We are extremely impressed with the business that you and your
management team have developed and the manner in which it would complement our
business. We believe that the complementary aspects of our two companies'
products, customers and distribution capabilities would enable the combined
entity to be an even more effective competitor.
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As I have briefly discussed with you and as Frank Tannura has emphasized to Mr.
Boehm, we are prepared to meet with you and/or your representatives at your
earliest convenience to discuss our ideas and to negotiate a mutually
satisfactory merger transaction (at a significant premium over current market
value) which we are confident could be quickly and successfully concluded. We
have existing bank availability and/or Ivex stock to fund any proposed
transaction that best serves your shareholders.
We hope that you and your Board of Directors will view our proposal to combine
our respective companies as an excellent opportunity for the Ultra Pac
stockholders to realize the full value of their shares (to an extent not likely
to be available to them in the marketplace in the foreseeable future). In the
context of a negotiated, friendly transaction, we are prepared to discuss all
aspects of our proposal fully with you and would hope and expect that you and
your management team would manage our combined PET business.
At this point, we hope that you will agree that the best way to proceed would be
to begin confidential, non-public discussions to see if we can quickly negotiate
a transaction that can be presented to your stockholders as the joint effort of
Ivex's and Ultra Pac's Board of Directors and management. Therefore, at this
point, we hope this letter and its contents will remain private between us,
although we believe that your shareholders may be interested in learning more
about our ideas.
We would appreciate it if you and your Board of Directors will give this
proposal prompt and serious consideration. We would request a response as soon
as possible, and preferably no later than February 13, 1998.
Sincerely yours,
George V. Bayly
Chairman, President and
Chief Executive Officer
After receiving Mr. Bayly's letter, Frank Harvey, a Director of the
Company, called Parent to ascertain possible dates for a meeting between the
management of the Company and Parent.
On February 25, 1998, the Company retained WP&Co. as the Company's
financial advisor. On February 25, 1998 and February 26, 1998, the Company's
Board of Directors, its legal advisors and representatives of WP&Co. met to
discuss the Company's strategic alternatives in light of the potential values
that might be achieved for shareholders of the Company through the sale of the
Company, through continued implementation of the Company's strategic plan as an
independent company and through other possible strategies. At the conclusion of
the meeting, the Board of Directors authorized WP&Co. to approach a limited
number of potential acquirors to determine their level of interest regarding a
potential strategic transaction with the Company and directed management to meet
with and listen to a possible proposal from Parent. The Board of Directors also
adopted a shareholder rights plan and amendments to the Company's bylaws
regarding certain notice provisions.
On March 2, 1998, the Company and Parent entered into a confidentiality
agreement preceding Parent's review of confidential information regarding the
Company, and members of the Company's and Parent's management met. During such
meeting, Parent indicated that it would be interested in discussing the
acquisition of the Shares, pursuant to a merger transaction, at a price in the
range of $12.00 per share, subject to certain conditions.
Also on March 2, 1998, WP&Co., on behalf of the Company, began to approach
a limited number of potential acquirors to determine their level of interest
regarding a potential strategic transaction with the Company.
On March 8, 1998, the Company's Board held a special meeting to explore
further the Company's strategic alternatives. The Company's management and
representatives of WP&Co. reported to the Board the
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status of discussions with Parent and the results of WP&Co.'s preliminary
discussions with other potential acquirors.
On March 10, 1998, WP&Co. met with representatives of Parent to discuss
possible purchase price ranges for the Company and the nature and extent of
Parent's proposed due diligence investigation of the Company. Thereafter,
representatives of the Company and the Company's financial advisors had several
telephone conversations with representatives of Parent to review business issues
with respect to a possible transaction with Parent.
On March 14, 1998, representatives of the Company, its legal advisors and
WP&Co. held a conference call to discuss the indications of interests received
to date from other potential acquirors.
On March 16, 1998, the Company delivered to Parent certain limited due
diligence information for Parent's review. The information shared with Parent
included financial projections prepared by the Company's management (see Section
8).
On March 18, 1998, a representative of Parent conducted certain financial
due diligence at the Company's auditors and on March 19, 1998, representatives
of Parent toured the Company's manufacturing facility in Rogers, Minnesota and
met with the Company's management to discuss further the nature and performance
of the Company's business. During the evening of March 19, 1998, members of
senior management of the Company and Parent met to continue discussions
concerning Parent's valuation of the Company. The parties discussed a range of
$15 to $18 per share in cash as merger consideration, as well as other terms of
a possible transaction. The parties considered that a value of $17.60 a share
was appropriate to discuss with their respective Boards and directed their
respective legal advisors to negotiate the terms of a definitive merger
agreement providing for Parent's acquisition of the Company for cash.
Negotiations between the Company and Parent continued from March 20 through
the early morning on March 23, 1998. Following meetings of its Board of
Directors, Parent presented the Company with an offer of $15.50 per Share, and,
after further negotiations between the parties and receipt of the opinion of
WP&Co., the Company's Board of Directors and a Special Committee established
pursuant to the MBCA approved the Merger Agreement and the transactions
contemplated thereby. Following this approval, the Merger Agreement and the
Tender Agreements were executed, and the transaction was publicly announced on
March 23, 1998.
(b)(ii) Reasons for the Recommendations
Prior to approving the Merger Agreement and the transactions contemplated
thereby, the Board held meetings on February 25, 26, March 8 and 22, 1998. At
its meeting on March 22, 1998, the Board considered presentations from, and
reviewed the terms and conditions of the Merger Agreement and the Merger and the
Offer with senior executive officers of Ultra Pac, Ultra Pac's legal counsel and
Ultra Pac's financial advisor, WP&Co. At the March 22, 1998 meeting, the Board
received final reports from senior management, legal counsel and WP&Co. and
approved the Merger Agreement and the transactions contemplated thereby. In
reaching the conclusions set forth in paragraph (a) above, the Board of
Directors of Ultra Pac considered a number of factors including, without
limitation, the following:
(A) The consideration offered by the Purchaser, and in particular the
fact that the $15.50 per Share to be received by Ultra Pac's shareholders
in the Offer or the Merger represents an approximately 132% premium over
the closing market price of $6.688 per Share on March 20, 1998 (the last
trading day prior to the March 22 Board of Directors meeting and an
approximately 123% premium over the closing market price 30 days prior to
March 22, 1998.
(B) Ultra Pac's financial condition, results of operations, assets,
liabilities, business and prospects and industry, economic and market
conditions, including the inherent risks and uncertainties in Ultra Pac's
lines of business (including its dependence on the price of raw materials)
and in Ultra Pac's expansion plans, in each case on a historical, current
and prospective basis;
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(C) Ultra Pac had seriously considered pursuing a transaction with
Ivex because it believed that the two companies' strengths were
complementary and that the combination of the two companies would permit
the achievement of certain economies of scale and other synergies. The
Board of Directors ultimately determined, after consideration of views of
senior management, that in its view the combination of the two companies
presented the best available means of achieving the highest value
reasonably obtainable for holders of its Shares;
(D) Ivex's expressed intent that after the Merger, Ultra Pac would
continue to be run as an independent business unit of Ivex;
(E) Management's analysis of the future prospects of Ultra Pac on a
stand-alone basis;
(F) The historical and recent market prices for the Shares and
potential future share prices;
(G) The Board's view, after consultation with management, counsel to
Ultra Pac and WP&Co., regarding the likelihood of the existence of other
viable purchasers on terms as favorable as those in the Offer and the
Merger;
(H) The opinion of WP&Co. to the effect that as of the date of such
opinion, the cash consideration to be received in the Offer and the Merger,
based upon and subject to the assumptions and limitations set forth therein
by the Ultra Pac shareholders is fair to such shareholders from a financial
point of view. A copy of the written opinion of WP&Co. dated March 22,
1998, which sets forth the factors considered, assumptions made and
limitations on the review conducted by WP&Co. is attached as Annex C
hereto, and is incorporated herein by reference. SHAREHOLDERS ARE
ENCOURAGED TO READ THE OPINION OF WP&CO. CAREFULLY AND IN ITS ENTIRETY;
(I) the availability of appraisal rights under Sections 302A.471 and
302A.473 of the MBCA for Dissenting Shares;
(J) The terms and conditions of the Merger Agreement, including
provisions that (a) although prohibiting Ultra Pac and its representatives
from soliciting or initiating any Acquisition Transaction, permit Ultra Pac
and its representatives to furnish information to, and negotiate and
otherwise engage in discussions with, any third party in response to an
unsolicited written Superior Proposal to the extent the Board determines in
good faith, after consultation with its financial advisors and based upon
the advice of outside independent counsel, that failing to take such action
would result in a breach of the fiduciary duties of the Board under
applicable law, and (b) permit Ultra Pac to terminate the Merger Agreement
to accept a an alternative Acquisition Transaction (upon which termination
of the Merger Agreement, the Tender and Option Agreements would also
terminate), subject to payment of a termination fee of $2,500,000 plus
reasonable expenses of Parent and the Purchaser not to exceed $600,000;
(K) Calvin S. Krupa's and James A. Thole's, directors and principal
shareholders of Ultra Pac, support of the Merger Agreement and the
transactions contemplated thereby and their willingness to enter into the
Tender Agreements, the fact that such shareholders would receive the same
consideration as the other shareholders of Ultra Pac, and that the Tender
Agreements would not preclude an alternative third-party proposal, as the
Tender Agreements would terminate in the event the Merger Agreement were
terminated in connection with the Company entering into a Superior
Proposal;
(L) The proposed structure of the Offer and the Merger involving an
immediate cash tender offer followed by a merger for the same consideration
and the fact that there is no financing or due diligence contingency to the
Offer. In this connection, the Board also considered the likelihood that
the proposed acquisition would be consummated, including the likelihood of
satisfaction of the conditions to the Offer and the Merger contained in the
Merger Agreement, and the risks to Ultra Pac if the acquisition were not
consummated; and
(M) The recommendation of Ultra Pac's management with respect to the
proposed transaction.
The Board evaluated the factors listed above in light of the directors'
knowledge of the business and operations of Ultra Pac and in their business
judgment. In view of the variety of factors considered by the
14
<PAGE> 17
Board in connection with its evaluation of the Merger Agreement and the Offer
and the Merger, the Board did not find it practicable to and did not quantify or
otherwise assign relative weight to the specific factors considered in reaching
its determination. In addition, individual members of the Board may have given
different weights to different factors in making their individual
determinations.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to a letter agreement dated, as of March 22, 1998 (the "Engagement
Letter"), between Ultra Pac and WP&Co., Ultra Pac engaged WP&Co. on an exclusive
basis as its financial advisor with respect to the possible disposition of Ultra
Pac, in one or a series of transactions, including through the sale or exchange
of capital stock, a merger, consolidation or other business combination, an
exchange or tender offer, the formation of a joint venture, partnership or
similar entity, or any similar transaction. The Engagement Letter provides for
the payment to WP&Co. of a financial advisory fee of $50,000, payable upon
execution of the Engagement Letter, to be credited against any transaction fee
payment to WP&Co. In the event of the occurrence of any of the transactions
described above, the Engagement Letter provides for the payment to WP&Co. of a
transaction fee of two percent (2%) of the transaction value representing a
price per share of $15.00 a share, plus three and one-half percent (3.5%) of the
transaction value representing a price per share greater than $15.00 per share.
Ultra Pac also agreed to reimburse WP&Co. for its out-of-pocket expenses,
including fees and expenses of its legal counsel. In addition, Ultra Pac agreed
to indemnify WP&Co. against certain liabilities, including liabilities arising
under federal securities laws.
Ultra Pac retained WP&Co. based on its experience and expertise. WP&Co. is
a internationally recognized investment banking and advisory firm. WP&Co., as
part of its investment banking business, is continuously engaged in the
valuation of businesses and securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. In the course of its market making
and other trading activities, WP&Co. and its affiliates may, from time to time,
have a long or short position in, and may buy and sell, securities of Ultra Pac.
Neither Ultra Pac nor any person acting on its behalf has employed,
retained or compensated any other person to make solicitations or
recommendations to security holders of Ultra Pac on its behalf concerning the
Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) To the best of Ultra Pac's knowledge, other than the execution of the
Tender Agreements, no transactions in Shares have been effected during the past
60 days by Ultra Pac or by any executive officer, director, affiliate or
subsidiary of Ultra Pac.
(b) To the best of Ultra Pac's knowledge, all of its executive officers and
directors who own Shares intend to tender pursuant to the Offer all Shares which
are owned beneficially or of record by such persons.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Schedule 14D-9, Ultra Pac is not presently
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 Ultra Pac or any subsidiary of Ultra Pac; (ii) a purchase, sale or
transfer of a material amount of assets by Ultra Pac or any subsidiary of Ultra
Pac; (iii) a tender offer for or other acquisition of securities by or of Ultra
Pac; or (iv) any material change in the present capitalization or dividend
policy of Ultra Pac.
(b) Except as set forth in this Schedule 14D-9, there are no transactions,
board resolutions, agreements in principle or signed contracts in response to
the Offer which relate to or would result in one or more of the matters referred
to in paragraph (a) of this Item 7.
15
<PAGE> 18
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Rights Plan.
On February 27, 1998, Ultra Pac entered into a Rights Agreement (the
"Rights Agreement") with Norwest Bank Minnesota, N.A., as rights agent, under
which preferred stock purchase rights (the "Rights") were distributed on March
18, 1998, at the rate of one Right for each outstanding Share, to shareholders
of record on that date. In connection with the Merger Agreement, Ultra Pac
executed Amendment No. 1 the ("Amendment No. 1") to the Rights Agreement.
Amendment No. 1 amends Sections 1(a), 3(a), 11, and 13 of the Rights
Agreement to provide that the announcement, commencement or consummation of the
Offer or the execution of the Merger Agreement and any amendments thereto and
the Tender Agreements or the consummation of the transactions contemplated
thereby (including, without limitation, the Offer and the Merger), will not (i)
cause Ivex, the Purchaser or any of their respective Affiliates or Associates to
become an "Acquiring Person" (as defined in the Rights Agreement), (ii) give
rise to a Distribution Date (as defined in the Rights Agreement) or (iii)
trigger certain other events specified in the Rights Agreement.
In addition, Amendment No. 1 amends Section 7(a) of the Rights Agreement to
provide that the Rights are exercisable at or prior to the earliest of (i) the
close of business on February 27, 2008, (ii) immediately prior to the effective
time of the Merger, (iii) the time at which the Rights are redeemed as provided
in Section 23 of the Rights Agreement or (iv) the time at which the Rights are
exchanges as provided in Section 24 of the Rights Agreement. The preceding
discussion relating to the Amendment No. 1 is qualified in its entirety by
reference to the full text of Amendment No. 1 filed as Exhibit 17 to this
Schedule 14D-9.
16
<PAGE> 19
EXHIBITS INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
1 Agreement and Plan of Merger dated as of March 23, 1998
among Ivex Packaging Corporation, Package Acquisition, Inc.
and Ultra Pac, Inc. (attached as Annex A herein)
2 Form of Tender and Option Agreement (attached as Annex B
herein).
3 Amendment No. 3 to Employment Agreement between Ultra Pac
and Calvin S. Krupa dated March 22, 1998.(1)
4 *Portions of Ultra Pac's Proxy Statement, dated May 12,
1997.
5 *Employment Agreement between Ultra Pac and Thomas F. Rains
dated March 31, 1997.
6 *Employee Confidentiality, Non-Compete and Separation
Agreement between Ultra Pac and William J. Howard dated
January 31, 1997.
7 Ultra Pac's 1991 Stock Option Plan.(2)
8 Ultra Pac's 1996 Stock Option Plan.(3)
9 *Ultra Pac's 1997 Stock Option Plan.
10 Ultra Pac's Outside Director Stock Option Plan.(4)
11 *Change of Control Agreement between Ultra Pac and Thomas V.
Bissell dated November 13, 1997.
12 *Change of Control Agreement between Ultra Pac and Charles
C. Ahern, Jr. dated November 13, 1997.
13 Change of Control Agreement between Ultra Pac and Gregory L.
Nelson dated March 3, 1997.(5)
14 Change of Control Agreement between Ultra Pac and Dan
Erikstrup dated February 28, 1997.(5)
15 Change of Control Agreement between Ultra Pac and William J.
Howard dated January 31, 1997.(5)
16 *Press release dated March 23, 1998.
17 Amendment No. 1 to Rights Agreement dated as of March 22,
1998 between Ultra Pac, Inc. and Norwest Bank Minnesota,
N.A.(6)
</TABLE>
- -------------------------
* Filed herewith.
(1) To be filed by Amendment to this 14D-9.
(2) Incorporated by reference to the specified exhibit to the Form 10-Q for the
quarter ended July 31, 1991.
(3) Incorporated by reference to the specified exhibit to the Form 10-Q for the
quarter ended April 30, 1997.
(4) Incorporated by reference to the specified exhibit to the Form 10-Q for the
quarter ended April 30, 1992.
(5) Incorporated by reference to the specified exhibit to the 10-K for the year
ended January 31, 1997.
(6) Incorporated by reference to the specified exhibit to the Registration
Statement on Form 8-A/A dated March 26, 1998.
17
<PAGE> 20
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.
ULTRA PAC INC.
By: /s/ CALVIN S. KRUPA
--------------------------------------
Name: Calvin S. Krupa
Title: Chairman, Chief Executive
Officer and President
Dated: March 26, 1998
18
<PAGE> 21
ANNEX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF
MARCH 23, 1998
AMONG
IVEX PACKAGING CORPORATION,
PACKAGE ACQUISITION, INC.
AND
ULTRA PAC, INC.
<PAGE> 22
TABLE OF CONTENTS
PAGE
----
ARTICLE 1
DEFINITIONS............................................................ A-1
ARTICLE 2
THE OFFER AND MERGER................................................... A-4
2.1 The Offer................................................... A-4
2.2 Company Actions............................................. A-5
2.3 Directors................................................... A-6
2.4 The Merger.................................................. A-6
2.5 Effective Time; Filing of Articles of Merger................ A-7
2.6 Articles of Incorporation................................... A-7
2.7 By-Laws..................................................... A-7
2.8 Directors and Officers...................................... A-7
2.9 Additional Actions.......................................... A-7
2.10 Time and Place of Closing................................... A-7
2.11 Conversion of Company Common Stock.......................... A-7
2.12 Exchange of Shares.......................................... A-8
No Further Rights or Transfers; Cancellation of Treasury
2.13 Shares...................................................... A-9
2.14 Dissenters' Rights.......................................... A-9
2.15 Special Meeting of Shareholders............................. A-10
2.16 Merger Without Meeting of Shareholders...................... A-10
2.17 Commercially Reasonable Efforts............................. A-10
2.18 Existing Options............................................ A-11
ARTICLE 3
OTHER AGREEMENTS....................................................... A-11
3.1 Access...................................................... A-11
3.2 Disclosure Letter........................................... A-11
3.3 Deliveries of Information................................... A-11
3.4 Acquisition Proposals....................................... A-11
3.5 Public Announcements........................................ A-12
3.6 Confidentiality Agreement................................... A-12
3.7 Regulatory and Other Approvals.............................. A-12
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................... A-13
4.1 Organization; Business...................................... A-13
4.2 Capitalization.............................................. A-13
4.3 Authorization; Enforceability............................... A-14
4.4 No Violation or Conflict.................................... A-14
4.5 Title to Assets............................................. A-14
4.6 Litigation.................................................. A-14
4.7 Books and Records; Company Financial Statements............. A-15
4.8 Absence of Certain Changes.................................. A-15
4.9 Buildings and Equipment..................................... A-16
4.10 Performance of Contracts.................................... A-16
4.11 Employee Benefit Plans...................................... A-16
4.12 Brokers..................................................... A-17
4.13 Taxes....................................................... A-17
4.14 Real Estate................................................. A-18
4.15 Governmental Approvals...................................... A-18
4.16 No Pending Acquisitions..................................... A-18
4.17 Labor Matters............................................... A-18
4.18 Existing Permits and Violations of Law...................... A-18
4.19 Intangible Assets........................................... A-19
<PAGE> 23
PAGE
----
4.20 Customers and Suppliers..................................... A-19
4.21 Environmental Protection.................................... A-19
4.22 Vote Required............................................... A-20
4.23 Returns..................................................... A-20
4.24 SEC Reports................................................. A-21
4.25 Content of Proxy Statement.................................. A-21
4.26 Opinion of Financial Advisor................................ A-21
4.27 Certain Agreements.......................................... A-21
4.28 Rights Agreement............................................ A-21
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND ACQUISITION........... A-22
5.1 Due Incorporation and Authority............................. A-22
5.2 Consents and Approvals...................................... A-22
5.3 No Broker's, Finder's or Similar Fees....................... A-22
5.4 No Violation or Conflict.................................... A-22
5.5 Litigation.................................................. A-22
5.6 Sufficient Funds............................................ A-22
ARTICLE 6
COVENANTS.............................................................. A-23
6.1 Conduct of Business by the Company.......................... A-23
6.2 Shareholder Option Agreements............................... A-24
ARTICLE 7
CONDITIONS............................................................. A-24
Conditions to Each Party's Obligation to Effect the
7.1 Merger...................................................... A-24
Condition to Parent's and Acquisition's Obligation to Effect
7.2 the Merger.................................................. A-24
ARTICLE 8
NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION......... A-24
8.1 No Survival of Representations and Warranties............... A-24
8.2 Directors' and Officers' Indemnification.................... A-24
ARTICLE 9
TERMINATION............................................................ A-25
9.1 Termination................................................. A-25
9.2 Rights on Termination....................................... A-26
9.3 Termination Fee Payable to the Parent....................... A-26
9.4 Other Remedies.............................................. A-27
ARTICLE 10
MISCELLANEOUS.......................................................... A-27
10.1 Expenses.................................................... A-27
10.2 Entire Agreement; Amendment................................. A-27
10.3 Governing Law............................................... A-27
10.4 Assignment.................................................. A-27
10.5 Notices..................................................... A-27
10.6 Counterparts; Headings...................................... A-28
10.7 Interpretation.............................................. A-28
10.8 Specific Performance........................................ A-28
10.9 No Reliance................................................. A-28
10.10 Exhibits and Schedules...................................... A-28
10.11 No Third Party Beneficiary.................................. A-28
<PAGE> 24
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 23, 1998 (the "Agreement"),
among IVEX PACKAGING CORPORATION, a Delaware corporation (the "Parent"), PACKAGE
ACQUISITION, INC., a Minnesota corporation and a wholly owned indirect
subsidiary of Parent ("Acquisition"), and ULTRA PAC, INC., a Minnesota
corporation (the "Company"). The Company and Acquisition are hereinafter
sometimes collectively referred to as the "Constituent Corporations."
WHEREAS, the Boards of Directors of the Parent, Acquisition and the Company
have approved and deem it advisable and in the best interests of their
respective shareholders to consummate the acquisition of the Company by the
Parent upon the terms and subject to the conditions set forth herein;
WHEREAS, as a condition and inducement to Parent's and Acquisition's
willingness to enter into this Agreement, concurrently with the execution
hereof, certain beneficial and record shareholders of the Company are entering
into tender and option agreements (each, a "Tender and Option Agreement")
obligating such shareholder to tender his shares of Company Common Stock
pursuant to the Offer (each as hereinafter defined) and granting an option to
Parent with respect to their respective shares of Company Common Stock,
substantially in the form attached hereto as Exhibit 2; and
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the Parent, Acquisition and the Company agree as follows:
ARTICLE 1
DEFINITIONS
When used in this Agreement, and in addition to the other terms defined
herein, the following terms shall have the meanings specified:
1.1 Accounts. "Accounts" shall mean all accounts receivable, notes and
associated rights owned by the Company.
1.2 Affiliate. "Affiliate" shall mean, in relation to any party hereto, any
entity directly or indirectly controlling, controlled by or under common control
with such party.
1.3 Agreement. "Agreement" shall mean this Agreement and Plan of Merger,
together with the Exhibits attached hereto and the Disclosure Letter, as the
same may be amended from time to time in accordance with the terms hereof.
1.4 Articles of Merger. "Articles of Merger" shall mean the Articles of
Merger in substantially the form of Exhibit 1 attached to this Agreement.
1.5 Buildings. "Buildings" shall mean all buildings, fixtures, structures
and improvements leased or owned by the Company.
1.6 Code. "Code" shall mean the Internal Revenue Code of 1986, as the same
may be in effect from time to time.
1.7 Company. "Company" shall mean Ultra Pac, Inc., a Minnesota corporation.
1.8 Company Common Stock. "Company Common Stock" shall mean shares of
common stock of the Company, no par value.
1.9 Company Financial Statements. "Company Financial Statements" shall mean
the audited Consolidated Balance Sheet, Consolidated Statement of Operations,
Consolidated Statement of Cash Flows and Consolidated Statement Shareholders
Equity of Company and related notes for each of the fiscal years ended on
January 31, 1995, January 31, 1996 and January 31, 1997.
A-1
<PAGE> 25
1.10 Contracts. "Contracts" shall mean all of the material contracts,
agreements, and obligations, written or oral, to which the Company is a party or
by which the Company or any of its assets are bound, including, without
limitation, any loan, bond, mortgage, indenture, lease, instrument, franchise or
license.
1.11 Control. "Control" (including the terms "controlling," "controlled
by," and "under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, through the ownership
of voting securities or by contract.
1.12 Dissenting Shares. "Dissenting Shares" shall mean shares of the
Company Common Stock which dissent from the Merger in accordance with the
provisions of the MBCA.
1.13 Employees. "Employees" shall mean all of the employees of the Company.
1.14 Employee Benefit Plans. "Employee Benefit Plans" shall mean any
pension plan, profit sharing plan, bonus plan, incentive compensation plan,
stock purchase plan, stock ownership plan, stock option plan, stock appreciation
plan, employee benefit plan, employee benefit policy, retirement plan, fringe
benefit program, insurance plan, severance plan, disability plan, health care
plan, sick leave plan, death benefit plan, or any other plan, program or policy
to provide retirement income, fringe benefits or other benefits to former or
current employees of the Company (including, without limitation, any employee
pension benefit plan, employee welfare plan or multi-employer plan as each term
is defined in ERISA).
1.15 Equipment. "Equipment" shall mean all machinery, equipment, boilers,
furniture, fixtures, motor vehicles, furnishings, parts, tools, office
equipment, computers and other items of tangible personal property owned or used
by the Company.
1.16 ERISA. "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as the same may be in effect from time to time.
1.17 Existing Corporate Jurisdictions. "Existing Corporate Jurisdictions"
shall mean those states, provinces and foreign countries in which the Company is
qualified to do business as a foreign corporation.
1.18 Existing Insurance Policies. "Existing Insurance Policies" shall mean
all of the insurance policies currently in effect and owned by the Company.
1.19 Existing Liens. "Existing Liens" shall mean those Liens affecting any
of the assets or properties of the Company.
1.20 Existing Options. "Existing Options" shall mean any of the following
relating to any capital stock or other equity interest of the Company and as
described in the Disclosure Letter (as defined in Section 3.2): (a) options or
warrants (whether vested or not) to purchase or other rights (including
registration rights), agreements, arrangements or commitments of any character
to which the Company is a party relating to the issued or unissued capital stock
or other equity or phantom equity interests of the Company to grant, issue or
sell any shares of the capital stock or other equity or phantom equity interests
of the Company by sale, lease, license or otherwise; (b) rights to subscribe for
or purchase any shares of the capital stock or other equity or phantom equity
interests of the Company; or (c) Contracts with respect to any right to
purchase, put or call.
1.21 Existing Permits. "Existing Permits" shall mean those permits,
licenses, approvals, qualifications, authorizations, and registrations required
by Law which the Company has or holds.
1.22 Existing Plans. "Existing Plans" shall mean all material Employee
Benefit Plans of the Company.
1.23 Indebtedness. "Indebtedness" shall mean all liabilities or obligations
of the Company, whether primary or secondary or absolute or contingent, in
excess of $50,000 as to any single item: (a) for borrowed money; or (b)
evidenced by notes, bonds, debentures or similar instruments; or (c) secured by
Liens on any assets of the Company.
1.24 Intangible Assets. "Intangible Assets" shall mean (a) any invention,
United States and foreign patents, pending patent applications, trade names,
trade dress, logos, corporate names, trademarks, service marks, trademark
registrations, service mark registrations, pending trademark applications,
pending service
A-2
<PAGE> 26
mark applications, registered copyrights, and pending copyright applications,
together with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith; (b) proprietary software;
and (c) all trade secrets and confidential business information (including
ideas, research and development, know-how, formulas, compositions, manufacturing
and production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information, and
business and marketing plans and proposals).
1.25 Investment. "Investment" by the Company shall mean (a) any transfer or
delivery of cash, stock or other property or value by the Company in exchange
for equity, debt, preferred stock, partnership interest, participation or any
other security of another Person; (b) any loan or capital contribution to or in
any other Person; (c) any guaranty of any obligation to pay money to, or perform
an obligation, of any other Person; and (d) any investments in any property or
assets other than properties and assets acquired and used in the ordinary course
of the business of the Company.
1.26 Law. "Law" shall mean any foreign, federal, state or local
governmental law, rule, regulation or requirement, including any rules,
regulations and orders promulgated thereunder and any orders, decrees, consents
or judgments of any governmental regulatory agencies and courts having the force
of law, other than any Environmental Laws.
1.27 Lien. "Lien" shall mean, with respect to any asset (real, personal or
mixed): (a) any mortgage, pledge, lien, easement, lease, title defect or
imperfection or any other form of security interest, whether imposed by Law or
by Contract; and (b) the interest of a vendor or lessor under any conditional
sale agreement, financing lease or other title retention agreement relating to
such asset.
1.28 Material Adverse Effect. "Material Adverse Effect" shall mean a
material adverse effect on the business, condition (financial or otherwise),
results of operations, assets or liabilities of the Company taken as a whole.
1.29 MBCA. "MBCA" shall mean the Minnesota Business Corporation Act.
1.30 Merger. "Merger" shall mean the merger of Acquisition with and into
the Company pursuant to this Agreement.
1.31 Optionholders. "Optionholders" shall mean all Persons holding the
Existing Options.
1.32 Permitted Liens. "Permitted Liens" shall mean those of the Existing
Liens that do not materially detract from the value of the property or assets of
the Company taken as a whole subject thereto and do not materially impair the
business or operations of the Company taken as a whole.
1.33 Person. "Person" shall mean a natural person, corporation, limited
liability company, association, joint stock company, trust, partnership,
governmental entity, agency or branch or department thereof, or any other legal
entity.
1.34 Real Estate. "Real Estate" shall mean the parcels of real property
owned or leased by the Company.
1.35 Rights. "Rights" shall mean those Preferred Share Purchase Rights
issued pursuant to the Rights Agreement dated February 27, 1998.
1.36 Shareholders. "Shareholders" shall mean all Persons owning any shares
of Company Common Stock.
1.37 Subsidiary. "Subsidiary" shall mean any corporation, at least a
majority of the outstanding capital stock of which (or any class or classes,
however designated, having ordinary voting power for the election of at least a
majority of the board of directors of such corporation) shall at the time be
owned by the relevant Person directly or through one or more corporations which
are themselves Subsidiaries.
