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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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THE RIVAL COMPANY
(NAME OF SUBJECT COMPANY)
THE RIVAL COMPANY
(NAME OF PERSON FILING STATEMENT)
COMMON STOCK, $.01 PAR VALUE PER SHARE
(TITLE OF CLASS OF SECURITIES)
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768020109
(CUSIP NUMBER OF CLASS OF SECURITIES)
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THOMAS K. MANNING, CHAIRMAN
AND CHIEF EXECUTIVE OFFICER
THE RIVAL COMPANY
800 EAST 101ST TERRACE
KANSAS CITY, MISSOURI 64131
(816) 943-4100
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON
BEHALF OF THE PERSON FILING STATEMENT)
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WITH A COPY TO
KENT E. WHITTAKER
JAMES S. SWENSON
MORRISON & HECKER, L.L.P.
2420 PERSHING ROAD, FOURTH FLOOR
KANSAS CITY, MISSOURI 64108-2537
(816) 221-0355
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is The Rival Company, a Delaware
corporation (the "Company"), and the address of the principal executive offices
of the Company is 800 East 101st Terrace, Kansas City, Missouri, 64131. The
title of the class of equity securities to which this statement relates is the
common stock, $.01 par value per share, of the Company (the "Common Stock").
ITEM 2. TENDER OFFER OF PURCHASER.
This statement relates to a cash tender offer by Holmes Products Corp., a
Massachusetts corporation ("Parent"), and its wholly owned subsidiary, Moriarty
Acquisition Corp., a Delaware corporation ("Purchaser"), disclosed in a Tender
Offer Statement on Schedule 14D-1, dated December 23, 1998 (the "Schedule
14D-1"), to purchase all of the issued and outstanding shares of Common Stock
(the "Shares") at a price of $13.75 per Share (such amount, or any greater
amount per share paid pursuant to the Offer, being hereafter referred to as the
"Per Share Amount"), net to the seller in cash, subject to reduction for any
applicable back-up withholding or stock transfer taxes payable by the seller,
upon the terms and subject to the conditions set forth in the Offer to Purchase,
dated December 23, 1998 (the "Offer to Purchase"), and the related Letter of
Transmittal (which together constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of December 17, 1998, by and among Parent, Purchaser and the Company (the
"Merger Agreement"). The Merger Agreement provides, among other things, that as
soon as practicable after the consummation of the Offer and satisfaction or
waiver of all conditions to the Merger, including the conditions set forth below
in the section entitled "The Merger Agreement -- Conditions To The Merger,"
Purchaser will be merged with and into the Company with the Company surviving
the Merger (sometimes referred to herein as the "Surviving Corporation"). The
Merger will become effective upon the filing of a Certificate of Merger with the
Delaware Secretary of State, or at such later time as is specified in the
Certificate of Merger (the "Effective Time"). A copy of the Merger Agreement is
filed herewith as EXHIBIT 1 and is incorporated herein by reference.
Based on the information in the Schedule 14D-1, the principal executive
offices of Parent and Purchaser are located at 233 Fortune Boulevard, Milford,
Massachusetts 01757.
ITEM 3. IDENTITY AND BACKGROUND.
(a) Person Filing Statement
The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b)Contracts, Agreements, Arrangements or Understandings; Actual and
Potential Conflicts of Interest
Except as set forth below, there are no material contracts, agreements,
arrangements or understandings, or any actual or potential conflicts of
interest, between the directors, executive officers or affiliates of the Company
and (i) the Company, its directors, executive officers or affiliates, or (ii)
Parent, its directors, executive officers or affiliates.
Stock Options. As of the Effective Time, each outstanding, unexercised
stock option to purchase Shares (a "Company Stock Option") issued under the
Company's 1986 Stock Option Plan (the "1986 Plan") and 1994 Stock Option Plan
(the "1994 Plan") (collectively, the "Company Stock Option Plans") shall
terminate and be canceled and each holder of a Company Stock Option shall be
entitled to receive, in consideration therefor, a cash payment from the Company
(which payment shall be tendered to such holder on the closing date of the
Merger, or such earlier date after the consummation of the Offer and not later
than five business days after the option holder shall have tendered the option
to the Company and consented to its cancellation in exchange for payment) equal
to the product of (a) the excess, if any, of (x) the Per Share amountover (y)
the per Share exercise price of such Company Stock Option, times (b) the number
of Shares subject to the Company Stock Option. Upon the termination of the
Company Stock Options, the executive officers and directors of the Company will
respectively receive the following amounts (assuming that the Merger
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Consideration is $13.75 per Share): Thomas K. Manning will receive $655,585;
William L. Yager will receive $536,000; Darrel M. Sanders will receive $47,250;
and each of Jack J. Culberg, Todd Goodwin, John E. Grimm, III, Lanny R. Julian,
Noel Thomas Patton and Beatrice B. Smith will receive $6,625.
Change in Control Severance Agreements. The Company has entered into
Change in Control Severance Agreements ("Severance Agreements") with Thomas K.
Manning, William L. Yager and Darrel M. Sanders, executive officers and
directors of the Company, and W. Mark Meierhoffer, an executive officer of the
Company. Each of the Severance Agreements provides for the payment to the
executive officer of severance pay equal to 2.99 times the executive's annual
base salary, in twelve substantially equal monthly installments, in the event
that, at any time after a Change in Control of the Company (as defined in the
Severance Agreement, which definition includes the Purchaser's purchase of
Shares pursuant to the Offer), the executive is discharged by the Company other
than for Just Cause (as defined in the Severance Agreement), or the executive
terminates his employment for Stated Cause (as defined in the Severance
Agreement). Each of the Severance Agreements provides that any discharge of the
executive by the Company within one year after a Change in Control shall
conclusively be deemed to be a discharge other than for Just Cause. The form of
Change in Control Severance Agreement entered into with each of the persons
described above is attached hereto as EXHIBIT 2 and incorporated herein by
reference.
Indemnification of Officers and Directors and Insurance. Under the Merger
Agreement, the Company will indemnify, defend and hold harmless all individuals
who as of the date of the Merger Agreement were current or former directors,
officers, employees, fiduciaries or agents of the Company and its subsidiaries
(the "Indemnified Persons") to the fullest extent permitted under Delaware law,
and after the Effective Time, Parent will, and will cause the Surviving
Corporation to indemnify, defend and hold harmless the Indemnified Persons to
the fullest extent permitted under Delaware law in connection with any
threatened, pending or completed claim, action, suit, proceeding or
investigation, to the extent that it was based on the fact that such Indemnified
Person is or was a director, officer, employee, fiduciary or agent of the
Company or its subsidiaries and arose out of actions or omissions or alleged
actions or omissions occurring at or prior to the Effective Time. Parent, the
Company or the Surviving Corporation, as applicable, will advance expenses to
the Indemnified Persons in advance of the final disposition of any such claim,
action, suit, proceeding or investigation upon receipt of the undertaking
required under Delaware law. In addition, Parent, the Company or the Surviving
Corporation shall obtain a fully-paid officers' and directors' liability
insurance policy covering the Indemnified Persons who are currently covered by
the Company's officers' and directors' liability insurance policy for a term of
six years on terms not materially less favorable to the Indemnified Parties than
those in effect on the date of the Merger Agreement in terms of coverage and
amounts.
Executive Compensation Arrangements. Any other material contracts,
agreements, arrangements or understandings between the Company and any director
or executive officer of the Company with respect to services rendered to the
Company by such persons as employees, directors or executive officers are
described in the section entitled "Executive Compensation" in Annex I attached
hereto.
THE MERGER AGREEMENT
The following is a summary of the material terms of the Merger Agreement.
This summary is not a complete description of the terms and conditions thereof
and is qualified in its entirety by reference to the full text of the Merger
Agreement, a copy of which is filed herewith as EXHIBIT 1 and is incorporated
herein by reference.
The Offer. The Merger Agreement provides for the making of the Offer. The
Offer will be made by Purchaser. The obligation of Purchaser to accept payment
or pay for Shares is subject, among other things, to the satisfaction of the
Tender Offer Conditions (as described below). The Offer is initially scheduled
to expire twenty business days after commencement of the Offer, at 12:00
midnight, New York City time, on January 25, 1999. Purchaser may, without the
consent of the Company, (i) extend the Offer, at any time up to March 15, 1999,
for one or more periods of not more than ten business days each, if any of the
Tender Offer Conditions are not satisfied or waived, (ii) extend the Offer for
any period required by any rule, regulation, interpretation or position of the
Securities and Exchange Commission (the "SEC") or the staff thereof
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applicable to the Offer, or (iii) if all of the Tender Offer Conditions are
satisfied or waived and the number of Shares tendered is at least equal to 70%,
but less than 90%, of the then-outstanding number of Shares, further extend the
Offer for an aggregate period of not more than ten business days beyond the
then-scheduled expiration date. So long as the Merger Agreement is in effect,
the Offer has been commenced and the Tender Offer Conditions have not been
satisfied or waived, the Purchaser will cause the Offer not to expire prior to
March 15, 1999. As used herein, the term "Expiration Date" means 12:00 midnight,
New York City time, on January 25, 1999, unless and until Purchaser shall have
extended the Offer as provided in the Merger Agreement, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by Purchaser, shall expire. If any and all of the Tender Offer
Conditions are not satisfied prior to the Expiration Date, Purchaser expressly
reserves the right, in its sole discretion, at any time and from time to time,
to (i) decline to purchase any of the Shares tendered and terminate the Offer,
subject to the terms of the Merger Agreement, (ii) waive any of the conditions
to the Offer (including the Minimum Condition, as defined below under "Certain
Conditions of the Offer," provided that no such waiver of the Minimum Condition
shall decrease the Minimum Condition to less than a majority of the Shares on a
fully diluted basis), to the extent permitted by applicable law and the
provisions of the Merger Agreement, and, subject to complying with the
applicable rules and regulations of the SEC, purchase all Shares validly
tendered, (iii) subject to the terms of the Merger Agreement, extend the Offer
and, subject to the right of stockholders to withdraw Shares until the
Expiration Date, retain the Shares which will have been tendered during the
period or periods for which the Offer is extended, or (iv) subject to the terms
of the Merger Agreement, amend the Offer.
Certain Conditions of the Offer. The Offer is conditioned upon, among
other things, (a) the condition that there shall be validly tendered in
accordance with the terms of the Offer prior to the expiration date of the Offer
and not withdrawn a number of Shares which, together with any Shares then owned
by Parent or Purchaser, represents at least 70% of the Shares then outstanding
(the "Minimum Condition"), (b) the receipt of cash proceeds of the Financing (as
described below) in an amount sufficient to consummate the transactions
contemplated hereby pursuant to the terms of the Commitments (as described
below) or such other terms as Parent and the Company shall agree or as are not
materially more onerous to Parent than as set forth in the Commitments (the
"Financing Condition") and (c) certain other conditions set forth in Annex I to
the Merger Agreement (together with the Minimum Condition and the Financing
Condition, the "Tender Offer Conditions"). Under Annex I to the Merger
Agreement, Purchaser is not required to accept for payment or pay for Shares
upon the occurrence of any of a number of specified events, including without
limitation the following: (i) the institution of any action, suit or proceeding
that in the reasonable judgment of Parent materially adversely affects or is
reasonably likely to materially adversely affect the Company and its
subsidiaries taken as a whole, or Parent and its subsidiaries taken as a whole,
the Financing or the consummation of the transactions contemplated by the Merger
Agreement, (ii) the taking of any action by any court or governmental entity
that in the reasonable judgment of Parent is likely to result in any of the
consequences in clause (i) above, (iii) any change, event or occurrence that, in
the reasonable judgment of the Parent would have a material adverse effect upon
the business, assets, properties, condition (financial or otherwise), or results
of operations of the Company and its subsidiaries taken as a whole, (iv) certain
breaches of representations, warranties and covenants in the Merger Agreement by
the Company, (v) termination of the Merger Agreement in accordance with its
terms, (vi) certain material adverse changes in or material disruptions of
financial, banking and capital market conditions, (vii) acquisition by any third
party of beneficial ownership of 25% or more of the outstanding Shares , unless
such shares have been validly tendered in the Offer and not withdrawn, (vii) the
making or public proposal of a tender offer or exchange offer for more than 25%
of outstanding Shares by a third party, (viii) withdrawal or modification by the
Board of Directors of the Company in a manner adverse to Purchaser of its
approval or recommendation of the Offer, the Merger Agreement or the Merger or
recommendation or approval of an acquisition proposal by a third party, and (ix)
receipt of required approvals from governmental entities. Reference is made to
the Merger Agreement for a complete statement of the Tender Offer Conditions.
Financing. Parent and Purchaser have received and accepted the following
financing commitments (the "Commitments"): (a) a written commitment from
BankBoston, N.A. for the provision of a senior credit facility or facilities for
the transactions contemplated by the Merger Agreement, in an amount up to $325
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million, (b) a written commitment from BancBoston Robertson Stephens Inc and
Lehman Brothers Inc. for the issuance of senior subordinated debt securities for
the transactions contemplated by the Merger Agreement in an amount of at least
$30 million, and (c) written commitments from stockholders of Parent and their
affiliates to subscribe for an aggregate of $50 million of equity securities of
Parent to finance the transactions contemplated by the Merger Agreement
(collectively the "Financing"). The Financing is subject to a number of
conditions, including without limitation the following: (i) no material adverse
change in the assets, business or financial condition of Parent and its
subsidiaries, (ii) no material adverse change in the assets and business of the
Company, (iii) no material adverse change in governmental regulation or policy
affecting the lenders or Parent and its subsidiaries and (iv) no material
changes or disruptions in the syndication, financial or capital markets that
could materially impair the syndication of the debt portion of the Financing.
The Offer to Purchase and Schedule 14D-1 contain a more complete summary of the
terms and conditions of the Financing.
The Company's Board of Directors. Effective upon the purchase of and
payment for Shares by Purchaser pursuant to the Offer such that Purchaser shall
own at least a majority of the Shares and from time to time thereafter, Parent
shall be entitled to designate up to such number of directors, rounded up to the
next whole number, on the Board of Directors that equals the product of (i) the
total number of directors on the Board of Directors (giving effect to any
increase in the number of directors in accordance with the Merger Agreement)
multiplied by (ii) the percentage that the number of Shares owned by Parent and
Purchaser bears to the total number of Shares outstanding on an undiluted basis,
and the Company shall take all action necessary to cause Parent's designees to
be elected or appointed to the Board of Directors, including, without
limitation, increasing the number of directors and/or securing the resignations
of such number of incumbent directors as is necessary to enable Parent's
designees to be elected to the Board of Directors and to cause Parent's
designees to be so elected. At such times, the Company will use its best efforts
to cause individuals designated by Parent to constitute the same percentage as
such individuals represent on the Board of Directors of (x) each committee of
the Board of Directors, (y) each board of directors of each subsidiary of the
Company and (z) each committee of each such board. Notwithstanding the
foregoing, until the Effective Time, the Company shall use its best efforts to
ensure that not less than two (2) persons who are directors on the date of the
Merger Agreement shall remain as members of the Board of Directors (the
"Continuing Directors") until the Effective Time, and Parent and Purchaser shall
take no action (other than removal for cause) to prevent such Continuing
Directors from so serving. In the event there is only one Continuing Director,
such Continuing Director shall have the right to designate a person who is
reasonably acceptable to Purchaser to become a Continuing Director.
The Company's obligations to appoint designees to the Board of Directors is
subject to Section 14(f) of the Securities Exchange Act of 1934 (the "Exchange
Act") and Rule 14f-1 promulgated thereunder. The Company is required to promptly
take all actions required pursuant to Section 14(f) and Rule 14f-1 in order to
fulfill its obligations in accordance with the Merger Agreement, including
mailing to the stockholders as part of the Schedule 14D-9 the information
required by such Section 14f-1, as is necessary to enable Parent's designees to
be elected to the Board of Directors. Parent will supply to the Company in
writing and be solely responsible for any information with respect to itself and
its nominees, officers, directors and affiliates required by Section 14(f) and
Rule 14f-1. For purposes of the Merger Agreement, "affiliate" shall mean, as to
any person, any other person that would be deemed to be an "affiliate" of such
person as that term is defined in Rule 12b-2 under the Exchange Act.
Following the election or appointment of Parent's designees in accordance
with the Merger Agreement and prior to the Effective Time, so long as there
shall be at least one Continuing Director, any amendment of the Merger
Agreement, any termination of the Merger Agreement by the Company, any extension
by the Company of the time for the performance of any of the obligations or
other acts of Parent or Purchaser, any consent of the Company contemplated by
the Merger Agreement, any extension of the Effective Time as provided in the
Merger Agreement, any waiver of any of the Company's rights thereunder, any
amendment to the Company's Restated Certificate of Incorporation or By-laws or
any action taken by the Company that materially adversely affects the interests
of the stockholders of the Company (other than Purchaser) with
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respect to the transactions contemplated by the Merger Agreement, will require
the concurrence of at least one of the Continuing Directors.
Vote Required to Approve Merger. Under the General Corporation Law of the
State of Delaware (the "DGCL"), the approval of the Board of Directors of the
Company and the affirmative vote of the holders of a majority of the outstanding
Shares entitled to vote thereon are required to adopt and approve the Merger
Agreement and the transactions contemplated thereby. The Company has represented
in the Merger Agreement that the Board of Directors of the Company has
unanimously approved the Merger Agreement, the Offer and the Merger and the
other transactions contemplated thereby as required under the DGCL. Therefore,
unless the Merger is consummated pursuant to the "short-form" merger provisions
under the DGCL described below under "Short-Form Merger" (in which case no
further corporate action by the stockholders of the Company will be required to
complete the Merger), the only remaining required corporate action of the
Company will be the approval of the Merger Agreement and the transactions
contemplated thereby by the affirmative vote of the holders of a majority of the
outstanding Shares entitled to vote thereon. In the event that Parent and
Purchaser acquire in the aggregate at least a majority of the outstanding Shares
entitled to vote thereon, the vote of no other stockholder of the Company will
be required to approve the Merger and the Merger Agreement. See "Tender and
Voting Agreement."
The Merger. The Merger Agreement provides that, if 70% or more of the
outstanding Shares are validly tendered in the Offer and not withdrawn,
Purchaser is required to consummate the Offer, subject to satisfaction or waiver
of the other Tender Offer Conditions. If more than 50% and less than 70% of the
Shares are validly tendered in the Offer and are not withdrawn, Purchaser may,
but is not required to, purchase such Shares and consummate the Offer. If Parent
purchases the Shares and consummates the Offer, upon satisfaction or waiver of
the conditions described below under "Conditions to the Merger," and in
accordance with Delaware law, Purchaser will be merged with and into the
Company, with the Company surviving the Merger. If more than 50% and less than
70% of the Shares are validly tendered in the Offer and are not withdrawn, and
if Purchaser does not acquire such Shares, then upon the written request of
Parent or the Company to the other within five days following expiration of the
Offer, the parties shall undertake in an expeditious manner the efforts required
under the Merger Agreement to consummate and make effective the Merger, and the
Company shall promptly call and hold a stockholders' meeting to consider
approval of the merger of Purchaser with and into the Company with the Company
surviving the Merger. Such Merger would be subject to satisfaction or waiver of
the conditions described below under "Conditions to the Merger." In any case,
upon consummation of the Merger, each outstanding Share (other than Shares held
by stockholders who properly demand their appraisal rights under Delaware law,
Shares held in the Company's treasury and Shares owned by Parent or Purchaser)
will be converted into the right to receive the cash price per Share paid
pursuant to the Offer, without interest thereon.
Short-Form Merger. Section 253 of the DGCL provides that, if a corporation
owns at least 90% of the outstanding shares of each class of stock of another
corporation, the corporation holding such stock may merge itself into such other
corporation by vote of its directors without any action or vote on the part of
the stockholders (a "short-form merger"). In the event that Purchaser acquires,
pursuant to the Offer or otherwise, at least 90% of the outstanding Shares, then
Parent shall effect a short-form merger without any approval of the stockholders
of the Company by a vote of the Board of Directors of Purchaser, subject to
compliance with the provisions of Section 253 of the DGCL. Accordingly, if as a
result of the Offer or otherwise, Purchaser acquires at least 90% of the
outstanding Shares, Parent shall effect the Merger without approval of any other
stockholder of the Company.
Conditions to the Merger. The Merger Agreement provides that the
respective obligations of Parent, Purchaser and the Company to effect the Merger
are subject to the satisfaction or waiver on or prior to the closing date of the
Merger (the "Closing Date") of the following conditions, any and all of which
may be waived, in whole or in part, jointly by Parent and the Company to the
extent permitted by applicable law: (a) the Merger shall have been adopted and
approved by the requisite vote of the holders of outstanding Shares, if required
by the DGCL, (b) any waiting period under the The Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the regulations thereunder (the "HSR
Act") applicable to the Merger shall have expired or been terminated and (c)
there shall not be in effect any temporary restraining
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order, judgment, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger, provided that the parties invoking
this condition shall have used their best efforts to have any such order or
injunction vacated. These conditions apply whether or not Purchaser has acquired
Shares in the Offer.
If Purchaser has not acquired Shares in the Offer, the obligations of
Parent and Purchaser to effect the Merger are further subject to the
satisfaction or waiver by Parent, on or prior to the Closing Date, of the
following conditions: (a) the representations and warranties of the Company that
are qualified by materiality shall be true and correct, and the representations
and warranties of the Company that are not so qualified shall be true and
correct in all material respects, individually and in the aggregate, as of the
Closing Date as though made on and as of the Closing Date, except (i) for
changes permitted or contemplated by the Merger Agreement, and (ii) in the case
of any breach of such representations and warranties, where such breach or
breaches would not, individually or in the aggregate, have a material adverse
effect upon the business, assets, properties, condition (financial or
otherwise), or results of operations of the Company and its subsidiaries taken
as a whole or prevent the Company from consummating the transactions
contemplated by the Merger Agreement ("Material Adverse Effect"), (b) the
Company shall have performed in all material respects all obligations and
complied in all material respects with all agreements and covenants of the
Company required to be performed or complied with by it under the Merger
Agreement except, in the case of any breach of any such obligation, agreement or
covenant, where such breach or breaches would not, individually or in the
aggregate, have a Material Adverse Effect, (c) the Company shall have furnished
Parent with such certificates and other documents to evidence the fulfillment of
the foregoing conditions as Parent may reasonably request, (d) the Financing
Condition shall have been satisfied, (e) all filings required to be made by the
Company or its subsidiaries prior to the Effective Time with, and all consents,
approvals, permits and authorizations required to be obtained by the Company or
its subsidiaries prior to the Effective Time from, any governmental entities,
which, either individually or in the aggregate, if not made or obtained would
have a Material Adverse Effect on or after the Effective Time or would prevent
consummation of the Merger, shall have been made or obtained (as the case may
be), (f) between the date of the Merger Agreement and the Effective Time, there
shall not have been a material adverse change in the business, assets,
properties, condition (financial or otherwise), or results of operations of the
Company and its subsidiaries taken as a whole and (g) the percentage of
dissenting shares as to which appraisal rights shall have been exercised under
the DGCL shall not be greater than 10% of the aggregate number of Shares
outstanding immediately prior to the Effective Time.
If Purchaser has not acquired Shares in the Offer, the obligations of the
Company to effect the Merger are further subject to the satisfaction or waiver
by the Company on or prior to the Closing Date of the following conditions: (a)
the representations and warranties of Parent and Purchaser that are qualified by
materiality shall be true and correct, and the representations and warranties of
Parent and Purchaser that are not so qualified shall be true and correct in all
material respects, individually and in the aggregate, as of the Closing Date as
though made on and as of the Closing Date, except (i) for changes permitted or
contemplated by the Merger Agreement, and (ii) in the case of any breach of such
representations and warranties, where such breach or breaches would not,
individually or in the aggregate, materially and adversely affect the
consummation of the Merger, (b) Parent and Purchaser shall have performed in all
material respects all obligations and complied in all material respects with all
agreements and covenants required to be performed or complied with by them under
the Merger Agreement, except, in the case of any breach of any such obligation,
agreement or covenant, where such breach or breaches would not, individually or
in the aggregate, materially adversely affect the consummation of the Merger,
(c) Parent shall have furnished the Company with such certificates and other
documents to evidence the fulfillment of the foregoing conditions as the Company
may reasonably request and (d) all filings required to be made by Parent or its
subsidiaries prior to the Effective Time with, and all consents, approvals,
permits and authorizations required to be obtained by Parent or its subsidiaries
prior to the Effective Time from, any governmental entities, which, either
individually or in the aggregate, if not made or obtained would prevent
consummation of the Merger, shall have been made or obtained (as the case may
be).
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Termination of the Merger Agreement; Fees. The Merger Agreement may be
terminated and abandoned at any time prior to the Effective Time, whether before
or after approval of the Merger by the stockholders of the Company:
(a) by mutual written consent of Parent and the Company prior to the
purchase of Shares pursuant to the Offer; or
(b) (A) by either Parent or the Company, if: (i) the Offer shall not
have been commenced within the time period specified in the Merger
Agreement, unless the failure to have commenced the Offer is as a result of
any judgment, injunction, order, decree or other legal restraint or
prohibition enjoining or otherwise restraining the commencement of the
Offer, and provided notice of termination has been given prior to the
actual commencement of the Offer (even if such commencement occurs later
than the time period specified in the Merger Agreement), or (ii) the Offer
shall have terminated or expired or been withdrawn in accordance with its
terms without Purchaser having purchased any Shares pursuant to the Offer,
or (iii) at any time after March 15, 1999 (or such later date to which the
Offer shall have been extended pursuant to the Merger Agreement) the Offer
has not been consummated; but only to the extent that the parties shall not
then be required to proceed under the Merger Agreement and provided that
the failure to commence or consummate the Offer, as the case may be, is not
attributable to the failure of the terminating party to fulfill its
obligations pursuant to the Merger Agreement; or (B) by the Company prior
to the purchase of Shares pursuant to the Offer, if any change to the Offer
is made by Purchaser in contravention of the provisions of the Merger
Agreement; or
(c) by either Parent or the Company, if: (i) upon a vote at the
Stockholders Meeting (as defined below), or any adjournment thereof, the
adoption and approval of the Merger Agreement and the Merger by the
stockholders of the Company required by Delaware law, the Company's
Restated Certificate of Incorporation or By-laws or the terms of the Merger
Agreement shall not have been obtained; or (ii) the Merger shall not have
been consummated on or before June 15, 1999, provided that the failure to
consummate the Merger is not attributable to the failure of the terminating
party to fulfill its obligations pursuant to the Merger Agreement; or (iii)
there shall be any law or regulation that makes consummation of the Offer
or the Merger illegal or otherwise prohibited, or if any judgment,
injunction, order or decree enjoining or otherwise restraining Purchaser
from purchasing Shares pursuant to the Offer or Parent, Purchaser or the
Company from consummating the Merger is entered and such judgment,
injunction, order or decree shall become final and non-appealable; provided
that neither Parent nor the Company may terminate the Merger Agreement
pursuant to clause (i) or (ii) above if Shares are purchased pursuant to
the Offer; or
(d) by the Company prior to the purchase of Shares pursuant to the
Offer, immediately after payment to Parent of the Termination Amount (as
defined below), if the Board of Directors shall have withdrawn or modified
in a manner adverse to Parent or Purchaser its approval or recommendation
of the Offer, the Merger Agreement or the Merger in order to permit the
Company to execute an Acquisition Proposal (as defined below) providing for
the acquisition of the Company by a Third Party (as defined below) as
determined by the Board of Directors in good faith after consultation with
independent legal counsel (who may be the Company's regularly engaged
independent counsel) that such action is required for the Board of
Directors of the Company to comply with its fiduciary obligations to
stockholders under applicable law; or
(e) by Parent prior to the purchase of Shares pursuant to the Offer,
if the Board of Directors of the Company shall have approved an Acquisition
Proposal or withdrawn or modified (including by amendment of the Schedule
14D-9), in a manner adverse to Parent or Purchaser, the Board of Director's
recommendation pursuant to the Merger Agreement; or
(f) by Parent prior to the purchase of Shares pursuant to the Offer,
if any of the conditions to closing by Parent and Purchaser set forth in
the Merger Agreement shall have become incapable of fulfillment, and shall
not have been waived by Parent, or if the Company shall breach in any
respect any of its representations, warranties or obligations under the
Merger Agreement and such breach shall have a
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Material Adverse Effect, and the Company shall not have provided reasonable
assurance that such breach will be cured in all material respects on or
before the Closing Date; or
(g) by the Company prior to the purchase of Shares pursuant to the
Offer, if any of the conditions to closing by the Company set forth in the
Merger Agreement shall have become incapable of fulfillment, and shall not
have been waived by the Company, or if Parent or Purchaser shall breach in
any respect any of their respective representations, warranties or
obligations under the Merger Agreement and such breach shall have a
material adverse effect on the consummation of the transactions
contemplated by the Merger Agreement, and Parent or Purchaser, as the case
may be, shall not have provided reasonable assurance that such breach will
be cured in all material respects on or before the Closing Date;
provided, however, that the Merger Agreement provides that the party seeking
termination pursuant to clause (f) or (g) above shall not be in material breach
of any of its representations, warranties, covenants or agreements contained in
the Merger Agreement.
Pursuant to the Merger Agreement, if the Merger Agreement is terminated
pursuant to either clause (d) or (e) above, then the Company is required to
(provided that neither Parent nor Purchaser is then in material breach of its
obligations under the Merger Agreement) promptly (but not later than the second
business day following such termination) pay to Parent the sum of $4.5 million
in cash (the "Termination Amount")
If (i) as of the expiration or other termination of the Offer in accordance
with its terms, the number of Shares then validly tendered in the Offer and not
withdrawn shall be equal to or less than 50% of the then outstanding number of
Shares, and the Merger Agreement is terminated, (ii) all Tender Offer Conditions
are otherwise satisfied at the time of the expiration or termination of the
Offer, except as provided in the Merger Agreement and (iii) at any time prior to
or within one year after termination of the Merger Agreement, the Company enters
into an agreement relating to an Acquisition Proposal at a value (if the
consideration is other than a cash payment) or at a price per Share to
stockholders which is greater (after giving effect to any stock dividends, stock
splits, recapitalizations and similar events affecting the Shares) than the per
share price set forth in the Merger Agreement, with a person other than Parent
or Purchaser or their Affiliates and Associates (each, as defined in the Merger
Agreement), which agreement is consummated within such one year period, then,
upon the Consummation thereof (as defined below), the Company shall pay to
Parent the Termination Amount. At no time prior to or within one year after
termination of the Merger Agreement shall the Company enter into any agreement
relating to any such Acquisition Proposal which is to be Consummated within such
one year period with a person other than Parent or Purchaser or their Affiliates
and Associates unless such agreement provides that such person shall, upon the
execution of such agreement, pay any Termination Amount due Parent under the
Merger Agreement which at that time remains unpaid. Under the Merger Agreement,
an Acquisition Proposal shall be "Consummated" on the first date after the
execution thereof that the other party thereto acquires any Shares or assets of
the Company or its Subsidiaries, whether by purchase, exchange, merger,
consolidation or otherwise.
Appraisal Rights. Holders of Shares do not have appraisal rights as a
result of the Offer. However, if the Merger is consummated, holders of Shares
will have appraisal rights with respect to such Merger. In such event, the
Surviving Corporation will notify holders of outstanding Shares on the Effective
Time of their rights pursuant to the provisions of Section 262 of the DGCL to
dissent and demand appraisal of their Shares. Under Section 262 of the DGCL,
dissenting stockholders who comply with the applicable statutory procedures will
be entitled to receive a judicial determination of the fair value of their
Shares (exclusive of any element of value arising from the accomplishment or
expectation of the Merger) and to receive payment of such fair value in cash,
together with a fair rate of interest, if any. Any such judicial determination
of the fair value of Shares could be based upon factors other than, or in
addition to, the price per Share to be paid in the Merger or the market value of
the Shares. The values so determined could be more or less than the price per
Share to be paid in the Merger.
The foregoing summary of Section 262 of the DGCL does not purport to be
complete and is qualified in its entirety be reference to Section 262 of the
DGCL, a copy of which has been filed herewith as EXHIBIT 3. Failure to follow
the steps required by Section 262 of the DGCL for perfecting appraisal rights
may result in the loss of such rights.
