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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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A.P. GREEN INDUSTRIES, INC.
(NAME OF SUBJECT COMPANY)
A.P. GREEN INDUSTRIES, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE
$1.00 PER SHARE
(TITLE OF CLASS OF SECURITIES)
393059100
(CUSIP NUMBER OF CLASS OF SECURITIES)
MICHAEL B. COONEY, ESQ.
SENIOR VICE PRESIDENT--LAW/ADMINISTRATION AND SECRETARY
A.P. GREEN INDUSTRIES, INC.
GREEN BOULEVARD
MEXICO, MISSOURI 65265
(573) 473-3626
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICE AND COMMUNICATION ON BEHALF OF THE PERSON(S) FILING STATEMENT)
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WITH A COPY TO:
ROBERT M. LAROSE, ESQ.
THOMPSON COBURN
ONE MERCANTILE CENTER
ST. LOUIS, MISSOURI 63101
(314) 552-6000
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is A.P. Green Industries, Inc., a Delaware
corporation (the "Company"), and the address of the principal executive
offices of the Company is Green Boulevard, Mexico, Missouri 65265. The title
of the class of equity securities to which this statement relates is the
common stock, par value $1.00 per share (the "Company Common Stock"), of the
Company, including the associated rights to purchase the Company's Series B
Junior Participating Preferred Stock (the "Rights") issued pursuant to the
Rights Agreement, dated as of November 13, 1997, as amended by that certain
First Amendment to Rights Agreement, dated as of March 5, 1998 (together, the
"Rights Agreement"), between the Company and Harris Trust and Savings Bank, as
Rights Agent (the "Rights Agent") (the Company Common Stock and the Rights
together are referred to herein as the "Shares").
ITEM 2. TENDER OFFER OF THE PURCHASER.
This statement relates to the tender offer (the "Offer") by BGN Acquisition
Corp., a Delaware corporation ("Merger Sub") and a wholly owned subsidiary of
Global Industrial Technologies, Inc., a Delaware corporation ("Purchaser"),
disclosed in a Tender Offer Statement on Schedule 14D-1, dated March 6, 1998
(the "Schedule 14D-1"), to purchase all of the issued and outstanding Shares,
at a price of $22.00 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 6, 1998 (the "Offer to Purchase"), and the related
Letter of Transmittal (which, together with the Offer to Purchase, constitute
the "Offer Documents").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of March 3, 1998 (the "Merger Agreement"), by and among the Company,
Purchaser and Merger Sub. The Merger Agreement provides, among other things,
that as soon as practicable after the satisfaction or waiver of the conditions
set forth in the Merger Agreement, Merger Sub will be merged with and into the
Company (the "Merger"), and each issued and outstanding Share (other than
Shares owned by Purchaser, Merger Sub or any other subsidiary of Merger Sub
(collectively, the "Purchaser Companies") or Shares that are held by
stockholders exercising their appraisal rights ("Dissenting Stockholders")
pursuant to Section 262 of the Delaware General Corporation Law (the "DGCL"))
shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into the right to receive, without interest, an
amount in cash equal to $22.00 or such greater amount which may be paid
pursuant to the Offer (the "Merger Consideration"). As a result of the Merger,
the Company will continue as the surviving corporation (the "Surviving
Corporation") and will become a wholly owned subsidiary of Purchaser. A copy
of the Merger Agreement is filed herewith as Exhibit 1 and is incorporated
herein by reference.
As set forth in the Schedule 14D-1, the principal executive offices of
Purchaser and Merger Sub are located at 2121 San Jacinto Street, Suite 2500,
Dallas, Texas 75201.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Except as set forth in this Item 3(b), to the knowledge of the Company,
there are no material contracts, agreements, arrangements or understandings
and no actual or potential conflicts of interest between the Company or its
affiliates and (i) the Company's executive officers, directors or affiliates
or (ii) Purchaser or Merger Sub or their respective executive officers,
directors or affiliates.
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ARRANGEMENTS WITH PURCHASER, MERGER SUB OR THEIR RESPECTIVE AFFILIATES
Confidentiality Agreement
The following is a summary of certain material provisions of the
Confidentiality Agreement, dated as of December 12, 1997, between the Company
and Purchaser (the "Confidentiality Agreement"). This summary does not purport
to be complete and is qualified in its entirety by reference to the complete
text of the Confidentiality Agreement, a copy of which is filed as Exhibit 2
hereto and is incorporated herein by reference. Capitalized terms not otherwise
defined below shall have the meanings set forth in the Confidentiality
Agreement.
The Confidentiality Agreement contains customary provisions pursuant to
which, among other matters, each of the Company and Purchaser agreed that, for
a period of three years from the date thereof, it would keep confidential all
nonpublic, confidential or proprietary information furnished to it by the other
relating to the Company or Purchaser, as the case may be, subject to certain
exceptions (the "Evaluation Material"), and use the Evaluation Material solely
for the purpose of evaluating a possible transaction involving the Company and
Purchaser. In addition, each of the Company and Purchaser has agreed in the
Confidentiality Agreement that for a period of eighteen months from the date
thereof, unless consented to in writing by the other, neither it nor any of its
affiliates will, among other things, directly or indirectly, by purchase or
otherwise, acquire or offer to acquire or agree to acquire ownership or
warrants or options covering any common shares of the other. Each party further
agreed that, for a period of two years from the date thereof, neither it nor
any of its affiliates would solicit to employ, without the written consent of
the other, officers or employees of the other or of the other's affiliates with
whom it, its affiliates or its representatives have had contact, or who were
specifically identified to it or its representatives during the period of
investigation of the Company, so long as such officers or employees are
employed by the other or any of the other's affiliates, provided that either
party or their respective affiliates could make general solicitations of
employment not directed to the other party, its affiliates or its employees.
Exclusivity Agreement
Pursuant to an Exclusivity Agreement, dated as of February 25, 1998 (the
"Exclusivity Agreement"), by and between Purchaser and the Company, as an
inducement to Purchaser to negotiate the definitive Merger Agreement with the
Company, to keep available its proposal for consideration by the Board of
Directors of the Company and in consideration of the time and expense Purchaser
would devote to the Merger, the Company agreed to negotiate exclusively with
Purchaser during the period (the "Exclusivity Period") beginning upon execution
of the Exclusivity Agreement and ending upon the earlier of (i) the execution
and delivery of the Merger Agreement or (ii) midnight on March 4, 1998. In
addition, the Company agreed (a) to cause its Company Representatives (as
defined below) not to directly or indirectly (A) contact, solicit, encourage or
respond to any inquiry or proposal with respect to a merger, consolidation,
share exchange, liquidation, dissolution or sale of all or a substantial
portion of the assets of the Company or any purchase of 10% or more of the
Shares or (B) enter into any discussions or negotiations concerning such a
proposal or disclose any information concerning the Company or otherwise assist
or facilitate any effort relating to such a proposal, (b) to immediately cease
any existing discussions concerning such a proposal, and (c) to notify
Purchaser immediately if the Company or any Company Representatives received
any proposals, offers, requests for information or solicitations of
negotiations or discussions.
Merger Agreement
The following is a summary of certain material provisions of the Merger
Agreement. This summary does not purport to be complete and is qualified in its
entirety by reference to the complete text of the Merger Agreement, a copy of
which is filed as Exhibit 1 hereto and is incorporated herein by reference.
Capitalized terms not otherwise defined below shall have the meanings set forth
in the Merger Agreement.
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The Offer. The Merger Agreement provides for the commencement of the Offer
not later than the fifth business day from the date of execution of the Merger
Agreement. The Merger Agreement also provides that Purchaser and Merger Sub
cannot waive the Minimum Condition (as defined below) or, unless previously
approved by the Company in writing, decrease the Offer Price, change the form
of consideration payable in the Offer (other than by increasing the
consideration), reduce the maximum number of Shares to be purchased in the
Offer, or impose conditions to the Offer in addition to those set forth in the
Merger Agreement that are materially adverse to the holders of Shares.
Notwithstanding the foregoing, Merger Sub may extend the Offer from time to
time notwithstanding the prior satisfaction of the Offer Conditions (as defined
below).
Merger Sub shall not be required to accept for payment, subject to any
applicable rules and regulations of the Securities and Exchange Commission (the
"SEC"), including Rule 14e-1(c) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (relating to the Merger Sub's obligation to pay
for or return tendered Shares promptly after termination or withdrawal of the
Offer), pay for, or may delay the acceptance for payment of or payment for, any
tendered Shares, or may, in its sole discretion, terminate or amend the Offer
as to any Shares not then paid for if (i) prior to the expiration of the Offer,
(x) a number of Shares which, together with any Shares owned by Purchaser or
the Merger Sub, represent more than 50% of the voting power (determined on a
fully-diluted basis) of all securities of the Company entitled to vote
generally in the election of directors or in connection with a merger shall not
have been validly tendered and not withdrawn prior to the expiration of the
Offer (the "Minimum Condition") or (y) any waiting periods under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"),
applicable to the purchase of the Shares pursuant to the Offer and any
applicable waiting periods under any foreign statutes or regulations that are
applicable to the Offer and the Merger shall not have expired or been
terminated, or any consents, approvals or authorizations ("Regulatory
Approvals") required to be obtained from any governmental or regulatory
authority, agency, commission or other entity, domestic or foreign
("Governmental Entity") applicable to the Offer and the Merger shall not have
been obtained on terms satisfactory to Purchaser in its reasonable judgment; or
(ii) on or after March 3, 1998, and at or before the time of payment for any of
such Shares (whether or not any Shares have theretofore been accepted for
payment), any of the following events shall occur:
(a) there shall have occurred (A) any general suspension of, or
limitation on prices for, trading in securities on the New York Stock
Exchange, Inc. ("NYSE"), (B) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (C) a
commencement or escalation of a war, armed hostilities or other
international calamity directly or indirectly involving the United States,
(D) any limitation (whether or not mandatory) by any Governmental Entity
on, or any other event which might affect, the extension of credit by banks
or other lending institutions, (E) a material change in United States or
any other currency exchange rates or a suspension of, or limitation on, the
markets thereof, (F) in the case of any of the foregoing existing at the
time of commencement of the Offer, a material acceleration or worsening
thereof, (G) any extraordinary or material change in the market price of
the Shares or in the United States securities or financial markets
generally, including, without limitation, a decline of at least 20% in
either the Dow Jones Average of Industrial Stocks or the Standard & Poor's
500 index, or (H) any material adverse change in the relevant financial
markets that could reasonably be expected to materially and adversely
affect the debt facilities related to the financing of the Offer;
(b) the Company shall have breached or failed to perform in any material
respect any of its obligations, covenants or agreements contained in the
Merger Agreement or any representation or warranty of the Company set forth
in the Merger Agreement shall have been inaccurate or incomplete in any
material respects when made or thereafter shall become inaccurate or
incomplete in any material respect;
(c) there shall be threatened, instituted or pending any civil, criminal
or administrative action, suit, claim, hearing, investigation or proceeding
("Action") before any court or other Governmental Entity by any
Governmental Entity or instituted or pending any Action by any other
person, domestic or foreign: (A) challenging the acquisition by Purchaser
or Merger Sub of the Shares, seeking to restrain or prohibit the
consummation of the transactions contemplated by the Offer or the Merger or
other subsequent business combination, seeking to obtain any material
damages or otherwise directly or indirectly relating to the
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transactions contemplated by the Offer or the Merger or other subsequent
business combination; (B) seeking to prohibit, or impose any material
limitations on, Purchaser's or Merger Sub's ownership or operation of all
or any portion of their or the Company's business or assets (including the
business or assets of their respective affiliates and subsidiaries), or to
compel Purchaser or Merger Sub to dispose of or hold separate all or any
portion of Purchaser's or Merger Sub's or the Company's business or assets
(including the business or assets of their respective affiliates and
subsidiaries) as a result of the transactions contemplated by the Offer or
the Merger or other subsequent business combination; (C) seeking to make
the acceptance for payment, purchase of, or payment for, some or all of the
Shares illegal or to render Merger Sub unable to, or result in a delay in,
or restrict, the ability of Purchaser or Merger Sub to, accept for payment,
purchase or pay for some or all of the Shares; (D) seeking to impose
material limitations on the ability of Purchaser or Merger Sub effectively
to acquire or hold or exercise full rights of ownership of the Shares
including, without limitation, the right to vote the Shares purchased by
them on an equal basis with all other Shares on matters properly presented
to the stockholders; or (E) that, in any event, in the judgment of
Purchaser, is reasonably likely to have a material adverse effect on the
financial condition, properties, business or operations of the Company or
Purchaser or Merger Sub (or any of their respective affiliates or
subsidiaries) or the value of the Shares to Purchaser or Merger Sub or the
benefits expected to be derived by Purchaser or Merger Sub as a result of
the consummation of the transactions contemplated by the Offer and the
Merger;
(d) any statute, rule, regulation, judgment, order or injunction shall be
sought, proposed, enacted, promulgated, entered, enforced or deemed or
become applicable to the Offer, the Merger, the Merger Agreement or other
subsequent business combination, or any other action shall have been taken,
proposed or threatened, by any court or other Governmental Entity other
than the application to the Offer, the Merger, the Merger Agreement or
other subsequent business combination of waiting periods under the HSR Act
that, in the judgment of Purchaser, could be expected to, directly or
indirectly, result in any of the effect of, or have any of the consequences
sought to be obtained or achieved in, any Action referred to in parts (A)
through (E) of clause (c) above;
(e) a tender or exchange offer for some portion or all of the Shares
shall have been commenced or publicly proposed to be made by another person
(including the Company or its subsidiaries), or it shall have been publicly
disclosed or Purchaser shall have learned that (A) any person (including
the Company or its subsidiaries), entity or "group" (as defined in Section
13(d) of the Exchange Act, and the rules promulgated thereunder) shall have
become the beneficial owner (as defined in Section 13(d) of the Exchange
Act and the rules promulgated thereunder) of more than 20% of any class or
series of capital stock of the Company (including the Shares) other than
for bona fide arbitrage purposes or (B) any person, entity or group shall
have entered into a definitive agreement or an agreement in principle or
made a proposal with respect to a tender offer or exchange offer for some
portion or all of the Shares in a merger, consolidation or other business
combination involving the Company;
(f) any change shall have occurred (or any development shall have
occurred involving a prospective change) or Purchaser or Merger Sub shall
have become aware of any fact (including, but not limited to, any such
change) that has had, or is reasonably likely to have, a material adverse
effect on the financial condition, properties, business or results of
operations of the Company and its subsidiaries taken as a whole;
(g) the Board of Directors of the Company (or a special committee
thereof) shall have amended, modified or withdrawn its approval or
recommendation of the Offer, the Merger Agreement or the Merger, or shall
have failed to publicly reconfirm such approval or recommendation upon
request by Purchaser or Merger Sub, or shall have endorsed, approved or
recommended any other offer or proposal (including, without limitation, any
offer or proposal to the stockholders of the Company (an "Acquisition
Proposal") concerning any acquisition or exchange of all or any material
portion of the assets of, or more than 15% of the equity interest in, the
Company or any of its subsidiaries (by direct purchase from the Company,
tender or exchange offer or otherwise) or any business combination, merger,
consolidation or similar transaction (including an exchange of stock or
assets) with or involving the Company or any subsidiary or division of the
Company (an "Acquisition Transaction"), or shall have resolved to do any of
the foregoing; or
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(h) the Merger Agreement shall have been terminated by the Company or
Purchaser or Merger Sub in accordance with its terms or Purchaser or Merger
Sub shall have reached an agreement or understanding in writing with the
Company providing for termination or amendment of the Offer or delay in
payment for the Shares;
which, in the sole judgment of Purchaser and Merger Sub, in any such case, and
regardless of the circumstances (including any action or inaction by Purchaser
or Merger Sub) giving rise to any such conditions, makes it inadvisable to
proceed with the Offer and/or with such acceptance for payment of or payment
for Shares (collectively, the "Offer Conditions").
The Merger. The Merger Agreement provides that, subject to the terms and
conditions thereof, Merger Sub will be merged with and into the Company, with
the Company continuing as the Surviving Corporation in the Merger, and each
issued and outstanding Share (other than Shares owned by Purchaser Companies or
Shares held by stockholders who exercise their appraisal rights pursuant to
Section 262 of the DGCL) shall be converted into the right to receive the
Merger Consideration. In addition, all Shares (other than those owned by
Purchaser Companies) will be canceled and retired and shall cease to exist, and
holders of certificates formerly representing Shares shall only have the right
to receive upon surrender of such certificates either the Merger Consideration
or the "fair value" of such Shares in accordance with Section 262 of the DGCL.
The Merger Agreement also provides that (i) the directors of the Merger Sub
immediately prior to the date upon which a Certificate of Merger is duly filed
with the Secretary of State of the State of Delaware (the "Effective Time")
will be the initial directors of the Surviving Corporation and the officers of
the Company immediately prior to the Effective Time will be the initial
officers of the Surviving Corporation; (ii) the Restated Certificate of
Incorporation of the Company (the "Company Certificate") will be the initial
Certificate of Incorporation of the Surviving Corporation, except that Article
Fourth of the Certificate of Incorporation shall be amended in its entirety to
provide that the aggregate number of shares which the Company shall have the
authority to issue shall be 1,000 shares of common stock, par value $1.00 per
share; and (iii) the By-laws of the Company (the "Company By-laws") will be the
initial By-laws of the Surviving Corporation.
Treatment of Options. The Merger Agreement provides that, except as provided
below, each option ("Option") to purchase Shares, whether or not then
exercisable, which has been granted under the Company's 1987 Long-Term
Performance Plan, 1989 Long-Term Performance Plan, 1993 Performance Plan and
1996 Long-Term Performance Plan (collectively, the "Option Plans") will be
canceled in exchange for an amount in cash (the "Option Payment") to be paid by
Purchaser as soon as practicable after the Effective Time equal to the product
of the number of Shares previously subject to the Option and the difference
between the Merger Consideration and the per share exercise price of such
Option. The Merger Agreement provides that Paul F. Hummer II, Chairman of the
Board, President and Chief Executive Officer of the Company, may elect to
convert Options for up to 75,000 Shares held by him into options ("Purchaser
Options") to purchase Purchaser common stock ("Purchaser Common Stock") at an
exchange ratio of 1.405 shares of Purchaser Common Stock for every Share
subject to Options so converted. See "Arrangements with Executive Officers,
Directors or Affiliates of the Company--Stock Options."
Directors. The Merger Agreement provides that, following the purchase by
Merger Sub of Shares pursuant to the Offer, if requested by Purchaser, the
Company will take all actions necessary to cause persons designated by
Purchaser to become directors of the Company so that, subject to compliance
with Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder,
the total number of such persons is equal to at least the product of (i) the
total number of directors on the Board of Directors of the Company (giving
effect to such additional directors) and (ii) a fraction, the numerator of
which is the aggregate number of Shares beneficially owned by Merger Sub or its
affiliates and the denominator of which is the total number of Shares then
outstanding. In addition, if requested by Purchaser, the Company will use its
reasonable efforts to cause persons designated by Purchaser to constitute the
same proportionate representation of each committee of the Board of Directors
of the Company, each board of directors of each subsidiary of the Company and
each committee of each such board. The Company has also agreed to promptly take
all actions required pursuant to Section 14(f) of
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the Exchange Act and Rule 14f-1 promulgated thereunder and to include in this
Schedule 14D-9 or in a separate Rule 14f-1 information statement provided to
stockholders, such information with respect to the Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1 to fulfill such
obligations.
The Merger Agreement also provides that after the date of consummation of the
Offer and prior to the Merger, any amendment of the Merger Agreement, any
termination of the Merger Agreement or any waiver of any condition or any of
the Company's rights thereunder may be effected only by the affirmative vote of
at least a majority of the directors of the Company who are not officers of
Purchaser or designees, stockholders or affiliates of Purchaser.
Stockholders' Meeting. Pursuant to the Merger Agreement, following
termination of the Offer, the Company will, if required in order to consummate
the Merger, take all action necessary to convene and hold a meeting of holders
of Shares as promptly as practicable following the purchase of Shares pursuant
to the Offer to consider and vote upon the approval of the Merger Agreement and
the Merger. In addition, subject to applicable law, the Board of Directors of
the Company will recommend such approval, the Company will solicit such
approval and at any such meeting all of the Shares then owned by the Purchaser
Companies will be voted in favor of the Merger Agreement.
The Merger Agreement also provides that, notwithstanding the preceding
paragraph, in the event that Merger Sub acquires at least 90% of the
outstanding Shares, if requested by Merger Sub, subject to the fulfillment or
waiver of certain conditions in the Merger Agreement, the Company will take all
necessary and appropriate action to cause the Merger to become effective as
soon as reasonably practicable following the termination of the Offer, without
a meeting of the Company's stockholders, in accordance with Section 253 of the
DGCL.
Representations and Warranties. The Merger Agreement contains representations
and warranties of one or both of the parties with respect to, among other
things, (i) corporate organization, qualification and corporate power, (ii)
ownership of subsidiaries and associated entities, (iii) authorized and
outstanding capital, (iv) corporate authority, (v) required governmental
filings and no conflicts with charter documents or material contracts, (vi) no
material misstatements in filings made with the SEC and in financial
statements, (vii) absence of material changes, (viii) no litigation or
undisclosed liabilities, (ix) employee benefit and compensation plans and
arrangements, (x) compliance with law, (xi) brokers and finders, (xii) related
corporate actions by the Company, (xiii), the applicability of certain
antitakeover statutes or regulations under the DGCL, (xiv) environmental
matters, (xv) tax matters, (xvi) intangible property, and (xvii) the
sufficiency of funds to consummate the Merger.