A-3
<PAGE> 27
ARTICLE 2
THE OFFER AND MERGER
2.1 The Offer.
(a) As promptly as practicable (but in no event later than five
business days after the public announcement of the execution hereof),
Acquisition shall commence (within the meaning of Rule 14d-2 under the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (collectively, the "Exchange Act")) a tender offer
(the "Offer") for all of the outstanding shares of Company Common Stock
(including the Rights) at a price of $15.50 per share of Company Common
Stock, net to the seller in cash (such price, or any such higher price per
share as may be paid in the Offer, being referred to herein as the "Offer
Price"), subject to there being validly tendered and not withdrawn prior to
the expiration of the Offer, that number of shares of Company Common Stock
which represents at least a majority of the Company Common Stock
outstanding on a fully diluted basis (the "Minimum Condition") and to the
other conditions set forth in Annex A hereto, and shall consummate the
Offer in accordance with its terms ("fully diluted basis" means issued and
outstanding Company Common Stock and Company Common Stock subject to
issuance under warrants and outstanding employee stock options). The
obligations of Acquisition to accept for payment and to pay for any Company
Common Stock validly tendered on or prior to the expiration of the Offer
and not withdrawn shall be subject only to the Minimum Condition and the
other conditions set forth in Annex A hereto. The Offer shall be made by
means of an offer to purchase (the "Offer to Purchase") containing the
terms set forth in this Agreement, the Minimum Condition and the other
conditions set forth in Annex A hereto. Acquisition shall not amend or
waive the Minimum Condition and shall not decrease the Offer Price or
decrease the number of shares of Company Common Stock sought, or amend any
other condition of the Offer in any manner adverse to the holders of the
Company Common Stock without the prior written consent of the Company;
provided, however, that if on the initial scheduled expiration date of the
Offer which shall be 20 business days after the date of the Offer is
commenced, the sole condition remaining unsatisfied is the failure of the
waiting period under the HSR Act (as defined below) to have expired or been
terminated, Acquisition shall extend the expiration date from time to time
until two business days after the expiration of the waiting period under
the HSR Act. Acquisition shall, on the terms and subject to the prior
satisfaction or waiver of the conditions of the Offer, accept for payment
and pay for Company Common Stock tendered as soon as it is legally
permitted to do so under applicable law; provided, however, that if,
immediately prior to the initial expiration date of the Offer (as it may be
extended), the Company Common Stock tendered and not withdrawn pursuant to
the Offer equals less than 90% of the outstanding Company Common Stock,
Acquisition may extend the Offer one time for a period not to exceed twenty
business days, notwithstanding that all conditions to the Offer are
satisfied as of such expiration date of the Offer.
(b) As soon as practicable on the date the Offer is commenced, Parent
and Acquisition shall file with the United States Securities and Exchange
Commission (the "SEC") 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"). The Schedule
14D-1 will include, as exhibits, the Offer to Purchase and a form of letter
of transmittal and summary advertisement (collectively, together with any
amendments and supplements thereto, the "Offer Documents"). The Offer
Documents 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 shareholders,
shall 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 statements therein, in light of the circumstances under which they
were made, not misleading, except that no representation is made by Parent
or Acquisition with respect to information furnished by the Company to
Parent or Acquisition, in writing, expressly for inclusion in the Offer
Documents. The information supplied by the Company to Parent or
Acquisition, in writing, expressly for inclusion in the Offer Documents and
by Parent or Acquisition to the Company, in writing, expressly for
inclusion in the Schedule 14D-9 (as hereinafter defined) 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
A-4
<PAGE> 28
order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(c) Each of Parent and Acquisition will take all steps necessary to
cause the Offer Documents to be filed with the SEC and to be disseminated
to holders of the Company Common Stock, in each case as and to the extent
required by applicable federal securities laws. Each of Parent and
Acquisition, on the one hand, and the Company, on the other hand, will
promptly correct any information provided by it for use in the Offer
Documents if and to the extent that it shall have become false or
misleading in any material respect and Parent and Acquisition will take all
steps necessary to cause the Offer Documents as so corrected to be filed
with the SEC and to be disseminated to holders of the Company Common Stock,
in each case as and 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. In addition, Parent and
Acquisition will provide the Company and its counsel in writing with any
comments, whether written or oral, Parent, Acquisition or their counsel may
receive from time to time from the SEC or its staff with respect to the
Offer Documents promptly after the receipt of such comments.
2.2 Company Actions.
(a) The Company hereby approves of and consents to the Offer and
represents that its Board of Directors, at a meeting duly called and held,
acting upon the unanimous recommendation of the special committee of all
independent directors (the "Special Committee") of the Board of Directors
established pursuant to Section 302A.673(d) of the MBCA on March 22, 1998
has (i) unanimously determined that each of the Agreement, the Offer and
the Merger are fair to and in the best interests of the shareholders of the
Company, (ii) approved this Agreement and the transactions contemplated
hereby, including the Offer and the Merger (collectively, the
"Transactions"), and such approval constitutes approval of the Offer, this
Agreement and the Transactions, including the Merger, for purposes of
Section 302A.673 of the MBCA, such that Section 302A.671 of the MBCA will
not apply to the Transactions contemplated by this Agreement, and (iii)
resolved to recommend that the shareholders of the Company accept the
Offer, tender their Company Common Stock thereunder to Acquisition and
approve and adopt this Agreement and the Merger; provided, that such
recommendation may be withdrawn, modified or amended if, in the good faith
opinion of the Board of Directors, based upon the receipt of advice from
outside independent legal counsel, failure to withdraw, modify or amend
such recommendation would result in the Board of Directors violating its
fiduciary duties to the Company's shareholders under applicable Law.
(b) Concurrently with the commencement of the Offer, the Company shall
file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9
(together with all amendments and supplements thereto and including the
exhibits thereto, the "Schedule 14D-9") which shall, subject to the proviso
of Section 2.2(a), contain the recommendation referred to in clause (iii)
of Section 2.2(a) hereof. 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 shareholders, shall 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 statements therein, in light of
the circumstances under which they were made, not misleading, except that
no representation is made by the Company with respect to information
furnished by Parent or Acquisition for inclusion in the Schedule 14D-9. The
Company further 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 Company
Common Stock, in each case as and to the extent required by applicable
federal securities laws. Each of the Company, on the one hand, and Parent
and Acquisition, on the other hand, agrees promptly to correct any
information provided by it for use in the Schedule 14D-9 if and to the
extent that it shall have become false and misleading in any material
respect, and the Company further agrees to take all steps necessary to
cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be
disseminated to holders of Company Common Stock, in each case as and to the
extent required by applicable federal securities laws. Parent and its
counsel shall be given the opportunity to review the Schedule 14D-9 before
it is filed with the SEC. In addition, the Company agrees to provide
Parent, Acquisition and their counsel with any comments, whether
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written or oral, that the Company or its counsel may receive from time to
time from the SEC or its staff with respect to the Schedule 14D-9 promptly
after the receipt of such comments or other communications.
(c) In connection with the Offer, the Company will promptly furnish or
cause to be furnished to Acquisition mailing labels, security position
listings and any available listing, or computer file containing the names
and addresses of all recordholders of Company Common Stock as of a recent
date, and shall furnish Acquisition with such additional information
(including, but not limited to, updated lists of holders of Company Common
Stock and their addresses, mailing labels and lists of security positions)
and assistance as the Acquisition or its agents may reasonably request in
communicating the Offer to the record and beneficial holders of the Company
Common Stock. Except for such steps as are necessary to disseminate the
Offer Documents, Parent and Acquisition shall hold in confidence the
information contained in any of such labels and lists and the additional
information referred to in the preceding sentence, will use such
information only in connection with the Offer, and, if this Agreement is
terminated, will, upon request of the Company, deliver or cause to be
delivered to the Company all copies of such information then in its
possession or the possession of its agents or representatives.
2.3 Directors.
(a) Promptly upon the purchase of and payment for any Company Common
Stock by Parent or any of its subsidiaries which represents at least a
majority of the outstanding Company Common Stock (on a fully diluted basis,
as defined in Section 2.1(a)), Parent shall be entitled to designate such
number of directors, rounded up to the next whole number, on the Board of
Directors of the Company as is equal to the next whole number, on the Board
of Directors of the Company as is equal to the product of the total number
of directors on such Board (giving effect to the directors designated by
Parent pursuant to this sentence) multiplied by the percentage that the
number of shares of Company Common Stock so accepted for payment bears to
the total number of shares of then outstanding. In furtherance thereof, the
Company shall, upon request of Acquisition, use its best reasonable efforts
promptly either to increase the size of its Board of Directors or secure
the resignation of such number of its incumbent directors, or both, as is
necessary to enable Parents' designees to be so elected to the Company's
Board, and shall take all actions available to the Company to cause
Parent's designees to be so elected. At such time, the Company shall, if
requested by Parent, also cause persons designated by Parent to constitute
at least the same percentage (rounded up to the next whole number) as is on
the Company's Board of Directors of each committee of the Company's Board
of Directors. Notwithstanding the foregoing, the Company shall have at
least one independent director until the Effective Time.
(b) The Company shall promptly take all actions required pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in
order to fulfill its obligations under Section 2.3(a), including mailing to
shareholders the information required by such Section 14(f) and Rule 14f-1
as is necessary to enable Parent's designees to be elected to the Company's
Board of Directors. Parent or Acquisition will supply the Company and be
solely responsible for any information with respect to either of them and
their nominees, offices, directors and affiliates required by such Section
14(f) and Rule 14f-1. The provisions of this Section 2.3 are in addition to
and shall not limit any rights which the Acquisition, Parent or any of
their affiliates may have as a holder or beneficial owner of Company Common
Stock as a matter of law with respect to the election of directors or
otherwise.
2.4 The Merger. Upon the terms and subject to the conditions of this
Agreement and in accordance with the MBCA, at the Effective Time (as defined
herein), Acquisition shall be merged with and into the Company, and the Company
shall (i) be the surviving corporation in the Merger (in such capacity, the
"Surviving Corporation"), (ii) succeed to and assume all the rights and
obligations of Acquisition in accordance with the MBCA, and (iii) continue its
corporate existence under the laws of the State of Minnesota. The Merger shall
have the effect set forth in Section 302A.641 of the MBCA. At the Effective
Time, the separate existence of Acquisition shall cease. The Merger shall be
pursuant to the provisions of, and shall be with the effect provided in, the
MBCA. In accordance with the MBCA, all of the rights, privileges, powers and
franchises of the Company and Acquisition shall vest in the Surviving
Corporation, and all of the
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debts, liabilities and duties of the Company and Acquisition shall become the
debts, liabilities and duties of the Surviving Corporation.
2.5 Effective Time; Filing of Articles of Merger. The Merger shall be
effected by the filing at the time of the Closing (as defined herein) of a
properly executed Articles of Merger or other appropriate documents (in the form
attached as Exhibit 1 hereto) with the Secretary of State of the State of
Minnesota in accordance with the provisions of the MBCA. The Merger shall become
effective at the time of such filing of the Articles of Merger with the
Secretary of State of the State of Minnesota or at such later date or time as
Acquisition and the Company shall agree and as specified in the Articles of
Merger (the "Effective Time"). At the Closing, the Parent and the Constituent
Corporations shall cause a properly executed Articles of Merger to be filed with
the Secretary of State of the State of Minnesota as provided in the MBCA, and
shall take any and all other lawful actions and do any and all other lawful
things to cause the Merger to become effective.
2.6 Articles of Incorporation. At the Effective Time, the Articles of
Incorporation of Acquisition as in effect immediately prior to the Effective
Time shall be the Articles of Incorporation of the Surviving Corporation until
thereafter amended in accordance with its terms and the MBCA.
2.7 By-Laws. The By-laws of Acquisition, as in effect immediately prior to
the Effective Time, shall be the By-laws of the Surviving Corporation until
thereafter amended in accordance with its terms and the MBCA.
2.8 Directors and Officers. The directors and officers of Acquisition
immediately prior to the Effective Time shall be the initial directors and
officers of the Surviving Corporation. Each director and officer of the
Surviving Corporation shall hold office in accordance with the Articles of
Incorporation and By-laws of the Surviving Corporation until his or her
successor is duly appointed and qualified.
2.9 Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that consistent with the
terms of this Agreement any further assignments or assurances in law or any
other acts are necessary or desirable (i) to vest, perfect or confirm, of record
or otherwise, in the Surviving Corporation, title to and possession of any
property or right of either Constituent Corporation acquired or to be acquired
by reason of, or as a result of, the Merger, or (ii) otherwise to carry out the
purposes of this Agreement, then, subject to the terms and conditions of this
Agreement, each such Constituent Corporation and its officers and directors
shall be deemed to have granted to the Surviving Corporation an irrevocable
power of attorney to execute and deliver all such deeds, assignments and
assurances in law and to do all acts necessary or proper to vest, perfect or
confirm title to and possession of such property or rights in the Surviving
Corporation and otherwise to carry out the purposes of this Agreement; and the
officers and directors of the Surviving Corporation are fully authorized in the
name of either Constituent Corporation to take any and all such action.
2.10 Time and Place of Closing. The closing of the Merger (the "Closing")
shall take place (a) at the offices of Skadden, Arps, Slate, Meagher & Flom
(Illinois), 333 West Wacker Drive, Suite 2100, Chicago, Illinois 60606 as soon
as practicable and no later than the second business day following satisfaction
or waiver of all of the conditions set forth in Article 7, or (b) at such other
place, at such other time or on such other date as the Parent and the Company
may mutually agree (the date of the Closing is hereinafter sometimes referred to
as the "Closing Date").
2.11 Conversion of Company Common Stock.
(a) Each share of the Company Common Stock issued and outstanding
immediately prior to the Effective Time (except for Dissenting Shares),
shall, by virtue of the Merger and without any action on the part of the
Company, the Parent, Acquisition or the holder thereof, be converted into
the right to receive the Offer Price in cash, payable to the holder
thereof, without any interest thereon, as soon as reasonably practicable
after the surrender of the certificate(s) representing such Company Common
Stock as provided in Section 2.12.
(b) Each share of common stock, par value $0.01 per share, of
Acquisition issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part
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of the holder thereof, be converted into one share of common stock of the
Surviving Corporation. Each certificate evidencing ownership of any such
shares shall, following the Merger, evidence ownership of the same number
of shares of common stock of the Surviving Corporation.
(c) Payments in respect of the Existing Options are provided for in
Section 2.18 below.
2.12 Exchange of Shares.
(a) Prior to the Effective Time, the Company shall appoint a Person
that is reasonably acceptable to the Parent to act as the exchange agent
hereunder (the "Exchange Agent") to receive in trust the funds which
holders of Company Common Stock shall become entitled upon surrender of the
certificates for exchange in accordance with this Section 2.12.
As soon as reasonably practicable after the Effective Time, the Exchange
Agent shall mail to each holder of record of a share certificate which
immediately prior to the Effective Time represented outstanding Company Common
Stock (other than Parent, the Company, any Subsidiary of Parent and any holder
of Dissenting Shares): (1) a letter of transmittal (a "Letter of Transmittal")
which shall (x) specify that delivery shall be effected, and risk of loss and
title to each such certificate shall pass, only upon delivery of such
certificates to the Exchange Agent, (y) contain a representation in a form
reasonably satisfactory to the Parent as to the good and marketable title to the
Company Common Stock held by such holder free and clear of any Lien, and (z)
contain such other provisions as the Company and the Parent may reasonably
specify; and (2) instructions to effect the surrender of such certificate(s) in
exchange for a check in an amount equal to the Offer Price multiplied by the
number of shares of Company Common Stock represented by such certificate(s).
At the Closing, immediately prior to the Effective Time, Parent shall cause
Acquisition to deposit with the Exchange Agent, on behalf of the Shareholders,
an aggregate amount in cash equal to the Offer Price times the number of shares
of Company Common Stock outstanding as of the Closing (such aggregate amount
being hereinafter referred to as the "Exchange Fund"), and then, upon surrender
to the Exchange Agent of certificate(s) for cancellation together with a duly
executed Letter of Transmittal and such other documents as the Exchange Agent
may reasonably require, make payment of the Offer Price provided for in Section
2.11(a) to the holder of such certificate(s) out of the Exchange Fund. The
Exchange Agent shall invest portions of the Exchange Fund as Parent directs,
provided that substantially all such investments shall be in obligations of or
guaranteed by the United States of America, in commercial paper obligations
receiving the highest rating from either Moody's Investors Services, Inc. or
Standard and Poor's Corporation, or in certificates of deposit, bank repurchase
agreements or banker's acceptances of commercial banks with capital exceeding
$250 million. The Exchange Fund shall not be used for any other purpose, except
as provided in this Agreement.
Thereafter (except as otherwise provided for in Section 2.12(c)), each
holder of certificate(s) representing Company Common Stock may surrender such
certificate(s) to the Exchange Agent and (subject to applicable abandoned
property, escheat and similar laws) receive from the Exchange Agent in exchange
therefor an amount equal to the product of (x) the Offer Price and (y) the
number of shares of Company Common Stock represented by the certificate(s) so
surrendered, without interest, but such holder shall have no rights whatsoever
against the Surviving Corporation.
Upon the surrender of any such certificate(s) to the Exchange Agent, the
Exchange Agent shall promptly surrender such certificate(s) to the Surviving
Corporation for cancellation.
(b) If the consideration payable for any Company Common Stock is to be
delivered to a person other than the person in whose name the
certificate(s) representing such Company Common Stock is registered, it
shall be a condition of such delivery that the certificate(s) so
surrendered shall be properly endorsed or accompanied by appropriate stock
powers, in either case signed exactly as the name of the record holder
appears on such certificate, and shall otherwise be in proper form for
transfer, and that the person requesting such delivery shall pay to the
Exchange Agent or the Surviving Corporation, as the case may be, any
transfer or other taxes required by law as a result of such delivery to a
person other than the
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record holder of the certificate(s) surrendered or shall establish to the
Exchange Agent's and the Surviving Corporation's reasonable satisfaction
that such tax has been paid or is not payable.
(c) Any portion of the Exchange Fund delivered upon the Closing Date
to the Exchange Agent pursuant to this Agreement that remains unclaimed for
one (1) year after the Closing Date shall be delivered by the Exchange
Agent to the Surviving Corporation, upon demand, and any Shareholders who
have not theretofore complied with Section 2.12(a) shall thereafter look
only to the Surviving Corporation for delivery of the Offer Price, subject
in all events to all applicable escheat and other similar laws.
(d) Until surrender as contemplated by this Section 2.12 of this
Agreement, certificate(s) representing Company Common Stock shall be deemed
at all times after the Effective Time to represent only the right to
receive upon surrender the consideration to be paid therefor as specified
in this Agreement.
(e) No interest shall accrue or be payable with respect to any amounts
which any Shareholder or Optionholder shall be entitled to receive pursuant
to this Agreement. The Exchange Agent shall be authorized to pay the Offer
Price attributable to any certificate(s) representing Company Common Stock
which has been lost or destroyed upon receipt of evidence of ownership of
the Company Common Stock represented thereby and of appropriate
indemnification and/or bond in each case reasonably satisfactory to the
Company or the Surviving Corporation, as the case may be (but no bond shall
be required in cases of 25 shares or less).
(f) Neither the Exchange Agent nor any party to this Agreement shall
be liable to any Shareholder or Optionholder for any Company Common Stock,
any Existing Options, the Offer Price or cash delivered to a public
official pursuant to any abandoned property, escheat or similar law.
(g) The Exchange Agent shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any
Shareholder or Optionholder such amounts as the Company reasonably
determines are required to be deducted and withheld with respect to the
making of such payment under the Code, or any provision of state, local or
foreign tax Law. To the extent that amounts are so withheld by the Exchange
Agent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the Shareholder or Optionholder in respect
of which such deduction and withholding was made by the Exchange Agent.
2.13 No Further Rights or Transfers; Cancellation of Treasury
Shares. Except for the surrender of the certificate(s) representing the Company
Common Stock in exchange for the right to receive the Offer Price with respect
to each share of Company Common Stock or the perfection of appraisal rights with
respect to the Dissenting Shares, at and after the Effective Time, the holder of
shares of Company Common Stock shall cease to have any rights as a shareholder
of the Company, and no transfer of shares of Company Common Stock shall
thereafter be made on the stock transfer books of the Surviving Corporation.
Each share of Company Common Stock held in the Company's treasury immediately
prior to the Effective Time shall, by virtue of the Merger, be canceled and
retired and cease to exist without any conversion thereof.
2.14 Dissenters' Rights. Shares of Company Common Stock which immediately
prior to the Effective Time are held by Shareholders who have properly exercised
and perfected appraisal rights under Section 302A.473 of the MBCA (the
"Dissenting Shares") shall, if required by the MBCA, but only to the extent
required thereby, not be converted into the right to receive the Offer Price,
but the holders of Dissenting Shares shall be entitled to receive such
consideration as shall be determined pursuant to Section 302A.473 of the MBCA;
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 MBCA, 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 Offer Price,
without any interest thereon, and such shares shall no longer be Dissenting
Shares. The Company shall give the Parent, Acquisition and the Exchange Agent
prompt notice of any claim by a Shareholder for payment of fair value for
Dissenting Shares as provided in Section 302A.473 of the MBCA. Prior to the
Effective Time,
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the Company will not, except with the prior written consent of Parent and
Acquisition, make any payments with respect to, or settle or offer to settle,
any such demands.
2.15 Special Meeting of Shareholders.
(a) If required by applicable law in order to consummate the Merger,
the Company agrees to take all steps necessary to cause a special meeting
of the Shareholders (the "Special Meeting") to be duly called, noticed,
convened and held as soon as practicable following the acceptance for
payment and purchase of shares of Company Common Stock by the Parent or its
affiliates pursuant to the Offer for the purpose of voting to approve this
Agreement and the Merger. In connection with the Special Meeting, the Board
of Directors of the Company, acting upon the unanimous recommendation of
the Special Committee, shall unanimously recommend to the Shareholders that
the Shareholders vote in favor of the approval of this Agreement and the
Merger.
(b) In connection with the Special Meeting, the Company agrees to
promptly prepare and cause to be filed with the SEC and mailed to the
Shareholders a notice of the Special Meeting and a definitive proxy
statement (the "Proxy Statement") and shall cause such notice to be mailed
no later than the time required by applicable law and the certificate of
incorporation and bylaws of the Company. The Parent and Acquisition agree
to provide the Company with any information for inclusion in the Proxy
Statement (or any amendments or supplements thereto) which is required by
applicable law or which is reasonably requested by the Company. The Company
shall consult with the Parent and Acquisition with respect to the Proxy
Statement (and any amendments or supplements thereto) and shall afford the
Parent and Acquisition reasonable opportunity to comment thereon prior to
its finalization. If, at any time prior to the Special Meeting, any event
shall occur relating to Company or the transactions contemplated by this
Agreement which should be set forth in an amendment or a supplement to the
Proxy Statement, the Company will promptly notify in writing the Parent and
Acquisition of such event. In such case, the Company, with the cooperation
of the Parent and Acquisition, will promptly prepare and mail such
amendment or supplement and the Company shall consult with the Parent and
Acquisition with respect to such amendment or supplement and shall afford
the Parent and Acquisition reasonable opportunity to comment thereon prior
to such mailing. The Company agrees to notify the Parent and Acquisition at
least three (3) days prior to the mailing of the Proxy Statement (or any
amendment or supplement thereto) to the Shareholders.
(c) The Parent agrees that if any event with respect to the Parent,
Acquisition or their officers or directors shall occur which is required to
be described in an amendment or supplement to the Proxy Statement or any
other filing with the Securities and Exchange Commission (the "SEC") that
may be required in connection with this Agreement, the Merger and all
matters related thereto, the Parent will promptly inform the Company
thereof and the Company will cause such event to be so described and such
amendment or supplement to be promptly filed with the SEC and, as required
by law, disseminated to the Shareholders; provided, however, that prior to
such filing or mailing the Company shall consult with the Parent and
Acquisition with respect to such amendment, supplement or other filing and
shall afford the Parent and Acquisition a reasonable opportunity to comment
thereon.
2.16 Merger Without Meeting of Shareholders. Notwithstanding Section 2.15
hereof, in the event that Parent, Acquisition and any other Subsidiaries of
Parent shall acquire in the aggregate at least 90% of the class of capital stock
of the Company Common Stock, pursuant to the Offer or otherwise, the parties
hereto shall, at the request of Parent and subject to Article 7 hereof, take all
necessary and appropriate action to cause the Merger to become effective as soon
as practicable after such acquisition, without a meeting of shareholders of the
Company, in accordance with Section 302A. 621 of the MBCA.
2.17 Commercially Reasonable Efforts. So long as this Agreement has not
been terminated, the Company, the Parent and Acquisition shall: (i) promptly
make their respective filings and thereafter make any other submissions required
under all applicable laws with respect to this Agreement, the Offer, the Merger
and the other transactions contemplated hereby and (ii) use their respective
commercially reasonable efforts to promptly take, or cause to be taken, all
other actions and do, or cause to be done, all other things necessary proper or
appropriate to consummate and make effective the Merger as provided for in this
Agreement.
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2.18 Existing Options.
(a) As of the Effective Time, each Existing Option which is
outstanding at the Effective Time will be exchanged for, and the holders of
each such Existing Option will be entitled to receive at the Closing (or
thereafter, if necessary) upon surrender of such Existing Option for
cancellation, cash equal to (i) the product of (a) the difference between
the Offer Price and the exercise price of each such Existing Option, times
(b) the number of shares of Company Common Stock covered by such Existing
Option. It is presently anticipated by the Company that the payment to be
made at the Closing to the Optionholders in respect of the Existing Options
will be approximately $6.6 million (before any income taxes and other
required withholdings).
(b) The Company shall take all actions necessary to ensure that from
and after the Effective Time the Surviving Corporation will not be bound by
any options, warrants, rights or agreements which would entitle any person,
other than Parent or Acquisition, to beneficially own shares of Surviving
Corporation or Parent or receive any payments (other than as set forth in
(a)) in respect of such options, warrants, rights or agreements. The
Company shall take all actions necessary to terminate each plan with
respect to Existing Options as of the Effective Time.
ARTICLE 3
OTHER AGREEMENTS
3.1 Access. Subject to the provisions of the Confidentiality Agreement
referred to in Section 3.6 below, and so long as this Agreement has not been
terminated as herein provided, upon reasonable request, the Company shall grant
to the Parent, Acquisition and their agents, accountants, attorneys and other
advisers reasonable access during normal business hours to all of the
properties, facilities, books, records, financial statements and other documents
and materials relating to its financial condition, assets, liabilities and
business, including, without limitation, permitting the Parent (at its expense
and subject to the prior approval of the Company, which approval shall not be
unreasonably withheld) to: (a) conduct appraisals of the Equipment, Buildings,
Real Estate and other properties of the Company; and (b) conduct an
environmental and occupational safety inspection of the properties of the
Company. In addition, the Company shall confer and consult with representatives
of the Parent, as the Parent may reasonably request, to report on operational
matters, financial matters and the general status of ongoing business operations
of the Company.
3.2 Disclosure Letter. The Company has delivered to the Parent a disclosure
letter (the "Disclosure Letter") which shall be signed by the President and the
Secretary of the Company stating that the Disclosure Letter was delivered
pursuant to this Agreement and is the Disclosure Letter referred to in this
Agreement. The Disclosure Letter is deemed to constitute an integral part of
this Agreement and to modify, as specified, the representations, warranties,
covenants or agreements of the Company contained in this Agreement.
3.3 Deliveries of Information. From time to time after the date of this
Agreement and prior to the Closing Date (unless this Agreement is terminated),
the Company shall furnish promptly to the Parent:
(a) a copy of each report, schedule and other document filed by the
Company or received by the Company after the date of this Agreement
pursuant to the requirements of federal or state securities Laws promptly
after such documents are available; and
(b) the monthly financial statements of the Company (as prepared by
the Company in accordance with its normal accounting procedures) promptly
after such financial statements are available.
3.4 Acquisition Proposals.
(a) Prior to the Effective Time, the Company agrees that neither it,
any of its Affiliates, nor any of the respective directors, officers,
employees, agents or representatives of the foregoing, will, directly or
indirectly, (i) solicit, initiate, facilitate or encourage (including by
way of furnishing or disclosing non-public information) any inquiries or
the making of any proposal with respect to any merger, consolidation or
other business combination involving the Company or the acquisition of all
or any significant part of
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the assets or capital stock of the Company (an "Acquisition Transaction")
or (ii) negotiate, explore or otherwise engage in discussions with any
Person (other than the Parent and its representatives) with respect to any
Acquisition Transaction, or which may reasonably be expected to lead to a
proposal for an Acquisition Transaction or enter into any agreement,
arrangement or understanding with respect to any such Acquisition
Transaction or which would require it to abandon, terminate or fail to
consummate the Merger or any other transaction contemplated by this
Agreement; provided, however, that the Company may, in response to an
unsolicited written proposal from a third party regarding a Superior
Proposal (as hereinafter defined), furnish information to and engage in
discussions and negotiations with such third party, but only if the Board
of Directors of the Company determines in good faith, after consultation
with its financial advisors and based upon the advice of outside
independent counsel, that failing to take such action would result in a
breach of the fiduciary duties of such Board of Directors under applicable
Law. It is understood and agreed, without limitation of the Company's
obligations, that any violation of this Section 3.4 by any director,
officer, Affiliate, investment banker, financial advisor, attorney or other
advisor or representative of the Company, whether or not such Person is
purporting to act on behalf of the Company, or otherwise, shall be deemed
to be a breach of this Section 3.4 by the Company.
(b) The Company agrees that, as of the date hereof, it, its
Affiliates, and the respective directors, officers, employees, agents and
representatives of the foregoing, shall immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
Person (other than the Parent and its representatives) conducted heretofore
with respect to any Acquisition Transaction. The Company agrees to promptly
advise the Parent in writing of the existence of (x) any inquiries or
proposals (or desire to make a proposal) received by (or indicated to)
after the date hereof, any such information requested from, or any
negotiations or discussions sought to be initiated or continued with, the
Company, its Affiliates, or any of the respective directors, officers,
employees, agents or representatives of the foregoing, in each case from a
Person (other than the Parent and its representatives) with respect to an
Acquisition Transaction, and (y) the terms thereof, including the identity
of such third party and the terms of any financing arrangement or
commitment in connection with such Acquisition Transaction, and to update
on an ongoing basis or upon the Parent's reasonable request, the status
thereof. As used herein, "Superior Proposal" means a bona fide, written and
unsolicited proposal or offer made by any Person (or group) (other than the
Parent or any of its Subsidiaries) with respect to an Acquisition
Transaction on terms which, as determined by the Board of Directors of the
Company in good faith and in the exercise of reasonable judgment (based on
the advice of independent financial advisors and Katten Muchin & Zavis or
outside independent Minnesota counsel), would reasonably be likely to be
more favorable to the Company and its Shareholders than the transactions
contemplated hereby.
3.5 Public Announcements. Any public announcement made by or on behalf of
either the Parent or the Company prior to the termination of this Agreement
pursuant to Article 9 hereof concerning this Agreement, the transactions
described herein or any other aspect of the dealings heretofore had or hereafter
to be had between the Company and the Parent and their respective Affiliates
must first be approved by the other party (any such approval not to be
unreasonably withheld), subject to either party's obligations under applicable
Law (but such party shall use its best efforts to consult with the other party
as to all such public announcements).