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Stockholders' Meeting. Pursuant to the Merger Agreement, following the
consummation of the Offer or the satisfaction of the conditions described above
under "The Merger Agreement -- The Merger," the Company will promptly take all
action necessary in accordance with applicable law and its Restated Certificate
of Incorporation and By-laws to duly call, give notice of, and convene a meeting
of its stockholders (the "Stockholders' Meeting") to consider and vote upon the
adoption and approval of the Merger Agreement and the Merger and all actions
contemplated thereby which require approval and adoption by the Company's
stockholders, unless the Merger may be effected as a short-form merger as
described above under "Short-Form Merger" or pursuant to written consents. The
Merger Agreement provides that the Company will, if required by applicable law
to consummate the Merger, prepare and file with the SEC a preliminary proxy or
information statement (the "Proxy Statement") and will use its commercially
reasonable best efforts to respond to the comments of the SEC concerning the
Proxy Statement and to cause the Proxy Statement to be mailed to the Company's
stockholders, in each case as soon as reasonably practicable. The Company shall
use its best efforts to cause the Fairness Opinion (as defined below) to be
included as an exhibit to the Proxy Statement. Parent has agreed to cause all of
the shares of capital stock of the Company held by Parent and/or Purchaser to be
voted, either in person or by proxy, in favor of the adoption and approval of
the Merger Agreement and the Merger at the Stockholders' Meeting.
Other Offers. Pursuant to the Merger Agreement, the Company has agreed not
to, nor to authorize or permit any of its representatives to, directly or
indirectly, (i) solicit, initiate or knowingly encourage any Third Party (as
defined below) with respect to the submission of any Acquisition Proposal (as
defined below) or (ii) participate in any discussions or negotiations regarding,
or furnish to any Third Party any non-public information with respect to, or
take any other action to facilitate any inquiries or the making of any proposal
that constitutes, or may reasonably be expected to lead to, any Acquisition
Proposal; provided, however, that the foregoing shall not prohibit the Board of
Directors of the Company (or, if applicable, a duly appointed committee thereof
(the "Special Committee")) from: (i) furnishing information to, or entering into
discussions or negotiations with, any Third Party in connection with an
unsolicited bona fide Acquisition Proposal by such Third Party if, and to the
extent that, the Board of Directors of the Company (or the Special Committee),
after consultation with independent legal counsel (who may be the Company's
regularly engaged independent counsel), determines in good faith that such
action is required for the Board of Directors of the Company to comply with its
fiduciary obligations under applicable law; (ii) withdrawing or modifying its
recommendation referred to in the Merger Agreement following receipt of a bona
fide unsolicited Acquisition Proposal if the Board of Directors of the Company
(or the Special Committee), after consultation with independent legal counsel
(who may be the Company's regularly engaged independent counsel), determines in
good faith that such action is necessary for the Board of Directors of the
Company to comply with its fiduciary obligations under applicable law; or (iii)
making to the Company's stockholders any recommendation and related filing with
the SEC as required by Rule 14e-2 and 14d-9 under the Exchange Act, with respect
to any tender offer, or taking any other equally required action (including,
without limitation, the making of public disclosures as may be necessary or
advisable under applicable securities laws); and provided further, that, in the
event of an exercise of the Company's or its Board of Director's (or the Special
Committee's) rights under clause (i), (ii) or (iii) above, notwithstanding
anything contained in the Merger Agreement to the contrary, such action shall
not constitute a breach of the Merger Agreement by the Company. The Company
shall provide immediate written notice to Parent of the receipt of any oral or
written inquiry or proposal from a Third Party with respect to a merger,
consolidation, share exchange, tender offer or similar transaction involving the
Company, or any purchase or other acquisition of all or substantially all of the
assets or equity interests of the Company, other than the transactions
contemplated by the Merger Agreement (an "Acquisition Transaction") and of the
Company's intention to furnish information to, or enter into discussions or
negotiations with, such person or entity, along with a copy of any such written
inquiry or proposal and copies of any information furnished to such Third Party,
to the extent not previously provided to Parent. For purposes of the Merger
Agreement, (i) "Acquisition Proposal" means any written proposal with respect to
an Acquisition Transaction that the Board of Directors of the Company (or the
Special Committee), after consultation with and receipt of advice from the
Company's financial advisor or another nationally recognized investment banking
firm, determines in good faith in the exercise of its fiduciary obligations
under applicable law to be more favorable than the transactions contemplated by
the Merger
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Agreement; and (ii) "Third Party" means any corporation, partnership, person or
other entity or "group" (as defined in Section 13(d)(3) of the Exchange Act)
other than Parent, Purchaser or any Affiliates of Parent or Purchaser and their
respective directors, officers, employees, representatives and agents.
Conduct of the Company's Business Until the Effective Time. Pursuant to
and except as contemplated by the Merger Agreement, during the period from the
date of the Merger Agreement to the Effective Time, the Company has agreed to
operate, and cause each subsidiary to operate, its business in the ordinary
course of business in a manner consistent with past practices. Without limiting
the generality of the foregoing, during the period from the date of the Merger
Agreement to the Effective Time, except as expressly contemplated by the Merger
Agreement, and except for actions requested by a majority of those directors of
the Company designated by Parent pursuant to the Merger Agreement, the Company
has agreed not to, without the prior written consent of Parent:
(i)(x) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock or property) in respect of, any of
the Company's outstanding capital stock, except for a cash dividend of $.07
per Share which was paid on December 15, 1998, (y) split, combine or
reclassify any of its outstanding capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its outstanding capital stock, or (z) purchase,
redeem or otherwise acquire any shares of outstanding capital stock or any
rights, warrants or options to acquire any such shares;
(ii) issue, sell, grant, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities, except for the
issuance of Shares upon exercise of Company Stock Options outstanding prior
to the date of the Merger Agreement and disclosed in the Merger Agreement,
or take any action that would make the Company's representations and
warranties set forth in the Merger Agreement not true and correct in all
material respects;
(iii) amend its Restated Certificate of Incorporation or By-laws or
the comparable charter or organizational documents of any of its
subsidiaries;
(iv) acquire any business or any corporation, partnership, joint
venture, association or other business organization or division thereof (or
any interest therein), or form any subsidiaries;
(v) sell or otherwise dispose of any of its assets, except in the
ordinary course of business, other than (x) obsolete or immaterial
equipment or tooling, and (y) in connection with the restructuring
described in the disclosure schedule to the Merger Agreement (the
"Disclosure Schedule") and previously announced by the Company;
(vi) make any capital expenditures, enter into leases or agreements
for new locations, close any locations (other than in connection with the
restructuring described in the Disclosure Schedule), or make other
commitments with respect thereto, except capital expenditures, leases,
agreements or commitments (x) set forth in the Disclosure Schedule, or (y)
not exceeding $100,000 in the aggregate as the Company may, in its
discretion, deem appropriate;
(vii)(x) incur any indebtedness for borrowed money or guaranty any
such indebtedness of another person, other than (A) borrowings in the
ordinary course under existing lines of credit, (B) indebtedness owing to,
or guaranties of indebtedness owing to, the Company or (C) in connection
with the Financing, or (y) make any loans or advances to any other person,
other than routine advances to employees;
(viii) except as disclosed in the Disclosure Schedule, grant or agree
to grant to any employee any increase in wages or bonus, severance, profit
sharing, retirement, deferred compensation, insurance or other compensation
or benefits, or establish any new compensation or benefit plans or
arrangements, or amend or agree to amend any such existing plans, except
(x) as may be required under existing agreements, and (y) customary
increases in the ordinary course of business consistent with prior practice
(not including, however, any new or additional benefit plan unless
disclosed in the Disclosure Schedule);
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(ix) merge, amalgamate or consolidate with any other person or entity
in any transaction, sell all or substantially all of its business or
assets, or acquire all or substantially all of the business or assets of
any other person or entity;
(x) except as disclosed in the Disclosure Schedule, enter into or
amend any employment, consulting (except for consulting agreements for
development services for new products involving payments by the Company or
any Subsidiary of less than $500,000 in the aggregate, prior to March 31,
1999, and less than $500,000 in the aggregate for the period from April 1,
1999 to June 30, 1999), severance or similar agreement with any person or
amend the Company's engagement letter with NationsBanc Montgomery
Securities LLC (sometimes referred to herein as the "Financial Advisor" or
"NMS");
(xi) change its accounting policies in any material respect, except as
required by generally accepted accounting principles;
(xii) except as set forth in the Disclosure Schedule, enter into any
material contract, agreement or commitment not otherwise permitted under
the Merger Agreement, including, without limitation, any contract,
agreement or commitment involving expenditures by the Company or any of its
Subsidiaries in excess of $50,000 or which is not terminable by the Company
upon giving 30 days or less prior written notice, except in the ordinary
course of business consistent with prior practice;
(xiii) settle or compromise any pending or threatened suit, action or
claim, except for products liability cases being defended in the ordinary
course of business, if such settlement or compromise involves the payment
of more than $100,000 by the Company or any subsidiary or would impose any
material obligations on, or (other than releasing the Company's or any
subsidiary's claim for relief in such proceeding and the Company's or any
subsidiary's right to a trial of such claim) waive or affect any material
right or interest of, the Company, any subsidiary, Parent or Purchaser; or
(xiv) commit or agree to take any of the foregoing actions.
Pursuant to the Merger Agreement, the Company, Parent and Purchaser agree
not to take any action that would, or that could reasonably be expected to,
result in (i) any of the representations and warranties of such party set forth
in the Merger Agreement that are qualified as to materiality becoming untrue,
(ii) any of such representations and warranties that are not so qualified
becoming untrue in any material respect or (iii) any of the conditions of the
Offer set forth above under "Certain Conditions of the Offer" or of the Merger
set forth above under "Conditions to the Merger" not being satisfied.
Stock Options. Not later than the second business day following the
execution and delivery of the Merger Agreement, the Company shall cause the
committee administering each Company Stock Option Plan to provide to each holder
of a Company Stock Option written notice regarding the termination of such
Company Stock Option as contemplated by such Company Stock Option Plans. As of
the Effective Time, each of the Company Stock Option Plans shall terminate and
be of no further force or effect, and the Company shall take such action as
shall be necessary to ensure, to Parent's reasonable satisfaction, that no
holder of a Company Stock Option will have any right to acquire any interest
under the Company Stock Option Plans in the Surviving Corporation.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the Company (which will not survive
the earlier of the consummation of the Offer or Effective Time) relating to,
among other things, (i) the Company's and its subsidiaries' due organization,
power, standing and similar corporate matters; (ii) the Company's and its
subsidiaries' capital structure; (iii) authorization, execution, delivery and
enforceability of the Merger Agreement and related matters; (iv) governmental
authorizations required in connection with the transactions contemplated by the
Merger Agreement; (v) documents filed by the Company with the SEC and the
accuracy of information contained therein; (vi) preparation of financial
statements in accordance with generally accepted accounting principles applied
on a consistent basis; (vii) absence of certain adverse changes or events;
(viii) absence of certain undisclosed liabilities; (ix) compliance with
applicable laws; (x) litigation pending or threatened against the Company or any
of its subsidiaries; (xi) governmental licenses and permits required to held by
the Company; (xii) ownership and use of intellectual property by the Company and
its subsidiaries; (xiii) material contracts
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of the Company; (xiv) environmental matters; (xv) labor relations and employment
matters; (xvi) accuracy of information supplied by the Company for use in
documents relating to the Offer and the Merger; (xvii) brokers' and financial
advisors' fees; and (xviii) tax and employee benefits matters.
Additional Agreements. The Merger Agreement provides that, subject to the
conditions and other agreements set forth in the Merger Agreement, each of
Parent, Purchaser and the Company will use commercially reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the transactions contemplated by the Merger Agreement. Each
of the Company and Parent has agreed in the Merger Agreement to make as promptly
as practicable all filings and notifications required to be made with, and seek
all consents, approvals, permits and authorizations required to be obtained
from, any third parties or Governmental Entities in connection with the Merger
Agreement, including any filing necessary under the HSR Act.
Amendments; Waivers. The Merger Agreement provides that, subject to the
applicable provisions of the DGCL and certain provisions of the Merger
Agreement, any provision of the Merger Agreement may be amended or waived prior
to the Effective Time if such amendment or waiver is in writing and signed, in
the case of any amendment, by the Company, Parent and Purchaser, or in the case
of a waiver, by the party against whom the waiver is to be effective.
TENDER AND VOTING AGREEMENT
Simultaneously with the execution of the Merger Agreement, the executive
officers, the treasurer and the directors of the Company entered into a Tender
and Voting Agreement with Parent and Purchaser (the "Tender and Voting
Agreement"). The following is a summary of the material terms of the Tender and
Voting Agreement. This summary is not a complete description of the terms and
conditions thereof and is qualified in its entirety by reference to the full
text thereof, which is incorporated herein by reference and a copy of which is
filed herewith as EXHIBIT 4.
Pursuant to the Tender and Voting Agreement, each of the executive
officers, the treasurer and the directors of the Company agreed: (i) with
respect to all of the Shares beneficially owned by such stockholder on December
17, 1998, the date of the Tender and Voting Agreement, and any additional Shares
acquired by such stockholder in any capacity after December 17, 1998 (the "Owned
Shares"), to tender such Owned Shares no later than three (3) days prior to the
initial expiration of the Offer; (ii) to vote the Owned Shares in favor of the
adoption of the Merger Agreement and the approval of the Merger, and against any
action or agreement that would result in a breach in any material respect of any
covenant, representation or warranty or any other obligation or agreement of the
Company under the Merger Agreement or that would impede, interfere with, delay,
postpone or attempt to discourage the Merger; (iii) to appoint Parent as such
stockholder's proxy to vote the Owned Shares in connection with the Merger
Agreement and the Merger; (iv) not to enter into any contract or understanding
to convey any interest in or to the Owned Shares, or grant any proxy with
respect to the Owned Shares, or deposit the Owned Shares into any voting trust,
or subject the Owned Shares to any voting agreement, except that such
stockholders may transfer any or all of the Owned Shares to a "Permitted
Transferee" (as defined in the Tender and Voting Agreement), if such Permitted
Transferee agrees to be bound by the terms of the Tender and Voting Agreement;
and (v) not to solicit or initiate any Acquisition Proposal or other offer from
any person or, except to the extent permitted by the Merger Agreement (as
described above under "Other Offers"), engage in discussions or negotiations
relating thereto. On December 17, 1998, such stockholders were the beneficial
owners of an aggregate of 1,049,769 Shares, constituting approximately 11.3% of
outstanding Shares.
The Tender and Voting Agreement, and the obligations thereunder of the
stockholders who are parties to such agreement, terminate upon the earlier of
(i) the consummation of the Merger; (ii) the termination of the Offer pursuant
to the terms of the Merger Agreement without any Shares having been purchased
pursuant thereto; and (iii) the termination of the Merger Agreement in
accordance with its terms. The obligations of such stockholders thereunder may
also be terminated by such stockholders if (i) Parent or Purchaser shall
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have failed to comply with any of its obligations under Article I of the Merger
Agreement or (ii) Parent or Purchaser shall have violated any provisions of the
Tender and Voting Agreement.
The Tender and Voting Agreement contains representations and warranties of
each of such stockholders regarding his or her unencumbered title to the Owned
Shares and his or her authority and capacity to enter into and be bound by, and
perform in accordance with, the terms of the Tender and Voting Agreement.
CONFIDENTIALITY AGREEMENT
In connection with negotiations relating to the Offer and as a condition to
the Company providing any non-public information to Parent, the Company and
Parent entered into the Confidentiality Agreement, which provides generally that
Parent and its representatives agree to use such non-public information solely
for evaluating a possible transaction between the Company or its shareholders
and Parent and agree to keep such non-public information confidential. The
Confidentiality Agreement also contains "standstill" provisions which, without
the consent of the Company, would prohibit Parent from: (i) acquiring or
agreeing to acquire in any manner any securities or property of the Company or
seeking or proposing to influence or control the management or the policies of
the Company or to obtain representation on the Board of Directors, for a period
of fifteen (15) months from the date of the Confidentiality Agreement; subject
to certain exceptions, or (ii) soliciting as an employee any senior executive
officer of the Company with whom Parent came in contact in connection with the
consideration of a transaction with the Company, other than pursuant to a
general solicitation not specifically directed at such officer, for a period of
one (1) year from the date of the Confidentiality Agreement.
The foregoing summary of certain provisions of the Confidentiality
Agreement is qualified in its entirety by reference to the Confidentiality
Agreement, which is incorporated herein by reference, and a copy of which is
filed herewith as EXHIBIT 5.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(A) Recommendation of the Board of Directors.
The Board of Directors (with one director absent) has (a) unanimously
determined that the Merger Agreement and the transactions contemplated thereby,
including the Offer and the Merger, are fair to and in the best interest of the
Company and its stockholders, (b) unanimously approved the Merger Agreement and
the transactions contemplated thereby, including the Offer and the Merger, which
approvals are sufficient to render entirely inapplicable to the Offer and the
Merger the provisions of Section 203 of the DGCL, assuming neither Parent nor
Purchaser is an "interested stockholder" as defined therein, (c) taken such
action as is necessary to approve the Merger Agreement, the Offer, the Merger
and the other transactions contemplated thereby under the provisions of the
Company's Restated Certificate of Incorporation and By-laws, and (d) subject to
the terms of the Merger Agreement, resolved to recommend acceptance of the Offer
and approval and adoption of the Merger Agreement and the Merger by its
stockholders.
(B) Background; Reasons for the Recommendation.
Reasons For The Transaction.
The Company completed an initial public offering in 1992. One reason for
the offering was to enable the Company to make acquisitions. The intention was
to expand the product line and broaden distribution. Over the next five years
the Company made seven acquisitions. In fiscal years 1997, 1998 and 1999 the
Company had restructuring charges as part of an effort to consolidate the
acquired facilities. The effect was to cause the price of the Company's stock to
decline. At the August 11, 1998 meeting of the Company's Board of Directors (the
"Company's Board") it was recommended that the Company engage an investment
advisor for the purpose of analyzing strategic alternatives available to the
Company. A special committee was appointed by the Company's Board to select the
advisor. The Company received a letter of interest on September 1 from Parent
that accelerated the process.
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History of Events.
In late 1997, Mr. Jordan A. Kahn, the President and Chief Executive Officer
of Parent, contacted Mr. Thomas K. Manning, Chairman and CEO of the Company,
about a potential merger. On December 15, Mr. Manning and Mr. Kahn met to
discuss such a merger.
In January, 1998 the senior managers of the companies, along with Parent's
financial partner, Berkshire Partners LLC ("Berkshire"), met again. Mr. Manning
and Kahn met once more on February 18. By March the two companies concluded that
there was not agreement on a valuation and discussions ceased.
From April through August 1998 the Company evaluated one potential
acquisition and visited with another company and its corporate parent.
In late August 1998 Mr. Kahn called Mr. Manning. He, Berkshire and their
financial advisor, Donaldson, Lufkin & Jenrette ("DLJ") desired a meeting to
discuss Parent's possible acquisition of the Company. On August 31, Mr. Manning
and Mr. William Yager, the President and Chief Operating Officer of the Company,
met with representatives of Parent. On September 1, the Company received a
letter from Parent declaring its interest in pursuing the acquisition of the
Company at $17.00 per share.
On September 9, representatives of the Company were asked to meet with the
management of another company within the industry to explore a possible merger.
Nothing further developed from this meeting.
On September 15th and 16th, the special committee of the Company's Board
met with four financial institutions. This committee recommended that the
Company retain NationsBanc Montgomery Securities LLC (referred to herein as
"NMS") as financial advisor.
On October 1, the Company signed a confidentiality agreement with Parent.
On the same date NMS met in Boston with representatives of Parent, Berkshire and
DLJ to learn the details of Parent's offer and the means of financing. The same
day the members of the Company's Board were brought up to date on the
discussions. A resolution was adopted authorizing the corporation's
representatives to pursue the proposal made by Parent.
On October 5, Messrs. Manning and Yager met with representatives of Parent
to discuss the Company's first quarter results and financial projections.
On October 7, Mr. Manning met with the CEO of another company within the
industry who had expressed interest in a possible merger. Nothing further
developed from that meeting until December 2, 1998.
The Company's Board had a meeting on October 7. The discussions with Parent
were covered. NMS reported on assurances made by Parent with respect to price
and financing.
During the weeks of October 12 and October 19, Parent conducted due
diligence visits in Kansas City and other facilities. The visit included meeting
with senior managers and examining of data prepared by the Company. The Company
responded to numerous follow-up due diligence requests over the ensuing weeks.
On November 4th, Parent, Berkshire and BankBoston, N.A. met with Messrs.
Manning, Yager and Meierhoffer to review financial results for the first four
months.
During the week of November 16th, Parent revised its offer for the Company
to $13.00 per share. This information was shared with the Company's Board on
November 20 and a meeting of the Company's Board was scheduled for November 23.
At this November 23 meeting, representatives of NMS reviewed the status of
the discussions and their analysis of the offer. The Company's Board then
reviewed with Messrs. Manning and Yager the status of the industry and the
Company's business and financial prospects. Following general discussions, a
resolution was adopted to report to Parent the Company's agreement to a cash
tender offer at $15.00 if commenced expeditiously.
On November 25th, the price of the Company's shares jumped almost 50% to
$11.00 on very heavy trading. Rumors appeared on an Internet bulletin board
about a possible acquisition of the Company. On
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November 27th, in response to such stock activity, the Company issued a press
release stating the company had hired NMS to evaluate an unsolicited offer to
acquire the Company.
On November 27, DLJ indicated to NMS that Parent was willing to pay $14.00
per share for the Company. On November 29th many of the Company's directors
participated in a telephone meeting. NMS was advised to continue to work with
Parent towards an agreement, and was also asked to contact other potential
buyers. In response to one such contact, on December 2, the company with whom
Mr. Manning met on October 7 expressed interest in the possible acquisition of
the Company. They requested the opportunity to do an accelerated due diligence
process. This was done December 3rd and 4th in Kansas City followed up by
additional visits to other facilities the week of December 7th. On December 13,
this company indicated that it would require several additional weeks of due
diligence before it could make a proposal.
On December 1st and 2nd officers and advisors of the Company met with the
representative of Parent to work on definitive agreements. Mr. Manning met with
Mr. Kahn at the same time.
On December 14th and 15th, the Company's Board met for their regularly
scheduled quarterly Board meeting. Mr. Jack Culberg was unable to attend for
medical reasons. During this meeting the most recent offer from Parent of $13.25
was discussed. This offer had been given to NMS by DLJ on December 13. Details
of the agreement and financing were also covered. The Company's Board authorized
management to accept an offer of $13.75 per share.
On December 17th, an agreement was signed, with Parent agreeing to proceed
with a tender offer for shares of the Company at $13.75 per share.
Factors Considered by the Company's Board of Directors.
In approving the Merger Agreement and the transactions contemplated
thereunder, and recommending that all stockholders tender their Shares in
response to the Offer and vote their Shares in favor of the Merger Agreement,
the Company's Board of Directors considered the following material factors:
(i) The terms of the Merger Agreement and the fact that they were the
product of arms'-length negotiations among the parties;
(ii) The trading price of Shares, including recent trends;
(iii) The Company's projected financial performance, competitive
position and current trends in the industry;
(iv) The results of the process undertaken by NMS to identify and
solicit indications of interest from selected potential purchasers with
respect to the purchase of the Company;
(v) The oral opinion of NMS delivered to the Company's Board at its
meeting held on the December 14 and 15, 1998 (which was subsequently
confirmed in writing) (the "Fairness Opinion"), more fully described below.
(vi) The fact that the terms of the Merger Agreement allow the Board
of Directors, if required by its fiduciary duties, to withdraw its
recommendation of the Merger to accept an acquisition proposal which is
more favorable to the stockholders upon payment of a reasonable breakup
fee;
(vii) The fact that an affirmative vote of a majority of the
outstanding Shares of the Company entitled to vote thereon is required to
approve and adopt the Merger Agreement;
(ix) The fact that the Offer made by Parent and Purchaser was for cash
and was accompanied by financing commitments, subject to customary and
usual conditions; and
(x) The availability of dissenters' rights of appraisal in the Merger.
The Company's Board of Directors did not assign relative weight to the
above factors or determine that any factor was of particular importance. Rather,
the Board of Directors view this position and its recommendations as being based
on the totality of the information presented to it and considered by it.
16
<PAGE> 17
Opinion of Financial Advisor. On December 14, 1998, NMS delivered to the
Board of Directors of the Company its opinion as investment bankers that, as of
such date and subject to the conditions and limitations set forth therein, the
consideration to be received by holders of Shares (other than Parent and
Purchaser, and other than holders of dissenting Shares) pursuant to the Offer
and the Merger is fair to such holders from a financial point of view. The
Fairness Opinion contains certain important qualifications and a description of
assumptions made, matters considered, areas of reliance on others and
limitations on the review undertaken by NMS. The Fairness Opinion addresses only
the financial fairness of the consideration to be received by the holders of
Shares pursuant to the Offer and the Merger and does not address the relative
merits of the Offer and the Merger or any alternatives to the Offer and the
Merger, the underlying decision of the Board of Directors of the Company to
proceed with or effect the Offer and the Merger or any other aspect of the Offer
and the Merger. The full text of the Fairness Opinion is set forth as an Annex
to this Schedule 14D-9 and is incorporated herein by reference and should be
read carefully and in its entirety in connection with the Offer and this
Schedule 14D-9. THE FAIRNESS OPINION, WHICH IS LIMITED TO AN ASSESSMENT, AS OF
ITS DATE, OF THE FAIRNESS OF THE PROPOSED CONSIDERATION FROM A FINANCIAL POINT
OF VIEW, IS ADDRESSED TO THE BOARD OF DIRECTORS FOR ITS USE IN CONNECTION WITH
ITS REVIEW AND APPROVAL OF THE MERGER AGREEMENT, AND DOES NOT CONSTITUTE A
RECOMMENDATION AS TO HOW ANY HOLDER OF SHARES SHOULD VOTE WITH RESPECT TO THE
MERGER, OR WHETHER OR NOT ANY HOLDER OF SHARES SHOULD TENDER SUCH SHARES IN THE
OFFER.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Board of Directors of the Company retained NMS as its financial adviser
in connection with the Offer and the Merger. For its services in connection with
the Offer and the Merger, the Company shall pay NMS a sale transaction fee equal
to (a) 0.5% of the Aggregate Transaction Value up to $240 million; plus (b) 1%
of the Aggregate Transaction Value in excess of $240 million and up to $265
million; plus (c) 2% of the Aggregate Transaction Value in excess of $265
million and up to $290 million, plus (d) 3% of the Aggregate Transaction Value
in excess of $290 million and up to $315 million; plus (e) 4% of the Aggregate
Transaction Value in excess of $315 million and up to $340 million, (f) 5% of
the Aggregate Transaction Value in excess of $315 million. The Aggregate
Transaction Value is defined as all cash, securities and notes paid or issued by
the acquiring entity, plus (i) any borrowed money debt assumed or discharged in
connection with any transaction; plus (ii) any other material long-term
liabilities or obligations, including post-retirement medical liabilities or
unfunded pension liabilities, which are applicable in the determination of
proceeds to be paid in connection with a transaction. The sale transaction fee
in connection with the Offer and the Merger is currently estimated to be
approximately $1.8 million. The sale transaction fee is payable only if a sale
transaction is completed.
Upon retention of NMS, the Company paid NMS a non-refundable initial cash
fee of $100,000, which will be credited against the sale transaction fee. An
additional $250,000 became payable upon delivery of the Fairness Opinion on
December 14, 1998, which also will be credited against the sale transaction fee.
The Board of Directors was aware of this fee structure and took it into account
in considering the Fairness Opinion.
The Company also has agreed to reimburse NMS for its out-of-pocket
expenses, including the fees and expenses of legal counsel and other advisors,
and to indemnify NMS and certain related persons or entities against certain
liabilities, including liabilities under the federal securities laws, relating
to or arising out of its engagement.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transactions in the Shares have been effected during the past sixty
(60) days by the Company or, to the best of the Company's knowledge, by any
executive officer, director, affiliate or subsidiary of the Company.
(b) To the best of the Company's knowledge, to the extent permitted by
applicable securities laws, rules or regulations, all of the Company's executive
officers, directors and affiliates who own Shares presently intend to tender
such Shares to Parent pursuant to the Offer.
17
<PAGE> 18
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY SUBJECT COMPANY.
(a) Except as set forth herein, the Company is not engaged in any
negotiation in response to the Offer which relates to or would result in (i) an
extraordinary transaction, such as a merger or reorganization, involving the
Company or any subsidiary of the Company; (ii) a purchase, sale or transfer of a
material amount of assets by the Company or any subsidiary of the Company; (iii)
a tender offer for or other acquisition of securities by or of the Company; or
(iv) any material change in the present capitalization or dividend policy of the
Company.
(b) Except as set forth herein, there are no transactions, Board of
Directors' resolutions, agreements in principle or signed contracts in response
to the Offer that relate to or would result in one or more of the events
referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The Information Statement attached hereto as Annex I is being furnished
pursuant to Rule 14f-1 under the Exchange Act in connection with the possible
designation by Parent and Purchaser, pursuant to the Merger Agreement, of
certain persons to be appointed to the Board of Directors other than at a
meeting of the Company's stockholders.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit No.
Exhibit 1 Agreement and Plan of Merger, dated as of December 17, 1998, by and
among The Rival Company, Holmes Products Corp. and Moriarty
Acquisition Corp.
Exhibit 2 Form of Change in Control Severance Agreements, between the Company
and each of Thomas K. Manning, William L. Yager, Darrel M. Sanders
and W. Mark Meierhoffer.
Exhibit 3 Section 262 of the General Corporation Law of the State of Delaware.
Exhibit 4 Tender and Voting Agreement dated December 17, 1998, by and among
Parent, Purchaser and the directors and certain executive officers of
the Company.
Exhibit 5 Confidentiality Agreement dated October 1, 1998 by and between Parent
and BancAmerica Securities, Inc. on behalf of the Company.
Exhibit 6 Opinion of NationsBanc Montgomery Securities LLC* dated December 14,
1998.
Exhibit 7 Text of Press Release issued by Parent and the Company on December
17, 1998.
Exhibit 8 Letter to Stockholders.* dated December 23, 1998.
- ---------------
* Included in copies mailed to stockholders.
18
<PAGE> 19
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
The Rival Company
By: /s/ THOMAS K. MANNING
------------------------------------
Thomas K. Manning
Chairman and Chief Executive Officer
Dated: December 23, 1998
19
<PAGE> 20
ANNEX I
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES EXCHANGE
ACT OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about December 23, 1998,
as part of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of The Rival Company, a Delaware corporation (the "Company")
to holders of the shares of Common Stock, $.01 par value per share, of the
Company (the "Shares"). You are receiving this Information Statement in
connection with the possible election of persons designated by Holmes Products
Corp. ("Parent") to a majority of the seats on the Board of Directors of the
Company.
On December 17, 1998, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Parent and its wholly-owned subsidiary,
Moriarty Acquisition Corp. ("Purchaser"). Subject to the terms and conditions of
the Merger Agreement, (a) Parent has caused Purchaser to commence a tender offer
(the "Offer") to purchase all issued and outstanding Shares at $13.75 per share,
net to the seller in cash (subject to reduction only for any applicable back-up
withholding or stock transfer taxes payable by the seller) and (b) upon
consummation of the Offer and/or satisfaction of certain other conditions,
Purchaser is to be merged with and into the Company. As a result of the
consummation of the Offer and the Merger, the Company will become a wholly-owned
subsidiary of Parent.
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
thereunder. You are urged to read this Information Statement carefully. You are
not, however, required to take any action at this time. Capitalized terms used
herein and not otherwise defined herein shall have the meaning set forth in the
Schedule 14D-9.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on
December 23, 1998. The Offer is scheduled to expire at 12:00 midnight, New York
City time, on January 25, 1999, unless the Offer is extended.
GENERAL INFORMATION REGARDING THE COMPANY
The Shares are the only class of voting securities of the Company
outstanding. As of December 17, 1998, there were approximately 9,294,227 Shares
issued and outstanding.