Interim Operations. In the Merger Agreement, the Company has covenanted and
agreed that, as to itself and its subsidiaries, among other things, between the
date of the Merger Agreement and prior to the Effective Time, unless Purchaser
otherwise agrees in writing and except as otherwise permitted or required by
the Merger Agreement or set forth in a disclosure letter delivered by the
Company to Purchaser on or prior to the date of the Merger Agreement (the
"Disclosure Letter"):
(a) the business of the Company and its subsidiaries shall be conducted
only in the ordinary and usual course and, to the extent consistent
therewith, each of the Company and its subsidiaries shall use its best
efforts to preserve its business organization intact and maintain its
existing relations with customers, suppliers, employees and business
associates;
(b) the Company shall not: (A) sell or pledge or agree to sell or pledge
any stock owned by it in any of its subsidiaries; (B) amend the Company
Certificate or Company By-laws or amend, modify or terminate the Rights
Agreement, or redeem the Rights issued pursuant thereto; (C) split, combine
or reclassify the outstanding Shares; or (D) declare, set aside or pay any
dividend payable in cash, stock or property with respect to the Shares;
(c) neither the Company nor any of its subsidiaries will (A) issue, sell,
pledge, dispose of or encumber any additional shares of, or securities
convertible into or exchangeable for, or options, warrants, calls,
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commitments or rights of any kind to acquire, any shares of capital stock
of any class of the Company or its subsidiaries, other than, in the case of
the Company, Shares issuable pursuant to Options outstanding under Option
Plans on the date of the Merger Agreement; (B) transfer, lease, license,
guarantee, sell, mortgage, pledge, dispose of or encumber any assets or
incur or modify any indebtedness or other liability other than in the
ordinary and usual course of business; (C) acquire directly or indirectly
by redemption or otherwise any shares of capital stock of the Company; (D)
authorize capital expenditures for items other than those relating to
Palmetto Lime LLC in excess of $250,000 individually or $1,500,000 in the
aggregate; (E) authorize capital expenditures for items relating to
Palmetto Lime LLC in excess of $8,500,000 in the aggregate; or (F) make any
acquisition of another person or entity (by merger, consolidation or
acquisition of stock or assets) or any investment in assets or stock of
another person or entity;
(d) neither the Company nor any of its subsidiaries will grant any
severance or termination pay to, or enter into any employment severance
agreement with any director, officer or other employee of the Company or
such subsidiaries and neither the Company nor any of its subsidiaries shall
establish, adopt, enter into, make any new grants or awards under or amend
any collective bargaining, bonus, profit sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, employee stock
ownership, deferred compensation, employment, termination, severance or
other plan, agreement, trust, fund, policy or arrangement for the benefit
of any directors, officers or employees;
(e) except in the ordinary and usual course of business and with the
consent of Purchaser, neither the Company nor any of its subsidiaries shall
settle or compromise any material claims or litigation or modify, amend or
terminate any of its joint venture agreements, partnership agreements or
material agreements, leases, permits, contracts, notes, mortgages,
indentures, arrangements or other legal obligations ("Contracts") or waive,
release or assign any material rights or claims;
(f) neither the Company nor any of its subsidiaries shall make any tax
election or permit any insurance policy naming it as a beneficiary or a
loss payable payee to be canceled or terminated without notice to
Purchaser, except in the ordinary and usual course of business;
(g) except as may be required as a result of a change in law or in
generally accepted accounting principles, neither the Company nor any of
its subsidiaries shall change any of the accounting practices or principles
used by it;
(h) neither the Company nor any of its subsidiaries shall adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or
any of its subsidiaries not constituting an inactive subsidiary (other than
the Merger); and
(i) neither the Company nor any of its subsidiaries will authorize or
enter into any agreement to do any of the foregoing or take any action that
would make any of the representations or warranties of the Company
contained in the Merger Agreement untrue or incorrect as of the date when
made if such action had then been taken, or would result in any of the
Offer Conditions not being satisfied.
Actions Regarding the Rights. The Board of Directors of the Company agreed in
the Merger Agreement to amend the Rights Agreement prior to the commencement of
the Offer so that (i) the consummation of the transactions contemplated by the
Merger Agreement will not cause Merger Sub and/or Purchaser to become an
Acquiring Person (as defined in the Rights Agreement) or a Distribution Date or
a Stock Acquisition Date (as such terms are defined in the Rights Agreement) to
occur, irrespective of the number of Shares acquired pursuant to the Offer and
(ii) all outstanding Rights will expire upon the acceptance of Shares for
payment pursuant to the Offer, whether or not such Rights are tendered and
purchased pursuant to the Offer, and the Company, Merger Sub and Purchaser
shall be relieved of any obligations under the Rights or the Rights Agreement
to any holder (or former holder) of Rights following the consummation of the
Offer. On March 5, 1998, the Company and the Rights Agent executed the First
Amendment to Rights Agreement, which amended the Rights Agreement in these
respects.
No Solicitation. Pursuant to the Merger Agreement, the Company has agreed
that it, its affiliates and their respective officers, directors, employees,
representatives and agents (including, without limitation, any
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investment banker, attorneys or accountant retained by the Company or any of
its subsidiaries) (collectively, the "Company Representatives") shall
immediately cease all existing discussions or negotiations, if any, with any
parties conducted prior to the date of the Merger Agreement with respect to
any Acquisition Transaction. In addition, neither the Company nor any Company
Representatives may, directly or indirectly, encourage, solicit, participate
in or initiate discussions or negotiations with, or provide any information
to, any corporation, partnership, person or other entity or group (other than
Purchaser and Merger Sub or their affiliates, associates and designees)
concerning an Acquisition Proposal, unless (i) the Board of Directors of the
Company determines in good faith, based upon advice of its outside legal
counsel, that such action is necessary in order for the directors to comply
with their respective fiduciary duties under applicable law and (ii) the Board
of Directors of the Company determines in good faith (after consultation with
its financial advisor) that such Acquisition Proposal, if accepted, is
reasonably likely to be consummated and would, if consummated, result in a
transaction more favorable to the Company's stockholders from a financial
point of view than the transaction contemplated by the Merger Agreement (a
"Superior Proposal"). In addition, the Merger Agreement also provides that the
Company will notify Purchaser immediately if any such inquiries or proposals
are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with the
Company, the name of the person making such proposals (unless identifying such
party is otherwise prohibited by the terms of a confidentiality agreement in
effect as of February 25, 1998), the material terms and conditions of such
proposals and shall thereafter keep Purchaser informed, on a current basis of
the status of such proposals and any such negotiations or discussions. Except
to the extent such action would violate the fiduciary duties of the Board of
Directors of the Company under applicable law, the Company has also agreed not
to release any third party from, or waive any provisions of, any
confidentiality or standstill agreement to which the Company is a party.
Employee Benefits. The Merger Agreement provides that, effective as of the
Effective Time and for one year following the Effective Time, the employees of
the Company (other than employees covered by collective bargaining agreements)
will continue to be provided with benefits under employee benefit plans (other
than stock options or other plans involving the potential issuance of
securities of the Company or Purchaser) which in the aggregate are
substantially comparable to those currently provided by the Company to such
employees. In addition, Purchaser will cause each employee benefit plan of
Purchaser in which such employees are eligible to participate to take into
account the service of such employees with the Company for purposes of
eligibility and vesting thereunder as if such service were with Purchaser. In
addition, Purchaser has agreed to and to cause the Surviving Corporation to
honor without modification all employee benefit obligations to current and
former employees of the Company accrued as of the Effective Time and, to the
extent set forth in the Disclosure Letter, all employee severance plans in
existence on the date of the Merger Agreement and all employment or severance
agreements adopted by the Board of Directors of the Company and entered into
prior to the date of the Merger Agreement.
Employee Stock Ownership Trust. The Merger Agreement also provides that, as
soon as practicable following the Effective Time, Purchaser and the Company
shall take all actions necessary or appropriate to cause the Company's
Employee Stock Ownership Trust, which implements and forms a part of the
Company's Investment Plan (collectively, the "ESOP") to provide for the use of
all proceeds received pursuant to the Offer from the tender of Shares
allocated to the suspense account of the ESOP to, first, be applied to the
repayment of the outstanding loan incurred by the ESOP, and, second, the
balance be allocated to the participants' Employer Match ESOP accounts in
proportion to the total aggregate value of such accounts of the participants
as of the accounting date immediately preceding the Effective Time, except to
the extent such allocation could exceed the limits on annual contributions
pursuant to Section 415 of Section 424(a) of the Internal Revenue Code of
1986, as amended (the "Code"). The Purchaser and Company have also agreed that
as soon as reasonably practicable after the Effective Time (or, if deemed
appropriate by the parties, as soon as reasonably practicable after the
receipt of a favorable determination letter from the Internal Revenue Service
on the effect of termination of the ESOP), the Company and Purchaser shall
terminate the ESOP and the proceeds thereof shall be distributed to the
participants in accordance therewith, except that Purchaser has no obligation
to implement the foregoing to the extent that the foregoing would violate the
terms of the ESOP or jeopardize the tax-qualification status of the ESOP.
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Directors' and Officers' Insurance; Indemnification. The Merger Agreement
provides that (a) from and after the Effective Time, Purchaser will, and will
cause the Surviving Corporation to, indemnify and hold harmless each present
and former director and officer of the Company, determined as of the Effective
Time (the "Indemnified Party"), against any costs or expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims, damages or
liabilities incurred in connection with any Action arising out of matters
existing or occurring at or prior to the Effective Time, regardless of whether
such claim is asserted or claimed prior to, at or after the Effective Time, to
the full extent permitted under Delaware law or the Company Certificate or By-
laws in effect on the date of the Merger Agreement (and advance to such
Indemnified Party expenses as incurred to the fullest extent permitted under
applicable law, provided that such person provides an undertaking to repay such
advances if it is ultimately determined that such person is not entitled to
indemnification), provided that any determination required to be made with
respect to whether an officer's or director's conduct complies with the
standards set forth under Delaware law or the Company Certificate or By-laws
shall be made by independent legal counsel selected by the Surviving
Corporation. Subject to certain restrictions in the event of a conflict of
interest between Purchaser or the Surviving Corporation and any Indemnified
Party, in the event of any Action giving rise to such a claim of
indemnification, Purchaser or the Surviving Corporation shall have the right to
assume the defense thereof and Purchaser shall not be liable for legal expenses
of other counsel or other expenses subsequently incurred by the Indemnified
Party in connection with the defense thereof. The Surviving Corporation shall
be permitted to maintain the Company's existing officers' and directors'
liability insurance policy for a period of two years after the Effective Time
so long as the annual premium therefor is not in excess of 150% of the last
annual premium paid prior to the date of the Merger Agreement, provided that,
in the event such existing insurance expires, is terminated or is canceled
during such two-year period, the Surviving Corporation will use its best
efforts to obtain as much officers' and directors' liability insurance as can
be obtained for the remainder of such period for a premium not in excess of the
last annual premium paid prior to the date of the Merger Agreement.
Further Assurances. In the Merger Agreement, each of the parties agrees to
promptly make their respective filings under the HSR Act, under Section 252 of
the DGCL and as required under the Exchange Act (collectively, the "Regulatory
Filings"), and thereafter make any other required submissions under the HSR Act
and other Regulatory Filings with respect to the Offer and the Merger, and to
use all reasonable best efforts to take, or cause to be taken, all action and
do, or cause to be done, all things necessary, proper or appropriate under
applicable laws and regulations to consummate and make effective the
transactions contemplated by the Merger Agreement which efforts shall include,
without limitation, cooperation in the preparation and filing of the Offer
Documents, this Schedule 14D-9, the Company's proxy or information statement
with respect to any meeting of holders of Shares required following termination
of the Offer, any required filings under the HSR Act or other foreign filings
and any amendments to any thereof. In addition, the Company has agreed to use
all reasonable efforts to obtain all licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities and
parties to Contracts with the Company and its subsidiaries as are necessary for
the consummation of the transactions contemplated by the Merger Agreement and
to fulfill the conditions to the Offer and the Merger and to cooperate with
Purchaser and Merger Sub in consummating the financing for the Offer and the
Merger and any refinancing of the Company's indebtedness. Notwithstanding the
foregoing, Purchaser will not be obligated to make or accept or engage in
negotiations for any settlement with any Governmental Entity or any other
arrangement involving the sale, disposition or separate holding, through the
establishment of a trust, or otherwise, of the business or any of the assets of
the Company or any of its subsidiaries acquired pursuant to the Merger
Agreement, or any portion thereof, or particular assets of Purchaser, its
subsidiaries or any of the Purchaser Companies in order to complete the
transactions contemplated by the Merger Agreement. The Company has also agreed
to promptly make all filings, notifications, applications, permit transfers and
other submissions ("Environmental Submissions") relating to the Offer and the
Merger that may be required pursuant to any applicable environmental law,
regulation, order, decree, permit, authorization, opinion, common law or agency
requirement and to provide Purchaser with copies of all Environmental
Submissions at the time of filing, and Purchaser has agreed to cooperate with
the Company in the preparation and execution of all Environmental Submissions.
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Conditions to the Merger. The Merger Agreement provides that the respective
obligations of each party to effect the Merger shall be subject to the
fulfillment of the following conditions, any of which may be waived in whole or
in part to the extent permitted by applicable law: (a) if required, the Merger
Agreement shall have been duly approved by the holders of a majority of Shares,
in accordance with applicable law and the Company Certificate and By-laws; (b)
any waiting period applicable to the consummation of the Merger under the HSR
Act shall have expired or been terminated; (c) no statute, rule, regulation,
judgment, decree, injunction or order shall have been enacted, issued,
promulgated, enforced or entered by any United States or state court or other
Governmental Entity which is in effect and prohibits consummation of the
transactions contemplated by the Merger Agreement or imposes material
restrictions on Purchaser or the Company in connection with the consummation of
the Merger or with respect to their business operations, either prior to or
subsequent to the Merger; and (d) Merger Sub (or one of the Purchaser
Companies) shall have purchased Shares pursuant to the Offer. The Merger
Agreement provides that the obligations of Purchaser and Merger Sub to
consummate the Merger are further subject to the conditions that (i) all
filings with any Governmental Entity required to be made prior to the Effective
Time with, and all consents, approvals and authorizations required to be
obtained prior to the Effective Time from any Governmental Entity in connection
with the execution and delivery of the Merger Agreement and the consummation of
the Merger by the Company, Purchaser and Merger Sub shall have been made or
obtained, (ii) the Company shall have fulfilled its obligations under the
Merger Agreement to cancel all Options outstanding under the Company's Option
Plans, (iii) the Company's representations under the Merger Agreement that
Article Sixth of the Company Certificate is inapplicable to the Offer and the
Merger and that the Company has taken all necessary action under the Rights
Agreement to prevent Merger Sub and/or Purchaser from becoming an Acquiring
Person (as defined in the Rights Agreement) or the occurrence of a Distribution
Date or a Stock Acquisition Date (as such terms are defined in the Rights
Agreement) shall be true and correct as if made as of such date.
Termination. The Merger Agreement provides that it may be terminated and the
transactions contemplated by the Merger Agreement may be abandoned at any time
prior to the Effective Time, before or after the approval of the transactions
contemplated by the Merger Agreement by the holder of Shares: (a) by mutual
consent of Purchaser and the Company, by action of their respective Boards of
Directors; (b) by action of the Board or Directors of either the Company or
Purchaser if: (A) Merger Sub, or any Purchaser Company, shall have terminated
the Offer without purchasing any Shares pursuant thereto; (B) the Merger shall
not have been consummated by August 31, 1998, whether or not such date is
before or after the approval by holders of Shares; (C) if required, the
approval of the stockholders of the Company shall not have been obtained at a
meeting duly convened therefor; or (D) any court of competent jurisdiction or
other Governmental Entity located or having jurisdiction within the United
States or any country in which either the Company or Purchaser, directly or
indirectly, has material assets or operations, shall have issued a final order,
decree or ruling or taken any other final action restraining, enjoining or
otherwise prohibiting the Offer or the Merger and such order, decree, ruling or
other action shall have become final and non-appealable; (c) by Purchaser and
Merger Sub at any time prior to the Effective Time, before or after the
approval of the transactions contemplated by the Merger Agreement by holders of
Shares, by action of the Board of Directors of Purchaser if: (A) the Company
shall have breached or failed to perform any of its covenants or agreements
contained in the Merger Agreement required to be complied with or performed
prior to the date of termination and shall not have cured such breach or
failure within certain time periods or any of the representations or warranties
of the Company contained in the Merger Agreement shall have been inaccurate or
incomplete when made, unless such failures could not be reasonably expected to
have a material adverse effect on the financial condition, properties, business
or results of operations of the Company and its subsidiaries taken as a whole
or would not prevent or materially delay the transactions contemplated by the
Merger Agreement or impair the ability of the parties thereto, following
consummation of the Offer or the Merger, to conduct any material business or
operations in any jurisdiction where they are now being conducted; (B) the
Board of Directors of the Company (or a special committee thereof) shall have
amended, modified or withdrawn in a manner adverse to Purchaser or Merger Sub
its approval or recommendation of the Offer, the Merger Agreement or the Merger
or, upon request by Purchaser, shall have failed to reconfirm such approval or
recommendation, or shall have endorsed, approved or recommended any other
Acquisition Proposal or shall have resolved to do any of the foregoing; or (C)
the Company or any
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Company Representatives shall have not ceased existing discussions and
negotiations concerning an Acquisition Transaction or shall have encouraged or
solicited an Acquisition Proposal (each as proscribed by the Merger Agreement),
unless such actions are required by fiduciary obligations under applicable law
as advised in writing by counsel; or (d) by the Company prior to the Effective
Time, before or after approval by holders of Shares, by action of the Board of
Directors of the Company if: (A) Purchaser or Merger Sub or another Purchaser
Company shall have breached or failed to perform any of its covenants or
agreements contained in the Merger Agreement required to be complied with or
performed prior to the date of termination and shall not have cured such breach
or failure within certain time periods; or (B) if the Company is not in
material breach of any of the terms of the Merger Agreement, the Board of
Directors of the Company authorizes the Company to enter into a binding written
agreement concerning a transaction that constitutes a Superior Proposal and the
Company notifies Purchaser in writing that it intends to enter into such an
agreement, and Purchaser does not make within two business days of such
notification an offer that the Board of Directors determines is at least as
favorable to the stockholders of the Company as the Superior Proposal, and the
Company pays to Purchaser the Termination Fee (as defined herein).
Termination Fee. The Company has agreed to pay to Purchaser a termination fee
(the "Termination Fee") of $8 million (and to reimburse Purchaser for certain
out-of-pocket expenses up to a maximum amount of $1.5 million) if either: (a)
the Offer has remained open for at least twenty business days, a third party
shall have become the beneficial owner of 20% or more of the outstanding Shares
or shall have announced its intention to make an Acquisition Proposal or
commenced or announced its intention to commence a tender offer for 20% or more
of the outstanding Shares and the Minimum Condition shall not have been
satisfied, and the Offer is terminated without the purchase of any Shares
thereunder; or (b) the Merger Agreement shall have been terminated by Purchaser
pursuant to clauses (c)(B) or (C) of the foregoing paragraph or by the Company
pursuant to clause (d)(B) of the foregoing paragraph.
Amendment. The Merger Agreement provides that, subject to the applicable
provisions of the DGCL, the Merger Agreement may be amended or modified by
written agreement executed and delivered by duly authorized officers of the
respective parties thereto.
ARRANGEMENTS WITH EXECUTIVE OFFICERS,
DIRECTORS OR AFFILIATES OF THE COMPANY
SEVERANCE AGREEMENTS
The Company currently has separate agreements (collectively, the "Severance
Agreements") with each of Paul F. Hummer II, Max C. Aiken, Michael B. Cooney
and Gary L. Roberts under which each such officer would be given severance
benefits in the event that his employment with the Company is terminated by the
Company for any reason other than death, disability, retirement or "cause" or
by the officer for "good reason" within three years of a change in control of
the Company (except that in all such agreements the rights to severance
benefits terminate upon reaching age 65 if it occurs before the expiration of
three years after a change in control). Each agreement is for a term of three
years, subject to automatic extension each year for an additional year unless
the Company gives a 60-day notice that the term will not be so extended prior
to the end of the year, except if there is a change in control of the Company
prior to such notice. Each agreement would require a lump-sum cash payment
generally in an amount equal to 2.99 times the officer's then-current annual
base salary and then-current full year bonus (except that such multiplier will
be subject to a declining pro rata reduction from the date of such officer's
62nd birthday until his 65th birthday, based upon the number of months left
until such officer's 65th birthday at the effective date of his termination).
If payment of the foregoing amounts and any other benefits received or
receivable subject such officer to payment of federal excise taxes, the total
amount payable to such officer shall be increased by an amount sufficient to
satisfy the excise tax and the additional excise and income taxes thereon.
For purposes of the Severance Agreements, the Offer and the Merger will each
qualify as a "change in control" of the Company. "Termination" generally
includes any event which severs the officer's employment
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relationship with the Company, other than termination due to death, disability
or retirement or dismissal for cause. The Severance Agreements provide
severance benefits in the event the officer terminates his employment for "good
reason." "Good reason" is generally defined in each such agreement as (i)
assignment of duties inconsistent with the officer's then-current position,
status or responsibilities; (ii) reduction of the officer's then-current base
salary; (iii) elimination of the officer's then-current participation level in
the Company's bonus plans or employee benefit plans; (iv) geographic relocation
of the officer; or (v) failure by the Company to obtain assumption of the
agreement by any successor.
In addition, the Company is a party to certain other severance enhancement
agreements (the "Severance Enhancement Agreements") with each of Jurgen H.
Abels, Ronald L. Bramblett, Frank J. Cordie, Daniel Y. Hagan, John L. Kelsey
and one other employee under which each such officer or employee would be given
enhanced severance benefits in addition to those that such officer or employee
would otherwise be entitled under the Company's normal severance policies in
the event that such officer's or employee's employment with the Company is
terminated by the Company for reasons other than death, disability, retirement
or cause or by the officer or employee for "good reason" within one year of a
change in control of the Company. Each agreement would require a lump-sum cash
payment generally in an amount equal to approximately one-half to one times the
officer's or employee's then-current annual base salary, in addition to a cash
payment equal to two times the officer's or employee's weekly base salary in
the event that less than two weeks' notice of termination is given to the
officer or employee. The agreements also provide for the continuation of
medical benefits for a certain period of months following any such termination.
For purposes of the Severance Enhancement Agreements, the Offer and the
Merger will each qualify as a "change in control" of the Company. "Good reason"
is generally defined in each such Severance Enhancement Agreement as: (i)
reduction of the officer's or employee's then-current base salary; (ii)
elimination of the officer's or employee's then-current participation level in
the Company's bonus plans or employee benefit plans; (iii) the non-payment of
moving expenses in connection with a geographic relocation of the officer or
employee; or (iv) failure by the Company to continue in effect any employee
benefit plan in which the officer or employee was participating at the time of
the change in control or deprive the officer or employee of any benefit
thereunder or under the Company's normal vacation policy.
STOCK OPTIONS
The Merger Agreement provides that each Option granted under the Company's
Option Plans will be canceled in exchange for an Option Payment. However, the
Merger Agreement also provides that Paul F. Hummer II, who serves as the
Chairman of the Board, President and Chief Executive Officer of the Company,
may, not less than ten business days prior to the Effective Time, in lieu of
receipt of the Option Payment for his Options, make an irrevocable election to
convert up to 75,000 Shares subject to Options held by him into Purchaser
Options on the same terms of the applicable Option Plans and stock option
agreements by which the Options are evidenced, except with respect to the
number of shares of Purchaser Common Stock to be received upon exercise and the
exercise price thereof. Each Share subject to the Purchaser Option will be
converted into 1.405 shares of Purchaser Common Stock (the "Conversion
Fraction"). The per share exercise price of such Purchaser Options will be
equal to the former per share exercise price of the related Option divided by
the Conversion Fraction, subject to applicable requirements of the Code.
Assuming that Mr. Hummer elects to convert the entire 75,000 Shares subject
to an Option, then following the Effective Time, Mr. Hummer's Purchaser Option
will be exercisable for 105,375 shares of Purchaser Common Stock. The exercise
price of Mr. Hummer's Options range from $6.17 to $9.32, so Mr. Hummer's
exercise price under the Purchaser Options will range from $4.39 to $6.63,
depending upon the Options that Mr. Hummer elects to convert. On March 5, 1998,
the last full trading day prior to the commencement of the Offer, the reported
closing sales price per share of Purchaser Common Stock on the NYSE was
$15.875.