3.6 Confidentiality Agreement. The Company and the Parent agree that the
Confidentiality Agreement entered into between the Company and the Parent, dated
March 2, 1998, remains in effect, but shall at the Effective Time be deemed to
have terminated without further action by the parties.
3.7 Regulatory and Other Approvals.
(a) Subject to the terms and conditions herein provided, the Company
will (i) take all reasonable steps necessary or desirable, and proceed
diligently and in good faith and use all reasonable efforts to obtain all
approvals required by any Contract to consummate the transactions
contemplated hereby, (ii) take all reasonable steps necessary or desirable,
and proceed diligently and in good faith and use all reasonable efforts to
obtain all approvals, authorizations, and clearances of governmental and
regulatory authorities required of the Company to permit the Company to
consummate the transactions
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contemplated hereby, (iii) provide such other information and
communications to such governmental and regulatory authorities as such
authorities may reasonably request, and (iv) cooperate with Parent in
obtaining all approvals, authorizations, and clearances of governmental or
regulatory authorities and others required of Parent to consummate the
transactions contemplated hereby.
(b) The Company and Parent will (i) take all reasonable actions
necessary to file as soon as practicable, notifications under the HSR Act,
(ii) comply at the earliest practicable date with any request for
additional information received from the Federal Trade Commission or
Antitrust Division of the Department of Justice pursuant to the HSR Act,
and (iii) request early termination of the applicable waiting period.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Parent and Acquisition on
the date of this Agreement that:
4.1 Organization; Business.
(a) Organization. The Company is a corporation duly and validly
organized and existing under the Laws of the State of Minnesota, is
qualified to do business as a foreign corporation, is in good standing in
the Existing Corporate Jurisdictions. The Existing Corporate Jurisdictions
(as applicable) constitute all jurisdictions where the ownership or leasing
of property or the conduct of its business requires qualification as a
foreign corporation by the Company and where the failure to so qualify
would have a Material Adverse Effect. The Company is not in violation of
any provision of its Articles of Incorporation, By-laws or equivalent
organizational documents.
(b) Powers. The Company has all requisite corporate power and
authority to carry on its business as it is now conducted and to own, lease
and operate its assets and properties unless the absence of same would not
have a Material Adverse Effect.
4.2 Capitalization.
(a) Capital Stock. The entire authorized capital stock of the Company
consists of 10,000,000 shares of common stock, no par value, of which
3,893,791 shares are issued and outstanding as of the date hereof. No
shares are held by the Company as treasury shares and no shares of the
Company Common Stock have been acquired by the Company that are subject to
outstanding pledges to secure the future payment of the purchase price
therefor.
(b) Issuance; Ownership. All of the outstanding capital stock of the
Company is duly authorized, validly issued, fully paid and nonassessable
and was not issued in violation of any preemptive rights. Other than as
disclosed in the Company SEC Documents, the Company does not own, directly
or indirectly, any capital stock or other ownership interest in any
corporation, partnership, trust, limited liability company or other entity.
The Company has no Subsidiaries. Except for the Existing Options, there are
no options, warrants, conversion rights or other rights to subscribe for or
purchase, or other contracts with respect to, any capital stock of the
Company and there are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to the
Company. Except as set forth in this Agreement, to the knowledge of the
Company, there are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of the
Company.
(c) As of the date of this Agreement, (i) no bonds, debentures, notes
or other indebtedness having the right to vote under ordinary circumstances
(or convertible into securities having such right to vote) ("Voting Debt")
of the Company are issued or outstanding, and (ii) there are no outstanding
contractual obligations of the Company to repurchase, redeem or otherwise
acquire any shares of capital stock of the Company or any rights.
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4.3 Authorization; Enforceability.
(a) The execution, delivery and performance of this Agreement are
within the corporate power and authority of the Company and, subject to the
provisions hereof, have been duly authorized by the Board of Directors of
the Company. Except for the approval of the Shareholders as required by
Law, the Charter Documents and described in Section 4.22 hereof, no other
corporate proceeding or action on the part of the Company is necessary to
authorize the execution and delivery by the Company of this Agreement and
the consummation by it of the transactions contemplated hereby. This
Agreement is, and the other documents and instruments required by this
Agreement to be executed and delivered by the Company will be, when
executed and delivered by the Company, the valid and binding obligations of
the Company, enforceable against the Company in accordance with their
respective terms, except as the enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar
Laws generally affecting the rights of creditors and subject to general
equity principles.
(b) Prior to execution and delivery of this Agreement, the Board of
Directors of the Company and the Special Committee have each (at a meeting
duly called and held) unanimously (i) approved the Transactions
contemplated hereby, and such approval is sufficient to render the
provisions of Section 302.671 of the MBCA inapplicable to the Merger, (ii)
determined that the Transactions contemplated hereby are fair to and in the
best interests of the holders of the Company Common Stock and (iii)
resolved to recommend that the shareholders of the Company accept the
Offer, tender their Company Common Stock thereunder to Acquisition and
approve and adopt this Agreement.
(c) No other state takeover statute or similar statute or regulation
in any jurisdiction in which the Company does business applies or purports
to apply to the Merger or to this Agreement, or any of the transactions
contemplated hereby or thereby.
4.4 No Violation or Conflict. Subject to the receipt of the approvals and
consents, if any, described in Section 7.1(a) of this Agreement, the execution
and delivery of this Agreement and all documents and instruments required by
this Agreement to be executed and delivered by the Company do not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, (i) except as disclosed in the Disclosure Letter,
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 Contract or to the loss of a material benefit under any
Contract, or result in the creation of any Lien upon any of the properties or
assets of the Company, (ii) conflict or result in any violation of any provision
of the Certificate of Incorporation or By-Laws or other equivalent
organizational document, in each case as amended, of the Company, (iii) violate
any Existing Permits or any Law applicable to the Company or any of their
respective properties or assets, other than, in the case of clauses (i) and
(iii), any such violations, defaults, rights, losses or Liens that, individually
or in the aggregate, would not have a Material Adverse Effect or would not
affect adversely the ability of the Company to consummate the Merger and the
other transactions contemplated by this Agreement.
4.5 Title to Assets. The Company owns fee simple or valid leasehold (as the
case may be) title to the Real Estate and has valid title to its other tangible
assets and properties which it owns, free and clear of any and all Liens, except
for the Permitted Liens.
4.6 Litigation. (a) There are no actions, suits, claims, worker's
compensation claims, litigation or other governmental or judicial proceedings or
investigations, arbitrations and product warranty claims against the Company or
any of its properties, assets or business, or, to the knowledge of the Company
and if and to the extent the Company is, through indemnity or otherwise, liable
therefor, any of the Company's current or former directors or officers or any
other Person whom the Company has agreed to indemnify, as such, that could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect; (b) as of the date hereof, there are no such actions, suits or
proceedings pending or, to the knowledge of the Company, threatened, against the
Company by any Person which question the legality or validity of the
transactions contemplated by this Agreement; and (c) there are no outstanding
orders, judgments, injunctions, awards or decrees of any Governmental Entity
against the Company, any of its or its properties, assets or business, or, to
the knowledge of the Company, any of the Company's current or former directors
or officers or any other
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person whom the Company has agreed to indemnify, as such, that could reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect.
4.7 Books and Records; Company Financial Statements.
(a) Audited Company Financial Statements. The Company Financial
Statements comply in all material respects with the applicable accounting
requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis by the Company during
the periods involved (except as may be indicated therein or in the notes
thereto (which are subject to completion)). The Company Financial
Statements fairly present the financial position of the Company as of the
date set forth on each of such Company Financial Statements and the results
of operations of the Company for the periods indicated on each of the
Company Financial Statements. The draft financial statements for the year
ended January 31, 1998, which have been provided to Parent, have been
prepared in accordance with generally accepted accounting principles
applied on a consistent basis by the Company during the periods involved
(except as may be indicated therein or in the notes thereto) and fairly
present the financial position of the Company as of January 31, 1998.
(b) Unaudited Company Financial Statements. Those financial statements
which are unaudited and contained in the Company SEC Documents fairly
present in all material respects the financial position of the Company as
of the date set forth on each of such financial statements and the results
of operations and cash flows of the Company for the periods indicated on
each of such financial statements in accordance with generally accepted
accounting principles consistently applied by the Company except that such
financial statements do not reflect normal year-end adjustments and do not
contain footnotes.
(c) Accounting Records. The accounting books and records of the
Company: (i) are in all material respects correct and complete; (ii) are
current in a manner consistent with past practice; and (iii) to the
knowledge of the Company, have recorded therein all the properties, assets
and liabilities of the Company (except where the failure to so record would
not violate generally accepted accounting principles as consistently
applied by the Company).
4.8 Absence of Certain Changes.
(a) To the knowledge of the Company, since January 31, 1998 there has
not been any:
(i) Material Adverse Effect;
(ii) transactions by the Company outside the ordinary course of
business of the Company, except for the transactions contemplated by
this Agreement;
(iii) declaration or payment of any dividend or any distribution in
respect of the capital stock of the Company or any direct or indirect
redemption, purchase or other acquisition of any such stock by the
Company; or
(iv) payments or distributions, other than normal salaries, to the
Shareholders as such or, except for transactions in the ordinary course
of business upon commercially reasonable terms of the Company, any
Affiliate of the Company.
(b) Except as disclosed in the Disclosure Letter, without limiting the
generality of the foregoing, since January 31, 1998:
(i) the Company has not sold, leased, transferred, or assigned any
of its material assets, tangible or intangible, other than for a fair
consideration in the ordinary course of business and other than the
disposition of obsolete or unusable property;
(ii) the Company has not made any capital expenditure (or series of
related capital expenditures) either involving more than $50,000 (unless
such expenditure is identified in the current business plan of the
Company as disclosed to Parent) or outside the ordinary course of
business;
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(iii) the Company has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) from fire or
other casualty to its tangible property;
(iv) the Company has not materially increased the base salary of
any officer or employee of the Company, or adopted, amended, modified,
or terminated any bonus, profit-sharing, incentive, severance, or other
similar plan for the benefit of any of its directors, officers or
employees; and
(v) the Company has not entered into a binding commitment to any of
the foregoing.
4.9 Buildings and Equipment. The Company has not received any written
notice from any governmental authority that any of the Buildings or Equipment
fail to comply with any applicable building and zoning or other similar Laws in
effect at the date hereof which notice is still outstanding; and the
continuation of the Company Business as currently conducted will not result in
the enforcement or the threat of enforcement of any such Laws, except where such
enforcement or threat of enforcement would not result in a Material Adverse
Effect.
4.10 Performance of Contracts. Each of the Contracts is in full force and
effect and constitutes the legal and binding obligation of the Company and, to
the knowledge of the Company, constitutes the legal and binding obligation of
the other parties thereto. Except as disclosed in the Disclosure Letter, there
are no existing breaches or defaults by the Company or, to the knowledge of the
Company, any other party to a Contract under any Contract the effect of which
would constitute a Material Adverse Effect and, to the knowledge of the Company,
no event has occurred which, with the passage of time or the giving of notice or
both, could reasonably be expected to constitute such a breach or default.
To the knowledge of the Company, the Existing Insurance Policies are in
full force and effect and the Company has not received notice of any
cancellation or threat of cancellation of such insurance.
4.11 Employee Benefit Plans.
(a) Existing Plans. Except as previously delivered to Parent, neither
the Company nor any Company ERISA Affiliate (defined below) maintains or
contributes to, nor is it bound by, nor has it maintained or contributed to
at any time during the six (6) years prior to the date hereof any Employee
Benefit Plan. All of the Existing Plans that are subject to ERISA or the
Code are in compliance in all material respects with ERISA and the Code.
All of the Existing Plans which are intended to meet the requirements of
Section 401(a) of the Code have been determined by the Internal Revenue
Service to be "qualified" within the meaning of the Code or have been filed
with the Internal Revenue Service with a request for a determination letter
on or prior to the end of the applicable remedial amendment period and, to
the knowledge of the Company, there are no facts which would adversely
affect the tax qualified status of any of the Existing Plans. "Company
ERISA Affiliate" shall mean any Person which together with the Company
would be deemed a "single employer" within the meaning of Section 4001 of
ERISA.
(b) ERISA; Code. There is no accumulated funding deficiency, within
the meaning of Section 302 of ERISA or Section 412 of the Code, in
connection with the Existing Plans. No reportable event, as defined in
ERISA (other than reportable events for which the 30-day notice requirement
has been waived), has occurred in connection with the Existing Plans since
January 1, 1995. The Existing Plans have not, nor has any trustee or
administrator with respect to the Existing Plans, engaged in any non-
exempt prohibited transaction as defined in ERISA or the Code. Neither the
Company nor a Company ERISA Affiliate is contributing to, and nor has it
any material liability with respect to, any multi-employer plan, as defined
in ERISA.
(c) Compliance. Neither the Company nor any Company ERISA Affiliate
has incurred, directly or indirectly, any material liability to or on
account of an Existing Plan pursuant to Title IV of ERISA; no proceedings
have been instituted to terminate any Existing Plan that is subject to
Title IV of ERISA; and, to the knowledge of the Company, no condition
exists that presents a material risk to the Company or any Company ERISA
Affiliate of incurring a liability to or on account of a Existing Plan
pursuant to Title IV of ERISA.
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(d) Funding. The current value of the assets of each of the Existing
Plans that is subject to Title IV of ERISA exceeds the present value of the
accrued benefits under each such Existing Plan, based upon the actuarial
assumptions (to the extent reasonable) presently used for funding purposes
in the most recent actuarial report prepared by such Existing Plan's
actuary with respect to such Existing Plan; and all contributions or other
amounts payable by the Company as of the Effective Time with respect to
each Existing Plan in respect of current or prior plan years have been
either paid or accrued on the balance sheet of the Company. There are no
material pending or, to the knowledge of the Company, threatened or
anticipated claims (other than routine claims for benefits) by, on behalf
of or against any of the Existing Plans or any trusts related thereto.
(e) Other Plan Obligations. To the knowledge of the Company, neither
the Company nor any Company ERISA Affiliate, nor any Existing Plan, nor any
trust created thereunder, nor any trustee or administrator thereof has
engaged in a transaction in connection with which the Company or any
Company ERISA Affiliate, any Existing Plan, any such trust, or any trustee
or administrator thereof, or any party dealing with any Existing Plan or
any such trust could be subject to either a civil penalty assessed pursuant
to Section 409 or 502(i) of ERISA or a tax imposed pursuant to Section 4975
or 4976 of the Code. No Existing Plan provides death or medical benefits
(whether or not insured), with respect to current or former employees of
the Company or any Company ERISA Affiliate beyond their retirement or other
termination of service other than (i) coverage mandated by applicable Law
or (ii) death benefits under any "employee pension plan," as that term is
defined in Section 3(2) of ERISA.
4.12 Brokers. Except for Wasserstein Perella & Co., Inc., the Company has
not incurred any brokers', finders' or any similar fee in connection with the
transactions contemplated by this Agreement. A true, correct and complete copy
of the engagement letter or other agreement between the Company and Wasserstein
Perella & Co., Inc. has been made available to Acquisition.
4.13 Taxes.
(a) Tax Returns. For all years for which the applicable statutory
period of limitation has not expired, the Company has timely and properly
filed, and will through the Closing Date timely and properly file, all
material federal, state, local and foreign tax returns (including but not
limited to income, franchise, sales, payroll, employee withholding and
social security and unemployment) which were or will be required to be
filed. The Company has paid all taxes (including interest and penalties)
and withholding amounts owed by the Company except where the failure to do
so would not cause a Material Adverse Effect. No tax deficiencies have been
proposed or assessed against the Company. To the knowledge of the Company,
no issue has been raised in any prior tax audit of the Company which, by
application of the same or similar principles, could reasonably be expected
upon a future tax audit of the Company to result in a proposed deficiency
for any period and which deficiency would have a Material Adverse Effect.
The Company is not liable for any taxes attributable to any other Person,
whether by reason of being a member of another affiliated group, being a
party to a tax sharing agreement, as a transferee or successor, or
otherwise.
(b) Audits. The Company has not consented to any extension of the
statute of limitation with respect to any open federal, state or local tax
returns.
(c) Liens. There are no tax Liens upon any property or assets of the
Company except for Liens for current taxes not yet due and payable.
(d) Deliveries. The Company has delivered to the Parent correct and
complete copies of all tax returns and reports of the Company filed for all
periods not barred by the applicable statute of limitations through the
Effective Time. No examination or audit of any tax return or report for any
period not barred by the applicable statute of limitations has occurred, no
such examination is in progress and, to the knowledge of the Company, no
such examination or audit is planned.
(e) Withholding Taxes. The Company has properly withheld and timely
paid substantially all withholding and employment taxes which it was
required to withhold and pay relating to salaries, compensation and other
amounts heretofore paid to its employees or other Persons. All Forms W-2
and
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1099 required to be filed with respect thereto have been timely and
properly filed except where the failure to file would not have a Material
Adverse Effect.
(f) Other Representations. The Company has not and will not make any
elections under Section 341(f) of the Code and, except as shown in the
Disclosure Letter, has and will not be subject to Section 280G of the Code.
4.14 Real Estate. The Real Estate: (a) constitutes all real property and
improvements leased or owned by the Company; and (b) is not subject to any
leases, tenancies, encumbrances or encroachments of any kind except for
Permitted Liens.
4.15 Governmental Approvals. No permission, approval, determination,
consent or waiver by, or any declaration, filing or registration with, any
federal, state, local or foreign court, arbitral tribunal, administrative agency
or commission or other governmental or regulatory authority or administrative
agency (a "Governmental Entity") is required by the Company in connection with
the execution and delivery of this Agreement by the Company or the consummation
by the Company of the Merger, except for: (a) the approvals described in Section
7.1(a) of this Agreement; and (b) the filing of the Articles of Merger as
described in this Agreement.
4.16 No Pending Acquisitions. Except for this Agreement and previously
executed confidentiality agreements, the Company is not a party to or bound by
any agreement, undertaking or commitment with respect to an Acquisition
Transaction.
4.17 Labor Matters.
(a) Employment Claims. To the knowledge of the Company, there is no
present or former employee of the Company who has any material claim
against the Company (whether under Law, under any employee agreement or
otherwise) on account of or for: (i) overtime pay, other than overtime pay
for the current payroll period; (ii) wages or salaries, other than wages or
salaries for the current payroll period; or (iii) vacations, sick leave,
time off or pay in lieu of vacation or time off, other than vacation, sick
leave or time off (or pay in lieu thereof) earned in the period immediately
preceding the date of this Agreement or incurred in the ordinary course of
business and appearing as a liability on the most recent Company Financial
Statements.
(b) Labor Disputes. (i) There are no pending and unresolved material
claims by any Person against the Company arising out of any statute,
ordinance or regulation relating to unfair labor practices, discrimination
or to employees or employee practices or occupational or safety and health
standards; (ii) there is no pending, nor has the Company experienced since
January 31, 1995 any, material labor dispute, strike or organized work
stoppage; and (iii) to the knowledge of the Company, there is no threatened
material labor dispute, strike or organized work stoppage against the
Company.
(c) Union Matters. (i) To the knowledge of the Company, no union
organizing activities are in process or have been proposed or threatened
involving any employees of the Company; and (ii) no petitions have been
filed or, to the knowledge of the Company, have been threatened or proposed
to be filed, for union organization or representation of employees of the
Company not presently organized.
4.18 Existing Permits and Violations of Law. The Existing Permits
constitute all licenses, permits, approvals, exemptions, orders, approvals,
franchises, qualifications, permissions, agreements and governmental
authorizations required by Law which the Company currently has and is required
to have for the conduct of the business of the Company as currently conducted,
except where the failure to have the same would not have a Material Adverse
Effect. No action or proceeding is pending or, to the knowledge of the Company,
threatened that is reasonably likely to result in a revocation, non-renewal,
termination, suspension or other material impairment of any material Existing
Permits. The business of the Company is not being conducted in violation of any
applicable Law, except for such violations which would not have a Material
Adverse Effect. No Governmental Entity has indicated to the Company an intention
to conduct an investigation or review with respect to the Company other than, in
each case, those which would not have a Material Adverse Effect.
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4.19 Intangible Assets.
(a) Claims. (i) There are no material claims, demands or proceedings
instituted, pending or, to the knowledge of the Company, threatened by any
Person contesting or challenging the right of the Company to use any of its
Intangible Assets; (ii) each trademark registration, service mark
registration, copyright registration and patent which is owned by or
licensed to the Company and, with respect to those owned by the Company,
has been maintained in good standing and, with respect to those licensed to
the Company, to the Company's knowledge, has been maintained in good
standing except where the failure to so maintain would not have a Material
Adverse Effect; (iii) there are no Intangible Assets owned by a Person
which the Company is using without license to do so, except where the
failure to possess such license could not reasonably be expected to have a
Material Adverse Effect; (iv) the Company owns or possesses adequate
licenses or other rights to use all Intangible Assets necessary to conduct
its business as now conducted, except where the failure to possess such
licenses could not reasonably be expected to have a Material Adverse
Effect; and (v) the consummation of the Merger and the transactions
contemplated by this Agreement will not impair the validity,
enforceability, ownership or right of the Company to use its Intangible
Assets except, in each case, where the impairment would not have a Material
Adverse Effect.
4.20 Customers and Suppliers. Since January 31, 1997, there has been no
termination, cancellation or material curtailment of the business relationship
of the Company with any customer or supplier or group of affiliated customers or
suppliers which would result in a Material Adverse Effect nor, to the knowledge
of the Company, any notice of intent to so terminate, cancel or materially
curtail.
4.21 Environmental Protection.
(a) Definitions. As used in this Agreement:
(i) "Environmental Claim" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters,
directives, claims, Liens investigations, proceedings or notices of
noncompliance or violation (written or oral) by any Person alleging
liability (including, without limitation, liability for enforcement,
investigatory costs, cleanup costs, governmental response costs, removal
costs, remedial costs, natural resources damages, property damages,
personal injuries, or penalties) arising out of, based on or resulting
from: (A) the presence or environmental release of any Hazardous
Materials at any parcel of real property; or (B) circumstances forming
the basis of any violation or alleged violation, of any Environmental
Law; or (C) any and all claims by any Person seeking damages,
contribution, indemnification, cost, recovery, compensation or
injunctive relief resulting from the presence or Environmental Release
of any Hazardous Materials.
(ii) "Hazardous Materials" shall mean: (A) any petroleum or
petroleum products, radioactive materials, asbestos in any form that is
or could become friable, urea formaldehyde foam insulation, and
transformers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls ("PCBs") above regulated levels and radon gas;
and (B) any chemicals, materials or substances which are now defined as
or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants,"
or words of similar import, under any Environmental Law; and (C) any
other chemical, material, substance or waste, exposure to which is now
prohibited, limited or regulated by any governmental authority.
(iii) "Environmental Laws" shall mean any federal, state, local or
foreign statute, Law, rule, ordinance, code, policy, rule of common law
and regulations relating to pollution or protection of human health
(excluding OSHA) or the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface
strata), including, without limitation, Laws and regulations relating to
Environmental Releases or threatened Environmental Releases of Hazardous
Materials, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling
of Hazardous Materials.
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(iv) "Environmental Release" shall mean any release, spill,
emission, leaking, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the atmosphere, soil, surface water or
groundwater.
Except for violations of Sections (b), (c), (d) and (e) which would not cause a
Material Adverse Effect:
(b) Environmental Laws. The Company: (i) is in compliance with all
applicable Environmental Laws; and (ii) has not received any communication
(written or oral), from a governmental authority or third party that
alleges that the Company or any current or former Affiliate of the Company
is not in compliance with applicable Environmental Laws.
(c) Environmental Permits. The Company has obtained all environmental,
health and safety permits and governmental authorizations (collectively,
the "Environmental Permits") required for its operations, and all such
permits are in good standing and the Company is in substantial compliance
with all terms and conditions of the Environmental Permits.
(d) Claims. There is no Environmental Claim pending or, to the
knowledge of the Company, threatened against the Company or any current or
former Affiliate of the Company (to the extent such Environmental Claim
relates to the Company) or against any Person whose liability for any
Environmental Claim the Company has retained or assumed either
contractually or by operation of Law, or against any real or personal
property or operations which the Company owns, operates, leases, manages or
controls or, to the knowledge of the Company, which the Company owned,
operated, leased, managed or controlled.
(e) Environmental Releases. There have been no Environmental Releases
of any Hazardous Material by the Company or any current or former Affiliate
of the Company on any parcel of real property or, to the knowledge of the
Company, by any Person on, beneath or adjacent to any parcel of real
property which the Company or any current or former Affiliate of the
Company owned, leased, operated, managed or controlled.
(f) CERCLA. The Company has not received any written notice of
potential liability from any Person under or relating to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), or any similar state or local Law.
(g) Reports. The Company will make available for inspection to Parent
true, complete and correct copies and results of any reports, studies,
analyses, tests or monitoring possessed by the Company pertaining to
Hazardous Materials in, on, beneath or adjacent to any property currently
or formerly owned, operated or leased by the Company or any current or
former Affiliate of the Company, or regarding the Company's compliance with
applicable Environmental Laws.
(h) Tanks. The Real Estate does not contain any underground storage
tanks which contained or contain any Hazardous Material.
4.22 Vote Required. The affirmative vote of the holders of at least a
majority of the outstanding shares of Company Common Stock entitled to vote with
respect to the Merger is the only vote of the holders of any class or series of
the Company's capital stock necessary to approve the Merger, this Agreement and
the transactions contemplated hereby.
4.23 Returns. As of the date of this Agreement, to the knowledge of the
Company, there are no known claims against the Company to return in excess of
$50,000 (after giving effect to and exhausting any applicable reserves and/or
accruals therefor contained in the Company Financial Statements) of merchandise
by reason of alleged overshipments, defective merchandise or otherwise, or of
merchandise in the hands of customers under an understanding that such
merchandise would be returnable for credit. To the knowledge of the Company,
there is no reasonable basis for claims against the Company to return in excess
of $50,000 (after giving effect to and exhausting any applicable reserves and/or
accruals therefor contained in the Company Financial Statements) if the
Company's finished good inventories were sold to the intended customer therefor.
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4.24 SEC Reports. The Company has filed with the SEC, and has heretofore
made available to the Parent true and complete copies of, all forms, reports,
schedules, statements and other documents required to be filed by it since
January 31, 1995 under the Exchange Act or the Securities Act of 1933, as
amended, and the rules and regulations thereunder (collectively, the "Securities
Act") (as such documents have been amended since the time of their filing,
collectively, the "Company SEC Documents"). As of their respective dates or, if
amended, as of the date of the last such amendment, the Company SEC Documents,
including, without limitation, any financial statements or schedules included
therein (a) did not contain any untrue statement of a material fact or omit to
state a 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 and (b) complied in all material respects with the
applicable requirements of the Exchange Act and the Securities Act, as the case
may be, and the applicable rules and regulations of the SEC thereunder at such
time of filing.
4.25 Content of Proxy Statement. The Proxy Statement, if any (or any
amendment thereof or supplement thereto), will, at the date mailed to Company
shareholders and at the time of the meeting of Company shareholders to be held
in connection with the Merger, 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 statements therein, in light of the circumstances
under which they are made, not misleading, except that no representation is made
by the Company with respect to statements made therein based on information
supplied by Parent or Acquisition for inclusion in the Proxy Statement. The
Proxy Statement will comply in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder.
4.26 Opinion of Financial Advisor. The Company has received the opinion of
Wasserstein Perella & Co., Inc., its financial advisor, to the effect that, as
of March 22, 1998, the cash consideration to be received in the Offer and the
Merger, based upon and subject to the assumptions and limitations set forth in
such opinion, by the Company 's shareholders is fair to such shareholders from a
financial point of view, a copy of which opinion has been delivered to Parent.
4.27 Certain Agreements. Except as set forth in the Disclosure Letter, the
Company is not a party to any oral or written Agreement or plan, including any
stock option plan, stock appreciation rights plan, restricted stock plan or
stock purchase plan, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement. Except as described in the Disclosure Letter,
the transactions contemplated by this Agreement will not constitute a "change of
control" under, require the consent from or the giving of notice to any third
party pursuant to, or accelerate the vesting or repurchase rights under, the
terms, conditions or provisions of any loan or credit agreement, note, bond,
mortgage, indenture, license, lease, contract, Agreement or other instrument or
obligation to which the Company is a party or by which any of them or any of
their properties or assets may be bound. There are no amounts payable by the
Company to any officers of the Company (in their capacity as officers) as a
result of the transactions contemplated by this Agreement.
4.28 Rights Agreement. The Company has taken all action which may be
necessary under the Rights Agreement, dated February 27, 1998, between the
Company and Norwest Bank Minnesota, N.A., as agent (the "Rights Agreement"), so
that the execution of this Agreement and any amendments thereto by the parties
hereto and the execution of one or both of the Tender and Option Agreements and
the consummation of the transactions contemplated hereby and thereby shall not
cause (i) Parent and/or Acquisition or their respective Affiliates or Associates
to become an Acquiring Person (as such terms are defined in the Rights
Agreement) unless this Agreement or one or both of the Tender and Option
Agreements have been terminated in accordance with their respective terms or
(ii) a Distribution Date, a Shares Acquisition Date or a Triggering Event (as
such terms are defined in the Rights Agreement) to occur, irrespective of the
number of shares of Company Common Stock acquired pursuant to the Offer, the
Merger or other transactions contemplated by the Merger Agreement or either of
the Tender and Option Agreements.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND ACQUISITION
The Parent and Acquisition represent and warrant to the Company as follows:
5.1 Due Incorporation and Authority. Each of the Parent and Acquisition is
a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation, and has all requisite corporate power
and authority to own, lease and operate its assets and business and to carry on
its business as now being and as heretofore conducted. Each of the Parent and
Acquisition has all requisite corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the Merger. The execution, delivery and performance by each of the Parent and
Acquisition of this Agreement and, subject to the provisions hereof, all of the
documents and instruments required by this Agreement to be executed and
delivered by the Parent and/or Acquisition, and the consummation by Acquisition
of the Merger, have been duly authorized by all the shareholders of Acquisition
and the Board of Directors of the Parent and Acquisition as required by Law and
the organizational documents of each such entity, and no other corporate
proceedings on the part of the Parent or Acquisition will be necessary to
authorize the execution, delivery and performance by each of the Parent and
Acquisition of this Agreement, or the consummation by Acquisition and Parent of
the transactions contemplated hereby. This Agreement is (and each of the
documents and instruments required by this Agreement to be executed and
delivered by the Parent and/or Acquisition will be, when executed and delivered
by the Parent and/or Acquisition) the valid and binding obligations of the
Parent and Acquisition, as the case may be, enforceable against the Parent and
Acquisition, as the case may be, in accordance with their respective terms,
except as the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar Laws generally affecting the rights
of creditors and subject to general equity principles.