PROPOSED CHANGES TO THE COMPANY'S BOARD OF DIRECTORS
Pursuant to the Merger Agreement and subject to compliance with applicable
law, effective upon the purchase of and payment for Shares by Purchaser pursuant
to the Offer, such that Purchaser shall own at least a majority of the Shares,
and from time to time thereafter, Parent shall be entitled to designate up to
such number of directors, rounded up to the next whole number, on the Board of
Directors of the Company that equals the product of (i) the total number of
directors on the Board of Directors (giving effect to any increase in the number
of directors pursuant to the Merger Agreement) multiplied by (ii) the percentage
that the number of Shares owned by Parent and Purchaser bears to the total
number of Shares outstanding on an undiluted basis. Pursuant to the Merger
Agreement, the Company has agreed to take all action necessary to cause Parent's
designees to be elected or appointed to the Board of Directors, including,
without limitation, increasing the number of directors and/or securing the
resignations of such number of incumbent directors as is necessary to enable
Parent's designees to be elected to the Board of Directors. The Company has
agreed that at such times it will use its best efforts to cause individuals
designated by Parent to constitute the same percentage as such individuals
represent on the Board of Directors of (x) each committee of the Board of
Directors, (y) each board of directors of each subsidiary of the Company and (z)
each committee of each such board. Pursuant to the Merger Agreement, the Company
has agreed to use its best efforts until the effective time of the Merger
("Effective Time") to ensure that not less than two persons who are directors on
the date of the Merger Agreement shall remain as members of the Board of
Directors (the "Continuing
A-1
<PAGE> 21
Directors") until the Effective Time, and Parent and Purchaser have agreed to
take no action (other than removal for cause) to prevent such Continuing
Directors from so serving. In the event there is only one Continuing Director,
such Continuing Director shall have the right to designate a person, who is
reasonably acceptable to Purchaser, to become a Continuing Director.
DESIGNEES OF PARENT
Parent has informed the Company that it will choose its designees for the
Board of Directors ("Parent Designees") from the persons listed below. Parent
has also informed the Company that each of the Parent Designees has consented to
act as a director, if so designated. Biographical information concerning each of
the Parent Designees is presented below. The following biographical information
has been provided to the Company by Parent, and the Company assumes no
responsibility for the accuracy or completeness of such information.
None of the Parent Designees (a) is currently a director of, or holds any
position with, the Company or (b) has a familial relationship with any of the
directors or executive officers of the Company. The Company has been advised by
Parent that, to Parent's knowledge, none of the Parent Designees beneficially
owns any securities (or rights to acquire any securities) of the Company. The
Company has been advised by Parent that, to Parent's knowledge, none of the
Parent Designees has been involved in any transaction with the Company or any of
its directors, executive officers, affiliates or associates that is required to
be disclosed pursuant to the rules or regulations of the Securities and Exchange
Commission, except as may be disclosed herein or in the Schedule 14D-9.
IDENTITY AND DESCRIPTION OF PARENT DESIGNEES.
JORDAN A. KAHN, age 56, is President, Chief Executive Officer and a
Director of Parent. Mr. Kahn is the founder of Parent and has served as its
President and Chief Executive Offer and a director since its organization in
1982. Since 1968, Mr. Kahn has also been President of Jordan Kahn Co., Inc., a
manufacturer's representative representing small electric personal appliance
manufacturers, including Parent, to retailers across the Northeast.
STANLEY ROSENZWEIG, age 34, has served Parent since 1991, initially as Vice
President - Operations, and since 1993 as Chief Operating Officer and a
director. From 1987 to 1988, Mr. Rosenzweig served as a management consultant
with Bain & Company, and from 1988 to 1989 as a sales manager with Jolson
Corporation, a Canadian appliance company.
IRA MORGENSTERN, age 45 joined Parent as Senior Vice President -- Finance
in August, 1998 from Diageo, PLC, a combination of the food and beverage
business of Grand Metropolitan PLC and Guinness PLC, where he spent over six
years in a number of financial management positions in the U.S. and London,
including Vice President of Strategic Marketing Finance in the U.S. drinks
division. Prior to Diageo, Mr. Morgenstern served as Vice President of Ditri
Associates, Inc., a leveraged acquisition firm, consultant for Touche Ross, and
internal auditor with Atlantic Richfield.
GREGORY F. WHITE, age 34, has served as Executive Vice President, Sales and
Marketing of Parent since 1995, and from 1993 to 1995 as Vice
President -- Marketing. He became a director in 1997. He served as Account
Supervisor at Ammirati & Puris, an advertising agency from 1992 to 1993 and as
Account Manager at the advertising agency D'Arcy, Masius, Benton & Bowles from
1991 to 1992.
RICHARD K. LUBIN, age 52, is a Managing Director of Berkshire Partners,
which he co-founded in 1986, and has been a director of many of the firm's
manufacturing, retailing and transportation investments, including, among
others, InteSys Technologies, Inc. and English Welsh & Scottish Railway, Ltd. In
addition, Mr. Lubin is Treasurer of the Dana-Farber Cancer Institute and a
Trustee of Beth Israel Deaconess Medical Center. He became a director of Parent
in 1997.
RANDY PEELER, age 34, is a Vice President of Berkshire Partners, where he
has been employed since 1996. From 1994 to 1996, he was responsible for new
business ventures at Health Advances, a healthcare industry
A-2
<PAGE> 22
consulting firm. From 1993 to 1994, he served as Chief of Staff to the Assistant
Secretary for Economic Policy at the U.S. Department of the Treasury, and also
serves as a director of Miami Cruise Services, Inc., Charrette Corporation and
Weigh-Tronix, Inc. Prior to that, he was a consultant with Cannon Associates. He
became a director of Parent in 1997, and also serves as a director of Miami
Cruise Services, Inc., Charrette Corporation and Weigh-Tronix, Inc.
CURRENT DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Biographical information concerning each of the Company's current directors
and executive officers as of December 17, 1998 is set forth below. Some of the
current directors may resign effective immediately following the purchase of
Shares by Purchaser pursuant to the Offer.
<TABLE>
<CAPTION>
YEAR
FIRST
ELECTED
TO THE
NAME AGE BOARD POSITION WITH COMPANY
- ---- --- ------- ---------------------
<S> <C> <C> <C>
Thomas K. Manning..... 56 1986 Chairman of the Board of Directors and Chief Executive
Officer
William L. Yager...... 50 1994 Director, President and Chief Operating Officer
Darrel M. Sanders..... 57 1994 Director, Senior Vice President -- Operations
W. Mark Meierhoffer... 50 -- Senior Vice President -- Finance and Administration
Jack J. Culberg....... 84 1986 Director
Todd Goodwin.......... 67 1986 Director
John E. Grimm III..... 76 1994 Director
Lanny R. Julian....... 55 1994 Director
Noel Thomas Patton.... 52 1995 Director
Beatrice B. Smith..... 57 1994 Director
</TABLE>
MR. MANNING was named Chairman of the Board of Directors and Chief
Executive Officer effective June 30, 1996. He was President and Chief Executive
Officer from 1989 until 1996 and has been employed by the Company for over 20
years.
MR. YAGER was named President and Chief Operating Officer effective June
30, 1996. He was Senior Vice President -- Finance and Administration of the
Company from February 1992 through June 1996 and has been employed by the
Company since 1988.
MR. SANDERS has been Senior Vice President -- Operations of the Company
since 1992. He has been employed by the Company for over 30 years.
MR. MEIERHOFFER has served as Senior Vice President -- Finance and
Administration since November 1996. Prior to joining the Company in November
1996, Mr. Meierhoffer was Senior Vice President and Chief Operating Officer of
DeMarche Associates, Inc., a national investment consulting firm, serving in
such position from 1993 until 1996. Prior to 1993, Mr. Meierhoffer served in
various capacities for Marion Merrell Dow, Inc. including as Vice President and
International Treasurer.
MR. CULBERG is an independent investor. He was Chairman of the Board of
Directors from May 1988 through his resignation as Chairman on June 30, 1996.
MR. GOODWIN has been a partner in Gibbons, Goodwin, van Amerongen ("GGvA"),
a New York investment banking firm, for more than five years. Mr. Goodwin is
also a member of the Board of Directors of Johns Manville Corporation, Merrill
Lynch Institutional Funds and Wells Aluminum Corporation.
MR. GRIMM has been Chairman and Chief Executive Officer of Midbrook, Inc.,
a New York business consulting firm, for more than ten years. Prior to that he
was a corporate Vice President of the Colgate Palmolive Company.
A-3
<PAGE> 23
MR. JULIAN is President of Donlan Marketing Group, L.L.C., a marketing
consulting company. He was previously President of Ambassador Cards, a division
of Hallmark Cards, Inc., a position which he held from 1992 through 1994.
MR. PATTON is an independent investor. He was the owner, Chairman and Chief
Executive Officer of Patton Electric Company for more than five years prior to
its acquisition by the Company in April 1995.
MS. SMITH has been Dean of the College of Human Environmental Sciences at
the University of Missouri in Columbia, Missouri for more than five years.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES.
The Board of Directors conducts its business through meetings of the Board
and through activities of its committees and, when appropriate, by unanimous
written consent in lieu of meetings of the Board or its committees. The Board of
Directors met four times during the year ended June 30, 1998. The committees of
the Board are the Executive Committee, the Audit Committee and the Compensation
and Stock Option Committee (the "Compensation Committee").
The Executive Committee may be empowered to take all actions of the full
Board of Directors at all times between regularly scheduled meetings of the full
Board. The Executive Committee consists of Jack J. Culberg, Todd Goodwin, Thomas
K. Manning and Beatrice B. Smith. The Executive Committee did not meet during
the year ended June 30, 1998.
The Compensation Committee consists of Todd Goodwin, Chairman, John E.
Grimm, III, and Lanny R. Julian. This committee administers the Company's Stock
Option Plans and determines the level of executive compensation, including
amounts to be allocated under the Company's incentive compensation plan for
executive officers and other key managers. The Compensation Committee met once
during the year ended June 30, 1998.
The Audit Committee periodically reviews the Company's auditing practices
and procedures and recommends independent auditors for selection by the full
Board of Directors. The Audit Committee consists of Lanny R. Julian, Noel Thomas
Patton and Beatrice B. Smith. This committee met once during the year ended June
30, 1998.
The Company does not have a standing nominating committee of the Board or a
committee performing a similar function.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The table below shows all plan and non-plan compensation awarded to, earned
by, or paid to the Company's Chief Executive Officer ("CEO") and its four most
highly compensated executive officers other than the CEO, for services rendered
to the Company and its subsidiaries during the periods indicated. (See also the
"Executive Compensation" section of the Company's Proxy Statement, dated
September 15, 1998, filed with the Securities and Exchange Commission, which
section is incorporated herein).
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION(4)
ANNUAL COMPENSATION -----------------------------
----------------------------- STOCK ALL
FISCAL OPTIONS OTHER
NAME AND TITLE YEAR SALARY BONUS OTHER(1) GRANTED(3) COMPENSATION(5)
- -------------- ------ -------- ------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Thomas K. Manning........ 1998 $285,000 -- $ 8,950 25,000 $37,256
Chairman of the Board 1997 270,000 28,337 11,948 25,000 48,346
of Directors and Chief
Executive Officer 1996 270,000 128,253 9,989 30,000 43,213
</TABLE>
A-4
<PAGE> 24
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION(4)
ANNUAL COMPENSATION -----------------------------
----------------------------- STOCK ALL
FISCAL OPTIONS OTHER
NAME AND TITLE YEAR SALARY BONUS OTHER(1) GRANTED(3) COMPENSATION(5)
- -------------- ------ -------- ------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
William L. Yager......... 1998 200,000 -- 6,540 15,000 26,715
President and Chief 1997 200,000 17,992 6,402 12,000 29,163
Operating Officer 1996 150,000 50,894 5,123 15,000 22,788
Darrel M. Sanders........ 1998 165,000 33,413 5,321 10,000 21,840
Sr. Vice President 1997 165,000 12,370 6,139 8,000 26,013
Operations 1996 150,000 50,894 5,123 10,000 22,788
W. Mark Meierhoffer...... 1998 155,000 31,388 1,471 10,000 15,765
Sr. Vice President 1997 93,333 10,495 -- 16,000 556
Finance and
Administration 1996 -- -- --
Neal Bastick(3).......... 1998 112,816 28,800 -- 4,000 10,518
Vice President 1997 109,529 20,246 -- 4,000 0
International Sales 1996 -- -- -- -- --
William Endres(2)........ 1998 165,000 -- -- -- 45,765
Former Sr., Vice 1997 165,000 12,370 6,139 8,000 26,013
President 1996 150,000 50,894 5,123 10,000 22,788
Sales and Marketing
</TABLE>
- ---------------
(1) Other Annual Compensation consists solely of cash payments made in March of
each year to reimburse participants in the Company's Secular Trust Plan for
a portion of the income tax liabilities incurred as a result of
participating in this non-qualified retirement plan.
(2) Mr. Endres resigned his position as Director and Senior Vice President of
Sales and Marketing in November 1997. The Company continues to pay Mr.
Endres his base salary for one year following termination under the terms of
his employment agreement.
(3) Mr. Bastick's compensation is paid in Netherlands Guilders. For purposes of
the presentation herein, the Guilders have been converted to U.S. dollars at
the June 30, 1998 exchange rate of .4905.
(4) Stock Options are the only form of Long Term Compensation currently provided
by the Company.
(5) The majority of All Other Compensation for the executive officers represents
the Company's contributions to the Secular Trust Plan. The Secular Trust
Plan was designed to replace benefits under the Company's defined benefit
pension plan which are no longer available to the executive officers and
certain other managers. Contributions to the Secular Trust Plan for fiscal
year 1996, 1997 and 1998 were as follows: Mr. Manning, $42,657, $47,790,
$36,700; Mr. Yager, $22,788, $28,607, $26,159; and Mr. Sanders, $22,788,
$25,457, $21,284. The contribution for Mr. Meierhoffer for fiscal 1998 was
$15,209. The balance of All Other Compensation represents the Company's
payments for term life insurance and the Company's 401K matching
contributions made on behalf of the executive officers.
A-5
<PAGE> 25
STOCK OPTION GRANTS IN FISCAL 1998
The following table provides information concerning stock options granted
during the year ended June 30, 1998 to the named executive officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------------------
NUMBER OF POTENTIAL REALIZABLE VALUE AT
SECURITIES % OF TOTAL ASSUMED ANNUAL RATES OF STOCK
UNDERLYING OPTIONS PRICE APPRECIATION FOR OPTION
OPTIONS GRANTED TO EXERCISE TERM(2)
GRANTED EMPLOYEES IN PRICE EXPIRATION -----------------------------
NAME #(1) FISCAL YEAR $/SHARE DATE 5% 10%
- ---- ---------- ------------ -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Thomas K. Manning...... 25,000 14.1% $15.625 5/12/08 $245,662 $622,556
William L. Yager....... 15,000 8.5 15.625 5/12/08 147,397 373,533
Darrel M. Sanders...... 10,000 5.6 15.625 5/12/08 98,265 249,022
W. Mark Meierhoffer.... 10,000 5.6 15.625 5/12/08 98,265 249,022
Neal Bastick........... 4,000 2.3 15.625 5/12/08 39,306 99,609
</TABLE>
- ---------------
1) The exercise price of each option was 100% of the fair market value of the
Common Stock at the close of business on the date of grant. At the end of
each year following the date of grant, 25% of the options become exercisable,
with accumulation privileges.
2) These dollar amounts represent a hypothetical increase in the price of the
Common Stock from the date the referenced options were granted until their
expiration date at the rate of 5% and 10% per annum compounded.
AGGREGATED OPTION EXERCISES IN FISCAL 1998 AND 6/30/98 OPTION VALUES
The table below provides information concerning stock options exercised
during the year ended June 30, 1998 by the named executive officers and the
number and value of unexercised options held by them as of June 30, 1998.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
OPTIONS EXERCISED NUMBER OF UNEXERCISED IN-THE-MONEY
-------------------- OPTIONS AT 6/30/98 OPTIONS AT 6/30/98
SHARES VALUE ---------------------------- ----------------------------
NAME ACQUIRED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas K. Manning.... 0 0 162,414 66,250 $ 633,419 $0
William L. Yager..... 0 0 81,040 34,000 522,490 0
Darrel M. Sanders.... 0 0 41,500 23,500 42,750 0
W. Mark
Meierhoffer........ 0 0 4,000 22,000 0 0
Neal Bastick......... 0 0 2,000 8,000 0 0
William S. Endres.... 27,540 $159,413 0 0 0 0
</TABLE>
RETIREMENT PLAN
During the year ended June 30, 1990, the accrued benefits under the
Company's defined benefit pension plan of certain individuals defined under the
Internal Revenue Code as "highly compensated," including all of the executive
officers employed by the Company, were vested and frozen at their accrued
benefit levels. Certain executive officers will receive retirement benefits
under the Company's retirement plan as a result of accrued benefits available to
such officers at the time their benefits were frozen. At regular retirement age,
monthly benefits will be available as follows: Mr. Manning ($3,410), Mr. Endres
($1,405) and Mr. Sanders ($1,944).
EMPLOYMENT AGREEMENTS
The Company has entered into Employment Agreements ("Agreements") with
Messrs. Manning, Yager, Meierhoffer and Sanders. Each of the Agreements provide
for severance pay equal to twice the
A-6
<PAGE> 26
executive's annual base salary in the event that the executive is discharged by
the Company, other than for just cause ( as defined in the Agreements).
DEFERRED COMPENSATION PLAN
Each of such executive officers, except Mr. Bastick, defers a portion of
his compensation under a Deferred Compensation Plan adopted by the Company.
Amounts so deferred are payable upon death, retirement or change in control of
the Company. The Offer and Merger will constitute such a change in control. The
amounts to which such executive officers were entitled, as of June 30, 1998
were: Mr. Manning $212,222; Mr. Yager $197,248; Mr. Sanders $38,504; and Mr.
Meierhoffer $14,520.
CHANGE IN CONTROL SEVERANCE AGREEMENTS
The Company has entered into Change in Control Severance Agreements
("Severance Agreements") with Thomas K. Manning, William L. Yager and Darrel M.
Sanders, executive officers and directors of the Company, and W. Mark
Meierhoffer, an executive officer of the Company. Each of the Severance
Agreements provides for the payment to the executive officer of severance pay
equal to 2.99 times the executive's annual base salary, in twelve substantially
equal monthly installments, in the event that, at any time after a Change in
Control of the Company (as defined in the Severance Agreement, which definition
includes the Purchaser's purchase of Shares pursuant to the Offer), the
executive is discharged by the Company other than for Just Cause (as defined in
the Severance Agreement), or the executive terminates his employment for Stated
Cause (as defined in the Severance Agreement). Each of the Severance Agreements
provides that any discharge of the executive by the Company within one year
after a Change in Control shall conclusively be deemed to be a discharge other
than for Just Cause.
DIRECTOR COMPENSATION
Members of the Board of Directors, other than executive offices of the
Company, receive fees of $5,000 per quarter for serving on the Board. In
addition to the cash compensation, at each annual shareholders' meeting
commencing with the 1995 meeting, each Outside Director elected to serve at such
annual meeting receives a grant of a nonqualified stock option to purchase 1,000
shares, effective as of the date of the meeting, at an exercise price equal to
the fair market value of the share on the date of grant, and which shall become
exercisable in four equal annual installments.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee currently consists of Todd Goodwin, Chairman,
John E. Grimm, III and Lanny Julian. There are no compensation committee
interlocks involving these individuals.
A-7
<PAGE> 27
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial ownership
of the Company's Common Stock by all present directors and the named executive
officers. The table also sets forth the number of shares beneficially owned and
the percentage of ownership of the Company's Common Stock by all directors and
executive officers as a group and by each person who was known by the Company to
own beneficially as much as five percent of the total outstanding shares of the
Company's Common Stock as of the dates indicated. The table reports ownership as
of August 25, 1998, except for Neuberger & Berman LLC, Franklin Templeton Group
and Pioneering Management Corporation for which the Company relied on Forms
13(f) filed as of June 30, 1998.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
SHAREHOLDER
SHAREHOLDER OWNERSHIP(1) PERCENT OWNED(11)
- ----------- ----------------- -----------------
<S> <C> <C>
5% Shareholders:
T. Rowe Price(2)........................................ 1,132,000 11.5%
Pioneering Management Corporation(3).................... 924,000 9.4
Franklin Templeton Group(4)............................. 870,400 8.8
Neuberger & Berman LLC(5)............................... 713,900 7.2
Royce & Associates, Inc.(6)............................. 474,600 4.8
Directors and Named Executive Officers:
Thomas K. Manning(7).................................... 261,977 2.7
William L. Yager(8)..................................... 88,840 .9
Darrel M. Sanders....................................... 67,554 .7
Jack J. Culberg......................................... 35,650 .4
Todd Goodwin(9)......................................... 57,988 .6
John E. Grimm, III...................................... 3,800 *
Lanny R. Julian......................................... 2,700 *
Noel Thomas Patton(10).................................. 851,500 8.6
Beatrice Smith.......................................... 2,700 *
W. Mark Meierhoffer..................................... 6,000 *
Neal Bastick............................................ 2,000 *
All Directors and Executive Officers as a Group......... 1,380,709 14.0
</TABLE>
- ---------------
(1) The shares beneficially owned as scheduled above include those shares the
following persons have the right to acquire within sixty days from August
25, 1998 by way of option exercise: Mr. Manning -- 162,414; Mr.
Yager -- 81,040; Mr. Sanders -- 41,500; Mr. Meierhoffer -- 4,000; Mr.
Bastick -- 2,000; Mr. Culberg -- 750; Mr. Goodwin -- 750; Mr.
Grimm -- 1,500; Mr. Julian -- 1,500; Mr. Patton -- 1,500; and Ms.
Smith -- 1,500. Out-of-the-money options are included in the shares
presented as beneficially owned to the extent they are exercisable within
60 days of August 25, 1998.
(2) T. Rowe Price Associates, Inc. (100 East Pratt Street, Baltimore, MD)
("Price Associates") is a registered investment advisor, which has sole
investment power with respect to the shares indicated and sole voting power
with respect to 116,200 shares. These securities are owned by various
individual and institutional investors for which Price Associates serves as
investment adviser with power to direct investments and/or sole power to
vote the securities. For purposes of the reporting requirements of the
Securities Exchange Act of 1934, Price Associates is deemed to be a
beneficial owner of such securities; however, Price Associates expressly
disclaims that it is, in fact, the beneficial owner of such securities.
(3) Pioneering Management Corporation (60 State Street, Boston, MA) is a
registered investment advisor, which has sole investment power and sole
voting power over all of the shares indicated.
(4) Franklin Templeton Group (777 Mariners Island Blvd., San Marco, CA) is a
registered investment advisor, which has sole investment power and sole
voting power over all of the shares indicated.
A-8
<PAGE> 28
(5) Neuberger & Berman LLC (605 Third Avenue, New York, NY) ("N&B") is a
registered investment advisor. In its capacity as investment advisor, N&B
may have discretionary authority to dispose of or to vote shares that are
under its management. As a result, N&B may be deemed to have beneficial
ownership of such shares. N&B does not, however, have any economic interest
in the shares. As of June 30, 1998, of the shares set forth above, N&B had
shared investment power on 231,900 shares and sole voting power with
respect to 482,000 shares. With regard to the shared voting power,
Neuberger & Berman Management, Inc. and Neuberger & Berman Funds are deemed
to be beneficial owners for purpose of Rule 13(d) since they have shared
power to make decisions whether to retain or dispose of the securities. N&B
is the sub-advisor to the above referenced Funds.
(6) Royce & Associates, Inc. (1414 Avenue of the Americas, New York, NY) is a
registered investment advisor, which has sole investment power and sole
voting power over all of the shares indicated.
(7) Includes 30,000 shares held by Mr. Manning's spouse. Mr. Manning shares
voting and investment power with respect to these shares.
(8) Includes 1,800 shares held by members of Mr. Yager's family. Mr. Yager
shares voting and investment power with respect to these shares.
(9) Includes 3,000 shares held by Mr. Goodwin's spouse as to which he disclaims
beneficial ownership.
(10) Includes 843,948 shares held by a corporation in which Mr. Patton and his
spouse each have a 50% ownership interest.
(11) For purposes of determining this percentage, the outstanding shares of the
Company include shares which such persons have the right to acquire within
sixty days by way of option exercise.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
On December 15, 1998, the Company agreed to pay Noel Thomas Patton, a
director of the Company, $150,000 to settle a claim asserted by Mr. Patton
against the Company. The claim related to the Company's purchase in 1995 of the
assets of Patton Electric Company, which was owned by Mr. Patton and his wife.
Mr. Patton agreed to release the Company from such claim and to indemnify it
from the claims of others arising from the situation.
A-9
<PAGE> 1
AGREEMENT AND PLAN OF MERGER
DATED AS OF DECEMBER 17, 1998
among
THE RIVAL COMPANY,
HOLMES PRODUCTS CORP.
and
MORIARTY ACQUISITION CORP.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I. THE OFFER....................................................... 1
SECTION 1.1. THE OFFER................................................. 1
SECTION 1.2. COMPANY ACTION............................................ 3
SECTION 1.3. DIRECTORS................................................. 5
ARTICLE II. THE MERGER..................................................... 6
SECTION 2.1. THE MERGER................................................ 6
SECTION 2.2. CLOSING................................................... 6
SECTION 2.3. EFFECTIVE TIME............................................ 6
SECTION 2.4. EFFECTS OF THE MERGER..................................... 6
SECTION 2.5. CERTIFICATE OF INCORPORATION; BY-LAWS..................... 7
SECTION 2.6. DIRECTORS................................................. 7
SECTION 2.7. OFFICERS.................................................. 7
SECTION 2.8. FURTHER ASSURANCES........................................ 7
ARTICLE III................................................................. 8
EFFECT OF THE MERGER ON THE SECURITIES OF THE CONSTITUENT CORPORATIONS.... 8
SECTION 3.1. EFFECT ON CAPITAL STOCK................................... 8
SECTION 3.2. STOCK OPTIONS............................................. 9
SECTION 3.3. EXCHANGE OF CERTIFICATES.................................. 9
ARTICLE IV. REPRESENTATIONS AND WARRANTIES................................. 11
SECTION 4.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............. 11
SECTION 4.2. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.......... 26
ARTICLE V................................................................... 28
COVENANTS RELATING TO CONDUCT OF BUSINESS................................. 28
SECTION 5.1. CONDUCT OF BUSINESS OF THE COMPANY........................ 28
SECTION 5.2. OTHER ACTIONS............................................. 30
ARTICLE VI. ADDITIONAL AGREEMENTS.......................................... 30
SECTION 6.1. MEETING OF STOCKHOLDERS................................... 30
SECTION 6.2. PROXYSTATEMENT............................................ 31
SECTION 6.3. ACCESS TO INFORMATION; CONFIDENTIALITY.................... 32
SECTION 6.4. COMMERCIALLY REASONABLE EFFORTS........................... 32
SECTION 6.5. FINANCING................................................. 33
SECTION 6.6. INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE....... 33
SECTION 6.7. PUBLIC ANNOUNCEMENTS...................................... 34
SECTION 6.8. ACQUISITION PROPOSALS..................................... 34
SECTION 6.9. STOCKHOLDER LITIGATION.................................... 35
SECTION 6.10. COMPANY ACTION RELATING TO BENEFIT PLANS................. 35
SECTION 6.11. CONSENTS AND APPROVALS................................... 36
SECTION 6.12. REPAYMENT OF INDEBTEDNESS................................ 36
SECTION 6.12. GUARANTY OF SUB'S OBLIGATIONS............................ 36
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VII. CONDITIONS PRECEDENT.......................................... 36
SECTION 7.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER 36
SECTION 7.2. CONDITIONS TO OBLIGATIONS OF PARENT AND SUB............... 37
SECTION 7.3. CONDITIONS TO OBLIGATIONS OF THE COMPANY.................. 38
SECTION 7.4. EXCEPTION.................................................. 38
SECTION 7.5 FRUSTRATION OF CONDITIONS.................................. 38
ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER............................ 39
SECTION 8.1. TERMINATION............................................... 39
SECTION 8.2. EFFECT OF TERMINATION..................................... 40
SECTION 8.3. AMENDMENT................................................. 41
SECTION 8.4. EXTENSION; WAIVER......................................... 42
ARTICLE IX. GENERAL PROVISIONS............................................. 42
SECTION 9.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES............. 42
SECTION 9.2. FEES AND EXPENSES......................................... 42
SECTION 9.3. DEFINITIONS............................................... 42
SECTION 9.4. NOTICES................................................... 42
SECTION 9.5. INTERPRETATION............................................ 43
SECTION 9.6. COUNTERPARTS.............................................. 43
SECTION 9.7. ENTIRE AGREEMENT; THIRD-PARTY BENEFICIARIES............... 43
SECTION 9.8. GOVERNING LAW............................................. 44
SECTION 9.9. ASSIGNMENT................................................ 44
SECTION 9.10. ENFORCEMENT............................................... 44
SECTION 9.11. SEVERABILITY.............................................. 44
ANNEX I...................................................................... 1
DISCLOSURE SCHEDULES......................................................... 4
</TABLE>
ii
<PAGE> 4
AGREEMENT AND PLAN OF MERGER
DATED AS OF DECEMBER 17, 1998
among
THE RIVAL COMPANY,
A DELAWARE CORPORATION (THE "COMPANY"),
HOLMES PRODUCTS CORP.,
A MASSACHUSETTS CORPORATION ("PARENT"),
and
MORIARTY ACQUISITION CORP.,
A DELAWARE CORPORATION AND A WHOLLY OWNED SUBSIDIARY OF
PARENT ("SUB")
WITNESSETH:
WHEREAS, the Board of Directors of the Company has determined that this
Agreement and the transactions contemplated hereby including the Offer and the
Merger (each as defined herein) are fair to and in the best interest of the
Company and its stockholders;
WHEREAS, the Board of Directors of each of Parent and Sub has determined
that the transactions contemplated by this Agreement (including the Offer and
the Merger) are in the best interests of Parent and Sub and their respective
stockholders; and
WHEREAS, the Boards of Directors of the Company, Parent and Sub, have each
approved and adopted this Agreement and approved the Offer and the Merger and
the other transactions contemplated hereby and agreed to recommend, in the case
of the Company, acceptance of the Offer by its stockholders.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
THE OFFER
SECTION 1.1. THE OFFER.
(a) PURCHASE PRICE AND CONDITIONS. Provided that nothing shall have
occurred that would result in a failure to satisfy any of the conditions set
forth in Annex I hereto which is not waived by Parent, Parent shall or shall
cause Sub to, as promptly as practicable following the date hereof, but in no
event later than five business days after the initial public announcement of the
Offer, commence (within the meaning of Rule 14d-2 under the Securities
<PAGE> 5
Exchange Act of 1934, as amended (the "Exchange Act")) a tender offer (as
amended from time to time in accordance with this Agreement, the "Offer") to
purchase all of the issued and outstanding shares of common stock, par value
$0.01 per share, of the Company (the "Shares" or "Common Stock"), at a price of
not less than $13.75 per Share, net to the seller in cash, subject to reduction
only for any applicable back-up withholding or stock transfer taxes payable by
the seller. For purposes of this Article 1, the party which makes the Offer,
whether Parent or Sub, shall be referred to as the "Offeror." The obligation of
Offeror to accept for payment and to pay for any Shares tendered in the Offer
shall be subject only to (i) the condition that there shall be validly tendered
in accordance with the terms of the Offer prior to the expiration date of the
Offer and not withdrawn a number of Shares which, together with any Shares then
owned by Parent or Sub, represents at least 70% of the Shares then outstanding
(the "Minimum Condition"), (ii) the receipt of cash proceeds of the Financing
(as defined in Section 4.2(d) hereof) in an amount sufficient to consummate the
transactions contemplated hereby pursuant to the terms of the Commitments (as
defined in said Section 4.2(d)) or such other terms as Parent and the Company
shall agree or as are not materially more onerous to Parent than as set forth in
the Commitments (the "Financing Condition") and (iii) the other conditions set
forth in Annex I hereto (together with the Minimum Condition and the Financing
Condition, the "Tender Offer Conditions").
(b) MODIFICATION OF CONDITIONS. Offeror expressly reserves the right in
its sole discretion, subject to the limitations set forth in this Section
1.1(b), to waive any condition to the Offer (including the Minimum Condition,
provided that no waiver of the Minimum Condition shall decrease the Minimum
Condition to less than a majority of the Shares outstanding on a fully-diluted
basis), to increase the price per Share payable in the Offer, to extend the
Offer and to make any other changes in the terms and conditions of the Offer;
provided, however, that unless previously approved by the Company in writing,
Offeror will not (i) decrease the price per Share payable in the Offer, (ii)
decrease the maximum number of Shares to be purchased in the Offer, (iii) impose
terms and conditions to the Offer in addition to those set forth in Annex I
hereto, (iv) change the terms and conditions to the Offer in any respect adverse
to the Company, (v) except as provided in the next sentence, extend the Offer,
(vi) change the form of consideration payable in the Offer or (vii) amend any
other term or condition of the Offer in a manner adverse to the holders of the
Shares. Notwithstanding the foregoing, Offeror may, without the consent of the
Company, (i) extend the Offer (the initial scheduled expiration date being 20
business days following commencement of the Offer), at any time up to March 15,
1999, for one or more periods of not more than ten business days each, if any of
the Tender Offer Conditions shall not be satisfied or waived, (ii) extend the
Offer for any period required by any rule, regulation, interpretation or
position of the Securities and Exchange Commission (the "SEC") or the staff
thereof applicable to the Offer, or (iii) if all of the Tender Offer Conditions
are satisfied or waived and the number of Shares tendered is at least equal to
70%, but less than 90%, of the then-outstanding number of Shares, further extend
the Offer for an aggregate period of not more than ten business days beyond the
then-scheduled expiration date. So long as this Agreement is in effect, the
Offer has been commenced and the Tender Offer Conditions have not been satisfied
or waived, the Offeror shall cause the Offer not to expire.
