As filed with the Securities and Exchange Commission on September 11, 1997
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-1
Tender Offer Statement
Pursuant to Section 14(d)(1) of the Securities Exchange Act of 1934
SCHEDULE 13D
Under the Securities Exchange Act of 1934
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NATIONAL PICTURE & FRAME COMPANY
(Name of Subject Company)
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NPF ACQUISITION CORPORATION
a wholly owned subsidiary of
NPF HOLDING CORPORATION
(Bidders)
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COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class of Securities)
-------------------
637152 10 9 (Common Stock)
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(CUSIP Number of Class of Securities)
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John T. Herzog
James C. Wheat, III
Riverfront Plaza, West Tower
901 East Byrd Street, Suite 1300
Richmond, VA 23219
Telephone: (804) 782-3288
(Names, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidder)
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Copy to:
John Owen Gwathmey, Esq..
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219
Telephone: (804)788-8700
Calculation of Filing Fee
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Transaction valuation: Amount of filing fees:
===============================================================================
$65,752,320* $13,151.00**
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* For purposes of calculating fee only. Based on the offer to purchase
all of the outstanding shares of Common Stock of the Subject Company at
$12.00 per share. This calculation assumes the purchase of 5,479,360
shares of Common Stock of the Subject Company (including 4,972,686
shares outstanding as of September 4 , 1997, and 506,674 shares were
reserved for issuance pursuant to outstanding options to purchase
shares of Common Stock of the Company as of September 4, 1997.)
** 1/50 of 1% of Transaction Valuation determined in accordance with Rule
0-11(d) of the Securities Exchange Act of 1934, as amended.
Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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<S> <C>
Amount Previously Paid: Not Applicable Filing Party: Not Applicable
Form or Registration No.: Not Applicable Date Filed: Not Applicable
<PAGE>
CUSIP NO. 637152 10 9
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14D-1/13D
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1. NAME OF REPORTING PERSONS
S.S. OR IRS IDENTIFICATION NO. OF ABOVE PERSON NPF Acquisition
Corporation
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)[X]
(b)
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3. SEC USE ONLY
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4. SOURCE OF FUNDS BK;AF;WC
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5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) OR 2(f)
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6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
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7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,787,671*
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8. CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
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9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7): 56.1%*
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10. TYPE OF REPORTING PERSON
CO
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<PAGE>
CUSIP NO. 637152 10 9
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14D-1/13D
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1. NAME OF REPORTING PERSONS NPF Holding Corporation
S.S. OR IRS IDENTIFICATION NO. OF ABOVE PERSON
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)[X]
(b)
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3. SEC USE ONLY
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4. SOURCE OF FUNDS WC; OO
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5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) OR 2(f)
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6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
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7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,787,671*
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8. CHECK IF THE AGGREGATE AMUNT IN ROW (7) EXCLUDES CERTAIN SHARES
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9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7): 56.1%*
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10. TYPE OF REPORTING PERSON
CO
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</TABLE>
* 2,707,587 representing approximately 54.4% of the issued and outstanding
shares of National Picture & Frame Company (the "Company") are required to be
tendered in the Offer pursuant to stockholder tender agreements among NPF
Holding Corporation, NPF Acquisition Corporation and certain selling
stockholders of the Company. In addition, NPF Holding Corporation has
entered into subscription and exchange agreements with certain members of
management of the Company (the "Management Investors"), whereby such Management
Investors will subscribe for shares of NPF Holding Corporation in exchange for
80,084 shares of Common Stock of the Company held by the Management Investors
representing 1.6% of the issued and outstanding shares of Common Stock of the
Company.
<PAGE>
TENDER OFFER
This Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1")
relates to the offer by NPF Acquisition Corporation, a Delaware corporation (the
"Purchaser") and wholly owned subsidiary of NPF Holding Corporation (the
"Parent"), to purchase all of the outstanding shares of Common Stock, par value
$0.01 per share (the "Shares"), of National Picture & Frame Company, a Delaware
corporation (the "Company"), at a purchase price of $12.00 per Share, net to the
seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated September 11, 1997 (the
"Offer to Purchase"), a copy of which is attached hereto as Exhibit (a)(l), and
in the related Letter of Transmittal, a copy of which is attached hereto as
Exhibit (a)(2) (which, together with the Offer to Purchase, as the same may be
amended or supplemented from time to time, constitute the "Offer") and is
intended to satisfy the reporting requirements of Section 14(d) of the
Securities and Exchange Act of 1934, as amended.
Item 1. Security and Subject Company
(a) The name of the subject company is National Picture & Frame
Company, a Delaware corporation. The information set forth in Section 7 of the
Offer to Purchase is incorporated herein by reference. The address of its
principal executive offices is 702 Highway 82 West, Greenwood, Mississippi
38930.
(b) The exact title of the class of equity securities being sought in
the Offer is Common Stock, par value $0.01 per share, of the Company. The
information set forth in the Introduction (the "Introduction") of the Offer to
Purchase is incorporated herein by reference.
(c) The information set forth in Section 6 of the Offer to Purchase is
incorporated herein by reference.
Item 2. Identity and Background
(a)-(d) and (g) This Schedule 14D-1 is filed jointly by the Purchaser
and the Parent. The information set forth in Section 8 of the Offer to Purchase
and in Schedule I thereto is incorporated herein by reference.
(e)-(f) Neither the Purchaser nor the Parent, nor to the best
knowledge of the Purchaser and the Parent, any of the persons listed in
Schedule I to the Offer to Purchase has during the last five years (i)
been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or (ii) was a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws.
Item 3. Past Contacts, Transactions or Negotiations With the Subject Company
(a) Since May 1, 1994, there have been no transactions which would be
required to be disclosed under this Item 3(a) between any of the Purchaser,
Parent or, to the best knowledge of the Purchaser and the Parent, any of the
persons listed in Schedule I to the Offer to Purchase and the Company or any of
its executive officers, directors or affiliates.
(b) The information set forth in the Introduction, Section 10 and
Section 11 of the Offer to Purchase is incorporated herein by reference. Except
as set forth in the Introduction, Section 10 and Section 11 of the Offer to
Purchase, since May 1, 1994, there have been no contacts, negotiations or
transactions which would be required to be disclosed under this Item 3(b)
between any of the Purchaser, the Parent or, to the best knowledge of the
Purchaser and Parent, any of those persons listed in Schedule I to the Offer to
Purchase and the Company or its affiliates concerning a merger, consolidation or
acquisition, a tender offer or other acquisition of securities, an election of
directors or a sale or other transfer of a material amount of assets.
Item 4. Source and Amount of Funds or Other Consideration
(a)-(b) The information set forth in Section 9 of the Offer to Purchase
is incorporated herein by reference.
(c) not applicable.
Item 5. Purpose of the Tender Offer and Plans or Proposals of the Bidder.
(a)-(e) The information set forth in the Introduction, Section 10 and
Section 11 of the Offer to Purchase is incorporated herein by reference.
(f)-(g) The information set forth in Section 12 of the Offer to
Purchase is incorporated herein by reference.
Item 6. Interest in Securities of the Subject Company
(a)-(b) The information set forth in the Introduction and Section 8 of
the Offer to Purchase is incorporated herein by reference.
Item 7. Contracts, Arrangements, Understandings or Relationships with Respect to
the Subject Company's Securities.
The information set forth in the Introduction, Section 8, Section 10
and Section 11 of the Offer to Purchase is incorporated herein by reference.
Except as set forth in the Introduction, Section 8, Section 10 and Section 11 of
the Offer to Purchase, none of the Purchaser, the Parent, nor, to the best
knowledge of the Purchaser or the Parent, any of the persons listed in Schedule
I to the Offer to Purchase, has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the Company
(including, but not limited to, any contract, arrangement, understanding or
relationship concerning the transfer or the voting of any such securities, joint
ventures, loan or option arrangements, puts or calls, guaranties of loans,
guaranties against loss or the giving or withholding of proxies).
Item 8. Persons Retained, Employed or to be Compensated
The information set forth in the Introduction and Section 15 of the
Offer to Purchase is incorporated herein by reference.
Item 9. Financial Statements of Certain Bidders
Not Applicable.
Item 10. Additional Information
(a) The information set forth in the Introduction, Section 10 and
Section 11 of the Offer to Purchase is incorporated herein by reference.
(b)-(d) The information set forth in the Introduction, Section 12 and
Section 14 of the Offer to Purchase is incorporated herein by reference.
(e) To the best knowledge of the Purchaser and the Parent, no such
legal proceedings are pending or have been instituted.
(f) The information set forth in the entire text of the Offer to
Purchase and the Letter of Transmittal is incorporated herein by reference.
Item 11. Material to be Filed as Exhibits
(a) (1) Form of Offer to Purchase, dated September 11, 1997.
(2) Form of Letter of Transmittal.
(3) Form of Notice of Guaranteed Delivery.
(4) Form of Letter to Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(5) Form of Letter to Clients for Use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
(6) Internal Revenue Service Certificate of Taxpayer
Identification Number on Form W-9.
(7) Text of Press Release issued by the Company, dated
September 5, 1997.
(8) Summary Advertisement, dated September 11, 1997.
(b) (1) Commitment Letter, dated September 3, 1997, by and
among AT&T Commercial Finance Corporation,
Colonnade Capital, L.L.C. and NPF Acquisition
Corporation.
(c) (1) Confidentiality Agreement, dated as of August 12, 1996,
between Colonnade Capital, L.L.C. and National Picture &
Frame Company.
(c) (2) Letter of Intent, dated as of May 29, 1997, between
Colonnade Capital, L.L.C. and National Picture & Frame
Company.
(c) (3) Agreement and Plan of Merger, dated as of September 4,
1997, by and among NPF Acquisition Corporation, NPF
Holding Corporation, Colonnade Capital, L.L.C. and
National Picture & Frame Company.
(c) (4) Form of Stockholder Tender Agreement-Management, by
and among NPF Acquisition Corporation and certain
stockholders listed thereto of National Picture & Frame
Company.
(c) (5) Form of Stockholder Tender Agreement-Non-Management,
by and among NPF Acquisition Corporation and certain
stockholders listed thereto of National Picture & Frame
Company.
(c) (6) Employment Agreement, by and between NPF Acquisition
Company and Richard A. Beattie.
(c) (7) Employment Agreement, by and between NPF Acquisition
Company and Billy D. Moore.
(c) (8) Consulting and Noncompetition Agreement, dated as of
August 1, 1997, by and between NPF Acquisition Corporation
and Jesse C. Luxton.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
<PAGE>
SIGNATURES
After due 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.
NPF ACQUISITION CORPORATION
By: /s/ John T. Herzog
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John T. Herzog
Vice President
NPF HOLDING CORPORATION
By: /s/ John T. Herzog
-----------------------------
John T. Herzog
President
Date: September 11, 1997
<PAGE>
EXHIBIT INDEX
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EXHIBIT
NO. DESCRIPTION
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(a)(1) Form of Offer to Purchase, dated September 11, 1997.