5.2 Consents and Approvals. The execution and delivery by each of the
Parent and Acquisition of this Agreement and all documents and instruments
required by this Agreement to be executed and delivered by the Parent and/or
Acquisition, and the performance by each of the Parent and Acquisition of its
obligations hereunder and thereunder do not require the Parent or Acquisition to
obtain any consent, approval or action of, or make any filing with or give any
notice to, any person or any governmental or regulatory body, except (i)
compliance with applicable requirements of the HSR Act and (ii) the filing and
recordation of appropriate merger documents as required by the MBCA.
5.3 No Broker's, Finder's or Similar Fees. There are no brokerage
commissions, finder's fees or similar fees or commissions payable in connection
with the transactions contemplated hereby based on any agreement, arrangement or
understanding with the Parent and/or Acquisition, or any action taken by the
Parent and/or Acquisition.
5.4 No Violation or Conflict. Subject to the receipt of the approvals and
consents, if any, described in Section 7.1(a) of this Agreement and except for
the Amended and Restated Credit Agreement, dated as of October 2, 1997, by and
among IPC, Inc., Parent, NationsBank, N.A. and Bankers Trust, as agents, and
other parties thereto, the execution, delivery and performance by the Parent and
Acquisition of this Agreement and all documents and instruments required by this
Agreement to be executed and delivered by the Parent and/or Acquisition do not
and will not conflict with or violate any Law, the Certificate of Incorporation
or Articles of Incorporation, as the case may be, or By-laws of the Parent or
Acquisition or any material contract or agreement to which the Parent or
Acquisition is a party or by which it is bound.
5.5 Litigation. There are no actions, suits or proceedings pending or, to
the knowledge of the Parent, threatened against the Parent or Acquisition or any
shareholder of the Parent, by any Person which question the validity, legality
or propriety of the transactions contemplated by this Agreement.
5.6 Sufficient Funds. Parent has, or will have at the time of consummation
of the Offer, sufficient funds available to purchase, or to cause Acquisition to
purchase, on a fully diluted basis, all the outstanding Shares pursuant to the
Offer and the Merger and pay all fees and expenses related to the transactions
contemplated by this Agreement.
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ARTICLE 6
COVENANTS
6.1 Conduct of Business by the Company. From and after the date of this
Agreement and until the termination of this Agreement or the Closing Date
(whichever first occurs), the Company shall:
(a) carry on its business in the usual, regular and ordinary course
substantially in the same manner as heretofore carried on;
(b) not (i) make payments or distributions (other than normal
salaries) to any Affiliate of the Company except for transactions in the
ordinary course of business upon commercially reasonable terms; (ii) sell,
lease, transfer or assign any of its assets, tangible or intangible, other
than for a fair consideration in the ordinary course of business and other
than the disposition of obsolete or unusable property; (iii) enter into any
Contract (other than purchase and sales orders in the ordinary course of
business in accordance with past practice) involving either more than
$50,000 or outside the ordinary course of business without the consent of
the Parent (which consent shall not be unreasonably withheld); (iv)
accelerate, terminate, modify in any material respect, or cancel any
Contract (other than purchase and sales orders in the ordinary course of
business in accordance with past practice) involving more than $50,000 to
which the Company is a party or by which any of them is bound without the
consent of the Parent (which consent shall not be unreasonably withheld);
(v) make any capital expenditure (or series of related capital
expenditures) involving either more than $50,000 (unless such expenditure
is identified in the current business plan of the Company as disclosed to
Parent) or outside the ordinary course of business; (vi) delay or postpone
the payment of accounts payable and other liabilities outside the ordinary
course of business; (vii) cancel, compromise, waive or release any right or
claim (or series of related rights and claims) not covered by the reserves
or accruals relating to such claim in the Company Financial Statements
either involving more than $50,000 or outside the ordinary course of
business without the consent of the Parent (which consent shall not be
unreasonably withheld); (viii) grant any license or sublicense of any
rights under or with respect to any Intangible Assets; or (ix) make any
loan to, or enter into any other transaction with, any of its Affiliates,
directors, officers and employees outside the ordinary course of business;
(c) use, operate, maintain and repair all of its assets and properties
in a normal business manner consistent with its past practices;
(d) use commercially reasonable efforts to preserve in all material
respects its business organization intact, to retain the services of the
Employees and to conduct business with suppliers, customers, creditors and
others having business relationships with the Company in the best interests
of the Company;
(e) not knowingly do any act or knowingly omit to do any act or, to
the extent within the Company's reasonable control, knowingly permit any
act or omission to act, which will cause a breach of any of the Contracts
that would have a Material Adverse Effect;
(f) use reasonable efforts to maintain all of the Existing Insurance
Policies (or policies substantially equivalent thereto) in full force and
effect;
(g) (i) except as required by any Contract or in a manner consistent
with past practice, grant any increase in the rate of pay of any of the
Employees; (ii) institute or amend any Employee Benefit Plan unless
required by Law; (iii) enter into or modify any written employment
agreement with any Person; or (iv) pay or accrue any bonus or incentive
compensation to any Person;
(h) other than in the ordinary course of business, not create, incur
or assume any Indebtedness or make any Investment;
(i) not amend the Company Charter Documents;
(j) not (i) issue any additional shares of stock of any class (except
pursuant to the Existing Options) or grant any warrants, options or rights
to subscribe for or acquire any additional shares of stock
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of any class; (ii) declare or pay any dividend or make any capital, surplus
or other distributions (other than normal salaries) of any nature to the
Shareholders; or (iii) directly or indirectly redeem, purchase or otherwise
acquire, recapitalize or reclassify any of its capital stock or liquidate
in whole or in part;
(k) timely and properly file, or timely and properly file requests for
extensions to file, all federal, state, local and foreign tax returns which
are required to be filed, and pay or make provision for the payment of all
taxes owed by it;
(l) not knowingly do any act or omit to do any act that would result
in a breach of any representation by the Company set forth in this
Agreement; and
6.2 Shareholder Option Agreements. On or before the date hereof, the
Company will use its reasonable best efforts to obtain and deliver to Parent a
Shareholder Option Agreement, in the form attached as Exhibit 2 hereto, executed
by each of Calvin Krupa and James Thole.
ARTICLE 7
CONDITIONS
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to consummate the Merger shall be subject to
the satisfaction prior to or at the Closing as hereinafter provided of the
following express conditions precedent, each of which may be waived in whole or
in part by the Company, Parent or Acquisition, as the case may be, to the extent
permitted by law:
(a) Regulatory Approvals. Clearance from the appropriate agencies,
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act, as amended
(the "HSR Act"), shall have been obtained by the Company and the Parent or
the waiting period thereby required shall have expired or been terminated.
(b) Approval of Shareholders. This Agreement, the Merger and the
transactions contemplated by this Agreement shall (if necessary) have
received the requisite approval and authorization of the Shareholders.
(c) Statutes, Court Orders. No statute, rule or regulation shall have
been enacted or promulgated by any governmental authority which prohibits
the consummation of the Merger; and there shall be no order or injunction
of a court of competent jurisdiction in effect precluding consummation of
the Merger.
(d) Purchase of Company Common Stock in Offer. Parent, Acquisition or
their affiliates shall have purchased Company Common Stock pursuant to the
Offer, except that this condition shall not apply if Parent, Acquisition or
their affiliates shall have failed to purchase Company Common Stock
pursuant to the Offer in breach of their obligations under this Agreement.
7.2 Condition to Parent's and Acquisition's Obligation to Effect the
Merger. The obligations of Parent and Acquisition to consummate the Merger are
further subject to the fulfillment of the condition that all actions
contemplated by Section 2.18(b) hereto shall have been taken, which may be
waived in whole or part by Parent or Acquisition.
ARTICLE 8
NO SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION
8.1 No Survival of Representations and Warranties. None of the
representations, warranties, covenants, agreements and certifications of the
Company and/or any officer of the Company contained herein shall survive the
Effective Time.
8.2 Directors' and Officers' Indemnification.
(a) Subsequent to the Effective Time, Acquisition shall cause the
Surviving Corporation to, and the Surviving Corporation and Parent, jointly
and severally, shall, indemnify and hold harmless each present
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and former director and officer of the Company (collectively, the
"Indemnified Parties") against all losses in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to any action
or omission in their capacity as director or officer occurring before the
Effective Time, whether asserted or claimed prior to, at or after the
Effective Time, for a period of six years after the Closing Date, in each
case to the fullest extent permitted under applicable Law (and shall pay
any expenses in advance of the final disposition of such action or
proceeding to each Indemnified Party to the fullest extent permitted under
applicable Law, upon receipt from the Indemnified Party to whom expenses
are advanced of an undertaking to repay such advances as required under
applicable Law); provided, however, that, if any claim for indemnification
is asserted or made within such six year period, all rights to
indemnification in respect of such claim shall continue until the
disposition of such claim. Until the Effective Time, the Company shall keep
in effect Article 7 of its certificate and Article 5 of its bylaws, and
thereafter for a period of six years the Surviving Corporation shall keep
in effect in its certificate and bylaws provisions which provide for
indemnification exculpation to the extent provided for in Article 7 and
Article 5 of the certificate and bylaws, respectively.
(b) In the event the Surviving Corporation or any of its respective
successors or assigns (i) consolidates with or merges into any other Person
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any Person, then, and in each such case, provision
shall be made by the Surviving Corporation so that the successors and
assigns of the Surviving Corporation shall assume the obligations set forth
in this Section 8.2.
(c) Parent and Acquisition shall cause to be maintained in effect for
not less than four years after the Effective Time the current policies, or
substantially similar policies, of directors' and officers' liability
insurance maintained by the Company with respect to matters existing or
occurring at or prior to the Effective Time; provided, however, the Parent
and Acquisition shall not be required to expend an amount greater than 150%
of the annual premium of the current policy.
ARTICLE 9
TERMINATION
9.1 Termination. This Agreement may be terminated and the transactions
contemplated by this Agreement may be abandoned at any time prior to the Closing
(whether before or after the approval of this Agreement by the Shareholders), as
follows:
(a) by mutual written agreement of the Parent and the Company;
(b) by either of the Company or Parent:
(i) if (x) the Offer shall have expired without any Company Common
Stock being purchased therein or (y) Acquisition shall not have accepted
for payment all Company Common Stock tendered pursuant to the Offer by
September 30, 1998; provided, however, that the right to terminate this
Agreement under this Section 9.1(b)(i) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has
been the cause of, or resulted in, the failure of Parent or Acquisition,
as the case may be, to purchase the Company Common Stock pursuant to the
Offer on or prior to such date; or
(ii) if any Governmental Entity 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 reasonable efforts to
lift), which permanently restrains, enjoins or otherwise prohibits the
acceptance for payment of, or payment for, Company Common Stock pursuant
to the Offer or the Merger and such order, decree, ruling or other
action shall have become final and non-appealable.
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(c) by the Company:
(i) if Parent, Acquisition or any of their affiliates 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
the Company may not terminate this Agreement pursuant to this Section
9.1(c)(i) if the Company is at such time in breach of its obligations
under this Agreement;
(ii) in connection with entering into a definitive agreement in
connection with an Acquisition Transaction, provided it has complied
with all provisions of Section 3.4, including the notice provisions
therein, and that it makes simultaneous payment of the $2,500,000
payment referred to in Section 9.3 hereof, plus any amounts then due as
a reimbursement of expenses; or
(iii) if Parent or Acquisition shall have breached in any material
respect any of their respective representations, warranties, covenants
or other agreements contained in this Agreement, which breach cannot be
or has not been cured, in all material respects, within 30 days after
the giving of written notice to Parent or Acquisition, as applicable.
(d) by Parent:
(i) if, due to an occurrence, not involving a breach by Parent or
Acquisition of their obligations hereunder, which makes it impossible to
satisfy any of the conditions set forth in Annex A hereto, Parent,
Acquisition, or any of their affiliates 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;
(ii) if prior to the purchase of Company Common Stock pursuant to
the Offer, the Company shall have breached any representation, warranty,
covenant or other agreement contained in this Agreement which (A) would
give rise to the failure of a condition set forth in paragraph (f) or
(g) of Annex A hereto and (B) cannot be or has not been cured, in all
material respects, within 30 days after the giving of written notice to
the Company; or
(iii) if either Parent or Acquisition is entitled to terminate the
Offer as a result of the occurrence of any event set forth in paragraph
(e) of Annex A hereto.
9.2 Rights on Termination. In the event of termination and abandonment of
the Merger by any party pursuant to Section 9.1, written notice thereof shall
forthwith be given to the other parties and this Agreement shall terminate and
the Merger and the other transactions contemplated hereby shall be abandoned,
without further action by any of the parties hereto. If this Agreement is
terminated and the transactions contemplated hereby are not consummated pursuant
to Section 9.1 of this Agreement, this Agreement shall become void and of no
further force and effect, except for (a) the provisions of Section 3.1 relating
to the obligation of the Parent and Acquisition to keep confidential and not to
use certain information obtained from the Company and (b) the provisions of
Section 9.3 relating to the Company's obligations to make certain payments to
the Parent.
9.3 Termination Fee Payable to the Parent. Notwithstanding any provision to
the contrary contained herein, the Company shall immediately pay to the Parent
(x) the amount of $2,500,000 and (y) all reasonably documented out-of-pocket
expenses reasonably incurred by the Parent and Acquisition in connection with
this Agreement and the Merger in an amount not to exceed $600,000 if this
Agreement is terminated: (1) by the Company pursuant to Section 9.1(c)(ii), (2)
by the Parent pursuant to Section 9.1(d)(iii) hereof, (3) by Parent pursuant to
Section 9.1(d)(ii) if the breach thereof is due to the Company's intentional or
bad faith acts, or (4) by either the Company or Parent pursuant to Section
9.1(b)(i) and (a) prior thereto there shall have been publicly announced another
Acquisition Proposal or an event set forth in paragraph (h) of Annex A shall
have occurred and (b) an Acquisition Proposal shall be consummated on or prior
to March 31, 1999. The amount in (x) above shall be paid concurrently with any
such termination and the amount in (y) above shall be paid within five (5)
business days after receipt by the Company of reasonably detailed evidence of
the same. Upon receipt of such payments, the Parent shall not be entitled to and
shall waive the right to seek damages or other amounts or remedies from the
Company for breach of, or otherwise in connection with, this Agreement.
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<PAGE> 50
9.4 Other Remedies. Notwithstanding any provision to the contrary contained
herein, if this Agreement is terminated pursuant to Article 9 or otherwise by
the Company, on the one hand, or the Parent or Acquisition, on the other hand,
and the non-terminating party is not entitled to receive the payments described
in Section 9.3 (as the case may be), then the non-terminating party shall be
entitled to pursue any available legal rights to recover actual damages,
including, without limitation, its reasonable costs and expenses incurred in
pursuing such recovery (including, without limitation, reasonable attorneys'
fees).
ARTICLE 10
MISCELLANEOUS
10.1 Expenses. If this Agreement is not consummated, the Parent and
Acquisition, on the one hand, and the Company, on the other hand, shall bear
their respective legal fees and expenses.
10.2 Entire Agreement; Amendment. This Agreement and the documents referred
to in this Agreement and required to be delivered pursuant to this Agreement
constitute the entire agreement among the parties pertaining to the subject
matter of this Agreement, and supersede all prior and contemporaneous
agreements, understandings, negotiations and discussions of the parties, whether
oral or written, and there are no warranties, representations or other
agreements between the parties in connection with the subject matter of this
Agreement, except as specifically set forth in this Agreement. No amendment,
supplement, modification, waiver or termination of this Agreement shall be
binding unless executed in writing by the party to be bound thereby. No waiver
of any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision of this Agreement, whether or not similar, nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided.
10.3 Governing Law. This Agreement shall be governed and construed (i) with
respect to the Merger, in accordance with the laws of the State of Minnesota and
(ii) with respect to all other transactions contemplated hereunder, in
accordance with the laws of the State of Illinois, applicable to agreements made
and to be performed entirely within such States.
10.4 Assignment. Prior to the Closing, this Agreement may not be assigned
by any party hereto, except with the prior written consent of the other parties
hereto.
10.5 Notices. All communications or notices required or permitted by this
Agreement shall be in writing and shall be deemed to have been given at the
earlier of the date personally delivered or sent by telephonic facsimile
transmission (with a copy via regular mail) or one day after sending via
nationally recognized overnight courier or five days after deposit in the United
States mail, certified or registered mail, postage prepaid, return receipt
requested, and addressed as follows, unless and until any of such parties
notifies the others in accordance with this Section of a change of address:
If to the Parent: Ivex Packaging Corporation
100 Tri-State Drive
Suite 200
Lincolnshire, Illinois 60069
Telephone: (847) 945-9100
Telecopy: (847) 945-2355
Attention: General Counsel
With a copy to:
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker
Suite 2100
Chicago, Illinois 60606
Telephone: (312) 407-0700
Telecopy: (312) 407-0411
Attention: William R. Kunkel, Esq.
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If to the Company: ULTRA PAC, Inc.
22051 Industrial Boulevard
Rogers, Minnesota 55374
Telephone: (612) 428-8340
Fax No.
Attention: Calvin Krupa
with a copy to:
Larkin Hoffman Daly & Lindren
7900 Xerxes Avenue South
Suite 1500
Bloomington, MN 55431
Telephone: (612) 896-3291
Fax No.: (612) 896-3333
Attention: Frank I. Harvey, Esq.
and
Katten Muchin & Zavis
525 W. Monroe
Suite 1600
Chicago, IL 60661
Telephone: (312) 902-5200
Fax No.: (312) 902-1061
Attention: David J. Kaufman, Esq.
10.6 Counterparts; Headings. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same Agreement. The Article and
Section headings in this Agreement are inserted for convenience of reference
only and shall not constitute a part hereof.
10.7 Interpretation. Unless the context requires otherwise, all words used
in this Agreement in the singular number shall extend to and include the plural,
all words in the plural number shall extend to and include the singular, and all
words in any gender shall extend to and include all genders.
10.8 Specific Performance. The parties agree that the assets and business
of the Company as a going concern constitute unique property and, accordingly,
each party shall be entitled, at its option and in addition to any other
remedies available as herein provided, to the remedy of specific performance to
effect the Merger as provided in this Agreement.
10.9 No Reliance. Except for the parties to this Agreement: (a) no Person
is entitled to rely on any of the representations, warranties and agreements of
the parties contained in this Agreement; and (b) the parties assume no liability
to any Person because of any reliance on the representations, warranties and
agreements of the parties contained in this Agreement.
10.10 Exhibits and Schedules. The Exhibits and Schedules are a part of this
Agreement as if fully set forth herein. All references herein to Sections,
subsections, clauses, Exhibits and Schedules shall be deemed references to such
parts of this Agreement, unless the context shall otherwise require.
10.11 No Third Party Beneficiary. Except as provided pursuant to Section
8.2 hereof, the terms and provisions of this Agreement are intended solely for
the benefit of the parties hereto and their respective successors and assigns
and it is not the intention of the parties to confer third-party beneficiary
rights upon any other Person.
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IN WITNESS WHEREOF, the parties have caused this Agreement and Plan of
Merger to be duly executed as of the day and year first above written.
IVEX PACKAGING CORPORATION
By: /s/ GEORGE V. BAYLY
------------------------------------
Name George V. Bayly
Title: Chairman of the Board,
Chief Executive Officer and
President
PACKAGE ACQUISITION, INC.
By: /s/ FRANK V. TANNURA
------------------------------------
Name Frank V. Tannura
Title: President
ULTRA PAC, INC.
By: /s/ CALVIN S. KRUPA
------------------------------------
Name Calvin S. Krupa
Title: Chairman, Chief Executive
Officer and President
A-29
<PAGE> 53
(ANNEX A TO THE MERGER AGREEMENT)
CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the Offer, and in addition to (and
not in limitation of) Acquisition's right to extend and amend the Offer at any
time in its sole discretion (subject to the provisions of the Merger Agreement),
Acquisition shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act (relating to Acquisition's obligation to pay for or return tendered
Company Common Stock promptly after termination or withdrawal of the Offer), and
may terminate or amend the Offer as to any Company Common Stock not then paid
for, if (i) any applicable waiting period under the HSR Act has not expired or
terminated, (ii) the Minimum Condition has not been satisfied, or (iii) at any
time on or after the date of the Merger Agreement and before the time of
acceptance for payment for any such Company Common Stock, any of the following
events shall have occurred:
(a) there shall be threatened or pending any suit, action or
proceeding by an Governmental Entity against Acquisition, Parent or the
Company (i) seeking to prohibit or impose any material limitations on
Parent's or Acquisition's ownership or operation (or that of Parent's
Subsidiaries or affiliates) of all or a material portion of their or the
Company's businesses or assets, or to compel Parent or Acquisition or
Parent's Subsidiaries and affiliates to dispose of or hold separate any
material portion of the business or assets of the Company or Parent and
Parent's Subsidiaries, in each case taken as a whole, (ii) challenging the
acquisition by Parent or Acquisition of any Company Common Stock under the
Offer, seeking to restrain or prohibit the making or consummation of the
Offer or the Merger or the performance of any of the other transactions
contemplated by the Agreement, or seeking to obtain from the Company,
Parent or Acquisition any damages that are material in relation to the
Company, (iii) seeking to impose material limitations on the ability of
Acquisition, or render Acquisition unable, to accept for payment, pay for
or purchase some or all of the Company Common Stock pursuant to the Offer
and the Merger, (iv) seeking to impose material limitations on the ability
of Acquisition or Parent effectively to exercise full rights of ownership
of the Company Common Stock, including, without limitation, the right to
vote the Company Common Stock purchased by it on all matters properly
presented to the Company's shareholders, or (v) which otherwise is
reasonably likely to have a Material Adverse Effect;
(b) there shall be any statute, rule regulation, judgment, order or
injunction enacted, entered, enforced or promulgated on behalf of a
Government Entity, to the Offer or the Merger, or any other action shall be
taken by any Governmental Entity, other than the application to the offer
or the Merger of applicable waiting periods under HSR Act, that is
reasonably likely to result, directly or indirectly, in any of the
consequences referred to in clauses (i) through (v) of paragraph (a) above;
(c) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock Exchange
for a period in excess of 24 hours (excluding suspensions or limitations
resulting solely from physical damage or interference with such exchanges
not related to market conditions), (ii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory), (iii) a commencement 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 United States governmental authority on the extension of
credit generally by banks or other financial institutions, or (v) a change
in general financial, bank or capital market conditions which materially
and adversely affects the ability of financial institutions in the United
States to extend credit or syndicate loans or (vi) in the case of any of
the foregoing existing at the time of the commencement of the Offer, a
material acceleration or worsening thereof;
(d) there shall have occurred any events after the date of the
Agreement which, either individually or in the aggregate, would have a
Material Adverse Effect; provided, however, that no event, change or effect
that materially results from the Transactions or the announcement thereof
shall be deemed to cause either individually or in the aggregate, a
Material Adverse Effect;
A-30
<PAGE> 54
(e) (i) the Board of Directors of the Company shall have withdrawn or
modified in a manner adverse to Parent or Acquisition its approval or
recommendation of the Offer, the Merger or the Agreement, or approved or
recommended any Acquisition Proposal or (ii) the Company shall have entered
into any agreement with respect to any Superior Proposal in accordance with
Section 3.4 of the Agreement;
(f) the representations and warranties of the Company set forth in the
Agreement shall not be true and correct, in each case (i) as of the date
referred to in any representation or warranty which addresses matters as of
a particular date, or (ii) as to all other representations and warranties,
as of the date of the Agreement and as of the scheduled expiration of the
Offer, unless the inaccuracies (without giving effect to any materiality or
material adverse effect qualifications or materiality exceptions contained
therein) under such representations and warranties, taking all the
inaccuracies under all such representations and warranties together in
their entirety, do not, individually or in the aggregate, result in a
Material Adverse Effect;
(g) the Company shall have failed to perform any obligation or to
comply with any agreement or covenant to be performed or complied with by
it under the Agreement other than any failure which would not have, either
individually or in the aggregate, a Material Adverse Effect;
(h) any person acquires beneficial ownership (as defined in Rule 13d-3
promulgated under the Exchange Act) of at least 15% of the outstanding
Company Common Stock (other than any person not required to file a Schedule
13D under the rules promulgated under the Exchange Act); or
(i) the Agreement shall have been terminated in accordance with its
terms.
The foregoing conditions are for the sole benefit of Parent and
Acquisition, may be asserted by Parent or Acquisition regardless of the
circumstances giving rise to such condition (including any action or inaction by
Parent or Acquisition not in violation of the Agreement) and may be waived by
Parent or Acquisition in whole or in part at any time and from time to time in
the sole discretion of Parent or Acquisition, subject in each case to the terms
of the Merger Agreement. The failure by Parent or Acquisition at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time from time to time.
A-31
<PAGE> 55
EXHIBIT 1
ARTICLES OF MERGER
MERGING
PACKAGE ACQUISITION, INC.
WITH AND INTO
ULTRA PAC, INC.
Ultra Pac, Inc., a Minnesota corporation ("Ultra Pac"), and Package
Acquisition, Inc., a Minnesota corporation ("Merger Sub") and an indirect
wholly-owned subsidiary of Ivex Packaging Corporation, a Delaware corporation,
do hereby certify as follows:
1. Attached hereto as Exhibit A is the plan of merger (the "Plan of
Merger") for the merger (the "Merger") of Merger Sub into Ultra Pac,
which has been duly adopted by the board of directors of each of such
corporations.
2. The Plan of Merger has been approved by Merger Sub and Ultra Pac
pursuant to chapter 302A of the Minnesota Business Corporation Act.
3. The Merger shall be effective upon the filing of these Articles of
Merger with the Secretary of State of Minnesota.
IN WITNESS WHEREOF, the undersigned have caused this Articles of Merger to
be signed by its duly authorized officer, this ______ day of __________, 1998.
ULTRA PAC, INC.
By:
----------------------------------
Name:
Title:
PACKAGE ACQUISITION, INC.
By:
----------------------------------
Name:
Title:
A-32
<PAGE> 56
ANNEX B
TENDER AND OPTION AGREEMENT
TENDER AND OPTION AGREEMENT, dated as of March , 1998 (the "Agreement"), by
and among Ivex Packaging Corporation, a Delaware corporation ("Parent"), Package
Acquisition, Inc., a Minnesota corporation and an indirect wholly-owned
subsidiary of Parent ("Acquisition"), and (the "Shareholder").
WHEREAS, the Shareholder is the owner of shares (the "Shares") of
Common Stock, no par value per share (the "Common Stock"), of Ultra Pac, Inc.
(the "Company");
WHEREAS, the Parent, Acquisition and the Company have entered into an
Agreement and Plan of Merger, dated as of the date hereof (as amended from time
to time, the "Merger Agreement"), which provides, among other things, that, upon
the terms and subject to the conditions therein, Acquisition will make a cash
tender offer (the "Offer") for all of the outstanding shares of Common Stock and
after expiration of the Offer will merge with and into the Company (the
"Merger"); and
WHEREAS, as a condition to the willingness of Parent and Acquisition to
enter into the Merger Agreement, Parent has requested that the Shareholder
agree, and in order to induce Parent and Acquisition to enter into the Merger
Agreement, the Shareholder has agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and subject to the terms and conditions set forth herein,
the parties hereto hereby agree as follows:
1. Representations and Warranties of the Shareholder. The Shareholder
represents and warrants to the Parent as follows:
a. The Shareholder is the sole record and beneficial owner (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of the Shares and, except for the pledge of shares of
common stock (the "Pledged Shares") to Norwest Bank, N.A., there exist no
liens, claims, security interests, options, proxies, voting agreements,
charges, obligations, understandings, arrangements or other encumbrances of
any nature whatsoever, except for restrictions applicable thereto under
federal and state securities laws ("Liens"), affecting the Shares.
b. The Shares and the certificates representing the Shares are now and
at all times during the term hereof will be held by the Shareholder, or by
a nominee or custodian for the benefit of the Shareholder free and clear of
all Liens, except for the Liens described in (a) above and Liens arising
hereunder. Upon transfer to Parent by the Shareholder of the Shares
hereunder, Parent will have good and marketable title to the Shares, free
and clear of all Liens.
c. This Agreement has been duly and validly executed and delivered by
the Shareholder and, assuming due authorization, execution and delivery by
Parent and Acquisition, constitutes a valid and binding agreement of the
Shareholder, enforceable against the Shareholder in accordance with its
terms, except to the extent that enforceability may be limited by
applicable bankruptcy or other laws affecting the enforcement of creditors'
rights generally and by general principles of equity, regardless of whether
such enforceability is considered in a proceeding in equity or at law.
d. The execution and delivery of this Agreement by the Shareholder
does not, and the performance by the Shareholder of its obligations
hereunder will not, constitute a violation of, conflict with, result in a
default (or an event which, with notice or lapse of time or both, would
result in a default) under, or result in the creation of any Lien on any
Shares under, (i) any contract, commitment, agreement, partnership
agreement, understanding, arrangement or restriction of any kind to which
the Shareholder is a party or by which the Shareholder is bound, (ii) any
judgment, writ, decree, order or ruling applicable to the Shareholder or
(iii) any law applicable to the Shareholder.
B-1
<PAGE> 57
e. To the Shareholder's knowledge, neither the execution and delivery
of this Agreement nor the performance by the Shareholder of its obligations
hereunder will require any consent, authorization or approval of, filing
with or notice to, any court, administrative agency or other governmental
body or authority, other than any required notices or filings pursuant to
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the rules and regulations promulgated thereunder (the "HSR Act"), state
antitrust laws or the federal securities laws.
2. Representations and Warranties of Parent and Acquisition. Parent and
Acquisition jointly and severally represent and warrant to the Shareholder as
follows:
a. Each of Parent and Acquisition is duly organized and validly
existing and in good standing under the laws of its jurisdiction of
incorporation, has the requisite corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby, and has taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement. This Agreement has
been duly and validly executed and delivered by each of Parent and
Acquisition and constitutes the legal, valid and binding obligation of each
of Parent and Acquisition, enforceable against each of Parent and
Acquisition in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting the enforcement of
creditors' rights generally and by general principles of equity, regardless
of whether such enforceability is considered in a proceeding in equity or
at law.
b. The execution and delivery of this Agreement by each of Parent and
Acquisition does not, and the performance by each of Parent and Acquisition
of its obligations hereunder will not, constitute a violation of, conflict
with, or result in a default (or an event which, with notice or lapse of
time or both, would result in a default) under, its charter or bylaws or
any contract, commitment, agreement, understanding, arrangement or
restriction of any kind to which Parent or Acquisition is a party or by
which Parent or Acquisition is bound or any judgment, writ, decree, order
or ruling applicable to Parent or Acquisition.
c. Neither the execution and delivery of this Agreement nor the
performance by each of Parent and Acquisition of its obligations hereunder
will violate any order, writ, injunction, judgment, law, decree, statute,
rule or regulation applicable to Parent or Acquisition or require any
consent, authorization or approval of, filing with, or notice to, any
court, administrative agency or other governmental body or authority, other
than any required notices or filings pursuant to the HSR Act, state
antitrust laws or the federal securities laws.