(c) ACCEPTANCE OF SHARES. Subject to the terms and conditions of the Offer
and this Agreement, Offeror shall accept for payment, and pay for, all Shares
validly tendered and not withdrawn pursuant to the Offer that Offeror becomes
obligated to accept for payment, and pay for,
2
<PAGE> 6
pursuant to the Offer as soon as practicable after expiration of the Offer,
subject to compliance with Rule 14e-1 (c) under the Exchange Act. Subject to the
terms and conditions of the Offer, Parent and Sub will each use its reasonable
best efforts to take, or cause to be taken, all actions and to do, or cause to
be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate the Offer.
(d) OFFER DOCUMENTS. As soon as practicable on the date of the
commencement of the Offer, Offeror shall file with the SEC a Tender Offer
Statement on Schedule 14D-1 with respect to the Offer which will contain the
offer to purchase and form of the related letter of transmittal and summary
advertisement (together with any supplements or amendments thereto and including
exhibits thereto, the "Offer Documents"). The Offer Documents will comply in all
material respects with applicable federal securities laws and any other
applicable laws. Parent, Sub and the Company each agree to promptly correct any
information provided by it for use in the Offer Documents if and to the extent
that it shall have become false or misleading in any material respect. Offeror
will take all steps necessary to cause the Offer Documents as so corrected to be
filed with the SEC and to be disseminated to holders of Shares, in each case as
and to the extent required by applicable federal securities laws and any other
applicable laws. The Company and its counsel shall be given an opportunity to
review and comment on the Offer Documents and any amendments thereto prior to
the filing thereof with the SEC; provided that Offeror will attempt to give the
Company and its counsel as much time prior to filing to so review and comment as
Offeror believes is reasonably practicable under the circumstances. Offeror will
provide the Company and its counsel with any comments Offeror and its counsel
may receive from the SEC or its staff with respect to the Offer Documents
promptly after the receipt thereof.
(e) TERMINATION OF OFFER. In the event that the Offer is terminated or
withdrawn by Offeror, Parent and Sub shall cause all tendered Shares to be
returned to the registered holders of the Shares represented by the certificate
or certificates surrendered to the Exchange Agent (as defined in Section 3.3
hereof).
SECTION 1.2. COMPANY ACTION.
(a) APPROVAL BY BOARD OF DIRECTORS. The Company hereby consents to the
Offer and represents that as of the date hereof its Board of Directors (the
"Board of Directors"), at a meeting duly called and held, has (i) unanimously
determined that this Agreement and the transactions contemplated hereby,
including the Offer and the Merger (as defined in Section 2.1 hereof), are fair
to and in the best interest of the Company and its stockholders, (ii)
unanimously approved this Agreement and the transactions contemplated hereby,
including the Offer and the Merger, which approvals are sufficient to render
entirely inapplicable to the Offer and the Merger or Parent or Sub the
provisions of Section 203 of the Delaware General Corporation Law (the "Delaware
GCL"), assuming neither Parent nor Sub is an "interested stockholder" as defined
therein, (iii) taken such action as is necessary to approve this Agreement, the
purchase of Shares pursuant to the Offer, the Merger and the other transactions
contemplated hereby under the provisions of the Company's Restated Certificate
of Incorporation and By-laws, each as amended to date (as so amended, the
"Restated Certificate of Incorporation" and "By-laws", respectively), and (iv)
subject
3
<PAGE> 7
to the terms hereof, resolved to recommend acceptance of the Offer and approval
and adoption of this Agreement and the Merger by its stockholders.
(b) OPINION OF FINANCIAL ADVISOR. NationsBanc Montgomery Securities LLC
(the "Financial Advisor") has delivered to the Board of Directors its written
opinion, as of the date hereof, subject to the qualifications and limitations
stated therein, to the effect that the consideration to be received by the
holders of the Shares (other than Shares owned by Parent and its Affiliates)
pursuant to each of the Offer and the Merger, taken together, is fair to the
holders of Shares from a financial point of view. The Company has been
authorized by the Financial Advisor to permit, subject to prior review and
consent by the Financial Advisor, the inclusion of the fairness opinion (or a
reference thereto) in the Offer Documents and the Schedule 14D-9 (as defined in
paragraph (e) of this Section 1.2) on the terms of the engagement letter between
the Company and the Financial Advisor dated September 24, 1998.
(c) TENDERS BY DIRECTORS AND OFFICERS. Concurrently with the execution
hereof, each of the Company's directors and certain executive officers, as
requested by Parent, have executed and delivered a Tender and Voting Agreement
with Parent and Sub, pursuant to which each of such persons has agreed, subject
to the terms thereof, to the extent of their beneficial ownership of Shares, to
tender their Shares pursuant to the Offer and to vote such Shares in favor of
the Merger.
(d) STOCKHOLDER LIST. The Company will promptly furnish Parent with a list
of its stockholders, mailing labels containing the names and addresses of all
record holders of Shares and lists of securities positions of Shares held in
stock depositories, in each case as of the most recent practicable date, and
will provide to Parent such additional information (including, without
limitation, updated lists of stockholders, mailing labels and lists of
securities positions) and such other assistance as Parent may reasonably request
from time to time in connection with the Offer and the Merger (including but not
limited to communicating the Offer and the Merger to the record and beneficial
holders of Shares). Subject to the requirements of applicable law, and except
for such steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Offer or the Merger, Parent, Offeror and
their agents and advisors shall use the information contained in any such labels
and listings only in connection with the Offer and the Merger and, if this
Agreement shall be terminated pursuant to Article VIII hereof, shall deliver to
the Company all copies and extracts of such information then in their possession
or under their control.
(e) SCHEDULE 14D-9. On or prior to the date that the Offer is commenced,
the Company will file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 (together with any supplements or amendments thereto and
including exhibits thereto, the "Schedule 14D-9"), which shall contain the
recommendations of the Board of Directors referred to in Section 1.2(a) hereof,
subject to the fiduciary duties of the Board of Directors under applicable law
and to the terms of this Agreement. The Schedule 14D-9 will comply in all
material respects with all applicable federal
4
<PAGE> 8
securities laws and any other applicable laws. The Company, Parent and Sub each
agree to promptly correct any information provided by it for use in the Schedule
14D-9 if and to the extent that it shall have become false or misleading in any
material respect. The Company will take all steps necessary to cause the
Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated
to holders of Shares, in each case as and to the extent required by applicable
federal securities laws and any other applicable laws. Parent, Sub and their
counsel shall be given an opportunity to review and comment on the Schedule
14D-9 and any amendments thereto prior to the filing thereof with the SEC;
provided that the Company will attempt to give Parent, Sub and their counsel as
much time prior to filing to so review and comment as the Company believes is
reasonably practicable under the circumstances. The Company will provide Parent
and Sub and their counsel with any comments the Company or its counsel may
receive from the SEC or its staff with respect to the Schedule 14D-9 promptly
after the receipt of such comments.
SECTION 1.3. DIRECTORS.
(a) APPOINTMENT OF PARENT DESIGNEES. Effective upon the purchase of and
payment for Shares by Offeror pursuant to the Offer such that Offeror shall own
at least a majority of the Shares and from time to time thereafter, Parent shall
be entitled to designate up to such number of directors, rounded up to the next
whole number, on the Board of Directors that equals the product of (i) the total
number of directors on the Board of Directors (giving effect to any increase in
the number of directors pursuant to this Section 1.3) multiplied by (ii) the
percentage that the number of Shares owned by Parent and Sub bears to the total
number of Shares outstanding on an undiluted basis, and the Company shall take
all action necessary to cause Parent's designees to be elected or appointed to
the Board of Directors, including, without limitation, increasing the number of
directors and/or securing the resignations of such number of incumbent directors
as is necessary to enable Parent's designees to be elected to the Board of
Directors and to cause Parent's designees to be so elected. At such times, the
Company will use its best efforts to cause individuals designated by Parent to
constitute the same percentage as such individuals represent on the Board of
Directors of (x) each committee of the Board of Directors, (y) each board of
directors of each Subsidiary (as defined below) of the Company and (z) each
committee of each such board. Notwithstanding the foregoing, until the Effective
Time (as defined in Section 2.3 hereof), the Company shall use its best efforts
to ensure that not less than two persons who are directors on the date hereof
shall remain as members of the Board of Directors (the "Continuing Directors")
until the Effective Time, and Parent and Sub shall take no action (other than
removal for cause) to prevent such Continuing Directors from so serving. In the
event there is only one Continuing Director, such Continuing Director shall have
the right to designate a person, who is reasonably acceptable to Offeror, to
become a Continuing Director. For purposes of this Agreement, "Subsidiary" means
any corporation or other entity of which securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are directly or indirectly owned by
the Company or Parent, as applicable.
(b) COMPLIANCE WITH INFORMATION REQUIREMENTS. The Company's obligations to
appoint designees to the Board of Directors shall be subject to Section 14(f) of
the Exchange Act and Rule 14f-1 promulgated thereunder. The Company, with
Parent's cooperation, shall promptly take all actions required pursuant to
Section 14(f) and Rule 14f-1 in order to fulfill its obligations under this
Section 1.3, including mailing to the stockholders as part of the Schedule 14D-9
the information required by such Section 14(f), as is necessary to enable
Parent's designees to be elected to the Board of Directors. Parent will supply
to the Company in writing and be solely responsible for any information with
respect to itself and its nominees, officers, directors and affiliates required
by Section 14(f) and Rule 14f-1. For purposes of this Agreement, "affiliate"
shall
5
<PAGE> 9
mean, as to any person, any other person that would be deemed to be an
"affiliate" of such person as that term is defined in Rule 12b-2 of the General
Rules and Regulations under the Exchange Act.
(c) CONTINUING DIRECTOR APPROVAL. Following the election or appointment of
Parent's designees pursuant to this Section 1.3 and prior to the Effective Time
(as defined in Section 2.3), so long as there shall be at least one Continuing
Director, any amendment of this Agreement, any termination of this Agreement by
the Company, any extension by the Company of the time for the performance of any
of the obligations or other acts of Parent or Sub, any consent of the Company
contemplated hereby, any extension of the Effective Time as contemplated by the
last sentence of Section 2.3, any waiver of any of the Company's rights
hereunder, any amendment to the Company's Restated Certificate of Incorporation
or By-laws or any action taken by the Company that materially adversely affects
the interests of the stockholders of the Company (other than the Offeror) with
respect to the transactions contemplated hereby, will require the concurrence of
at least one of the Continuing Directors.
ARTICLE II
THE MERGER
SECTION 2.1. THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Delaware GCL, at the
Effective Time, Sub shall be merged with and into the Company (the "Merger").
Upon the Effective Time, the separate existence of Sub shall cease, and the
Company shall continue as the surviving corporation (sometimes referred to
herein as the "Surviving Corporation").
SECTION 2.2. CLOSING. Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to
Section 8. 1, and subject to the satisfaction or waiver of the conditions set
forth in Article VII, the closing of the Merger (the "Closing") will take place
at 10:00 a.m., Boston time, not later than the third business day following the
date on which the last to be fulfilled or waived of the conditions set forth in
Article VII shall be fulfilled or waived in accordance with this Agreement (the
"Closing Date"), at the offices of Posternak, Blankstein & Lund, L.L.P., 100
Charles River Plaza, Boston, Massachusetts, unless another date, time or place
is agreed to by the parties hereto.
SECTION 2.3. EFFECTIVE TIME. The parties hereto will file with the
Secretary of State of the State of Delaware (the "Delaware Secretary of State")
on the Closing Date (or on such other date as Parent and the Company may agree)
a Certificate of Merger or other appropriate documents, executed in accordance
with the relevant provisions of the Delaware GCL, and make all other filings or
recordings required under the Delaware GCL in connection with the Merger. The
Merger shall become effective upon the filing of the Certificate of Merger with
the Delaware Secretary of State, or at such later time as is agreed upon by the
parties hereto and specified in the Certificate of Merger (the "Effective
Time").
SECTION 2.4. EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in the appropriate provisions of the Delaware GCL. Without limiting the
generality of the foregoing,
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and subject thereto, at the Effective Time, all the assets, properties, rights,
privileges, powers and franchises of the Company and Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of the Company and
Sub shall become the debts, liabilities and duties of the Surviving Corporation.
SECTION 2.5. CERTIFICATE OF INCORPORATION; BY-LAWS.
(a) The Company's Restated Certificate of Incorporation, as in effect at
the Effective Time, shall be, from and after the Effective Time, the Certificate
of Incorporation of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law.
(b) The Company's By-laws, as in effect at the Effective Time, shall be,
from and after the Effective Time, the By-laws of the Surviving Corporation
until thereafter changed or amended as provided therein or by applicable law.
SECTION 2.6. DIRECTORS. The directors of Sub at the Effective Time shall
become, from and after the Effective Time, the directors of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
SECTION 2.7. OFFICERS. The officers of Sub at the Effective Time,
including such officers of the Company as shall have become duly elected and
qualified officers of Sub, shall become, from and after the Effective Time, the
officers of the Surviving Corporation, until the earlier of their resignation or
removal or until their respective successors are duly elected and qualified, as
the case may be.
SECTION 2.8. FURTHER ASSURANCES. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either of the Company or Sub acquired or to be acquired
by the Surviving Corporation as a result of, or in connection with, the Merger
or otherwise to carry out this Agreement, the officers and directors of the
Surviving Corporation shall be authorized to execute and deliver, in the name
and on behalf of either the Company or Sub, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on behalf of each
of such corporations or otherwise, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title and
interest in, to and under such rights, properties or assets in the Surviving
Corporation or otherwise to carry out this Agreement.
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ARTICLE III
EFFECT OF THE MERGER ON THE SECURITIES OF THE
CONSTITUENT CORPORATIONS
SECTION 3.1. EFFECT ON CAPITAL STOCK. As of the Effective Time, by
virtue of the Merger and without any action on the part of any holder:
(a) COMMON STOCK OF SUB. Each share of the capital stock of Sub issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one validly issued, fully paid and non-assessable share of common stock,
par value $0.01 per share, of the Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED STOCK. Each Share
issued or outstanding immediately prior to the Effective Time that is owned by
the Company or by Parent or Sub shall be canceled automatically and shall cease
to exist, and no cash or other consideration shall be delivered or deliverable
in exchange therefor.
(c) CONVERSION OF COMPANY SHARES. At the Effective Time, each Share other
than (i) Shares to be canceled pursuant to Section 3.1(b) and (ii) Dissenting
Shares (as hereinafter defined) shall be converted into and become the right to
receive, upon surrender of the certificate representing such Shares in
accordance with Section 3.3, the cash price per Share paid by Sub pursuant to
the Offer (the "Merger Consideration").
(d) DISSENTING SHARES. Notwithstanding anything in this Agreement to the
contrary, Shares issued and outstanding immediately prior to the Effective Time
and held by a holder (a "Dissenting Stockholder"), if any, who has the right to
demand, and who properly demands, an appraisal of such Shares in accordance with
the Delaware GCL (including but not limited to Section 262 thereof, or any
successor provision) ("Dissenting Shares") shall not be converted into a right
to receive the Merger Consideration unless such Dissenting Stockholder fails to
perfect or otherwise loses or withdraws such Dissenting Stockholder's right to
such appraisal, if any. Provided the holder of any Dissenting Shares complies
with the provisions of Delaware law, such holder shall have with respect to such
Shares solely the rights provided under the Delaware GCL. If, after the
Effective Time, such Dissenting Stockholder fails to perfect or otherwise loses
or withdraws any such right to appraisal, each such Share of such Dissenting
Stockholder shall be treated as a Share that had been converted as of the
Effective Time into the right to receive the Merger Consideration in accordance
with this Section 3.1. The Company shall give prompt notice to Parent of any
demands received by the Company for appraisal of any Dissenting Shares, and
Parent shall have the right to participate in and direct all negotiations and
proceedings with respect to such demands. The Company shall not, except with the
prior written consent of Parent, which consent shall not be unreasonably
withheld, make any payment with respect to, or settle or offer to settle, any
such demands.
(e) CANCELLATION AND RETIREMENT OF COMMON STOCK. As of the Effective Time
all certificates representing Shares, other than certificates representing
Shares to be canceled in accordance with Section 3.1(b) or Dissenting Shares,
issued and outstanding
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immediately prior to the Effective Time, shall no longer be outstanding and
shall automatically be canceled and shall cease to exist, and each holder of a
certificate representing any such Shares shall cease to have any rights with
respect thereto, except the right to receive the Merger Consideration upon
surrender of such certificate in accordance with Section 3.3.
SECTION 3.2. STOCK OPTIONS. As of the Effective Time, each outstanding,
unexercised stock option to purchase Shares (a "Company Stock Option") issued
under the Company's 1986 Stock Option Plan (the "1986 Plan") and the 1994 Stock
Option Plan (the "1994 Plan") (collectively, the "Company Stock Option Plans")
shall terminate and be canceled and each holder of a Company Stock Option shall
be entitled to receive, in consideration therefor, a cash payment from the
Company (which payment shall be tendered to such holder on the Closing Date, or
such earlier date after the consummation of the Offer and not later than five
business days after the option holder shall have tendered the option to the
Company and consented to its cancellation in exchange for payment) equal to the
product of (a) the excess, if any, of (x) the Merger Consideration over (y) the
per Share exercise price of such Company Stock Option, times (b) the number of
Shares then subject to such Company Stock Option. Such cash payment shall be net
of any required withholding taxes. Not later than the second business day
following the execution and delivery of this Agreement, the Company shall cause
the committee administering each Company Stock Option Plan (the "Option
Committee") to provide to each holder of a Company Stock Option written notice
regarding the termination of such Company Stock Option as contemplated by
Section 3.13(a)(i) of the 1986 Plan and Section 3.12(a)(i) of the 1994 Plan,
respectively. As of the Effective Time, each outstanding Company Stock Option
and each of the Company Stock Option Plans shall terminate and be of no further
force or effect, and the Company shall take such action as shall be necessary to
ensure, to Parent's reasonable satisfaction, that no holder of a Company Stock
Option or participant in any other employee benefit plan or program of the
Company will have any right to acquire any interest in the Surviving Corporation
under the Company Stock Option Plans or any other such plan or program.
SECTION 3.3. EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. As of the Effective Time, Sub (or the Company, as the
Surviving Corporation) shall deposit, or shall cause to be deposited, with or
for the account of a bank, trust company or other agent designated by Sub, which
shall be reasonably satisfactory to the Company (the "Exchange Agent"), for the
benefit of the holders of Shares, cash in an aggregate amount equal to the
product of (x) the number of Shares outstanding immediately prior to the
Effective Time (other than Shares to be canceled pursuant to Section 3.1(b) and
Dissenting Shares), times (y) the Merger Consideration (such amount being
hereinafter referred to as the 'Payment Fund"). The Exchange Agent shall invest
the Payment Fund, as directed by the Surviving Corporation, in any of the
following: (i) obligations issued or guaranteed by the United States of America;
(ii) certificates of deposit, time deposits, commercial paper or any other
obligations of any bank or trust company organized or licensed to conduct a
banking business under the laws of the United States or any state thereof and
having total assets of not less than $10.0 billion; (iii) commercial paper with
maturities of not more than ninety days having the highest rating then given by
Moody's Investors Services, Inc. or Standard & Poor's Corporation; (iv)
repurchase obligations for underlying securities of the types described in
clause (i) above; (v) any trust, fund, Money
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Market account or other collective investment vehicle investing principally in
the investments specified in clauses (i) through (iv) above; or (vi) any other
investment reasonably satisfactory to the Company. Earnings on the Payment Fund
shall be for the account of Parent.
(b) EXCHANGE PROCEDURES. As soon as practicable after the Effective Time,
each holder of an outstanding certificate or certificates which prior thereto
represented outstanding Shares shall, upon surrender to the Exchange Agent of
such certificate or certificates and acceptance thereof by the Exchange Agent,
be entitled to the amount of cash which the aggregate number of Shares
previously represented by such certificate or certificates surrendered shall
have been converted into the right to receive pursuant to Section 3.1(c). The
Exchange Agent shall accept such certificates upon compliance with such
reasonable terms and conditions as the Exchange Agent may impose to effect an
orderly exchange thereof in accordance with normal exchange practices. If the
consideration to be paid in the Merger (or any portion thereof) is to be
delivered to any person other than the person in whose name the certificate
representing Shares surrendered in exchange therefor is registered, it shall be
a condition to such exchange that the certificate so surrendered shall be
properly endorsed with the signature guaranteed or otherwise be in proper form
for transfer and that the person requesting such exchange shall pay to the
Exchange Agent any transfer or other tax required by reason of the payment of
such consideration to a person other than the registered holder of the
certificate surrendered, or shall establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not applicable. After the Effective
Time, there shall be no further transfer on the records of the Company or its
transfer agent of certificates representing Shares, and if such certificates are
presented to the Company for transfer, they shall be canceled against delivery
of the Merger Consideration as hereinabove provided. Until surrendered as
contemplated by this Section 3.3(b), each certificate representing Shares shall
be deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the Merger Consideration, without any interest
thereon, as contemplated by Section 3.1. No interest will be paid or will accrue
on any cash payable as Merger Consideration to any holder of Shares.
(c) LETTER OF TRANSMITTAL. Promptly after the Effective Time, but in any
event within five business days thereafter, the Surviving Corporation shall
cause to be mailed to each record holder of certificates that immediately prior
to the Effective Time represented Shares which have been converted pursuant to
Section 3.1, a form of letter of transmittal and instructions for use in
surrendering such certificates and receiving the consideration to which such
holder shall be entitled therefor pursuant to Section 3.1.
(d) NO FURTHER OWNERSHIP RIGHTS IN COMMON STOCK. The Merger Consideration
paid upon the surrender for exchange of certificates representing Shares in
accordance with the terms of this Article III shall be deemed to have been
issued and paid in full satisfaction of all rights pertaining to the Shares
theretofore represented by such certificates, and no holder of Shares shall
thereby have any equity interest in the Surviving Corporation.
(e) TERMINATION OF PAYMENT FUND. Any portion of the Payment Fund which
remains undistributed to the holders of the certificates representing Shares
more than six months after the Effective Time (including, without limitation,
all interest and other income received by the Exchange Agent in respect to all
funds made available to it) shall be delivered to the Surviving
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Corporation, upon demand, and any such holders of Shares who have not
theretofore complied with this Article III shall thereafter look only to the
Surviving Corporation (subject to abandoned property, escheat and other similar
laws) and only as general creditors thereof for payment of their claim for the
Merger Consideration.
(f) NO LIABILITY. None of Parent, Sub, the Surviving Corporation or the
Exchange Agent shall be liable to any person in respect of any cash, shares,
dividends or distributions payable from the Payment Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If any certificates representing Company Shares shall not have been surrendered
immediately prior to such date on which the Merger Consideration in respect of
such certificate would otherwise escheat to or become the property of any
Governmental Entity (as defined in Section 4.1(d)), any such cash, shares,
dividends or distributions payable in respect of such certificate shall, to the
extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person previously
entitled thereto.
(g) WITHHOLDING RIGHTS. The Surviving Corporation, Parent or Sub shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of Shares, and shall promptly pay over
to the appropriate Governmental Entity, such amounts as the Surviving
Corporation, Parent or Sub is required to deduct and withhold with respect to
the making of such payment under the Code (as defined herein), or any provision
of state, local or foreign tax law, including, without limitation, withholdings
required in connection with payments with respect to Company Stock Options. To
the extent that amounts are so withheld by the Surviving Corporation, Parent or
Sub, such withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the holder in respect of which such deduction and
withholding was made.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to Parent and Sub as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. The Company is a
corporation duly organized, validly existing and in corporate good standing
under the laws of the State of Delaware and has the requisite corporate power
and authority to carry on its business as now being conducted and to own,
operate and lease its properties as now owned, operated and leased. The Company
is duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) would not (i) have a material adverse effect
upon the business, assets, properties, condition (financial or otherwise), or
results of operations of the Company and its Subsidiaries taken as a whole, or
(ii) prevent the Company from consummating the transactions contemplated hereby
(a "Material Adverse Effect"). The Company has delivered to Parent complete
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and correct copies of its Restated Certificate of Incorporation and By-laws, as
amended to the date of this Agreement.
(b) SUBSIDIARIES. Section 4.1(b) of the disclosure schedule delivered by
the Company to Parent contemporaneously herewith (the "Disclosure Schedule")
sets forth the name, jurisdiction of incorporation, capitalization and number of
shares of outstanding capital stock of each of the Company's Subsidiaries. All
the issued and outstanding shares of capital stock of each Subsidiary are
validly issued, fully paid and nonassessable and are owned, directly or
indirectly, by the Company, beneficially and of record, free and clear of all
liens, pledges, encumbrances or restrictions of any kind. No Subsidiary has
outstanding any securities convertible into or exchangeable or exercisable for
any shares of its capital stock, there are no outstanding options, warrants or
other rights to purchase or acquire any capital stock of any Subsidiary, there
are no irrevocable proxies with respect to such shares, and there are no
contracts, commitments, understandings, arrangements or restrictions by which
any Subsidiary or the Company is bound to issue additional shares of the capital
stock of a Subsidiary. Except for the Company's Subsidiaries, and as otherwise
disclosed in Section 4.1(b) of the Disclosure Schedule, the Company does not
own, directly or indirectly, any capital stock or other equity securities of any
corporation or have any direct or indirect equity interest in any business. Each
of the Company's Subsidiaries (a) is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation; (b) has all requisite corporate power and authority to carry on
its business as it is now being conducted and to own, operate and lease its
properties as now owned, operated or leased; and (c) is qualified or licensed to
do business as a foreign corporation and is in good standing in each of the
jurisdictions in which (i) the ownership or leasing of real property or the
conduct of its business requires such qualification or licensing and (ii) the
failure to be so qualified or licensed, either singly or in the aggregate, would
have a Material Adverse Effect. The Company has delivered to Parent complete and
correct copies of the Certificate of Incorporation or other charter documents
and By-laws of each of its Subsidiaries, each as amended to date.
(c) CAPITALIZATION. As of the date hereof, the authorized capital stock of
the Company consists solely of 15,000,000 shares of Common Stock. As of the date
hereof, 9,294,227 Shares are issued and outstanding, 880,311 shares of Common
Stock are reserved for issuance pursuant to outstanding Company Stock Options,
and 513,497 shares of Common Stock are held by the Company in its treasury.
Except as set forth above, no shares of capital stock or other equity securities
of the Company are issued, reserved for issuance or outstanding. All outstanding
shares of capital stock of the Company are, and all shares which may be issued
pursuant to the Company Stock Option Plans will be, when issued, duly
authorized, validly issued, fully paid and non-assessable and not subject to
preemptive rights. Section 4.1(c) of the Disclosure Schedule accurately sets
forth the number of Shares issuable upon exercise of each outstanding Company
Stock Option, the vesting schedule thereof, and the applicable exercise price
with respect to each such Company Stock Option. Except as set forth in Section
4.1(c) of the Disclosure Schedule, the Company has no outstanding option,
warrant, subscription or other right, agreement or commitment which either (i)
obligates the Company to issue, sell or transfer, repurchase, redeem or
otherwise acquire or vote any shares of the capital stock of the Company or (ii)
restricts the transfer of Common Stock. Except as set forth in Section 4.1(c) of
the Disclosure Schedule, the Company has no outstanding stock appreciation
rights, phantom stock or stock equivalents.
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(d) AUTHORITY; ENFORCEABILITY; NONCONTRAVENTION. The Company has the
requisite corporate power and authority to enter into this Agreement and,
subject to the approval of its stockholders, if required, as set forth in
Section 7.1(a) with respect to the consummation of the Merger, to consummate the
Merger and the other transactions contemplated by this Agreement. The execution
and delivery of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Company, subject to the approval
of its stockholders as set forth in Section 7.1(a). This Agreement has been duly
executed and delivered by the Company and constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except that the enforceability hereof may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated by this Agreement
and compliance with the provisions hereof will not, (i) violate any of the
provisions of the Restated Certificate of Incorporation or By-laws of the
Company, (ii) except as otherwise set forth in Section 4.1(d) of the Disclosure
Schedule and subject to the governmental filings and other matters referred to
in the following sentence, contravene any law, rule or regulation of any state
or of the United States or any political subdivision thereof or therein, or any
order, writ, judgment, injunction, decree, determination or award currently in
effect, or (iii) violate, conflict with or constitute a breach under any
contract, agreement, indenture, mortgage, deed of trust, lease or other
instrument to which the Company or any of its Subsidiaries is a party or by
which any of its assets is bound or subject, which, in the case of clauses (ii)
and (iii) above, singly or in the aggregate, would have a Material Adverse
Effect or prevent consummation of the transactions contemplated hereby. No
consent, approval or authorization of, or declaration or filing with, or notice
to, any governmental agency, board, commission, department or regulatory
authority, domestic or foreign (a "Governmental Entity"), which has not been
received or made, is required by or with respect to the Company or any
Subsidiary in connection with the execution and delivery of this Agreement by
the Company or the consummation by the Company of the transactions contemplated
hereby, except for (i) compliance with any applicable requirements of the
Exchange Act and the rules and regulations promulgated thereunder, (ii) state
securities or blue sky laws and state takeover, antitrust and compensation law
filings and approvals, (iii) compliance with any applicable requirements of The
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (iv) the filing of the Certificate of Merger with the Delaware Secretary
of State and appropriate documents with the relevant authorities of other states
in which the Company is qualified to do business, and (v) such other consents,
approvals, authorizations, filings or notices as are set forth in Section 4.1(d)
of the Disclosure Schedule or as to which the failure to so receive or make
would not have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is a party or subject to, or bound by, any contract, agreement,
indenture, mortgage, deed of trust, lease or other instrument which prevents or
restricts its power and authority or its ability to grant liens upon or
otherwise pledge its assets, to guarantee obligations of third parties or pay
dividends on its capital stock, except as set forth in Section 4.1(d) of the
Disclosure Schedule.
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(e) FINANCIAL STATEMENTS; SEC REPORTS. The Company has previously
furnished Parent and Sub with true and complete copies of (i) its Annual Reports
on Form 10-K for the fiscal years ended June 30, 1996 (the "1996 Annual
Report"), June 30, 1997 (the "1997 Annual Report") and June 30, 1998 (the "1998
Annual Report" and, together with the 1996 Annual Report, the 1997 Annual
Report, and the Form 10-Q as defined below, the "Reports") filed by the Company
with the SEC, (ii) its Quarterly Report on Form 10-Q for the three months ended
September 30, 1998 (the "Form 10-Q") filed by the Company with SEC, (iii) the
unaudited consolidated balance sheets and the unaudited consolidated statements
of operations of the Company and its Subsidiaries as at October 31, 1998,
November 30, 1998 and for the months then ended (the "Monthly Financial
Statements"), (iv) proxy statements relating to all of the Company's meetings of
stockholders (whether annual or special) held or scheduled to be held since June
30, 1996 and (v) each other registration statement, proxy or information
statement or current report on Form 8-K filed since June 30, 1996 by the Company
with the SEC. Since the effective date of its initial public offering in 1992,
the Company has complied in all material respects with its SEC filing
obligations under the Exchange Act and the Securities Act of 1933, as amended
(the "Securities Act"). The financial statements and related schedules and notes
thereto of the Company contained in the Reports (or incorporated therein by
reference) and the Monthly Financial Statements were prepared in accordance with
generally accepted accounting principles (except, in the case of interim
unaudited financial statements, as permitted by the rules and regulations
applicable to Form 10-Q) applied on a consistent basis except as noted therein,
and fairly present in all material respects the consolidated financial position
of the Company and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended, subject (in the case of interim unaudited financial statements) to normal
year-end audit adjustments, and such financial statements complied as to form as
of their respective dates in all material respects with applicable rules and
regulations of the SEC. Each such registration statement, proxy statement and
Report was prepared in accordance with the requirements of the Securities Act or
the Exchange Act and did not, on the date of effectiveness in the case of such
registration statements, on the date of mailing in the case of such proxy
statements and on the date of filing in the case of such Reports, 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 therein, in light of the
circumstances under which they were made, not misleading.