(2) Form of Letter of Transmittal.
(3) Form of Notice of Guaranteed Delivery.
(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
(5) Form of Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
(6) Internal Revenue Service Certificate of Taxpayer Identification Number on Form W-9.
(7) Text of Press Release issued by the Company, dated September 5, 1997.
(8) Summary Advertisement, dated September 11, 1997.
(b)(1) Commitment Letter, dated September 3, 1997, by and among AT&T Commercial Finance Corporation, Colonnade
Capital, L.L.C. and NPF Acquisition Corporation.
(c)(1) Confidentiality Agreement, dated as of August 12, 1996, between Colonnade Capital, L.L.C. and National Picture
& Frame Company.
(c)(2) Letter of Intent, dated as of May 29, 1997, between Colonnade Capital, L.L.C. and National Picture & Frame
Company.
(c)(3) Agreement and Plan of Merger, dated as of September 4, 1997, by and among NPF Acquisition Corporation, NPF
Holding Corporation, Colonnade Capital, L.L.C. and National Picture & Frame Company.
(c)(4) Form of Stockholder Tender Agreement -- Management, by and among NPF Acquisition Corporation and certain
stockholders listed thereto of National Picture & Frame Company.
(c)(5) Form of Stockholder Tender Agreement -- Non-Management, by and among NPF Acquisition Corporation and certain
stockholders listed thereto of National Picture & Frame Company.
(c)(6) Employment Agreement, by and between NPF Acquisition Company and Richard A. Beattie.
(c)(7) Employment Agreement, by and between NPF Acquisition Company and Billy D. Moore.
(c)(8) Consulting and Noncompetition Agreement, dated as of August 1, 1997, by and between NPF Acquisition
Corporation and Jesse C. Luxton.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
</TABLE>
EXHIBIT (A)(1)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
NATIONAL PICTURE & FRAME COMPANY
AT
$12.00 NET PER SHARE
BY
NPF ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
NPF HOLDING CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON THURSDAY, OCTOBER 9, 1997 UNLESS THE OFFER IS
EXTENDED.
THE OFFER IS BEING MADE PURSUANT TO A MERGER AGREEMENT, DATED AS OF
SEPTEMBER 4, 1997, BY AND AMONG NPF HOLDING CORPORATION (THE "PARENT"), NPF
ACQUISITION CORPORATION (THE "PURCHASER") AND NATIONAL PICTURE & FRAME COMPANY
(THE "COMPANY"). SEE SECTION 10.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST 90% OF
THE SHARES OUTSTANDING ON THE DATE SHARES ARE ACCEPTED FOR PAYMENT, INCLUDING
SHARES OWNED BY THE PARENT OR THE PURCHASER, (II) THE EXPIRATION OR TERMINATION
OF ANY APPLICABLE WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST
IMPROVEMENTS ACT OF 1976, IF APPLICABLE, AND (III) THE SATISFACTION OF CERTAIN
OTHER TERMS AND CONDITIONS. SEE SECTION 13.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT EACH
OF THE OFFER AND THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE
STOCKHOLDERS OF THE COMPANY, AND RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER
AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
CERTAIN STOCKHOLDERS OF THE COMPANY, OWNING IN THE AGGREGATE APPROXIMATELY
56.1% OF THE OUTSTANDING SHARES, INCLUDING ALL DIRECTORS AND EXECUTIVE OFFICERS
OF THE COMPANY, HAVE ENTERED INTO AGREEMENTS WITH THE PARENT AND THE PURCHASER,
PURSUANT TO WHICH SUCH STOCKHOLDERS HAVE AGREED TO TENDER AND SELL ALL OF THEIR
SHARES TO THE PURCHASER PURSUANT TO THE OFFER OTHER THAN SHARES BEING EXCHANGED.
SEE SECTION 10.
-------------------------------------------------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
shares of Common Stock, par value $.01 per share (the "Shares"), of the Company
should either (1) complete and sign the Letter of Transmittal (or a facsimile
thereof) in accordance with the Instructions in the Letter of Transmittal, have
such stockholder's signature thereon, guaranteed if required by the Instructions
to the Letter of Transmittal and mail or deliver the Letter of Transmittal
together with the certificate(s) evidencing tendered Shares, and any other
required documents, to the Depositary or tender such Shares pursuant to the
procedure for book-entry transfer set forth in Section 3 or (2) request such
stockholder's broker, dealer, commercial bank, trust company or other nominee to
effect the transaction for such stockholder. Any stockholder whose Shares are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee must contact such broker, dealer, commercial bank, trust company
or other nominee if such stockholder desires to tender such Shares.
A stockholder who desires to tender Shares and whose certificates
evidencing such Shares are not immediately available, or who cannot comply with
the procedure for book-entry transfer on a timely basis, may tender such Shares
by following the procedure for guaranteed delivery set forth in Section 3.
Questions or requests for assistance may be directed to the Information
Agent or to the Dealer Manager at their respective addresses and telephone
numbers set forth on the back cover of this Offer to Purchase. Additional copies
of this Offer to Purchase, the Letter of Transmittal and the Notice of
Guaranteed Delivery or other tender offer materials may also be obtained from
the Information Agent, the Dealer Manager, or from brokers, dealers, commercial
banks or trust companies.
-------------------------------------------------------
THE DEALER MANAGER FOR THE OFFER IS:
PRUDENTIAL SECURITIES INCORPORATED
September 11, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
INTRODUCTION ................................................1
THE TENDER OFFER .......................................3
1. Terms of the Offer; Expiration Date.................................3
2. Acceptance for Payment and Payment for Shares.......................4
3. Procedures for Accepting the Offer and Tendering Shares.............5
4. Withdrawal Rights ............................7
5. Certain Federal Income Tax Consequences.............................8
6. Price Range of Shares; Dividends....................................9
7. Certain Information Concerning the Company..........................9
8. Certain Information Concerning the Purchaser and the Parent........12
9. Source and Amount of Funds.........................................13
10. Background of the Offer; Contacts with the Company; the Merger
Agreement;
Stockholder Tender Agreements; Subscription and Exchange Agreements;
Employment and Consulting Agreements..............................15
11. Purpose of the Offer; Plans for the Company After the Offer and the
Merger.................................................................24
12. Effect of the Offer on the Market for the Shares Exchange Listing and
Exchange Act Registration..............................................26
13. Certain Conditions of the Offer....................................27
14. Certain Legal Matters and Regulatory Approvals.....................29
15. Fees and Expenses ..........................30
16. Miscellaneous ...................................31
SCHEDULE I -- Directors and Executive Officers of the Purchaser and the
Parent.......................................................................I-1
i
<PAGE>
TO THE HOLDERS OF COMMON STOCK OF
NATIONAL PICTURE & FRAME COMPANY:
INTRODUCTION
NPF Acquisition Corporation, a Delaware corporation (the "Purchaser"), and
a wholly owned subsidiary of NPF Holding Corporation, a Delaware corporation
(the "Parent"), hereby offers to purchase all outstanding shares of common
stock, par value $.01 per share (the "Shares"), of National Picture & Frame
Company, a Delaware corporation (the "Company"), at a price of $12.00 per Share
(such amount or any greater amount per Share paid pursuant to the Offer (as
defined below), being hereinafter referred to as the "Per Share Amount"), net to
the seller in cash, without interest thereon upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which together constitute the "Offer").
The Parent and the Purchaser have been organized at the direction of
Colonnade Capital, L.L.C., a Virginia limited liability company ("Colonnade"),
to effect the transactions described herein. Colonnade is a private investment
firm dedicated to sponsoring friendly growth buyouts of companies. Colonnade is
the general partner of Commonwealth Investors II, L.P. ("Commonwealth II"), NPF
Special Partnership, L.P. ("NPF LP") and NPF Special Partnership II, L.P. ("NPF
II LP"). Colonnade, Commonwealth II, NPF LP and NPF II LP and their respective
affiliates are sometimes referred to in this Offer to Purchase as the "Colonnade
Affiliates." The Colonnade Affiliates will collectively own approximately 86% of
the issued and outstanding capital stock of the Parent on the date of the
Merger.
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the Letter of
Transmittal, stock transfer taxes with respect to the purchase by the Purchaser
of Shares pursuant to the Offer. The Purchaser will pay all charges and expenses
of Prudential Securities Incorporated ("Prudential"), which is acting as Dealer
Manager for the Offer (in such capacity, the "Dealer Manager"), First Union
National Bank, which is acting as the depositary (the "Depositary"), and
MacKenzie Partners, Inc., which is acting as the information agent (the
"Information Agent"), incurred in connection with the Offer. See Section 15.
THE OFFER IS BEING MADE PURSUANT TO A MERGER AGREEMENT, DATED AS OF
SEPTEMBER 4, 1997, BY AND AMONG THE PARENT, THE PURCHASER AND THE COMPANY. SEE
SECTION 10.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST 90% OF
THE SHARES OUTSTANDING ON THE DATE SHARES ARE ACCEPTED FOR PAYMENT, INCLUDING
SHARES OWNED BY THE PARENT OR THE PURCHASER (THE "MINIMUM CONDITION"), (II) THE
EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING PERIOD UNDER THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR
ACT"), IF APPLICABLE, AND (III) THE SATISFACTION OF CERTAIN OTHER TERMS AND
CONDITIONS. SEE SECTION 13.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") HAS UNANIMOUSLY
DETERMINED THAT EACH OF THE OFFER AND THE MERGER (AS DEFINED BELOW) IS FAIR TO,
AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY, AND RECOMMENDS
THAT STOCKHOLDERS ACCEPT AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
CERTAIN STOCKHOLDERS OF THE COMPANY (THE "SELLING STOCKHOLDERS"), OWNING IN
THE AGGREGATE APPROXIMATELY 56.1% OF THE OUTSTANDING SHARES, INCLUDING ALL
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY, HAVE ENTERED INTO AGREEMENTS
WITH THE PARENT AND THE PURCHASER, PURSUANT TO WHICH SUCH STOCKHOLDERS HAVE
AGREED TO TENDER AND SELL ALL OF THEIR SHARES PURSUANT TO THE OFFER OTHER THAN
THE SHARES BEING EXCHANGED. SEE SECTION 10.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of September 4, 1997 (the "Merger Agreement"), among the Parent, the
Purchaser, the Company and Colonnade. The Merger Agreement provides that, among
other things, as soon as practicable after the purchase of Shares pursuant to
the Offer and the satisfaction of the other conditions set forth in the Merger
Agreement and in accordance with the relevant provisions of the General
Corporation Law of the State of Delaware ("Delaware Law"), the Purchaser will be
merged with and into the Company (the "Merger"). Following consummation of the
Merger, the Company will continue as the surviving corporation (the "Surviving
Corporation") and will become a wholly owned subsidiary of the Parent. At the
effective time of the Merger (the "Effective Time"), each Share issued and
outstanding immediately prior to the Effective Time (other than Shares held in
the treasury of the Company or held by the Purchaser, the Parent or any direct
or indirect wholly owned subsidiary of the Parent or of the Company, and other
than Shares held by stockholders who shall have demanded and perfected appraisal
rights, if any, under Delaware Law) will be canceled and converted automatically
into the right to receive $12.00 in cash, or any higher price that may be paid
per
1
<PAGE>
Share in the Offer, without interest (the "Merger Consideration"). The Merger
Agreement is more fully described in Section 10.