Pursuant to the Merger Agreement, at or prior to the Effective Time,
Purchaser shall take all corporate action necessary to reserve for issuance a
sufficient number of shares of Purchaser Common Stock for delivery
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upon exercise of the Purchaser Option and, as soon as administratively feasible
following the Effective Time, shall file a registration statement on Form S-8
(or any successor or other appropriate form) with respect to the Purchaser
Common Stock subject to such Purchaser Option (or shall cause such Purchase
Option to be deemed to be an option issued pursuant to a Purchaser stock option
plan for which Purchaser Common Stock has previously been registered pursuant
to an appropriate registration form). Purchaser shall use its best efforts to
maintain the effectiveness of such registration statement (and maintain the
current status of the prospectus or prospectuses contained therein) for so long
as the Purchaser Option remains outstanding.
CERTAIN PROVISIONS IN THE MERGER AGREEMENT
As described above, the Merger Agreement provides that, during the one-year
period following the Effective Time, employees of the Company will receive
employee benefits that are no less favorable in the aggregate than those
provided to such employees immediately prior to the date of the Merger
Agreement. With respect to such benefits, service accrued with the Company and
its subsidiaries by such employees will be recognized for purposes of
eligibility and vesting. The Merger Agreement further provides that Purchaser
honor, without modification, all employment and severance agreements with
employees and former employees of the Company. In addition, the Merger
Agreement provides for termination of the ESOP and the allocation of net
proceeds from the tendering of Shares in the ESOP's suspense account (after the
payment of the ESOP's loan balance) to the Employer Match ESOP accounts of
participants. See "The Merger Agreement--Employee Benefits; Employee Stock
Ownership Trust."
The Merger Agreement also provides for Purchaser to, and to cause the
Surviving Corporation to, indemnify and hold harmless the Company's officers
and directors against costs incurred in connection with any Action arising out
of matters existing or occurring at or prior to the Effective Time to the full
extent permitted under Delaware law or the Company Certificate or By-laws.
Purchaser has also agreed that the Surviving Corporation shall be entitled to
maintain the Company's existing officers' and directors' liability insurance
policy for a period of not less than two years after the Effective Date. See
"The Merger Agreement--Directors' and Officers' Insurance and Indemnification."
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation of the Board of Directors of the Company. The Board of
Directors of the Company has unanimously approved the Offer and the Merger, and
the Merger Agreement and has determined that the Offer and the Merger are fair
to and in the best interests of the Company's stockholders, and unanimously
recommends that the Company's stockholders accept the Offer and tender their
Shares in the Offer.
A letter to the Company's stockholders communicating the recommendation of
the Board of Directors of the Company and a press release announcing the
execution of the Merger Agreement are filed herewith as Exhibits 3 and 4,
respectively, and are incorporated herein by reference.
(b) Background of the Transaction; Reasons for the Company Board's
Recommendation.
BACKGROUND OF THE TRANSACTION
For some time, management of the Company and its Board of Directors have
discussed the status of the refractory business, its fragmentation and the
necessity of growing the Company's refractories business in order for it to
sustain and/or increase the Company's profitability. Consistent with this
strategy, in July 1994, the Company acquired the refractory assets of General
Refractories Company. Over the next two years, management's efforts were
directed to the successful integration of the General Refractories Company
assets into the Company's refractories business. During this time period,
management discussed internally several other acquisition candidates in the
refractories business. Informal discussions were held with several of these
companies with regard to a potential combination of their respective
refractories businesses with that of the Company. None of these discussions
advanced beyond the stage of informal discussions.
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In August 1997, the Board of Directors authorized the retention of A.T.
Kearney Associates, Inc. ("A.T. Kearney") to review the Company's strategic
position in its businesses as well as its management resources in order to
present the Board with recommendations to enhance the long-term value of the
Company's stockholders. A.T. Kearney dedicated a significant amount of time
with the Company's management in identifying internal and external structural
issues that were inhibiting the Company from significantly improving
profitability. At the end of this process, A.T. Kearney prepared a report that
set forth recommendations encompassing the following four alternative
strategies: (i) address the Company's structural problems to improve
profitability; (ii) sell the Company's lime business and reinvest the proceeds
into the Company's refractories business; (iii) sell the Company's refractories
business and reinvest the proceeds in the Company's lime business; or (iv) sell
the Company.
On November 13, 1997, A.T. Kearney presented its final report to the Board of
Directors of the Company. At that meeting, after discussing in great detail the
four alternatives set forth in the A.T. Kearney report, the consensus of the
Board was that the sale of the Company was the best course of action to pursue.
During the course of the meeting, the management, the Board and the
representatives of A.T. Kearney identified two companies that were considered
to be the most likely candidates to be interested in acquiring the Company. One
of these companies was Purchaser. The Board of Directors directed Paul F.
Hummer II, as Chairman of the Board, President and Chief Executive Officer of
the Company, to contact both companies in order to assess the degree of
interest that such companies would have in pursuing discussions with respect to
the possible purchase of the Company. Management was also instructed by the
Board to identify and interview several prospective investment banking firms
with a view toward retaining one such firm to act as the Company's financial
advisor in a potential transaction.
On November 19, 1997, Mr. Hummer contacted by telephone J.L. Jackson, the
Chairman of the Board and Chief Executive Officer of Purchaser, to gauge
Purchaser's interest in further discussions. Mr. Hummer and Mr. Jackson agreed
to meet to discuss preliminarily a possible transaction between the parties.
The meeting was scheduled for December 1, 1997 at the offices of Purchaser. Mr.
Hummer made a similar contact with the other party identified by the Board as a
likely prospective acquirer and scheduled similar meetings with its
representatives.
In preparation for the December 1, 1997 meeting, Juan M. Bravo, the President
of Harbison-Walker Refractories Company ("H-W Refractories"), the refractory
subsidiary of Purchaser, traveled to the Company's headquarters in Mexico,
Missouri to discuss the concept of merging the Company with Purchaser or a
subsidiary of Purchaser.
On December 1, 1997, Mr. Hummer and Michael B. Cooney, Senior Vice President
Law/Administration and Secretary of the Company, met with Mr. Jackson, Graham
L. Adelman, Senior Vice President, General Counsel and Secretary of Purchaser,
Mr. Bravo and Dirk H. Hilkmann, Vice President--Planning and Development of H-W
Refractories at Purchaser's offices in Dallas, Texas. At this meeting, the
parties discussed the need to consolidate and outlined the perceived benefits
that would accrue from a combination of the two companies. The parties also
discussed a number of transaction structuring issues on a preliminary basis. As
the parties had not yet executed a confidentiality agreement at this date, no
proprietary information with respect to the respective businesses was discussed
and no non-public financial information was exchanged. Both parties agreed that
further discussions should continue with respect to a possible business
combination.
On December 5, 1997, management of the Company conducted interviews with
several nationally recognized investment banking firms with respect to the
retention by the Company of one of these firms as its financial advisor. At the
end of these interviews, management selected Credit Suisse First Boston
Corporation ("Credit Suisse First Boston") as its financial advisor and
negotiated a fee arrangement that discounted the transactional fee that Credit
Suisse First Boston would receive in the event that the Company combined with
one of the two identified companies.
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Commencing on December 4, 1997, a number of telephone calls were exchanged
between management personnel of the Company and of Purchaser with respect to
the negotiation and execution of a confidentiality agreement between the
parties. The definitive Confidentiality Agreement was executed by the parties
on December 12, 1997. Similar discussions occurred with respect to the other
identified party and a definitive confidentiality agreement was signed between
the Company and such other party in early January 1998.
On December 22, 1997, the Board of Directors of the Company convened a
meeting by telephone in order for management of the Company to apprise the
Board of the status of its discussions with both identified acquirer
candidates. Because the December 1, 1997 meeting between the Company and
Purchaser had raised the possibility of a stock-for-stock combination, Mr.
Hummer discussed this possible structure in some detail. Representatives of
Credit Suisse First Boston also participated in the telephonic meeting and
outlined the strategy of conducting parallel discussions between the Company
and the two parties. It was determined that management should arrange meetings
with both candidates to determine their interest in moving forward with these
discussions.
On January 7, 1998, Mr. Hummer, Mr. Cooney, John L. Kelsey, Vice President
of the Company, and Gary L. Roberts, Vice President and Chief Financial
Officer of the Company, met with Mr. Jackson, Mr. Adelman, Mr. Bravo and Mr.
Hilkmann at the offices of Purchaser in Dallas, Texas. At this meeting, the
parties discussed potential structures for a transaction. Purchaser advised
the Company at this meeting that its preferred structure for acquisition of
the Company involved a complete acquisition of the Company for cash or an
establishment of a joint venture in which Purchaser would control at least 80%
of the equity interest. Mr. Jackson and Mr. Hummer also met privately to
discuss personnel and operational matters in the context of an acquisition
transaction.
Following the meeting and over the next several weeks, the Company responded
to diligence requests and conducted meetings with respect to operational
issues and tours of the Company's facilities with both interested parties.
Discussions were also held between representatives of Credit Suisse First
Boston and the financial advisors of the each of interested parties regarding
the scope of due diligence required and the timetable for making a written
proposal to the Company with respect to the structure and financial terms of a
proposed transaction.
On February 9, 1998, Mr. Hummer met with Mr. Jackson at Purchaser's offices
in Dallas to discuss the business of Purchaser and the possibility of Mr.
Hummer and certain other of the Company's executive officers continuing with
the combined operations. The terms of the Termination Compensation Agreements
between the Company and Messrs. Hummer, Cooney and Roberts and Mr. Max C.
Aiken, Executive Vice President of the Company, were discussed in the context
of the proposed structure of an acquisition transaction by Purchaser. Mr.
Jackson also inquired as to the interest of certain executive officers in
converting a portion of their Options to Purchaser Options.
At the Company's Board of Directors meeting held on February 12, 1998,
Credit Suisse First Boston presented an update to the Board with respect to
the continuing discussions that the Company was having with both interested
parties. In its presentation, Credit Suisse First Boston identified the key
steps in the process of obtaining financial proposals, reviewed a timetable of
events, discussed valuation methodology and other valuation issues and
presented an analysis that included data on comparable companies, comparable
acquisitions and the Company's recent trading history. The Board of Directors
authorized the grant of severance enhancement agreements to six additional
officers or employees of the Company pursuant to which each such officer or
employee would receive a severance payment equal to six months' salary, in
addition to the Company's normal severance benefits, if the officer or
employee was terminated or resigned in certain designated circumstances within
one year after the date of consummation of an acquisition.
On February 18, 1998, Mr. Hummer again met with Mr. Jackson in Dallas. At
this meeting, Mr. Jackson expressed Purchaser's strong interest in acquiring
the Company. Mr. Hummer also disclosed to Mr. Jackson, the Board's grant of
the severance enhancement agreements with the six officers or employees.
16
<PAGE>
On February 23, 1998, a non-binding written proposal was received by the
Company from Purchaser through Credit Suisse First Boston pursuant to which
Purchaser proposed to acquire all of the outstanding stock (on a fully diluted
basis) for $22.00 per share in cash. The proposal was conditioned upon the
completion of several items of due diligence, the negotiation of a definitive
agreement with respect to a tender offer and merger and the approval of the
transaction by the Boards of Directors of both companies. A non-binding written
proposal was also received by the Company from the other identified party
through Credit Suisse First Boston on the same date. The other proposal was
also an all-cash bid for all the outstanding stock (or a fully diluted basis)
for a lesser price per Share than that proposed by Purchaser.
On February 24, 1998, a telephonic Board meeting was held to discuss both
written proposals that had been received by the Company to date. With the
advice and assistance of Credit Suisse First Boston and the Company's outside
legal counsel, the Company reviewed and analyzed the competing proposals. There
was a consensus of the Board that the proposal of Purchaser appeared to be the
superior proposal and that this proposal should be pursued. If negotiations
resulted in definitive agreement, the Board directed management to report back
to the Board of Directors with management's recommendation.
On February 25, 1998, Purchaser requested an exclusivity agreement by which
the Company would agree to pursue negotiations with respect to a definitive
acquisition agreement solely with Purchaser during an agreed-upon period of
time. The Company indicated its willingness to enter into such exclusive
negotiations and the parties negotiated and executed the Exclusivity Agreement.
On February 26 and 27, 1998, representatives of management of the Company and
of Purchaser met in St. Louis, Missouri with their respective legal and
financial advisors to negotiate a definitive Merger Agreement. The form of the
Merger Agreement, pursuant to which Purchaser agreed to initiate the Offer for
all of the Shares for a price of $22.00, net to the seller in cash, and to
consummate the Merger for the balance of the Shares not purchased in the Offer
at $22.00 in cash, was agreed to in principle by the parties in the morning of
March 2, 1998, subject to the approvals of the respective Boards of Directors
of the parties and the completion of due diligence by Purchaser. The terms of
the Offer and the Merger were presented to the respective Boards for approval
in the afternoon and evening of March 2, 1998. The definitive Merger Agreement
was executed on March 3, 1998 after Purchaser's completion of its pre-execution
diligence and a public announcement of the execution of the Merger Agreement
was made prior to the opening of trading on the NYSE on March 4, 1998.
REASONS FOR THE TRANSACTION; FACTORS CONSIDERED BY THE COMPANY BOARD
In approving the Offer, the Merger, the Merger Agreement and the other
transactions contemplated thereby and recommending that all holders of Shares
accept the Offer and tender their Shares pursuant to the Offer, the Board of
Directors of the Company considered a number of factors, including:
1. the presentations and views expressed by management of the Company (at
the meetings of the Board of Directors of the Company held on November 13,
1997, December 22, 1997, February 12, 1997, February 24, 1997 and March 2,
1998 and at previous meetings of the Board) regarding, among other things:
(a) the financial condition, results of operations, cash flows, business
and prospects of the Company, including the prospects of the Company if it
were to remain independent; (b) the strategic alternatives available to the
Company; (c) the fact that in view of the discussions held with both
interested parties, management of the Company believed it was unlikely that
the other interested party would propose an acquisition or strategic
business combination that, taken as a whole, would be more favorable to the
Company and its stockholders than the Offer and the Merger; and (d) the
recommendation of the Offer and the Merger by the management of the
Company;
2. the oral and written presentation of A.T. Kearney at the meeting of
the Board of Directors of the Company held on November 13, 1997 setting
forth the four alternative strategies available to the Company and the
presentations of Credit Suisse First Boston at subsequent Board meetings on
December 22, 1997,
17
<PAGE>
February 12, 1998, February 24, 1998 and March 2, 1998 and the fairness
opinion of Credit Suisse First Boston, expressed orally and confirmed in
writing at the March 2, 1998 meeting, to the effect that, as of such date,
the Offer and the Merger are fair, from a financial point of view, to the
Company's stockholders. The full text of the opinion of Credit Suisse First
Boston, dated as of March 2, 1998, which sets forth the assumptions made,
matters considered and limitations on the review undertaken by Credit
Suisse First Boston, is attached hereto as Exhibit 5 and is incorporated
herein by reference. STOCKHOLDERS ARE URGED TO READ THE OPINION OF CREDIT
SUISSE FIRST BOSTON CAREFULLY IN ITS ENTIRETY.
3. the historical market prices and the recent trading activity of the
Shares, including the fact that the Offer Price represents a premium of
approximately 24% over the reported closing price of the Shares on the NYSE
on the last full trading day preceding the public announcement of the
execution of the Merger Agreement;
4. the extensive arms-length negotiations between the Company and
Purchaser leading to the belief of the Board of Directors of the Company
that $22.00 per Share represented the highest price per Share that could be
negotiated with Purchaser;
5. the history of the Company's discussions with other party thought to
be, along with Purchaser, the most likely candidate to acquire the Company,
including, without limitation, (i) the fair and ample opportunity provided
to the other party to submit a superior proposal to the Company, and (ii)
that the proposal made by such other party contemplating the acquisition of
the Company was at a price that was significantly less than $22.00 per
Share;
6. that the Offer and the Merger provide for a prompt Offer for all
Shares to be followed by the Merger for the same consideration, thereby
enabling the Company's stockholders to obtain the benefits of the
transaction in exchange for their Shares at the earliest possible time;
7. that, in the Merger Agreement, Purchaser and Merger Sub have agreed to
honor all employment and severance agreements and arrangements with respect
to employees and former employees of the Company, and that, effective as of
the Effective Time and for a one-year period thereafter, the Company's
employees will be provided with employee benefits that are no less
favorable in the aggregate than those provided to such employees prior to
the date of execution of the Merger Agreement;
8. other provisions of the Offer and the Merger Agreement, including the
parties' representations, warranties and covenants, the conditions to their
respective obligations, and the limited ability of Purchaser and Merger Sub
to terminate the Offer or the Merger Agreement;
9. the regulatory approvals required to consummate the Merger, including,
among others, antitrust approval, the prospects for receiving such approval
and agreements in the Merger Agreement with respect to seeking to obtain
such approval;
10. the business reputation and capabilities of Purchaser and its
management, and Purchaser's financial strength, including its ability to
finance the Offer;
11. the fact that pursuant to the Merger Agreement, the Board of
Directors of the Company has the right to participate in discussions or
negotiations (including, as a part thereof, making any offer or proposal)
with or furnish information to third parties making an unsolicited
Acquisition Proposal or approve an unsolicited Acquisition Proposal if the
Board determines in good faith, after receiving advice from its financial
advisor, that such third party has submitted to the Company an Acquisition
Proposal which is a Superior Proposal, or, the Board determines in good
faith, based upon the advice of its outside legal counsel, that the failure
to participate in such discussions or negotiations or to furnish such
information or to approve such an Acquisition Proposal would violate the
Board's fiduciary duties;
12. the fact that pursuant to the Merger Agreement, the Board of
Directors of the Company has the right, upon payment to Purchaser of an $8
million termination fee (and Purchaser's out-of-pocket costs and expenses
of up to $1.5 million), to terminate the Merger Agreement if, prior to the
purchase of Shares, a third party shall have made an Acquisition Proposal
that the Company Board determines in good faith, after consultation with
its financial advisor, is a Superior Proposal;
18
<PAGE>
13. that the strategic fit between the Company and Purchaser offers the
opportunity for substantial synergies; and
14. the Company's belief that the combined company would be better able
to respond to the needs of consumers and customers, the increased
competitiveness of the industrial lime and refractory products industry and
the opportunities that changes in the industrial lime and refractory
products industry might bring.
The foregoing discussion of information and factors considered and given
weight by the Board of Directors of the Company is not intended to be
exhaustive. In view of the variety of factors considered in connection with
its evaluation of the Offer and the Merger, the Board of Directors of the
Company did not find it practicable to, and did not, quantify or otherwise
assign relative weights to the specific factors considered in reaching its
determinations and recommendations. In addition, individual members of the
Board of Directors of the Company may have given different weights to
different factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to the terms of a letter agreement, dated December 17, 1997 (the
"Credit Suisse First Boston Letter Agreement"), the Company retained Credit
Suisse First Boston, in part, to assist the Company as its exclusive financial
advisor in considering the desirability and feasibility of effecting various
strategies for maximizing the Company's value to its stockholders, including,
among other things, a merger or sale of the Company.
The Company agreed in the Credit Suisse First Boston Letter Agreement to pay
to Credit Suisse First Boston transaction fee of 1.375% of the total fair
market value of all consideration paid or payable to the Company or the
Company's stockholders or contributed or to be contributed by the Company in
connection with the sale, with a reduction to 1.125% (which is the fee
percentage that is applicable to the Offer and the Merger) if the definitive
agreement for such sale was executed with previously identified parties and
such agreement was delivered before the Company had requested Credit Suisse
First Boston to initiate a formal marketing process in connection with the
sale. The Company currently estimates the transaction fee due to Credit Suisse
First Boston would be approximately $2.5 million. The Company paid Credit
Suisse First Boston a financial advisory fee of $150,000 upon execution of the
Credit Suisse First Boston Letter Agreement, which fee is fully creditable
against the transaction fee, and has agreed to reimburse Credit Suisse First
Boston for all out-of-pocket expenses incurred by Credit Suisse First Boston
(including fees and expenses of its legal counsel, if any, and any other
advisor retained by Credit Suisse First Boston) resulting from or arising out
of such engagement. In connection with the matters contemplated by the Credit
Suisse First Boston Letter Agreement, the Company also entered into a separate
letter agreement, dated as of December 17, 1997, to indemnify Credit Suisse
First Boston against certain liabilities arising out of or in connection with
Credit Suisse First Boston's engagement. In addition, the Company has agreed
that in the event of any termination of Credit Suisse First Boston's
engagement under the Credit Suisse First Boston Letter Agreement, Credit
Suisse First Boston will continue to be entitled to the full transaction fee
described above in the event that, at any time prior to the expiration of two
years after such termination, the Company consummates or enters into an
agreement providing for the sale of the Company.
Credit Suisse First Boston may from time to time effect transactions and
hold positions in securities of the Company and Purchaser.
Except as disclosed herein, neither the Company nor any person acting on its
behalf has employed, retained or compensated any person to make solicitations
or recommendations to the Company's stockholders with respect to the Offer or
the Merger.
19
<PAGE>
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transactions in the Shares have been effected during the past 60 days
by the Company or, to the best of the Company's knowledge, by any executive
officer, director, affiliate or subsidiary of the Company.
(b) To the best knowledge of the Company, all of its executive officers,
directors, affiliates and subsidiaries currently intend to tender pursuant to
the Offer all Shares held of record or beneficially owned by them (other than
Shares issuable upon exercise of Options and Shares, if any, which if tendered
could cause such persons to incur liability under the provisions of Section
16(b) of the Exchange Act).
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Schedule 14D-9, the Company is not engaged
in any negotiation in response to the Offer which relates to or would result
in (i) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any subsidiary of the Company; (ii) a purchase, sale
or transfer of a material amount of assets by the Company or any subsidiary of
the Company; (iii) a tender offer for or other acquisition of securities by or
of the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as described in Item 3(b) and Item 4 above (the provisions of
which are hereby incorporated by reference), 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.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<C> <S>
Exhibit 1 Agreement and Plan of Merger, dated as of March 3, 1998, by and
among A. P. Green Industries, Inc., Global Industrial Technologies,
Inc. and BGN Acquisition Corp. (including Annex A thereto).
Exhibit 2 Confidentiality Agreement, dated December 12, 1997, between A. P.
Green Industries, Inc. and Global Industrial Technologies, Inc.
Exhibit 3 Letter to Stockholders of A. P. Green Industries, Inc., dated March
6, 1998.*
Exhibit 4 Press Release issued by A. P. Green Industries, Inc. on March 4,
1998.
Exhibit 5 Opinion of Credit Suisse First Boston Corporation, dated as of March
2, 1998.*
</TABLE>
- --------
* Included in copies of Schedule 14D-9 mailed to stockholders.
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: March 6, 1998
A. P. Green Industries, Inc.
By: /s/ Paul F. Hummer
----------------------------------
Name: Paul F. Hummer II
Title: Chairman of the Board,
President and Chief Executive
Officer
20
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
Exhibit 1 Agreement and Plan of Merger, dated as of March 3, 1998, by and
among A. P. Green Industries, Inc., Global Industrial Technologies,
Inc. and BGN Acquisition Corp. (including Annex A thereto).
Exhibit 2 Confidentiality Agreement, dated December 12, 1997, between A. P.
Green Industries, Inc. and Global Industrial Technologies, Inc.
Exhibit 3 Letter to Stockholders of A. P. Green Industries, Inc., dated March
6, 1998.
Exhibit 4 Press Release issued by A. P. Green Industries, Inc. on March 4,
1998.
Exhibit 5 Opinion of Credit Suisse First Boston Corporation, dated as of March
2, 1998.