(f) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as may be disclosed in
the Reports or as otherwise disclosed in Section 4.1(f) of the Disclosure
Schedule, since June 30, 1998 there has not been (i) any declaration, setting
aside or payment of any dividend or other distribution in respect of the capital
stock of the Company or any redemption or other acquisition by the Company of
any of its capital stock, other than cash dividends of $.07 per Share paid or to
be paid to stockholders on or about September 15, 1998 and December 15, 1998;
(ii) any issuance by the Company, or agreement or commitment of the Company to
issue, any shares of its Common Stock or securities convertible into or
exchangeable for shares of its Common Stock, except for stock options and stock
purchase rights set forth in Section 4.1(c) of the Disclosure Schedule; (iii)
any change by the Company in accounting methods, principles or practices, except
as required by generally accepted accounting principles; (iv) any increase in
wage or bonus, severance, profit sharing, retirement, deferred compensation,
change of control, insurance or other compensation or benefits or any new
compensation or benefit plans or arrangements or any amendments to any
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Benefit Plans (as hereinafter defined) existing on June 30, 1998, other than as
required under written agreements or commitments in effect as of June 30, 1998
and other than customary increases or bonus payments made in the ordinary course
of business consistent with prior practice (not including, however, any new or
additional Benefit Plans unless disclosed in Section 4.1(f) of the Disclosure
Schedule); (v) any damage, destruction or loss (whether or not covered by
insurance) with respect to any assets of the Company or its Subsidiaries which
would have a Material Adverse Effect; (vi) any other event or change which would
have a Material Adverse Effect; or (vii) any agreement or commitment to which
the Company is a party, whether in writing or otherwise, to take any action
described in this subsection 4.1(f). Since June 30, 1998, the Company and its
Subsidiaries have conducted their respective businesses in all material respects
only in the ordinary course, consistent with past custom and practice, except as
contemplated by this Agreement or as described in Schedule 5.1 of the Disclosure
Schedule.
(g) NO UNDISCLOSED LIABILITIES. Except as set forth in the Reports, or as
contemplated by the Restructuring (as defined in Section 5.1), neither the
Company nor any of its Subsidiaries has any liabilities (absolute, accrued,
contingent or otherwise), except liabilities (i) in the aggregate adequately
provided for in the Company's audited balance sheet (including any related notes
thereto) for the fiscal year ended June 30, 1998 included in the 1998 Annual
Report (the "1998 Balance Sheet"), (ii) incurred in the ordinary course of
business and not required under generally accepted accounting principles to be
reflected on the 1998 Balance Sheet, (iii) incurred since June 30, 1998 in the
ordinary course of business consistent with past practice, (iv) incurred in
connection with this Agreement or (v) which would not have a Material Adverse
Effect.
(h) COMPLIANCE WITH LAWS. The business of the Company and each of the
Subsidiaries has been operated at all times in compliance with applicable
statutes, laws, rules, regulations, permits, licenses, orders, injunctions and
judgments (collectively, "Laws"), including, without limitation, applicable Laws
governing or regulating environmental matters, manufacturing, marketing and
distribution of products, product safety (including the regulations of the
Consumer Product Safety Commission, the Canadian Standards Association and
Underwriters' Laboratory), product recalls, wages and hours, plant closings or
reductions of activities at any facility, layoffs or reductions in force,
working conditions and health and safety, except for such violations or failures
to comply that, individually or in the aggregate, would not have a Material
Adverse Effect.
(i) LITIGATION. Except as set forth in Section 4.1(i) of the Disclosure
Schedule or otherwise disclosed in the Reports, there is no suit, action or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries which, individually or in the aggregate,
would have a Material Adverse Effect, nor is there any judgment, decree,
injunction, ruling or order of any Governmental Entity outstanding against the
Company or any of its Subsidiaries which, individually or in the aggregate,
would have a Material Adverse Effect.
(j) EMPLOYEE BENEFIT MATTERS.
(A) Section 4.1(j) of the Disclosure Schedule sets forth a list of
all material employee welfare benefit plans (as defined in Section 3(l) of
the Employee Retirement
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Income Security Act of 1974, as amended ("ERISA")), employee pension
benefit plans (as defined in Section 3(2) of ERISA), and all other bonus,
stock option, stock purchase, benefit, profit sharing, savings,
retirement, disability, insurance, incentive, deferred compensation and
other similar fringe or employee benefit plans, programs or arrangements
for the benefit of, or relating to, any employee or director of, or
independent contractor or consultant to, the Company or its Subsidiaries
(together, the "Benefit Plans") and any employment, severance or
termination agreement to which the Company or any Subsidiary is a party.
The Company has made available to Parent true and complete copies of all
Benefit Plans, as in effect, together with all amendments thereto which
will become effective at a later date, as well as the latest Internal
Revenue Service ("IRS") determination letters obtained with respect to any
Benefit Plan intended to be qualified under Section 401(a) or 501(a) of
the Internal Revenue Code of 1986, as amended (the "Code"). True and
complete copies of the (i) most recent annual actuarial valuation report,
if any, (ii) last filed Form 5500 together with Schedule A and/or B
thereto, if any, (iii) summary plan description (as defined in ERISA), if
any, and all modifications thereto communicated to employees, (iv) most
recent annual and periodic accounting of related plan assets, if any, and
(v) such other materials with respect to the Employee Plans reasonably
requested by Parent in each case, relating to the Benefit Plans, have been
or will be delivered to Parent and are, or will be, correct in all
material respects.
(B) Except to the extent that any of the following, either alone or
in the aggregate, would not have a Material Adverse Effect, or as set
forth on Schedule 4.1(j) of the Disclosure Schedule: (i) neither the
Company nor, to the Company's knowledge, any of its directors, officers,
employees or agents has, with respect to any Benefit Plan, engaged in or
been a party to any "prohibited transaction", as such term is defined in
Section 4975 of the Code or Section 406 of ERISA, which could result in
the imposition of either a penalty assessed pursuant to Section 502(i) of
ERISA or a tax imposed by Section 4975 of the Code, in each case
applicable to the Company or any Benefit Plan; (ii) all Benefit Plans are
and have been at all times in compliance in all respects with the
currently applicable requirements prescribed by all statutes, orders, or
governmental rules or regulations currently in effect with respect to such
Benefit Plans, including, but not limited to, ERISA and the Code (except
for such requirements that are not required to be adopted as of the
effective date of the applicable requirement) and, to the knowledge of the
Company, there are no pending or threatened claims, lawsuits or
arbitrations (other than routine claims for benefits), relating to any of
the Benefit Plans, which have been asserted or instituted against the
Company, any Benefit Plan or the assets of any trust for any Benefit Plan,
nor, to the knowledge of the Company, is there any basis for one; (iii)
each Benefit Plan intended to be qualified under Section 401(a) of the
Code, is so qualified, and has heretofore been determined by the IRS to be
so qualified; (iv) neither the Company nor any trade or business which,
together with the Company, is treated as a single employer under Section
414(t) of the Code (an "ERISA Affiliate") has, or at any time has had, an
obligation to contribute to a "defined benefit plan" as defined in Section
16
<PAGE> 20
3(35) of ERISA, a pension plan subject to the funding standards of Section
302 of ERISA or Section 412 of the Code, a "multiemployer plan" within the
meaning of Section 3(37) or 4001(a)(13) of ERISA or Section 414(f) of the
Code or a "multiple employer plan" within the meaning of Section 210(a) of
ERISA or Section 413(c) of the Code; (v) with respect to each group health
plan benefiting any current or former employee of the Company, or any
ERISA Affiliate, that is subject to Section 4980B of the Code, the Company
and any ERISA Affiliate, have complied with (A) the continuation coverage
requirements of Section 4980B of the Code and Part 6 of Subtitle B of
Title I of ERISA and (B) the Health Insurance Portability and
Accountability Act of 1996, as amended; (vi) all (A) insurance premiums
required to be paid with respect to, (B) benefits, expenses, and other
amounts due and payable under, and (C) contributions, transfers, or
payments required to be made to, any Benefit Plan prior to the Effective
Time will have been paid, made or accrued on or before the Effective Time;
(vii) with respect to any insurance policy providing funding for benefits
under any Benefit Plan, (A) there is no liability of the Company or any of
its Subsidiaries, in the nature of a retroactive rate adjustment, loss
sharing arrangement, or other actual or contingent liability, nor would
there be any such liability if such insurance policy was terminated on the
date hereof, and (B) no insurance company issuing any such policy is in
receivership, conservatorship, liquidation or similar proceeding and, to
the knowledge of the Company, no such proceedings with respect to any
insurer are imminent; (viii) no Benefit Plan provides benefits, including,
without limitation, death or medical benefits, beyond termination of
service or retirement other than (A) coverage mandated by law, (B) death
or retirement benefits under any qualified Benefit Plan, or (C) deferred
compensation benefits reflected on the books of the Company; (ix) the
execution and performance of this Agreement will not (A) constitute a
stated triggering event under any Benefit Plan that will result in any
payment (whether of severance pay or otherwise) becoming due from the
Company or any of the Company's Subsidiaries to any officer, director,
employee, or former employee (or dependents of such employee), or (B)
accelerate the time of payment or vesting, or increase the amount of
compensation due to any employee, officer or director of the Company; (x)
any amount that could be received (whether in cash or property or the
vesting of property) as a result of any of the transactions contemplated
by this Agreement by any employee, officer or director of the Company or
any of its affiliates who is a "disqualified individual" (as such term is
defined in proposed Treasury Regulation Section 1.280G-1) under any
employment, severance or termination agreement, other compensation
arrangement or Benefit Plan currently in effect would not be characterized
as an "excess parachute payment" (as such term is defined in Section
280G(b)(1) of the Code); (xi) the disallowance of a deduction under
Section 162(m) of the Code for employee remuneration will not apply to any
amount paid or payable by the Company or any affiliate of the Company
under any contract, Benefit Plan, program, arrangement or understanding
currently in effect; (xii) neither the Company nor any ERISA Affiliate has
any current or future liability with respect to any "employee benefit
plans" (within the meaning of Section 3(3) of ERISA), other than the
Benefit Plans, previously maintained or contributed to by the Company, any
ERISA Affiliate or any predecessor to either
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<PAGE> 21
thereof, or to which the Company, any ERISA Affiliate, or any such
predecessor previously had an obligation to contribute.
(k) TAXES. Except as disclosed in the Reports or in Section 4.1(k) of the
Disclosure Schedule, each of the Company and the Subsidiaries (i) has timely
filed all federal and, except as would not have a Material Adverse Effect, state
and foreign Tax Returns required to be filed by the Company and each Subsidiary,
respectively, for tax years ended prior to the date of this Agreement and all
such Tax Returns are correct and complete in all material respects, (ii) has
timely paid, withheld or accrued all Taxes due and payable, whether or not
reflected on such Tax Returns, except as would not have a Material Adverse
Effect, (iii) has not entered into any agreement or waiver which would extend
the statute of limitations for filing any Tax Returns that have not yet been
filed, and (iv) has "open" years for federal income Tax Returns only as set
forth in Section 4.1(k) of the Disclosure Schedule. There are no liens for Taxes
on the assets of the Company or the Subsidiaries except for liens for current
Taxes not yet due, and, except as set forth in the Reports or in Section 4.1(k)
of the Disclosure Schedule, there is no pending, nor has the Company or any
Subsidiary received written notice of any threatened, Tax audit, examination,
refund litigation or adjustment in controversy. Neither the Company nor any
Subsidiary is a party to any agreement providing for the allocation or sharing
of Taxes. All Taxes which each of the Company and the Subsidiaries has been
required to collect or withhold have been duly collected or withheld and to the
extent required when due, have been or will be duly and timely paid to the
proper taxing authority, except as would not have a Material Adverse Effect.
Further, (A) no Taxes have been incurred after June 30, 1998 which were not
incurred in the ordinary course of business consistent with prior practice,
except as would not have a Material Adverse Effect, (B) the Company has not
filed a consent to the application of Section 341(f) of the Code, (C) the
Company is not and has not been a United States real property holding company
(as defined in Section 897(c)(2) of the Code) during the applicable period
specified in Section 897(c)(1)(ii) of the Code, (D) no indebtedness of the
Company is "corporate acquisition indebtedness" within the meaning of Section
279(b) of the Code, and (E) within the past three years, the Company has not
been a member of an affiliated group filing consolidated or combined Tax Returns
other than a federal income tax group the common parent of which is the Company.
As used in the foregoing paragraph, (a) "Taxes" shall mean (i) all taxes,
charges, fees, levies or other assessments, including, without limitation,
income, gross receipts, excise, real and personal property, sales, transfer,
use, license, payroll and franchise taxes, imposed by the United States, or any
state, county, local or foreign government or subdivision or agency thereof, and
such term shall include any interest, penalties or additions to tax attributable
to such taxes, charges, fees, levies or other assessments and any obligations
under any agreement or arrangements with any other person with respect to such
amounts and including any liability for taxes of a predecessor entity and (ii)
all obligations, including joint and several liability pursuant to the law of
any jurisdiction or otherwise, for the payment of any of the types of taxes
referred to in clause (i) of this definition as a result of being a member of an
affiliated, consolidated, combined or unitary group for any taxable period, and
(b) "Tax Returns" shall mean any report, return or other information required to
be supplied to any taxing authority in connection with Taxes.
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<PAGE> 22
(l) BUSINESS COMBINATION STATUTE. The Board of Directors has taken all
action necessary to render Section 203 of the Delaware GCL inapplicable to the
Offer, the Merger, this Agreement, and any of the transactions contemplated
hereby and thereby, assuming neither Parent nor Sub is an "interested
stockholder" as defined in such Section 203.
(m) CONDUCT OF BUSINESS.
(A) The Company and its Subsidiaries hold all licenses, permits,
variances, consents, authorizations, waivers, grants, franchises,
concessions, exemptions, orders, registrations and approvals of any
Governmental Entity or other persons necessary for the ownership, leasing,
operation, occupancy and use of their respective property and assets and
the conduct of their respective businesses as currently conducted
("Permits"), except where the failure to hold such Permits individually
and in the aggregate would not have a Material Adverse Effect. Neither the
Company nor any of its Subsidiaries has received notice that any Permit
will be terminated or modified or cannot be renewed in the ordinary course
of business, and the Company has no knowledge of any reasonable basis for
any such termination, modification or non-renewal, except for such
terminations, modifications or non-renewals as individually and in the
aggregate would not have a Material Adverse Effect.
(B) The Company has provided to Parent a true and accurate listing
of the Company's and its Subsidiaries' material insurance policies. Each
of such policies is in full force and effect as of the date hereof, and
the Company and its Subsidiaries have no knowledge of any noncompliance
with the terms of such policies or any threatened termination of any of
such policies, except as would not have a Material Adverse Effect. Neither
the Company nor any Subsidiary, as of the date hereof, (i) self-insures
against any occurrence subsequent to December 31, 1993 (except for
self-insurance retentions or deductibles not exceeding $500,000 with
respect to any single occurrence) or (ii) is a participant or shareholder
in any captive or industry insurance program, except as set forth in
Section 4.1(m) of the Disclosure Schedule.
(C) The Company has provided to Parent a report, true and accurate
as of its date, as to the Company's and its Subsidiaries' computer and
system readiness for the Year 2000, including but not limited to, their
ability to conduct and operate their business and to maintain and operate
their books and records, to use and operate their computers and other
systems and software and to process dates and date-related data both
before and after the Year 2000 (collectively, "Year 2000 Compliance"). The
Company and its Subsidiaries have used commercially reasonable efforts to
identify and address their internal and third-party risks on a timely
basis in order to achieve Year 2000 Compliance, except for such
non-compliance as would not have a Material Adverse Effect.
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<PAGE> 23
(n) INTELLECTUAL PROPERTY.
(A) The Company has previously provided to Parent a true and
complete list of all of the Company's and its Subsidiaries' (i) patents,
(ii) trademark and service mark registrations, (iii) material copyright
registrations, and (iv) all material licenses related to the foregoing.
(B) Except as set forth in Section 4.1(n) of the Disclosure
Schedule, the Company and its Subsidiaries own or have the valid right to
use all intellectual property used by them in connection with their
business, including: (i) trademarks and service marks (registered or
unregistered) and trade names, and all goodwill associated therewith; (ii)
patents, patentable inventions, discoveries, improvements, ideas,
know-how, processes and computer programs, software and databases
(including source code); (iii) trade secrets and the right to limit the
use or disclosure thereof; (iv) copyrights in all works, including
software programs and mask works; and (v) domain names (collectively
"Intellectual Property"), except where the failure to own or have the
valid right to use the Intellectual Property would not have a Material
Adverse Effect.
(C) Except as set forth in Section 4.1(n) of the Disclosure Schedule
or as would not have a Material Adverse Effect, all grants, registrations
and applications for Intellectual Property that are used in the conduct of
the business of the Company and its Subsidiaries as currently conducted
(i) are valid, subsisting, in proper form and have been duly maintained,
including the submission of all necessary filings and fees in accordance
with the legal and administrative requirements of the appropriate
jurisdictions and (ii) have not lapsed, expired or been abandoned.
(D) Except as set forth in Section 4.1(n) of the Disclosure
Schedule, to the Company's knowledge, (i) there are no conflicts with or
infringements of any Intellectual Property by any third party, except for
conflicts or infringements which would not have a Material Adverse Effect,
and (ii) the conduct of the business of the Company and its Subsidiaries
as currently conducted does not conflict with or infringe any proprietary
right of any third party, which conflict or infringement would have a
Material Adverse Effect. Except as set forth in Section 4.1(n) of the
Disclosure Schedule, there is no claim, suit, action or proceeding pending
or, to the Company's knowledge, threatened against the Company or any
Subsidiary (i) alleging any such conflict or infringement with any third
party's proprietary rights, or (ii) challenging the ownership, use,
validity or enforceability of the Intellectual Property, except for
claims, suits, actions or proceedings which would not in the aggregate
have a Material Adverse Effect.
(E) Except as set forth in Section 4.1(n) of the Disclosure Schedule
or as would not have a Material Adverse Effect, no former or present
employees, officers or directors of the Company or any Subsidiary hold any
right, title or interest directly or indirectly, in whole or in part, in
or to any Intellectual Property.
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(o) MATERIAL CONTRACTS.
(A) Other than the contracts or agreements of the Company included
as exhibits to the 1998 Annual Report (the "Material Contracts"), and
contracts or agreements between the Company and its wholly owned
Subsidiaries or between wholly owned Subsidiaries of the Company, true and
complete copies of each of the following contracts and agreements to which
the Company or any of its Subsidiaries is a party or by which any of them
is bound (contracts and agreements of the types described below being
"Identified Contracts") has been previously delivered to Parent, in each
case as such Identified Contract is in effect on the date hereof:
(i) each contract or agreement for (A) the purchase of
inventories, goods or other materials by, or for the furnishing of
services to, the Company or any of its Subsidiaries that requires
payments by the Company or any of its Subsidiaries in excess of
$250,000 in the aggregate, or (B) for the sale of inventories, goods
or other materials by the Company or any of its Subsidiaries other
than in the ordinary course of business; that, in the case of both
(A) and (B), has a remaining term of one year or more and is not
terminable by the Company or Subsidiary party thereto, as the case
may be, on notice of six months or less without penalty;
(ii) manufacturer's representative, sales agency and
distribution contracts and agreements that have a term of one year
or more and are not terminable by the Company or Subsidiary party
thereto, as the case may be, on notice of six months or less without
penalty;
(iii) each contract, agreement or instrument (A) governing the
terms of indebtedness, or guarantees of indebtedness, of the Company
or any of its Subsidiaries in excess of $50,000 principal amount in
the aggregate, all of which such indebtedness the Company represents
is unsecured, or (B) governing the terms of capital leases or leases
that would be classified as operating leases under generally
accepted accounting principles but as a loan or financing
arrangement for federal income tax purposes, pursuant to which the
Company or any of its Subsidiaries has financial obligations in
excess of $50,000, or (C) evidencing, governing the terms of or
providing for any letters of credit, documentary acceptances, trade
bills, trust receipt loans, shipside bonds, standby letters of
credit or performance bonds to which the Company or any Subsidiary
is a party, or (D) providing for obligations of the Company and its
Subsidiaries in respect of interest rate swap or similar agreements,
commodity swaps or options or similar agreements or foreign currency
hedge, exchange or similar agreements or any other derivative
instrument (a list of the Identified Contracts included in this
paragraph (iii), together with the outstanding balances thereunder,
is set forth on
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Section 4.1(o) of the Disclosure Schedule, which list shall be
updated by the Company as of each expiration date of the Offer and
as of the Closing Date);
(iv) contracts and agreements entered into since January 1,
1995 providing for the acquisition or disposition of assets
(including the capital stock of any entity) having a value in excess
of $1,000,000 other than sales or purchases of inventories in the
ordinary course of business and sales of obsolete equipment;
(v) joint venture agreements, partnership agreements and other
similar contracts and agreements involving a sharing of profits and
expenses; and
(vi) contracts and agreements providing for future payments
that are conditioned, in whole or in part, on a change in control of
the Company or any of its Subsidiaries.
(B) Each contract or agreement to which the Company or any of its
Subsidiaries is a party or by which any of them is bound is in full force
and effect, and neither the Company nor any of its Subsidiaries, nor, to
the actual knowledge of the Company, any other person, is in breach of, or
default under, any such contract or agreement, and no event has occurred
that with notice or passage of time or both would constitute such a breach
or default thereunder by the Company or any of its Subsidiaries, or, to
the actual knowledge of the Company, any other person, except for such
failures to be in full force and effect and such breaches and defaults as
individually and in the aggregate would not have a Material Adverse
Effect.
(p) ENVIRONMENTAL MATTERS.
(A) Except as disclosed in the Reports, as disclosed in Section
4.1(p) of the Disclosure Schedule, or as would not have a Material Adverse
Effect, and except for those noncompliance matters that have been and are
resolved, the Company and its Subsidiaries are and have been in compliance
with all applicable Environmental Laws (as hereinafter defined).
(B) Except as disclosed in the Reports, as disclosed in Section
4.1(p) of the Disclosure Schedule, or as would not have a Material Adverse
Effect, (i) there has been no Release and/or Threat of Release (each, as
hereinafter defined) of any Hazardous Substance (as hereinafter defined),
and there is no Hazardous Substance present, on, in, under, above,
migrating to and/or about any of the properties or assets owned, leased or
operated by the Company or its Subsidiaries, and (ii) the Company and its
Subsidiaries have not caused or allowed, nor contracted with any party
for, the generation, use, transportation, treatment, storage or disposal
of any Hazardous Substance; except, in the case of clauses (i) and (ii),
for such quantities of Hazardous Substances as are stored, used
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and disposed of in the ordinary course of business in compliance with all
Environmental Laws.
(C) Except as disclosed in the Reports or as disclosed in Section
4.1(p) of the Disclosure Schedule, there are no Environmental Claims (as
hereinafter defined) pending or threatened against the Company or any of
its Subsidiaries that individually or in the aggregate would have a
Material Adverse Effect nor, to the Company's knowledge, does any basis
for such an Environmental Claim exist.
(D) The Company has disclosed and, where requested, made available
to Parent all material information, including such studies, analyses and
test results, and litigation and/or administrative case files, in the
possession, custody or control of or otherwise known and available to the
Company or any of its Subsidiaries relating to Hazardous Substances, the
Release and/or Threat of Release of Hazardous Substances, and/or the
environmental conditions on, in, under, above, migrating to and/or about
any of the properties or assets owned, leased, or operated by any of the
Company and its Subsidiaries or any predecessor in interest thereto at the
present time or in the past.
(E) As used in this Agreement:
(i) the term "Environmental Claim" means any written claim,
demand, suit, action, proceeding, investigation or notice to the
Company or any of its Subsidiaries by any person or entity
including, without limitation, any Governmental Entity, alleging any
liability or potential liability of any name or nature, both in law
and in equity (including, without limitation, potential liability
for investigatory costs, cleanup costs, governmental response costs,
natural resource damages, real or personal property damage or
penalties) arising, in part or in whole, out of, based on, or
resulting from the presence, Release and/or Threat of Release, of
any Hazardous Substance at any location, whether or not owned,
leased, operated or used by the Company or its Subsidiaries;
(ii) the term "Environmental Laws" means all Laws relating to
emissions, discharges, Releases or threatened Releases of Hazardous
Substances, and/or otherwise relating to the clean-up, manufacture,
generation, processing, distribution, use, sale, treatment, receipt,
storage, disposal, transport, handling, licensing and/or permitting
of Hazardous Substances, including the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), the Resource
Conservation and Recovery Act ("RCRA"), and the Occupational Safety
and Health Act;
(iii) the term "Hazardous Substance" means (1) chemicals,
pollutants, contaminants, hazardous wastes, toxic substances, and
oil and petroleum products, (2) any substance that is or contains
friable asbestos, urea formaldehyde foam
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<PAGE> 27
insulation, polychlorinated biphenyls, petroleum or
petroleum-derived substances or wastes, radon gas or related
materials, (3) any substance that requires removal, remediation,
permitting, licensing and/or government approved plans under any
Environmental Law, or is defined, listed or identified as a
"hazardous waste" or "hazardous substance" thereunder, (4) any
substance that is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic, or otherwise
hazardous; in each case in clauses (1)-(4) above which is regulated
under any Environmental Law, (5) hazardous waste as defined under
RCRA, (6) hazardous substances as defined under CERCLA, and (7)
"pollutants" as defined under the Federal Clean Air Act;
(iv) (a) the term "Release" means any releasing, disposing,
discharging, spilling, leaking, pumping, pouring, escaping,
leaching, dumping, emitting, migration, transporting, placing and
the like, including into or upon, any land, soil, surface water,
ground water or air, or otherwise entering into the environment; and
(b) the term "Threat of Release" means a substantial
likelihood of a Release which requires action to prevent or mitigate
damage to the environment which may result from such Release.
(q) LABOR RELATIONS; EMPLOYEES. Except as set forth in Section 4.1(q) of
the Disclosure Schedule, there are no collective bargaining agreements covering
any of the employees of the Company or any of its Subsidiaries. Except as set
forth in Section 4.1(q) of the Disclosure Schedule or as would not have a
Material Adverse Effect, there are no pending or, to the knowledge of the
Company, threatened (i) employment discrimination charges or complaints against
or involving the Company or any of its Subsidiaries before any Governmental
Entity, (ii) unfair labor practice charges or complaints, disputes or grievances
affecting the Company or any of its Subsidiaries, (iii) union representation
petitions or other organizing activity respecting the employees of the Company
or any of its Subsidiaries, or (iv) strikes, picketing, slow downs, work
stoppages or lockouts or threats thereof affecting the Company or any of its
Subsidiaries. Except as set forth in Section 4.1(q) of the Disclosure Schedule,
to the Company's knowledge, the Company and its Subsidiaries are in compliance
with all applicable Laws respecting employment and employment practices,
including provisions of such Laws relating to wages, hours, equal opportunity,
collective bargaining and the payment of social security and other Taxes, except
where the failure to so comply would not have a Material Adverse Effect.
(r) DISCLOSURE DOCUMENTS.
(A) Each document required to be filed by the Company with the SEC
in connection with the transactions contemplated by this Agreement (the
"Company Disclosure Documents"), including, without limitation, the
Schedule 14D-9, the proxy or information statement of the Company (the
"Company Proxy Statement"), if any, to be filed with the SEC in connection
with the Merger, and any amendments or supplements thereto, will, when
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<PAGE> 28
filed, comply as to form in all material respects with the applicable
requirements of the Exchange Act and the rules and regulations thereunder.
(B) At the time the Company Proxy Statement or any amendment or
supplement thereto is first mailed to stockholders of the Company, at the
time such stockholders vote on adoption of this Agreement and approval of
the Merger and at the Effective Time, the Company Proxy Statement, as
supplemented or amended, if applicable, will not contain any untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. At the time of
the filing of any Company Disclosure Document other than the Company Proxy
Statement, at the time of any distribution thereof and throughout the
remaining pendency of the Offer, each such Company Disclosure Document
will not contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading.
The representations and warranties contained in paragraphs (A) and (B) of
this Section 4.1(r) will not apply to statements or omissions included in
the Company Disclosure Documents or the Company Proxy Statement, if any,
based upon information furnished to the Company in writing by Parent or
Sub specifically for use therein.
(C) The information with respect to the Company or any Company
Subsidiary that the Company furnishes to Parent or Sub in writing
specifically for use in the Offer Documents will not, at the time of the
filing thereof, at the time of any distribution thereof and throughout the
remaining pendency of the Offer, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
(s) FAIRNESS OPINION. The Board of Directors has received from the
Financial Advisor the written opinion referred to in Section 1.2(b) hereof, and
such opinion has not been withdrawn or modified as of the date hereof.
(t) BROKERS. No broker, investment banker, financial advisor or other
person, the fees and expenses of which will be paid by the Company, is entitled
to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement,
other than pursuant to an engagement letter with the Financial Advisor, a copy
of which has been furnished to Parent.
(u) BOARD RECOMMENDATION. The Company's Board of Directors has taken the
actions specified in Section 1.2(a) hereof as of the date hereof.
(v) OPTION AGREEMENTS. Each outstanding option agreement executed in
connection with a Company Stock Option pursuant to the Company Stock Option
Plans is in substantially the form provided to Purchaser as an exhibit to the
1986 Plan or the 1994 Plan, as the case may be.
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SECTION 4.2. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB. Parent
and Sub represent and warrant to the Company as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. Parent is a corporation
duly organized, validly existing and in corporate good standing under the laws
of the Commonwealth of Massachusetts. Sub is a corporation duly organized,
validly existing and in corporate good standing under the laws of the State of
Delaware. Each of Parent and Sub has the requisite corporate power and authority
to carry on its business as now being conducted. Each of Parent and Sub is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) would not have a material adverse effect on
the business, financial condition or results of operations of Parent and Sub
taken as a whole.
(b) CAPITALIZATION. As of the date of this Agreement, the authorized
capital stock of Sub consists of 1,000 shares of common stock, par value $0.01
per share, 1,000 shares of which are presently issued and outstanding, which
constitutes all of the issued and outstanding capital stock of Sub. All of the
issued and outstanding shares of capital stock of Sub are validly issued, fully
paid and non-assessable and are held by Parent.
(c) AUTHORITY; ENFORCEABILITY; NONCONTRAVENTION. Parent and Sub have all
requisite corporate power and authority to enter into this Agreement and to
consummate the Merger and the other transactions contemplated by this Agreement.
The execution and delivery of this Agreement by Parent and Sub and the
consummation by Parent and Sub of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action on the
part of Parent and Sub. This Agreement has been duly executed and delivered by
and constitutes a valid and binding obligation of each of Parent and Sub,
enforceable against such party in accordance with its terms, except that the
enforceability hereof may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought. The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this Agreement and compliance
with the provisions of this Agreement will not (i) violate any of the provisions
of the charter documents or By-laws of Parent or Sub, (ii) subject to the
governmental filings and other matters referred to in the following sentence,
contravene any law, rule or regulation of any state or of the United States or
any political subdivision thereof or therein, or any order, writ, judgment,
injunction, decree, determination or award currently in effect, or (iii) except
for (A) the existing credit agreement dated as of November 26, 1997 among Parent
and certain of its subsidiaries and BankBoston, N.A. and certain other lenders
party thereto (the "Parent Credit Agreement") which is to be refinanced with a
portion of the proceeds of the Financing, and (B) certain filings and notices
required to be made under the Indenture dated as of November 26, 1997 among
Parent, certain of its subsidiaries and State Street Bank and Trust Company as
trustee, violate, conflict with or constitute a breach under any contract,
agreement, indenture, mortgage, deed of trust, lease or other instrument to
which
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Parent or any of its Subsidiaries is a party or by which any of their assets is
bound or subject, which, in the case of clauses (ii) and (iii) above, singly or
in the aggregate, would have a material adverse effect on the business,
financial condition or results of operations of Parent and Sub taken as a whole
or prevent consummation of the transactions contemplated hereby. No consent,
approval or authorization of, or declaration or filing with, or notice to, any
Governmental Entity which has not been received or made is required by or with
respect to Parent or Sub in connection with the execution and delivery of this
Agreement by Parent or Sub or the consummation by Parent or Sub, as the case may
be, of any of the transactions contemplated by this Agreement, except for (i)
compliance with any applicable requirements of the Exchange Act and the rules
and regulations promulgated thereunder, (ii) state securities or blue sky laws
and state takeover, antitrust and competition law filings and approvals, (iii)
compliance with any applicable requirements of the HSR Act, (iv) the filing of
the Certificate of Merger with the Delaware Secretary of State and appropriate
documents with the relevant authorities of other states in which the Company is
qualified to do business, and (v) such other consents, approvals,
authorizations, filings or notices as are set forth in Section 4.1(d) of the
Disclosure Schedule or as to which the failure to so receive or make would not
have a material adverse effect on the business, financial condition or results
of operations of Parent and Sub taken as a whole or prevent Parent and Sub from
consummating the transactions contemplated hereby.