Bowles Hollowell Conner & Co. ("Bowles Hollowell"), financial advisor to
the Company, has delivered to the Company's Board of Directors a written
opinion, dated September 4, 1997, to the effect that, as of such date and based
upon and subject to certain matters stated therein, the consideration to be
received by holders of Shares pursuant to the Offer and the Merger is fair to
such holders from a financial point of view (the "Company Fairness Opinion"). A
copy of the Company Fairness Opinion, which sets forth the assumptions made,
matters considered and limitations on the review undertaken by Bowles Hollowell,
is contained in the Company's Solicitation/Recommendation Statement on Schedule
14D-9 (the "Schedule 14D-9"), which is being mailed to stockholders herewith.
The Merger Agreement provides that, promptly upon the purchase by the
Purchaser of Shares pursuant to the Offer and from time to time thereafter, the
Purchaser shall be entitled to designate up to such number of directors, rounded
up to the next whole number, on the Board as will give the Purchaser
representation on the Board equal to the product of the number of directors on
the Board multiplied by the percentage that the aggregate number of Shares then
beneficially owned by the Purchaser and its affiliates following such purchase
bears to the total number of Shares then outstanding. In the Merger Agreement,
the Company has agreed to take all actions necessary to cause the Purchaser's
designees to be elected as directors of the Company, including increasing the
size of the Board or securing the resignations of incumbent directors or both.
Following the election or appointment of the Purchaser's designees, any
amendment or 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 the Purchaser or waiver of any of the Company's rights thereunder
will require the concurrence of a majority of the directors of the Company then
in office who are not designated by the Purchaser if such amendment,
termination, extension or waiver would be reasonably likely to have an adverse
effect on the minority stockholders of the Company.
The consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including the approval and adoption of the Merger Agreement
by the requisite vote of the stockholders of the Company. See Section 11. Under
the Company's Certificate of Incorporation and under Delaware Law, the
affirmative vote of the holders of a majority of the outstanding Shares is
required to approve and adopt the Merger Agreement and the Merger. Consequently,
if the Purchaser acquires (pursuant to the Offer or otherwise) at least a
majority of the outstanding Shares, the Purchaser will have sufficient voting
power to approve and adopt the Merger Agreement and the Merger without the vote
of any other stockholder.
Under Delaware Law, if the Purchaser acquires, pursuant to the Offer or
otherwise, at least 90% of the then outstanding Shares, the Purchaser will be
able to approve and adopt the Merger Agreement and the transactions contemplated
thereby, including the Merger, without a vote of the Company's stockholders. In
such event, the Parent, the Purchaser and the Company have agreed to take, at
the request of the Purchaser, all necessary and appropriate action to cause the
Merger to become effective as soon as reasonably practicable after such
acquisition, without a meeting of the Company's stockholders. If, however, the
Purchaser does not acquire at least 90% of the then outstanding Shares pursuant
to the Offer or otherwise and the Purchaser elects to waive the Minimum
Condition, then a vote of the Company's stockholders would be required under
Delaware Law, and a significantly longer period of time will be required to
effect the Merger. See Section 11. The satisfaction of the Minimum Condition is
also a condition to the lender's obligation to lend the funds necessary to pay
for the Shares validly tendered and accepted for payment pursuant to the
Commitment Letter (as defined in Section 9 herein), and the Purchaser believes
that it is unlikely that the lender will waive this condition.
The Company has advised the Purchaser that as of September 4, 1997,
4,972,686 Shares were issued and outstanding, and 506,674 Shares were reserved
for issuance pursuant to outstanding stock options granted by the Company to
employees and directors. As a result, as of such date, the Minimum Condition
would be satisfied if the Purchaser acquired 4,475,418 Shares including any
Shares owned by the Parent or the Purchaser.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION, WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
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THE TENDER OFFER
1. TERMS OF THE OFFER; EXPIRATION DATE.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of such extension or
amendment), the Purchaser will accept for payment and pay for all Shares validly
tendered on or prior to the Expiration Date (as hereinafter defined) and not
properly withdrawn as permitted by Section 4. The term "Expiration Date" means
5:00 p.m., New York City time, on Thursday, October 9, 1997, unless and until
the Purchaser, in its sole discretion (but subject to the terms and conditions
of the Merger Agreement), shall have extended the period during which the Offer
is open, in which event the term "Expiration Date" shall mean the latest time
and date at which the Offer, as so extended by the Purchaser, shall expire.
The Purchaser expressly reserves the right, in its sole discretion, at any
time and from time to time, to extend the period of time during which the Offer
is open, for any reason, including failure to satisfy any of the conditions
specified in Section 13, and thereby delay acceptance for payment of, and
payment for, any Shares, by giving oral or written notice of such extension to
the Depositary, and making a public announcement, as described below. There can
be no assurance that the Purchaser will exercise its right to extend the Offer.
During any such extension, all Shares previously tendered and not properly
withdrawn will remain subject to the Offer, subject to the rights of a tendering
stockholder to withdraw such stockholder's Shares. See Section 4.
Subject to the applicable regulations of the Securities and Exchange
Commission (the "Commission"), the Purchaser also expressly reserves the right,
in its sole discretion (but subject to the terms and conditions of the Merger
Agreement), at any time and from time to time, (i) to delay acceptance for
payment of, or, regardless of whether such Shares were theretofore accepted for
payment, payment for any Shares pending receipt of any regulatory approvals
specified in Section 14, (ii) to terminate the Offer and not accept for payment
or pay for any Shares if any of the conditions referred to in Section 13 have
not been satisfied or upon the occurrence and during the continuance of any of
the conditions specified in Section 13 and (iii) to waive any condition or
otherwise amend the Offer in any respect, in each case, by giving oral or
written notice of such delay, termination, waiver or amendment to the Depositary
and by making a public announcement thereof. The Merger Agreement provides that,
without the consent of the Company, the Purchaser will not (i) decrease the
price per Share or change the consideration payable in the Offer, (ii) decrease
the number of Shares to be purchased in the Offer or (iii) change or impose
conditions to the Offer in addition to those set forth in Section 13. The
Purchaser acknowledges that (x) Rule 14e-1(c) under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), requires the Purchaser to pay the
consideration offered or to return the Shares tendered promptly after the
termination or withdrawal of the Offer and (y) that the Purchaser may not delay
acceptance for payment of, or payment for (except as provided in clause (i) of
the first sentence of this paragraph), any Shares upon the occurrence of any of
the conditions specified in Section 13 without extending the period of time
during which the Offer is open.
If the Minimum Condition or any other condition specified in Section 13 is
not fulfilled by the Expiration Date, the Purchaser reserves the right (but
shall not be obligated) to (i) decline to purchase any of the Shares tendered,
return all tendered Shares to tendering stockholders and terminate the Offer,
(ii) extend the Offer and retain all tendered Shares until the expiration of the
Offer, as extended, subject to the terms and conditions of the Offer (including
any rights of stockholders to withdraw their Shares) or (iii) waive or reduce
the condition and, subject to complying with applicable rules and regulations of
the Commission, accept for payment and purchase all Shares validly tendered.
Any extension, delay, termination, waiver or amendment will be followed as
promptly as practicable by a public announcement thereof, such announcement in
the case of an extension, to be made no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the
Exchange Act, which require that material changes be promptly disseminated to
stockholders in a manner reasonably designed to inform them of such changes) and
without limiting the manner in which the Purchaser may choose to make any public
announcement, the Purchaser shall have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by issuing a press
release to the Dow Jones News Service.
If, as permitted by the Merger Agreement, the Purchaser makes a material
change in the terms of the Offer or the information concerning the Offer, or if
it waives a material condition of the Offer, the Purchaser will disseminate
additional tender offer materials (including by public announcement as set forth
above) and extend the Offer to the extent required by Rules l4d-4(c) and
l4d-6(d) under the Exchange Act. The minimum period during which an offer must
remain open following material changes to the terms of the offer or information
concerning the offer, other than a change in price or a change in percentage of
securities sought or a change in any dealer's soliciting fee, will depend upon
the facts and circumstances,
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including the relative materiality of the changes. With respect to a change in
price or, subject to certain limitations, a change in the percentage of
securities sought or a change in any dealer's soliciting fee, a minimum ten
business day period from the day of such change is generally required to allow
for adequate dissemination to stockholders.
Subject to the terms of the Merger Agreement, if, prior to the Expiration
Date, the Purchaser should decide to decrease the number of Shares being sought
or to increase or decrease the consideration being offered in the Offer, such
decrease in the number of Shares being sought or such increase or decrease in
the consideration being offered will be applicable to all stockholders whose
Shares are accepted for payment pursuant to the Offer and, if at the time notice
of any such decrease in the number of Shares being sought or such increase or
decrease in the consideration being offered is first published, sent or given to
holders of such Shares, the Offer is scheduled to expire at any time earlier
than the period ending on the tenth business day from and including the date
that such notice is first so published, sent or given, the Offer will be
extended at least until the expiration of such ten business day period. For
purposes of the Offer, a "business day" means any day other than a Saturday,
Sunday or federal holiday and consists of the time period from 12:01 a.m.
through 12:00 midnight, New York City time.
The Company has provided the Purchaser with the Company's stockholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of Transmittal
and, if required, other relevant material will be mailed to record holders of
Shares whose names appear on the Company's stockholder list and will be
furnished, for subsequent transmittal to beneficial owners of Shares, to
brokers, dealers, commercial banks, trust companies and similar persons whose
names, or the names of whose nominees, appear on the Company's stockholder list
or, if applicable, who are listed as participants in a clearing agency's
security position listing for subsequent transmittal to beneficial owners of
Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will accept for payment, and will pay for, all
Shares validly tendered on or prior to the Expiration Date and not properly
withdrawn (including Shares validly tendered and not withdrawn during any
extension of the Offer, if terms and conditions of such extension) promptly
after the later to occur of (i) the Expiration Date, (ii) the expiration or
termination of any applicable waiting periods under the HSR Act, and (iii) the
satisfaction or waiver of the conditions to the Offer set forth in Section 13.