3. Tender of Shares.
a. Parent and Acquisition jointly and severally agree:
i. subject to the conditions of the Offer set forth in Annex A to
the Merger Agreement and the other terms and conditions of the Merger
Agreement, that Acquisition will purchase all shares of Common Stock
tendered pursuant to the Offer as promptly as practicable following
commencement of the Offer and that Acquisition will consummate the
Merger in accordance with the terms of the Merger Agreement;
ii. not to decrease the price per share to be paid to the Company's
shareholders in the Offer below $15.50 per share (the "Tender Offer
Price"); and iii. to deliver, or to cause to be delivered, the Offer
Documents to the Shareholder. The provisions of Sections 3(a)(i) and
3(a)(ii) shall survive the termination of this Agreement.
b. The Shareholder will (i) tender the Shares (other than the Pledged
Shares which will be tendered as soon as practicable) into the Offer
promptly, and in any event no later than the fifth business day following
the commencement of the Offer, or, if the Shareholder has not received the
Offer Documents by such time, within two business days following receipt of
such documents, and (ii) not withdraw any Shares so tendered (except in the
event the Stock Option is exercised). Upon the purchase of all the Shares
pursuant to the Offer in accordance with this Section 3, this Agreement
will terminate.
B-2
<PAGE> 58
The Shareholder will receive the same price per Share received by other
shareholders of the Company in the Offer with respect to Shares tendered by
it in the Offer. In the event that, notwithstanding the provisions of the
first sentence of this Section 3(b), any Shares are for any reason
withdrawn from the Offer or are not purchased pursuant to the Offer, such
Shares will remain subject to the terms of this Agreement. The Shareholder
acknowledges that Acquisition's obligation to accept for payment and pay
for the Shares in the Offer is subject to all the terms and conditions of
the Offer. On the date the Shares are accepted for payment and purchased by
Acquisition pursuant to the Offer, Acquisition or Parent, as the case may
be, shall make payment by wire transfer to the Shareholder of the purchase
price for such Shares to an account designated by the Shareholder.
c. The Shareholder hereby agrees to permit Parent to publish and
disclose in the Offer Documents and, if approval of the shareholders of the
Company is required under applicable law, the Proxy Statement, its identity
and ownership of Common Stock and the nature of its commitments,
arrangements and understandings under this Agreement.
4. Option to Purchase.
a. The Shareholder hereby grants to Parent, subject to the terms and
conditions hereof, an irrevocable option (the "Stock Option") to purchase
the Shares at a purchase price per share of $15.50 per Share (the "Exercise
Price") in cash, in the manner set forth in this Section 4. At any time
prior to the termination of the Stock Option hereunder, Parent (or a wholly
owned subsidiary of Parent) may exercise the Stock Option, in whole only,
if on or after the date hereof:
i. any corporation, partnership, individual, trust, unincorporated
association, or other entity or "person" (as defined in Section 13(d)(3)
of the Exchange Act) other than Parent or any of its "affiliates" (as
defined in the Exchange Act) (a "Third Party"), will have:
A. commenced or announced an intention to commence a bona fide
tender offer or exchange offer for any shares of Common Stock, the
consummation of which would result in "beneficial ownership" (as
defined in the Exchange Act) by such Third Party (together with all
such Third Party's affiliates and "associates" (as defined in the
Exchange Act)) of 50% or more of the then outstanding voting equity
of the Company (either on a primary or a fully diluted basis);
B. acquired beneficial ownership of shares of Common Stock that,
when aggregated with any shares of Common Stock already owned by such
Third Party, its affiliates and associates, would result in the
aggregate beneficial ownership by such Third Party, its affiliates
and associates of 15% or more of the then outstanding voting equity
of the Company (either on a primary or a fully diluted basis);
provided, however, that "Third Party" for purposes of this clause (B)
does not include any corporation, partnership, person, other entity
or group that beneficially owns more than 15% of the outstanding
voting equity of the Company (either on a primary or a fully diluted
basis) as of the date hereof and that does not, after the date
hereof, increase such ownership percentage by more than an additional
1% of the outstanding voting equity of the Company (either on a
primary or a fully diluted basis);
C. acquired assets constituting 15% or more of the total assets
or earning power of the Company taken as a whole;
D. entered into an agreement with the Company that contemplates
the acquisition of (x) assets constituting 15% or more of the total
assets or earning power of the Company taken as a whole or (y)
beneficial ownership of 15% or more of the outstanding voting equity
of the Company; or
ii. any of the events described in Section 9.1(c)(ii) or
9.1(d)(iii) of the Merger Agreement that would allow the Company or
Parent to terminate the Merger Agreement has occurred (after the passage
of any time periods set forth in such sections but without the necessity
of the Company or Parent having terminated the Merger Agreement).
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<PAGE> 59
In the event that Parent wishes to exercise the Stock Option, Parent
shall give written notice (the "Option Notice", with the date of the Option
Notice being hereinafter called the "Notice Date") to the Shareholder
specifying the place and date (not earlier than three nor later than ten
Business Days from the Notice Date) for closing such purchase (a
"Closing"). Parent's obligation to purchase the Shares upon any exercise of
the Stock Option and the Shareholder's obligation to sell the Shares upon
any exercise of the Stock Option are subject (at the election of Parent and
the Shareholder, respectively,) to the conditions that (i) no preliminary
or permanent injunction or other order prohibiting the purchase, issuance
or delivery of the Shares issued by any Governmental Authority will be in
effect and (ii) any applicable waiting period required for the purchase of
Shares under the HSR Act will have expired or been terminated or clearance
from the appropriate agencies shares have been obtained, provided that if
such injunction or other order has become final and nonappealable, the
Stock Option shall terminate; and provided further, that if the Stock
Option is not exercisable because either of the circumstances described in
clauses (i) or (ii) exist, then the Stock Option shall be exercisable for
the ten business day period commencing on the date that the circumstances
set forth in clauses (i) or (ii) cease to exist, but in no event shall the
Stock Option be exercisable after the date set forth in Section 9(c).
Parent's obligation to purchase the Shares upon exercise of the Stock
Option is further subject (at Parent's election) to the condition that
there will have been no material breach of the representations, warranties,
covenants or agreements of the Shareholder contained in this Agreement or
of the Company contained in the Merger Agreement which breach has not been
cured within ten business days of the receipt of written notice thereof
from the Parent. The Share holder's obligation to sell the Shares upon
exercise of the Stock Option and the Shareholder's obligations under
Section 7 are subject (at the Shareholder's election) to the further
conditions that there will have been no material breach of the
representations, warranties, covenants or agreements of Parent or
Acquisition contained in this Agreement or contained in the Merger
Agreement, which breach has not been cured within ten business days of the
receipt of written notice thereof from the Shareholder. Parent agrees to
use its best efforts to cause any such waiting period or injunction or
order to be terminated or lifted and to obtain all necessary regulatory
approvals under the HSR Act.
b. At the Closing, (i) the Shareholder shall deliver to Parent the
certificate or certificates representing the Shares in proper form for
transfer upon exercise of the Stock Option in the denominations designated
by Parent in the Option Notice and (ii) Parent shall pay the aggregate
purchase price for the Shares by wire transfer of immediately available
funds to an account designated by the Shareholder in writing to Parent in
the amount equal to the product of the Exercise Price and the number of the
Shares.
c. In the event that Parent or Acquisition pays a price higher than
$15.50 per share for Shares tendered into the Offer, the Exercise Price
shall be increased to equal such higher price.
d. The Shareholder has granted the Stock Option to Parent in order to
induce Parent to enter into and consummate the transactions contemplated by
the Merger Agreement. Parent and Acquisition covenant and agree that they
will perform their respective obligations under the Merger Agreement. The
provisions of this Section 4(d) are intended both for the benefit of the
Shareholder and for the benefit of the Company and the other shareholders
of the Company and may not be modified, waived or amended without the
consent of the Company.
5. Transfer of the Shares.
a. During the term of this Agreement, the Shareholder will not offer
to sell, sell, pledge or otherwise dispose of or transfer any interest in
or encumber with any Lien any of the Shares, (ii) enter into any contract,
option or other agreement or understanding with respect to any transfer of
any or all of the Shares or any interest therein; (iii) grant any proxy,
power-of-attorney or other authorization or consent in or with respect to
the Shares; (iv) deposit the Shares into a voting trust or enter into a
voting agreement or arrangement with respect to the Shares; or (v) take any
other action with respect to the Shares that would in any way restrict,
limit or interfere with the performance of its obligations hereunder.
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<PAGE> 60
b. The Shareholder agrees to place the following legend on any and all
certificates evidencing the Shares:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO CERTAIN RESTRICTIONS ON TRANSFER PURSUANT TO THAT CERTAIN TENDER AND
OPTION AGREEMENT, DATED AS OF MARCH 23, 1998, BY AND BETWEEN IVEX
PACKAGING CORPORATION, PACKAGE ACQUISITION INC., AND .
ANY TRANSFER OF SUCH SHARES OF COMMON STOCK IN VIOLATION OF THE TERMS OF
SUCH AGREEMENT SHALL BE NULL AND VOID AND OF NO EFFECT WHATSOEVER.
6. Certain Other Agreements. The Shareholder shall notify Parent
immediately if any proposals are received by, any information is requested from,
or any negotiations or discussions are sought to be initiated or continued with
the Shareholder or his attorneys, accountants or other agents (each of such
actions, an "Interest"), in each case in connection with any Acquisition
Transaction indicating, in connection with such notice, the name of the person
indicating such Interest and the terms and conditions of any related proposals
or offers. The Shareholder agrees to cease immediately and cause to be
terminated immediately any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any Acquisition Transaction. In
addition, the Shareholder agrees to keep Parent informed, on a current basis, of
the status and terms of any Acquisition Transaction. The Shareholder furthermore
agrees not to, and will use his best efforts to ensure that his attorneys,
accountants and other agents do not, directly or indirectly: (i) initiate,
solicit or encourage, or take any action to facilitate the making of, any offer
or proposal that constitutes or is reasonably likely to lead to any Acquisition
Transaction, (ii) enter into any agreement with respect to any Acquisition
Transaction or (iii) in the event of an unsolicited written proposal in respect
of a Acquisition Transaction, engage in negotiations or discussions with, or
provide any information or data to, any person (other than Parent, any of its
affiliates or representatives and except for information that has been
previously publicly disseminated by the Company) relating to any Acquisition
Transaction. The obligations provided for in this Section 6 shall become
effective immediately following the execution and delivery of this Agreement by
the parties hereto.
7. Voting of Shares; Grant of Irrevocable Proxy; Appointment of Proxy.
a. The Shareholder hereby agrees that, during the term of this
Agreement, at any meeting (whether annual or special and whether or not an
adjourned or postponed meeting) of the holders of Common Stock, however
called, or in connection with any written consent of the holders of Common
Stock, the Shareholder will appear at the meeting or otherwise cause the
Shares to be counted as present thereat for purposes of establishing a
quorum and vote or consent (or cause to be voted or consented) the Shares
(i) in favor of the Merger and (ii) against any action or agreement that
would impede, interfere with or prevent the Merger, including any other
extraordinary corporate transaction, such as a merger, reorganization or
liquidation involving the Company and a third party or any other proposal
of a third party to acquire the Company and (iii) if requested by Parent,
in favor of a shareholder resolution proposed by Parent in accordance with
applicable provisions of the Minnesota Business Corporation Act (the
"MBCA") the purpose of which is to cause the Offer and the Merger to be
consummated and which does not relate to the election of directors.
b. The Shareholder hereby irrevocably grants to, and appoints, Parent
and any nominee thereof, its proxy and attorney-in-fact (with full power of
substitution) during the term of this Agreement, for and in the name, place
and stead of the Shareholder, to vote the Shares, or grant a consent or
approval in respect of the Shares, in connection with any meeting of the
shareholders of the Company (i) in favor of the Merger and (ii) against any
action or agreement that would impede, interfere with or prevent the
Merger, including any other extraordinary corporate transaction, such as a
merger, reorganization or liquidation involving the Company and a third
party or any other proposal of a third party to acquire the Company.
c. The Shareholder represents that all proxies heretofore given in
respect of the Shares, if any, are not irrevocable, and hereby revokes all
such proxies given with respect to the Shares.
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<PAGE> 61
d. The Shareholder hereby affirms that the irrevocable proxy set forth
in this Section 7 is given in connection with the execution of the Merger
Agreement and that such irrevocable proxy is given to secure the
performance of the duties of the Shareholder under this Agreement. The
Shareholder hereby further affirms that the irrevocable proxy set forth in
this Section 7 is coupled with an interest and is intended to be
irrevocable in accordance with the provisions of Section 302A.449(2) of the
MBCA.
8. Adjustments. The number and types of securities subject to this
Agreement will be appropriately adjusted in the event of any stock dividends,
stock splits, recapitalization, combinations, exchanges of shares or the like or
any other action that would have the effect of changing the Shareholder's
ownership of the Company's capital stock.
9. Termination. Except as otherwise specifically provided herein, all
obligations under this Agreement will terminate on the earliest of (a) the date
the Merger Agreement is terminated in accordance with its terms or the date the
Offer is terminated by Parent or Acquisition as a result of any failure of a
condition of the Offer; provided, however, that the provisions of Sections 4(a)
shall not terminate until sixty (60) days thereafter (or such later time as
permitted by Section 4(a)) if the Merger Agreement was terminated pursuant to
Section 9.1(c)(ii) or 9.1(d)(iii) thereof, (b) the purchase of all the Shares
pursuant to the Offer in accordance with Section 3 or pursuant to the Stock
Option, or (c) on September 30, 1998. The provisions of Section 13 shall survive
any termination of this Agreement.
10. Effectiveness. This Agreement shall not be effective unless and until
the Merger Agreement shall have been approved by the Company's Board of
Directors.
11. Brokerage. Parent, Acquisition and the Shareholder represent and
warrant to the other that the negotiations relevant to this Agreement have been
carried on by Parent and Acquisition, on the one hand, and the Shareholder, on
the other hand, directly with the other, and that except for Wasserstein Perella
& Co., Inc. ("Wasserstein"), there are no claims for finder's fees or brokerage
commissions or other like payments in connection with this Agreement or the
transactions contemplated hereby. Except for the fees of Wasserstein, which will
be paid solely by the Company, Parent and Acquisition, on the one hand, and
Shareholder, on the other hand, will indemnify and hold harmless the other from
and against any and all claims or liabilities for finder's fees or brokerage
commissions or other like payments incurred by reason of action taken by him, it
or any of them, as the case may be.
12. Miscellaneous.
a. Except for the representations and warranties set forth in Section
l(b), all representations and warranties contained herein will terminate
upon the termination of this Agreement.
b. Any provisions of this Agreement may be waived at any time by the
party that is entitled to the benefits thereof. No such waiver, amendment
or supplement will be effective unless in writing and is signed by the
party or parties sought to be bound thereby. Any waiver by any party of a
breach of any provision of this Agreement will not operate as or be
construed to be a waiver of any other breach of such provisions or of any
breach of any other provision of this Agreement. The failure of a party to
insist upon strict adherence to any term of this Agreement or one or more
sections hereof will not be considered a waiver or deprive that party of
the right thereafter to insist upon strict adherence to that term or any
other term of this Agreement.
c. This Agreement contains the entire agreement among the parties in
respect to the subject matter hereof, and supersedes all prior agreements
among the parties with respect to such matters. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified, except upon
the delivery of a written agreement executed by the parties hereto.
d. This Agreement will be governed by and construed in accordance with
the laws of the State of Minnesota applicable to contracts made and
performed in that state. Each of the parties hereto acknowledges and agrees
that in the event of any breach of this Agreement, each non-breaching party
would be irreparably and immediately harmed and could not be made whole by
monetary damages. It is accordingly agreed that the parties hereto (i) will
waive, in any action for specific performance, the
B-6
<PAGE> 62
defense of adequacy of a remedy at law and (ii) will be entitled, in
addition to any other remedy to which they may be entitled at law or in
equity, to compel specific performance of this Agreement in any action
instituted in any state or federal court sitting in Minneapolis, Minnesota.
Capitalized terms used and not otherwise defined herein shall have the
meanings set forth in the Merger Agreement.
e. The descriptive headings contained herein are for convenience and
reference only and will not affect in any way the meaning or interpretation
of this Agreement.
f. All communications or notices required or permitted by this
Agreement shall be in writing and shall be deemed to have been given at the
earlier of the date personally delivered or sent by telephonic facsimile
transmission (with a copy via regular mail) or one day after sending via
nationally recognized overnight courier or five days after deposit in the
United States mail, certified or registered mail, postage prepaid, return
receipt requested, and addressed as follows, unless and until any of such
parties notifies the others in accordance with this Section of a change of
address:
If to Shareholder to:
[ ]
c/o ULTRA PAC, Inc.
22051 Industrial Boulevard
Rogers, Minnesota 55374
Telephone: (612) 428-8340
Fax No. (612) 428-2754
with a copy to:
Larkin Hoffman Daly & Lindren
7900 Xerxes Avenue South
Suite 1500
Bloomington, MN 55431
Telephone: (612) 896-3291
Fax No.: (612) 896-3333
Attention: Frank I. Harvey, Esq.
and
Katten Muchin & Zavis
525 W. Monroe
Suite 1600
Chicago, IL 60661
Telephone: (312) 902-5200
Fax No.: (312) 902-1061
Attention: David J. Kaufman, Esq.
B-7
<PAGE> 63
If to Parent or Acquisition to:
Ivex Packaging Corporation
100 Tri-State Drive
Suite 200
Lincolnshire, IL 60069
Telephone: (847) 945-9100
Telecopy: (847) 945-2355
Attention: G. Douglas Patterson, Esq.
With a copy to:
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker
Suite 2100
Chicago, IL 60606
Telephone: (312) 407-0700
Telecopy: (312) 407-0411
Attention: William R. Kunkel, Esq.
or to such other address as any party may have furnished to the other parties in
writing in accordance herewith.
g. This Agreement may be executed in any number of counterparts, each
of which will be deemed to be an original, but all of which together will
constitute one agreement.
h. This Agreement is binding upon and is solely for the benefit of the
parties hereto and their respective successors, legal representatives and
assigns. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement may be assigned by any of the parties
hereto without the prior written consent of the other parties.
i. If any term or other provision of this Agreement is determined to
be invalid, illegal or incapable of being enforced by any rule of law or
public policy, all other terms and provisions of this Agreement will
nevertheless remain in full force and effect as long as the economic or
legal substance of the transactions contemplated hereby is not affected in
any manner adverse to any party hereto. Upon any such determination that
any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto will negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions
contemplated by this Agreement are consummated to the extent possible.
j. All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity will be
cumulative and not alternative, and the exercise of any thereof by either
party will not preclude the simultaneous or later exercise of any other
such right, power or remedy by such party.
13. Expenses. Except as provided in Section 4 hereof, all fees and expenses
incurred by any one party hereto shall be borne by the party incurring such fees
and expenses.
14. Further Assurances; Shareholder Capacity.
a. The Shareholder shall, upon request of Parent or Acquisition,
execute and deliver any additional documents and take such further actions
as may reasonably be deemed by Parent or Acquisition to be necessary or
desirable to carry out the provisions hereof and to vest the power to vote
the Shares as contemplated by Section 7 hereof in Parent.
b. Nothing in this Agreement shall be construed to prohibit any
affiliate of the Shareholder who is a member of the Board of Directors of
the Company from taking any action solely in his capacity as a
B-8
<PAGE> 64
member of the Board of Directors of the Company to the extent specifically
permitted by the Merger Agreement or as required by applicable law.
IN WITNESS WHEREOF, the Parent, Acquisition and the Shareholder have caused
this Agreement to be signed by their respective officers or representatives
thereunto duly authorized, all as of the date first written above.
IVEX PACKAGING CORPORATION
By:
----------------------------------
Name:
Title:
PACKAGE ACQUISITION, INC.
By:
----------------------------------
Name:
Title:
----------------------------------
, as Shareholder
B-9
<PAGE> 65
ANNEX C
Wasserstein Perella & Co.,
Inc.
31 West 52nd Street
New York, New York 10019
Telephone 212-969-2700
WASSERSTEIN PERELLA & CO. LOGO Fax 212-969-7836
March 22, 1998
The Board of Directors
Ultra Pac, Inc.
21925 Industrial Boulevard
Rogers, MN 55374
Members of the Board:
You have asked us to advise you with respect to the fairness, from a
financial point of view, to the holders of the common stock, no par value
("Shares") of Ultra Pac, Inc. (the "Company") of the consideration to be
received by such holders pursuant to the terms of the Agreement and Plan of
Merger, dated as of March 22, 1998, (the "Merger Agreement"), among the Company,
Ivex Packaging Corporation ("Parent"), and Package Acquisition, Inc. ("Sub").
The Merger Agreement provides for, among other things, a cash tender offer by
Sub to acquire all of the outstanding Shares at a price of $15.50 per Share (the
"Tender Offer"), and for a subsequent merger of Sub with and into the Company
pursuant to which each outstanding Share will be converted into the right to
receive $15.50 in cash (the "Merger" and, together with the Tender Offer, the
"Transaction"). The terms and conditions of the Transaction will be set forth in
more detail in the Offer to Purchase relating to the Tender Offer (the "Offer to
Purchase") and the Merger Agreement.
In connection with rendering our opinion, we have reviewed a draft of the
Merger Agreement dated March 22, 1998, and for purposes hereof, we have assumed
that the final form of this document will not differ in any material respect
from the draft provided to us. We have also reviewed and analyzed certain
publicly available business and financial information relating to the Company
for recent years and interim periods to date, as well as certain internal
financial and operating information, including financial forecasts, analyses and
projections prepared by or on behalf of the Company and provided to us for
purposes of our analysis, and we have met with management of the Company to
review and discuss such information and, among other matters, the Company's
business, operations, assets, financial condition and future prospects.
We have reviewed and considered certain financial and stock market data
relating to the Company, and we have compared that data with similar data for
certain other companies, the securities of which are publicly traded, that we
believe may be relevant or comparable in certain respects to the Company or one
or more of its businesses or assets, and we have reviewed and considered the
financial terms of certain recent acquisitions and business combination
transactions in the packaging industry specifically, and in other industries
generally, that we believe to be reasonably comparable to the Transaction or
otherwise relevant to our inquiry. We have also performed such other financial
studies, analyses, and investigations and reviewed such other information as we
considered appropriate for purposes of this opinion.
In our review and analysis and in formulating our opinion, we have assumed
and relied upon the accuracy and completeness of all the financial and other
information provided to or discussed with us or publicly available, and we have
not assumed any responsibility for independent verification of any of such
information. We have also relied upon the reasonableness and accuracy of the
financial projections, forecasts and analyses provided to us and we have
assumed, with your consent, that such projections, forecasts and analyses were
C-1
<PAGE> 66
reasonably prepared in good faith and on bases reflecting the best currently
available judgments and estimates of the Company's management, and we express no
opinion with respect to such projections, forecasts and analyses or the
assumptions upon which they are based. In addition, we have not reviewed any of
the books and records of the Company, or assumed any responsibility for
conducting a physical inspection of the properties or facilities of the Company,
or for making or obtaining an independent valuation or appraisal of the assets
or liabilities of the Company, and no such independent valuation or appraisal
was provided to us. We have assumed that the transactions described in the
Merger Agreement will be consummated on the terms set forth therein, without
waiver or modification. Our opinion is necessarily based on economic and market
conditions and other circumstances as they exist and can be evaluated by us as
of the date hereof.
We are acting as financial advisor to the Company in connection with the
proposed Transaction and will receive a fee for our services, a major portion of
which is contingent upon the consummation of the Transaction. In the ordinary
course of our business, we may actively trade the debt and equity securities of
the Company and the Parent for our own account and for the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities.
Our opinion addresses only the fairness from a financial point of view to
the shareholders of the Company of the consideration to be received by such
shareholders pursuant to the Transaction, and we do not express any views on any
other terms of the Transaction. Specifically, our opinion does not address the
Company's underlying business decision to effect the transactions contemplated
by the Merger Agreement.
It is understood that this letter is for the benefit and use of the Board
of Directors of the Company in its consideration of the Transaction and except
for inclusion in its entirety in a proxy statement circulated to shareholders of
the Company relating to the Merger or tender offer recommendation statement on
Schedule 14D-9 from the Company to holders of Shares relating to the
Transaction, may not be disseminated, quoted, referred to or reproduced at any
time and in any manner without our prior written consent. This opinion does not
constitute a recommendation to any shareholder with respect to whether such
holder should tender Shares pursuant to the Tender Offer or as to how such
holder should vote with respect to the Merger, and should not be relied upon by
any shareholder as such.
Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein, it is our opinion that as of the date hereof,
the $15.50 per Share cash consideration to be received by the shareholders of
the Company pursuant to the Transaction is fair to such shareholders from a
financial point of view.
Very truly yours,
WASSERSTEIN PERELLA & CO., INC.
C-2
<PAGE> 67
ANNEX D
ULTRA PAC, INC.
21925 INDUSTRIAL BOULEVARD
ROGERS, MINNESOTA 55374
INFORMATION STATEMENT PURSUANT TO SECTION 14(F)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER
This Information Statement ("Information Statement") is being mailed on or
about March 23, 1998, as part of the Company's Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") to the holders of record of
the Shares at the close of business on or about March 23, 1998. You are
receiving this Information Statement in connection with the possible appointment
of persons designated by the Purchaser to fill seats on the Board of Directors
of Ultra Pac (the "Board"). See "Change in Board of Directors Upon Consummation
of the Offer -- Right to Designate Directors; the Ivex Designees." This
Information Statement is required by Section 14(f) of the Exchange Act and Rule
14f-1 thereunder.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in the accompanying Schedule
14D-9.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on
March 26, 1998. The Offer is scheduled to expire at 12:00 midnight on April 22,
1998, unless the Purchaser extends the Offer. The Offer is conditioned on a
minimum number of the outstanding Shares being tendered for cash pursuant to the
Offer such that, when added to any Shares acquired pursuant to the Tender
Agreements, the Purchaser will own at least a majority of the Shares outstanding
on a fully diluted basis. The Offer is also subject to certain other conditions.
Upon the expiration of the Offer, if all conditions of the Offer have been
satisfied or waived, the Purchaser has agreed to purchase all Shares validly
tendered pursuant to the Offer and not withdrawn.
The information contained in this Information Statement concerning Ivex and
the Purchaser has been furnished to Ultra Pac by Ivex and the Purchaser, and
Ultra Pac assumes no responsibility for the accuracy or completeness of such
information.
CHANGE IN BOARD OF DIRECTORS
UPON CONSUMMATION OF THE OFFER
GENERAL
The Shares are the only class of voting securities of Ultra Pac
outstanding. Each Share has one vote. As of March 23, 1998, the Company had
3,893,791 Shares outstanding. The Board currently consists of five members. Each
director holds office until such director's successor is elected and qualified
or until such director's earlier resignation or removal.
RIGHT TO DESIGNATE DIRECTORS; THE IVEX DESIGNEES
Board Representation. The Merger Agreement provides that upon the purchase
of and payment for Shares by the Purchaser which represents at least a majority
of the outstanding Shares, the Purchaser shall be entitled to designate such
number of directors, rounded up to the next whole number, as will make the
percentage of Ultra Pac's directors designated by the Purchaser equal to the
aggregate voting power of the Shares held by the Purchaser and Ivex. In
furtherance thereof, Ultra Pac has agreed, upon request of the Purchaser, either
to increase the size of the Board or secure the resignations of such number of
incumbent directors, or both, as is necessary to enable the Purchaser's
designees to be so elected to the Board. Ultra Pac's obligation to appoint such
designees is subject to Section 14(f) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Ultra Pac is required to take all action necessary
to effect any such election and to include in this Information Statement the
information required by Section 14(f) of the Exchange Act
D-1
<PAGE> 68
and Rule 14f-1 promulgated thereunder. Notwithstanding the foregoing, Ultra Pac
shall have at least one independent director until the effective time of the
Merger.
Information concerning the Ivex Designees is set forth in Exhibit A hereto.
Such information was provided by the Purchaser and Ultra Pac does not assume any
responsibility for the accuracy or completeness thereof. To the best knowledge
of Ultra Pac, none of the Ivex Designees beneficially owns any equity securities
in Ultra Pac.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
DIRECTORS
The names of Ultra Pac's current directors, their ages as of March 23, 1998
and certain other information about them are set forth below. As indicated
above, it is anticipated that all of the current directors of Ultra Pac will be
requested to resign effective as of the consummation of the Offer.
<TABLE>
<CAPTION>
NAME AGE COMPANY POSITION DIRECTOR SINCE
---- --- ---------------- --------------
<S> <C> <C> <C>
Calvin S. Krupa(1).................. 51 President, Chief Executive Officer 1987
and Chairman of the Board
James A. Thole(2)................... 58 Secretary and Director 1987
John F. DeBoer(2)(3)................ 56 Director 1991
Frank I. Harvey (1)(2)(3)........... 47 Director 1991
Thomas F. Rains(1).................. 63 Director 1996
</TABLE>
- -------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Stock Option Committee.
CALVIN S. KRUPA has served as the Company's President and Chief Executive
Officer since February 1987. For the three years prior to 1987, Mr. Krupa was
marketing manager for Innovative Plastics, Inc., a Minneapolis-based producer of
plastic packaging.
JAMES A. THOLE has served as Secretary of the Company since February 1987.
From February 1987 to August 1991, he also served as Treasurer of the Company.
Mr. Thole is not an employee of the Company. He has served as the President and
Chief Executive Officer of Packaging Plus, Inc., a Minneapolis-based packaging
company, since 1979.
JOHN F. DEBOER is the Secretary of SIG Holding U.S.A., Inc., a
privately-held holding company. Mr. DeBoer is also Vice President-Finance for
SIG Packaging Technology N.A. Inc. based in New Richmond, Wisconsin, a wholly
owned subsidiary of SIG Holding U.S.A., Inc., which is engaged in the
manufacture and sale of packaging equipment.
FRANK I. HARVEY is a shareholder in the law firm of Larkin, Hoffman, Daly &
Lindgren, Ltd. based in Bloomington, Minnesota, where he has practiced law since
1976.
THOMAS F. RAINS was employed by Pillsbury Bakeries and Food Service, Inc.,
a Minneapolis-based food products company, from 1992 until his retirement in
June 1995, at which time he held the position of Vice President/General
Manager-in-Store Retail Bakeries. From 1965 to 1992, Mr. Rains was employed by
McGlynn Bakeries, Inc. in various positions, including President of the Frozen
Products Division. From November 1996 to February 1997, Mr. Rains was Interim
Chief Operating Officer of the Company while the Company searched for a new
Chief Operating Officer.
D-2
<PAGE> 69
OFFICERS
The names of Ultra Pac's executive officers, their ages and certain other
information about them are set forth below:
WILLIAM J. HOWARD, an executive officer of the Company, became Chief
Operating Officer of the Company in March 1997. From January 1995 to February
1997, Mr. Howard served as Senior Vice President, Business Development of GE
Capital Fleet Services, a financial services company based in Eden Prairie,
Minnesota. From June 1992 until January 1995 he served as Vice President,
Business Development with Pillsbury Bakeries and Food Service, Inc., a
Minneapolis-based food products company. Mr. Howard also served as Vice
President, Finance of Pillsbury Bakeries and Food Service, Inc. from May 1990 to
June 1992.
ADDITIONAL INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS
Each director of Ultra Pac holds office until the next annual meeting of
shareholders or until a successor has been elected and qualified. Ultra Pac's
executive officers are elected by the Board and serve at the discretion of the
Board.