</TABLE>
<PAGE>
EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"),
---------
dated as of March 3, 1998, among A.P. Green Industries, Inc., a Delaware
corporation (the "Company"), Global Industrial Technologies, Inc., a Delaware
-------
corporation ("Purchaser"), and BGN Acquisition Corp., a Delaware corporation and
---------
a wholly-owned subsidiary of Purchaser ("Merger Sub"), the Company and Merger
----------
Sub sometimes being hereinafter collectively referred to as the "Constituent
-----------
Corporations."
- ------------
RECITALS
WHEREAS, the Boards of Directors of Purchaser and the Company each
have determined that it is in the best interests of their respective
shareholders for Purchaser to acquire the Company upon the terms and subject to
the conditions set forth herein; and
WHEREAS, the Company, Purchaser and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement.
NOW, THEREFORE, in consideration of the premises, and of the
representation, warranties, covenants and agreements contained herein the
parties hereto hereby agree as follows:
ARTICLE I
THE TENDER OFFER
1.1. Tender Offer. (a) Provided that this Agreement shall not have
------------
been terminated in accordance with Article IX hereof and none of the events set
forth in Annex A hereto shall have occurred or be existing, within five business
days of the date hereof, Purchaser shall cause Merger Sub to commence a tender
offer (the "Offer") for all of the outstanding shares of Common Stock, par value
-----
$1.00 per share, of the Company, including the associated Rights (as defined in
Section 6.1(b)) (together, the "Shares") at a price of $22.00 per Share in cash,
------
net to the seller, subject to the terms and conditions set forth in Annex A
hereto (the "Offer Conditions"). The initial expiration date of the Offer shall
----------------
be the date twenty business days from and including the date (the "Commencement
------------
Date") the Offer Documents (as hereinafter defined) are first filed with the
- ----
Securities and Exchange Commission (the "SEC"). Purchaser and Merger Sub
---
expressly reserve the right, in their sole discretion, to waive any condition
(other than the Minimum Condition, as defined in the Offer Conditions) and to
set forth or change any other term and condition of the Offer, provided that,
--------
unless previously approved by the Company in writing, no provision may be set
forth or changed which decreases the price per Share payable in the Offer,
changes the form of consideration payable in the Offer (other than by adding
consideration), reduces the maximum number of Shares to be purchased in the
Offer, or imposes conditions to the Offer
<PAGE>
in addition to those set forth herein that are materially adverse to holders of
the Shares. Merger Sub covenants and agrees that, subject to the terms and
conditions of the Offer, including but not limited to the Offer Conditions, it
will accept for payment and pay for Shares as soon as it is permitted to do so
under applicable law, provided that Merger Sub shall have the right, in its sole
--------
discretion, to extend the Offer from time to time notwithstanding the prior
satisfaction of the Offer Conditions. It is agreed that the terms and
conditions set forth in the Offer, including but not limited to the Offer
Conditions, are for the benefit of Purchaser and Merger Sub and may be asserted
by Purchaser and Merger Sub regardless of the circumstances giving rise to any
such condition.
(b) The Company hereby approves of and consents to the Offer and
represents and warrants that: (i) its Board of Directors, at a meeting duly
called and held on March 2, 1998, has unanimously (A) determined that this
Agreement and the transactions contemplated hereby, including each of the Offer
and the Merger (as defined in Section 2.1), are fair to and in the best
interests of the holders of Shares, (B) approved this Agreement and the
transactions contemplated hereby, including each of the Offer and the Merger,
and (C) resolved to recommend that the stockholders of the Company accept the
Offer, tender their Shares to Merger Sub thereunder and approve this Agreement
and the transactions contem plated hereby; and (ii) Credit Suisse First Boston
(the "Financial Advisor") has delivered to the Board of Directors of the Company
-----------------
its written opinion that the consideration to be received by holders of Shares,
other than Purchaser and Merger Sub, pursuant to each of the Offer and the
Merger is fair to such holders from a financial point of view. The Company has
been authorized by the Financial Advisor to permit, subject to prior review and
consent by such Financial Advisor (such consent not to be unreasonably
withheld), the inclusion of such fairness opinion (or a reference thereto) in a
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
--------------
to be filed with the SEC upon commencement of the Offer and in the Proxy
Statement referred to in Section 7.3(a). The Company hereby consents to the
inclusion in the Offer Documents (as defined in Section 1.1(c)) of the
recommendations of the Board of Directors of the Company described herein.
(c) Purchaser agrees, as to the Offer to Purchase and related Letter
of Transmittal (which together constitute the "Offer Documents"), and the
---------------
Company agrees, as to the Schedule 14D-9, that such documents shall, in all
material respects, comply with the requirements of the Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder (the "Exchange
--------
Act") and other applicable laws. The Company and its counsel, as to the Offer
Documents, and Purchaser and its counsel, as to the Schedule 14D-9, shall be
given an opportunity to review such documents a reasonable time prior to their
being filed with the SEC. Purchaser, Merger Sub and the Company each agrees
promptly to correct any information provided by it for use in the Offer
Documents or the Schedule 14D-9, as applicable, that shall have become false or
misleading in any material respect, and Purchaser and Merger Sub, on the one
hand, and the Company, on the other hand, further agree to take all steps
necessary to cause the Offer Documents and the Schedule
-2-
<PAGE>
14D-9, as the case may be, as so corrected to be filed with the SEC and
disseminated to holders of Shares, in each case as and to the extent required by
applicable federal securities laws.
(d) In connection with the Offer, the Company will cause its transfer
agent to furnish promptly to Merger Sub a list, as of a recent date, of the
record holders of Shares and their addresses, as well as mailing labels
containing the names and addresses of all record holders of Shares and lists of
security positions of Shares held in stock depositories. The Company will
furnish Merger Sub with such additional information (including, but not limited
to, updated lists of holders of Shares and their addresses, mailing labels and
lists of security positions) and such other assistance as Purchaser or Merger
Sub or their agents may reasonably request in communicating the Offer to the
record and beneficial holders of Shares.
ARTICLE II
THE MERGER; CLOSING; EFFECTIVE TIME
2.1. The Merger. Subject to the terms and conditions of this
----------
Agreement, at the Effective Time (as defined in Section 2.3) Merger Sub shall be
merged with and into the Company and the separate corporate existence of Merger
Sub shall thereupon cease (the "Merger"). The Company shall be the surviving
------
corporation in the Merger (sometimes hereinafter referred to as the "Surviving
---------
Corporation") and shall continue to be governed by the laws of the State of
- -----------
Delaware, and the separate corporate existence of the Company with all its
rights, privileges, immunities, powers and franchises shall continue unaffected
by the Merger, except as set forth in Section 3.1. The Merger shall have the
effects specified in the Delaware General Corporation Law (the "DGCL").
----
2.2. Closing. The closing of the Merger (the "Closing") shall take
------- -------
place (i) at the offices of Sullivan & Cromwell, 125 Broad Street, New York, New
York at 9:00 a.m. on the first business day on which the last to be fulfilled or
waived of the conditions set forth in Article VIII hereof shall be fulfilled or
waived in accordance with this Agreement or (ii) at such other place and time
and/or on such other date as the Company and Purchaser may agree.
2.3. Effective Time. As soon as practicable following the Closing,
--------------
and provided that this Agreement has not been terminated or abandoned pursuant
to Article IX hereof, the Company and Purchaser will cause a Certificate of
Merger (the "Delaware Certificate of Merger") to be executed and filed with the
------------------------------
Secretary of State of Delaware as provided in Section 251 of the DGCL. The
Merger shall become effective on the date on which the Delaware Certificate of
Merger has been duly filed with the Secretary of State of Delaware, and such
time is hereinafter referred to as the "Effective Time."
--------------
-3-
<PAGE>
ARTICLE III
CERTIFICATE OF INCORPORATION AND BY-LAWS
OF THE SURVIVING CORPORATION
3.1. The Certificate of Incorporation. The Restated Certificate of
--------------------------------
Incorporation of the Company (the "Company Certificate") in effect at the
-------------------
Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation, until duly amended in accordance with the terms thereof and the
DGCL, except that Article Fourth of the Company Certificate shall be amended
to read in its entirety as follows:
"The aggregate number of shares which the Corporation shall have the
authority to issue is 1,000 shares of Common Stock, par value $1.00
per share."
3.2. The By-Laws. The By-Laws of the Company (the "Company By-Laws")
----------- ---------------
in effect at the Effective Time shall be the By-Laws of the Surviving
Corporation, until duly amended in accordance with the terms thereof and the
DGCL.
ARTICLE IV
OFFICERS AND DIRECTORS
OF THE SURVIVING CORPORATION
4.1. Officers and Directors. The directors of Merger Sub and the
----------------------
officers of the Company at the Effective Time shall, from and after the
Effective Time, be the directors and officers, respectively, of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and By-Laws.
4.2. Boards of Directors; Committees. If requested by Purchaser, the
-------------------------------
Company will, subject to compliance with applicable law and promptly following
the purchase by Merger Sub of Shares pursuant to the Offer, take all actions
necessary to cause persons designated by Purchaser to become directors of the
Company so that the total number of such persons equals not less than the
product of (i) the total number of directors on the Board of Directors of the
Company (giving effect to the directors elected pursuant to this sentence) and
(ii) a fraction the numerator of which is the aggregate number of Shares
beneficially owned by Merger Sub or any affiliate of Merger Sub and the
denominator of which is the total number of Shares then outstanding. In
furtherance thereof, the Company will increase the size of the Board of
Directors of the Company, or use its reasonable efforts
-4-
<PAGE>
to secure the resignation of directors, or both, as is necessary to permit
Purchaser's designees to be elected to the Board of Directors of the Company.
At such time, the Company, if so requested, will use its reasonable efforts to
cause persons designated by Purchaser to constitute the same proportionate
representation of each committee of the Board of Directors of the Company, each
board of directors of each subsidiary of the Company and each committee of each
such board (in each case to the extent of the Company's ability to elect such
persons). No directors appointed by Purchaser shall be entitled to receive any
compensation or benefits currently in effect for the Company's non-employee
directors. The Company's obligations to appoint designees to the Board of
Directors of the Company shall be subject to Section 14(f) of the Exchange Act
and Rule 14f-1 promulgated thereunder. The Company shall promptly take all
actions required pursuant to such Section and Rule in order to fulfill its
obligations under this Section 4.2 and shall include in the Schedule 14D-9, or
in a separate Rule 14f-1 information statement provided to stockholders, such
information with respect to the Company and its officers and directors as is
required under Section 14(f) and Rule 14f-1 to fulfill its obligations under
this Section 4.2. Purchaser and Merger Sub will supply to the Company and will
be solely responsible for any information with respect to either of them and
their nominees, officers, directors and affiliates required by Section 14(f) and
Rule 14f-1.
4.3 Actions by Directors. For purposes of Article IX and Sections
--------------------
10.3 and 10.4, no action taken by the Board of Directors of the Company after
the date of the consummation of the Offer and prior to the Merger shall be
effective unless such action is approved by the affirmative vote of at least a
majority of the directors of the Company which are not officers of Purchaser or
designees, stockholders or affiliates of Purchaser.
ARTICLE V
CONVERSION OR CANCELLATION OF SHARES IN THE MERGER
5.1. Conversion or Cancellation of Shares. The manner of converting
------------------------------------
or canceling shares of the Company and Merger Sub in the Merger shall be as
follows:
(a) At the Effective Time, each Share of the Company issued and
outstanding immediately prior to the Effective Time (other than Shares owned by
Purchaser, Merger Sub or any other subsidiary of Purchaser (collectively, the
"Purchaser Companies") or Shares that are held by stockholders ("Dissenting
- -------------------- ----------
Stockholders") exercising appraisal rights pursuant to Section 262 of the DGCL)
- ------------
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive, without interest, an amount in
cash (the "Merger Consideration") equal to $22.00 or such greater amount which
--------------------
may be paid pursuant to the Offer. All Shares (other than those owned by the
Purchaser Companies), by virtue of the Merger and without any action on the part
of the holders thereof, shall no longer be outstanding and shall be canceled and
retired and shall cease to exist, and each
-5-
<PAGE>
holder of a certificate representing any such Shares shall thereafter cease to
have any rights with respect to such Shares, except the right to receive the
Merger Consideration for such Shares upon the surrender of such certificate in
accordance with Section 5.2 or the right, if any, to receive payment from the
Surviving Corporation of the "fair value" of such Shares as determined in
accordance with Section 262 of the DGCL.
(b) At the Effective Time, each Share issued and outstanding at the
Effective Time and owned by any of the Purchaser Companies, and each Share
issued and held in the Company's treasury at the Effective Time, shall, by
virtue of the Merger and without any action on the part of the holder thereof,
cease to be outstanding, shall be canceled and retired without payment of any
consideration therefor and shall cease to exist.
(c) At the Effective Time, each share of Common Stock, par value
$0.001 per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of Merger Sub or the holders of such shares, be converted into one Share.
5.2. Payment for Shares. Purchaser shall make available or cause to
------------------
be made available to the paying agent appointed by Purchaser with the Company's
prior approval (the "Paying Agent") amounts sufficient in the aggregate to
------------
provide all funds necessary for the Paying Agent to make payments pursuant to
Section 5.1(a) hereof to holders of Shares issued and outstanding immediately
prior to the Effective Time (other than Shares owned by the Purchaser
Companies). Such funds shall be invested by the Paying Agent as directed by
Purchaser, provided that such investments shall be in obligations of or
--------
guaranteed by the United States of America, in commercial paper obligations
rated A-1 or P-1 or better by Moody's Investors Service, Inc. or Standard &
Poor's Corporation, respectively, or in certificates of deposit, bank repurchase
agreements or banker's acceptances of commercial banks with capital exceeding
$500 million. Any net profit resulting from, or interest or income produced by,
such investments will be payable to the Surviving Corporation or Purchaser, as
Purchaser directs. Promptly after the Effective Time, the Surviving Corporation
shall cause to be mailed to each person who was, at the Effective Time, a holder
of record (other than any of the Purchaser Companies) of Shares a form (mutually
agreed to by Purchaser and the Company) of letter of transmittal and
instructions for use in effecting the surrender of the certificates which,
immediately prior to the Effective Time, represented any of such Shares in
exchange for payment therefor. Upon surrender to the Paying Agent of such
certificates, together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, the Surviving Corporation
shall promptly cause to be paid to the persons entitled thereto a check in the
amount to which such persons are entitled as Merger Consideration, after giving
effect to any required tax withholdings. No interest will be paid or will
accrue on the amount payable upon the surrender of any such certificate. If
payment is to be made to a person other than the registered holder of the
certificate surrendered, it shall be a condition of such payment that the
certificate so
-6-
<PAGE>
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of the certificate surrendered or establish to the satisfaction of the
Surviving Corporation or the Paying Agent that such tax has been paid or is not
applicable. One hundred and eighty days following the Effective Time, the
Surviving Corporation shall be entitled to cause the Paying Agent to deliver to
it any funds (including any interest received with respect thereto) made
available to the Paying Agent which have not been disbursed to holders of
certificates formerly representing Shares outstanding on the Effective Time, and
thereafter such holders shall be entitled to look to the Surviving Corporation
only as general creditors thereof with respect to the cash payable upon due
surrender of their certificates. Notwithstanding the foregoing, neither the
Paying Agent nor any party hereto shall be liable to any holder of certificates
formerly representing Shares for any amount paid to a public official pursuant
to any applicable abandoned property, escheat or similar law. The Surviving
Corporation shall pay all charges and expenses, including those of the Paying
Agent, in connection with the exchange of cash for Shares and Purchaser shall
reimburse the Surviving Corporation for such charges and expenses.
5.3. Dissenters' Rights. If any Dissenting Stockholder shall be
------------------
entitled to be paid the "fair value" of his or her Shares, as provided in
Section 262 of the DGCL, the Company shall give Purchaser notice thereof and
Purchaser shall have the right to participate in all negotiations and
proceedings with respect to any such demands. Neither the Company nor the
Surviving Corporation shall, except with the prior written consent of Purchaser,
voluntarily make any payment with respect to, or settle or offer to settle, any
such demand for payment. If any Dissenting Stockholder shall fail to perfect or
shall have effectively withdrawn or lost the right to dissent, the Shares held
by such Dissenting Stockholder shall thereupon be treated as though such Shares
had been converted into the Merger Consideration pursuant to Section 5.1.
5.4. Transfer of Shares After the Effective Time. No transfers of
-------------------------------------------
Shares shall be made on the stock transfer books of the Surviving Corporation at
or after the Effective Time.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1. Representations and Warranties of the Company. The Company
---------------------------------------------
hereby represents and warrants to Purchaser and Merger Sub that:
(a) Corporate Organization and Qualification. Each of the Company
----------------------------------------
and its subsidiaries is a corporation duly organized, validly existing and in
good standing under the
-7-
<PAGE>
laws of its respective jurisdiction of incorporation and is in good standing as
a foreign corporation in each jurisdiction where the properties owned, leased or
operated, or the business conducted, by it require such qualification, except
for such failure to so qualify or be in such good standing, which, when taken
together with all other such failures, is not reasonably likely to have a
material adverse effect on the financial condition, properties, business or
results of operations of the Company and its subsidiaries taken as a whole.
Each of the Company and its subsidiaries has the requisite corporate power and
authority to carry on its respective businesses as they are now being conducted.
The Company has made available to Purchaser a complete and correct copy of the
Company Certificate and Company By-Laws, each as amended to date. The Company
Certificate and Company By-Laws so delivered are in full force and effect. The
Company has delivered to Purchaser prior to the date hereof (i) a true, correct
and complete list of the subsidiaries and associated entities of the Company
which evidences, among other things, the amount of capital stock or other equity
interests owned by the Company, directly or indirectly, in such subsidiaries or
associated entities, (ii) copies of all joint venture agreements and partnership
agreements to which the Company or any subsidiary of the Company is a party and
(iii) a true, correct and complete list of all entities in which the Company
owns, directly or indirectly, less than a 50% equity interest.
(b) Authorized Capital. The authorized capital stock of the Company
------------------
consists of 10,000,000 Shares, of which 8,068,665 Shares were outstanding on
February 26, 1998, and 2,000,000 shares of Preferred Stock par value $1.00 per
share (the "Preferred Shares"), of which no shares were outstanding as of the
----------------
date hereof. All of the outstanding Shares have been duly authorized and are
validly issued, fully paid and nonassessable. The Company has no Shares or
Preferred Shares reserved for issuance, except that, as of February 26, 1998,
there were an aggregate of 919,150 Shares reserved for issuance under then-
current outstanding stock options pursuant to the 1987 Long-Term Performance
Plan (the "1987 Plan"), the 1989 Long-Term Performance Plan (the "1989 Plan"),
--------- ---------
the 1993 Performance Plan (the "1993 Plan") and the 1996 Long-Term Performance
---------
Plan (the "1996 Plan" and collectively with the Plans listed in this sentence,
---------
the "Stock Plans") and 120,000 Preferred Shares reserved for issuance upon
-----------
exercise of the rights (the "Rights") issued pursuant to the Rights Agreement,
------
dated as of November 13, 1997, between the Company and Harris Trust and Savings
Bank (the "Rights Agreement"). Each of the outstanding shares of capital stock
----------------
of each of the Company's subsidiaries (as defined in Rule 1.02(v) of Regulation
S-X promulgated pursuant to the Exchange Act) is duly authorized, validly
issued, fully paid and nonassessable and, except as set forth in the Disclosure
Letter, owned, either directly or indirectly, by the Company free and clear of
all liens, pledges, security interests, claims or other encumbrances. Except as
set forth above, there are no shares of capital stock of the Company authorized,
issued or outstanding and except as set forth above, there are no pre emptive
rights nor any outstanding subscriptions, options, warrants, rights, convertible
securities or other agreements or commitments of any character relating to the
issued or unissued capital stock or other securities of the Company or any of
its subsidiaries.
-8-
<PAGE>
Immediately prior to the consummation of the Offer and the Merger, no Preferred
Shares or any other securities of the Company will be subject to issuance
pursuant to the Rights Agreement, no Distribution Date (as defined in the Rights
Agreement) shall have occurred and, at or after the Effective Time, the
Surviving Corporation will have no obligation to issue, transfer or sell any
Shares or common stock of the Surviving Corporation pursuant to any Benefit Plan
(as defined in Section 7.1(d)).
(c) Corporate Authority. Subject only to approval of this Agreement
-------------------
by the holders of a majority of the outstanding Shares, the Company has the
requisite corporate power and authority and has taken all corporate action
necessary in order to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement is a valid and binding
agreement of the Company enforceable against the Company in accordance with its
terms, assuming the due authorization, execution and delivery hereof by
Purchaser and Merger Sub.
(d) Governmental Filings; No Violations. (i) Other than the filings
-----------------------------------
provided for in Section 2.3, as required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") and as required under the Exchange Act
-------
(collectively, the "Regulatory Filings"), no notices, reports or other filings
------------------
are required to be made by the Company with, nor are any consents,
registrations, approvals, permits or authorizations required to be obtained by
the Company from, any governmental or regulatory authority, agency, commission
or other entity, domestic or foreign ("Governmental Entity"), in connection with
-------------------
the execution and delivery of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby, the failure to make or
obtain any or all of which is reasonably likely to have a material adverse
effect on the financial condition, properties, business or results of operations
of the Company and its subsidiaries taken as a whole, or could prevent, delay or
materially burden the transactions contemplated by this Agreement.
(ii) Except as to matters described in the disclosure letter
delivered to Purchaser on or prior to the date hereof (the "Disclosure Letter"),
-----------------
the execution and delivery of this Agreement by the Company do not, and the
consummation by the Company of the transactions contemplated by this Agreement
will not, constitute or result in (i) a breach or violation of, or a default
under, the Company Certificate or Company By-Laws or the comparable governing
instruments of any of its subsidiaries, (ii) a breach or violation of, a default
under or the triggering of any payment or other material obligations pursuant
to, any of the Company's existing Benefit Plans (as defined in Section 7.1(d))
or any grant or award made under any of the foregoing, (iii) a breach or
violation of, or a default under, the acceleration of or the creation of a
lien, pledge, security interest or other encumbrance on assets (with or without
the giving of notice or the lapse of time) pursuant to, any provision of any
agreement, lease, permit, contract, joint venture agreement, partnership
agreement, note, mortgage, indenture, arrangement or other legal obligation
("Contracts") of the Company or
- -----------
-9-
<PAGE>
any of its subsidiaries or any law, rule, ordinance or regulation or judgment,
decree, order, award or governmental or non-governmental permit or license to
which the Company or any of its subsidiaries is subject or (iv) any change in
the rights or obligations of any party under any of the Contracts, except, in
the case of clause (iii) or (iv) above, for such breaches, violations, defaults,
accelerations or changes that, alone or in the aggregate, are not reasonably
likely to have a material adverse effect on the financial condition, properties,
business or results of operations of the Company and its subsidiaries taken as a
whole or that could not prevent, delay or materially burden the transactions
contemplated by this Agreement. The Disclosure Letter (i) specifically
identifies all Contracts that contain any "change of control" or other similar
provisions and (ii) sets forth, to the best knowledge of the officers of the
Company, a list of any consents required under any Contracts to be obtained
prior to consummation of the transactions contemplated by this Agreement
(whether or not subject to the exception set forth with respect to clause (iii)
above). The Company will use its best efforts to obtain the consents referred
to in the Disclosure Letter.