Subject to applicable rules of the Commission, the Purchaser expressly reserves
the right to delay acceptance for payment of, or payment for, Shares pending
receipt of any regulatory approvals specified in Section 14 or in order to
comply, in whole or in part, with any other applicable law.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i) the
certificates evidencing such Shares (the "Share Certificates") or timely
confirmation of a book-entry transfer of such Shares (a "Book-Entry
Confirmation") into the Depositary's account at The Depository Trust Company or
the Philadelphia Trust Company (each, a "Book-Entry Transfer Facility" and,
collectively, the "Book-Entry Transfer Facilities") pursuant to the procedures
set forth in Section 3, (ii) the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees, or
an Agent's Message (as defined below) in connection with a book-entry transfer,
and (iii) any other documents required under the Letter of Transmittal.
Accordingly, payment may be made to tendering stockholders at different times if
delivery of the Shares and other required documents occurs at different times.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares which are the subject of such Book-Entry
Confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that the Purchaser may enforce such
agreement against such participant.
The Parent and the Company have determined that no filing with the Federal
Trade Commission (the "FTC") and the Antitrust Division of the Department of
Justice (the "Antitrust Division") of a Premerger Notification and Report Form
under the HSR Act with respect to the Offer is required in connection with the
Offer and the Merger. See Section 14 for additional information regarding the
HSR Act.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance for payment of such Shares pursuant to
the Offer. Upon the terms and subject to the conditions of
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the Offer, payment for Shares accepted for payment pursuant to the Offer will be
made by deposit of the aggregate purchase price therefor with the Depositary,
which will act as agent for tendering stockholders for the purpose of receiving
payments from the Purchaser and transmitting such payments to tendering
stockholders whose Shares have been accepted for payment. Under no circumstances
will interest on the purchase price for Shares be paid by the Purchaser,
regardless of any delay in making such payment. Upon the deposit of funds with
the Depositary for the purpose of making payment to validly tendering
stockholders, the Purchaser's obligation to make such payment shall be satisfied
and such tendering stockholders must thereafter look solely to the Depositary
for payment of the amounts owed to them by reason of acceptance for payment of
shares pursuant to the Offer.
If any tendered Shares are not accepted for payment, for any reason,
pursuant to the terms and conditions of the Offer, or if Share Certificates are
submitted evidencing more Shares than are tendered, Share Certificates
evidencing unpurchased or untendered Shares will be returned, without expense to
the tendering stockholder (or, in the case of Shares tendered by book-entry
transfer into the Depositary's account at a Book-Entry Transfer Facility
pursuant to the procedure set forth in Section 3, such Shares will be credited
to an account maintained at such Book-Entry Transfer Facility), as promptly as
practicable following the expiration or termination of the Offer.
If, on or prior to the Expiration Date, the Purchaser increases the
consideration to be paid per Share, the Purchaser will pay such increased
consideration for all Shares purchased pursuant to the Offer, whether or not
such Shares have been tendered or purchased prior to such increase in
consideration.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to one or more of its affiliates, the right to purchase
all or any portion of the Shares tendered pursuant to the Offer, but any such
transfer or assignment will not relieve the Purchaser of its obligations under
the Offer and will in no way prejudice the rights of tendering stockholders to
receive payment for Shares validly tendered and accepted for payment pursuant to
the Offer.
3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES.
GENERAL
Except as set forth below, in order for a holder of Shares validly to
tender Shares pursuant to the Offer, the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, together with any required
signature guarantees (or, in the case of a book-entry transfer, an Agent's
Message in lieu of the Letter of Transmittal) and any other documents required
by the Letter of Transmittal, must be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase on or prior to
the Expiration Date and either (i) the Share Certificates evidencing tendered
Shares must be received by the Depositary at such address or such Shares must be
tendered pursuant to the procedure for book-entry transfer described below and a
Book-Entry Confirmation must be received by the Depositary (including an Agent's
Message if the tendering stockholder has not delivered a Letter of Transmittal),
in each case on or prior to the Expiration Date, or (ii) the tendering
stockholder must comply with the guaranteed delivery procedures described below.
No alternative, conditional or contingent tenders will be accepted, and no
fractional Shares will be purchased. All tendering stockholders, by execution of
the Letter of Transmittal (or facsimile thereof) waive any right to receive any
notice of the acceptance of their Shares for payment.
The method of delivery of Share Certificates and all other required
documents, including delivery through any Book-Entry Transfer Facility, is at
the option and risk of each tendering stockholder, and the delivery will be
deemed made only when actually received by the Depositary. If delivery is by
mail, registered mail with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to ensure timely
delivery.
BOOK-ENTRY TRANSFER
The Depositary will make a request to establish accounts with respect to
the Shares at the Book-Entry Transfer Facilities for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in the system of any Book-Entry Transfer
Facility may make a book-entry delivery of Shares by causing such Book-Entry
Transfer Facility to transfer such Shares into the Depositary's account at such
Book-Entry Transfer Facility in accordance with such Book-Entry Transfer
Facility's procedures for such transfer. However, although delivery of Shares
may be effected through book-entry transfer into the Depositary's account at a
Book-Entry Transfer Facility, the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, together with any required
signature guarantees, or an Agent's Message in lieu of the Letter of
Transmittal, and any other required documents, must, in any case, be received by
the Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase on or prior to the Expiration Date, in
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order for such Shares to be validly tendered pursuant to the Offer, or the
tendering stockholder must comply with the guaranteed delivery procedure
described below. Delivery of documents to a Book-Entry Transfer Facility in
accordance with such Book-Entry Transfer Facility's procedures does not
constitute delivery to the Depositary.
SIGNATURE GUARANTEES
Signatures on all Letters of Transmittal must be guaranteed by a firm that
is a bank, broker, dealer, credit union, savings association or other entity
which is a member in good standing of the Securities Transfer Agents Medallion
Program, the Stock Exchanges' Medallion Program or the New York Stock Exchange,
Inc. Medallion Signature Program (each of the foregoing being referred to as an
"Eligible Institution"), except in cases where Shares are tendered (i) by a
registered holder of Shares who has not completed either the box entitled
"Special Payment Instructions" or the box entitled "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. If a Share Certificate is registered in the name of a
person other than the signer of the Letter of Transmittal, or if payment is to
be made, or a Share Certificate not accepted for payment or not tendered is to
be returned, to a person other than the registered holder(s), then the Share
Certificate must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name(s) of the registered holder(s) appear on
the Share Certificate, with the signature(s) on such Share Certificate or stock
powers guaranteed by an Eligible Institution as provided above and in the Letter
of Transmittal. See Instructions 1 and 5 of the Letter of Transmittal.
GUARANTEED DELIVERY
If a stockholder desires to tender Shares pursuant to the Offer and such
stockholder's Share Certificates evidencing such Shares are not immediately
available or such stockholder cannot deliver the Share Certificates and all
other required documents to the Depositary on or prior to the Expiration Date,
or such stockholder cannot complete the procedure for delivery by book-entry
transfer on a timely basis, such Shares may nevertheless be tendered, provided
that all the following conditions are satisfied:
(a) such tender is made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form made available by the Purchaser herewith, is received
on or prior to the Expiration Date by the Depositary, as provided below; and
(c) the Share Certificates (or a Book-Entry Confirmation) evidencing all
tendered Shares, in proper form for transfer, in each case together with the
Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, with any required signature guarantees, or, in the case of book-entry
transfer, an Agent's Message and any other documents required by the Letter of
Transmittal are received by the Depositary within four Nasdaq National Market
("Nasdaq") trading days after the date of execution of such Notice of Guaranteed
Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by telegram, mail, telex or facsimile transmission to the Depositary
and must include a guarantee by an Eligible Institution in the form set forth in
the form of Notice of Guaranteed Delivery made available by the Purchaser and a
representation that the stockholder on whose behalf the tender is being made is
deemed to own the Shares being tendered within the meaning of Rule 14e-4
promulgated under the Exchange Act.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of the
Share Certificates evidencing such Shares, or a Book-Entry Confirmation of the
delivery of such Shares into the Depositary's account at a Book-Entry Transfer
Facility, and the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, together with any required signature guarantees, or
in the case of a book-entry transfer, an Agent's message, and any other
documents required by the Letter of Transmittal. Accordingly, payment might not
be made to all tendering stockholders at the same time, and will depend upon
when Share Certificates or Book-Entry Confirmations of such Shares are received
into the Depositary's account at a Book-Entry Transfer Facility.
DETERMINATION OF VALIDITY.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of Shares pursuant to any of
the procedures described above will be determined by the Purchaser in its sole
discretion, which determination shall be final and binding on all parties. The
Purchaser reserves the absolute right to reject any and all tenders of any
particular Shares determined by it not to be in proper form or the acceptance
for payment of which may, in the opinion of its counsel, be unlawful. The
Purchaser also reserves the absolute right to waive any condition of the Offer
(subject to the terms and conditions of the Merger Agreement) or any defect or
irregularity, in the tender of any Shares of any particular
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stockholder, whether or not similar defects or irregularities are waived in the
case of other stockholders. The Purchaser's interpretations of the terms and
conditions of the Offer (including the Letter of Transmittal and the
Instructions, thereto) will be final and binding. No tender of Shares will be
deemed to have been validly made until all defects and irregularities have been
cured or waived. None of the Purchaser, the Parent, the Dealer Manager, the
Depositary, the Information Agent or any other person will be under any duty to
give notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification. The Purchaser's
interpretation of the terms and conditions of the Offer (including the Letter of
Transmittal and the Instructions thereto) will be final and binding.
BACKUP FEDERAL TAX WITHHOLDING.
Under the federal income tax laws, the Depositary may, under certain
circumstances, be required to withhold 31% of the amount of any payments made to
certain stockholders pursuant to the Offer. To prevent such backup federal
income tax withholding with respect to payments made to stockholders of the
purchase price of Shares purchased pursuant to the Offer, each stockholder who
does not otherwise establish an exemption from such withholding must provide the
Depositary with such stockholder's correct taxpayer identification number and
certify that such stockholder is not subject to backup federal income tax
withholding by completing the Form W-9 made available by the Purchaser herewith.
See Instruction 9 of the Letter of Transmittal.
OTHER REQUIREMENT
It is a violation of Section 14(e) of the Exchange Act and Rule 14e-4
promulgated thereunder for a person, directly or indirectly, to tender Shares
for his own account unless the person so tendering (i) has a net long position
equal to or greater than his amount of (x) Shares tendered or (y) other
securities immediately convertible into, exercisable, or exchangeable for the
amount of Shares tendered and will acquire such Shares for tender by conversion,
exercise or exchange of such other securities and (ii) will cause such Shares to
be delivered in accordance with the terms of the Offer. Rule 14e-4 provides a
similar restriction applicable to the tender or guarantee of a tender on behalf
of another person.
A tender of Shares made pursuant to any one of the procedures set forth
above will constitute the tendering stockholder's acceptance of terms and
conditions of the Offer, including the tendering stockholder's representation
and warranty that (i) such stockholder has a net long position in the Shares
being tendered within the meaning of Rule 14e-4 and (ii) the tender of such
Shares complies with Rule 14e-4.