(d) FINANCING. Parent and Sub have received and accepted (i) a written
commitment from BankBoston, N.A. (the "Bank") for the provision of a senior
credit facility or facilities (the "Credit Facility") for the transactions
contemplated hereby, in an amount of up to $325 million, (ii) a written
commitment from BancBoston Robertson Stephens Inc. ("BRS") and Lehman Brothers
Inc. ("Lehman") for the issuance of senior subordinated debt securities (the
"Debt Securities") for the transactions contemplated hereby in an amount of at
least $30 million, and (iii) written commitments from stockholders of Parent and
their affiliates to subscribe for an aggregate of $50 million of equity
securities of Parent to finance the transactions contemplated hereby (the
"Equity Infusion"). The aggregate amount of the financing (the "Financing")
contemplated by the commitments from the Bank for the Credit Facility, from BRS
and Lehman for the Debt Securities and from stockholders of Parent and their
affiliates for the Equity Infusion (collectively, the "Commitments"), will be
sufficient to consummate the Offer and the Merger. Parent has provided true and
correct copies of the Commitments to the Company prior to the date hereof, and
will provide copies of any material amendments or modifications thereto. To the
knowledge of Parent and Sub, there exists no condition with respect to Parent or
Sub as of the date of this Agreement that would materially adversely affect the
ability of Parent and Sub to satisfy in all respects the conditions set forth in
the Commitments.
(e) DISCLOSURE DOCUMENTS.
(A) The information with respect to Parent and its Subsidiaries that
Parent furnishes to the Company in writing specifically for use in any Company
Disclosure Document will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading (i) in the case of the Company Proxy
Statement, if any, at the time the Company Proxy Statement or any amendment or
supplement
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thereto is first mailed to stockholders of the Company, at the time the
stockholders vote on adoption of this Agreement and at the Effective Time, and
(ii) in the case of any Company Disclosure Document other than the Company Proxy
Statement, at the time of the filing thereof, at the time of any distribution
thereof and throughout the remaining pendency of the Offer.
(B) The Offer Documents will comply in all material respects with
the applicable requirements of the Exchange Act and will not, at the time of the
filing thereof, at the time of any distribution thereof and throughout the
remaining pendency of the Offer contain any untrue statement of material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading; provided, that no representation is made by
Parent or Sub with respect to statements or omissions in the Offer Documents
based upon information furnished to Parent or Sub in writing by the Company
specifically for use therein.
(f) BROKERS. No broker, investment banker, financial advisor or other
person, the fees and expenses of which will be paid by Parent or Sub, is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement,
except for fees and expenses payable to Donaldson, Lufkin & Jenrette Securities
Corporation and fees payable to the providers of the Commitments, which fees and
expenses shall remain the sole responsibility of Parent and Sub.
(g) OWNERSHIP OF SHARES. Neither Parent, Sub nor any other subsidiary of
Parent is the beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act) of any Shares.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
PRIOR TO MERGER
SECTION 5.1. CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated by
this Agreement, during the period from the date of this Agreement to the
Effective Time, the Company shall operate, and shall cause each Subsidiary to
operate, its business in the ordinary course of business in a manner consistent
with past practices. Without limiting the generality of the foregoing, during
the period from the date of this Agreement to the Effective Time, except as
expressly contemplated by this Agreement, and except for actions requested by a
majority of those directors of the Company designated by Parent pursuant to
Section 1.3(a), the Company and the Subsidiaries shall not, without the prior
written consent of Parent:
(i) (x) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock or property) in respect of, any of the
Company's outstanding capital stock, except for a cash dividend of $.07 per
Share payable on December 15, 1998, (y) split, combine or reclassify any of its
outstanding capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
outstanding capital stock, or (z) purchase, redeem or otherwise acquire any
shares of outstanding capital stock or any rights, warrants or options to
acquire any such shares;
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(ii) issue, sell, grant, pledge or otherwise encumber any shares of its
capital stock, any other voting securities or any securities convertible into,
or any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities, except for the issuance of Shares upon
exercise of Company Stock Options outstanding prior to the date of this
Agreement and disclosed in Section 4.1(c), or take any action that would make
the Company's representations and warranties set forth in Section 4.1(c) not
true and correct in all material respects;
(iii) amend its Restated Certificate of Incorporation or By-laws or the
comparable charter or organizational documents of any of its Subsidiaries;
(iv) acquire any business or any corporation, partnership, joint venture,
association or other business organization or division thereof (or any interest
therein), or form any subsidiaries;
(v) sell or otherwise dispose of any of its assets, except in the ordinary
course of business, other than (x) obsolete or immaterial equipment or tooling,
and (y) in connection with the restructuring described in Section 5.1 of the
Disclosure Schedule (the "Restructuring");
(vi) make any capital expenditures, enter into leases or agreements for
new locations, close any locations (other than in connection with the
Restructuring), or make other commitments with respect thereto, except capital
expenditures, leases, agreements or commitments (x) set forth on Section 5.1 of
the Disclosure Schedule, or (y) not exceeding $100,000 in the aggregate as the
Company may, in its discretion, deem appropriate;
(vii) (x) incur any indebtedness for borrowed money or guaranty any such
indebtedness of another person, other than (A) borrowings in the ordinary course
under existing lines of credit, (B) indebtedness owing to, or guaranties of
indebtedness owing to, the Company or (C) in connection with the Financing, or
(y) make any loans or advances to any other person, other than routine advances
to employees;
(viii) except as disclosed in Section 4.1(f) of the Disclosure Schedule,
grant or agree to grant to any employee any increase in wages or bonus,
severance, profit sharing, retirement, deferred compensation, insurance or other
compensation or benefits, or establish any new compensation or benefit plans or
arrangements, or amend or agree to amend any existing Benefit Plans, except (x)
as may be required under existing agreements, and (y) customary increases in the
ordinary course of business consistent with prior practice (not including,
however, any new or additional Benefit Plan unless disclosed in Section 4.1(f)
of the Disclosure Schedule);
(ix) merge, amalgamate or consolidate with any other person or entity in
any transaction, sell all or substantially all of its business or assets, or
acquire all or substantially all of the business or assets of any other person
or entity;
(x) except as disclosed in Section 4.1(f) or 5.1 of the Disclosure
Schedule, enter into or amend any employment, consulting (except for consulting
agreements for development services for
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new products involving payments by the Company or any Subsidiary of less than
$500,000 in the aggregate, prior to March 31, 1999, and less than $500,000 in
the aggregate for the period from April 1, 1999 to June 30, 1999), severance or
similar agreement with any person or amend the Company's engagement letter with
the Financial Advisor;
(xi) change its accounting policies in any material respect, except as
required by generally accepted accounting principles;
(xii) except as set forth in Section 4.1(f) of the Disclosure Schedule,
enter into any material contract, agreement or commitment not otherwise
permitted under this Section 5.1, including, without limitation, any contract,
agreement or commitment involving expenditures by the Company or any of its
Subsidiaries in excess of $50,000 or which is not terminable by the Company upon
giving 30 days or less prior written notice, except in the ordinary course of
business consistent with prior practice;
(xiii) settle or compromise any pending or threatened suit, action or
claim, except for products liability cases being defended in the ordinary course
of business, if such settlement or compromise involves the payment of more than
$100,000 by the Company or any Subsidiary or would impose any material
obligations on, or (other than releasing the Company's or any Subsidiary's claim
for relief in such proceeding and the Company's or any Subsidiary's right to a
trial of such claim) waive or affect any material right or interest of, the
Company, any Subsidiary, Parent or Sub; or
(xiv) commit or agree to take any of the foregoing actions.
SECTION 5.2. OTHER ACTIONS. The Company shall not, and shall cause its
Subsidiaries not to, take any action that would, or that could reasonably be
expected to, result in (i) any of the representations and warranties of the
Company set forth in this Agreement that are qualified as to materiality
becoming untrue, (ii) any of such representations and warranties that are not so
qualified becoming untrue in any material respect or (iii) any of the conditions
of the Offer set forth in Annex I or of the Merger set forth in Article VII not
being satisfied.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1. MEETING OF STOCKHOLDERS.
(a) Following the expiration of the Offer (or at such earlier time as the
parties hereto shall mutually agree), unless the Merger is to be effected
pursuant to Section 253 of the Delaware GCL or pursuant to written consents, the
Company will promptly take all action necessary in accordance with applicable
law and its Restated Certificate of Incorporation and By-laws to duly call, give
notice of, and convene a meeting of its stockholders (the "Stockholders'
Meeting") to consider and vote upon the adoption and approval of this Agreement
and the Merger and all actions contemplated hereby which require approval and
adoption by the Company's stockholders; provided,
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however, that the obligations contained herein shall be subject to the
provisions of Section 6.8. Parent shall agree to cause all of the shares of
capital stock of the Company held by Parent and/or Sub to be voted, either in
person or by proxy, in favor of the adoption and approval of this Agreement and
the Merger at the Stockholders' Meeting.
(b) Subject to the earlier termination of this Agreement in accordance
with the provisions of Section 8.1 (other than Section 8.1(b)(A)), if, as of
March 15, 1999, (i) more than 50% of the then-outstanding Shares shall have been
validly tendered in the Offer and not withdrawn, (ii) all of the Tender Offer
Conditions other than the Minimum Condition shall have been satisfied or waived
by Offeror, and (iii) the Minimum Condition shall not have been waived by
Offeror in order to purchase the Shares pursuant to the Offer, then, upon the
written request of Parent or Company given to the other within five days
following the expiration of the Offer, the Company shall promptly proceed to
take the actions specified in Section 6.1(a) above with respect to the
Stockholders Meeting, and the parties hereto shall, subject to the provisions of
Article VII and Section 8.1 hereof (other than Section 8.1(b)(A)), undertake in
an expeditious manner the efforts required by Section 6.4 hereof to consummate
and make effective the Merger.
SECTION 6.2. PROXY STATEMENT.
(a) In connection with the Stockholders' Meeting contemplated hereby, as
promptly as practicable after Offeror first purchases Shares pursuant to the
Offer or if the parties proceed under Section 6.1(b) hereof, and if required by
applicable law, the Company will promptly prepare and file, and Parent will
cooperate with the Company in the preparation and filing of, a preliminary
Company Proxy Statement (the "Preliminary Proxy Statement") with the SEC and
will use its commercially reasonable best efforts to respond to the comments of
the SEC concerning the Preliminary Proxy Statement and to cause the Company
Proxy Statement to be mailed to the Company's stockholders, in each case as soon
as reasonably practicable. The Company shall pay the filing fees for the
Preliminary Proxy Statement. Each party to this Agreement will notify the other
parties promptly of the receipt of the comments of the SEC, if any, and of any
request by the SEC for amendments or supplements to the Preliminary Proxy
Statement or the Company Proxy Statement or for additional information, and will
supply the other parties with copies of all correspondence between such party or
its representatives, on the one hand, and the SEC or members of its staff, on
the other hand, with respect to the Preliminary Proxy Statement, the Company
Proxy Statement or the Merger.
(b) If at any time prior to the Stockholders' Meeting, any event should
occur relating to the Company or any of the Subsidiaries which should be set
forth in an amendment of, or a supplement to, the Company Proxy Statement, the
Company will promptly inform Parent. If at any time prior to the Stockholders'
Meeting, any event should occur relating to Parent or Sub or any of their
respective Associates or Affiliates, or relating to the plans of any such
persons for the Surviving Corporation after the Effective Time of the Merger, or
relating to the Financing, that should be set forth in an amendment of, or a
supplement to, the Company Proxy Statement, the Company, with the cooperation of
Parent, will, upon learning of such event, promptly prepare, file and, if
required, mail such amendment or supplement to the Company's stockholders;
provided that, prior to such filing or
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mailing, the Company shall consult with Parent with respect to such amendment or
supplement and shall afford Parent reasonable opportunity to comment thereon.
(c) Parent will furnish to the Company the information relating to Parent
and Sub, their respective Associates and Affiliates and the plans of such
persons for the Surviving Corporation after the Effective Time of the Merger,
and relating to the Financing, which is required to be set forth in the
Preliminary Proxy Statement or the Company Proxy Statement under the Exchange
Act and the rules and regulations of the SEC thereunder. The Company shall use
its best efforts to cause to be included as an exhibit to the Preliminary Proxy
Statement and the Company Proxy Statement the fairness opinion of the Financial
Advisor referred to in Section 4.1(s).
SECTION 6.3. ACCESS TO INFORMATION; CONFIDENTIALITY. From and after the
date hereof, the Company will provide to Parent, its financing sources and their
respective Representatives (as defined below), reasonable access, upon notice
and during normal business hours, to the Company's facilities, books and records
and shall cause the directors, employees, accountants, attorneys, financial
advisors, lenders and other agents and representatives (collectively,
"Representatives") of the Company to continue to cooperate fully with Parent and
Parent's Representatives in order to enhance such persons' knowledge of the
Company's assets, contracts, liabilities, operations, records and other aspects
of its business (including any environmental investigation of the Company's
facilities) and the efforts of Parent and Sub to secure the Financing as
described in Section 4.2(d). As soon as reasonably practicable after monthly
financial statements of the Company become available to senior officers of the
Company, the Company shall provide Parent with a copy of the same. Parent shall,
and shall cause Parent's Representatives to, keep all information supplied or
made available to Parent hereunder in confidence in accordance with and subject
to the terms of that certain letter agreement between Parent and BancAmerica
Securities, Inc. dated October 1, 1998 (the "Confidentiality Agreement").
SECTION 6.4. COMMERCIALLY REASONABLE EFFORTS.
(a) Upon the terms and subject to the conditions and other agreements set
forth in this Agreement, each of the parties agrees to use commercially
reasonable efforts to take, or cause to be taken (including, without limitation,
by such parties' respective Representatives), all actions, and to do, or cause
to be done, and to assist and cooperate with the other parties in doing, all
things necessary, proper or advisable to consummate and make effective, in the
most expeditious manner practicable, the Offer, the Merger, the Financing and
the other transactions contemplated by this Agreement, including the
satisfaction of the respective conditions set forth in Annex I and Article VII
hereof. Following the purchase by Offeror of Shares pursuant to the Offer,
neither Parent nor Sub will take any action as a stockholder of the Company that
would cause the Company to breach any of the Company's obligations contained in
this Agreement.
(b) Parent and the Company shall promptly notify each other of (i) the
occurrence or non-occurrence of any fact or event which would be reasonably
likely (A) to cause any representation or warranty contained in this Agreement
to be untrue or inaccurate in any material respect at any time from the date
hereof to the Effective Time or (B) to cause any covenant, condition or
obligation under this Agreement not to be complied with or satisfied in any
material
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respect, and (ii) any failure of the Company or Parent or Sub, as the case may
be, to comply with or satisfy any covenant, condition or obligation to be
complied with or satisfied by it hereunder in any material respect; provided,
however, that no such notification shall affect the representations or
warranties of any party or the conditions to the obligations of any party
hereunder.
SECTION 6.5. FINANCING. Each of Parent and Sub shall use commercially
reasonable efforts to accept and close the Financing on terms consistent with
the Commitments or such other terms as shall be satisfactory to Parent or as are
not materially more onerous to Parent than as set forth in the Commitments, and
to execute and deliver definitive agreements with respect to the Financing (the
"Definitive Financing Agreements") on or before the Closing Date. Parent and Sub
shall use commercially reasonable efforts to satisfy on or before the Closing
Date all requirements of the Definitive Financing Agreements which are
conditions to closing the transactions constituting the Financing and to drawing
the cash proceeds thereunder. The obligations contained herein are not intended,
nor shall they be construed, to benefit or confer any rights upon any person,
firm or entity other than the Company.
SECTION 6.6. INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
(a) The Certificate of Incorporation and By-laws of the Company or the
Surviving Corporation, as the case may be, shall not be amended, repealed or
otherwise modified for a period from the date hereof until six years after the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who as of the date hereof are or were directors, officers,
employees, fiduciaries or agents of the Company and its Subsidiaries or
otherwise entitled to indemnification, advancement of expenses or exculpation
from liability under the Company's Restated Certificate of Incorporation,
By-laws or indemnification agreements (the "Indemnified Parties"). It is
understood and agreed that the Company shall, to the fullest extent permitted
under Delaware law and regardless of whether the Merger becomes effective,
indemnify, defend and hold harmless, and after the Effective Time, Parent shall,
and shall cause the Surviving Corporation to, to the fullest extent permitted
under Delaware law, indemnify, defend and hold harmless, each Indemnified Party
against any costs or expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages, liabilities and amounts paid in settlement in
connection with any threatened, pending or completed claim, action, suit,
proceeding or investigation, including without limitation liabilities arising
out of this transaction, to the extent that it was based on the fact that such
Indemnified Party is or was a director, officer, employee, fiduciary or agent of
the Company or its Subsidiaries and arising out of actions or omissions or
alleged actions or omissions occurring at or prior to the Effective Time, and in
the event of any such claim, action, suit proceeding, or investigation (whether
arising before or after the Effective Time), (i) Parent, the Company or the
Surviving Corporation, as applicable, shall advance expenses to such Indemnified
Parties in advance of the final disposition thereof upon receipt of the
undertaking specified in Section 145 of the Delaware GCL, including payment of
the reasonable fees and expenses of counsel selected by the Indemnified Parties,
which counsel shall be reasonably satisfactory to Parent, promptly as statements
therefor are received and (ii) Parent, the Company and the Surviving Corporation
will cooperate in the defense of any such matter; provided, however, that
neither Parent, the Company
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nor the Surviving Corporation shall be liable for any settlement effected
without its written consent (which consent shall not be unreasonably withheld);
and further, provided, that neither Parent, the Company nor the Surviving
Corporation shall be obliged pursuant to this Section 6.6 to pay the fees and
disbursements of more than one counsel for all Indemnified Parties in any single
action except to the extent that, in the written opinion of counsel for the
Indemnified Parties, two or more of such Indemnified Parties have conflicting
interests in the outcome of such action. Any determination required to be made
with respect to whether an Indemnified Party's conduct complies with the
standards set forth under Delaware law, the Certificate of Incorporation or
By-laws, as the case may be, shall be made by independent counsel mutually
acceptable to Parent and the Indemnified Party.
(b) At or prior to the Effective Time, Parent, the Company or the
Surviving Corporation shall obtain a fully-paid officers' and directors'
liability insurance policy covering the Indemnified Parties who are currently
covered by the Company's officers' and directors' liability insurance policy for
a term of six years on terms not materially less favorable than those in effect
on the date hereof in terms of coverage and amounts. This Section 6.6 shall
survive the consummation of the Merger. Notwithstanding Section 9.7 hereof, this
Section 6.6 is intended to be for the benefit of and to grant third party rights
to Indemnified Parties whether or not parties to this Agreement, and each of the
Indemnified Parties shall be entitled to enforce the covenants contained herein.
(c) If the Surviving Corporation or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then and in each such case, proper provision shall be made so that the
successors and assigns of the Surviving Corporation assume the obligations set
forth in this Section 6.6.
SECTION 6.7. PUBLIC ANNOUNCEMENTS. Parent and Sub, on the one hand, and
the Company, on the other hand, will consult with each other before issuing, and
provide each other the opportunity to review and comment upon, any press release
or other public statements with respect to the existence of and transactions
contemplated by this Agreement, and shall not issue any such press release or
make any such public statement without the consent of the other party following
such consultation, except as may be required by applicable law, regulation or
judicial process, and in such case only after reasonable notice to the other
party.
SECTION 6.8. ACQUISITION PROPOSALS. The Company shall not, nor shall it
authorize or permit any of its Representatives to, directly or indirectly, (i)
solicit, initiate or knowingly encourage any Third Party (as hereinafter
defined) with respect to the submission of any Acquisition Proposal (as
hereinafter defined) or (ii) participate in any discussions or negotiations
regarding, or furnish to any Third Party any non-public information with respect
to, or take any other action to facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal; provided, however, that the foregoing shall not prohibit
the Board of Directors of the Company (or, if applicable, a duly appointed
committee thereof (the "Special Committee")) from: (i) furnishing information
to, or entering into discussions or negotiations with, any Third Party in
connection with an unsolicited bona fide Acquisition
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Proposal by such Third Party if, and to the extent that, the Board of Directors
of the Company (or the Special Committee), after consultation with independent
legal counsel (who may be the Company's regularly engaged independent counsel),
determines in good faith that such action is required for the Board of Directors
of the Company to comply with its fiduciary obligations under applicable law;
(ii) withdrawing or modifying its recommendation referred to in Section 1.2(a)
following receipt of a bona fide unsolicited Acquisition Proposal if the Board
of Directors of the Company (or the Special Committee), after consultation with
independent legal counsel (who may be the Company's regularly engaged
independent counsel), determines in good faith that such action is necessary for
the Board of Directors of the Company to comply with its fiduciary obligations
under applicable law; or (iii) making to the Company's stockholders any
recommendation and related filing with the SEC as required by Rule 14e-2 and
14d-9 under the Exchange Act, with respect to any tender offer, or taking any
other equally required action (including, without limitation, the making of
public disclosures as may be necessary or advisable under applicable securities
laws); and provided further, that, in the event of an exercise of the Company's
or its Board of Director's (or the Special Committee's) rights under clause (i),
(ii) or (iii) above, notwithstanding anything contained in this Agreement to the
contrary, such action shall not constitute a breach of this Agreement by the
Company. The Company shall provide immediate written notice to Parent of the
receipt of any oral or written inquiry or proposal from a Third Party with
respect to a merger, consolidation, share exchange, tender offer or similar
transaction involving the Company, or any purchase or other acquisition of all
or substantially all of the assets or equity interests of the Company, other
than the transactions contemplated by this Agreement (an "Acquisition
Transaction") and of the Company's intention to furnish information to, or enter
into discussions or negotiations with, such person or entity, along with a copy
of any such written inquiry or proposal and copies of any information furnished
to such Third Party, to the extent not previously provided to Parent. For
purposes of this Agreement, (i) "Acquisition Proposal" means any written
proposal with respect to an Acquisition Transaction that the Board of Directors
of the Company (or the Special Committee), after consultation with and receipt
of advice from the Financial Advisor or another nationally recognized investment
banking firm, determines in good faith in the exercise of its fiduciary
obligations under applicable law to be more favorable than the transactions
contemplated by this Agreement; and (ii) "Third Party" means any corporation,
partnership, person or other entity or "group" (as defined in Section 13(d)(3)
of the Exchange Act) other than Parent, Sub or any Affiliates of Parent or Sub
and their respective directors, officers, employees, representatives and agents.
SECTION 6.9. STOCKHOLDER LITIGATION. The Company shall give Parent the
opportunity to participate, at the expense of Parent, in the defense or
settlement of any stockholder litigation against the Company and its
Representatives relating to the transactions contemplated by this Agreement;
provided, however, that no such settlement shall be agreed to without Parent's
consent, which consent shall not be unreasonably withheld.
SECTION 6.10. COMPANY ACTION RELATING TO BENEFIT PLANS. Without Parent's
prior written consent, no action shall be taken by or on behalf of the Company,
any Subsidiary or any trustee or administrative committee with respect to any
Benefit Plan which action would, by itself, constitute cause for any employee of
the Company or a Subsidiary party to any employment, severance or change of
control agreement to claim constructive termination under such agreement.
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SECTION 6.11. CONSENTS AND APPROVALS. As soon as practicable following the
date of this Agreement, the Company and Parent and Sub shall make all filings
and notifications required to be made with and seek all consents, approvals,
permits and authorizations required to be obtained from, any third parties or
Governmental Entities in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, the filing of any required
notification under the HSR Act as promptly as practicable, and any other filing,
consent or approval listed on Section 4.1(d) of the Disclosure Schedule. The
Company shall pay any required filing fees or other expense in connection
therewith; provided that Parent shall pay the required filing fee under the HSR
Act.
SECTION 6.12. REPAYMENT OF INDEBTEDNESS. Parent or Sub shall utilize a
portion of the net proceeds of the Financing, together with available cash of
the Company, to (or to enable the Company to) repay, satisfy or otherwise
discharge, in full, the Company's or its Subsidiaries' indebtedness (including
under any guaranty or surety obligation) to (i) NationsBank, N.A. and the other
banks party to the Credit Agreement dated April 15, 1996, as amended, (ii) Bank
of America Canada pursuant to the revolving credit facility dated September 2,
1998, (iii) Bank of America National Trust and Savings Association pursuant to
the Hong Kong letter of credit facility dated June 2, 1998, and (iv) the
noteholders pursuant to the Note Purchase Agreements dated July 23, 1993 and
April 15, 1996, in each case as existing on the Closing Date (or make such other
arrangements with respect to the foregoing indebtedness as shall be satisfactory
to the lenders thereof).
SECTION 6.13. GUARANTY OF SUB'S OBLIGATIONS. Parent hereby
unconditionally guaranties to the Company the due and punctual performance by
Sub of all of Sub's obligations hereunder.
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) STOCKHOLDER APPROVAL. The Merger and this Agreement shall have been
adopted and approved by the requisite vote of the holders of outstanding Shares,
if required by the Delaware GCL.
(b) GOVERNMENTAL CONSENTS. All filings required to be made prior to the
Effective Time with, and all consents, approvals, permits and authorizations
required to be obtained prior to the Effective Time from, any Governmental
Entities under the HSR Act which, either individually or in the aggregate, if
not made or obtained would have a Material Adverse Effect or would prevent
consummation of the Merger, shall have been made or obtained (as the case may
be).
(c) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
judgment, preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or
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other legal restraint or prohibition preventing the consummation of the Merger
shall be in effect; provided, however, that the parties invoking this condition
shall use their best efforts to have any such order or injunction vacated.
SECTION 7.2. CONDITIONS TO OBLIGATIONS OF PARENT AND SUB. The obligations
of Parent and Sub to effect the Merger are further subject to the satisfaction,
or waiver by Parent, on or prior to the Closing Date, of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Company set forth in Section 4.1 that are qualified by materiality shall be
true and correct, and the representations and warranties of the Company set
forth in Section 4.1 that are not so qualified shall be true and correct in all
material respects, individually and in the aggregate, as of the Closing Date as
though made on and as of the Closing Date, except (i) for changes permitted or
contemplated by this Agreement, and (ii) in the case of any breach of such
representations and warranties, where such breach or breaches would not,
individually or in the aggregate, have a Material Adverse Effect.
(b) COMPANY OBLIGATIONS. The Company shall have performed in all material
respects all obligations and complied in all material respects with all
agreements and covenants of the Company required to be performed or complied
with by it under this Agreement including, without limitation, its obligations
under Articles V and VI hereof, except, in the case of any breach of any such
obligation, agreement or covenant, where such breach or breaches would not,
individually or in the aggregate, have a Material Adverse Effect.
(c) OFFICERS' CERTIFICATE. The Company shall have furnished Parent with
such certificates and other documents to evidence the fulfillment of the
conditions set forth in this Section 7.2 as Parent may reasonably request.
(d) FINANCING. The Financing Condition shall have been satisfied.
(e) GOVERNMENTAL CONSENTS. All filings required to be made by the Company
or its Subsidiaries prior to the Effective Time with, and all consents,
approvals, permits and authorizations required to be obtained by the Company or
its Subsidiaries prior to the Effective Time from, any Governmental Entities,
which, either individually or in the aggregate, if not made or obtained would
have a Material Adverse Effect on or after the Effective Time or would prevent
consummation of the Merger, shall have been made or obtained (as the case may
be).
(f) MATERIAL ADVERSE CHANGE. Between the date of the Agreement and the
Effective Time, there shall not have been a material adverse change in the
business, assets, properties, condition (financial or otherwise), or results of
operations of the Company and its Subsidiaries taken as a whole.
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(g) DISSENTING SHARES. The percentage of Dissenting Shares shall not be
greater than 10% of the aggregate number of Shares outstanding immediately prior
to the Effective Time.
SECTION 7.3. CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of
the Company to effect the Merger are further subject to the satisfaction, or
waiver by the Company, on or prior to the Closing Date, of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Parent and Sub set forth in Section 4.2 that are qualified by materiality shall
be true and correct, and the representations and warranties of Parent and Sub
set forth in Section 4.2 that are not so qualified shall be true and correct in
all material respects, individually and in the aggregate, as of the Closing Date
as though made on and as of the Closing Date, except (i) for changes permitted
or contemplated by this Agreement, and (ii) in the case of any breach of such
representations and warranties, where such breach or breaches would not,
individually or in the aggregate, materially and adversely affect the
consummation of the Merger.
(b) PARENT OBLIGATIONS. Parent and Sub shall have performed in all
material respects all obligations and complied in all material respects with all
agreements and covenants required to be performed or complied with by them under
this Agreement including, without limitation, their respective obligations under
Article VI hereof, except, in the case of any breach of any such obligation,
agreement or covenant, where such breach or breaches would not, individually or
in the aggregate, materially adversely affect the consummation of the Merger.
(c) OFFICERS' CERTIFICATE. Parent shall have furnished the Company with
such certificates and other documents to evidence the fulfillment of the
conditions set forth in this Section 7.3 as the Company may reasonably request.
(d) GOVERNMENTAL CONSENTS. All filings required to be made by Parent or
its subsidiaries prior to the Effective Time with, and all consents, approvals,
permits and authorizations required to be obtained by Parent or its subsidiaries
prior to the Effective Time from, any Governmental Entities, which, either
individually or in the aggregate, if not made or obtained would prevent
consummation of the Merger, shall have been made or obtained (as the case may
be).
SECTION 7.4. EXCEPTION. The conditions set forth in Sections 7.2 and 7.3
hereof shall cease to be conditions to the obligations of any of the parties
hereto if Offeror shall have accepted for payment and paid for Shares validly
tendered pursuant to the Offer.
SECTION 7.5. FRUSTRATION OF CONDITIONS. No party hereto may rely on the
failure of any condition set forth in this Article to be satisfied if such
failure was caused by such party's failure to use commercially reasonable
efforts to consummate the transactions contemplated by this Agreement.
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ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1. TERMINATION. This Agreement may be terminated and
abandoned at any time prior to the Effective Time, whether before or after
approval of the Merger by the stockholders of the Company:
(a) by mutual written consent of Parent and the Company prior to the
purchase of Shares pursuant to the Offer; or
(b) (A) by either Parent or the Company, if: (i) the Offer shall not have
been commenced within the time period specified in Section 1.1(a), unless the
failure to have commenced the Offer is as a result of any judgment, injunction,
order, decree or other legal restraint or prohibition enjoining or otherwise
restraining the commencement of the Offer, and provided notice of termination
under this subsection has been given prior to the actual commencement of the
Offer (even if such commencement occurs later than the time period specified in
Section 1.1(a)), or (ii) the Offer shall have terminated or expired or been
withdrawn in accordance with its terms without Offeror having purchased any
Shares pursuant to the Offer, or (iii) at any time after March 15, 1999 (or such
later date to which the Offer shall have been extended pursuant to Section
1.1(b)) the Offer has not been consummated; but only to the extent that the
parties shall not then be required to proceed under Section 6.1(b) and provided
that the failure to commence or consummate the Offer, as the case may be, is not
attributable to the failure of the terminating party to fulfill its obligations
pursuant to this Agreement; or (B) by the Company prior to the purchase of
Shares pursuant to the Offer, if any change to the Offer is made by Offeror in
contravention of the provisions of Section 1.1; or
(c) by either Parent or the Company, if: (i) upon a vote at the
Stockholders Meeting, or any adjournment thereof, the adoption and approval of
this Agreement and the Merger by the stockholders of the Company required by
Delaware law, the Company's Restated Certificate of Incorporation or By-laws or
the terms of this Agreement shall not have been obtained; or (ii) the Merger
shall not have been consummated on or before June 15, 1999, provided that the
failure to consummate the Merger is not attributable to the failure of the
terminating party to fulfill its obligations pursuant to this Agreement; or
(iii) there shall be any law or regulation that makes consummation of the Offer
or the Merger illegal or otherwise prohibited, or if any judgment, injunction,
order or decree enjoining or otherwise restraining Offeror from purchasing
Shares pursuant to the Offer or Parent, Sub or the Company from consummating the
Merger is entered and such judgment, injunction, order or decree shall become
final and non-appealable; provided that neither Parent nor the Company may
terminate this Agreement pursuant to clause (i) or (ii) hereof if the Shares are
purchased pursuant to the Offer; or
(d) by the Company prior to the purchase of Shares pursuant to the Offer,
immediately after payment to Parent of the Termination Amount as defined in
Section 8.2(b), if the Board of Directors shall have withdrawn or modified in a
manner adverse to Parent or Sub its approval or recommendation of the Offer,
this Agreement or the Merger in order to permit the Company to
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execute an Acquisition Proposal providing for the acquisition of the Company by
a Third Party as determined by the Board of Directors in good faith after
consultation with independent legal counsel (who may be the Company's regularly
engaged independent counsel) that such action is required for the Board of
Directors of the Company to comply with its fiduciary obligations to
stockholders under applicable law; or
(e) by Parent prior to the purchase of Shares pursuant to the Offer, if
the Board of Directors of the Company shall have approved an Acquisition
Proposal or withdrawn or modified (including by amendment of the Schedule
14D-9), in a manner adverse to Parent or Sub, the Board of Director's
recommendation pursuant to Section 1.2(a); or
(f) by Parent prior to the purchase of Shares pursuant to the Offer, if
any of the conditions set forth in Sections 7.1 or 7.2 shall have become
incapable of fulfillment, and shall not have been waived by Parent, or if the
Company shall breach in any respect any of its representations, warranties or
obligations hereunder and such breach shall have a Material Adverse Effect, and
the Company shall not have provided reasonable assurance that such breach will
be cured in all material respects on or before the Closing Date; or
(g) by the Company prior to the purchase of Shares pursuant to the Offer,
if any of the conditions set forth in Sections 7.1 or 7.3 shall have become
incapable of fulfillment, and shall not have been waived by the Company, or if
Parent or Sub shall breach in any respect any of their respective
representations, warranties or obligations hereunder and such breach shall have
a material adverse effect on the consummation of the transactions contemplated
by this Agreement, and Parent or Sub, as the case may be, shall not have
provided reasonable assurance that such breach will be cured in all material
respects on or before the Closing Date;
provided, however, that the party seeking termination pursuant to clause
(f) or (g) hereof is not in material breach of any of its representations,
warranties, covenants or agreements contained in this Agreement.