(e) Company Reports; Financial Statements. The Company has delivered
-------------------------------------
to Purchaser each registration statement, schedule, report, proxy statement or
information statement required to be filed or otherwise filed with the SEC (the
"Company Reports") prepared by it since December 31, 1996 (the "Audit Date"),
--------------- ----------
including, without limitation, (i) the Company's Annual Report on Form 10-K/A
for the fiscal year ended December 31, 1996, (ii) the Company's Quarterly
Reports on Form 10-Q/A for the periods ended March 31, 1997, June 30, 1997 and
September 30, 1997, (iii) a Definitive Proxy Statement on Schedule 14A dated
April 7, 1997, (iv) a Form 8-A dated January 6, 1998, and (v) the Form 8-K dated
December 31, 1996 and the Form 8-K dated November 13, 1997, each in the form
(including exhibits and any amendments thereto) filed with the SEC. As of their
respective dates, the Company Reports complied in all material respects with the
applicable requirements under the Exchange Act and did not, and any Company
Reports filed with the SEC subsequent to the date hereof will not, contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in light of
the circumstances in which they were made, not misleading. Each of the
consolidated balance sheets and statements of financial position included in or
incorporated by reference into the Company Reports (including the related notes
and schedules) fairly presents the consolidated financial position of the
Company and its subsidiaries as of its date and each of the consolidated
statements of earnings, stockholders' equity and cash flows included in or
incorporated by reference into the Company Reports (including any related notes
and schedules) fairly presents the results of operations, stockholders' equity
and changes in cash flows, as the case may be, of the Company and its
subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments which will not be
material in amount or effect), in each case in accordance with generally
accepted accounting principles consistently applied during the periods involved,
except as may be noted therein. Other than the Company Reports specifically
recited above, the Company has not filed any other
-10-
<PAGE>
definitive reports or statements with the SEC since the Audit Date. The Company
will provide Purchaser with the most current draft version of the Company's
Annual Report on Form 10-K, including documents incorporated therein by
reference, for the year ended December 31, 1997, (the "1997 10-K") promptly
---------
after preparation of such draft. As soon as practicable after receiving its
auditor's opinion with respect to the Company's financial statements for the
fiscal year ended December 31, 1997 (the "1997 Financial Statements"), the
-------------------------
Company will deliver to Purchaser a copy of such 1997 Financial Statements
(including such auditor's opinion) and, either simultaneously therewith or as
soon thereafter as is practicable, a copy of the 1997 10-K in substantially the
form to be filed with the SEC. The 1997 10-K, as filed with the SEC, will
comply with the standards set forth in this Section 6.1(e) for the Company
Reports.
(f) Absence of Certain Changes. Except as disclosed in the Company
--------------------------
Reports filed with the SEC prior to the date hereof or otherwise disclosed in
the Disclosure Letter, since the Audit Date, the Company and its subsidiaries
have conducted their respective businesses only in, and have not engaged in
any material transaction other than according to, the ordinary and usual course
of such businesses and there has not been (i) any material adverse change in the
financial condition, properties, business or results of operations of the
Company and its subsidiaries taken as a whole or any development or combination
of developments of which management of the Company has knowledge that is
reasonably likely to result in any such change; (ii) any material change in the
net projected liability relating to asbestos or silica or projected insurance
recovery related thereto included in the Company Reports or any development or
combination of developments of which management of the Company has knowledge
that is reasonably likely to result in any such change; (iii) any declaration,
setting aside or payment of any dividend or other distribution with respect to
the capital stock of the Company; or (iv) any change by the Company in
accounting principles, practices or methods. Since the Audit Date, except as
provided for herein or as disclosed in the Company Reports filed with the SEC
prior to the date hereof and other than in the ordinary course, there has not
been any increase in the compensation payable or which could become payable by
the Company and its subsidiaries to their officers or key employees, or any
amendment of any Benefit Plans (as defined in Section 7.1).
(g) Litigation and Liabilities. Except as disclosed with reasonable
--------------------------
specificity in the Company Reports filed with the SEC prior to the date hereof
or in the Disclosure Letter, there are no (i) civil, criminal or administrative
actions, suits, claims, hearings, investigations or proceedings (collectively,
"Actions") pending or, to the knowledge of the management of the Company,
- --------
threatened against the Company or any of its subsidiaries or (ii) obligations or
liabilities, whether or not accrued, contingent or otherwise, including, without
limitation, those relating to matters involving any Environmental Law (as
defined in Section 6.1(m)), or any other facts or circumstances of which the
management of the Company is aware that could result in any claims against or
obligations or liabilities of the Company or any of its subsidiaries, that,
alone or in the aggregate, are reasonably likely to
-11-
<PAGE>
have a material adverse effect on the financial condition, properties, business
or results of operations of the Company and its subsidiaries taken as a whole.
The Company has set forth in the Disclosure Letter a true description of all
claims, obligations and liabilities relating to asbestos and silica, including,
without limitation, product and general liability.
(h) Employee Benefits.
-----------------
(i) All bonus, deferred compensation, pension, retirement, profit-
sharing, thrift, savings, employee stock ownership, stock bonus, stock purchase,
restricted stock and stock option, employment, termination, severance,
compensation, medical, health or other plan, contract, policy or arrangement
which covers current or former employees of the Company and its subsidiaries
(the "Employees") and current or former directors of the Company (the
---------
"Compensation and Benefit Plans") including, but not limited to, "employee
- -------------------------------
benefit plans" within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") are listed in the Disclosure
-----
Letter and any "change of control" or similar provisions therein are
specifically identified in the Disclosure Letter. True and complete copies of
all Compensation and Benefit Plans and such other benefit plans, contracts or
arrangements, including, but not limited to, any trust instruments and insurance
contracts, if any, forming a part of any such plans and agreements, and all
amendments thereto have been made available to Purchaser.
(ii) All Compensation and Benefit Plans are in substantial compliance
with applicable law and all Compensation and Benefit Plans which are employee
benefit plans, other than "multiemployer plans" within the meaning of Sections
3(37) of ERISA, covering employees (the "Plans") to the extent subject to ERISA,
are in substantial compliance with ERISA. Each Plan which is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA ("Pension
-------
Plan") and which is intended to be qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), has received a favorable
----
determination letter from the Internal Revenue Service with respect to "TRA" (as
defined in Section 1 of Internal Revenue Service Revenue Procedure 93-39), and
the Company is not aware of any circumstances likely to result in revocation of
any such favorable determination letter. There is no material pending or, to
the knowledge of the Company, threatened litigation relating to the Compensation
and Benefit Plans. Neither the Company nor any subsidiary has engaged in a
transaction with respect to any Plan that, assuming the taxable period of such
transaction expired as of the date hereof, could subject the Company or any of
its subsidiaries to a material tax or penalty imposed by either Section 4975 of
the Code or Section 502(i) of ERISA.
(iii) No liability under Subtitle C or D of Title IV of ERISA has
been or is expected to be incurred by the Company or any subsidiary with respect
to any ongoing, frozen or terminated "single-employer plan", within the meaning
of Section 4001(a)(15) of ERISA, currently or formerly maintained by any of
them, or the single-employer plan of any
-12-
<PAGE>
entity which is considered one employer with the Company under Section 4001 of
ERISA or Section 414 of the Code (an "ERISA Affiliate"). The Company and its
---------------
subsidiaries have not incurred and do not expect to incur any withdrawal
liability with respect to a multiemployer plan under Subtitle E of Title IV of
ERISA. No notice of a "reportable event", within the meaning of Section 4043 of
ERISA for which the 30-day reporting requirement has not been waived, has been
required to be filed for any Pension Plan or by any ERISA Affiliate within the
12-month period ending on the date hereof.
(iv) All contributions required to be made under the terms of any
Plan have been timely made. Neither any Pension Plan nor any single-employer
plan of an ERISA Affiliate has an "accumulated funding deficiency" (whether or
not waived) within the meaning of Section 412 of the Code or Section 302 of
ERISA. Neither the Company nor its subsidiaries has provided, or is required to
provide, security to any Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Code.
(v) Except as set forth in the Disclosure Letter, under each Pension
Plan which is a single-employer plan, as of the last day of the most recent plan
year ended prior to the date hereof, the actuarially determined present value of
all "benefit liabilities", within the meaning of Section 4001(a)(16) of ERISA
(as determined on the basis of the actuarial assumptions contained in the Plan's
most recent actuarial valuation), did not exceed the then current value of the
assets of such Plan, and there has been no material change in the financial
condition of such Plan since the last day of the most recent Plan Year. The
withdrawal liability of the Company and its subsidiaries under each Benefit Plan
which is a multiemployer plan to which the Company, its subsidiaries or an ERISA
Affiliate has contributed during the preceding 12 months, determined as if a
"complete withdrawal", within the meaning of Section 4203 of ERISA, had occurred
as of the date hereof, does not exceed $100,000.
(vi) Neither the Company nor the subsidiaries have any obligations
for retiree health and life benefits under any Plan, except as set forth in the
Disclosure Letter. The Company or its subsidiaries may amend or terminate any
such Plan pursuant to the terms thereof.
(vii) Except as set forth in the Disclosure Letter, the consummation
of the transactions contemplated by this Agreement will not (x) entitle any
employees of the Company or any of its subsidiaries to severance pay, (y)
accelerate the time of payment or vesting or trigger any payment of compensation
or benefits under, increase the amount payable or trigger any other material
obligation pursuant to, any of the Compensation and Benefit Plans or (z) result
in any breach or violation of, or a default under any of the Compensation and
Benefit Plans.
-13-
<PAGE>
(viii) All Compensation and Benefit Plans covering non-U.S. Employees
comply in all material respects with applicable local law. Except as set forth
in the Disclosure Letter, the Company and its subsidiaries have no material
unfunded liabilities with respect to any Pension Plan which covers non-U.S.
Employees.
(ix) The method of allocating the portion of the proceeds of the
Offer from the suspense account which is part of the A.P. Green Industries, Inc.
Employee Stock Ownership Trust, which implements and forms part of the A.P.
Green Investment Plan (collectively, the "ESOP") to participants' accounts in
accordance with Section 7.8(d) hereof will not violate the terms of the ESOP.
(i) Compliance. Neither the Company nor any of its subsidiaries is
----------
in conflict with, or in default or violation of, (i) any law, rule, regulation,
order, judgment or decree applicable to the Company or any of its subsidiaries
or by which its or any of their respective properties are bound or affected, or
(ii) any Contract to which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries or its or any of their
respective properties are bound or affected, except for any such conflicts,
defaults or violations that, individually or in the aggregate, are not
reasonably likely to have a material adverse effect on the financial condition,
properties, business or results of operations of the Company and its
subsidiaries taken as a whole, or could prevent, delay or materially burden the
transactions contemplated by this Agreement.
(j) Brokers and Finders. Neither the Company nor any of its
-------------------
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders, fees in connection
with the transactions contemplated herein, except that the Company has employed
Credit Suisse First Boston as its financial advisor, the arrangements with which
have been disclosed in writing to Purchaser prior to the date hereof.
(k) Other Actions.
-------------
(i) The transactions contemplated hereby have been approved by the
Board of Directors of the Company in accordance with Article Sixth of the
Company Certificate and, as a result thereof, Article Sixth is inapplicable to
the Offer and the Merger.
(ii) The Company has taken all necessary action under the Rights
Agreement to provide that the execution of this Agreement and the consummation
of the transactions contemplated hereby will not cause (i) Merger Sub and/or
Purchaser to become an Acquiring Person (as defined in the Rights Agreement) or
(ii) a Distribution Date or a Stock Acquisition Date (as such terms are defined
in the Rights Agreement) to occur, irrespective of the number of Shares acquired
pursuant to the Offer.
-14-
<PAGE>
(l) Takeover Statutes. No "fair price", "moratorium", "control share
-----------------
acquisition" or other similar antitakeover statute or regulation (including,
without limitation, Section 203 of the DGCL) (each a "Takeover Statute") is
----------------
applicable to the Company, the Shares, the Offer, the Merger or the transactions
contemplated hereby.
(m) Environmental Matters. Except as disclosed in the Disclosure
---------------------
Letter and except to the extent that the Company's noncompliance with the
following would not reasonably be likely to have a material adverse effect on
the on the financial condition, properties, business or results of operations of
the Company and its subsidiaries taken as a whole: (i) the Company and its
subsidiaries have complied at all times with all applicable Environmental Laws;
(ii) all properties currently owned or operated by the Company or any subsidiary
(including soils, groundwater, surface water, buildings or other structures)
have not been contaminated with any Hazardous Substances; (iii) any properties
formerly owned or operated by the Company or any of its subsidiaries were not
contaminated with Hazardous Substances on or prior to such period of ownership
or operation; (iv) neither the Company nor any subsidiary is subject to
liability for any Hazardous Substance disposal or contamination on any third
party property; (v) neither the Company nor any subsidiary is subject to
liability for any release or threat of release of any Hazardous Substance; (vi)
neither the Company nor any subsidiary has received any notice, demand, letter,
claim or request for information indicating that it may be in violation of or
liable under any Environmental Law; (vii) neither the Company nor any subsidiary
is subject to any order, decree, injunction or other arrangement with any
governmental entity or any indemnity or other agreement with any third party
relating to liability under any Environmental Law; (viii) none of the properties
of the Company or any subsidiary contain any underground storage tanks,
asbestos-containing material, silica, lead products, or polychlorinated
biphenyls; (ix) there are no other circumstances or conditions involving the
Company or any subsidiary that could reasonably be expected to result in any
claims, liability, investigations, costs or restrictions on the ownership, use,
or transfer of any property pursuant to any Environmental Law; and (x) the
Company has delivered or made available to Purchaser copies of all environmental
reports, studies, assessments, sampling data and all other information in its
possession relating to asbestos and silica liability and claims including
without limitation product and sales information, filing rates, settlements,
projected claims, legal advice, reserves, insurance and the use and disposal of
asbestos containing material and silica.
As used herein, the term "Environmental Law" means any federal, state
-----------------
or local law, regulation, order, decree, permit, authorization, opinion, common
law or agency requirement relating to: (A) the protection, investigation or
restoration of the environment, health, safety, or natural resources, (B) the
handling, use, presence, disposal, release or threatened release of any
Hazardous Substance, (C) noise, odor, wetlands, pollution, contamination or any
injury or threat of injury to persons or property or (D) standards of conduct
concerning protection of human health (including, without limitation, employee
health and safety), in each case as amended and as now or hereafter in effect,
and the term
-15-
<PAGE>
"Hazardous Substance" means any substance that is: (A) listed, classified or
-------------------
regulated pursuant to any Environmental Law; (B) any petroleum product or by-
product, asbestos-containing material, silica, lead-containing paint or
plumbing, polychlorinated biphenyls, radioactive materials or radon; or (C) any
other substance which may be the subject of regulatory action by any
governmental authority pursuant to any Environmental Law.
(n) Tax Matters. The Company and each of its subsidiaries, and any
-----------
consolidated, combined, unitary or aggregate group for tax purposes of which the
Company or any of its subsidiaries is or has been a member, has timely filed all
Tax Returns required to be filed by it in the manner provided by law. All such
Tax Returns are true, correct and complete in all material respects. The
Company and each of its subsidiaries have paid all Taxes (including interest and
penalties) due or required to be withheld from amounts owing to any employee,
creditor or third party or have provided adequate reserves in their financial
statements for any Taxes that have not been paid, whether or not shown as being
due on any returns. Except as has been disclosed to Purchaser in the Disclosure
Letter: (i) no material claim for unpaid Taxes has become a lien or encumbrance
of any kind against the property of the Company or any of its subsidiaries or is
being asserted against the Company or any of its subsidiaries; (ii) no audit,
examination, investigation or other proceeding in respect of Taxes is pending,
threatened or being conducted by a Tax Authority; (iii) no extension or waiver
of the statute of limitations on the assessment of any Taxes has been granted by
the Company or any of its subsidiaries and is currently in effect; (iv) neither
the Company nor any of its subsidiaries is a party to, is bound by, or has any
obligation under, or potential liability with regards to, any Tax sharing
agreement, Tax indemnification agreement or similar contract or arrangement; (v)
no power of attorney has been granted by or with respect to the Company or any
of its subsidiaries with respect to any matter relating to Taxes; (vi) neither
the Company nor any of its subsidiaries is a party to any agreement, plan,
contract or arrangement (whether oral or in writing) that would result,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code; (vii) neither the
Company nor any of its subsidiaries has any deferred intercompany gain or loss
arising as a result of a deferred intercompany transaction within the meaning of
Treasury Regulation Section 1.1502-13 (or similar provision under state, local
or foreign law) or any excess loss accounts within the meaning of Treasury
Regulation Section 1.1502-19; (viii) the Company is not and has not been a
United States real property holding corporation (as defined in Section 897(c)(2)
of the Code) during the applicable period specified in Section 897(c)(1)(ii) of
the Code. As used herein, "Taxes" shall mean any taxes of any kind, including
-----
but not limited to those on or measured by or referred to as income, gross
receipts, capital, sales, use, ad valorem, franchise, profits, license,
withholding, premium, value added, property or windfall profits taxes, customs,
duties or similar fees, assessments or charges of any kind whatsoever, together
with any interest and any penalties, additions to tax or additional amounts
imposed by any governmental authority, domestic or
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<PAGE>
foreign. As used herein, "Tax Return" shall mean any return, report or statement
----------
required to be filed with any governmental authority with respect to Taxes.
(o) Intangible Property. Except as set forth in the Disclosure
-------------------
Letter, the Company and its subsidiaries own or have adequate rights to use all
patents, trademarks, trade names, service marks, brands, logos, copyrights,
licenses, trade secrets, customer lists and other proprietary intellectual
property rights (collectively, "Intellectual Property") required for, used in or
---------------------
incident to the business of the Company and its subsidiaries as now conducted or
proposed to be conducted. To the knowledge of the Company, all Intellectual
Property owned by the Company is valid and enforceable. Except as set forth in
the Disclosure Letter, the Company has not received notice, and has no reason to
know of any claim or threatened infringement of the rights of others with
respect to any Intellectual Property used or owned by the Company, the loss of
which could have a material adverse effect on the financial condition,
properties, business or results of operations of the Company and its
subsidiaries taken as a whole. Except as disclosed in the Disclosure Letter,
the Company and its subsidiaries have not been sued within the past two years
(or with respect to a subsidiary of the Company, since such subsidiary was
acquired by the Company if acquired less than two years prior to the date
hereof) for infringing on the Intellectual Property of another entity or person.
To the knowledge of the Company, the Company is not now using, and has not in
the past used without appropriate authorization, any confidential information or
trade secrets of any third party. The Company has not received any notice
alleging such conduct within the past two years and, with respect to notices
received prior to such time, there is no Action pending or, to the knowledge of
the Company, threatened with respect thereto.
6.2. Representations and Warranties of Purchaser and Merger Sub.
----------------------------------------------------------
Purchaser and Merger Sub represent and warrant to the Company that:
(a) Corporate Organization and Qualification. Each of Purchaser and
----------------------------------------
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation and is
in good standing as a foreign corporation in each jurisdiction where the
properties owned, leased or operated, or the business conducted, by it require
such qualification except for such failure to so qualify or to be in such good
standing, which, when taken together with all other such failures, is not
reasonably likely to have a material adverse effect on the financial condition,
properties, business or results of operations of Purchaser and its subsidiaries,
taken as a whole. Each of Purchaser and its subsidiaries has the requisite
corporate power and authority to carry on its respective businesses as they are
now being conducted.
(b) Corporate Authority. Purchaser and Merger Sub each has the
-------------------
requisite corporate power and authority and has taken all corporate action
necessary in order to execute and deliver this Agreement and to consummate the
transactions contemplated
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<PAGE>
hereby. This Agreement is a valid and binding agreement of Purchaser and Merger
Sub enforceable against Purchaser and Merger Sub in accordance with its terms,
assuming the due authorization, execution and delivery hereof by the Company.
(c) Governmental Filings; No Violations. (i) Other than the
-----------------------------------
Regulatory Filings, no notices, reports or other filings are required to be made
by Purchaser and Merger Sub with, nor are any consents, registrations,
approvals, permits or authorizations required to be obtained by Purchaser and
Merger Sub from, any Governmental Entity in connection with the execution and
delivery of this Agreement by Purchaser and Merger Sub and the consummation by
Purchaser and Merger Sub of the transactions contemplated hereby, the failure to
make or obtain any or all of which could prevent, delay or materially burden the
transactions contemplated by this Agreement.
(ii) The execution and delivery of this Agreement by Purchaser and
Merger Sub do not, and the consummation by Purchaser and Merger Sub of the
transactions contemplated by this Agreement will not, constitute or result in
(i) a breach or violation of, or a default under, the Certificate of
Incorporation or By-Laws of Purchaser or Merger Sub or the comparable governing
instruments of any of their subsidiaries or (ii) a breach or violation of, a
default under, the acceleration of or the creation of a lien, pledge, security
interest or other encumbrance on assets (with or without the giving of notice or
the lapse of time) pursuant to, any provision of any Contract of Purchaser or
Merger Sub or any of their subsidiaries or any law, ordinance, rule or
regulation or judgment, decree, order, award or governmental or non-governmental
permit or license to which Purchaser or Merger Sub or any of their subsidiaries
are subject, except, in the case of clause (ii) above, for such breaches,
violations, defaults or accelerations or changes that, alone or in the
aggregate, could not prevent or delay or materially burden the transactions
contemplated by this Agreement.
(d) Funds. Purchaser has or will have the funds necessary to
-----
consummate the transactions contemplated by this Agreement.