By executing the Letter of Transmittal as set forth above, a tendering
stockholder irrevocably appoints designees of the Purchaser as such
stockholder's proxies, each with full power of substitution, in the manner set
forth in the Letter of Transmittal, to the full extent of such stockholder's
rights with respect to the Shares tendered by such stockholder and accepted for
payment by the Purchaser (and with respect to any and all other Shares or other
securities issued or issuable in respect of such Shares on or after the date of
the Merger Agreement). All such proxies shall be considered coupled with an
interest in the tendered Shares. Such appointment will be effective when, and
only to the extent that, the Purchaser accepts such Shares for payment. Upon
such acceptance for payment, all prior proxies given by such stockholder with
respect to such Shares (and such other Shares and securities) will be revoked
without further action, and no subsequent proxies may be given nor any
subsequent written consent executed by such stockholder (and, if given or
executed, will not be deemed to be effective) with respect thereto. The
designees of the Purchaser will, with respect to the Shares for which the
appointment is effective, be empowered to exercise all voting and other rights
of such stockholder as they in their sole discretion may deem proper at any
annual or special meeting of the Company's stockholders or any adjournment or
postponement thereof, by written consent in lieu of any such meeting or
otherwise. The Purchaser reserves the right to require that, in order for Shares
to be deemed validly tendered, immediately upon the Purchaser's payment for such
Shares, the Purchaser must be able to exercise full voting rights with respect
to such Shares.
THE ACCEPTANCE FOR PAYMENT BY THE PURCHASER OF SHARES PURSUANT TO ANY OF
THE PROCEDURES DESCRIBED ABOVE WILL CONSTITUTE A BINDING AGREEMENT BETWEEN THE
TENDERING STOCKHOLDER AND THE PURCHASER UPON THE TERMS AND SUBJECT TO THE
CONDITIONS OF THE OFFER.
4. WITHDRAWAL RIGHTS.
Tenders of Shares made pursuant to the Offer are irrevocable, except that
such Shares may be withdrawn at any time on or prior to the Expiration Date and,
unless theretofore accepted for payment by the Purchaser pursuant to the Offer,
may also be withdrawn at any time after November 9, 1997. If the Purchaser
extends the Offer, is delayed in, or delays, its acceptance for payment of
Shares or is unable to accept Shares for payment pursuant to the Offer for any
reason, then, without prejudice
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to the Purchaser's rights under the Offer, the Depositary may, nevertheless, on
behalf of the Purchaser, retain tendered Shares, and such Shares may not be
withdrawn except to the extent that tendering stockholders are entitled to
withdrawal rights as described in this Section 4. Any such delay will be
accompanied by an extension of the Offer to the extent required by law.
In order for a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses or numbers set forth on the back cover page
of this Offer to Purchase. Any such notice of withdrawal must specify the name
of the person who tendered the Shares to be withdrawn, the number of Shares to
be withdrawn and (if Share Certificates have been delivered or otherwise
identified to the Depositary) the name of the registered holder of such Shares,
if different from that of the person who tendered such Shares. If Share
Certificates evidencing Shares to be withdrawn have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such Share
Certificates, the serial numbers shown on such Share Certificates to be
withdrawn must be submitted to the Depositary and the signature(s) on the notice
of withdrawal must be guaranteed by an Eligible Institution, unless such Shares
have been tendered for the account of an Eligible Institution. If Shares have
been tendered pursuant to the procedures for book-entry transfer as set forth in
Section 3, any notice of withdrawal must specify the name and number of the
account at the Book-Entry Transfer Facility to be credited with the withdrawn
Shares, in which case a notice of withdrawal will be effective if delivered to
the Depositary by any method of delivery described in the first sentence of this
paragraph.
All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding. None of the
Purchaser, the Parent, the Dealer Manager, the Depositary, the Information Agent
or any other person will be under any duty to give notification of any defects
or irregularities in any notice of withdrawal or incur any liability for failure
to give any such notification.
Any Shares properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered at any time prior to the Expiration Date by following one of the
procedures described in Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following is a summary of the material federal income tax consequences
of the Offer and the Merger to the holders of Shares, except for Management
Investors (as defined below under Section 10), and is based on the law as
currently in effect, including modification made by the Taxpayer Relief Act of
1997. This summary is based upon the provisions of the Internal Revenue Code of
1986, as amended (the "Code"), applicable Treasury regulations thereunder,
judicial decisions and current administrative rulings. The discussion does not
address all aspects of federal income taxation that may be relevant to
particular taxpayers in light of their personal investment circumstances or to
taxpayers subject to special treatment under the Code (for example, life
insurance companies, tax-exempt entities, financial institutions,
broker-dealers, foreign corporations, employee benefit plans, personal holding
companies, individuals who are not citizens or residents of the United States,
and holders whose Shares were acquired pursuant to the exercise of employee
stock options or otherwise as compensation) and does not address any aspect of
state, local or foreign taxation. This discussion does not address the federal
income tax consequences of the Offer and the Merger to stockholders who are
Management Investors. EACH HOLDER OF SHARES IS URGED TO CONSULT SUCH HOLDER'S
TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO SUCH HOLDER OF THE OFFER AND
THE MERGER, INCLUDING THE APPLICATION OF STATE, LOCAL AND FOREIGN TAX LAWS.
The receipt of cash pursuant to the Offer or the Merger will be a taxable
transaction for federal income tax purposes under the Code. Generally, a
stockholder will recognize gain or loss in an amount equal to the difference
between the cash received by the stockholder pursuant to the Offer or the Merger
and the stockholder's adjusted tax basis in the Shares tendered and purchased
pursuant to the Offer or the Merger. Gain or loss is computed separately for
each block of Shares (I.E., Shares which were purchased at the same time and
price) sold. For federal income tax purposes, such gain or loss will be a
capital gain or loss if the Shares are a capital asset in the hands of the
stockholder. Capital gains of individuals, estates and trusts generally are
subject to a maximum federal income tax rate of (i) 39.6% if, at the time the
Purchaser accepts the Shares for payment pursuant to the Offer or the effective
date of the Merger, as the case may be, the stockholder held the Shares for not
more than one year, (ii) 28% if the stockholder held such Shares for more than
one year but not more than 18 months at such time, and (iii) 20% if the
stockholder held such Shares for more than 18 months at such time. Capital gains
of corporations generally are taxed at the federal income tax rates applicable
to ordinary income. Ordinary income is taxable at a maximum rate of 39.6% for
individuals and 35% for corporations. There are significant limitations on the
deductibility of
8
<PAGE>
capital losses by individuals and corporations. Capital losses can offset
capital gains on a dollar-for-dollar basis and, in the case of an individual
stockholder, capital losses in excess of capital gains can be deducted to the
extent of $3,000 annually. An individual can carry forward unused capital losses
indefinitely. A corporation can utilize capital losses only to offset capital
gain income; a corporation's unused capital losses can be carried back three
years and forward five years.
The receipt of cash pursuant to a stockholder's exercise of dissenter's
rights in connection with the Merger will be a taxable transaction for federal
income tax purposes. Any stockholders considering the exercise of dissenter's
rights are urged to consult their individual tax advisors regarding the tax
consequences of the exercise of such rights.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND IS BASED UPON PRESENT LAW. STOCKHOLDERS ARE URGED TO
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE
OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF THE
ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL AND FOREIGN TAX LAWS.
6. PRICE RANGE OF SHARES; DIVIDENDS.
The Shares are listed and traded principally on the Nasdaq National Market
("Nasdaq") under the symbol "NPAF". The following table sets forth, for the
quarters indicated, the high and low sales prices per Share on Nasdaq as
reported by the Dow Jones News Service.
<TABLE>
<CAPTION>
HIGH LOW
----------- -----------
<S> <C>
FISCAL YEAR 1996 ENDING APRIL 30, 1996:
First Quarter........................................................................ 10 1/4 8 1/4
Second Quarter....................................................................... 10 7 3/4
Third Quarter........................................................................ 9 3/4 8 1/2
Fourth Quarter....................................................................... 10 1/2 8 7/8
FISCAL YEAR 1997, ENDING APRIL 30, 1997:
First Quarter........................................................................ 11 1/4 8 5/8
Second Quarter....................................................................... 11 3/4 10 3/8
Third Quarter........................................................................ 11 1/2 9 1/4
Fourth Quarter....................................................................... 10 1/4 8 5/8
FISCAL YEAR 1998, ENDING APRIL 30, 1998:
First Quarter........................................................................ 11 3/8 8 3/4
Second Quarter (through September 10)................................................ 12 10 3/4
</TABLE>
Although there is no legal or contractual restriction on the payment of
dividends by the Company, historically the Company has never declared or paid
dividends and has stated that it has no future plans to do so. The Company has
advised the Purchaser that if the Offer and the Merger were not to be
consummated, it would expect to continue to retain any future earnings for the
development of its business.
On May 29, 1997, the last full trading day prior to the announcement of a
letter of intent between Colonnade and the Company and of Colonnade's intention
to acquire the Company through the Parent and the Purchaser, the closing price
per Share as reported on Nasdaq was $9 1/8. On September 4, 1997, the last full
trading day prior to the announcement of the execution of the Merger Agreement
and of the Purchaser's intention to commence the Offer, the closing price per
Share as reported on Nasdaq was $10 3/4. On September 10, 1997, the last full
trading day prior to the commencement of the Offer, the closing price per Share
as reported on Nasdaq was $11 5/8.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
7. CERTAIN INFORMATION CONCERNING THE COMPANY.
Except as otherwise set forth herein, the information concerning the
Company contained in this Offer to Purchase, including financial information,
has been furnished by the Company or has been taken from or based upon publicly
available documents and records on file with the Commission and other public
sources. Stockholders are urged to review the publicly available information
concerning the Company before acting on the Offer. Although neither the Parent
nor the Purchaser has any knowledge that would indicate that statements
contained herein based upon such documents are untrue, neither the Purchaser nor
the Parent assumes any responsibility for the accuracy or completeness of the
information concerning the
9
<PAGE>
Company furnished by the Company or contained in such documents and records or
for any failure by the Company to disclose events which may have occurred or may
affect the significance or accuracy of any such information but which are
unknown to the Purchaser or the Parent.
The Company is a Delaware Corporation with its principal executive offices
located at 702 Highway 82 West, Greenwood, Mississippi 38930 where its telephone
number is (601) 453-6686. According to the Company's Annual Report on Form 10-K
for the fiscal year ended April 30, 1997 (the "Form 10-K"), the Company, through
its wholly owned subsidiary NPF Company, a Delaware corporation, designs,
manufactures and markets a wide variety of picture frames, framed mirrors,
framed art and other items for home decor for sale primarily through major mass
merchant retailers.