SECTION 8.2. EFFECT OF TERMINATION.
(a) AGREEMENT VOID. In the event of the termination and abandonment of
this Agreement pursuant to Section 8.1 hereof, this Agreement shall forthwith
become void and have no effect, without any liability on the part of any party
hereto or its affiliates, directors, officers or stockholders and all rights and
obligations of any party hereto shall cease, except for agreements contained in
Sections 6.6, 8.2 and 9.2; provided, however, that (i) nothing contained in this
Section 8.2 shall relieve any party from liability for any breach of this
Agreement nor relieve the Company from any liability under this Article VIII,
and (ii) the Confidentiality Agreement shall remain in full force and effect in
accordance with its terms.
(b) TERMINATION AMOUNT. If this Agreement is terminated pursuant to either
of Sections 8.1(d) or 8.1(e), then the Company shall (provided that neither
Parent nor Sub is then in material breach of its obligations under this
Agreement) promptly (but not later than the second
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business day following such termination) pay to Parent the sum of $4.5 million
in cash (the "Termination Amount").
(c) ACQUISITION PROPOSAL FOLLOWING TERMINATION. If (i) as of the
expiration or other termination of the Offer in accordance with its terms, the
number of Shares then validly tendered in the Offer and not withdrawn shall be
equal to or less than 50% of the then outstanding number of Shares, and this
Agreement is terminated, (ii) all Tender Offer Conditions are satisfied at the
time of the expiration or termination of the Offer (except (x) any condition
that requires tender of 50% or more of the Shares, (y) in the case of the
Financing Condition, the parties issuing the Commitments would be then prepared
to provide the financing thereunder (if the required number of Shares were
tendered), and (z) condition (e) set forth on Annex I, provided Parent or Sub
have not terminated the Agreement for any breach of the Agreement which
constitutes a violation of said condition (e)), and (iii) at any time prior to
or within one year after termination of this Agreement, the Company enters into
an agreement relating to an Acquisition Proposal at a value (if the
consideration is other than a cash payment) or at a price per Share to
stockholders which is greater (after giving effect to any stock dividends, stock
splits, recapitalizations and similar events affecting the Shares) than the per
share price set forth in this Agreement, with a person other than Parent or Sub
or their Affiliates and Associates, which agreement is Consummated within such
one year period, then, upon the Consummation thereof, the Company shall pay to
Parent the Termination Amount. At no time prior to or within one year after
termination of this Agreement shall the Company enter into any agreement
relating to any such Acquisition Proposal which is to be Consummated within such
one year period with a person other than Parent or Sub or their Affiliates and
Associates unless such agreement provides that such person shall, upon the
execution of such agreement, pay any Termination Amount due Parent under this
Section 8.2 which at that time remains unpaid. For purposes hereof, an
Acquisition Proposal shall be "Consummated" on the first date after the
execution thereof that the other party thereto acquires any Shares or assets of
the Company or its Subsidiaries, whether by purchase, exchange, merger,
consolidation or otherwise.
(d) REASONABLE INDUCEMENT. The parties acknowledge and agree that the
provisions for payment of the Termination Amount are included herein in order to
reasonably induce Parent to enter into this Agreement and to reimburse Parent
for incurring the costs and expenses related to entering into this Agreement,
obtaining the Commitments and the Financing, and consummating the transactions
contemplated by this Agreement.
(e) COSTS OF ENFORCEMENT. Notwithstanding anything to the contrary set
forth in this Agreement, in the event Parent and/or Sub files suit to seek all
or a portion of the Termination Amount, the prevailing party in any such suit
shall be entitled, in addition to any other relief to which it may be entitled,
to payment by the non-prevailing party of all expenses, including reasonable
attorneys' fees and expenses, which it incurs in enforcing its rights under this
Section 8.2.
SECTION 8.3. AMENDMENT. Subject to the applicable provisions of the
Delaware GCL, 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; provided, however, that
after approval of the Merger by the stockholders of the Company, no amendment
shall be made which reduces the consideration payable in the Merger or adversely
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affects the rights of the Company's stockholders hereunder without the approval
of such stockholders. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties.
SECTION 8.4. EXTENSION; WAIVER. At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties of the other parties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c) subject
to Section 8.2, waive compliance with any of the agreements or conditions of the
other parties contained in this Agreement. Any agreement on the part of a party
to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The failure of any party
to this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of such rights.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties set forth in this Agreement shall survive the
Effective Time or, if earlier, the date of the purchase of Shares pursuant to
the Offer. This Section 9.1 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after such time or date,
including, without limitation, Section 6.6.
SECTION 9.2. FEES AND EXPENSES. Except as provided otherwise in this
Agreement, including, without limitation, in Sections 6.2, 6.11 and 8.2, whether
or not the Merger shall be consummated, each party hereto shall pay its own
expenses incident to preparing for, entering into and carrying out this
Agreement and the consummation of the transactions contemplated hereby.
SECTION 9.3. DEFINITIONS. For purposes of this Agreement:
(a) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act; and
(b) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity.
SECTION 9.4. NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given when delivered personally or sent by overnight courier (providing proof of
delivery) or telecopy to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to: Holmes Products Corp.
233 Fortune Boulevard
Milford, MA 01757
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Attn: Jordan A. Kahn, President
Telecopy No.: (508) 634-8734
with copies to: Berkshire Partners LLC
One Boston Place
Boston, MA 02108
Attn: Richard K. Lubin, Managing Director
Telecopy No.: (617) 227-6105
- and -
Posternak, Blankstein & Lund, L.L.P.
100 Charles River Plaza
Boston, MA 02114
Attn: Donald H. Siegel, P.C.
Telecopy No.: (617) 367-2315
(b) if to the Company, to: The Rival Company 800
East 101st Terrace Kansas City, MO 64131
Attn: Board of Directors Telecopy No.:
816-943-4107
with a copy to: Morrison & Hecker LLP
Two Crown Center
2420 Pershing Road
Kansas City, MO 64108
Attn: Kent Whittaker, Esq.
Telecopy No.: (816) 421-2896
SECTION 9.5. INTERPRETATION. When a reference is made in this Agreement to
a Section or Schedule, such reference shall be to a Section of, or a Schedule
to, this Agreement unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation."
SECTION 9.6. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 9.7. ENTIRE AGREEMENT; THIRD-PARTY BENEFICIARIES. This Agreement
and the other agreements referred to herein, including without limitation the
Confidentiality Agreement, constitute the entire agreement, and supersede all
prior agreements and
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understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement. This Agreement is not intended to confer upon
any person, other than the parties hereto and the third party beneficiaries
referred to in the following sentence, any rights or remedies. The parties
hereto expressly intend the provisions of Section 6.6 to confer a benefit upon
and be enforceable by, as third party beneficiaries of this Agreement, the third
persons referred to in, or intended to be benefited by, such provisions.
SECTION 9.8. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 9.9. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties, and any such assignment that is not
consented to shall be null and void, except that Parent may assign this
Agreement (i) to any wholly owned subsidiary of Parent or (ii) together with all
of the outstanding capital stock of Sub, to an entity organized under the
corporate or limited liability laws of jurisdiction of one of the United States
of America, the ownership interests of which entity are substantially identical
to the ownership interests of Parent immediately prior to such assignment and
which entity specifically and expressly assumes by written agreement the
obligations of Parent under this Agreement; in either case so long as such
assignment shall not adversely affect the ability of Parent and Sub to secure
the Financing described in Section 4.2(d) and without Parent being released from
liability hereunder and such transfer or assignment will not relieve Parent or
Sub of their obligations under the Offer or prejudice the rights of tendering
stockholders to receive payment for Shares validly tendered and accepted for
payment pursuant to the Offer. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of, and be enforceable by, the
parties and their respective successors and assigns.
SECTION 9.10. ENFORCEMENT. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
(without requirement to post a bond) the terms and provisions of this Agreement,
this being in addition to any other remedy to which they are entitled at law or
in equity.
SECTION 9.11. SEVERABILITY. Whenever possible, each provision or portion
of any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
[Remainder of Page Intentionally Left Blank.]
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IN WITNESS WHEREOF, the Company, Parent and Sub have caused this Agreement
to be executed as an agreement under seal by their respective officers thereunto
duly authorized, all as of the date first written above.
THE RIVAL COMPANY
By: /s/ THOMAS K. MANNING
--------------------------------------
Name: Thomas K. Manning
Title: Chairman/Chief Executive Officer
HOLMES PRODUCTS CORP.
By: /s/ JORDAN A. KAHN
---------------------------------------
Name: Jordan A. Kahn
Title: President and Chief Executive
Officer
MORIARTY ACQUISITION CORP.
By: /s/ JORDAN A. KAHN
---------------------------------------
Name: Jordan A. Kahn
Title: President
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ANNEX I
The capitalized terms used in this Annex have the meanings set forth in
the attached Agreement, except that the term "Merger Agreement" shall be deemed
to refer to the attached Agreement.
Notwithstanding any other provision of the Offer or the Merger Agreement,
Offeror 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 Offeror's obligation to pay for or return tendered
Shares after the termination or withdrawal of the Offer), to pay for any Shares,
and may terminate and withdraw the Offer, if (i) the Minimum Condition has not
been satisfied, (ii) the applicable waiting period under the HSR Act shall not
have expired or been terminated, (iii) the Financing Condition has not been
satisfied, or (iv) at any time on or after the date of the Merger Agreement and
prior to the acceptance for payment of or payment for Shares, any of the
following conditions shall occur and be continuing:
(a) there shall be instituted or pending any action, suit, investigation,
litigation or proceeding before any domestic court, government or Governmental
Entity or arbitrator, other than by Parent or Sub, a stockholder of Parent or
Sub or any person affiliated with Parent or Sub that, in the reasonable judgment
of Parent, materially adversely affects, or is reasonably likely to materially
adversely affect, the Company and its Subsidiaries, taken as a whole, or Parent
and its subsidiaries, taken as a whole, the Financing, or the consummation of
the transactions contemplated by the Merger Agreement, provided that, in any
such case, Parent shall have used commercially reasonable efforts to defeat or
have vacated any such action or proceeding against Parent or Sub and shall have
failed to do so; or
(b) there shall be any action taken, or any statute, rule, regulation,
injunction, interpretation, judgment, order or decree enacted, enforced,
promulgated, issued or deemed applicable to Parent or any of its Subsidiaries or
to the Company or any of its Subsidiaries or the Offer or the Merger, by any
court, government or Governmental Entity, other than the application of the
waiting period provision of the HSR Act to the Offer or the Merger that, in the
reasonable judgment of Parent, is likely, directly or indirectly, to result in
any of the consequences referred to in paragraph (a) above; or
(c) any change, event, occurrence or circumstance shall have occurred
that, in the reasonable judgment of Parent, would have a Material Adverse
Effect; or
(d) there shall have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on the New York Stock Exchange, which
suspension or limitation shall continue for at least three consecutive trading
days (excluding suspensions or limitations resulting solely from physical damage
or interference with such exchange not related to market conditions), (ii) a
declaration of a banking moratorium or any suspension of payments in respect of
banks in the United States, (iii) a commencement of a war or armed hostilities
or other national or international calamity directly or indirectly involving the
United States which would reasonably be expected to
<PAGE> 50
have a material adverse impact on the capital markets of the United States, or
(iv) in the case of any of the foregoing existing on the date of the Merger
Agreement, a material acceleration, escalation or worsening thereof; or
(e) the Company shall have breached or failed to perform in any material
respect any of its covenants or agreements under the Merger Agreement, or (i)
any of the representations and warranties of the Company set forth in the Merger
Agreement that are qualified as to materiality shall not be true and correct, or
(ii) any of the representations and warranties of the Company set forth in the
Merger Agreement that are not so qualified shall not be true and correct in any
material respect, individually or in the aggregate, in each case when made and
as of the expiration of the Offer; except for changes permitted or contemplated
by the Merger Agreement and except for such breaches of representations,
warranties, covenants or agreements as would not have, individually or in the
aggregate, a Material Adverse Effect or materially adversely affect the
Financing or the consummation of the transactions contemplated by the Merger
Agreement; or
(f) the Merger Agreement shall have been terminated in accordance with its
terms; or
(g) any Third Party acquires beneficial ownership (as defined in Rule
13d-3 under the Exchange Act) of 25% or more of the outstanding Shares, unless
such Shares have been validly tendered and not withdrawn; or
(h) a tender offer or exchange offer for more than 25% of the Shares shall
have been made or publicly proposed by a Third Party; or
(i) the Board of Directors of the Company withdraws or modifies in a
manner adverse to Sub or Parent its approval or recommendation of the Offer, the
Merger Agreement or the Merger or recommends or approves an Acquisition Proposal
by a Third Party; or
(j) any filing required to be made by the Company or its Subsidiaries
with, or any consent, approval, permit or authorization required to be obtained
by the Company or its Subsidiaries from, any Governmental Entity which, either
individually or in the aggregate, if not made or obtained would have a Material
Adverse Effect at the time of or after the consummation of the Offer or would
prevent the consummation of the Offer shall not have been made or obtained (as
the case may be);
which, in the reasonable judgment of Parent, in any such case, and regardless of
the circumstances giving rise to any such condition, makes it inadvisable to
proceed with the Offer and/or with such acceptance for payment or payments.
The foregoing conditions are for the sole benefit of Parent and Sub and may be
asserted by Parent or Sub regardless of the circumstances giving rise to such
condition or may be waived by Parent or Sub in whole or in part at any time and
from time to time in its sole discretion. The failure by Parent or Sub or any
Affiliate of Parent or 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
<PAGE> 51
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.
<PAGE> 1
EMPLOYMENT AGREEMENT
AGREEMENT, dated as __________________, 1998, by and between The Rival
Company, a Delaware corporation (the "Company"), and ________________ (the
"Executive").
A. The Executive is currently employed as an executive officer of the
Company.
B. The Company and the Executive desire to continue such employment and to
provide economic security to the Executive, on the terms hereinafter set forth,
in the event such employment is terminated under certain circumstances.
Accordingly, in consideration of the foregoing premises, and for other
valuable consideration, the adequacy of which is hereby acknowledged, the
Company and the Executive, intending to be legally bound, hereby agree as
follows:
1. In the event that, at any time prior to a "change in control" (as
hereinafter defined), the Executive is discharged by the Company other than for
"just cause" (as hereinafter defined), the Company shall be obligated to pay the
Executive (or his estate if the Executive shall have died after being
discharged) severance pay equal to two (2) times the Executive's then annual
base compensation. Such severance pay shall be paid in twenty-four (24) equal
monthly installments, commencing with the month following such discharge.
2. In the event that, at any time within one year after there has been a
"change in control", the Executive is discharged by the Company other than for
Executive's death, disability, normal retirement or "just cause", or the
Executive terminates his employment with the Company for "stated cause", the
Company shall be obligated to pay to the Executive (or his estate if the
Executive shall have died after termination) severance pay equal to the
Executive's annual base compensation at the time of termination multiplied by
2.99. Such severance pay shall be paid to the Executive (or his estate) in
substantially equal monthly installments on the first day of each of the twelve
(12) months commencing with the month immediately following the month in which
his employment with the Company is terminated.
<PAGE> 2
3. The Company acknowledges and agrees that the Executive shall be
entitled to receive all of the payments provided for herein regardless of any
income which the Executive may receive from other sources after the termination
of his employment with the Company, provided, however, that the Company shall be
under no obligation to make any payments under paragraph 1 hereof after the date
upon which Executive shall enter into competition with the Company, as referred
to in paragraph 4 hereof.
4. For a period of two (2) years after Executive's employment with the
Company terminates, for whatever reason except pursuant to paragraph 2 hereof,
Executive shall not engage, directly or indirectly, individually or through any
corporation, partnership, joint venture, trust, limited liability company or
person, as an officer, director, employee, agent, consultant, partner,
proprietor, shareholder or otherwise, in any business competitive with the
business then being conducted by the Company, or any of its affiliates, at any
place in which it, or any such affiliate, is then conducting its business, or at
any place where products manufactured or sold by it, or any such affiliate, are
offered for sale, provided, however, that ownership of five per cent (5%) or
less of the outstanding stock of any company whose shares trade on any national
exchange or market shall not be deemed to be competition with the Company.
5. The Executive remains an employee of the Company at will, and nothing
in this Agreement shall confer upon the Executive the right to continue in the
employ of the Company or any of its subsidiaries or, subject to the terms
hereof, shall affect any right which the Company or any of its subsidiaries may
have to terminate the employment of the Executive. Except as provided in
paragraph 8 hereof, no benefit provided herein is intended or shall be deemed to
be granted to the Executive in lieu of any benefits, rights or privileges to
which the Executive may be entitled while he is an employee of the Company under
any retirement, pension, insurance, hospitalization, stock option, stock
purchase, incentive compensation or other plan of the Company which may now be
in effect or which may hereafter be adopted, it being understood that the
Executive shall have the same rights and privileges to participate in such plans
as any other executive employee of the Company.
6. In the event of litigation under this Agreement, the prevailing party
shall be entitled to recover his or
2
<PAGE> 3
its costs and expenses, including reasonable attorneys' fees.
7. For purposes of this Agreement, (a) "just cause" shall mean the
Executive's willful violation of any reasonable rule or regulation of the Board
of Directors or the Chief Executive Officer of the Company that results in
significant damage to the Company; conviction of a felony; any willful failure
by the Executive to comply with a reasonable, direct order; any willful
misconduct by the Executive in the responsibilities reasonably assigned to him;
any willful failure to perform his job as required to meet Company objectives;
or the Executive's performing services for any other corporation or person which
competes with the Company while he is employed by the Company and without the
written approval of the Chief Executive Officer of the Company; provided,
however, that any discharge of the Executive by the Company within one (1) year
after there has been a "change in control" shall conclusively be deemed to be a
discharge other than for "just cause"; (b) "change in control" shall mean (i)
the acquisition, directly or indirectly, by any "person" or "group" of "persons"
(as those terms are used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934 and the rules thereunder) of beneficial ownership of securities of
the Company or of securities of the Company's ultimate parent corporation
representing 50% or more of the combined voting power of the then outstanding
securities of such corporation or (ii) any merger, consolidation or sale of all
or a substantial part of the assets of the Company, and (c) "Stated Cause" shall
mean (1) any material changes in Executive's duties and responsibilities for
Company which are not approved by him; (2) involuntary relocation or proposed
relocation of Executive from Kansas City, Missouri; or (3) any reduction in the
salary or benefits to which Executive is entitled immediately prior to the
Change of Control.
8. This Agreement shall inure to and be binding upon the parties hereto
and their respective heirs, successors and assigns, including, without
limitation, any person, partnership or corporation which may acquire all or
substantially all of the Company's assets and business or with or into which the
Company may be consolidated or merged, and this provision shall apply in the
event of any subsequent merger, consolidation or transfer.
3
<PAGE> 4
9. Any and all prior agreements between the Company and Executive with
respect to the subject matter hereof are hereby terminated.
10. As a condition to making the payments required of it under paragraph 1
hereof, the Company may require Executive to execute and deliver to the Company
a release of any and all non-contractual claims he may have against the Company.
11. Executive acknowledges that the services heretofore rendered to the
Company, and to be rendered hereafter, are of a special and unusual character
which have a unique value, that the use thereof for another, or the breach of
the provisions of paragraph 4 hereof, cannot be adequately measured or
compensated by an action for damages, and will cause irreparable injury and
damage to the Company, far in excess of the forfeiture of payments provided in
paragraph 3 hereof. Executive accordingly agrees that the Company shall be
entitled to injunctive and other equitable relief to prevent a breach of, or to
secure enforcement of, this agreement, in addition to any other remedy to which
the Company may be entitled. Any and all remedies for the breach of paragraph 4
hereof shall be cumulative and the pursuit of one remedy shall not be deemed to
exclude any or all other remedies.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
COMPANY: THE RIVAL COMPANY
By:__________________________
EXECUTIVE: _____________________________
4
<PAGE> 1
Section 262 of the Delaware General Corporation Code (1998)
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to Section 228
of this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of any class or
series of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
Sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting
from such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer
<PAGE> 2
quotation system by the National Association of Securities Dealers, Inc. or held
of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this paragraph;
or
d. Any combination of the shares of stock, depository receipts
and cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under Section 253 of this title is not
owned by the parent corporation immediately prior to the merger, appraisal
rights shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsection (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of
such stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of such
stockholder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such stockholder's shares. A proxy or
vote against the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written demand
as herein provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become effective;
or
(2) If the merger or consolidation was approved pursuant to Section
228 or Section 253 of this title, each constituent corporation, either before
the effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of
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<PAGE> 3
such constituent corporation who are entitled to appraisal rights of the
approval of the merger or consolidation and that appraisal rights are available
for any or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section; provided
that, if the notice is given on or after the effective date of the merger or
consolidation, such notice shall be given by the surviving or resulting
corporation to all such holders of any class or series of stock of a constituent
corporation that are entitled to appraisal rights. Such notice may, and, if
given on or after the effective date of the merger or consolidation, shall, also
notify such stockholders of the effective date of the merger or consolidation.
Any stockholder entitled to appraisal rights may, within 20 days after the date
of mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
such holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the merger
or consolidation notifying each of the holders of any class or series of stock
of such constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or within 10
days after such effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first notice, such second
notice need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice that
such notice has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation
may fix, in advance, a record date that shall be not more than 10 days prior to
the date the notice is given, provided, that if the notice is given on or after
the effective date of the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is given prior to the
effective date, the record date shall be the close of business on the day next
preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or
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<PAGE> 4
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders
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<PAGE> 5
of shares represented by certificates upon the surrender to the corporation of
the certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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<PAGE> 1
TENDER AND VOTING AGREEMENT
TENDER AND VOTING AGREEMENT (this "Agreement"), dated as of December 17,
1998, by and among Holmes Products Corp., a Massachusetts corporation
("Parent"), Moriarty Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Sub"), and the individuals set forth on
Exhibit A hereto (the "Stockholders," or individually, a "Stockholder"), each of
whom holds shares of The Rival Company, a Delaware corporation (the "Company").
WHEREAS, concurrently herewith, Parent, Sub and the Company, are entering
into an Agreement and Plan of Merger of even date herewith (the "Merger
Agreement"; capitalized terms used but not defined herein shall have the
meanings set forth in the Merger Agreement), pursuant to which Sub agrees to
make a tender offer (the "Offer") for all outstanding shares of Common Stock,
par value $.01 per share (the "Shares"), of the Company at $13.75 per share, net
to the seller in cash (the "Offer Price"), to be followed by the merger of Sub
with the Company (the "Merger"), with the corporation surviving the Merger
becoming a wholly-owned subsidiary of Parent;
WHEREAS, as of the date hereof, the Stockholders beneficially own the
Shares set forth on Exhibit A hereto (the "Owned Shares"); and
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, Parent and Sub have required that the Stockholders agree, and the
Stockholders have agreed (i) to tender pursuant to the Offer all of the Owned
Shares (which term shall include any Shares acquired by them after the date
hereof), (ii) to vote the Owned Shares in favor of the adoption of the Merger
Agreement and the approval of the Merger, (iii) to appoint Parent as the
Stockholders' proxy to vote the Owned Shares in connection with the Merger
Agreement and the Merger and (iv) with respect to other matters put to
stockholders of the Company for a vote, to vote the Owned Shares, in each case,
in accordance with the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration given to each party hereto, the receipt of which is
hereby acknowledged, the parties agree as follows:
1. Agreement to Tender and Vote.
1.1 Tender. Each of the Stockholders hereby agrees to validly tender (or
cause the record owner to tender), and not to withdraw, pursuant to and in
accordance with the terms of the Offer, not later than three (3) business days
prior to the initial expiration of the Offer, the Owned Shares beneficially
owned by him on the date hereof and any additional Shares acquired by such
Stockholder in any capacity after the date hereof and prior to the termination
of this Agreement (whether upon the exercise of options, warrants or rights, the
conversion or exchange of
<PAGE> 2
convertible or exchangeable securities, or by means of purchase, dividend,
distribution, gift, bequest, inheritance or as a successor in interest in any
capacity or otherwise) beneficially owned by such Stockholder, which additional
Shares shall constitute Owned Shares for all purposes of this Agreement. Parent
and Sub agree to accept and pay for the Owned Shares in the Offer, subject to
the terms and conditions of the Offer. The parties agree that the Stockholders
will, for all Owned Shares tendered by the Stockholders in the Offer and
accepted for payment and paid for by Sub, receive the same per share
consideration paid to other shareholders who have tendered Shares into the
Offer. The transfer by the Stockholders of the Owned Shares to Sub in the Offer
shall, upon payment therefor, pass to and unconditionally vest in Sub good and
valid title to the Owned Shares, free and clear of all claims, liens,
restrictions, security interests, pledges, limitations and encumbrances
whatsoever.
1.2 Voting. Each Stockholder hereby agrees that, during the time this
Agreement is in effect, at any meeting of the shareholders of the Company,
however called, or any other opportunity to vote, he shall (a) vote all of the
Owned Shares as are beneficially owned by him on the record date for determining
stockholders of record entitled to vote at such meeting in favor of the adoption
of the Merger Agreement and approval of the Merger; (b) vote such Owned Shares
against any action or agreement that would result in a breach in any material
respect of any covenant, representation or warranty or any other obligation or
agreement of the Company under the Merger Agreement; and (c) vote such Owned
Shares against any action or agreement (other than the Merger Agreement or the
transactions contemplated thereby) that would impede, interfere with, delay,
postpone or attempt to discourage the Merger, including, but not limited to: (i)
any extraordinary corporate transaction, such as a merger, consolidation or
other business combination involving the Company; or (ii) a sale or transfer of
a material amount of assets of the Company or any of its subsidiaries or a
reorganization, recapitalization or liquidation of the Company or any of its
subsidiaries. Each Stockholder shall forward to Parent any proxy cards that such
Stockholders receive with respect to the Merger Agreement duly executed by such
Stockholder.
1.3 Irrevocable Proxy. Each Stockholder (without any further action on
such Stockholder's part) shall be deemed to have hereby irrevocably appointed
Parent as the attorney and proxy of such Stockholder, with full power of
substitution, to vote, and otherwise act (by written consent or otherwise) with
respect to all Owned Shares that such Stockholder is entitled to vote at any
meeting of stockholders of the Company (whether annual or special and whether or
not an adjourned or postponed meeting) or consent in lieu of any such meeting or
otherwise, to vote such Shares as set forth in Section 1.2 above. THIS PROXY AND
POWER OF ATTORNEY IS IRREVOCABLE AND COUPLED WITH AN INTEREST. Each Stockholder
hereby revokes, effective upon the execution and delivery of the Merger
Agreement by the parties thereto, all other proxies and powers of attorney with
respect to the Owned Shares that he may have heretofore appointed or granted,
and no subsequent proxy or power of attorney (except in furtherance of such
Stockholder's obligations under Section 1.2 hereof) shall be given or written
consent executed (and if given or executed, shall not be effective) by such
Stockholder with respect thereto so long as the Stockholder's obligations under
this Section remain in effect.
2
<PAGE> 3
The proxy granted hereunder shall automatically be revoked and of no further
force and effect upon termination of this Agreement.
2. Termination of Agreement. (a) This Agreement and the Stockholders'
obligations hereunder shall terminate on the earlier of (i) the consummation of
the Merger, (ii) the termination of the Offer pursuant to the terms of the
Merger Agreement without any Shares having been purchased pursuant thereto, or
(iii) the termination of the Merger Agreement in accordance with its terms,
including as such terms may be amended or extended by the parties thereto.
(b) The obligations of any Stockholder hereunder may be
terminated by such Stockholder if (i) Purchaser or Sub shall have failed to
comply with any of its obligations under Article I of the Merger Agreement or
(ii) Purchaser or Sub shall have violated any provisions of this Agreement.
3. Representations and Warranties.
3.1 Representations and Warranties of Parent and Sub. Parent and Sub
hereby represent and warrant to Stockholder as follows:
(a) Organization; Due Authorization. Parent is a corporation duly
organized, validly existing and in good standing under the laws of Commonwealth
of Massachusetts. Parent has full power and authority to execute and deliver
this Agreement and to perform its obligations hereunder. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the Board of Directors of
Parent, and no other corporate proceedings on the part of Parent are necessary
to authorize this Agreement or to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by
Parent and constitutes a valid and binding agreement of Parent, enforceable
against Parent in accordance with its terms, except to the extent (i) such
enforcement may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights and (ii) the remedy of specific enforcement and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
(b) Organization; Due Authorization. Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Sub has full corporate power and authority to execute and deliver this
Agreement. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
the Board of Directors of Sub, and no other corporate proceedings on the part of
Sub are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Sub and constitutes a valid and binding agreement of Sub,
enforceable against Sub in accordance with its terms, except to the extent (i)
such enforcement may be limited by applicable
3
<PAGE> 4
bankruptcy, insolvency or similar laws affecting creditors' rights and (ii) the
remedy of specific enforcement and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
3.2 Representations and Warranties of The Stockholders. Each Stockholder
hereby severally represents and warrants to Parent and Sub as follows:
(a) Title. Such Stockholder has good and valid title (which may include
holding in nominee or "street" name) to the number of Owned Shares set opposite
his name on Exhibit A, free and clear of any lien, charge, encumbrance or claim
of whatever nature.
(b) Ownership of Shares. On the date hereof, the Stockholder beneficially
owns the number of Shares set opposite his name on Exhibit A, all of which are
held of record by him (except as otherwise set forth on Exhibit A). Such
Stockholder has sole voting power and sole power of disposition with respect to
the number Owned Shares set opposite his name on Exhibit A, with no
restrictions, subject to applicable federal securities laws, on his rights of
disposition pertaining thereto; provided that, if any of the Owned Shares are
held jointly, such Stockholder agrees to cause each joint owner of such Owned
Shares to comply with the provisions of this Agreement.
(c) Power; Binding Agreement. Such Stockholder has the legal capacity,
power and authority to enter into and perform all of his obligations under this
Agreement. The execution, delivery and performance of this Agreement by such
Stockholder will not violate any other agreement to which such Stockholder is a
party including, without limitation, any voting agreement, stockholders
agreement or voting trust. This Agreement has been duly and validly executed and
delivered by such Stockholder and constitutes a valid and binding agreement of
such Stockholder, enforceable against such Stockholder in accordance with its
terms, except to the extent (i) such enforcement may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights and (ii) the
remedy of specific enforcement and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(d) No Conflicts. The execution, delivery and performance of this
Agreement by such Stockholder will not constitute a breach, violation or default
(or any event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or accelerate the performance
required by, or result in a right of termination or acceleration under, or
result in the creation of any lien or encumbrance upon any of the properties or
assets of the Stockholder under, any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument to which such Stockholder
is a party or by which his respective properties or assets are bound.