ARTICLE VII
COVENANTS
7.1. Interim Operations of the Company. The Company covenants and
---------------------------------
agrees, as to itself and its subsidiaries, that, except as set forth in the
Disclosure Letter, after the date hereof and prior to the Effective Time (unless
Purchaser shall otherwise agree in writing and except as otherwise permitted or
required by this Agreement):
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<PAGE>
(a) the business of the Company and its subsidiaries shall be
conducted only in the ordinary and usual course and, to the extent
consistent therewith, each of the Company and its subsidiaries shall use
its best efforts to preserve its business organization intact and maintain
its existing relations with customers, suppliers, employees and business
associates;
(b) the Company shall not (i) sell or pledge or agree to sell or
pledge any stock owned by it in any of its subsidiaries; (ii) amend the
Company Certificate or Company By-Laws or amend, modify or terminate the
Rights Agreement, or redeem the Rights issued pursuant thereto; (iii)
split, combine or reclassify the outstanding Shares; or (iv) declare, set
aside or pay any dividend payable in cash, stock or property with respect
to the Shares;
(c) neither the Company nor any of its subsidiaries shall (i) issue,
sell, pledge, dispose of or encumber any additional shares of, or
securities convertible or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of its capital
stock of any class of the Company or its subsidiaries or any other property
or assets other than, in the case of the Company, Shares issuable pursuant
to options outstanding on the date hereof under the Stock Plans; (ii)
transfer, lease, license, guarantee, sell, mortgage, pledge, dispose of or
encumber any assets or incur or modify any indebtedness or other liability
other than in the ordinary and usual course of business; (iii) acquire
directly or indirectly by redemption or otherwise any shares of the
capital stock of the Company; (iv) authorize capital expenditures for items
other than those relating to the Company's Palmetto, South Carolina
facility in excess of $250,000 individually or $1,500,000 in the aggregate;
(v) authorize capital expenditures for items relating to the Company's
Palmetto, South Carolina facility in excess of $8,500,000 in the aggregate
or (vi) make any acquisition of another person or entity (by merger,
consolidation or acquisition of stock or assets) or any investment in,
assets or stock of any other person or entity;
(d) neither the Company nor any of its subsidiaries shall grant any
severance or termination pay to, or enter into any employment or severance
agreement with any director, officer or other employee of the Company or
such subsidiaries; and neither the Company nor any of its subsidiaries
shall establish, adopt, enter into, make any new grants or awards under or
amend, any collective bargaining, bonus, profit shar ing, thrift,
compensation, stock option, restricted stock, pension, retirement, employee
stock ownership, deferred compensation, employment, termination, severance
or other plan, agreement, trust, fund, policy or arrangement for the
benefit of any directors, officers or employees (the "Benefit Plans");
-------------
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<PAGE>
(e) except in the ordinary and usual course of business and with the
consent of Purchaser, neither the Company nor any of its subsidiaries shall
settle or compromise any material claims or litigation or, modify, amend or
terminate any of its joint venture agreements, partnership agreements or
material Contracts or waive, release or assign any material rights or
claims;
(f) neither the Company nor any of its subsidiaries shall make any
tax election or permit any insurance policy naming it as a beneficiary or a
loss payable payee to be canceled or terminated without notice to
Purchaser, except in the ordinary and usual course of business;
(g) except as may be required as a result of a change in law or in
generally accepted accounting principles, neither the Company nor any of
its subsidiaries shall change any of the accounting practices or principles
used by it;
(h) neither the Company nor any of its subsidiaries shall adopt a
plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization, or other reorganization of
the Company or any of its subsidiaries not constituting an inactive
subsidiary (other than the Merger); and
(i) neither the Company nor any of its subsidiaries will authorize or
enter into an agreement to do any of the foregoing or take any action that
would make any of the representations or warranties of the Company
contained in this Agreement untrue or incorrect as of the date when made if
such action had then been taken, or would result in any of the Offer
Conditions set forth in Annex A not being satisfied.
7.2. Acquisition Proposals. The Company, its affiliates and its and
---------------------
their respective officers, directors, employees, representatives and agents
(including, without limitation, any investment banker, attorney or accountant
retained by the Company or any of its subsidiaries) shall immediately cease all
existing discussions or negotiations, if any, with any parties conducted
heretofore with respect to any acquisition or exchange of all or any material
portion of the assets of, or more than 15% of the equity interest in, the
Company or any of its subsidiaries (by direct purchase from the Company, tender
or exchange offer or otherwise) or any business combination, merger,
consolidation or similar transaction (including an exchange of stock or assets)
with or involving the Company or any subsidiary or division of the Company (an
"Acquisition Transaction"). Neither the Company nor any of its affiliates, nor
- ------------------------
any of its or their respective officers, directors, employees, representatives
or agents (including, without limitation, any investment banker, attorney or
accountant retained by the Company or any of its subsidiaries) shall, directly
or indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any corporation, partnership,
person or other entity or group (other than Purchaser and Merger Sub, any
affiliate or associate of Purchaser and Merger Sub or any
-20-
<PAGE>
designees of Purchaser and Merger Sub) with respect to any inquiries or the
making of any offer or proposal (including, without limitation, any offer or
proposal to the stockholders of the Company) concerning an Acquisition
Transaction (an "Acquisition Proposal"), unless (i) the Board of Directors of
--------------------
the Company determines in good faith after consultation with outside legal
counsel that such action is necessary in order for its directors to comply with
their respective fiduciary duties under applicable law and (ii) the Board of
Directors of the Company determines in good faith (after consultation with its
financial advisor) that such Acquisition Proposal, if accepted, is reasonably
likely to be consummated (taking into account all legal, financial and
regulatory aspects of the proposal, the person making the proposal and all other
relevant factors) and would, if consummated, result in a transaction more
favorable to the Company's stockholders from a financial point of view than the
transaction contemplated by this Agreement (any such more favorable Acquisition
Proposal being referred to in this Agreement as a "Superior Proposal"). The
-----------------
Company will take the necessary steps to inform the individuals or entities
referred to in the first sentence hereof of the obligations undertaken in this
Section 7.2. The Company will notify Purchaser immediately if any such
inquiries or proposals are received by, any such information is requested from,
or any such negotiations or discussions are sought to be initiated or continued
with the Company, the name of the person making such proposals (unless
identifying such person is prohibited by a binding confidentiality agreement in
effect as of February 25, 1998), the material terms and conditions of such
proposals and thereafter shall keep Purchaser informed, on a current basis, of
the status and terms of such proposals and the status of such negotiations or
discussions. The Company agrees not to release any third party from, or waive
any provisions of, any confidentiality or standstill agreement to which the
Company is a party, unless the Board of Directors of the Company shall have
determined in good faith, based upon the advice of outside counsel to the
Company, that failing to release such third party or waive such provisions would
constitute a breach of the fiduciary duties of the Board of Directors of the
Company under applicable law.
7.3. Meetings of the Company's Stockholders. (a) If required
--------------------------------------
following termination of the Offer, the Company will take, consistent with
applicable law, the Company Certificate and the Company By-Laws, all action
necessary to convene a meeting of holders of Shares as promptly as practicable
following the purchase of Shares pursuant to the Offer to consider and vote upon
the approval of this Agreement and the Merger. Subject to fiduciary
requirements of applicable law, the Board of Directors of the Company shall
recommend such approval and the Company shall take all lawful action to solicit
such approval. At any such meeting of the Company all of the Shares then owned
by the Purchaser Companies will be voted in favor of this Agreement. The
Company's proxy or information statement with respect to such meeting of
shareholders (the "Proxy Statement"), at the date thereof and at the date of
---------------
such meeting, will comply in all material respects with the applicable
requirements under the Exchange Act and will not include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not
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<PAGE>
misleading; provided, however, that the foregoing shall not apply to the extent
-------- -------
that any such untrue statement of a material fact or omission to state a
material fact was made by the Company in reliance upon and in conformity with
written information concerning the Purchaser Companies furnished to the Company
by Purchaser specifically for use in the Proxy Statement. The Proxy Statement
shall not be filed, and no amendment or supplement to the Proxy Statement will
be made by the Company, without consultation with Purchaser and its counsel.
(b) Notwithstanding the foregoing, in the event that Merger Sub shall
acquire at least 90% of the outstanding Shares, the Company agrees, at the
request of Merger Sub, subject to Article VIII, to take all necessary and
appropriate action to cause the Merger to become effective as soon as reasonably
practicable after such acquisition, without a meeting of the Company's
stockholders, in accordance with Section 253 of the DGCL.
7.4. Filings; Other Action. (a) Subject to the terms and conditions
---------------------
herein provided, the Company and Purchaser shall: (i) promptly make their
respective filings and thereafter make any other required submissions under the
HSR Act and other Regulatory Filings with respect to the Offer and the Merger;
and (ii) use all reasonable efforts to promptly take, or cause to be taken, all
other action and do, or cause to be done, all other things necessary, proper or
appropriate under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including but not
limited to cooperating in the preparation and filing of the Offer Documents, the
Schedule 14D-9, the Proxy Statement, any required filings under the HSR Act or
other foreign filings and any amendments to any thereof. The Company shall use
all reasonable efforts to obtain all licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities and
parties to Contracts with the Company and its subsidiaries as are necessary for
the consummation of the transactions contemplated by this Agreement and to
fulfill the conditions to the Offer and the Merger. The Company will cooperate
with Purchaser and Merger Sub with respect to consummating the financing for the
Offer and the Merger and any refinancing of the Company's indebtedness.
Notwithstanding anything contained herein to the contrary, Purchaser shall be
under no obligation whatsoever to make or accept or engage in negotiations for
any settlement with any governmental entity or any other arrangement involving
the sale, disposition, or separate holding, through the establishment of a
trust, or otherwise, of the business or any of the assets of the Company or any
of its subsidiaries acquired pursuant to this Agreement, or any portion thereof,
or particular assets of Purchaser or its subsidiaries or any of the Purchaser
Companies in order to complete the transactions contemplated herein.
(b) The Company and Purchaser each shall keep the other apprised of
the status of matters relating to completion of the transactions contemplated
hereby, including promptly furnishing the other with copies of notices or other
communications received by Purchaser or the Company, as the case may be, or any
of their subsidiaries, from any
-22-
<PAGE>
Governmental Entity with respect to the Offer or the Merger or any of the other
transactions contemplated by this Agreement. The parties hereto will consult
and cooperate with one another, and consider in good faith the views of one
another in connection with any analyses, appearances, presentations, memoranda,
briefs, arguments, opinions and proposals made or submitted by or on behalf of
any party hereto in connection with proceedings under or relating to the HSR Act
or any other antitrust law.
7.5. Access. The Company shall (and shall cause each of its
------
subsidiaries to) afford Purchaser's officers, employees, counsel, lenders,
accountants and other authorized representatives ("Representatives") access,
---------------
during normal business hours throughout the period prior to the Effective Time,
to the Representatives of the Company (and each of its subsidiaries) and its
properties, books, Contracts and records and, during such period, the Company
shall (and shall cause each of its subsidiaries to) furnish promptly to
Purchaser all information concerning its business, properties and personnel as
Purchaser or its Representatives may reasonably request, provided that no
--------
investigation pursuant to this Section 7.5 shall affect or be deemed to modify
any representation or warranty made by the Company and provided, further, that
-------- -------
the foregoing shall not require the Company to permit any inspection, or to
disclose any information, which in the reasonable judgment of the Company would
result in the disclosure of any trade secrets of third parties or violate any
obligation of the Company with respect to confidentiality if the Company shall
have used reasonable efforts to obtain the consent of such third party to such
inspection or disclosure. All requests for information made pursuant to this
Section shall be directed to an executive officer of the Company or such person
as may be designated by any such officer. Upon any termination of this
Agreement, Purchaser will collect and deliver to the Company all documents
obtained by it or any of its Representatives then in their possession and any
copies thereof.
7.6. Notification of Certain Matters. The Company shall give prompt
-------------------------------
notice to Purchaser of: (a) any notice of, or other communication relating to,
any environmental matter, a default or event that, with notice or lapse of time
or both, would become a default, received by the Company or any of its
subsidiaries subsequent to the date of this Agreement and prior to the Effective
Time, under any Contract to which the Company or any of its subsidiaries is a
party or is subject; (b) any changes or developments relating to any Action
pending or, to the knowledge of management of the Company, threatened against
the Company or any of its subsidiaries existing as of the date hereof; (c) any
new Actions pending or, to the knowledge of management of the Company,
threatened against the Company or any of its subsidiaries since the date hereof;
(d) any material adverse change in the financial condition or results of
operations of the Company and its subsidiaries taken as a whole as compared to
the financial condition and results of operations of the Company and its
subsidiaries disclosed in the consolidated financial statements of the Company
as of and for the year ended December 31, 1997 which are set forth in the
Disclosure Letter or the occurrence of any event which, so far as reasonably can
be foreseen at the time of its
-23-
<PAGE>
occurrence, is reasonably likely to result in any such change; and (e) any
material adverse change in the properties or business of the Company and its
subsidiaries taken as a whole or the occurrence of any event which, so far as
reasonably can be foreseen at the time of its occurrence, is reasonably likely
to result in any such change. Each of the Company and Purchaser shall give
prompt notice to the other party of any notice or other communication from any
third party alleging that the consent of such third party is or may be required
in connection with the transactions contemplated by this Agreement.
7.7. Publicity. The initial press release relating to the execution
---------
of this Agreement shall be a joint press release and thereafter the Company and
Purchaser, unless they have previously agreed in writing to the contrary, will
not issue any press release or otherwise make a public statement with respect to
the transactions contemplated hereby or make any filings with any Governmental
Entity or with any national securities exchange with respect thereto, unless in
the written opinion of counsel to the party desiring to make such disclosure, a
copy of which opinion shall be delivered to the other party as promptly as
practicable under the circumstances, such disclosure is required by law or stock
exchange rule or regulation.
7.8. Stock Options and Employee Benefits.
-----------------------------------
(a) Stock Options - Cash Exchange. Subject to Section 7.8(b),
-----------------------------
immediately prior to the Effective Time, the Company shall take such actions as
may be necessary such that immediately prior to the Effective Time each stock
option outstanding and unexercised pursuant to the Stock Plans (the "Option"),
------
whether or not then exercisable, shall be canceled and shall cease to be
exercisable. In consideration for such cancellation, the holder thereof, as
soon as practicable after the Effective Time, will receive an amount in cash
from Purchaser equal to the result of multiplying the number of shares of
Company Common Stock previously subject to such Option by the difference between
the Merger Consideration and the per share exercise price of such Option.
(b) Stock Options - Option Exchange. (i) The executives of the
-------------------------------
Company that are listed in Exhibit 7.8(b) may, by written notice to Purchaser
received by Purchaser not less than ten (10) business days prior to the
Effective Time, elect to convert the Options held by them, up to the number of
Options so designated in Exhibit 7.8(b), into options ("Purchaser Options") to
-----------------
purchase Purchaser common stock ("Purchaser Common Stock"). Any such election
----------------------
shall identify the Options to be converted into Purchaser Options and shall
become irrevocable upon receipt by Purchaser of the notice of election. If such
election is made, at the Effective Time, each Option to be converted shall be
deemed to constitute an option to acquire Purchaser Common Stock on the same
terms of the applicable Stock Plan and the stock option agreement by which it is
evidenced. From and after the Effective Time, (A) each such Option may be
exercised solely for shares of Purchaser Common Stock, (B) the number of shares
of Purchaser Common Stock subject to such Option shall be equal
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<PAGE>
to the result (rounded down to the nearest whole share) of multiplying the
number of shares of Company Common Stock subject to such Option immediately
prior to the Effective Time by a fraction (the "Conversion Fraction"), where (x)
-------------------
the numerator is equal to the Merger Consideration and (y) the denominator is
equal to the average of the last reported sales prices of the Purchaser Common
Stock on the five business days immediately prior to the date hereof and (C) the
per share exercise price under each such Option shall be equal to the result
(rounded up to the nearest cent) of dividing the per share exercise price under
each such Option by the Conversion Fraction; provided, however, that with
-------- -------
respect to any Option which is an "incentive stock option", within the meaning
of Section 422 of the Code, the adjustments provided by this Section 7.8(b)(i)
shall be effected in a manner consistent with the requirements of Section 424(a)
of the Code. No payment shall be made pursuant to Section 7.8(a) with respect
to any portion of an Option that is converted into a Purchaser Option as
aforesaid.
(ii) (A) At or prior to the Effective Time, Purchaser shall
take all corporate action necessary to reserve for issuance a sufficient number
of shares of Purchaser Common Stock for delivery upon exercise of Options
assumed by it in accordance with Section 7.8(b)(i) and (B) as soon as
administratively feasible following the Effective Time, file a registration
statement on Form S-8 (or any successor or other appropriate form) with respect
to the Purchaser Common Stock subject to such Options (or shall cause such
Option to be deemed an option issued pursuant to a Purchaser stock option plan
for which Purchaser Common Stock have previously been registered pursuant to an
appropriate registration form). Purchaser shall use its best efforts to maintain
the effectiveness of such registration statement (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as the
Options remain outstanding.
(c) Employee Benefits. Purchaser agrees that during the period
-----------------
commencing at the Effective Time and ending on the first anniversary thereof,
the employees of the Company will continue to be provided with benefits under
employee benefit plans (other than stock options or other plans involving the
potential issuance of securities of the Company or Purchaser) which in the
aggregate are substantially comparable to those currently provided by the
Company to such employees; provided, however, that employees covered by
-------- -------
collective bargaining agreements need not be provided with such benefits.
Purchaser will cause each employee benefit plan of Purchaser in which employees
of the Company are eligible to participate to take into account for purposes of
eligibility and vesting thereunder the service of such employees with the
Company as if such service were with Purchaser. Purchaser will, and will cause
the Surviving Corporation to, honor without modification all employee benefit
obligations to current and former employees of the Company accrued as of the
Effective Time and, to the extent set forth in the Disclosure Letter, all
employee severance plans in existence on the date hereof and all employment or
severance agreements adopted by the Board of Directors of the Company and
entered into prior to the date hereof.
-25-
<PAGE>
(d) ESOP Distributions and Termination. As soon as practicable following
----------------------------------
the Effective Time, Purchaser and the Company shall take all actions necessary
or appropriate to cause the A.P. Green Industries, Inc. Employee Stock Ownership
Trust, which implements and forms part of the A.P. Green Investment Plan
(collectively, the "ESOP"), to provide for the use of all proceeds received
pursuant to the Offer from the tender of Shares allocated to the suspense
account of the ESOP, as follows: first, such proceeds shall be applied to repay
any outstanding loan incurred by the ESOP; and secondly, the balance of such
proceeds shall be allocated to participants' Employer Match ESOP account in
proportion to the total aggregate value of such accounts of the participants as
of the accounting date immediately preceding the Effective Time, except to the
extent such allocations could exceed the limits on annual contributions pursuant
to Section 415 of the Code. In addition, as soon as is reasonably practicable
following the Effective Time (or, if deemed appropriate by Purchaser and the
Company, after receipt of a favorable determination letter from the Internal
Revenue Service on the effect of termination of the ESOP) Purchaser and the
Company shall terminate the ESOP and distribute all proceeds to the participants
in accordance therewith. Notwithstanding the foregoing, Purchaser shall have no
obligation to implement this Section 7.8(d) if such implementation would violate
the terms of the ESOP or jeopardize the tax-qualified status of the ESOP.
7.9. Indemnification; Directors' and Officers' Insurance. (a) From
---------------------------------------------------
and after the Effective Time, Purchaser agrees that it will cause the Surviving
Corporation to indemnify and hold harmless each present and former director and
officer of the Company, determined as of the Effective Time (the "Indemnified
-----------
Parties"), against any costs or expenses (including reasonable attorneys' fees),
- -------
judgments, fines, losses, claims, damages or liabilities (collectively, "Costs")
-----
incurred in connection with any Action, whether civil, criminal, administrative
or investigative, arising out of matters existing or occurring at or prior to
the Effective Time, whether asserted or claimed prior to, at or after the
Effective Time, to the fullest extent that the Company is permitted to do so
under Delaware law and the Company Certificate or Company By-Laws in effect on
the date hereof (and Purchaser shall also advance expenses as incurred to the
fullest extent permitted under applicable law provided the person to whom
expenses are advanced provides an undertaking to repay such advances if it is
ultimately determined that such person is not entitled to indemnification);
provided that any determination required to be made with respect to whether an
- --------
officer's or director's conduct complies with the standards set forth under
Delaware law and the Company Certificate and Company By-Laws shall be made by
independent counsel selected by the Surviving Corporation.
(b) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of this Section 7.9, upon learning of any such Action, shall
promptly notify Purchaser thereof. In the event of any such Action (whether
arising before or after the Effective Time), (i) Purchaser or the Surviving
Corporation shall have the right to assume the defense thereof and Purchaser
shall not be liable to such Indemnified Parties for any legal expenses of other
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<PAGE>
counsel or any other expenses subsequently incurred by such Indemnified Parties
in connection with the defense thereof, except that if Purchaser or the
Surviving Corporation elects not to assume such defense or counsel for the
Indemnified Parties advises that, in such counsel's reasonable judgment, there
are material issues that constitute conflicts of interest between Purchaser or
the Surviving Corporation and the Indemnified Parties, the Indemnified Parties
may retain counsel satisfactory to them, and Purchaser or the Surviving
Corporation shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received; provided,
--------
however, that Purchaser shall be obligated pursuant to this paragraph (b) to pay
- -------
for only one firm of counsel for all Indemnified Parties in any jurisdiction,
(ii) the Indemnified Parties will cooperate in the defense of any such matter
and (iii) Purchaser shall not be liable for any settlement effected without its
prior written consent; and provided, further, however, that Purchaser shall not
-------- ------- -------
have any obligation hereunder to any Indemnified Party when and if a court of
competent jurisdiction shall ultimately determine, and such determination shall
have become final, that the indemnification of such Indemnified Party in the
manner contemplated hereby is pro hibited by applicable law.
(c) The Surviving Corporation shall be permitted to maintain the
Company's existing officers' and directors' liability insurance ("D&O
---
Insurance") for a period of two years after the Effective Time so long as the
annual premium therefor is not in excess of 150% of the last annual premium paid
prior to the date hereof (the "D&O Premium"); provided, however, if the existing
----------- -------- -------
D&O Insurance expires, is terminated or canceled during such two year period,
the Surviving Corporation will use its best efforts to obtain as much D&O
Insurance as can be obtained for the remainder of such period for a premium not
in excess (on an annualized basis) of the D&O Premium.
7.10. Environmental Filings. The Company shall promptly make all
---------------------
filings, notifications, applications, permit transfers and other submissions
relating to the Offer and Merger that may be required pursuant to any
Environmental Laws including without limitation those relating to the ownership,
operation or transfer of real property, underground storage tanks, waste
disposal locations or landfills and closure and post closure financial
assurances ("Environmental Submissions"). The Company shall provide Purchaser
-------------------------
with copies of all Environmental Submissions at the time of filing and Purchaser
shall cooperate with the Company in the preparation and execution of all
Environmental Submissions.
7.11. Other Actions by the Company.
----------------------------
(a) Takeover Statutes. If any Takeover Statute shall become
-----------------
applicable to the transactions contemplated hereby, the Company and the members
of the Board of Directors of the Company shall grant such approvals and take
such actions as are necessary so that the transactions contemplated hereby may
be consummated as promptly as practicable on the terms contemplated hereby and
otherwise act to eliminate or minimize the effects of such
-27-
<PAGE>
statute or regulation on the transactions contemplated hereby.
(b) Rights. Prior to the commencement of the Offer, the Board of
------
Directors of the Company shall amend the Rights Agreement so that the
consummation of the transactions contemplated hereby will not cause (x) Merger
Sub and/or Purchaser to become an Acquiring Person (as defined in the Rights
Agreement) or (y) a Distribution Date or a Stock Acquisition Date (as such terms
are defined in the Rights Agreement) to occur, irrespective of the number of
Shares acquired pursuant to the Offer. In addition, the Board of Directors of
the Company shall either (i) amend the Rights Agreement prior to the
commencement of the Offer so that all outstanding Rights will expire upon the
acceptance of Shares for payment pursuant to the Offer, whether or not tendered
and purchased pursuant to the Offer, and neither the Company, Merger Sub nor
Purchaser shall have any obligations under the Rights or the Rights Agreement to
any holder (or former holder) of Rights following consummation of the Offer or
(ii) redeem all of the outstanding Rights immediately prior to the consummation
of the Offer so that the Company, Merger Sub and Purchaser shall have no
obligations under the Rights or the Rights Agreement following such time and the
holders shall have no rights under the Rights or the Rights Agreement following
such time, other than the redemption payment of $0.001 per Right as provided in
the Rights Agreement.