The Company is subject to the disclosure requirements of the Exchange Act
and in accordance therewith is required to file reports, proxy statements and
other information with the Commission relating to its business, financial
condition and other matters. In addition, the Company has filed a statement on
Schedule 14D-9 regarding its recommendation to the Company's Stockholders with
respect to the Offer. Such reports, proxy statements, Schedule 14D-9 and other
information are available for inspection at the Commission's public reference
facilities at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549
and should be available for inspection at the regional offices of the Commission
located at Seven World Trade Center, Suite 1300, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies may be obtained at prescribed rates from the Commission's principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
maintains a World Wide Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of the site is http://www.sec.gov. In addition,
certain material filed by the Company should also be available for inspection at
the offices of the NASD, Reports Section, 1735 K Street, N.W., Washington, D.C.
20006.
FINANCIAL INFORMATION
Set forth below is certain selected consolidated financial information
relating to the Company and its subsidiaries which has been excerpted or derived
from the audited consolidated financial statements contained in the Form 10-K,
the unaudited consolidated financial statements contained in the Company's
Quarterly Report on Form 10-Q for the quarter ended July 31, 1996 and the
Company's earnings press release with respect to the unaudited consolidated
financial statements for the quarter ended July 31, 1997. More comprehensive
financial information is included in the Form 10-K and other documents filed by
the Company with the Commission. The financial information that follows is
qualified in its entirety by reference to such reports and other documents,
including the consolidated financial statements and related notes contained
therein. Such reports and other documents may be examined and copies may be
obtained from the offices of the Commission in the manner set forth above.
10
<PAGE>
NATIONAL PICTURE & FRAME COMPANY
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED APRIL 30 JULY 31
---------------------------------------- ------------------
1994 1995 1996 1997 1996 1997
------- ------- ------- ------- ------- -------
<S> <C>
(UNAUDITED)
Net sales................................................... $51,293 $60,794 $67,169 $73,355 $14,170 $14,032
Cost of goods sold.......................................... 39,079 44,837 50,701 54,879 10,878 10,701
------- ------- ------- ------- ------- -------
12,214 15,957 16,468 18,476 3,292 3,331
Operating expenses:
Selling................................................... 3,079 3,612 3,944 4,359 901 1,040
General and administrative................................ 2,270 3,172 3,459 3,920 1,132 907
Bad debt expense.......................................... 140 180 50 95 -- --
Amortization of intangibles............................... 356 359 356 432 108 96
------- ------- ------- ------- ------- -------
5,845 7,323 7,809 8,806 2,141 2,043
------- ------- ------- ------- ------- -------
Operating income............................................ 6,369 8,634 8,659 9,670 1,151 1,288
Other income and expenses:
Interest expense.......................................... (1,238) (615) (497) (486) (118) (96)
Other income and expense.................................. 5 1 1 (8) -- --
------- ------- ------- ------- ------- -------
(1,233) (614) (496) (494) (118) (96)
------- ------- ------- ------- ------- -------
Income before income taxes and extraordinary charge......... 5,136 8,020 8,163 9,176 1,033 1,192
Income taxes................................................ 1,869 2,992 3,102 3,518 (391) (454)
------- ------- ------- ------- ------- -------
Extraordinary charges from early extinguishment of debt, net
of income taxes of $357................................... (601) -- -- -- -- --
------- ------- ------- ------- ------- -------
Net income.................................................. $ 2,666 $ 5,028 $ 5,061 $ 5,658 $ 642 $ 738
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
Net income per share........................................ $ .60 $ 1.01 $ 1.02 $ 1.14 $ 0.13 $ 0.15
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
AT APRIL 30 AT JULY 31
------------------------------ -----------
BALANCE SHEET DATA: 1995 1996 1997 1997
-------- -------- -------- -----------
<S> <C>
(UNAUDITED)
Current assets.................................................................. $ 20,366 $ 22,668 $ 23,960 $22,985
Total assets.................................................................... 42,077 49,036 52,618 51,378
Working capital................................................................. 14,695 14,113 15,678 16,346
Current liabilities............................................................. 5,671 8,555 8,282 6,639
Long term debt -- exclusive of current maturities............................... 6,530 5,513 3,246 2,896
Total stockholders' equity...................................................... 28,842 33,572 39,356 40,114
Shares outstanding at end of period............................................. 4,878 4,967 4,968 4,969
</TABLE>
In connection with the Purchaser's review of the Company and in the course
of the negotiations between the Company and Colonnade and the Purchaser
described in Section 10, the Company provided Colonnade, the Parent and the
Purchaser with certain business and financial information which Colonnade, the
Parent and the Purchaser believe is not publicly available. The non-public
information provided by the Company included certain projections of the
Company's future operating performance. The projections do not give effect to
the Offer, the Merger or the financing thereof.
The Company does not as a matter of course publicly disclose projections as
to future revenues or earnings. The estimates of future financial performance
set forth below (the "Projections") were not prepared with a view to public
disclosure and are included in the Offer to Purchase only because such
information was made available to Colonnade in connection with its due diligence
investigation of the Company. Accordingly, it is expected that there will be
differences between actual and projected results, and actual results may be
materially different than those set forth below. The Projections were not
prepared with a view to public disclosure or compliance with the published
guidelines of the Commission regarding projections, nor were they prepared in
accordance with the guidelines established by the American Institute of
Certified Public Accountants
11
<PAGE>
for preparation and presentation of financial projections. The Projections do
not purport to present operations in accordance with generally accepted
accounting principles and the Company's independent auditors have not examined
or compiled the Projections presented herein and, accordingly, assume no
responsibility for them. The Projections are included herein only because such
information was provided to Parent and Purchaser in connection with their due
diligence investigation of the Company. These forward-looking statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from the Projections. The Projections reflect numerous
assumptions, many of which are not set forth herein and all of which were made
by management of the Company, with respect to industry performance, general
business, economic, regulatory, market and financial conditions and other
matters, all of which are difficult to predict, many of which are beyond the
Company's control and none of which were subject to approval by the Parent or
the Purchaser. Accordingly, there can be no assurance that the assumptions made
in preparing the Projections will prove to be accurate or that the Projections
will be realized, and actual results may be materially greater or less than
those contained in the Projections.
The inclusion of the Projections herein should not be regarded as an
indication that any of the Parent, the Purchaser, the Company or their
respective financial advisors considered or consider the Projections to be a
reliable prediction of future events, and the Projections should not be relied
upon as such. None of the Parent, the Purchaser, the Company or their respective
financial advisors assumes any responsibility for the validity, reasonableness,
accuracy or completeness of the Projections. None of the Parent, the Purchaser,
the Company or any of their financial advisors has made, or makes, any
representation to any person regarding the information contained in the
Projections and none of them intends to update or otherwise revise the
Projections to reflect circumstances existing after the date when made or to
reflect the occurrence of future events even in the event that any or all of the
assumptions underlying the Projections are shown to be in error.
The Company has provided to Colonnade, the Parent and the Purchaser the
following Projections: net sales of $81.3 million, $90.1 million and $99.9
million, net income of $6.8 million, $8.2 million and $9.8 million and net
income per Share of $1.37, $1.65 and $1.98 in fiscal 1998, 1999 and 2000,
respectively.
Colonnade took this information, together with its own analysis, into
account in determining to proceed with the Offer and the Merger.
8. CERTAIN INFORMATION CONCERNING THE PURCHASER AND THE PARENT.
GENERAL
The Parent and the Purchaser each is a newly incorporated Delaware
corporation organized in connection with the Offer and the Merger and has not
carried on any activities other than in connection with the Offer and the
Merger. The principal offices of the Parent and the Purchaser are located at 901
East Byrd Street, Suite 1300, Richmond, VA 23219. The Purchaser is a wholly
owned subsidiary of the Parent. The Parent and the Purchaser were each formed by
Colonnade, which is a private investment firm dedicated to sponsoring friendly
growth buyouts of companies. The Colonnade Affiliates will collectively own
approximately 86% of the outstanding capital stock of the Parent on the date of
the Merger.
Until immediately prior to the time that the Purchaser will purchase Shares
pursuant to the Offer, it is anticipated that neither the Purchaser nor the
Parent will have any significant assets or liabilities or engage in activities
other than those incident to its formation and capitalization and the
transactions contemplated by the Offer and the Merger. The Parent is a holding
company created solely to complete the acquisition of the Company. Because the
Parent and the Purchaser each is newly formed and has minimal assets and
capitalization, no meaningful financial information regarding the Parent or the
Purchaser is available. Upon completion of the Merger, the Parent's only assets
will be the Surviving Corporation.
The name, citizenship, business address, principal occupation or
employment, and five-year employment history for each of the directors and
executive officers of the Parent and the Purchaser and certain other information
are set forth in Schedule I hereto.
Neither the Parent nor the Purchaser are subject to the information
reporting requirements of the Exchange Act, and, accordingly, they each do not
file reports or other information with the Commission relating to their
business, financial condition and other matters, respectively.
The Parent and the Purchaser each were incorporated on September 3, 1997,
and have conducted no operations since then. The Parent has received commitments
to subscribe for $15.5 million in equity and equity-like instruments in
connection with the capitalization of the Parent. All such contributions shall
be paid immediately after acceptance of and prior to payment for all Shares
properly tendered and not withdrawn pursuant to the Offer.
12
<PAGE>
Except as described in this Offer to Purchase, (i) none of the Purchaser,
the Parent, the Colonnade Affiliates nor, to the knowledge of the Purchaser and
the Parent, any of the persons listed in Schedule I to this Offer to Purchase or
any affiliate or majority owned subsidiary of the Purchaser, the Parent, the
Colonnade Affiliates or any of the persons so listed beneficially owns or has
any right to acquire, directly or indirectly, any Shares and (ii) none of the
Purchaser, the Parent, the Colonnade Affiliates nor, to the knowledge of the
Purchaser and the Parent, any of the persons or entities referred to above nor
any director, executive officer or subsidiary of any of the foregoing has
effected any transaction in the Shares during the past 60 days. See Section 10.
Except as provided in the Merger Agreement and as otherwise described in
this Offer to Purchase, none of the Purchaser, the Parent, the Colonnade
Affiliates nor, to the knowledge of the Purchaser and the Parent, any of the
persons listed in Schedule I to this Offer to Purchase, has any contract,
arrangement, understanding or relationship with any other person with respect to
any Shares or other securities of the Company, including, but not limited to,
any contract, arrangement, understanding or relationship concerning the transfer
or voting of such securities, joint ventures, loan or option arrangements, puts
or calls, guaranties of loans, guaranties against loss or the giving or
withholding of proxies. Except as set forth in this Offer to Purchase, neither
the Purchaser, the Colonnade Affiliates nor the Parent nor, to the best
knowledge of the Purchaser and the Parent, any of the persons listed on Schedule
I hereto, has had any business relationship or transaction with the Company or
any of its executive officers, directors or affiliates that is required to be
reported under the rules and regulations of the Commission applicable to the
Offer. Except as set forth in this Offer to Purchase, there have been no
contacts, negotiations or transactions between any of the Purchaser, the Parent,
the Colonnade Affiliates, or any of their respective subsidiaries or, to the
best knowledge of the Purchaser and the Parent, any of the persons listed in
Schedule I to this Offer to Purchase, on the one hand, and the Company or its
affiliates, on the other hand, concerning a merger, consolidation or
acquisition, tender offer or other acquisition of securities, an election of
directors or a sale or other transfer of a material amount of assets. See
Section 10.