There are no family relationships between any director or executive officer
and any other director or executive officer of Ultra Pac.
Except as described in this Information Statement or the Schedule 14D-9,
there are no arrangements or understandings between any of the executive
officers of Ultra Pac and other persons relating to their selection as officers.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held 4 meetings during the fiscal
year ended January 31, 1998. All directors attended at least 75% of the total
number of meetings of the Board and the committees on which they served.
The Board of Directors presently has three committees.
The purpose of the Audit Committee is to recommend the appointment of an
auditor for the Company, review the scope of the audit, examine the auditor's
reports, make appropriate recommendations to the Board of Directors as a result
of such review and examination, and make inquiries into the effectiveness of the
financial and accounting functions and controls of the Company. The Audit
Committee also addresses conflicts of interest that may arise in transactions
between the Company and its officers and directors. The Audit Committee held one
meeting during the fiscal year ended January 31, 1998.
The Compensation Committee is responsible for setting the compensation of
executive officers of the Company. The Compensation Committee held one meeting
during the fiscal year ended January 31, 1998.
The purpose of the Stock Option Committee is to administer the Company's
1991 and 1996 Stock Option Plans and to designate appropriate individuals to
receive options pursuant to such Plans. The Stock Option Committee held one
meeting during the fiscal year ended January 31, 1998.
COMPENSATION OF DIRECTORS
The Company pays each director who is not an employee of the Company a
director's fee of $2,500 per year. The Outside Directors' Option Plan (the
"Directors' Plan") provides for an annual non-discretionary grant of an option
to purchase 1,000 shares (2,500 shares if the director has not previously
received an option under the Directors' Plan) to each nonemployee director of
the Company, who is a director immediately after each Annual Meeting of
Shareholders. The exercise price of such options is equal to the closing price
of the Company's Common Stock on the date of grant. The options are immediately
exercisable and expire five years from the date of grant, subject to earlier
cancellation upon termination as a director. The Company does not compensate
employee directors for service on the Board of Directors.
D-3
<PAGE> 70
The Company paid Mr. Thole $2,500 for services as the Company's Secretary.
The Company has agreed to employ Mr. Rains on a part-time basis and to pay him
an annual salary of $5,000 for services to be rendered in connection with
various projects of the Company during the fiscal year ending January 31, 1999.
D-4
<PAGE> 71
SHARE OWNERSHIP OF MANAGEMENT
The following sets forth certain information as of March 23, 1998 with
respect to shares of Common Stock beneficially owned by each executive officer
of the Company named in the Summary Compensation Table, each director of the
Company and by all executive officers and directors of the Company as a group.
Unless otherwise indicated, each of the following persons has sole voting and
investment power with respect to the shares of Common Stock set forth opposite
their respective names.
<TABLE>
<CAPTION>
COMMON SHARES
BENEFICIALLY OWNED(1)
------------------------------
NAME OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT
- ------------------------ ---------------- -------
<S> <C> <C>
Calvin S. Krupa............................................. 474,500(2) 11.8%
James A. Thole.............................................. 180,500(3) 4.6%
Frank I. Harvey............................................. 17,110(3) *
John F. DeBoer.............................................. 5,000(4) *
Thomas F. Rains............................................. 36,349(5) *
Bradley C. Yopp............................................. 45,000(6) *
William Howard.............................................. 120,000(7)
All directors and executive officers of the Company as a
group (7 persons)......................................... 758,459(8) 17.9%
</TABLE>
- -------------------------
* Less than 1%.
(1) Shares not outstanding but deemed beneficially owned by virtue of the
individual's or the group's right to acquire them as of March 23, 1998, or
within 60 days of such date, are treated as outstanding when determining the
percent of the class owned by such individual and when determining the
percent of the class owned by the group.
(2) Includes options to purchase up to 140,000 shares of Common Stock.
(3) Includes options to purchase up to 5,000 shares of the Common Stock.
(4) Includes options to purchase up to 4,000 shares of Common Stock and 1,000
shares owned jointly with Mr. DeBoer's spouse.
(5) Includes options to purchase up to 17,500 shares of Common Stock.
(6) Includes options to purchase up to 42,000 shares of Common Stock and 3,000
shares owned jointly with Mr. Yopp's spouse.
(7) Includes options to purchase 120,000 shares of Common Stock.
(8) Includes options to purchase up to 377,500 shares of Common Stock.
SECTION 16. REPORTING REQUIREMENTS
Section 16(a) of the Exchange Act requires Ultra Pac's officers, directors
and persons who are beneficial owners of more than ten percent of Ultra Pac's
Common Stock ("reporting persons") to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Reporting persons are
required by Securities and Exchange Commission regulations to furnish Ultra Pac
with copies of all Section 16(a) forms filed by them.
Based on its review of the copies of Section 16(a) forms received by it,
Ultra Pac believes that, during fiscal year 1998, all reporting persons fully
complied with the filing requirements applicable to such persons.
D-5
<PAGE> 72
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation earned for services
rendered in all capactities to the Company during the Company's fiscal years
ended January 31, 1996, 1997 and 1998 by Calvin S. Krupa, President and Chief
Executive Officer, Willian Howard, Chief Operating Officer and Bradley C. Yopp,
Chief Financial Officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------- ------------
FISCAL YEAR OTHER ANNUAL SECURITIES ALL OTHER
NAME AND ENDED COMPENSATION(1) UNDERLYING COMPENSATION(2)
PRINCIPAL POSITION JANUARY 31 SALARY($) BONUS($) ($) OPTIONS(#) ($)
------------------ ----------- --------- -------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Calvin S. Krupa,........... 1998 297,348 65,000 20,947 40,000 3,200
President and Chief 1997 297,105 -- 20,947 20,000 --
Executive Officer 1996 275,144 35,000 20,336 20,000 3,000
William Howard,............ 1998 172,941 25,000 7,261 20,000 --
Chief Operating Officer
Bradley C. Yopp,........... 1998 115,371 30,000 7,825 10,000 3,017
Chief Financial 1997 109,720 -- -- 12,000 --
Officer 1995 1997 109,720 -- -- 12,000
</TABLE>
- -------------------------
(1) Includes the cost to the Company of an automobile provided to Mr. Krupa and
the cost of a disability income policy for the benefit of Mr. Krupa.
(2) Matching contributions by the Company to a 401(k) plan for the benefit of
the person named.
EMPLOYMENT AGREEMENTS
See Item 3, "Identity and Background -- Potential or Actual Conflicts of
Interest" located on page 9 of the Schedule 14D-9, for a description of the
Employment Agreements.
TRANSACTIONS INVOLVING DIRECTORS AND EXECUTIVE OFFICERS
Frank I. Harvey, a director of the Company, is an attorney with and a
shareholder of the law firm of Larkin, Hoffman, Daly & Lindgren, Ltd., which
currently serves as legal counsel to the Company and served as legal counsel to
the Company during the fiscal year ended January 31, 1998.
D-6
<PAGE> 73
EXHIBIT A
IVEX DESIGNEES
Set forth below are the names, ages, present principal occupation or
employment and employment history (covering a period of not less than five
years) of each Ivex Designee. Each such person's business address is c/o Ivex
Packaging Corporation, 100 Tri-State Drive, Lincolnshire, Illinois 60069. All
persons listed below are citizens of the United States of America.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME AGE MATERIAL POSITIONS HELD DURING PAST FIVE YEARS
---- --- ----------------------------------------------
<S> <C> <C>
George V. Bayly................ 55 Director, Chairman of the Board, President and Chief
Executive Officer of Parent since January 1991.
Frank V. Tannura............... 41 Director of Parent since August 1995. Vice President and
Chief Financial Officer of Parent since October 1989.
G. Douglas Patterson........... 40 Vice President and General Counsel of Parent since 1991.
</TABLE>
D-7
<PAGE> 1
EXHIBIT 4
COMPENSATION OF DIRECTORS
The Company pays each director who is not an employee of the Company a
director's fee of $2,500 per year. The Outside Directors' Option Plan (the
"Directors' Plan") provides for an annual non-discretionary grant of an option
to purchase 1,000 shares (2,500 shares if the director has not previously
received an option under the Directors' Plan) to each nonemployee director of
the Company, who is a director immediately after each Annual Meeting of
Shareholders. The exercise price of such options is equal to the closing price
of the Company's Common Stock on the date of grant. The options are
immediately exercisable and expire five years from the date of grant, subject
to earlier cancellation upon termination as a director. The Company does not
compensate employee directors for service on the Board of Directors.
Two members of the Board of Directors received additional compensation
from the Company during the fiscal year ended January 31, 1997. The Company
paid Mr. Thole $2,500 for services as the Company's Secretary. The Company
paid Mr. Rains a total salary of $24,231 and granted Mr. Rains a five-year,
immediately exercisable option to purchase up to 15,000 shares of the Company's
Common Stock at an exercise price of $2.75 per share. Mr. Rains received this
compensation in consideration for his service as the Company's Interim Chief
Operating Officer from November 1996 through February 1997. The Company has
also agreed to employ Mr. Rains on a part-time basis and to pay him an annual
salary of $25,000 for services to be rendered in connection with various
projects of the Company during the fiscal year ending January 31, 1998.
EMPLOYMENT AGREEMENT, TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS
The Company entered into an employment agreement with Calvin S. Krupa
on June 20, 1989, as amended on March 31, 1990 and January 3, 1992 (the
"Employment Agreement"). The Employment Agreement provides for an annual
salary to be set by the Compensation Committee, discretionary bonuses as
determined by the Compensation Committee and other employment benefits.
Pursuant to the Employment Agreement, Mr. Krupa must give 90 days notice prior
to termination and is subject to a one year covenant not to compete. Mr.
Krupa's Employment Agreement also provides for serverance pay in the amount
equal to three years' base salary in effect on the date of termination if: (i)
the Company terminates him for any reason other than "for cause" as defined in
the Employment Agreement, or if such termination occurs "for cause,"
during the 18 months following a "change in control," as defined in the
Employment Agreement, or (ii) Mr. Krupa voluntarily terminates his employment
within 18 months after a "change in control." These amounts are payable, at
the option of Mr. Krupa, in a lump sum or in semi-monthly installments.
The Company and Bradley C. Yopp are parties to a Change of Control
Termination Agreement dated February 25, 1995 (the "Change of Control
Agreement"). The Change of Control Agreement provides that following a "change
in control termination" the Company will pay Mr. Yopp a lump sum payment in an
amount equal to two times Mr. Yopp's annual compensation. A "change in control
termination" means a termination within one year of a change of control by the
Company or its successors or a termination by Mr. Yopp for "good reason" as
defined in the Change of Control Agreement. The amount payable to Mr. Yopp
under the Change of Control Agreement is subject to certain limitations set
forth in the Internal Revenue Code.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
INTRODUCTION. This report is provided by the Compensation Committee of
the Board of Directors of the Company (the "Committee"). The Committee, which
consists solely of non-employee directors, is responsible for establishing and
administering the Company's executive compensation program. The members of the
Committee do not receive awards under the Company's incentive compensation
programs. The Compensation Committee met in September 1996 to set annual
compensation and to award bonuses to the Company's executive officers based on
the Company's results for the fiscal year ended January 31, 1996.
COMPENSATION PROGRAM. The Committee is responsible for establishing,
implementing and monitoring the Company's executive compensation program. The
<PAGE> 2
Company's current executive compensation program involves a combination of base
salary, performance-based bonuses and long-term incentive awards. Base
salaries are intended to attract and retain highly-qualified executives.
Bonuses to executive officers are intended to reward short-term performance of
the executive officer and the Company. Grants of stock options by the Company
are intended to encourage and reward executive officers based upon the
Company's long-term performance and to provide executive officers with a
financial interest in the success of the Company, which aligns the executive
officers' interests with the interests of the Company's shareholders.
BASE SALARY. The philosophy of the Committee is to set base salaries
for each of the executive officers of the Company at appropriate levels for the
relative positions of the officer and the duties of the position. The Committee
has the authority to determine the salaries of the Company's Chief Executive
Officer and other executive officers, subject to the terms of pre-existing
employment agreements The Committee believes that there should be little
change from year to year in the base salary of the executive officers other
than increases due to: (i) growth of the Company's sales; (ii) growth in
responsibility of the position; or (iii) cost of living increases. The
Committee believes that additional compensation above base levels should be by
bonus based on individual performance and the financial performance of the
Company.
PERFORMANCE-BASED BONUSES. Payment of bonuses to officers of the
Company is determined based upon the Company's financial results.
LONG-TERM INCENTIVE AWARDS. The Company's long-term incentive program
consists of stock option grants which encourage achievement of long-term goals
and objectives consistent with enhancing shareholder value. Awards of stock
options provide executives with increased motivation and incentive to exert
their best efforts on behalf of the Company by increasing their personal stake
in the Company's success through the opportunity to acquire a greater equity
interest in the Company and to benefit from appreciation in the value of the
Company's stock. All stock options granted to executive officers have an
exercise price of not less than the market value of the Company's Common Stock
on the date of grant, thereby ensuring that any value derived from such options
is dependent upon subsequent increases in share value which will be realized by
shareholders generally. Executives generally must be continually employed in
order for stock options to vest and become exercisable.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. When it met in September
1996, the Committee determined that Mr. Krupa would not receive a salary
increase, which means that Mr. Krupa's annual salary will continue to be
$291,500, as set in July 1995, and that he would not receive any bonus payment
based on the Company's performance during the fiscal year ended January 31,
1996. Mr. Krupa was awarded options to purchase up to 20,000 shares of the
Company's Common Stock exercisable at a price equal to the fair market value of
a share of the Company's Common Stock on the date of grant. The options vested
and became exercisable upon grant and have a term of five years. The Committee
believes Mr. Krupa's compensation is reasonable.
The foregoing Compensation Committee Report will not be deemed
incorporated by reference by any statement incorporating by reference this
Proxy Statement, or any portion thereof, into any filing under the Securities
Act of 1933 or under the Securities Exchange Act of 1934 and shall not
otherwise be deemed filed under such Acts.
James A. Thole
John F. DeBoer
Frank I. Harvey
ULTRA PAC, INC. COMPENSATION COMMITTEE
COMPARATIVE STOCK PERFORMANCE
<PAGE> 3
The following graph compares the cumulative total shareholder return,
assuming $100 invested on January 31, 1992, as if such amount had been invested
in each of: (i) the Company's Common Stock; (ii) the stocks comprising the Dow
Jones Containers and Packaging Industrial Sector; and (iii) the stocks included
in the Dow Jones Industrial Average. The graph assumes the reinvestment of all
dividends. The Company has never paid dividends on its Common Stock. The
prices for the Company's Common Stock are closing bid prices as reported by the
Nasdaq Stock Market.
The historical stock price performance of the Company's Common Stock
shown below is not necessarily indicative of future performance. The graph
below will not be deemed incorporated by reference by any statement
incorporating by reference this Proxy Statement, or any portion thereof, into
any filing under the Securities Act of 1933 or under the Securities Exchange
Act of 1934 and shall not otherwise be deemed filed under such Acts.
[GRAPHIC OMITTED]
------- ------- -------- --------
1/31/92 1/29/93 1/31/94 1/31/95
- ------------------------------ ------- ------- -------- --------
Ultra Pac, Inc. 100 62 42 33
- ------------------------------ ------- ------- -------- --------
Dow Jones Containers and 100 105 108 100
Packaging Industrial Sector
- ------------------------------ ------- ------- -------- --------
Dow Jones Industrial Average 100 106 131 130
- ------------------------------ ------- ------- -------- --------
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Frank I. Harvey, a director of the Company, is an attorney with and a
shareholder of the law firm of Larkin, Hoffman, Daly & Lindgren, Ltd., which
currently serves as legal counsel to the Company and served as legal counsel to
the Company during the fiscal year ended January 31, 1997.
<PAGE> 4
SHARE OWNERSHIP OF MANAGEMENT
The following sets forth certain information as of the record date with
respect to shares of Common Stock beneficially owned by each executive officer
of the Company named in the Summary Compensation Table, each director of the
Company and by all executive officers and directors of the Company as a group.
Unless otherwise indicated, each of the following persons has sole voting and
investment power with respect to the shares of Common Stock set forth opposite
their respective names.
<TABLE>
<CAPTION>
Common Shares Beneficially
--------------------------
Name of Beneficial Owner Number of Shares
- ------------------------ ----------------
<S> <C>
Calvin S. Krupa 414,050 (2)
James A. Thole 228,500 (3) (4)
Frank I. Harvey 17,110 (3) (4)
John F. DeBoer 7,500 (3) (5)
Thomas F. Rains 36,349 (6)
Bradley C. Yopp 30,000 (7)
All directors and executive officers of the 759,634 (8)
Company as a group
(7 persons)
</TABLE>
- ----------------------------------------
*Less than 1%.
(1) Shares not outstanding but deemed beneficially owned by virtue of the
individual's or the group's right to acquire them as of April 22, 1997,
or within 60 days of such date, are treated as outstanding when
determining the percent of the class owned by such individual and when
determining the percent of the class owned by the group.
(2) Includes options to purchase up to 80,000 shares of Common Stock.
(3) Excludes options to be issued, effective immediately after the
Company's Annual Meeting of Shareholders, for an additional 1,000
shares to each non-employee director elected.
(4) Includes options to purchase up to 6,500 shares of the Common Stock.
(5) Includes options to purchase up to 6,500 shares of Common Stock and
1,000 shares owned jointly with Mr. DeBoer's spouse.
(6) Includes options to purchase up to 17,500 shares of Common Stock.
(7) Includes options to purchase up to 27,000 shares of Common Stock and
3,000 shares owned jointly with Mr. Yopp's spouse.
(8) Includes options to purchase up to 169,000 shares of Common Stock.
INDEPENDENT AUDITORS
<PAGE> 5
The Board of Directors has selected Divine, Scherzer & Brody, Ltd., as
the Company's independent auditors for the fiscal year ending January 31, 1998.
Representatives of Divine, Scherzer & Brody, Ltd., are expected to be present
at the Annual Meeting of Shareholders with the opportunity to make a statement
if they so desire and to respond to appropriate shareholder questions.
<PAGE> 1
Exhibit 5
EMPLOYMENT AGREEMENT
THIS AGREEMENT, is effective as of March 31, 1997, by and between Thomas F.
Rains (the Employee) and Ultra Pac. Inc., a Minnesota corporation (the
Company);
RECITALS
WHEREAS, the Company is in the business of manufacturing and
distributing thermal formed plastic packaging; and
WHEREAS, the Company has employed the Employee and desires to continue to
employ the services of the Employee, and the Employee is willing to enter into
this Agreement as set forth herein upon receipt of the consideration set forth
herein.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, it is hereby agreed:
1.) Definitions - For purposes of this Agreement, the following words
shall have the indicated meanings hereinafter set forth:
(a) The "Business" means all business developed by the Company before or
during the term of this Agreement.
(b) The "Company" means the Company and any existing or future affiliates,
including parent, subsidiaries, divisions, joint ventures, and
partnerships.
(c) "Confidential Information" means any information or compilation of
information possessed by the Company that derives independent economic
value, actual or potential, from not being generally known too, and not
being readily ascertainable by proper means by other persons who can
obtain economic value from its disclosure or use, including but not
limited to: (a) any information not generally known in the industry of the
Business regarding the Company's products, pricing of products, research,
development, marketing, servicing, business systems, and techniques; (b)
financial information concerning the Business and customers of the
Company, including, but not limited to, information concerning accounts
receivable of the customers of the Company; (c) quantity and type of
products and services purchased by customers from the Company, and (d) any
information that the Company may from time designate as "confidential,"
"proprietary," or "trade secrets" which is not generally known in the
industry of the Business.
(d) "Competing Business" means any company, person, entity, or
organization other than the Company engaged in or about to become engaged
in the developing, marketing, manufacturing, selling of any product, good,
or service which is an alternative to or which is marketed in direct
competition with any product, good, or service of the Company.
<PAGE> 2
(e) "Product" means collectively the products and services sold by the
Company to its customers.
(f) "Inventions" means discoveries, improvements, and ideas (whether or
not shown or described in writing or reduced to practice) and works of
authorship, whether or not patentable or copyrightable:
(1) Which relate directly to the Company's business;
(2) Which relate to the Company's actual or demonstrably anticipated
research or development;
(3) Which result from any work performed by the Employee for the
Company;
(4) For which equipment, supplies, facility, or trade secret
information of the Company are used; or
(5) Which is developed on any Company time.
2.) Employment - The Company hereby retains the Employee to provide such
services on behalf of the Company as the Company's COO and CEO/President may
from time to time specify. The Employee hereby accepts employment with the
Company to provide said services upon the terms and conditions hereinafter set
forth. In performance of the services hereunder, the Employee agrees to comply
with such rules, regulations, instructions, and policies, as the Company may
from time to time adopt.
3.) Term - The Company hereby retains the Employee for a term of eighteen
(18) months, beginning on March 1, 1997, and ending on August 31, 1998, unless
terminated earlier as provided by Section 11 of this Agreement. After the
initial 18 month term, this Agreement will continue month to month thereafter
until terminated by either the Company or Employee on 30 days written notice.
Notwithstanding any termination of this Agreement, the Employee's duties
regarding confidentiality and his covenant not to compete as set forth herein
will survive.
4.) Compensation - Subject to the provisions of Section 11 herein, the
Company agrees to pay, and the Employee agrees to accept for his services
rendered hereunder the following:
(a) Salary - A gross salary of $25,000 per year, which amount shall be
inclusive of all Company contributions on behalf of Employee to employee
benefit plans maintained by the Company (other than any Company
contributions attributable the Employee's pre-tax salary reduction
contributions). The Employee's salary net of Company contributions to
employee benefit plans shall be paid weekly or at such other times as may
be agreed to by the Company and Employee. Any increase in the Employee's
salary will be determined by the Company's President and/or Board of
Directors in his/their sole discretion.
2
<PAGE> 3
(b) Benefits - The Employee shall be eligible to continue participating
under the Company's employee benefit plans in accordance with the terms
of such plans. Without limiting the generality of the above statement,
Employee and his currently-covered dependents shall, for the term of this
Agreement, specifically be eligible to continue participating under the
Company's medical benefit plan as it shall from time to time exist.
5.) Stock Options - The Employee may be granted the right to purchase
certain shares of the Company's stock pursuant to the Company's Stock Option
Plan and as determined by the Company's Board of Directors.
6.) Vacation - The Employee will be entitled to vacation each year in
accordance with the Company's vacation policy, during which time his
compensation as set forth herein will be paid in full.
7.) Inventions - With respect to Inventions made, authored, or conceived
by the Employee, either solely or jointly with others, during the Employee's
employment, whether or not during normal working hours or whether or not on
the Company's premises, the Employee shall:
(a) Keep accurate, complete, and timely records of such Inventions, which
records will be the Company's property and be retained on the Company's
premises.
(b) Promptly and fully disclose and describe such Inventions in writing to
the Company.
(c) Assign (and Employee does hereby assign) to the Company all of his
rights to such Inventions and to applications for letters, patents,
and/or copyrights in all countries and to letters, patents, and/or
copyrights granted upon such Inventions in all countries.
(d) Acknowledge and deliver promptly to the Company (without charge to
the Company but at the Company's expense) such written instruments and
to do such other acts as may be necessary in the Company's opinion to
preserve property rights against forfeiture, abandonment or loss and to
obtain and maintain letters, patents, and/or copyrights and to vest the
entire right and title thereto in the Company.
8.) Confidentiality - The Employee may have access to Confidential
Information which the Company desires to protect at all times. Therefore:
(a) The Employee understands, acknowledges, and agrees that:
(1) Confidential Information includes all types of information
described in Section 1 (c) at the outset of this Agreement;
(2) The Employee's duties may involve the use of the Confidential
Information;
3
<PAGE> 4
(3) The Company has expended substantial sums of money, time, and effort
in developing such Confidential Information; and
(4) The Company will be substantially harmed in the competitive marketplace
if the Confidential Information is used to its detriment or to the
benefit of others.
(b) In recognition of the foregoing, the Employee agrees that:
(1) The Employee will not during or after employment with the Company,
directly or indirectly use or disclose any Confidential Information
to any other person, firm or company, or in any way use for his
benefit, or to the detriment of the Company, any information or
knowledge obtained during the course of his employment with the
Company, except as required in the conduct of the Company's business
or as authorized in writing by the Company; and
(2) All memoranda, notes, records, papers, and other documents and all
copies thereof relating to the Company's operation of Business and
all objects related thereto are and remain the property of the
Company; including, but not limited to, those developed,
investigated, or considered by the Company. The Employee will not
copy or duplicate any of the aforementioned documents or objects nor
use any information contained therewith, except for the Company's
benefit, either during or after his employment.
9.) Termination - In addition to the expiration of the term specified in
Section 3 herein,
(1) This Agreement will immediately terminate:
a. Upon five (5) days' notice time notice if the Employee resigns
from the Company.
b. Immediately if the Employee dies.
(b) Immediately, upon notice from the Company, if any one of the following
occurs as determined in the sole discretion of the Company's President and/or
Board of Directors:
(1) The Employee's theft of the Company's property or the Employee's
dishonesty;
(2) The Employee's material violation of the Company's rules, regulations,
instructions or policies;
4
<PAGE> 5
(3) The Company is dissolved, liquidated, merged, consolidated,
adjudicated bankrupt, or substantially all of its assets are sold;
or
(4) The Employee's commission of a crime or other act which would
materially damage the reputation of the Company.
(c) If the Employee becomes incapacitated, mentally or physically, to the
extent that a certified medical doctor with a specialty in the type of
disability, certifies the Employee is unable to perform his duties under
this Agreement.
(d) Upon termination of this Agreement for any reason, the Employee will
immediately:
(1) Discontinue servicing any customers of the Company, and the use of
any property, facilities, and services provided by the Company;
(2) Discontinue the use of any and all programs, client lists, records,
or contacts, unless a written agreement thereon provides otherwise;
(3) Return to the Company equipment, lists, documents, and all other
property of the Company; and
(4) Discontinue further representation of himself as agent, employee,
or other person connected with the Company.
10.) Covenant Not to Compete - The parties agree that the Company would be
substantially harmed if the Employee competes with the Company during
employment with the Company or after termination of employment with the
Company. Therefore, in exchange for benefits provided to the Employee
hereunder, the Employee agrees that during his employment with the Company and
for a period of one year after termination of such employment for any reason,
the Employee will not directly or indirectly, without the written consent of
the Company:
(a) Render services to or for any person, firm, or corporation or other
organization for compensation or profit, or engage in any activity that
competes with the interest of the Company or in any way assists any
Competing Business in the State of Minnesota and such other states where
the Company may establish customers or potential customers during the term
of this Agreement; provided, however, that ownership of stock or other
securities in a publicly held corporation, for which the Employee's sole
purpose is that of an investor, is not prohibited;
(b) Hire, offer to hire, entice away, or in any other way persuade or
attempt to persuade any employee, officer, agent, independent contractor,
supplier, customer, or subcontractor of the Company to discontinue their
relationship with the Company; and
(c) Vilify, criticize, or otherwise slander or defame the business or
business practices of the Company or its officers, directors, or employees.
5
<PAGE> 6
11.) Consideration - The Employee acknowledges and agrees that beyond his
continued employment with the Company, the Employee has been offered and has
voluntarily accepted the following consideration for his agreements specified
herein:
(a) Compensation payable in such amount as set forth in Section 4;
(b) Access to new Confidential Information as set forth in the provisions
of this Agreement;
12.) Remedy - The Employee understands that the Company may not have an
adequate remedy at law for the threatened breach or breach of any covenant set
forth in this Agreement, and agrees that in the event of any breach thereof the
Employee shall reimburse the Company for its reasonable attorneys' fees and
costs incurred in enforcing its rights under this Agreement; and further agrees
that in the event of a breach or a threatened breach, in addition to other
remedies which may be available to it, the Company has the right to sue in
equity and enjoin the Employee for a breach or threatened breach of this
Agreement.
13.) Assignment - The Employee may not transfer or assign this Agreement
or any of the Employee's rights or obligations hereunder.
14.) Binding Effect - This Agreement shall be binding upon and inure to
the benefit of the parties hereto, their heirs, executors, administrators,
successors, and legal representatives.
15.) Gender Clause - All pronouns and any variations thereof shall be
deemed to refer to the masculine or feminine as the identity of the person may
require.
16.) Law Governing - This Agreement will be construed and governed in
accordance with the laws of the State of Minnesota.
17.) Jurisdiction/Venue - The Company and the Employee consent to
jurisdiction of the courts of the State of Minnesota and/or the Federal
District Courts, Fourth Division, State of Minnesota, for the purpose of
resolving all issues of law, equity, or fact arising out of or in connection
with this Agreement or any other instrument or document executed or delivered
in connection herewith and that venue, for the purpose of all such suits, shall
be in Hennepin County, State of Minnesota.
18.) Entire Agreement - This Agreement contains the entire agreement
between the parties and no amendments or additions or deletions will be valid
unless made in writing and signed by the parties hereto. There is merged
herewith all prior and collateral representations, promises, and conditions
concerning the Employee and the Company. This Agreement replaces, supersedes,
and nullifies all prior agreements or arrangements between the parties relating
to the subject matter of this Agreement.
19.) Severable - In the event any portion of this Agreement is found to
be invalid or unenforceable by any court of competent jurisdiction, the same
will not affect in any respect whatsoever the validity of the remainder of this
Agreement.
6
<PAGE> 7
20.) Captions - Article, paragraph, or section titles or other headings
contained in this Agreement are for convenience only and will not be deemed a
part of the context of this Agreement.
21.) Notices - Any notice required or permitted to be given under this
Agreement will be sufficient if in writing and sent by registered or certified
mail, in the case of the Employee, to the residence of the Employee as set
forth in the employment records of the Company, or in the case of the Company,
to the principal office of the Company, whichever will be applicable.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the day and year first above written.
THE COMPANY: THE EMPLOYEE:
Ultra Pac. Inc.
By: /s/ William J. Howard /s/ Thomas F. Rains
------------------------------- -------------------------------
Its: Chief Operating Officer Thomas F. Rains
7
<PAGE> 1
Exhibit 6
EMPLOYEE CONFIDENTIALITY, NON-COMPETE
AND SEPARATION AGREEMENT
PARTIES: Company: Ultra Pac, Inc.
21925 Industrial Boulevard
Rogers, Minnesota 55374-9474
Employee: William J. Howard
11447 Anderson Lake Parkway
Eden Prairie, Minnesota 55344
Dated this 31st day of January, 1997.
AGREEMENT:
WHEREAS, the Company desires to obtain reasonable protection against
unfair competition and reasonable protection of its proprietary and
confidential trade secrets, inventions and other business information that have
been developed and acquired at substantial expense;
NOW, THEREFORE, the parties do hereby agree to the terms set forth as
follows:
1.) Inventions-
(a) Inventions." as used in this Section 1, means any discoveries,
improvements and ideas (whether or not they are in writing or reduced to
practice) or works of authorship (whether or not they can be patented or
copyrighted) that the Employee makes, authors, or conceives (either alone
or with others) and that:
(1) concern directly the Company's business or the Company's
present or demonstrably anticipated future research or
development;
(2) result from any work the Employee performs for the Company;
(3) use the Company's equipment, supplies, facilities, or trade
secret information; or
(4) the Employee develops during the time the Employee is
performing employment duties for the Company.