4. Certain Covenants of the Stockholders. Each Stockholder hereby
covenants and agrees while this Agreement is in effect, as follows:
4
<PAGE> 5
4.1 Restriction on Transfer, Proxies and Non-Interference. Not to (i)
sell, transfer, pledge, encumber, assign or otherwise dispose of, or enter into
any contract, option or other arrangement or understanding with respect to the
sale, transfer, pledge, encumbrance, assignment or other disposition of, any of
his Owned Shares, (ii) grant any proxies, deposit any shares of capital stock of
the Company into a voting trust or enter into a voting agreement with respect to
any such Shares or (iii) take any action that would make any representation or
warranty of such Stockholder contained herein untrue or incorrect or have the
effect of preventing or disabling such Stockholder from performing his
obligations under this Agreement; provided, however, that such Stockholder shall
be permitted to transfer any of the Owned Shares to any member of the immediate
family of such Stockholder or any trust, limited partnership or other entity the
beneficial ownership of which is held by the Stockholder or such family members
(each, a "Permitted Transferee"), so long as such Permitted Transferee agrees in
writing, in form and substance satisfactory to Parent and Sub, to be bound by
the terms hereof to the same extent as such Stockholder is bound and provided
further, however, that no such transfer shall relieve such Stockholder of his
obligations hereunder if such Permitted Transferee does not perform such
obligations;
4.2 Additional Shares. To promptly notify Parent and Sub of the number of
additional Shares acquired by such Stockholder, if any, after the date hereof,
which additional Shares shall be deemed Owned Shares for all purposes of this
Agreement; and
4.3 No Solicitation of Transactions. Subject to the provisions of Section
6.8 of the Merger Agreement relating to actions by such Stockholder in his
capacity as a director or officer of the Company, not to directly or indirectly,
solicit, initiate or participate, or offer to participate with any person or
entity in any Acquisition Proposal or offer from any person or entity, or engage
in discussions or negotiations relating thereto (including by way of furnishing
information). While this Agreement is in effect, such Stockholder shall promptly
advise Purchaser of his receipt of any Acquisition Proposal (and provide the
details thereof) or if any inquiries are received by, any information or
documents are requested from, or any negotiations or discussions are sought to
be instituted or continued with, such Stockholder or any of his affiliates.
5. Further Assurances. From time to time, at the other party's request and
without further consideration, each party hereto shall execute and deliver such
additional documents and take all such further action as may be necessary or
desirable to consummate and make effective the transactions contemplated by
Section 1 of this Agreement.
6. Miscellaneous.
6.1 Entire Agreement, Assignment. This Agreement (i) constitutes the
entire agreement among the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
among the parties with respect to the
5
<PAGE> 6
subject matter hereof and (ii) shall not be assigned by operation of law or
otherwise, provided that Parent or Sub may assign its rights and obligations
hereunder to any direct or indirect wholly-owned subsidiary of Parent, but no
such assignment shall relieve Parent or Sub of its obligations hereunder if such
assignee does not perform such obligations. The obligations of the Stockholders
under this Agreement are several, and not joint.
6.2 Notice. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
To the Stockholders:
c/o The Rival Company
800 East 101st Terrace
Attn: Board of Directors
Kansas City, Missouri 64131
copy to:
Morrison & Hecker LLP
2420 Pershing Road
Fourth Floor
Kansas City, Missouri 64108-2537
Attention: Kent E. Whittaker, Esq.
To Parent or Sub:
Holmes Products Corp.
233 Fortune Boulevard
Milford, Massachusetts 01757
Attention: Ira Morgenstern
copies to:
Berkshire Partners
One Boston Place
Boston, Massachusetts 02108-4401
Attention: Richard K. Lubin
6
<PAGE> 7
and
Posternak, Blankstein & Lund, L.L.P.
100 Charles River Plaza
Boston, Massachusetts 02114
Attention: Donald H. Siegel, P.C.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
6.3 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
6.4 Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereby agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
6.5 Counterparts. This Agreement may be executed in one or more
counterparts, whether original signatures or facsimile copies, which together
shall form one complete Agreement.
6.6 Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
6.7 Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal on the date and year first above written.
7
<PAGE> 8
PARENT:
HOLMES PRODUCTS CORP.
By: /s/ Stan Rosenzweig
---------------------------------
Its: Chief Operating Officer
-------------------------------
SUB:
MORIARTY ACQUISITION CORP.
By: /s/ Stan Rosenzweig
---------------------------------
Its: Vice President
-------------------------------
8
<PAGE> 9
STOCKHOLDERS:
/s/ Thomas K. Manning
-------------------------------------
Name: Thomas K. Manning
/s/ William L. Yager
-------------------------------------
Name: William L. Yager
/s/W. Mark Meieroffer
-------------------------------------
Name: W. Mark Meierhoffer
/s/ Darrel M. Sanders
-------------------------------------
Name: Darrel M. Sanders
/s/ Stanley D. Biggs
-------------------------------------
Name: Stanley D. Biggs
/s/ Jack J. Culberg
-------------------------------------
Name: Jack J. Culberg
/s/ Todd Goodwin
-------------------------------------
Name: Todd Goodwin
/s/ John E. Grimm, III
-------------------------------------
Name: John E. Grimm, III
/s/ Lanny R. Julian
-------------------------------------
Name: Lanny R. Julian
/s/ Noel Thomas Patton
-------------------------------------
Name: Noel Thomas Patton
/s/ Beatrice B. Smith
-------------------------------------
Name: Beatrice B. Smith
9
<PAGE> 10
EXHIBIT A
<TABLE>
<CAPTION>
Name, Title and Address No. of Owned Shares
----------------------- -------------------
<S> <C>
Thomas K. Manning 69,563
Chairman, Chief Executive Officer, Director
William. L. Yager 6,000
President, Chief Operating Officer, Director
W. Mark Meierhoffer 2,000
Senior Vice President -
Finance & Administration, CFO
Darrel M. Sanders 26,054
Senior Vice President - Operations, Director
Stanley D. Biggs 2,314
Vice President, Treasurer, Corporate Secretary
Jack J. Culberg 34,900
Director
Todd Goodwin 54,238
Director
John E. Grimm, III 2,300
Director
Lanny R. Julian 1,200
Director
Noel Thomas Patton 850,000
Director
Beatrice B. Smith 1,200
Director
</TABLE>
10
<PAGE> 1
BA PARTNERS
- - DIVISION OF BANCAMERICA SECURITIES, INC.
- - BANKAMERICA COMPANY
OCTOBER 1, 1998
STRICTLY CONFIDENTIAL
Mr. Jerry Kahn
President and Chief Executive Officer
Holmes Products Corp.
233 Fortune Boulevard
Milford, MA 0175 7
Dear Mr. Kahn:
You have requested information from The Rival Company and its affiliates
(collectively the "Company") in connection with your consideration of a possible
transaction between the Company or its shareholders and you. As a condition to
your being furnished such information, you agree to treat any information
(whether prepared by the Company, its advisors or otherwise, and whether oral or
written) that is furnished to you or your representatives (which term shall
include your directors, officers, partners, employees, agents, advisors,
accountants, attorneys and potential financing sources) by or on behalf of the
Company (herein collectively referred to as the "Evaluation Material') in
accordance with the provisions of this letter and to take or abstain from taking
certain other actions herein set forth. The term "Evaluation Material" does not
include information that (i) is already lawfully in your possession, provided
that such information is not known by you to be subject to another
confidentiality agreement with or other obligation of secrecy to the Company or
another party, or (ii) is or becomes generally available to the public other
then as a result of a disclosure by you, your representatives or anyone acting
on your or their behalf, or (iii) is or becomes available to you on a
non-confidential basis from a source other than the Company or its advisors,
provided that such source is not known by you to be bound by a Confidentiality
agreement with or other obligation of secrecy to the Company or another party,
or (iv) is independently developed by you or your representatives without
violating any provision hereof.
You hereby agree that the Evaluation Material will be used solely for the
purpose of evaluating a possible transaction between the Company or its
shareholders and you (the "Transaction"), and will be kept confidential by you
and your representatives. You further agree the Evaluation Material will not be
provided, disclosed or otherwise made
<PAGE> 2
Holmes Products Corp.
October 1, 1998
Page 2
directly or indirectly available to any person or entity other than those
individuals who need to know such information for the purpose of evaluating or
financing any such possible Transaction and who agree to keep such information
confidential and to be bound by this agreement to the same extent as if they
were parties hereto and subject to all of your obligations hereunder. You will
be responsible for any breach of this agreement by your representatives.
You hereby acknowledge that you are aware, and that you will advise your
representatives who are informed as to the matters which are the subject of this
letter, that the United States securities laws may prohibit any person who has
received material, non-public information concerning the matters which are the
subject of this letter from purchasing or selling securities of such issue or
from communicating such information to any other person under circumstances in
which it is reasonably foreseeable that such person is likely to purchase or
sell such securities.
Notwithstanding any provision of this letter agreement to the contrary, in the
event you or your representatives are requested or required in a judicial
administrative or governmental proceeding, or required by statute or pursuant to
any rule or regulation promulgated by the Securities and Exchange Commission
(the "Rules and Regulations") to disclose any Evaluation Material or the
existence, content or status of negotiations relating to the Transaction, you
agree to provide the Company with prompt notice of such circumstance and all
related proceedings and information so that the Company may seek an appropriate
protective order, take other action deemed advisable by the Company or waive
your compliance with the confidentiality provisions of this letter agreement.
If, as a result of any such request or requirement you or your representatives
are, in the written opinion of your outside counsel ("Counsel"), compelled to
disclose Evaluation Material or the existence, content or status of negotiations
relating to the Transaction you may disclose that portion of the Evaluation
Material which your Counsel advises in writing that you or your representatives
are legally compelled to disclose without liability hereunder, provided that you
comply with the notice provisions of this paragraph and apply for confidential
treatment of such portions of the Evaluation Material as may be permitted under
the Rules and Regulations.
You agree that you will not, and will cause your representatives not to,
disclose to any person either the fact that discussions or negotiations are
taking place concerning a possible transaction between the Company or its
shareholders and you or any of the terms, conditions or other facts with respect
to any such possible transaction, including the status thereof, except that
disclosure of such information may be made to the extent required by applicable
law and the Rules and Regulations; provided that prior to any such disclosure,
you shall first give the Company a reasonable opportunity to review the proposed
disclosure and to comment thereon.
<PAGE> 3
Holmes Products Corp.
October 1, 1998
Page 3
Until the earlier of (i) the consummation of a transaction between the Company
and you, or (ii) one year from the date of this letter, you agree not to
initiate or maintain contact (except for contact in the ordinary course of
business) with any officer, director or employee of the Company for the purposes
of obtaining information regarding the Company's operations, assets, prospects
or finances, except with the express written permission of the Company. Each
party also hereby agrees that, for the period ending one year from the date of
this letter, such party will not, without the other party's written consent,
directly or indirectly, solicit the employment of any person who is a senior
executive officer of the other party, and with whom such soliciting party had
contacts in conjunction with the Transaction, other than pursuant to a general
solicitation not specifically directed at such officers.
You hereby acknowledge that the Evaluation Material is being furnished to you in
consideration of your agreement that for a period of twelve months from the date
hereof you and your affiliates (as defined in Rule 12b-2 under the Exchange Act)
will not (and you and they will not assist, provide or arrange financing to or
for others or encourage others to), directly or indirectly, acting alone or in
concert with others, unless specifically requested in writing or otherwise
consented to in advance by the Board of Directors of the Company:
(i) acquire or agree, offer, seek or propose to acquire (or request permission
to do so), ownership (including, but not limited to, beneficial ownership
as defined in Rule l3d-3 under the Exchange Act) of any of the assets or
busin6sses of the Company or any securities issued by the Company, or any
rights or options to acquire such ownership (including from a third
party), or make any public announcement (or request permission to make any
such announcement) with respect to any of the foregoing, or
(ii) seek or propose to influence or control the management or the policies of
the Company or to obtain representation on the Company's Board of
Directors, or solicit. or participate in the solicitation of, any proxies
or consents with respect to any securities of the Company, or make any
public announcement with respect to any of the foregoing or request
permission to do any of the foregoing, or
(iii) enter into any discussions, negotiations, arrangements or understandings
with any third party with respect to any of the foregoing.
Notwithstanding the foregoing however, (i) you shall be permitted at all times
to make (A) any proposals to the Company regarding transactions in the ordinary
course of business between the parties and (B) any confidential proposals to the
Company concerning the Transaction, or any other transaction, including but
limited to, any
<PAGE> 4
Holmes Products Corp.
October 1, 1998
Page 4
acquisition of any of the assets or business of the Company or any of its
securities or rights or options to acquire such ownership, and (ii) in the event
that the Company enters into or announces a definitive agreement relating to a
business combination transaction with an unaffiliated third party, you shall be
permitted to make or propose an unsolicited competing proposal.
Although the Company has endeavored to include in the Evaluation Material
information which it believes to be relevant for the purpose of your
investigation, you understand that neither the Company nor any of its
representatives or advisors have made or makes herein any representation or
warranty as to the accuracy or completeness of the Evaluation Material, You
agree that neither the Company nor its representatives or advisors shall have
any liability hereunder to you or any of your representatives resulting from the
use or contents of the Evaluation Material or from any action taken or any
inaction occurring in reliance on the Evaluation Material.
At the request of the Company in the event that you do not proceed with a
Transaction which is the subject of this letter, you and your representatives
shall promptly redeliver to the Company all written Evaluation Material and will
not retain any copies, extracts or other reproductions in whole or in part of
such written material. At the request of the Company in the event that you do
not proceed with a transaction which is the subject of this letter, all
documents, memoranda, notes and other writings whatsoever prepared by you or
your representatives based on the Evaluation Material shall be destroyed, and
such destruction shall be certified in writing to the Company by an authorized
officer supervising such destruction. The term "writing" shall include data in
computer format.
It is further understood and agreed that no failure or delay by the Company in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any right., power or privilege
hereunder.
You agree that unless and until a definitive agreement between the Company and
you with respect to any Transaction has been executed and delivered, neither the
Company nor you will be under any legal obligation of any kind whatsoever with
respect to such a Transaction by virtue of this or any written or oral
expression with respect to such a Transaction by any of its directors, officers,
employees, agents or my other representatives or its advisors except for the
matters specifically agreed to in this letter. You further agree that the
Company shall have no obligation to authorize or pursue with you or any other
party any Transaction and you understand that the Company has not, as of the
date hereof, authorized any such Transaction. The agreements set forth in this
letter may be modified or waived only by a separate writing by the Company and
you expressly so modifying or waiving such agreements.
<PAGE> 5
Holmes Products Corp.
October 1, 1998
Page 5
The parties hereto agree and acknowledge that they are engaged in similar lines
of business, and neither this agreement, the furnishing of the Evaluation
Material, nor any investigation by you shall be deemed to restrict you in any
way, except as herein specifically set forth, from developing, manufacturing,
marketing or selling products that are similar to or competitive with those of
the Company, or communicating with, contracting with or otherwise dealing with
the Company's suppliers, customers or distributors in the ordinary course of
your business as it may be conducted from time to time.
The parties hereto acknowledge that money damages are an inadequate remedy for
breach of this letter agreement because of the difficulty of ascertaining the,
amount of damage that will be suffered by a party in the event that this
agreement is breached. Therefore, you, on behalf of yourself and your
representatives, and we, on behalf of the Company, acknowledge and agree that in
the event of any breach of this Agreement by you or your representatives on the
one hand, or the Company on the other, and without prejudice to any rights and
remedies otherwise available to such non-breaching party, such non-breaching
party shall be entitled (i) to equitable relief by way of injunction and (ii) to
compel specific performance without the need of proof of actual damages. We each
further agree to waive, and to cause our representatives to waive, any
requirement for the securing or posting of any bond in connection with such
remedies. If any term, provision, covenant or restriction of this letter
agreement is hold by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
This letter shall be governed by, and construed in accordance with, the laws of
the State of Delaware, without regard to principles of conflicts of laws,
Sincerely,
BancAmerica Securities, Inc. on behalf of
THE RIVAL COMPANY
By: /s/ Michael E. Levy
-------------------------------
Title: Vice President
-----------------------------
Agreed and accepted this 1st day of October, 1998.
Holmes Products Corp.
By: /s/ Jordan A. Kahn
------------------------------
Title: President
--------------------------
<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NATIONSBANC MONTGOMERY SECURITIES
December 14, 1998
Board of Directors
The Rival Company
800 East 101st Terrace
Kansas City, Missouri 64131
Ladies and Gentlemen:
We understand that The Rival Company, a Delaware corporation ("Seller"),
Holmes Products Corp., a Massachusetts corporation ("Buyer"), and Moriarity
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Buyer
("Merger Sub"), propose to enter into an Agreement and Plan of Merger
substantially in the form of the draft dated as of December 12, 1998 (the
"Merger Agreement"), pursuant to which Merger Sub will be merged with and into
Buyer, which will be the surviving entity (the "Merger"). Pursuant to the Merger
Agreement, as more fully described in the Merger Agreement and as further
described to us by management of Seller, we understand that Buyer and Merger Sub
will commence a tender offer (the "Offer") to purchase all of the issued and
outstanding shares of common stock, par value $0.01 per share, of Seller (the
"Seller Stock"), at a price of not less than $13.75 per share, net to tendering
shareholders of Seller in cash, subject to a reduction only for applicable
back-up withholding or stock transfer taxes payable by tendering shareholders of
Seller. Following consummation of the Offer, or, in certain circumstances,
regardless of consummation of the Offer, but subject to approval by the
shareholders of Seller, the Merger will be effected and all remaining shares of
Seller Stock, other than those held by Buyer and Merger Sub, and other than
Dissenting Shares (as defined in the Merger Agreement), will be converted into
and become the right to receive, upon surrender of the certificates representing
such shares of Seller Stock in accordance with the terms of the Merger
Agreement, $13.75 per share. The terms and conditions of the Offer and the
Merger are set forth in more detail in the Merger Agreement. The description of
the Offer and the Merger and the other matters contemplated by the Merger
Agreement set forth herein is qualified in its entirety by reference to the
specific terms of the Merger Agreement.
You have asked for our opinion as investment bankers as to whether the
consideration to be received by the shareholders of Seller (other than Buyer and
Merger Sub, and other than holders of Dissenting Shares) pursuant to the Offer
and the Merger is fair to such shareholders from a financial point of view, as
of the date hereof. As you are aware, we were requested by Seller to limit our
solicitation of indications of interest from third parties for all or any part
of Seller or other transactions which might have been pursued instead of those
contemplated by the Merger Agreement.
In connection with our opinion, we have, among other things: (i) reviewed
certain publicly available financial and other data with respect to Seller,
including the consolidated financial statements for recent years and interim
periods to November 30, 1998 and certain other relevant financial and operating
data relating to Seller made available to us from published sources and from the
internal records of Seller; (ii) reviewed the financial terms and conditions of
the Merger Agreement; (iii) reviewed certain publicly available information
concerning the trading of, and the trading market for, Seller Stock; (iv)
compared Seller from a financial point of view with certain other companies in
the small home appliance industry which we deemed to be relevant; (v) considered
the financial terms, to the extent publicly available, of selected recent
business combinations of companies in the small home appliance industry since
January 1, 1994, which we deemed to be comparable, in whole or in part, to the
transactions contemplated by the Merger Agreement; (vi) analyzed premiums paid
for companies in the small home appliance industry since January 1, 1994; (vii)
analyzed premiums offered or
NationsBanc Montgomery Securities LLC
231 South LaSalle Street Chicago, Illinois 60697
- --------------------------------------------------------------------------------
Phone (312) 828-4365 Fax (312) 987-2789
<PAGE> 2
Board of Directors
The Rival Company
December 14, 1998
Page 2
paid in cash tender offers since January 1, 1998, whose transaction size was in
a range similar to the transaction size of the Offer; (viii) considered
valuations of Seller based on certain discounted cash flow analyses; (ix)
reviewed and discussed with representatives of the management of Seller certain
information of a business and financial nature regarding Seller, furnished to us
by Seller's management, including financial forecasts and related assumptions of
Seller; (x) made inquiries regarding and discussed the Merger Agreement and the
transactions contemplated by the Merger Agreement and other matters related
thereto with Seller's counsel; and (xi) performed such other analyses and
examinations as we have deemed appropriate.
In connection with our review, we have not assumed any obligation
independently to verify the foregoing information and have relied on its being
accurate and complete in all material respects. With respect to the financial
forecasts for Seller provided to us by its management, upon their advice and
with your consent we have assumed for purposes of our opinion that the forecasts
have been reasonably prepared on bases reflecting the best available estimates
and judgments of Seller's management at the time of preparation as to the future
financial performance of Seller and that they provide a reasonable basis upon
which we can form our opinion. With respect to the forecasts for Seller provided
to us by its management, for purposes of examining sensitivities of the
discounted cash flow analyses we have varied certain assumptions made by
management of Seller. We have discussed these varied assumptions with management
of Seller and they have acknowledged our use of the varied assumptions in
arriving at our opinion. We have also assumed that there have been no material
changes in Seller's assets, financial condition, results of operations, business
or prospects since the date of its last financial statements made available to
us. We have relied on advice of counsel and independent accountants to Seller as
to all legal and financial reporting matters with respect to Seller, the Offer,
the Merger, and the Merger Agreement. We have assumed that the Offer and the
Merger will each be consummated in a manner that complies in all respects with
the applicable provisions of the Securities Act of 1933, as amended (the
"Securities Act"), the Securities Exchange Act of 1934 and all other applicable
federal and state statutes, rules and regulations. In addition, we have not
assumed responsibility for making an independent evaluation, appraisal or
physical inspection of any of the assets or liabilities (contingent or
otherwise) of Seller or Buyer, nor have we been furnished with any such
appraisals. Finally, our opinion is based on economic, monetary and market and
other conditions as in effect on, and the information made available to us as
of, the date hereof. Accordingly, although subsequent developments may affect
this opinion, we have not assumed any obligation to update, revise or reaffirm
this opinion.
We have further assumed with your consent that the Offer and the Merger
will be consummated in accordance with the terms described in the Merger
Agreement, without any further amendments thereto, and without waiver by Seller
or Buyer of any of the conditions thereunder.
We have acted as financial advisor to Seller in connection with the Merger
and will receive a fee for our services, including rendering this opinion, a
significant portion of which is contingent upon the consummation of the Offer or
the Merger. In the ordinary course of our business, we have performed various
investment banking services for Seller. In addition, one or more of our
affiliates, including Bank of America, provides Seller with senior credit
financing as well as other financial services.
Based upon the foregoing and in reliance thereon, it is our opinion as
investment bankers that the consideration to be received by the shareholders of
Seller (other than Buyer and Merger Sub, and other than holders of Dissenting
Shares) pursuant to the Offer and the Merger is fair to such shareholders from a
financial point of view, as of the date hereof.
This opinion is directed to the Board of Directors of Seller in its
consideration of the Offer and the Merger and is not a recommendation to any
shareholder as to whether or not such shareholder should tender its shares of
Seller Stock into the Offer, or how such shareholder should vote with respect to
the Merger.
<PAGE> 3
Board of Directors
The Rival Company
December 14, 1998
Page 3
Further, this opinion addresses only the financial fairness of the consideration
to be received by shareholders of Seller in the Offer and the Merger and does
not address the relative merits of the Offer and the Merger and any alternatives
to the Offer and the Merger, Seller's underlying decision to proceed with the
Offer or the Merger, or any other aspect of the Offer, the Merger or the other
matters contemplated by the Merger Agreement. This opinion may not be used or
referred to by Seller, or quoted or disclosed to any person in any manner,
without our prior written consent, which consent is hereby given to the
inclusion of this opinion in its entirety in the Tender Offer Statement to be
filed with the Securities and Exchange Commission in connection with the Offer
and/or the Proxy Statement to be filed with the Securities and Exchange
Commission in connection with the Merger.
Very truly yours,
/s/ Nationsbanc Montgomery Securities LLC
NATIONSBANC MONTGOMERY SECURITIES LLC
<PAGE> 1
FOR IMMEDIATE RELEASE
December 17, 1998
Investor Contact: Media Contacts:
Holmes Products Corp. Holmes Products Corp.
Ira Morgenstern Fred Adair
Senior Vice President - Finance Senior Vice President of Human Resources
508/634-8050 508/634-8050
or
The Rival Company
William L. Yager
President and Chief Operating Officer
W. Mark Meierhoffer
Senior Vice President
Finance and Administration
816/943-4100
HOLMES PRODUCTS CORP. ANNOUNCES AGREEMENT TO ACQUIRE
THE RIVAL COMPANY FOR $13.75 PER SHARE
Milford, Massachusetts and Kansas City, Missouri - Dec. 17, 1998 --Holmes
Products Corp. ("Holmes"), a leading maker of consumer comfort products, and The
Rival Company ("Rival")(NASDAQ:RIVL), a leading maker of small kitchen
appliances and home environment products, today announced a definitive merger
agreement under which Holmes will acquire Rival for approximately $127.8 million
plus the assumption of debt.
Under the terms of the merger agreement, unanimously approved by Rival's
Board of Directors, Holmes, through its subsidiary, Moriarty Acquisition Corp.,
will commence a cash tender offer to purchase all outstanding shares of Rival
common stock for $13.75 per share. The transaction is subject to customary
closing conditions, including the valid tender of at least 70% of Rival's
outstanding shares, and is expected to be completed during the first quarter of
1999. Any shares not purchased in the tender will be acquired for the same price
in cash in a second-step merger.
Debt and equity commitments have been received by Holmes to fund the
tender offer and the merger, to refinance certain existing indebtedness of Rival
and Holmes and to pay fees and expenses related to the transaction.
The directors and certain officers of Rival have agreed to tender all of
the Rival shares (approximately 11.3% of the outstanding shares) beneficially
owned by them in the offer.
<PAGE> 2
"The merger of Holmes and Rival is unquestionably a win-win situation for
both companies, our shareholders, our retail partners and consumers," said
Jordan A. Kahn, president and chief executive officer of Holmes. "Rival is a
respected company with strong brands in the kitchen appliance and home comfort
markets, along with product distribution and geographic expansion capabilities
that complement Holmes' established strengths."
The acquisition of The Rival Company will allow Holmes to expand its
product line to include such well-known brands as Bionaire(R), Patton(R) and
Pollenex(R), as well as gain entry into the small kitchen appliance market
through the established Rival(R) brands, including Crock-Pot(R) slow cookers. In
addition, Holmes' international operations will be strengthened by Rival's more
extensive global network. Holmes' strong captive offshore manufacturing will
complement Rival's domestic manufacturing capability. Domestic distribution
capabilities will be significantly expanded as Holmes' east and west coast
distribution centers gain new territorial footholds through Rival's modern
distribution centers in the midwest.
"As we look to the future, Rival's Board of Directors believes this merger
agreement is in the best interests of all of our stockholders. It's no secret
that these are challenging times globally, and we are very pleased to unite with
Holmes on a fair and equitable basis for our shareholders," said Thomas K.
Manning, Rival's chairman and chief executive officer. "Holmes is known for
innovation, integrity and commitment to consumers' health and comfort - values
that we at Rival also embrace. Combining forces will help us continue to deliver
superior products and service for our customers, with a quality work environment
for associates."
The acquisition will be financed, in part, by an additional equity
investment by Berkshire Partners LLC ("Berkshire"), Holmes' majority shareholder
following the November 1997 recapitalization of Holmes by Berkshire and
management. "Our investment in Holmes to support the Rival acquisition is
consistent with our strategy of investing in and supporting companies with
attractive growth prospects and partnering with talented management teams," said
Richard K. Lubin, Managing Director of Berkshire Partners. "We are excited about
the prospect of combining the strengths of Holmes and Rival and their respective
managements."
Donaldson, Lufkin & Jenrette has acted as Holmes' financial advisor in
connection with the transaction, and is acting as dealer manager for the tender
offer.
Holmes Products Corp. is a leader in the development of home comfort
products, including fans, heaters, humidifiers, and air purifiers. In addition,
Holmes markets and distributes a variety of home and office lighting products.
Holmes' net sales for the year ended December 31, 1997 were $192.2 million, and
for the nine months ended September 30, 1998 were $157.6 million. Holmes is
headquartered in Milford, Massachusetts, and has offices in Toronto, Taiwan and
Hong Kong. More information on Holmes may be obtained from the Company's website
at http://www.holmesproducts.com.
<PAGE> 3
The Rival Company is a leading manufacturer of a variety of products
including small kitchen and personal care appliances, such as Crock-Pot(R) slow
cookers, can openers and massagers. The company markets products under the brand
names Rival(R), Rival Select(R), Simer(R), Bionaire(R), Patton(R), Pollenex(R)
and White Mountain(R). Rival's net sales for its fiscal year ended June 30,
1998, were $376.9 million.
Some of the statements in this press release may be considered
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking information is inherently subject
to risks and uncertainties, which include, but are not limited to, the
successful and timely completion of this transaction, the effective integration
of Rival into Holmes and the overall economic, market, and industry conditions,
as well as the risks described from time to time in reports filed by Holmes and
Rival with the Securities and Exchange Commission, including their most recently
filed Form 10-K and Form 10-Q reports. Should any such risks or uncertainties
materialize, or underlying assumptions prove incorrect, actual results or
outcomes may vary materially from those anticipated.
# # #
<PAGE> 1
THE RIVAL COMPANY
800 EAST 101ST TERRACE
KANSAS CITY, MISSOURI 64131
December 23, 1998
Dear Stockholder:
On behalf of the Board of Directors of The Rival Company (the "Company"), I
am pleased to inform you that on December 17, 1998, the Company entered into an
Agreement and Plan of Merger (the "Merger Agreement") with Holmes Products Corp.
("Parent") and Moriarty Acquisition Corp., its wholly-owned subsidiary
("Purchaser"), pursuant to which Purchaser today has commenced a cash tender
offer (the "Offer") to purchase all issued and outstanding shares of Common
Stock of the Company ("Common Shares") at $13.75 per share, net to the seller in
cash (subject to reduction only for any applicable back-up withholding or stock
transfer taxes payable by the seller).
Pursuant to the Merger Agreement, upon satisfaction of certain conditions,
the Offer will be followed by a merger (the "Merger") in which any Common Shares
not tendered pursuant to the Offer (except any Shares owned by the Company,
Parent or Purchaser and Shares as to which the holder has properly exercised
dissenter's rights of appraisal) will be converted into the right to receive
$13.75 per Share in cash, in each case without interest.
THE COMPANY'S BOARD OF DIRECTORS (WITH ONE DIRECTOR ABSENT) HAS UNANIMOUSLY
(A) DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE OFFER AND THE MERGER, ARE FAIR TO AND IN THE BEST
INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, (B) APPROVED THE MERGER AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED THEREBY AND (C) RESOLVED TO RECOMMEND THAT THE
STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND APPROVE AND ADOPT THE MERGER
AGREEMENT AND THE MERGER.
In arriving at its recommendations, the Board of Directors gave careful
consideration to a number of factors. These factors included the opinion dated
December 14, 1998 of NationsBanc Montgomery Securities LLC, financial advisor to
the Company, to the effect that, as of such date and based upon and subject to
certain matters stated in such opinion, the cash consideration of $13.75 per
share to be received by the Company's stockholders (other than Parent and
Purchaser, and other than holders of dissenting Shares, if any) in the Offer and
the Merger was fair from a financial point of view to such stockholders.
Accompanying this letter is a Solicitation/Recommendation Statement on
Schedule 14D-9 (the "Schedule 14D-9") that is being filed today with the
Securities and Exchange Commission. The Schedule 14D-9 describes the Board's
decision to recommend the Offer and the Merger and contains additional important
information relating to the transaction. We urge you to read it carefully in
making your decision with respect to tendering your Shares pursuant to the
Offer. The full text of the financial advisor's opinion is set forth as an Annex
to the Schedule 14D-9 and should, together with the related sections of the
Schedule 14D-9, be read in its entirety in connection with the Offer. The
financial advisor's opinion is directed to the Board of Directors of the Company
and does not constitute a recommendation to any stockholder of the Company as to
how such stockholder should respond to the Offer. The opinion addresses only the
financial fairness of the consideration to be received by the holders of Shares
pursuant to the Offer and the Merger and does not address any other aspect of
the Offer or the Merger.
On behalf of the Board of Directors,
Thomas K. Manning
Chairman of the Board of Directors
and Chief Executive Officer