9. SOURCE AND AMOUNT OF FUNDS.
The total amount of funds required by the Purchaser to consummate the Offer
and the Merger, to refinance debt, and to pay related fees and expenses is
estimated to be approximately $69.3 million. Colonnade and certain of its
affiliates and certain individuals will provide to the Purchaser to finance the
Offer and the Merger approximately $15.5 million of capital and the Purchaser
will receive the balance of the remaining funds for the Offer and Merger from
(i) a $20.0 million revolving credit facility (the "Revolving Credit Facility"),
(ii) a $30.0 million senior term loan facility (the "Senior Term Loan
Facility"), and (iii) a $14.0 million senior subordinated note facility (the
"Senior Subordinated Note Facility", and, together with the Revolving Credit
Facility and the Senior Term Loan Facility, the "Credit Facilities") to be
entered into pursuant to a commitment letter (the "Commitment Letter"), dated
September 3, 1997, with AT&T Commercial Finance Corporation ("AT&T-CFC").
AT&T-CFC has also agreed to make an equity investment of $775,000 in the Parent.
The Credit Facilities will be used to pay the Per Share Amount for the
Shares pursuant to the Offer and the Merger Consideration pursuant to the
Merger, to refinance the existing debt of the Company and to provide working
capital for the Surviving Corporation. The Purchaser and the Parent anticipate
that any indebtedness incurred through borrowings under the Credit Facilities
will be repaid from a variety of sources, which may include, but may not be
limited to, funds generated internally by the Purchaser (including, following
the Merger, funds generated by the Surviving Corporation), bank refinancing and
the public or private sale of debt or equity securities. No decision has been
made concerning the method the Purchaser will employ to repay such indebtedness.
Such decision will be made based on a review from time to time of the
advisability of particular actions, as well as on prevailing interest rates and
financial and other economic conditions and such factors as the Purchaser may
deem appropriate.
The obligation of AT&T-CFC to provide the Credit Facilities is subject to
(a) the preparation, execution and delivery of mutually acceptable loan
documentation including the credit agreements for the Credit Facilities, related
security documents and other terms, conditions and provisions customary for
transactions with AT&T-CFC generally; (b) the absence, in the reasonable opinion
of AT&T-CFC, of (i) a material adverse change in the business, condition
(financial or otherwise), operations, performance or properties of the Company
and its subsidiaries, taken as a whole, since April 30, 1997 (ii) a material
change in the nature of the collateral securing the Credit Facilities or a
material diminution in the value thereof, and (iii) any material adverse change
in loan syndication or financial or capital market conditions generally from
those currently in effect (it being understood that a change in interest rates
in and of itself shall not constitute a material adverse change), (c) the
accuracy and completion of representations and warranties made by Colonnade, the
Parent and the Purchaser and all information furnished by them to AT&T-CFC and
their compliance with the terms of the Commitment Letter and (d) the Minimum
Condition and the simultaneous merger of the Purchaser with and into the
Company. The Commitment Letter terminates on
13
<PAGE>
October 31, 1997. In the event that any change in law or regulation affecting
AT&T-CFC's entering into the transactions contemplated by the Commitment Letter
shall impose upon AT&T-CFC any potential obligation, fee, liability, loss,
claim, cost, expense or damage which is not expressly contemplated by the
Commitment Letter, AT&T-CFC may terminate its obligations under the Commitment
Letter in its sole and absolute discretion. The obligation of AT&T-CFC is also
subject to the completion of its due diligence review of the Company, the Parent
and the Purchaser which review shall not reveal any new information or material
change from information previously disclosed to AT&T-CFC, which could have a
material adverse impact on the Parent, the Purchaser or the Company, and certain
other conditions set forth in the Commitment Letter and as mutually agreed by
the parties.
The definitive credit agreement for each of the Credit Facilities will
provide for customary representations, warranties and affirmative covenants. The
definitive credit agreements will also provide for customary negative and
financial covenants, including (a) limitations on additional indebtedness, (b)
limitations on dividends and similar distributions, (c) limitations on liens and
encumbrances, (d) limitations on asset dispositions and similar transfers, (e)
limitations on investments, loans and advances, (f) limitations on mergers,
consolidations and similar combinations, (g) limitations on transactions with
affiliates, (h) limitations on salaries and bonuses, (i) limitations on lease
rentals, (j) limitations on changes in lines of business, and (k) compliance
with financial ratios.
THE REVOLVING CREDIT FACILITY
Under the Revolving Credit Facility, AT&T-CFC will make available to the
Purchaser a revolving credit facility of $20.0 million. The Purchaser intends to
make an initial draw of approximately $10.0 million in order to meet its
obligations contemplated by the Offer and the Merger. Advances under this
facility must be repaid within five years from the closing date. The annual rate
of interest on these loans will be the London Interbank Offered Rate ("LIBOR")
plus 2 1/2% or the Prime Rate (based on a source to be selected by AT&T-CFC and
the Purchaser) plus 1%.
THE SENIOR TERM LOAN FACILITY
Under the Senior Term Loan Facility, the Purchaser will borrow $30.0
million in two tranches. Tranche A, in the amount of $10.0 million, must be
repaid within 5 1/2 years from the closing date. The annual rate of interest on
Tranche A will be LIBOR plus 2 3/4% or the Prime Rate plus 1 1/4%. Tranche B, in
the amount of $20.0 million, must be repaid within 8 1/2 years from the closing
date. The annual rate of interest on Tranche B will be LIBOR plus 3 1/2% or the
Prime Rate plus 2%.
THE SENIOR SUBORDINATED NOTE FACILITY
Under the Senior Subordinated Note Facility, the Purchaser will borrow
$14.0 million which must be repaid within 10 years from the closing date. The
annual rate of interest for these notes will be calculated to be 4 3/4% over the
Treasury Rate (as defined below) until the fifth anniversary date of the closing
date, and thereafter the annual rate of interest will be LIBOR plus 4 3/4% or
the Prime Rate plus 3 1/4%. The Treasury Rate means 6.05% plus or minus, as the
case may be, 85% of the difference between 6.05% and the highest ask yield rate
per annum for the 6 3/8% United States Treasury Notes due May 2002 as of a date
two business days prior to the Merger.
COMMON EQUITY PURCHASE
AT&T-CFC will also purchase a common equity interest in the Parent in an
amount equal to $775,000 representing approximately 5% of the issued and
outstanding capital stock of the Parent.
The obligations of the Purchaser (and after the Merger, the Surviving
Corporation) under the Credit Facilities will be guaranteed by the Parent
pursuant to a guaranty agreement. The definitive guaranty agreement will provide
for customary representations, warranties and affirmative covenants, including
maintenance of 100% ownership of the Purchaser (and after the Merger, the
Surviving Corporation). The definitive guaranty agreement will also provide for
customary negative and financial covenants including (a) limitations on
additional indebtedness, (b) limitation of business to direct ownership of the
Purchaser (and after the Merger, the Surviving Corporation), (c) limitations on
ownership of property other than the common stock of the Purchaser (and after
the Merger, the Surviving Corporation), (d) limitations on mergers,
acquisitions, consolidations and similar combinations and (e) limitations on
dividends and similar distributions.
The Senior Term Loan Facility will be secured by a perfected first priority
lien and security interest in all existing and future assets of the Purchaser
(and after the Merger, the Surviving Corporation) other than its accounts
receivable and inventory and a perfected second priority lien and security
interest in the accounts receivable and inventory together with a first priority
pledge of all of the capital stock of the Purchaser (and after the Merger, the
Surviving Corporation). The Revolving
14
<PAGE>
Credit Facility will be secured by a perfected first priority lien and security
interest on the accounts receivable and inventory of the Purchaser (and after
the Merger, the Surviving Corporation) and a perfected second priority lien and
security interest on all other existing and future assets of the Purchaser (and
after the Merger, the Surviving Corporation) together with a second priority
pledge of all the capital stock of the Purchaser (and after the Merger, the
Surviving Corporation). The Senior Subordinated Note Facility will be secured by
a perfected third priority lien and security interest on all existing and future
assets of the Purchaser (and after the Merger, the Surviving Corporation)
together with a third priority pledge of all the capital stock of the Purchaser
(and after the Merger, the Surviving Corporation).
Although the Purchaser expects that the Credit Facilities will be available
to provide funds in accordance with their respective terms, there can be no
assurance that the Credit Facilities will be consummated. The availability of
funds pursuant to the Credit Facilities is a condition to consummation of the
Merger. See Section 13.
A copy of the Commitment Letter has been filed as an Exhibit to the
Schedule 14D-1 and the foregoing summary is qualified in its entirety by
references to such Exhibit.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY; THE MERGER AGREEMENT;
STOCKHOLDER TENDER AGREEMENTS; SUBSCRIPTION AND EXCHANGE AGREEMENTS;
EMPLOYMENT AND CONSULTING AGREEMENTS.
BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY
Set forth below is a description of the background of the Offer, including
a brief description of the material contacts between Parent and its affiliates
and the Company and its affiliates regarding the transactions described herein.
In late 1995, representatives of the Company began discussions with
representatives of Bowles Hollowell to review alternatives to enhance
stockholder value for the Company's stockholders, including a potential sale of
all or part of the Company.
In March 1996, the Company engaged Bowles Hollowell to approach potential
purchasers for the Company.
During the spring of 1996, Bowles Hollowell reviewed the Company's
operations, facilities and management, and prepared a financial information
memorandum regarding the Company for distribution to potential purchasers.
During August and September 1996, Bowles Hollowell contacted the parties to
whom the information memorandum had been provided to determine their interest in
acquiring the Company.
In September 1996, interested potential purchasers provided initial
indications of interest in a transaction.
From September 1996 through January 1997, potential purchasers that had
submitted acceptable initial values and provided satisfactory evidence of
ability to finance a transaction met with representatives from the Company,
visited the Company's facilities and performed due diligence reviews of the
Company.
In late January 1997, potential purchasers submitted revised indications of
interest based on their due diligence reviews of the Company.
In early February 1997, three parties, including Colonnade, were invited
for further meetings with representatives of the Company and conducted
additional due diligence.
On or about March 17, 1997, preliminary offers to acquire the Company were
submitted by Colonnade and another potential purchaser.
On March 18, 1997, the Board of Directors of the Company reviewed these
offers and from late March through May 1997, the Company had further discussions
with Colonnade and the other potential purchaser.