(b) The Employee agrees that all Inventions made, authored or conceived by
the Employee during the term of the Employee's employment with the Company
will be the Company's sole and exclusive property. The Employee will, with
respect to any Invention:
<PAGE> 2
(1) keep current, accurate, and complete records, which will belong to
the Company and will be kept and stored on the Company's premises
while the Employee is employed by the Company;
(2) promptly and fully disclose the existence and describe the nature
of the Invention to the Company in writing, and without request;
(3) assign (and the Employee does hereby assign) to the Company all
of the Employee's rights to the Invention, any applications the
Employee makes for patents or copyrights in any country, and any
patents or copyrights granted to the Employee in any country; and
(4) acknowledge and deliver promptly to the Company any written
instruments that are necessary in the Company's opinion to
preserve property rights in the Invention against forfeiture,
abandonment or loss and to obtain and maintain letters patent
and/or copyrights on the Invention and to vest the entire right
and title to the Invention in the Company.
The requirements of this subsection 1(b) do not apply to any
Invention for which no equipment, supplies, facility or trade secret
information of the Company was used and which was developed entirely
on the Employee's own time:, and which does not relate directly to the
Company's business or to the Company's actual or demonstrably
anticipated research or development.
2.) Confidential Information
(a) "Confidential Information," as used in this Section 2, means
information that is not generally known and that is proprietary to the
Company or that the Company is obligated to treat as proprietary. Any
information that the Employee reasonably considers Confidential
Information, or that the Company treats as Confidential Information
(whether the Employee or others originated it and regardless of how the
Employee obtained it) shall be deemed Confidential Information.
(b) Except as specifically authorized by an authorized officer of the
Company or by written Company, policies, the Employee will never use or
disclose Confidential Information to any person not authorized by the
Company to receive it. When the Employee's employment with the Company
ends, the Employee will promptly deliver to the Company all records and
any compositions, articles, devices, apparatus and other items that
disclose, describe or embody Confidential Information, including all
copies, reproductions and specimens of the Confidential Information in the
Employee's possession, regardless of who prepared them.
2
<PAGE> 3
3.) Trade Secrets-
(a) "Trade Secrets," as used in this Section 3 means information including
product knowledge, a formula, patterns, compilation, program, device,
method, technique, or process, that
(1) has independent economic value because it is not generally
known and not readily ascertainable by competitors; and
(2) is the subject of reasonable efforts to maintain secrecy.
(b) Except as specifically authorized by an authorized officer of the
Company or by written Company policies, the Employee will never use or
disclose a Company Trade Secret to any person not authorized by the
Company to receive it.
4.) Competitive Activities - The Employee agrees that during the term of
the Employee's employment with the Company and for a period of one year after
the Employee's employment with the Company ends:
(a) The Employee will not alone, or in any capacity with another firm:
(1) directly or indirectly engage in any commercial activity that
competes with the Company's business as the Company has
conducted it during the year before the Employee's employment
with the Company ends, within any state in the United States or
within any country in which the Company directly or indirectly
markets or services products or provides services;
(2) in any way interfere or attempt to interfere with the Company's
relationship with any of its current or potential customers,
suppliers, or lenders.
(b) The provisions of this Section 4 shall not prevent the Employee,
during such one-year period after termination, from seeking employment
which would violate subsection 4(a) so long as such employment commences
after the expiration of such one-year period.
5.) Separation Compensation - If at any time, the Employee becomes
involuntarily separated from the Company for reasons other than for
"cause," including but not limited to the bankruptcy of the Company, the
Company will pay the Employee a severance amount up to thirty-six (36)
weeks base salary at the Employee's then current base rate of compensation,
upon the Employee delivering a release of the Company in form acceptable
to the Company. "Cause" shall be defined as any one of the following:
(a) failure to show up for work;
(b) gross misrepresentation of financial or other significant Company
information;
(c) theft or stealing from the Company; or
3
<PAGE> 4
(d) moral or criminal misconduct .
The separation payments, to a total amount of thirty-six (36) weeks,
will be paid to Employee by the Company in three (3) increments of twelve
(12) weeks each with payments being made at the normal pay frequency and
on the normal payroll dates as follows:
(1) The initial twelve (12) week increment shall be paid following
Employee's termination of employment from the Company, for reasons
other than for "cause," as defined above;
(2) After the initial twelve (12) week increment has lapsed, if Employee
has still not found suitable employment, an additional twelve (12)
week increment of payments will be made; and
(3 ) After the second twelve (12) week increment has lapsed (i.e.,
twenty-four (24) weeks after termination of employment from the
Company), if Employee has still not found suitable employment, the
final twelve (12) week increment of payments will be made.
All taxes will be withheld in accordance with state and federal tax laws.
In the event that the Company is sold and Employee is terminated, Company
will pay a severance amount as set forth In the change of control
agreement between the Company and Employee in lieu of the foregoing.
6.) Remedy - The Employee understands that the Company may not have an
adequate remedy at law for the threatened breach or breach of any covenant set
forth in this Agreement and agrees that in the event of any breach, or
threatened breach, the Employee shall reimburse the Company for its reasonable
attorneys' fees and costs incurred in enforcing its rights under this Agreement.
The Employee further agrees that in the event of a breach or a threatened
breach, in addition to other remedies which may be available to it, the Company
has the right to sue in equity and enjoin the Employee for a breach or
threatened breach of this Agreement.
7.) Miscellaneous-
(a) Modification - This Agreement may be modified or amended Only in
writing signed by both the Company and the Employee
(b) Governing Laws - The laws of the State of Minnesota will govern the
validity, construction and performance of this Agreement. Any legal
proceedings related to this Agreement will be brought in an appropriate
Minnesota court, and both the Company and the Employee hereby consent to
the exclusive jurisdiction of the courts in Minnesota for this purpose
(c) Construction - Wherever possible, each provision of this Agreement
will be interpreted so that it is valid under the applicable law. If any
provision of this Agreement
4
<PAGE> 5
is to any extent invalid under the applicable law, that provision will
still be effective to the extent it remains valid, the reminder of this
Agreement also will continue to be valid, and the entire Agreement will
continue to be valid in other jurisdictions.
(d) Captions - The headings in this Agreement are for convenience only
and do not affect the interpretation of this Agreement.
(e) Notices - All notices and other communications required or permitted
under this Agreement shall be in writing and sent by registered
first-class mail.
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement as of the date first above written.
COMPANY:
ULTRA PAC., INC
By
-----------------------------
Its
EMPLOYEE:
/s/ William J. Howard
-------------------------------
William J. Howard
5
<PAGE> 1
EXHIBIT 9
ORIGINAL
ULTRA PAC, INC.
1997 STOCK OPTION PLAN
<PAGE> 2
ULTRA PAC, INC.
1997 STOCK OPTION PLAN
TABLE OF CONTENTS
1.) PURPOSES...............................................................1
2.) DEFINITIONS............................................................1
3.) OPTION STOCK AVAILABLE UNDER PLAN......................................3
4.) ADMINISTRATION.........................................................3
5.) ELIGIBILITY FOR INCENTIVE STOCK OPTIONS................................3
6.) ELIGIBILITY FOR NON-QUALIFIED STOCK OPTIONS............................4
7.) TERMS AND CONDITIONS OF OPTIONS........................................4
(a) Number of Shares and Option Price................................4
(b) Time and Manner of Exercise of Option............................4
(c) Termination of Employment, Except Death or Disability............5
(d) Death or Disability of Optionee..................................5
(e) Manner of Exercise of Options....................................6
(f) Option Certificate...............................................6
(g) Delivery of Certificate..........................................6
(h) Other Provisions.................................................7
8.) ADJUSTMENTS............................................................7
9.) CHANGE IN CONTROL......................................................7
(a) Change in Control................................................7
(b) Acceleration of Vesting..........................................8
(c) Cash Payment for Options.........................................8
(d) Limitation on Change in Control Payments.........................9
10.) RIGHTS AS STOCKHOLDER..................................................9
11.) NO OBLIGATION TO EXERCISE OPTION; MAINTENANCE OF
RELATIONSHIP...........................................................9
12.) WITHHOLDING TAXES......................................................9
13.) PURCHASE FOR INVESTMENT; RIGHTS OF HOLDER ON SUBSEQUENT
REGISTRATION..........................................................10
14.) MARKET STANDOFF.......................................................10
15.) MODIFICATION OF OUTSTANDING OPTIONS...................................10
16.) FOREIGN EMPLOYEES.....................................................11
17.) APPROVAL OF SHAREHOLDERS..............................................11
18.) LIQUIDATION...........................................................11
19.) RESTRICTIONS ON ISSUANCE OF SHARES....................................11
20.) TERMINATION AND AMENDMENT OF THE PLAN.................................12
21.) MODIFICATIONS TO THE PLAN.............................................12
22.) INDEMNIFICATION.......................................................12
23.) GENERAL PROVISIONS....................................................12
<PAGE> 3
ULTRA PAC, INC.
1997 STOCK OPTION PLAN
1.) Purposes.
The principal purposes of the Ultra Pac. Inc. (the "Corporation") 1997
Stock Option Plan (the "Plan") are: (a) to improve individual performance by
providing long-term incentives and rewards to certain employees, directors
and/or consultants of the Corporation; (b) to assist the Corporation in
attracting, retaining and motivating certain employees, directors and/or
consultants with experience and ability; and (c) to align the interests of such
persons with those of the Corporation's shareholders.
Options granted under this Plan may either be Incentive Stock Options
qualified under Section 422 of the Code or Non-Qualified Stock Options.
2.) Definitions.
For purposes of this Plan, the following terms shall have the meanings
indicated below:
(a) "Capital Stock" - any of the Corporation's authorized but
unissued shares of voting common stock, no par value designation.
(b) "Code" - the Internal Revenue Code of 1986, as amended from time
to time.
(c) "Committee" - a committee consisting solely of not less than two
members of the Board of Directors of the Corporation who are "Non-Employee
Directors" within the meaning of and to the extent required by the general
rules and regulations promulgated pursuant to Section 16 of the Exchange
Act (the "Section 16 Regulations"). The term "Committee" shall refer to
the Board of Directors of the Corporation during such times as no
committee is appointed by the Board of Directors.
(d) "Corporation" - Ultra Pac. Inc., a Minnesota corporation, and any
of its Subsidiaries or its Parent.
(e) "Exchange Act" - the Securities Exchange Act of 1934, as amended.
(f) "Fair Market Value" - the price per share determined as follows:
(a) if the security is listed for trading on one or more national
securities exchanges or is quoted on the NASDAQ National Market System,
the reported last sales price on such principal exchange or system on the
date in question (if such security shall not have been traded on such
principal exchange on such date, the reported last sales price on such
principal exchange on the first day prior thereto on which such security
was so traded); or (b) if the security is not listed for trading on a
national securities exchange and is not quoted on the NASDAQ National
Market System but is quoted on the NASDAQ Small Cap System or is otherwise
traded in the over-the-counter market, the mean of the highest and lowest
bid prices for such security on the date in question (if there are no such
bid prices for such security on such date, the mean of the highest and
lowest bid prices on the first day prior
<PAGE> 4
thereto on which such prices existed); or (c) if neither (a) nor (b)is
applicable, by any means deemed fair and reasonable by the Committee (as
defined above), which determination shall be final and binding on all
parties.
(g) "Incentive Stock Option" - an option defined in Section 422 of the
Code to purchase shares of the Capital Stock of the Corporation. Incentive
Stock Options granted hereunder are intended to qualify as "incentive
stock options" under the Code. If any provision of this Plan is
susceptible to more than one interpretation, such interpretation shall be
given thereto as is consistent with the Incentive Stock Options granted
under this Plan being treated as incentive stock options under the Code.
(h) "Non-Qualified Stock Option" - an option to purchase Capital Stock of
the Corporation not intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code.
(i) "Option" - the term shall refer to either an Incentive Stock Option
or a Non-Qualified Stock Option.
(j) "Option Agreement" - a written agreement pursuant to which the
Corporation grants an option to an Optionee and sets the terms and
conditions of the Option.
(k) "Option Date" - the date upon which an Option Agreement for an
Option granted pursuant to this Plan is duly executed by or on behalf of
the Corporation.
(l) "Option Stock" - the voting common stock of the Corporation
(subject to adjustment as described in Section 8) reserved for Options
pursuant to this Plan, or any other class of stock of the Corporation
which may be substituted therefor by exchange, stock split or otherwise.
(m) "Optionee" - an officer, management level employee, other employee,
consultant, or director of the Corporation or one of its Subsidiaries to
whom an option has been granted under the Plan.
(n) "Plan" - this Ultra Pac. Inc. 1997 Stock Option Plan, as amended
hereafter from time to time.
(o) A "Subsidiary" - any corporation in an unbroken chain of
corporations beginning with the Corporation, if, at the time of granting
the option, each of the corporations other than the last corporation in
the chain owns stock possessing more than fifty percent (50%) of the total
combined voting power of all classes of stock in one of the other
corporations in such chain. The term shall include any subsidiaries which
become such after adoption of this Plan.
(p) A "Parent" - a corporation that directly, or indirectly through
related corporations, owns more than fifty percent (50%) of the voting
power of the shares entitled to vote for directors of the Corporation. The
term shall include a corporation which becomes such after adoption of this
Plan.
2.
<PAGE> 5
(q) "Securities Act" - the Securities Act of 1933, as amended.
3.) Option Stock Available Under Plan.
The Corporation's authorized Capital Stock in an amount equal to 500,000
shares is hereby made available, and shall be reserved for issuance under this
Plan. The aggregate number of shares available under this Plan shall be
subject to adjustment on the occurrence of any of the events and in the manner
set forth in Section 8. Except as provided in Section 8, in no event shall the
number of shares reserved be reduced below the number of shares issuable upon
exercise of outstanding Options. If an Option shall expire or terminate for
any reason without having been exercised in full, the unpurchased shares,
shall (unless the Plan shall have been terminated) become available for other
Options under the Plan.
4.) Administration.
The Plan shall be administered by the Committee. The Corporation shall
grant Options pursuant to the Plan upon determinations of the Committee as to
which of the eligible persons shall be granted Options, the number of shares
to be optioned and the term during which any such Options may be exercised.
The Committee may from time to time adopt rules and regulations for carrying
out the Plan and shall have authority and discretion to interpret and construe
any provision of the Plan. Each determination, interpretation or other action
made or taken by the Committee pursuant to the provisions of the Plan shall be
final and conclusive. No member of the Committee will be liable for any action
or determination made in good faith with respect to the Plan or any Option
granted under the Plan.
5.) Eligibility for Incentive Stock Options.
Incentive Stock Options may only be granted to an officer, management
level employee or other employee of the Corporation or any of its
Subsidiaries. A director of the Corporation who is not also an employee shall
not be eligible to receive an Incentive Stock Option. In selecting the
employees to whom Incentive Stock Options shall be granted, as well as
determining the number of shares subject to each Option, the Committee shall
take into consideration such factors as it deems relevant in connection with
accomplishing the purposes of the Plan.
(a) For any calendar year, the aggregate Fair Market Value
(determined at the Option Date) of the stock with respect to which any
Incentive Stock Options are exercisable for the first time by any
individual employee (under all Incentive Stock Option plans of the
Corporation, the Parent, and all Subsidiary corporations) shall not exceed
$100,000 (or such other amount as may be prescribed by the Code from time
to time).
(b) Subject to the provisions of Section 3, an employee who has been
granted an Option may, if he or she is otherwise eligible, be granted an
additional Option or Options if the Committee shall so determine.
(c) No Incentive Stock Option may be granted under this Plan later
than the expiration of ten (10) years from the effective date of the Plan.
3.
<PAGE> 6
(d) To the extent that the aggregate Fair Market Value (determined as
of the date an Incentive Stock Option is granted) of the shares of Option
Stock with respect to which the Incentive Stock Options are exercisable
for the first time by a recipient during any calendar year (under the Plan
and any other incentive stock option plans of the Corporation or any
Subsidiary or Parent) exceeds $100,000 (or such other amount as may be
prescribed by the Code from time to time), such excess Options will be
treated as NonQualified Stock Options. The determination will be made by
taking Incentive Stock Options into account in the order in which they
were granted. If such excess only applies to a portion of an Incentive
Stock Option, the Committee, in its discretion, will designate which
shares will be treated as shares to be acquired upon exercise of an
Incentive Stock Option.
6.) Eligibility Non-Qualified Stock Options.
Non-Qualified Stock Options may be granted only to an officer, director,
management level employee, other employee or consultant of the Corporation or
a Subsidiary. No further restrictions are placed on the Committee in
determining eligibility for granting Non-Qualified Stock Options.
7.) Terms and Conditions of Options.
Whenever the Committee shall designate an Optionee, it shall communicate
to the Secretary of the Corporation the name of the Optionee, the number of
shares to be optioned and such other terms and conditions as it shall
determine, not inconsistent with the provisions of this Plan. The President or
other officer of the Corporation shall then enter into an Option Agreement
with the Optionee, complying with and subject to the following terms and
conditions and setting forth such other terms and conditions of the Option as
determined by the Committee:
(a) Number of Shares and Option Price.
The Option Agreement shall state the total number of shares to which it
pertains. The price of Option Stock for an Incentive Stock Option, shall
be not less than one hundred percent (100%) of the Fair Market Value of
the Option Stock at the Option Date. The price of the Option Stock for a
Non-Qualified Stock Option shall be determined by the Committee and may be
less than the Fair Market Value at the Option Date. In the event an
Incentive Stock Option is granted to an employee, who, at the Option Date,
owns more than ten percent (10%) of the total combined voting power of all
classes of the Corporation's stock then outstanding, the price of the
shares of common stock which will be covered by such Option shall be at
least one hundred ten percent (110%) of the Fair Market Value of the
common stock at the Option Date. The Option price shall be subject to
adjustment as provided in Section 8 hereof.
(b) Time and Manner of Exercise of Option.
The vesting and time of exercise of each Option shall be determined
from time to time by the Committee and shall be set forth in the Option
Agreement with each Optionee. Notwithstanding the foregoing, no option may
be exercised after ten (10) years from the
4.
<PAGE> 7
date on which the option was granted; provided that no incentive stock
option granted to a 10% Holder may be exercised after five (5) years from
the date on which it was granted.
(c) Termination of Employment. Except Death or Disabilitv.
In the event that an employee or director Optionee shall cease to be
employed by the Corporation for any reason other than his or her death,
disability or "for cause," such Optionee shall have the right to exercise
any vested outstanding Options which were exercisable at the time of
termination of employment at any time within three (3) months after the
termination of the employee or until the earlier date of termination
thereof under this Plan or the Option Agreement. Any vested Options not
exercised within the three (3) month period shall terminate at the
expiration of such period. In the event that a consultant Optionee shall
cease to be engaged by the Corporation for any reason, all Options held by
such Optionee shall immediately terminate. In the event that an employee
Optionee shall be terminated "for cause" including but not limited to: (i)
willful breach of any agreement entered into with the Corporation; (ii)
misappropriation of the Corporation's property, fraud, embezzlement,
breach of fiduciary duty, other acts of dishonesty against the
Corporation; or (iii) conviction of any felony or crime involving moral
turpitude, the Option shall terminate as of the date of the Optionee's
termination of employment.
(d) Death or Disability of Optionee.
If an employee Optionee shall die or become disabled within the definition
of Section 22(e)(3) of the Code: (i)while in the employ of the Corporation
or any Subsidiary or (ii) while any Options remain exercisable pursuant to
paragraph (c) of this section after the termination of his or her
employment with the Corporation or any Subsidiary as provided in paragraph
(c) of this section (other than "for cause"), and in either case shall not
have fully exercised his or her vested Options, any vested Options granted
pursuant to the Plan which were exercisable at the date of termination of
employment shall be exercisable only within six (6) months following his
or her death or date of disability or until the earlier originally stated
expiration thereof. In the case of death, such Option shall be exercised
pursuant to subparagraph (e) of this Section by the person or persons to
whom the Optionee's rights under the Option shall pass by the Optionee's
will or by the laws of descent and distribution, and only to the extent
that such Options were exercisable at the time of death.
(e) Transfer of Option. Each Incentive Stock Option granted hereunder
shall not be transferable by the Optionee other than by will or by the
laws of descent and distribution, and shall be, during the Optionee's
lifetime, exercisable only by the Optionee or Optionee's guardian or legal
representative. Each Non-Qualified Stock Option granted hereunder may be
transferred by the Optionee to a member of the Optionee's immediate
family, to a trust established for the benefit of the Optionee or a member
of the Optionee's immediate family, or to a charitable non-profit
organization. Except as permitted by the preceding sentences, each Option
granted under the Plan and the rights and privilege thereby conferred
shall not be transferred, assigned or pledged in any way (whether by
operation of law or otherwise), and shall not be subject to execution,
5.
<PAGE> 8
attachment or similar process. Upon any attempt to so transfer, assign,
pledge or otherwise dispose of the Option, or of any right or privilege
conferred thereby, contrary to the provisions of the Option or the Plan,
or upon levy of any attachment or similar process upon such rights and
privileges, the Option, and such rights and privileges, shall immediately
become null and void. A transfer of Non-Qualified Stock Options under the
terms of the Plan may result in the termination of the Company's
eligibility to register option stock under the Securities Act and
Optionees should make inquiry as to eligibility for registration prior to
exercising any Option.
(e) Manner of Exercise of Options.
An Option may be exercised, in whole or in part, at such time or times
and with such rights with respect to such shares which have accrued and
are in effect. Such Option shall be exercisable only by: (i) written
notice to the Corporation of intent to exercise the Option with respect to
a specified number of shares of stock; (ii) tendering the original Option
Agreement to the Corporation; and (iii) payment to the Corporation of the
amount of the Option purchase price for the number of shares of stock with
respect to which the Option is then exercised. Payment of the Option
purchase price may be made in cash (including certified check, bank draft
or postal or express money order), or by any other method of payment which
the Committee shall approve and, in the case of an Incentive Stock Option,
which shall not be inconsistent with the provisions of Section 422 of the
Code; provided, however, that there shall be no such exercise at any one
time as to fewer than 100 shares (or such lesser number of shares as the
Committee may from time to time determine in its discretion) or all of the
remaining shares then purchasable by the Optionee or person exercising the
Option. When shares of stock are issued to the Optionee pursuant to the
exercise of an Option, the fact of such issuance shall be noted on the
Option Agreement by the Corporation before the Option Agreement is
returned to the Optionee. When all shares of Optioned stock covered by the
Option Agreement have been issued to the Optionee, or the Option shall
expire, the Option Agreement shall be canceled and retained by the
Corporation.
(f) Option Certificate.
The Board of Directors shall have discretion to issue a certificate
representing an Option granted pursuant to this Plan. Such certificate
shall be surrendered to the Corporation upon exercise of the Option.
(g) Delivery of Certificate.
Except where shares are held for unpaid withholding taxes, between
fifteen (15) and thirty (30) days after receipt of the written notice and
payment specified above, the Corporation shall deliver to the Optionee
certificates for the number of shares with respect to which the Option has
been exercised, issued in the Optionee's name; provided, however, that
such delivery shall be deemed effected for all purposes when the
Corporation, or the stock transfer agent for the Corporation, shall have
deposited such certificates in the United States mail, postage prepaid,
addressed to the Optionee and the address specified in the written notice
of exercise.
6.
<PAGE> 9
(h) Other Provisions.
The Option Agreements under this Section shall contain such other
provisions as the Committee shall deem advisable.
8.) Adjustments.
In the event that the outstanding shares of the common stock of the
Corporation are changed into or exchanged for a different number or kind of
shares or other securities of the Company or of another corporation by reason
of any reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, combination of shares or dividends payable in
capital stock, appropriate adjustment shall be made in the number and kind of
shares as to which Options may be granted under the Plan and as to which
outstanding Options or portions thereof then unexercised shall be exercisable,
to the end that the proportionate interest of the participant shall be
maintained as before the occurrence of such event; such adjustment in
outstanding Options shall be made without change in the total price applicable
to the unexercised portion of such Options and with a corresponding adjustment
in the Option Price per share. No such adjustment shall be made which shall,
within the meaning of any applicable sections of the Code, constitute a
modification, extension or renewal of an Option or a grant of additional
benefits to a participant.
If the Corporation is a party to a merger, consolidation, reorganization
or similar corporate transaction and if, as a result of that transaction, its
shares of common stock are exchanged for: (i) other securities of the
Corporation or (ii) securities of another corporation which has assumed the
outstanding options under the Plan or has substituted for such Options its own
Options, then each Optionee shall be entitled (subject to the conditions stated
herein or in such substituted Options, if any), in respect of that Optionee's
Options, to purchase that amount of such other securities of the Corporation or
of such other corporation as is sufficient to ensure that the value of the
Optionee's Options immediately before the corporate transaction is equivalent
to the value of such Options immediately after the transaction, taking into
account the Option Price of the Option before such transaction, the fair market
value per share of the common stock immediately before such transaction and the
fair market value immediately after the transaction, of the securities then
subject to that Option (or to the option substituted for that Option, if any).
Upon the happening of any such corporate transaction, the class and aggregate
number of shares subject to the Plan which have been heretofore or may be
hereafter granted under the Plan shall be appropriately adjusted to reflect the
events specified in this clause.
9.) Change in Control.
(a) Change in Control.
For purposes of this Section 9(a), a "Change in Control" of the
Corporation will mean (i) the sale, lease, exchange or other transfer of
substantially all of the assets of the Corporation (in one transaction or
in a series of related transactions) to a person or entity that is not
controlled, directly or indirectly, by the Corporation, (ii)a merger or
consolidation to which the Corporation is a party if the stockholders of
the Corporation immediately prior to effective date of such merger or
consolidation do not have
7.
<PAGE> 10
"beneficial ownership" (as defined in Rule 13d-3 under the Exchange
Act) immediately following the effective date of such merger or
consolidation of more than 80% of the combined voting power of the
surviving corporation's outstanding securities ordinarily having the right
to vote at elections of directors, or (iii) a change in control of the
Corporation of a nature that would be required to be reported pursuant to
Section 13 or 15(d) of the Exchange Act, whether or not the Corporation is
then subject to such reporting requirements, including, without
limitation, such time as (1) any person becomes, after the effective date
of the Plan, the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of 40% or more of the combined
voting power of the Corporation's outstanding securities ordinarily having
the right to vote at elections of directors, or (2) individuals who
constitute the Board of Directors on the effective date of the Plan cease
for any reason to constitute at least a majority of the Board, provided
that any person becoming a director subsequent to the effective date of
the Plan whose election, or nomination for election by the Corporation's
stockholders, was approved by a vote of at least a majority of the
directors comprising the Board on the effective date of the Plan will, for
purposes of this clause (2), be considered as though such persons were a
member of the Board of Directors on the effective date of the Plan.
(b) Acceleration of Vesting.
Without limiting the authority of the Committee under Section 4 of the
Plan, if a Change in Control of the Corporation occurs, then, if approved
by the Committee in its sole discretion either in an agreement evidencing
an Option grant at the time of grant or at any time after the grant of an
Option, all Options will become immediately exercisable in full and will
remain exercisable in accordance with the terms of the Plan; provided,
however, that a recipient of Incentive Stock Options may elect that such
acceleration of vesting not apply with respect to some or all of the
Incentive Stock Options granted to him by so notifying the Committee in
writing within three (3) business days of being notified of the
Committee's actions pursuant to this Section 9(b).
(c) Cash Payment for Options.
If a Change in Control of the Corporation occurs, then the Committee in
its sole discretion either in an agreement evidencing an Option grant at
the time of grant or at any time after the grant of an Option, and without
the consent of any Option recipient effected thereby, may determine that
some or all recipients holding outstanding Options will receive, with
respect to and in lieu of some or all of the shares of Option Stock, as of
the effective date of any such Change in Control of the Corporation, cash
in an amount equal to the excess of the Fair Market Value of such shares
either immediately prior to the effective date of such Change in Control
of the Corporation or, if greater, determined on the basis of the amount
paid as consideration by the other party(ies) to the Change in Control
transaction over the exercise price per share of such Options.
8.
<PAGE> 11
(d) Limitation on Chance in Control Payments.
Notwithstanding anything in Section 9(b) or 9(c) of the Plan to the
contrary, if the Corporation is then subject to the provisions of Section
280G of the Code, and if the acceleration of the vesting of an Option as
provided in Section 9(b) or the payment of cash in exchange for all or
part of an Option as provided in Section 9(c) (which acceleration or
payment could be deemed a "payment" within the meaning of Section
280G(b)(2) of the Code), together with any other payments which such
recipient has the right to receive from the Corporation or any corporation
that is a member of an "affiliated group" (as defined in Section 1504(a)
of the Code without regard to Section 1504(b) of the Code) of which the
Corporation is a member, would constitute a "parachute payment" (as
defined in Section 280G(b)(2) of the Code), then the payments to such
recipient pursuant to Section 9(b) or 9(c) will be reduced to the largest
amount as will result in no portion of such payments being subject to the
excise tax imposed by Section 4999 of the Code; provided, however, that if
such recipient is subject to a separate agreement with the Corporation or
a Subsidiary which specifically provides that payments attributable to one
or more forms of employee stock incentives or to payments made in lieu of
employee stock incentives will not reduce any other payments under such
agreement, even if it would constitute an excess parachute payment, then
the limitations of this Section 9(d) will, to that extent, not apply.
10.) Rights as Stockholder.
An Optionee shall not, by reason of any Option granted hereunder, have
any right of a stockholder of the Corporation with respect to the shares
covered by his or her Option until such shares shall have been issued to the
Optionee.
11.) No Obligation to Exercise Option: Maintenance of Relationship.
The granting of an Option shall impose no obligation upon the Optionee to
exercise such Option. Nothing in the Plan or in any Option Agreement entered
into pursuant hereto shall be construed to confer upon any Option holder any
right to continue as an employee, consultant or member of the Corporation's
Board of Directors or interfere in any way with the right of the Corporation
to terminate his or her relationship with the Corporation at any time.
12.) Withholding Taxes.
Whenever under the Plan shares of Option Stock are to be issued upon
exercise of the Options granted hereunder and prior to the delivery of any
certificate or certificates for said shares by the Corporation, the Corporation
shall have the right to require the Optionee to remit to the Corporation an
amount sufficient to satisfy any federal and state withholding or other
employment taxes resulting from such exercise. In the event that withholding
taxes are not paid within five days after the date of exercise, to the extent
permitted by law the Corporation shall have the right, but not the obligation,
to cause such withholding taxes to be satisfied by reducing the number of
shares of stock deliverable or by offsetting such withholding taxes against
amounts otherwise due from the Corporation to the Optionee. If withholding
taxes are paid by
9.
<PAGE> 12
reduction of the number of shares deliverable to Optionee, such shares shall
be valued at the Fair Market Value as of the fifth business day following the
date of exercise.
13.) Purchase for Investment: Rights of Holder on Subsequent Registration.