ARTICLE VIII
CONDITIONS
8.1. Conditions to Obligations of Purchaser and Merger Sub. The
-----------------------------------------------------
respective obligations of Purchaser and Merger Sub to consummate the Merger are
subject to the fulfillment of each of the following conditions, any or all of
which may be waived in whole or in part by Purchaser or Merger Sub, as the case
may be, to the extent permitted by applicable law:
(a) Stockholder Approval. If required, this Agreement shall have
--------------------
been duly approved by the holders of a majority of the Shares, in accordance
with applicable law and the Company Certificate and the Company By-Laws;
(b) Purchase of Shares. Merger Sub (or one of the Purchaser
------------------
Companies) shall have purchased Shares pursuant to the Offer;
(c) Governmental Consents and Regulatory Approvals. The waiting
----------------------------------------------
period applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated and, other than the filings provided for in Section
2.3, all filings required to be made prior to the Effective Time with, and all
consents, approvals and authorizations
-28-
<PAGE>
required to be obtained prior to the Effective Time from, any Governmental
Entity in connection with the execution and delivery of this Agreement and the
consummation of the Merger by the Company, Purchaser and Merger Sub (the
"Regulatory Approvals") shall have been made or obtained (as the case may be);
- ---------------------
(d) Injunction. No United States or state court or other
----------
Governmental Entity of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, judgment,
decree, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and prohibits consummation of the transactions
contemplated by this Agreement or imposes material restrictions on Purchaser or
the Company in connection with consummation of the Merger or with respect to
their business operations, either prior to or subsequent to the Merger
(collectively, an "Order"); and
-----
(e) Other Obligations. The Company shall have fulfilled its
-----------------
obligations under Section 7.8(a) and the representations set forth in Section
6.1(k) shall be true and correct as of the Closing Date as if made on such date.
8.2. Conditions to Obligations of the Company. The obligations of
----------------------------------------
the Company to consummate the Merger are subject to the fulfillment of each of
the following conditions, any or all of which may be waived in whole or in part
by the Company to the extent permitted by applicable law:
(a) Stockholder Approval. If required, this Agreement shall have
--------------------
been duly approved by the holders of a majority of the Shares, in accordance
with applicable law and the Company Certificate and the Company By-Laws;
(b) Purchase of Shares. Merger Sub (or one of the Purchaser
------------------
Companies) shall have purchased Shares pursuant to the Offer;
(c) Governmental Consents. The waiting period applicable to the
---------------------
consummation of the Merger under the HSR Act shall have expired or been
terminated; and
(d) Order. There shall be in effect no Order.
-----
ARTICLE IX
TERMINATION
9.1. Termination by Mutual Consent. This Agreement may be terminated
-----------------------------
and the transactions contemplated hereby may be abandoned at any time prior to
the Effective
-29-
<PAGE>
Time, before or after the approval by holders of Shares, by the mutual consent
of Purchaser and the Company, by action of their respective Boards of Directors.
9.2. Termination by either Purchaser or the Company. This Agreement
----------------------------------------------
may be terminated and the transactions contemplated hereby may be abandoned at
any time prior to the Effective Time, before or after the approval by holders of
Shares, by action of the Board of Directors of either Purchaser or the Company
if (i) Merger Sub, or any Purchaser Company, shall have terminated the Offer
without purchasing any Shares pursuant thereto; or (ii) the Merger shall not
have been consummated by August 31, 1998 whether or not such date is before or
after the approval by holders of Shares; or (iii) if required, the approval of
shareholders required by Section 8.1(a) shall not have been obtained at a
meeting duly convened therefor; or (iv) any court of competent jurisdiction or
other Governmental Entity located or having jurisdiction within the United
States or any country in which either the Company or Purchaser, directly or
indirectly, has material assets or operations, shall have issued a final order,
decree or ruling or taken any other final action restraining, enjoining or
otherwise prohibiting the Offer or the Merger and such order, decree, ruling or
other action is or shall have become final and nonappealable.
9.3. Termination by Purchaser. This Agreement may be terminated and
------------------------
the transactions contemplated hereby may be abandoned at any time prior to the
Effective Time, before or after the approval by holders of Shares, by action of
the Board of Directors of Purchaser, if (i) the Company shall have breached or
failed to perform in any material respect any of the covenants or agreements
contained in this Agreement to be complied with or performed by the Company
prior to such date of termination which breach or failure shall not have been
cured prior to the earlier of (A) five business days following the giving of
written notice to the Company of such breach or failure and (B) two business
days prior to the date on which the Offer is then scheduled to expire, or any
representation or warranty of the Company set forth in this Agreement shall have
been inaccurate or incomplete when made except for such failures to be complete
or accurate that, individually or in the aggregate, could not reasonably be
expected to have a material adverse effect on the financial condition,
properties, business or results of operations of the Company and its
subsidiaries taken as a whole or could prevent or materially delay the
transactions contemplated by this Agreement or impair the ability of Purchaser,
Merger Sub, the Company or any of their respective affiliates, following
consummation of the Offer or the Merger, to conduct any material business or
operations in any jurisdiction where they are now being conducted, (ii) the
Board of Directors of the Company (or a special committee thereof) shall have
amended, modified or withdrawn in a manner adverse to Purchaser or Merger Sub
its approval or recommendation of the Offer, this Agreement or the Merger or the
Board of Directors of the Company (or a special committee thereof), upon request
by Purchaser, shall fail to reaffirm such approval or recommendation, or shall
have endorsed, approved or recommended any other Acquisition Proposal, or shall
have resolved to do any of the foregoing, or (iii) if the Company or any of the
other persons or entities described in Section 7.2 shall take any
-30-
<PAGE>
actions that would be proscribed by Section 7.2 but for the exception therein
allowing certain actions to be taken if required by fiduciary obligations under
applicable law as advised in writing by counsel.
9.4. Termination by the Company. This Agreement may be terminated
--------------------------
and the transactions contemplated hereby may be abandoned at any time prior to
the Effective Time, before or after the approval by holders of Shares by action
of the Board of Directors of the Company, (i) if Purchaser or Merger Sub (or
another Purchaser Company) (x) shall have breached or failed to perform in any
material respect any of the covenants or agreements contained in this Agreement
to be complied with or performed by Purchaser or Merger Sub prior to such date
of termination which shall not have been cured prior to the earlier of (A) five
business days following the giving of written notice to Purchaser of such breach
or failure and (B) two business days prior to the date on which the Offer is
then scheduled to expire, or (y) shall have failed to commence the Offer within
the time required in Section 1.1, or (ii) if (w) the Company is not in material
breach of any of the terms of this Agreement, (x) the Board of Directors of the
Company authorizes the Company, subject to complying with the terms of this
Agreement, to enter into a binding written agreement concerning a transaction
that constitutes a Superior Proposal and the Company notifies Purchaser in
writing that it intends to enter into such an agreement, attaching the most
current version of such agreement (which shall include all of the material
terms, including the price proposed to be paid for Shares pursuant thereto) to
such notice, (y) Purchaser does not make, within two business days of receipt of
the Company's written notification of its intention to enter into a binding
agreement for a Superior Proposal, an offer that the Board of Directors of the
Company determines, in good faith after consultation with its financial
advisors, is at least as favorable, from a financial point of view, to the
stockholders of the Company as the Superior Proposal and (z) the Company, prior
to such termination, pays to Purchaser in immediately available funds the fees
required to be paid pursuant to Section 9.5(b).
9.5. Effect of Termination and Abandonment. (a) In the event of the
-------------------------------------
termination of this Agreement pursuant to this Article IX, no party hereto (or
any of its directors or officers) shall have any liability or further obligation
to any other party to this Agreement, except as provided in Section 9.5(b) below
and Section 10.2 and except that nothing herein will relieve any party from
liability for any willful breach of this Agreement; provided, however, that if
-------- -------
this Agreement is terminated by Purchaser pursuant to Section 9.3(i) or the
Company pursuant to Section 9.4(i), the terminating party's rights to pursue all
legal remedies will survive such termination unimpaired.
(b) If (i) (x) the Offer shall have remained open for a minimum of at
least 20 business days, (y) after the date hereof any corporation, partnership,
person, other entity or group (as defined in Section 13(d)(3) of the Exchange
Act) other than Purchaser or Merger Sub or any of their respective subsidiaries
or affiliates (collectively, a "Person") shall have become the beneficial owner
------
of 20% or more of the outstanding Shares or shall have publicly
-31-
<PAGE>
announced a proposal or intention to make an Acquisition Proposal or any Person
shall have commenced, or shall have publicly announced an intention to commence,
a tender offer or exchange offer for 20% or more of the outstanding Shares, and
(z) the Minimum Condition (as defined in Annex A) shall not have been satisfied
and the Offer is terminated without the purchase of any Shares thereunder, or
(ii) Purchaser shall have terminated this Agreement pursuant to Section 9.3(ii)
or Section 9.3(iii) or (iii) the Company shall have terminated this Agreement
pursuant to Section 9.4(ii), then the Company shall promptly, but in no event
later than two days after the date of such termination, pay Purchaser a fee of
$8,000,000 and shall reimburse Purchaser and Merger Sub (not later than one
business day after request by Purchaser or Merger Sub) for all of the out-of-
pocket charges and expenses, including financing fees, incurred by Purchaser or
Merger Sub in connection with this Agreement and the transactions contemplated
by this Agreement up to a maximum amount of $1,500,000, in each case payable by
wire transfer in same day funds. The Company acknowledges that the agreements
contained in this Section 9.5(b) are an integral part of the transactions
contemplated in this Agreement, and that, without these agreements, Purchaser
and Merger Sub would not enter into this Agreement; accordingly, if the Company
fails to promptly pay the amount due pursuant to this Section 9.5(b), and, in
order to obtain such payment, Purchaser or Merger Sub commences a suit which
results in a judgment against the Company for the fee set forth in this
paragraph (b), the Company shall pay to Purchaser or Merger Sub its costs and
expenses (including attorneys' fees) in connection with such suit, together with
interest on the amount of the fee at the prime rate of Bank of America National
Trust and Savings Association on the date such payment was required to be made.
The payments made by the Company pursuant to this Section 9.5(b) are the sole
and exclusive remedy of Purchaser and Merger Sub for any claim that Purchaser or
Merger Sub may have arising from or relating to the events set forth in Section
9.5(b)(i), (ii) or (iii).
ARTICLE X
Miscellaneous and General
10.1. Payment of Expenses. Whether or not the Merger shall be
-------------------
consummated, each party hereto shall, subject to Section 9.5(b), pay its own
expenses incident to preparing for, entering into and carrying out this
Agreement and the consummation of the Merger.
10.2. Survival. The agreements of the Company, Purchaser and Merger
--------
Sub contained in Sections 5.2 (Payment for Shares) (but only to the extent that
such Section expressly relates to actions to be taken after the Effective Time),
5.3 (Dissenters' Rights), 5.4 (Transfer of Shares After the Effective Time), 7.8
(Stock Options and Employee Benefits), 7.9 (Indemnification; Directors' and
Officers' Insurance), 7.11 (Other Actions by the Company) and 10.1 (Payment of
Expenses) shall survive the consummation of the Merger.
-32-
<PAGE>
The agreements of the Company, Purchaser and Merger Sub contained in
Confidentiality Agreement, dated as of December 12, 1997 between the Company and
Purchaser and Sections 7.5 (Access), 9.5 (Effect of Termination and
Abandonment), 10.1 (Payment of Expenses), 10.6 (Governing Law), 10.7 (Notices),
10.8 (Severability), 10.9 (Entire Agreement, etc.), 10.10 (Parties in Interest),
10.11 (Definition of "Subsidiary"), 10.12 (Obligation of Purchaser) and 10.13
(Captions) shall survive the termination of this Agreement. All other
representations, warranties, agreements and covenants in this Agreement shall
not survive the consummation of the Merger or the termination of this Agreement.
10.3. Modification or Amendment. Subject to the applicable
-------------------------
provisions of the DGCL, at any time prior to the Effective Time, the parties
hereto may modify or amend this Agreement, by written agreement executed and
delivered by duly authorized officers of the respective parties.
10.4. Waiver of Conditions. The conditions to each of the parties'
--------------------
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.
10.5. Counterparts. For the convenience of the parties hereto, this
------------
Agreement may be executed in any number of counterparts, each such counterpart
being deemed to be an original instrument, and all such counterparts shall
together constitute the same agreement.
10.6. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware.
10.7. Notices. Any notice, request, instruction or other document to
-------
be given hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, if to
-----
Purchaser or Merger Sub, addressed to Purchaser or Merger Sub, as the case may
- -----------------------
be, at Global Industrial Technologies, Inc., 2121 San Jacinto Street, Suite
2500, Dallas, Texas 75201, Attention: Graham L. Adelman, Esq. Senior Vice
President, General Counsel and Secretary (with a copy to James C. Morphy, Esq.,
Sullivan & Cromwell, 125 Broad Street, New York, New York 10004); and if to the
-------------
Company, addressed to the Company at A.P. Green Industries, Inc., Green
- -------
Boulevard, Mexico, Missouri 65265, Attention: Michael B. Cooney, Esq., Senior
Vice President -Law/Administration and Secretary (with a copy to Robert LaRose,
Esq., Thompson Coburn, One Mercantile Center, St. Louis, Missouri, 63101), or to
such other persons or addresses as may be designated in writing by the party to
receive such notice.
10.8. Severability. If any term or other provision of this Agreement
------------
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other
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<PAGE>
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall 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 hereby are fulfilled to the fullest extent possible.
10.9. Entire Agreement, etc. This Agreement (including the
---------------------
Disclosure Letter and any exhibits or Annexes hereto) (a) constitutes the entire
agreement, and supersedes all other prior agreements, understandings,
representations and warranties both written and oral, among the parties, with
respect to the subject matter hereof, and (b) shall not be assignable by
operation of law or otherwise and is not intended to create any obligations to,
or rights in respect of, any persons other than the parties hereto; provided,
--------
however, that Purchaser may designate, by written notice to the Company, another
- -------
wholly-owned direct or indirect subsidiary to be a Constituent Corporation in
lieu of Merger Sub, in the event of which, all references herein to Merger Sub
shall be deemed references to such other subsidiary except that all
representations and warranties made herein with respect to Merger Sub as of the
date of this Agreement shall be deemed representations and warranties made with
respect to such other subsidiary as of the date of such designation.
10.10. Parties in Interest. This Agreement shall be binding upon and
-------------------
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
10.11. Definition of "Subsidiary". When a reference is made in this
--------------------------
Agreement to a subsidiary of a party, the word "subsidiary" means any
corporation or other organization whether incorporated or unincorporated of
which at least a majority of the securities or interests having by the terms
thereof ordinary voting power to elect at least a majority of the board of
directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such party or by any one or more of its subsidiaries, or by such party and
one or more of its subsidiaries, and, with respect to the Company, shall also
include Empresa de Refractarios Colombianos S.A. and Materiales Industriales
S.A. (the "Colombian Companies"); provided, however, that any representations
------------------- -------- -------
and warranties relating to the Colombian Companies shall be deemed qualified by
reference to the knowledge of the officers of the Company.
10.12. Obligation of Purchaser. Whenever this Agreement requires
-----------------------
Merger Sub to take any action, such requirement shall be deemed to include an
undertaking on the part of Purchaser to cause Merger Sub to take such action.
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<PAGE>
10.13. Captions. The Article, Section and paragraph captions herein
--------
are for convenience of reference only, do not constitute part of this Agreement
and shall not be deemed to limit or otherwise affect any of the provisions
hereof.
-35-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto on the date
first hereinabove written.
A.P. GREEN INDUSTRIES, INC.
By /s/ Paul F. Hummer
-----------------------------------
Name: Paul F. Hummer
Title: Chairman of the Board,
President and
Chief Executive Officer
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
By /s/ Graham L. Adelman
-----------------------------------
Name: Graham L. Adelman
Title: Senior Vice President
BGN ACQUISITION CORP.
By /s/ Graham L. Adelman
-----------------------------------
Name: Graham L. Adelman
Title: Senior Vice President
-36-
<PAGE>
ANNEX A
CERTAIN CONDITIONS OF THE OFFER. The capitalized terms used in this
-------------------------------
Annex A have the meanings set forth in the attached Agreement. Notwithstanding
any other provision of the Offer, Merger Sub 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 Merger Sub's
obligation to pay for or return tendered Shares promptly after termination or
withdrawal of the Offer), pay for, or may delay the acceptance for payment of or
payment for, any tendered Shares, or may, in its sole discretion, terminate or
amend the Offer as to any Shares not then paid for if, (i) prior to the
expiration of the Offer, (x) a number of Shares which, together with any Shares
owned by Purchaser or Merger Sub, constitutes more than 50% of the voting power
(determined on a fully-diluted basis) of all the securities of the Company
entitled to vote generally in the election of directors or in connection with a
merger shall not have been validly tendered and not withdrawn prior to the
expiration of the Offer (the "Minimum Condition") or (y) any waiting periods
-----------------
under the HSR Act applicable to the purchase of Shares pursuant to the Offer,
and any applicable waiting periods under any foreign statutes or regulations
that are applicable to the Offer or the Merger shall not have expired or been
terminated, or any Regulatory Approvals applicable to the Offer and the Merger
shall not have been obtained on terms satisfactory to Purchaser in its
reasonable judgment, or (ii) on or after March 3, 1998, and at or before the
time of payment for any of such Shares (whether or not any Shares have
theretofore been accepted for payment), any of the following events shall occur:
(a) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the NYSE, (ii) a
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States, (iii) a commencement or escalation
of a war, armed hostilities or other international or national calamity
directly or indirectly involving the United States, (iv) any limitation
(whether or not mandatory) by any Governmental Entity on, or any other
event which might affect, the extension of credit by banks or other lending
institutions, (v) a material change in United States or any other currency
exchange rates or a suspension of, or limitation on, the markets therefor,
(vi) or in the case of any of the foregoing existing at the time of the
commencement of the Offer, a material acceleration or worsening thereof,
(vii) any extraordinary or material adverse change in the market price of
the Shares or in the United States securities or financial markets
generally, including, without limitation, a decline of at least 20% in
either the Dow Jones Average of Industrial Stocks or the Standard & Poor's
500 index from the date of the Agreement or (viii) any material adverse
change in the relevant financial markets that could reasonably be expected
to materially and adversely affect the debt facilities related to the
financing of the Offer;
(b) the Company shall have breached or failed to perform in any
material respect any of its obligations, covenants or agreements contained
in the Agreement or any representation or warranty of the Company set forth
in
A-1
<PAGE>
the Agreement shall have been inaccurate or incomplete in any material
respect when made or thereafter shall become inaccurate or incomplete in
any material respect;
(c) there shall be threatened, instituted or pending any Action
before any court or other Governmental Entity by any Governmental Entity or
instituted or pending any Action by any other person, domestic or foreign:
(i) challenging the acquisition by Purchaser or Merger Sub of Shares,
seeking to restrain or prohibit the consummation of the transactions
contemplated by the Offer or the Merger or other subsequent business
combination, seeking to obtain any material damages or otherwise directly
or indirectly relating to the transactions contemplated by the Offer or the
Merger or other subsequent business combination; (ii) seeking to prohibit,
or impose any material limitations on, Purchaser's or Merger Sub's
ownership or operation of all or any portion of their or the Company's
business or assets (including the business or assets of their respective
affiliates and subsidiaries), or to compel Purchaser or Merger Sub to
dispose of or hold separate all or any portion of Purchaser's or Merger
Sub's or the Company's business or assets (including the business or assets
of their respective affiliates and subsidiaries) as a result of the
transactions contemplated by the Offer or the Merger or other subsequent
business combination; (iii) seeking to make the acceptance for payment,
purchase of, or payment for, some or all of the Shares illegal or render
Merger Sub unable to, or result in a delay in, or restrict, the ability of
Merger Sub to, accept for payment, purchase or pay for some or all of the
Shares; (iv) seeking to impose material limitations on the ability of
Purchaser or Merger Sub effectively to acquire or hold or to exercise full
rights of ownership of the Shares including, without limitation, the right
to vote the Shares purchased by them on an equal basis with all other
Shares on all matters properly presented to the stockholders; or (v) that,
in any event, in the judgment of Purchaser, is reasonably likely to have a
material adverse effect on the financial condition, properties, business or
operations of the Company or Purchaser or Merger Sub (or any of their
respective affiliates or subsi diaries) or the value of the Shares to
Purchaser or Merger Sub or the benefits expected to be derived by Purchaser
or Merger Sub as a result of consummation of the transactions contemplated
by the Offer and the Merger;
(d) any statute, rule, regulation, order or injunction shall be
sought, proposed, enacted, promulgated, entered, enforced or deemed or
become applicable to the Offer, the Merger, the Agreement or other
subsequent business combination, or any other action shall have been taken,
proposed or threatened, by any court or other Governmental Entity other
than the application to the Offer, the Merger, the Agreement or other
subsequent busi-
A-2
<PAGE>
ness combination of waiting periods under the HSR Act, that, in the
judgment of Purchaser, could be expected to, directly or indirectly, result
in any of the effects of, or have any of the consequences sought to be
obtained or achieved in, any Action referred to in clauses (i) through (v)
of paragraph (c) above;
(e) a tender or exchange offer for some portion or all of the Shares
shall have been commenced or publicly proposed to be made by another person
(including the Company or its subsidiaries), or it shall have been publicly
disclosed or Purchaser shall have learned that (i) any person (including
the Company or its subsidiaries), entity or "group" (as defined in Section
13(d) of the Exchange Act and the rules promulgated thereunder) shall have
become the beneficial owner (as defined in Section 13(d) of the Exchange
Act and the rules promulgated thereunder) of more than 20% of any class or
series of capital stock of the Company (including the Shares) other than
for bona fide arbitrage purposes or (ii) any person, entity or group shall
have entered into a definitive agreement or an agreement in principle or
made a proposal with respect to a tender offer or exchange offer for some
portion or all of the Shares or a merger, consolidation or other business
combination with or involving the Company;
(f) any change shall have occurred (or any development shall have
occurred involving a prospective change) or Purchaser or Merger Sub shall
have become aware of any fact (including, but not limited to, any such
change) that has had, or is reasonably likely to have, a material adverse
effect on the financial condition, properties, business or results of
operations of the Company and its subsidiaries taken as a whole;
(g) the Board of Directors of the Company (or a special committee
thereof) shall have amended, modified or withdrawn its approval or
recommendation of the Offer, the Agreement or the Merger, or shall have
failed to publicly reconfirm such approval or recommendation upon request
by Purchaser or Merger Sub, or shall have endorsed, approved or recommended
any other Acquisition Proposal, or shall have resolved to do any of the
foregoing; or
(h) the Agreement shall have been terminated by the Company or
Purchaser or Merger Sub in accordance with its terms or Purchaser or Merger
Sub shall have reached an agreement or understanding in writing with the
Company providing for termination or amendment of the Offer or delay in
payment for the Shares;
A-3
<PAGE>
which, in the sole judgment of Purchaser and Merger Sub, in any such case, and
regardless of the circumstances (including any action or inaction by Purchaser
or Merger Sub) giving rise to any such conditions, makes it inadvisable to
proceed with the Offer and/or with such acceptance for payment of or payment for
Shares.