Unless the shares to be issued upon exercise of an Option granted under
the Plan have been effectively registered under the Securities Act, the
Corporation shall be under no obligation to issue any shares covered by any
Option unless the person who exercises such Option, whether such exercise is
in whole or in part, shall give a written representation and undertaking to
the Corporation which is satisfactory in form and scope to counsel for the
Corporation and upon which, in the opinion of such counsel, the Corporation
may reasonably rely, that he or she is acquiring the shares issued to him or
her pursuant to such exercise of the Option for his or her own account as an
investment and not with a view to, or for sale in connection with, the
distribution of any such shares, and that he or she will make no transfer of
the same except in compliance with any rules and regulations in force at the
time of such transfer under the Securities Act, or any other applicable law,
and that if shares are issued without such registration a legend to this
effect may be endorsed on the securities so issued and a "stop transfer"
restriction may be placed in the stock transfer records of the Corporation. In
the event that the Company shall, nevertheless, deem it necessary or desirable
to register under the Securities Act or other applicable statutes any shares
with respect to which an Option shall have been exercised, or to qualify any
such shares for exemption from the Securities Act or other applicable
statutes, then the Corporation shall take such action at its own expense and
may require from each participant such information in writing for use in any
registration statement, prospectus, preliminary prospectus or offering
circular as is reasonably necessary for such purpose and may require
reasonable indemnity to the Company and its officers and directors from such
holder against all losses, claims, damages and liabilities arising from such
use of the information so furnished and caused by any untrue statement of any
material fact required to be stated therein or necessary to make the statement
therein not misleading in light of the circumstances under which they were
made.
14.) Market Standoff.
To the extent requested by the Corporation and any underwriter of
securities of the Corporation in connection with a firm commitment
underwriting, no holder of any shares of Option Stock will sell or otherwise
transfer any such shares not included in such underwriting, or not previously
registered pursuant to a registration statement filed under the Securities
Act, during the one hundred and twenty (120) day period following the
effective date of the registration statement filed with the Securities and
Exchange Commission in connection with such offering.
15.) Modification of Outstanding Options.
The Committee may accelerate the exercisability of an outstanding Option
and may authorize modification of any outstanding Option with the consent of
the Optionee when and subject to such conditions as are deemed to be in the
best interests of the Corporation and in accordance with the purposes of the
Plan.
10.
<PAGE> 13
16.) Foreign Employees.
Without amending the Plan, the Committee may grant Options to eligible
employees who are foreign nationals on such terms and conditions different
from those specified in this Plan as may in the judgment of the Commiittee be
necessary or desirable to foster and promote achievement of the purposes of
the Plan, and, in furtherance of such purposes the Committee may make such
modification, amendments, procedures, subplans and the like as may be
necessary or advisable to comply with provisions of laws in other countries in
which the Corporation operates or has employees.
17.) Approval of Shareholders.
This Plan is expressly subject to approval of the Corporation's
shareholders, and if it is not so approved on or before twelve (12) months
after the date of adoption of this Plan by the Board of Directors, the Plan
shall not come into effect and any Options granted pursuant to this Plan shall
be deemed canceled.
18.) Liquidation.
Upon the complete liquidation of the Corporation, any unexercised Options
theretofore granted under this Plan shall be deemed canceled, except as
otherwise provided in Section 8 in connection with a merger, consolidation or
reorganization of the Corporation.
19.) Restrictions on Issuance of Shares.
Notwithstanding the provisions of Section 7, the Corporation may delay
the issuance of shares covered by the exercise of any Option and the delivery
of a certificate for such shares until one of the following conditions shall
be satisfied:
(a) The shares with respect to which the Option has been exercised are at
the time of the issue of such shares effectively registered under
applicable Federal and state securities acts as now in force or hereafter
amended; or
(b) A no-action letter in respect of the issuance of such shares shall
have been obtained by the Corporation from the Securities and Exchange
Commission and any applicable state securities commissioner; or
(c) Counsel for the Corporation shall have given an opinion, which
opinion shall not be unreasonably conditioned or withheld, that such
shares are exempt from registration under applicable federal and state
securities acts as now in force or hereafter amended.
It is intended that all exercise of Options shall be effective, and the
Corporation shall use its best efforts to bring about compliance with the
above conditions within a reasonable time, except that the Corporation shall
be under no obligation to cause a registration statement or a post-effective
amendment to any registration statement to be prepared at its expense solely
for the purpose of covering the issue of shares in respect of which any option
may be exercised.
11.
<PAGE> 14
20.) Termination and Amendment of the Plan.
This Plan shall terminate ten (10) years after the date the Plan is
adopted by the Board or the Corporation's shareholders, whichever is earlier,
or at such earlier time as the Board of Directors shall determine. Any
termination shall not affect any Options then outstanding under the Plan. The
Plan shall also terminate at such earlier date that Options with respect to
all shares of Option Stock have been granted and exercised.
21.) Modifications to the Plan.
The Board may make such modifications of the Plan as it shall deem
advisable, but may not, without further approval of the stockholders of the
Corporation, except as provided in Section 8 hereof, (a) increase the number
of shares reserved for Options under this Plan, (b) change the manner of
determining the Option price for Incentive Stock Options, (c) increase the
maximum term of the Options provided for herein, or (d) change the class of
persons eligible to receive Options under the Plan.
22.) Indemnification.
In addition to such other rights of indemnification as they may have and
subject to limitations of applicable law, the members of the Committee shall
be indemnified by the Corporation against all costs and expenses reasonably
incurred by them in connection with any action, suit or proceeding to which
they or any of them may be a party by reason of any action taken or failure to
act under or in connection with the Plan or any rights granted thereunder and
against all amounts paid to them in settlement thereof or paid by them in
satisfaction of a judgment of any such action, suit or proceeding. The
Committee member or members shall notify the Corporation in writing, giving
the Corporation an opportunity at its own cost to defend the same before such
Committee member or members undertake to defend the same on their own behalf.
[THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
12.
<PAGE> 15
23.) General Provisions.
(a) If any day on or before which action under the Plan must be taken
falls on a Saturday, Sunday, or legal holiday, such action may be taken
on the next succeeding day not a Saturday, Sunday or legal holiday.
(b) To the extent that federal laws do not otherwise control, the Plan
and all determinations made and actions taken pursuant hereto shall be
governed by and construed under the laws of the State of Minnesota.
Adopted by the Board of Directors: November 13, 1997
IN WITNESS WHEREOF, the undersigned hereby acknowledges that the
Corporation has caused this document to be finalized and approved as the
"Ultra Pac. Inc. 1997 Stock Option Plan" as of this 4th day of December ,1997.
ULTRA PAC, INC.
By /s/ Calvin S. Krupa
----------------------------
Calvin S. Krupa
Its: Chief Executive Officer
Approved by the Shareholders: ------------------------
---------,----.
13.
<PAGE> 1
Exhibit 11
CHANGE OF CONTROL TERMINATION AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into this 13th day of
November 1997, by and between ULTRA PAC, INC., a Minnesota corporation
("Ultra Pac"), and THOMAS V. BISSELL, an individual residing in the State of
Minnesota (the "Executive").
RECITALS
A. The parties recognize that the Executive's contribution to the growth
and success of Ultra Pac has been substantial. The Board of Directors of Ultra
Pac (the "Board") desires to provide for the continued employment of the
Executive and to make certain changes in the Executive's employment
arrangements with Ultra Pac which the Board has determined will reinforce and
encourage the continued attention and dedication of the Executive as a member
of the management of Ultra Pac.
B. It is expressly recognized by the parties that the Executive's
employment with Ultra Pac and agreement to be bound by the terms of this
Agreement represent a substantial commitment to Ultra Pac in terms of the
Executive's personal and professional career and a foregoing of present and
future career options by the Executive, for all of which Ultra Pac receives
substantial value.
C. The parties recognize that a Change of Control, as defined herein, is
likely to result in material alteration or diminishment of the Executive's
position and responsibilities and substantially frustrate the purpose of the
Executive's commitment to Ultra Pac and forbearance of other career options.
D. The parties recognize that in light of the above-described commitment
and forbearance of other career options, it is essential that, for the benefit
of Ultra Pac and its stockholders, provision be made for a Change in Control
Termination, as defined herein, in order to enable the Executive to effectively
continue in the Executive's position in the face of inherently disruptive
circumstances arising from the possibility of a Change of Control of Ultra Pac,
although no such change is now contemplated or foreseen.
E. The parties have previously entered into agreements and undertakings
with respect to the Executive's employment and compensation, and the parties
wish to supplement such previous agreements and undertakings.
NOW, THEREFORE, in consideration of the foregoing recitals, the
Executive's continued employment with and by Ultra Pac, and the mutual benefits
to be gained by the performance hereof, the parties hereto agree as follows:
1.) Definitions. For purposes of this Agreement, the following definitions
shall be applied:
<PAGE> 2
(a) "Base Salary" shall mean regular cash compensation paid on a periodic
basis exclusive of benefits, bonuses or incentive payments, if any.
(b) "Board" or "Board of Directors" shall mean the board of directors of
Ultra Pac.
(c) "Change of Control" shall mean any merger, combination, sale,
transfer, exchange, reorganization, or other transaction whereby:
(1) any "person" (as such term is defined in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934), entity, or group
of associated persons or entities acting in concert becomes the
"beneficial owner" (as defined in Rule 13d-3 under such Act),
directly or indirectly, of securities of Ultra Pac representing
fifty percent (50%) or more of the voting control of Ultra Pac's
then issued and outstanding securities, which person, entity or
group is not affiliated (within the meaning of the Securities
Act of 1933) with Ultra Pac as of the date of this Agreement; or
(2) any "person" (as such term is defined in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934), entity, or group
of associated persons or entities acting in concert becomes the
"beneficial owner" (as defined in Rule 13d-3 under such Act),
directly or indirectly, of securities of Ultra Pac representing
thirty percent (30%) or more of the voting control of Ultra
Pac's then issued and outstanding securities, which person,
entity or group is not affiliated (within the meaning of the
Securities Act of 1933) with Ultra Pac as of the date of this
Agreement, coupled with a change in the composition of the Board
of fifty percent (50%) or more of the membership of the Board.
(d) "Change of Control Payments" shall mean any payment (including any
benefit or transfer of property) in the nature of compensation, to or for the
benefit of the Executive under any arrangement which is partially or entirely
contingent on a Change of Control, or is deemed to be contingent on a change of
control or ownership of Ultra Pac for purposes of Section 280G of the Code. As
used in this definition, the term "arrangement" includes any agreement between
the Executive and Ultra Pac and any and all of Ultra Pac's salary, bonus,
incentive, compensation or benefit plans, programs or arrangements, and shall
include this Agreement.
(e) "Change of Control Termination" shall mean, with respect to the
Executive, any of the following events occurring within one (1) year after a
Change of Control.
(1) Termination of the Executive's employment by Ultra Pac or its
successors; or
(2) Termination of employment with Ultra Pac by the Executive
pursuant to Section 2. A Change of Control Termination by the
Executive shall not, however, include termination by reason of
death, disability or retirement.
2.
<PAGE> 3
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended, and any
reference to a section of the Code shall mean that section of the Internal
Revenue Code of 1986, as amended, or the corresponding section of such Code as
hereafter amended.
(g) "Good Reason" shall mean a good faith determination by the Executive, in
the Executive's sole and absolute judgment, that any one or more of the
following events has occurred, without the Executive's express written
consent, after a Change of Control:
(1) A change in the Executive's reporting responsibilities, titles or
offices as in effect immediately prior to the Change of Control, or
any removal of the Executive from, or any failure to reselect the
Executive to, any position which has the effect of diminishing
Executive's responsibility or authority;
(2) A reduction by Ultra Pac in the Executive's Base Salary as in effect
immediately prior to the Change of Control or as the same may be
increased from time to time, or a change in the eligibility
requirements or performance criteria under any bonus, incentive or
compensation plan, program or arrangement under which the Executive
is covered immediately prior to the Change of Control, which
adversely affects the Executive;
(3) Without replacement by a plan providing benefits to the Executive
equal to or greater than those discontinued, the failure by Ultra
Pac to continue in effect, within its maximum stated term, any
pension, bonus, incentive, stock ownership, purchase, option, life
insurance, health insurance, accident and disability insurance, or
any other employee benefit plan, program, or arrangement in which the
Executive is participating at the time of the Change of Control, or
the taking of any action by Ultra Pac that would adversely affect the
Executive's participation or materially reduce the Executive's
benefits under any of such plans or benefits as such participation or
benefits may exist at the time of the Change of Control;
(4) The talking of any action by Ultra Pac that would materially adversely
affect the physical conditions existing at the time of the Change of
Control in or under which the Executive performs his or her
employment duties;
(5) The failure by Ultra Pac to obtain a binding and enforceable
agreement, signed by any successor to Ultra Pac, providing for the
assumption by such successor of the obligations of Ultra Pac under
this Agreement, and the agreement of such successor to perform all
obligations of Ultra Pac under this Agreement; or
(6) Any purported termination by Ultra Pac of this Agreement or the
employment of the Executive by Ultra Pac which is not expressly
authorized by this Agreement or any breach of this Agreement by Ultra
Pac
3.
<PAGE> 4
2.) Change of Control Termination Right and Compensation. For a period of
one (1) year following a Change of Control, the Executive shall have the
right, at any time and within the Executive's sole discretion, to terminate
employment with Ultra Pac for Good Reason. Such termination shall be
accomplished by, and effective upon, the Executive giving written notice to
Ultra Pac of the Executive's decision to terminate such employment. In the
event of a Change of Control Termination, and subject to the "Limitation on
Change of Control Compensation" contained in Section 3 herein, then, and
without further action by the Board or otherwise, Ultra Pac shall, within the
thirty (30) days of such termination, make a lump sum payment to the Executive
in an amount equal to two times the Executive's "annualized includible
compensation for the base period," as defined in Section 280G(d)(1) of the
Code.
3.) Limitation on Change of Control Compensation. In the event that the
Executive is a "disqualified individual" within the meaning of Section 280G of
the Code, the parties hereto expressly agree that the payments described in
Section 2 above shall be considered together with all other Change of Control
Payments so that, with respect to the Executive, all Change of Control
Payments are collectively subject to an overall maximum limit. Such maximum
limit shall be One Dollar ($1.00) less than the largest amount under which no
portion of the Change of Control Payments is considered a "parachute payment"
within the meaning of Section 280G of the Code. Accordingly, to the extent
that the Change of Control Payments would be considered a "parachute payment"
with respect to the Executive, the portions of such Change of Control Payments
shall be reduced or eliminated in the following order until the remaining
Change of Control Payments with respect to the Executive is One Dollar ($
1.00) less than the maximum allowable which would not be considered a
"parachute payment" under Section 280G of the Code:
(a) First, any cash payment to the Executive;
(b) Second, any Change of Control Payments not described herein; and
(c) Third, any forgiveness of indebtedness of the Executive to Ultra Pac.
The Executive expressly and irrevocably waives any and all rights to receive
any Change of Control Payments which would be considered a "parachute payment"
under the Code.
4.) Attorneys' Fees. In the event the Executive incurs any legal expense
to enforce or defend his or her rights under this Agreement, or to recover
damages for breach thereof, the Executive shall be entitled to recover from
Ultra Pac any actual expenses attorneys' fees and disbursements incurred.
5.) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the successors and assigns of Ultra Pac, whether by
way of merger, consolidation, operation of law, assignment, purchase or other
acquisition of substantially all of the assets or business of Ultra Pac, and
any such successors or assigns shall absolutely and unconditionally assume all
of Ultra Pac's obligations hereunder.
4
<PAGE> 5
6.) Notices. All notices, requests and demands given to or made pursuant
hereto shall, except as otherwise specified herein, be in writing and be
delivered personally or mailed by certified mail, return receipt requested, to
any such party at its address which:
(a) In the case of Ultra Pac shall be:
Ultra Pac. Inc.
21925 Industrial Boulevard
Rogers, Minnesota 55374
With a copy to:
Larkin, Hoffman, Daly & Lindgren, Ltd.
1500 Norwest Financial Center
7900 Xerxes Avenue South
Bloomington, Minnesota 55431
Attn: Frank I. Harvey, Esq.
(b) In the case of the Executive shall be:
Thomas V. Bissell
721 56th Street
Des Moines, Iowa 50312
Either party may, by notice hereunder, designate a changed address. Any notice,
if delivered or mailed properly, shall be deemed dispatched on the registered
date or that stamped on the certified mail receipt, and shall be deemed
received within the second business day thereafter or when it is actually
received, whichever is sooner.
7.) Captions. The various headings or captions in this Agreement are for
convenience only and shall not affect the meaning or interpretation of this
Agreement.
8.) Governing Law. The validity, construction and performance of this
Agreement shall be governed by the laws of the State of Minnesota, and any and
every legal proceeding arising out of or in connection with this Agreement
shall be brought in the appropriate courts of the State of Minnesota. Each of
the parties hereby consenting to the exclusive jurisdiction of said courts for
this purpose.
9.) Construction. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law. If any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
10.) Waivers. No failure on the part of either party to exercise, and no
delay in exercising, any right or remedy hereunder shall operate as a waiver
thereof; nor shall any single
5.
<PAGE> 6
or partial exercise of any right or remedy hereunder preclude any other or
fiercer exercise thereof or the exercise of any other right or remedy granted
hereby or by any related document or by law.
11.) Modification. This Agreement may not be and shall not be modified
or amended except by written instrument signed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
EXECUTIVE ULTRA PAC, INC.
/s/ Charles C. Ahern, Jr. By: /s/ Calvin S. Krupa
- -------------------------------- -------------------------------
Charles C. Ahern, Jr. Calvin S. Krupa
Its: President
6.
<PAGE> 1
EXHIBIT 12
CHANGE OF CONTROL TERMINATION AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into this 13th day of
November, 1997, by and between ULTRA PAC, INC., a Minnesota corporation
("Ultra Pac"), and CHARLES C. AHERN, JR., an individual residing in the State
of Florida (the "Executive").
RECITALS
A. The parties recognize that the Executive's contribution to the
growth and success of Ultra Pac has been substantial. The Board of Directors of
Ultra Pac (the "Board") desires to provide for the continued employment of the
Executive and to make certain changes in the Executive's employment
arrangements with Ultra Pac which the Board has determined will reinforce and
encourage the continued attention and dedication of the Executive as a member
of the management of Ultra Pac.
B. It is expressly recognized by the parties that the Executive's
employment with Ultra Pac and agreement to be bound by the terms of this
Agreement represent a substantial commitment to Ultra Pac in terms of the
Executive's personal and professional career and a foregoing of present and
future career options by the Executive, for all of which Ultra Pac receives
substantial value.
C. The parties recognize that a Change of Control, as defined herein,
is likely to result in material alteration or diminishment of the Executive's
position and responsibilities and substantially frustrate the purpose of the
Executive's commitment to Ultra Pac and forbearance of other career options.
D. The parties recognize that in light of the above-described
commitment and forbearance of other career options, it is essential that, for
the benefit of Ultra Pac and its stockholders, provision be made for a Change
in Control Termination, as defined herein, in order to enable the Executive to
effectively continue in the Executive's position in the face of inherently
disruptive circumstances arising from the possibility of a Change of Control of
Ultra Pac, although no such change is now contemplated or foreseen.
E. The parties have previously entered into agreements and undertakings
with respect to the Executive's employment and compensation, and the parties
wish to supplement such previous agreements and undertakings.
NOW, THEREFORE, in consideration of the foregoing recitals, the
Executive's continued employment with and by Ultra Pac, and the mutual benefits
to be gained by the performance hereof, the parties hereto agree as follows:
1.) Definitions. For purposes of this Agreement, the following
definitions shall be applied:
<PAGE> 2
(a) "Base Salary" shall mean regular cash compensation paid on a
periodic basis exclusive of benefits, bonuses or incentive payments, if any.
(b) "Board" or "Board of Directors" shall mean the board of directors of
Ultra Pac.
(c) "Change of Control" shall mean any merger, combination, sale,
transfer, exchange, reorganization, or other transaction whereby:
(1) any "person" (as such term is defined in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934), entity, or group of
associated persons or entities acting in concert becomes the
"beneficial owner" (as defined in Rule 13d-3 under such Act),
directly or indirectly, of securities of Ultra Pac representing fifty
percent (50%) or more of the voting control of Ultra Pac's then
issued and outstanding securities, which person, entity or group is
not affiliated (within the meaning of the Securities Act of 1933)
with Ultra Pac as of the date of this Agreement; or
(2) any "person" (as such term is defined in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934), entity, or group of
associated persons or entities acting in concert becomes the
"beneficial owner" (as defined in Rule 13d-3 under such Act),
directly or indirectly, of securities of Ultra Pac representing
thirty percent (30%) or more of the voting control of Ultra Pac's
then issued and outstanding securities, which person, entity or group
is not affiliated (within the meaning of the Securities Act of 1933)
with Ultra Pac as of the date of this Agreement, coupled with a
change in the composition of the Board of fifty percent (50%) or more
of the membership of the Board.
(d) "Change of Control Payments" shall mean any payment (including any
benefit or transfer of property) in the nature of compensation,
to or for the benefit of the Executive under any arrangement which is
partially or entirely contingent on a Change of Control, or is
deemed to be contingent on a change of control or ownership of Ultra
Pac for purposes of Section 280G of the Code. As used in this
definition, the term "arrangement" includes any agreement between
the Executive and Ultra Pac and any and all of Ultra Pac's salary,
bonus, incentive, compensation or benefit plans, programs or
arrangements, and shall include this Agreement.
(e) "Change of Control Termination" shall mean, with respect to the
Executive, any of the following events occurring within one (1)
year after a Change of Control.
(1) Termination of the Executive's employment by Ultra Pac or
its successors; or
(2) Termination of employment with Ultra Pac by the Executive
pursuant to Section 2. A Change of Control Termination by the
Executive shall not, however, include termination by reason of
death, disability or retirement.
2.
<PAGE> 3
(f) "Code" shall mean the Internal Revenue Code of 1986, as
amended, and any reference to a section of the Code shall mean
that section of the Internal Revenue Code of 1986, as amended,
or the corresponding section of such Code as hereafter amended.
(g) "Good Reason" shall mean a good faith determination by the
Executive, in the Executive's sole and absolute judgment, that
any one or more of the following events has occurred, without
the Executive's express written consent, after a Change of
Control:
(1) A change in the Executive's reporting responsibilities,
titles or offices as in effect immediately prior to
the Change of Control, or any removal of the Executive
from, or any failure to re-elect the Executive to, any
position which has the effect of diminishing Executive's
responsibility or authority;
(2) A reduction by Ultra Pac in the Executive's Base
Salary as in effect immediately prior to the Change of
Control or as the same may be increased from time to time,
or a change in the eligibility requirements or performance
criteria under any bonus, incentive or compensation plan,
program or arrangement under which the Executive is covered
immediately prior to the Change of Control, which adversely
affects the Executive;
(3) Without replacement by a plan providing benefits to the
Executive equal to or greater than those discontinued,
the failure by Ultra Pac to continue in effect, within its
maximum stated term, any pension, bonus, incentive, stock
ownership, purchase, option, life insurance, health
insurance, accident and disability insurance, or any other
employee benefit plan, program, or arrangement in which the
Executive is participating at the time of the Change of
Control, or the taking of any action by Ultra Pac that
would adversely affect the Executive's participation or
materially reduce the Executive's benefits under any of
such plans or benefits as such participation or benefits
may exist at the time of the Change of Control;
(4) The taking of any action by Ultra Pac that would
materially adversely affect the physical conditions
existing at the time of the Change of Control in or under
which the Executive performs his or her employment duties;
(5) The failure by Ultra Pac to obtain a binding and
enforceable agreement, signed by any successor to Ultra
Pac. providing for the assumption by such successor of the
obligations of Ultra Pac under this Agreement, and the
agreement of such successor to perform all obligations of
Ultra Pac under this Agreement, or
(6) Any purported termination by Ultra Pac of this Agreement
or the employment of the Executive by Ultra Pac which is
not expressly authorized by this Agreement or any breach
of this Agreement by Ultra Pac.
3.
<PAGE> 4
2.) Chance of Control Termination Right and Compensation. For a period
of one (1) year following a Change of Control, the Executive shall have the
right, at any time and within the Executive's sole discretion, to terminate
employment with Ultra Pac for Good Reason. Such termination shall be
accomplished by, and effective upon, the Executive giving written notice to
Ultra Pac of the Executive's decision to terminate such employment. In the
event of a Change of Control Termination, and subject to the "Limitation on
Change of Control Compensation" contained in Section 3 herein, then, and
without further action by the Board or otherwise, Ultra Pac shall, within the
thirty (30) days of such termination, make a lump sum payment to the Executive
in an amount equal to two times the Executive's "annualized includible
compensation for the base period," as defined in Section 280G(d)(l) of the
Code.
3.) Limitation on Change of Control Compensation. In the event that the
Executive is a "disqualified individual" within the meaning of Section 280G of
the Code, the parties hereto expressly agree that the payments described in
Section 2 above shall be considered together with all other Change of Control
Payments so that, with respect to the Executive, all Change of Control Patents
are collectively subject to an overall maximum limit. Such maximum limit shall
be One Dollar ($1.00) less than the largest amount under which no portion of
the Change of Control Payments is considered a "parachute payment" within the
meaning of Section 280G of the Code. Accordingly, to the extent that the Change
of Control Payments would be considered a "parachute payment" with respect to
the Executive, the portions of such Change of Control Payments shall be reduced
or eliminated in the following order until the remaining Change of Control
Payments with respect to the Executive is One Dollar ($1.00) less than the
maximum allowable which would not be considered a "parachute payment" under
Section 280G of the Code:
(a) First, any cash payment to the Executive;
(b) Second, any Change of Control Payments not described herein; and
(c) Third, any forgiveness of indebtedness of the Executive to Ultra Pac.
The Executive expressly and irrevocably waives any and all rights to
receive any Change of Control Payments which would be considered a
"parachute payment" under the Code.
4.) Attorneys' Fees. In the event the Executive incurs any legal
expense to enforce or defend his or her rights under this Agreement, or to
recover damages for breach thereof, the Executive shall be entitled to recover
from Ultra Pac any actual expenses for attorneys' fees and disbursements
incurred.
5.) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the successors and assigns of Ultra Pac, whether by way
of merger, consolidation, operation of law, assignment, purchase or other
acquisition of substantially all of the assets or business of Ultra Pac, and
any such successors or assigns shall absolutely and unconditionally assume all
of Ultra Pac's obligations hereunder.
4.
<PAGE> 5
6.) Notices. All notices, requests and demands given to or made
pursuant hereto shall, except as otherwise specified herein, be in writing and
be delivered personally or mailed by certified mail, return receipt requested,
to any such party at its address which:
(a) In the case of Ultra Pac shall be:
Ultra Pac. Inc.
21925 Industrial Boulevard
Rogers, Minnesota 55374
With a copy to:
Larkin, Hoffman, Daly & Lindgren, Ltd.
1500 Norwest Financial Center
7900 Xerxes Avenue South
Bloomington, Minnesota 55431
Attn: Frank I. Harvey, Esq.
(b) In the case of the Executive shall be:
Charles C. Ahern, Jr.
3725 South Ocean Drive,
Apt. 402
Hollywood, FL 33019
Either party may, by notice hereunder, designate a changed address. Any
notice, if delivered or mailed properly, shall be deemed dispatched on the
registered date or that stamped on the certified mail receipt, and shall be
deemed received within the second business day thereafter or when it is
actually received, whichever is sooner.
7.) Captions. The various headings or captions in this Agreement are
for convenience only and shall not affect the meaning or interpretation of this
Agreement.
8.) Governing Law. The validity, construction and performance of this
Agreement shall be governed by the laws of the State of Minnesota, and any and
every legal proceeding arising out of or in connection with this Agreement
shall be brought in the appropriate courts of the State of Minnesota. Each of
the parties hereby consenting to the exclusive jurisdiction of said courts for
this purpose.
9.) Construction. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law. If any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
10.) Waivers. No failure on the part of either party to exercise, and
no delay in exercising, any right or remedy hereunder shall operate as a waiver
thereof; nor shall any single
5.
<PAGE> 6
or partial exercise of any right or remedy hereunder preclude any other
or further exercise thereof or the exercise of any other right or remedy
granted hereby or by any related document or by law.
11.) Modification. This Agreement may not be and shall not be modified
or amended except by written instrument signed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
EXECUTIVE ULTRA PAC, INC.
/s/ Charles C. Ahern, Jr. By: /s/ Calvin S. Krupa
- ------------------------------- ----------------------------
Charles C. Ahern, Jr. Calvin S. Krupa
Its: President
6.
<PAGE> 1
EXHIBIT 16
FOR IMMEDIATE RELEASE
FOR: MEDIA CONTACT:
Ivex Packaging Corporation Richard R. Cote
100 Tri-State Drive Ivex Packaging Corporation
Suite 200 (847) 945-9100
Lincolnshire, Illinois 60069
Ultra Pac, Inc. Brad Yopp
22051 Industrial Boulevard Ultra Pac, Inc.
Rogers, Minnesota 55374 (612) 428-8340
Ivex Packaging Corporation and Ultra Pac, Inc. Announce
Signing of a Definitive Merger Agreement
March 23, 1998 - Ivex Packaging Corporation (NYSE: IXX)
("Ivex") and Ultra Pac Inc. (NASDAQ: UPAC) ("Ultra Pac") today jointly
announced that the two companies have signed a definitive merger agreement for
the acquisition of Ultra Pac by Ivex.
Under the terms of the agreement, a subsidiary of Ivex will
commence a tender offer on March 26, 1998, to acquire all of the outstanding
shares of Ultra Pac for $15.50 per share in cash. Following the completion of
the tender offer, Ivex will consummate a second step merger in which remaining
Ultra Pac shareholders will also receive $15.50 per share in cash.
Calvin Krupa, Chief Executive Officer of Ultra Pac, stated
that "We are excited to be combining Ultra Pac with Ivex because Ivex is a
world class company that will help us continue to grow Ultra Pac's business.
We believe the transaction is in the best interests of the Ultra Pac
shareholders, our employees and our customers." George Bayly, President and
Chief Executive Officer of Ivex, stated "We are delighted to integrate Ultra
Pac's PET business into Ivex's product line thereby accelerating our strategic
growth in PET. Ultra Pac will operate as an independent business unit within
Ivex, and the management, employees and customers of Ultra Pac will be a
tremendous addition to the Ivex business. Ultra Pac is the market leader in
PET and will be highly complementary to our leadership position in OPS."
<PAGE> 2
The transaction has been approved unanimously by the board of directors
of each company. The tender offer and merger are subject to customary
conditions, including the tender of a majority of Ultra Pac's shares and
termination of the waiting period under U.S. anti-trust laws. The tender offer
will be made pursuant to definitive documents to be filed with the Securities
and Exchange Commission.
Ivex is a vertically integrated specialty packaging company that
designs and manufactures value-added plastic and paper based flexible packaging
products for consumer and industrial packaging markets.
Ultra Pac designs, manufactures, markets and sells plastic containers
and packaging for the food industry.
Statements contained in this press release which are not historical
facts are forward-looking statements. Such forward-looking statements are
necessary estimates reflecting the best judgment of the party making such
statements based upon current information and involve a number of risks and
uncertainties. Forward-looking statements contained in this press release or
in other public statements of the parties should be considered in light of
those factors. There can be no assurance that such factors or other factors
will not affect the accuracy of such forward-looking statements.
2