The foregoing conditions are for the sole benefit of Purchaser and
Merger Sub and may be asserted by Purchaser or Merger Sub regardless of the
circumstances (including any action or inaction by Purchaser or Merger Sub)
giving rise to such condition or may be waived by Purchaser or Merger Sub, by
express and specific action to that effect, in whole or in part at any time and
from time to time in its sole discretion. Any determination by Purchaser and
Merger Sub concerning any event described in this Annex A shall be final and
binding upon all parties. The failure by Merger Sub at any time to exercise any
of the foregoing rights shall not be deemed a waiver of any such right, the
waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances, and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
A-4
<PAGE>
EXHIBIT 7.8(b)
--------------
1. Paul F. Hummer, President and Chief Executive Officer of the Company may,
by written notice to Purchaser received by Purchaser not less than ten
(10) business days prior to the Effective Time, elect to convert up to
75,000 Options into Purchaser Options, pursuant to Section 7.8(b) of the
Agreement.
<PAGE>
EXHIBIT 2
[GLOBAL INDUSTRIAL TECHNOLOGIES, INC. LETTERHEAD}
December 12, 1997
A.P. Green Industries, Inc.
Green Boulevard
Mexico, Missouri 65265
Attention: Mr. Paul F. Hummer, Chairman, President
and Chief Executive Officer
Gentlemen:
In connection with the consideration by A.P. Green Industries, Inc. ("Green")
and Global Industrial Technologies, Inc. ("Global") of a possible business
combination transaction (a "Transaction") between Green and Global involving
Green and the refractories business of Global conducted by Harbison-Walker
Refractories Company ("H-W"), a wholly owned subsidiary of Global, Global is
prepared to make available to Green, and it is our understanding that Green is
prepared to make available to Global, certain information concerning the
business, financial condition, operations, assets and liabilities of H-W and
Green, respectively (herein collectively referred to, and further defined below,
as the "Evaluation Material"). The purpose of this letter agreement is to set
forth the understanding of Global and Green (the "Parties") with respect to the
conditions upon which Evaluation Material will be furnished by each to the
other, including their agreement to treat any Evaluation Material (whether
prepared by the Parties, their advisors or otherwise and irrespective of the
form of communication) which has been or will be furnished by or on behalf of
the Parties after the date hereof in accordance with the provisions of this
letter agreement, and to take or abstain from taking certain other actions
hereinafter set forth.
The term "Evaluation Material" shall be deemed to include all data, reports,
interpretations, forecasts and records, financial or otherwise, reflecting
information and concerning Green and H-W which is not available to the general
public and which the Parties, their affiliates or any of their respective
directors, partners, officers, employees, agents or advisors (including without
limitation, attorneys, accountants, consultants, bankers and financial advisors)
(collectively, "Representatives") provide to each other as well as all notes,
analyses, compilations, studies, interpretations or other documents prepared by
the Parties or their Representatives which contain, reflect or are based upon,
in whole or in part, the information furnished to the Parties or their
Representatives pursuant hereto. The term "Evaluation Material" does not
include information which (1) is or becomes generally available to the public
other than as a result of a disclosure by a Party or its Representatives in
violation hereof, (2) was within the possession of a Party or its
Representatives prior to its being furnished to such Party by the other Party or
any Representative of the other Party pursuant hereto, provided that the source
of such information was not known by the Party claiming
<PAGE>
such information is not Evaluation Material to be bound by a confidentiality
agreement with or other direct or indirect contractual, legal or fiduciary
obligation of confidentiality to the other Party or its Representatives with
respect to such information, or (3) becomes available to the Party to which such
information was furnished under this letter agreement on a non-confidential
basis from a sourse other than the other Party or any Representative of the
other Party, provided that such source is not known by the Party claiming such
information is not Evaluation Material to be bound to the other Party or its
Representatives by a confidentiality agreement or other direct or indirect
contractual, legal or fiduciary obligation with respect to such information, or
(4) is demonstrated, to the reasonable satisfaction of the Party that furnished
such information, to have been developed by the other Party or its
Representatives independently from the Evaluation Material.
The Parties hereby agree that, for a period of three years after the date
hereof, they and their Representatives shall use the Evaluation Material solely
for the purpose of evaluating a possible Transaction, the Evaluation Material
will be kept confidential, and they and their Representatives will not disclose
any of the Evaluation Material to any person in any manner whatsoever; provided,
however, that (1) either Party may make any disclosure of such information to
which the other Party gives its prior written consent and (2) any of such
information may be disclosed to those Representatives of a Party who need to
know such information for the sole purpose of evaluating a possible Transaction,
who agree to keep such information confidential, and who agree to be bound by
the terms hereof to the same extent as if they were parties hereto.
Notwithstanding the foregoing, unless and until the Parties reach an agreement
in principle regarding a Transaction, and subject to the following paragraph and
the first full paragraph on page 3, the Parties agree that (1) the Evaluation
Material, (2) the fact that Evaluation Material has been furnished hereunder,
and (3) the fact that discussions are taking place and may take place in the
future between the Parties and their Representatives regarding a Transaction,
will only be disclosed by the Parties or their Representatives to those
corporate officers and other corporate employees of the Parties, and, in the
case of Global, also to those corporate officers and other corporate employees
of H-W, to whom such disclosure is necessary in order for the Parties to
initially evaluate a Transaction and discuss terms for an agreement in
principle. The Parties shall instruct such officers and employees to make no
further disclosure thereof and shall inform them of restrictions imposed by
applicable laws upon the disclosure and use of Evaluation Material. In any
event, each Party shall be responsible for the breach of this letter agreement
by any of its Representatives and agrees, at its sole expense, to take all
reasonable measures (including but not limited to court proceedings) to restrain
its Representatives from prohibited or unauthorized disclosure or use of the
Evaluation Material.
<PAGE>
In addition, unless they have previously agreed in writing to the contrary, the
Parties and their Representatives will not disclose to any other person (1) that
they have furnished Evaluation Material to each other, (2) that discussions or
negotiations have taken place or will take place concerning a possible
Transaction, or (3) any of the terms, conditions or other facts with respect
thereto (including the status thereof), unless in the written opinion of counsel
to the Party desiring to make such disclosure, a copy of which opinion shall be
delivered to the other Party, such disclosure is required by law or stock
exchange rule or regulation and then only with as much prior written notice to
the other Party as is practicable under the circumstances. The term "person" as
used in this letter agreement shall be broadly interpreted to include the media
and any individual, corporation, partnership, group, or other entity.
Until the discussions contemplated by this letter agreement have been
terminated, Green, on the one hand, and Global, on the other, shall not make any
contract with any directors, officers, employees, advisors, customers,
suppliers, lenders or subcontractors of the other Party (other than in the
ordinary course of business) without the express written consent of such other
Party. Each Party shall, as soon as possible after the date hereof, designate
one or more persons to whom contact may be made. All communications regarding
the proposed Transaction, requests for additional information, and discussions
or questions regarding procedures, will be submitted or directed only to those
the person so designated for such purpose.
In the event that a Party or its Representatives are requested or required (by
deposition, interrogatories, requests for information or documents in legal
proceedings, subpoena, civil investigative demand or other similar process) to
disclose any of the Evaluation Material, that Party shall provide the other
Party with prompt written notice of any such request or requirement. In such
event the other Party may seek a protective order or other appropriate remedy
and/or waive compliance with the provisions of this letter agreement. If, in
the absence of a protective order or other remedy or the receipt of a waiver by
the other Party, the Party which has received such request or is subject to such
requirement and its Representatives are nonetheless, in the written opinion of
counsel to such Party, a copy of which opinion shall be delivered to the other
Party, legally compelled to disclose Evaluation Material to any tribunal or else
stand liable for contempt or suffer other censure or penalty, it or its
Representative may, without liability hereunder, disclose to such tribunal only
that portion of the Evaluation Material which it has been advised by such
counsel that it is legally required to disclose, provided that such Party, at
the expense of the other Party, exercises commercially reasonable efforts to
preserve the confidentiality of the Evaluation Material, including, without
limitation, by cooperating with the other Party to obtain an appropriate
protective order or other reliable assurance that confidential treatment will be
accorded the Evaluation Material by such tribunal. Such efforts shall be at
the expense of the other Party
<PAGE>
if disclosure to such tribunal was not caused by or resulted from a previous
disclosure by the Party (or its Representatives) that received such request or
became subject to such requirement which was not permitted by this letter
agreement.
If either Party decides that it does not wish to participate in a Transaction,
it will promptly inform the other Party of that decision. In that case, or at
any time upon the request of either Party for any reason or for no reason, each
Party will promptly deliver to the other Party all documents (and all copies
thereof) furnished to it or its Representatives by or on behalf of the other
Party pursuant hereto. In the event of such a decision or request, all other
Evaluation Material prepared by the Parties or their Representatives shall be
immediately destroyed and no copy thereof shall be retained (except as may be
required by regulatory authorities to which you are subject). Notwithstanding
the return or the destruction of the Evaluation Material, the Parties and their
Representatives will continue to be bound by their obligations of
confidentiality and other obligations hereunder for a period of three years
after the date hereof.
In consideration of the Evaluation Material being furnished, the Parties hereby
agree that, for a period of two years from the date hereof, neither of them
will, nor will any of their affiliates (including H-W), solicit to employ
officers or other employees of the other, or any of the other's affiliates
(including H-W), with whom it, its affiliates or its Representatives have had
contact, or who were specifically identified to it or its Representatives during
the period of its investigation of the Company, so long as they are employed by
the other Party or any of the other Party's affiliates (including H-W), without
obtaining the prior written consent of the other Party, provided that either
Party or its affiliates may make general solicitations of employment not
directed to the other Party, its affiliates or its employees.
The parties understand and acknowledge that the stock of Green and Global is
publicly-held. Green warrants to Global that it does not own, directly or
indirectly, any of the capital stock of Global nor does it own any option,
warrant or right to acquire any such stock. Global warrants to Green that it
does not own, directly or indirectly, any of the capital stock of Green nor does
it own any option, warrant or right to acquire any such stock. For a period of
eighteen (18) months from the date hereof, Green agrees that it will not,
directly or indirectly, by purchase or otherwise, through subsidiaries or
associates, acquire, offer to acquire, or agree to acquire ownership of or
warrants or options covering any common shares of Global without the prior
written approval of Global. For a period of eighteen (18) months from the date
hereof, Global agrees that it will not, directly or indirectly, by purchase or
otherwise, through subsidiaries or associates, acquire, offer to acquire, or
agree to acquire ownership of or warrants or options covering any common shares
of Green without the prior written approval of Green.
<PAGE>
The Parties understand and acknowledge that no representation or warranty,
express or implied, is made or shall be deemed to have been made as to the
accuracy or completeness of any Evaluation Material furnished to them. The
Parties agree that neither of them shall have any liability to the other or to
any Representatives of the other relating to or resulting from the use of
Evaluation Material except as may be set forth in a final definitive agreement.
Only those representations or warranties which are made in a final definitive
agreement regarding a Transaction, when, as and if executed and delivered by the
parties, and subject to such limitations and restrictions as may be specified
therein (the "definitive agreement"), will have any legal effect. In
particular, but without prejudice to the generality of the foregoing, no
representation or warranty is given or shall be deemed to have been given as to
the achievement or reasonableness of any projections, management estimates,
prospects or returns contained in the Evaluation Material. The Parties also
understand and acknowledge that the Evaluation Material does not purport to
contain all the information that may be required to evaluate a Transaction and
that they should conduct their own independent analysis of the Green and H-W, as
the case may be, and of the data contained in the Evaluation Material.
Furthermore, the Parties understand and acknowledge that the definitive
agreement will provide that neither of them have not relied on or been induced
to enter into such definitive agreement by any representation, warranty, promise
or assurance save as may be expressly set out in such definitive agreement and
subject to such limitations and restrictions as may be specified therein, and,
unless and to the extent provided to the contrary in a definitive agreement,
that any information provided to either of them that is subject to this letter
agreement which is inconsistent with any representation or warranty shall be
deemed an exception thereto.
The Parties agree that unless and until they have both executed and exchanged a
final definitive agreement providing for a Transaction, neither of them will be
under any legal obligation of any kind whatsoever with respect to a Transaction
or otherwise by virtue of this letter agreement, except the matters specifically
agreed to herein. The Parties further acknowledge and agree that each of them
reserves the right, in its sole discretion, to reject any and all proposals made
by the other, or the other's affiliates or Representatives with regard to a
Transaction, and to terminate discussions and negotiations with the other at any
time for any reason or no reason.
It is understood and agreed that no failure or delay by either Party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder.
<PAGE>
It is understood and agreed that money damages would not be a sufficient remedy
for any breach of this letter agreement by either Party or any of its
Representatives and that each Party shall be entitled to equitable relief;
including injunction and specific performance, as a remedy for any such breach
and each Party hereby waives any requirement for the securing or posting of any
bond in connection with such remedy. Such remedies shall not be deemed to be
the exclusive remedies for a breach of this letter agreement but shall be in
addition to all other remedies available at law or equity to the Parties and H-
W.
This letter agreement shall be governed by and construed in accordance with the
laws of the State of New York without regard to the conflicts of law provisions
thereof.
Please confirm the agreement of Green with the foregoing by signing and
returning one copy of this letter agreement to the undersigned, whereupon this
letter agreement shall become a binding agreement between you and the Company as
to the matters specifically agreed to herein.
Very truly yours,
Global Industrial Technologies, Inc.
/s/ J.L. Jackson
J.L. Jackson, Chairman of the Board,
President and Chief Executive Officer
Accepted and agreed as of
the date first above written
A.P. Green Industries, Inc.
/s/ Paul F. Hummer
Paul F. Hummer, Chairman of the Board,
President and Chief Executive Officer
<PAGE>
EXHIBIT 3
[LETTERHEAD OF A.P. GREEN INDUSTRIES, INC.]
March 6, 1998
To the Stockholders of
A. P. Green Industries, Inc.:
We are pleased to inform you that on March 3, 1998, A. P. Green Industries,
Inc. ("A. P. Green" or the "Company") entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Global Industrial Technologies, Inc.
("Purchaser") and BGN Acquisition Corp. ("Merger Sub"), a wholly owned
subsidiary of Purchaser, pursuant to which Merger Sub has commenced a tender
offer (the "Offer") to purchase all of the outstanding shares of common stock,
$1.00 par value per share (the "Shares"), of the Company for $22.00 per Share
in cash. Under the Merger Agreement, following the Offer, Merger Sub will be
merged (the "Merger" and, together with the Offer, the "Transaction") with and
into the Company, and all Shares not purchased in the Offer (other than Shares
held by Purchaser, Merger Sub or the Company, or Shares held by dissenting
stockholders) will be converted into the right to receive $22.00 per Share in
cash.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT THE
OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND
ITS STOCKHOLDERS AND HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER
AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT
THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
In connection with the Offer, attached for your information is a Tender
Offer Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") setting forth information regarding the Offer and the recommendation
of the Board of Directors of the Company. As set forth in the Schedule 14D-9,
in arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors, including, among other things, the
opinion of Credit Suisse First Boston Corporation, the Company's financial
advisor, that the Transaction is fair, from a financial point of view, to the
stockholders of A. P. Green.
In addition to the attached Schedule 14D-9 relating to the Offer, Purchaser
has also enclosed herewith the Offer to Purchase, dated March 6, 1998, of
Merger Sub, together with other related materials, including a Letter of
Transmittal to be used for tendering your Shares. These documents set forth
the terms and conditions of the Offer and the Merger and provide instructions
as to how to tender your Shares. We urge you to read the enclosed materials
carefully.
Sincerely,
/s/ Paul F. Hummer II
Paul F. Hummer II
Chairman of the Board,
President and Chief Executive
Officer
<PAGE>
EXHIBIT 4
A.P. GREEN INDUSTRIES, INC.
PRESS RELEASE
MEXICO, MO--March 4, 1998--Global Industrial Technologies, Inc. (NYSE:GIX)
announced today that it has signed a definitive agreement to purchase for cash
all outstanding shares of A. P. Green Industries, Inc. (NYSE:APK) at $22 per
share, or approximately $195 million, plus the assumption of approximately $23
million of net debt.
"These transactions further our efforts to create one of the world's leading
refractories companies, and sharpen our focus on industrial businesses in
which we see strong opportunities for substantial future profit growth," said
J.L. Jackson, Chairman and Chief Executive of Global Industrial Technologies.
"A. P. Green also brings to Global an attractive and profitable lime business,
which makes up 38% of their operating profits and will provide product
diversity after integration into our Minerals operation.
"The critical mass we will possess in that business, our proven ability to
operate as a low-cost producer, and the economies of scale and synergies we
expect to achieve as a result of the combination will help us generate
enhanced returns from this business. As a result of these benefits, we expect
our acquisition of Green to be modestly accretive to earnings in fiscal 1998,
and significantly accretive to earnings in 1999 and beyond notwithstanding a
restructuring charge associated with this transaction. Further, we expect
profit contributions from this acquisition to build as we integrate Green's
operations with Harbison-Walker's over the next two years. Once fully
integrated, we believe that annual cost reductions in the range of $15-$20
million are achievable after 15% a reduction of A. P. Green's sales and
corresponding operating earnings.
"The decisions we announce today were arrived at following an extensive
evaluation of our businesses both with resources within the Company and with
outside consultants, together with a full review of all options that could
help us deliver the greatest possible value to shareholders," continued
Jackson. "Our major presence in the refractories market, together with our
forged products business and its exciting new undercarriage operation,
represent a solid core from which to build returns for shareholders."
Global's acquisition of Green, which will be effected by means of a tender
offer, was approved unanimously by the Boards of Directors of both companies.
The tender offer will commence within five business days and once initiated,
will be open for 20 business days unless further extended. Global's tender
offer is conditioned upon, among other things, customary regulatory approvals
and there being validly tendered and not withdrawn at least a majority of the
outstanding shares of A. P. Green. After the consummation of the tender offer,
Global has agreed to acquire any of the remaining outstanding shares of Green
pursuant to a second-step merger in which holders of such shares will receive
$22 per share.
Juan Bravo, President of Harbison-Walker stated: "We are very excited about
the prospects of the Harbison-Walker/Green operation. The combined business
will operate plants in six countries throughout the globe, with revenues of
more than $650 million. We believe that together, the management and employees
of the merged company can create significant value for Global shareholders."
Offering materials will be available from the Information Agent, Georgeson.
The depository for the offer is Harris Trust.
A. P. Green, with headquarters in Mexico, MO., reported sales and operating
revenues of $277.9 million from business worldwide last year. It has 22 plants
located in the U.S., Canada, Mexico, Colombia, the U.K. and Indonesia,
manufacturing refractory products used in the processing of steel and other
metals, chemicals, glass, ceramics, paper and cement. The Company also
produces lime used in the manufacture of steel, aluminum, pulp, and paper
processing, soil stabilization for road construction, and water purification.
Global Industrial Technologies is a major manufacturer of technologically
advanced industrial products that support high-growth markets around the
world. Its Harbison-Walker subsidiary operates 15 refractory plants in five
countries, including the United States, Canada, Mexico, Chile and Germany.
<PAGE>
Statements the Company may publish, including those in this announcement,
that are not strictly historical are "forward-looking" statements under the
safe harbor provisions of the Private Securities Litigation Act of 1995.
Although the Company believes the expectations reflected in such forward-
looking statements are based on reasonable assumptions, it can give no
assurance that its expectations will be realized. Forward-looking statements
involve known and unknown risks which may cause the Company's actual results
and corporate developments to differ materially from those expected. Factors
that could cause results and developments to differ materially from the
Company's expectations include, without limitation, changes in manufacturing
and shipment schedules, delays in completing plant construction and
acquisitions, currency exchange rates, new product and technology
developments, competition within each business segment, cyclicity of the
markets for the products of a major segment, litigation, significant cost
variances, the effects of acquisitions and divestitures, and other risks
described from time to time in the Company's SEC reports including quarterly
reports on Form 10-Q, annual reports on Form 10-K and reports on Form 8-K.
CONTACT: A. P. Green Industries, Inc.
Gary L. Roberts
Vice President, Chief Financial Officer and
Treasurer
(573) 473-3626
or
Morgen-Walke Associates:
June Filingeri, John Blackwell
Media contact: Stan Froelich
(212) 850-5600
2
<PAGE>
EXHIBIT 5
[LETTERHEAD OF CREDIT SUISSE FIRST BOSTON CORPORATION]
March 2, 1998
Board of Directors
A. P. Green Industries, Inc.
Green Boulevard
Mexico, Missouri 65265
Dear Sirs:
You have asked us to advise you with respect to the fairness to the
stockholders of A. P. Green Industries, Inc. (the "Company") from a financial
point of view of the consideration to be received by such stockholders
pursuant to the terms of the draft Agreement and Plan of Merger, dated as of
February 27, 1998 (the "Merger Agreement"), among the Company, Global
Industries Technologies, Inc. (the "Acquiror") and BGN Acquisition Corp. (the
"Sub"). The Merger Agreement provides for the commencement by the Sub of a
tender offer (the "Offer") for all of the outstanding shares of the common
stock of the Company, par value $1.00 par share, together with associated
rights (together, the "Shares"), at a price of $22.00 per Share, net to the
seller in cash, followed by a merger (the "Merger") of the Company with the
Sub pursuant to which the Company will become a wholly owned subsidiary of the
Acquiror with each remaining outstanding share to be converted into the right
to receive $22.00 in cash.
In arriving at our opinion, we have reviewed certain publicly available
business and financial information relating to the Company, as well as the
Merger Agreement. We have also held discussions with senior management of the
Company regarding the business prospects of the Company. We have also reviewed
certain other information, including financial forecasts, provided to us by
the Company and have met with the Company's management to discuss the business
and prospects of the Company.
We have also considered certain financial and stock market data of the
Company, and we have compared those data with similar data for other publicly
held companies in businesses similar to the Company and we have considered the
financial terms of certain other business combinations and other transactions
which have recently been effected. We also considered such other information,
financial studies, analyses and investigations and financial, economic and
market criteria which we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied
on its being complete and accurate in all material respects. With respect to
the financial forecasts, we have assumed that they have been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the Company's management as to the future financial performance
of the Company. In addition, we have not been requested to make, and have not
made or received, an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of the Company. Our opinion is
necessarily based upon financial, economic, market and other conditions as
they exist and can be evaluated on the date hereof. In connection with our
engagement, two parties (one of which was the Acquiror) were identified by the
Company's management as most likely to have the greatest strategic interest in
and largest potential cost savings to be achieved through a combination with
the Company. These parties were approached to solicit indications of interest
in a possible acquisition of the Company and preliminary discussions were
conducted with each of these parties prior to the date hereof. We did not
approach any other parties to solicit possible indications of interest in
acquiring the Company.
We have acted as financial advisor to the Company in connection with the
Merger and will receive a fee for our services, a significant portion of which
is contingent upon the consummation of the Merger.
<PAGE>
In the ordinary course of our business, we and our affiliates may actively
trade the equity securities of both the Company and the Acquiror for our and
such affiliates' own accounts and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
It is understood that this letter is for the information of the Board of
Directors of the Company in connection with its consideration of the Offer and
Merger, and does not constitute a recommendation to any stockholder as to
whether or not such stockholder should tender shares pursuant to the Offer and
is not to be quoted or referred to, in whole or in part without our prior
written consent.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the consideration to be received by the stockholders of the
Company in the Offer and the Merger is fair to such stockholders from a
financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON
CORPORATION
2