On May 29, 1997, the Company and Colonnade executed and announced a
nonbinding letter of intent (the "Letter of Intent"). The Letter of Intent
provided for consideration of $12.00 per share to be paid by Colonnade to the
holders of Shares and set forth certain conditions precedent to Colonnade's
obligation to enter into the Merger Agreement. In addition, the Letter of Intent
provided for a termination fee to be paid to Colonnade by the Company upon
termination of the Letter of Intent under certain circumstances or upon certain
change of control events.
Negotiations among the Company, Colonnade, and their respective
representatives continued through September 4, 1997 with respect to the
transaction, the Merger Agreement and related matters. During this period, the
legal and financial advisors of Colonnade also completed their due diligence
review of the Company. On September 4, 1997, the parties reached agreement on
the final terms of the Merger Agreement and the related transactions
contemplated thereunder.
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The Boards of Directors of the Parent and the Purchaser approved the Offer,
the Merger, the Merger Agreement, the commitment of AT&T-CFC as set forth in the
Commitment Letter (the "Financing Commitment") and the transactions contemplated
by each of the foregoing.
On September 3, 1997, AT&T-CFC delivered the Financing Commitment to
Colonnade, and Colonnade delivered a copy of the Financing Commitment to
representatives of the Company.
The Board of Directors of the Company held a meeting on September 4, 1997
to discuss the proposed Offer and Merger, the Merger Agreement, and related
matters. After hearing presentations by the Company's legal and financial
advisors, the Board of Directors discussed and considered the proposed
transaction. The Board of Directors then proceeded to unanimously approve the
Offer, the Merger, and the Merger Agreement. The Company executed the Merger
Agreement after the close of business on September 4, 1997.
Following the approval of the Board of Directors of the Company, the Merger
Agreement was executed and delivered by the Parent, the Purchaser, Colonnade and
the Company.
On September 5, 1997, the Purchaser and the Company issued a press release
announcing the execution and delivery of the Merger Agreement.
THE MERGER AGREEMENT
A copy of the Merger Agreement is filed as an Exhibit to the Schedule 14D-1
and is incorporated by reference in this Offer to Purchase. The following is a
brief summary of the Merger Agreement which is qualified in its entirety by
reference to the Merger Agreement. All stockholders of the Company are urged to
read the Merger Agreement in its entirety. Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed thereto in the Merger
Agreement.
THE OFFER
The Merger Agreement provides for the commencement of the Offer as promptly
as practicable, but in no event later than five business days after the
execution of the Merger Agreement. The obligation of the Purchaser to accept for
payment and pay for the Shares tendered pursuant to the Offer is subject to the
satisfaction of (i) the Minimum Condition prior to the expiration of the Offer
and (ii) certain other conditions described in Section 13. The Merger Agreement
provides that the Purchaser may waive any condition to the Offer, increase the
price per Share payable in the Offer and make any other changes to the Offer.
However, no change may (i) decrease the price per Share or change the form of
consideration payable in the Offer, (ii) decrease the number of Shares to be
purchased in the Offer or (iii) change or impose conditions to the Offer in
addition to those set forth in Section 13. The Purchaser may, without the
consent of the Company, (i) extend the Offer beyond the scheduled Expiration
Date (the initial scheduled Expiration Date being Thursday, October 9, 1997, if,
at the scheduled Expiration Date, any of the conditions to the Purchaser's
obligation to accept for payment, and to pay for, the Shares, shall not be
satisfied or waived or (ii) extend the Offer for any period required by any
rule, regulation or interpretation of the Commission or the staff thereof
applicable to the Offer.
THE MERGER
The Merger Agreement provides that, upon the terms and subject to the
conditions thereof and in accordance with Delaware Law, at the Effective Time,
the Purchaser will be merged with and into the Company and the Company will
continue as the Surviving Corporation and will become a wholly owned subsidiary
of the Parent. Upon consummation of the Merger, each issued and outstanding
Share (other than any Shares held in the treasury of the Company, or owned by
the Purchaser, the Parent or any direct or indirect wholly owned subsidiary of
the Parent or of the Company and any outstanding Shares which are held by
stockholders who have not voted in favor of the Merger or consented thereto in
writing and who shall have demanded properly in writing appraisal for such
Shares in accordance with Delaware Law) will be canceled and converted
automatically into the right to receive an amount equal to $12.00 per Share, or
any higher price per Share paid in the Offer, in cash without interest (the
"Merger Consideration"). Pursuant to the Merger Agreement, each share of common
stock, par value $.001 per share, of the Purchaser issued and outstanding
immediately prior to the Effective Time will be converted into and exchanged for
one validly issued, fully paid and nonassessable share of common stock, par
value $.001 per share, of the Surviving Corporation. Each Share held by the
Company as treasury stock or owned by the Parent, the Purchaser, Colonnade or
any subsidiary of any of them immediately prior to the Effective Time, shall be
automatically cancelled and extinguished and no payment of any kind shall be
made with respect thereto.
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CHARTER DOCUMENTS; INITIAL DIRECTORS AND OFFICERS
The Merger Agreement provides that, at the Effective Time, the Certificate
of Incorporation of the Purchaser, as in effect immediately prior to the
Effective Time, will be the Certificate of Incorporation of the Surviving
Corporation. The Bylaws of the Purchaser, as in effect immediately prior to the
Effective Time, will be the Bylaws of the Surviving Corporation. The directors
of the Purchaser immediately prior to the Effective Time will be the initial
directors of the Surviving Corporation and the officers specified by the
Purchaser prior to the Effective Time will be the initial officers of the
Surviving Corporation.
STOCKHOLDERS MEETING
The Merger Agreement provides that, if required by applicable law in order
to consummate the Merger, the Company will, in accordance with applicable law
and its Certificate of Incorporation and Bylaws, (i) convene and hold an annual
or special meeting of its stockholders (the "Company Stockholders Meeting") for
the purpose of considering and taking action on the Merger Agreement and the
transactions contemplated thereby, and (ii) except if the Board determines in
good faith that an alternative action is necessary in accordance with its
fiduciary duties to the Company's stockholders under applicable law as advised
by outside legal counsel, use its best efforts to approve and adopt the Merger
Agreement and the transactions contemplated thereby. The Parent and the
Purchaser will cause all Shares owned by them and their subsidiaries to be voted
in favor of the approval and adoption of the Merger Agreement and the
transactions contemplated thereby. If the Minimum Condition is satisfied, the
Purchaser will have sufficient voting power to cause the approval and adoption
of the Merger without the affirmative vote of any other stockholder. Under
Section 253 of Delaware Law, if the Purchaser acquires at least 90% of the then
outstanding Shares, the Purchaser will be able to approve the Merger without a
vote of the Company's stockholders.
FILINGS
The Merger Agreement provides that the Company will, as soon as reasonably
practicable after the consummation of the Offer and if required by applicable
law, prepare and file a proxy statement the ("Proxy Statement") with the
Commission, and will use all reasonable efforts to have the Proxy Statement
cleared by the Commission. The Company has agreed that, except if the Board
determines in good faith an alternative action to be necessary in accordance
with its fiduciary duties to the Company's stockholders under applicable law as
advised by outside legal counsel, the Proxy Statement will contain the unanimous
recommendation of the Board that the stockholders of the Company approve the
Merger Agreement and the transactions contemplated thereby.
CONDUCT OF BUSINESS
Pursuant to the Merger Agreement, the Company has covenanted and agreed
that, between the date of the Merger Agreement and the Effective Time, unless
the Purchaser otherwise agrees in writing, the businesses of the Company will be
conducted only in, and the Company and its material subsidiaries will not take
any material action with respect to the businesses of the Company and its
material subsidiaries except in the ordinary course of the business; and the
Company will use its reasonable best efforts to preserve substantially intact
its business organization, to keep available the services of the current
officers, employees and consultants of the business and to preserve the current
relationships of the Company and its material subsidiaries with customers,
payors and other persons with which the Company or its material subsidiaries
have significant business relations. By way of amplification and not limitation,
the Merger Agreement provides that neither the Company nor its subsidiaries
will, between the date of the Merger Agreement and the Effective Time, directly
or indirectly do, or propose to do, any of the following without the prior
written consent of the Purchaser:
(i) amend or otherwise change its Certificate of Incorporation or Bylaws or
equivalent organizational documents;
(ii) issue or sell or authorize the issuance or sale of, (i) any shares of
capital stock of any class of the Company or any of its subsidiaries, or any
options, warrants, convertible securities or other rights of any kind to acquire
any shares of such capital stock, or any other ownership interest of the Company
or any of its subsidiaries other than the grant of options previously disclosed
by the Company to the Purchaser prior to the date of the Merger Agreement
including, without limitation, the Company Stock Options (as defined in the
Merger Agreement) or (ii) any assets of the Company or any of its subsidiaries,
except for sales in the ordinary course of business or sales which individually,
do not exceed $150,000 or which, in the aggregate, do not exceed $500,000;
(iii) sell, pledge or encumber any stock owned by it in any subsidiary;
(iv) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock, other than a dividend or distribution payable solely to the
Company or a subsidiary;
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(v) reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock other than
acquisitions under any Company or subsidiary plan with an employee stock fund or
employee stock ownership plan feature, consistent with applicable securities
laws;
(vi) acquire, mortgage, encumber, sell, lease, license or dispose of any
assets (including intellectual property) or securities, except pursuant to
existing contracts or commitments or the sale or purchase of goods in the
ordinary course of business consistent with past practice, or enter into any
commitment or transactions outside the ordinary course of business consistent
with past practice;
(vii) acquire (for cash or shares of stock) (including, without limitation,
by merger, consolidation, or acquisition of stock or assets) any interest in any
corporation, partnership, other business organization or any division thereof;
authorize or make any capital expenditures not provided for in the Company's
capital budget which are in excess of $100,000; incur assume or prepay any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise as an accommodation become liable or
responsible for, the obligations of any person, or make any loans, advances or
capital contributions to, or investments in, any other person, except (A) in
connection with the Merger Agreement and the transactions contemplated thereby,
(B) borrowings under existing bank lines of credit in the ordinary course of
business, or (C) the refinancing of existing indebtedness; accelerate or delay
collection of notes or accounts receivable in advance of or beyond their regular
due dates or the dates when the same would have been collected in the ordinary
course of business consistent with past practice; delay or accelerate payment of
accounts payable beyond or in advance of its due date or the date such liability
would have been paid in the ordinary course of business consistent with past
practice; vary the Company's inventory practices in any material respect from
the Company's past practices; or enter into or amend any contract, agreement,
commitment or arrangement to effectuate any prohibited matter set forth in the
Merger Agreement;
(viii) increase the compensation or fringe benefits payable or to become
payable to its directors, executive officers or employees, except for increases
in the ordinary course of business in accordance with past practice, grant any
severance or termination pay to any executive officer, director or other
employee of the Company or any subsidiary (other than as required by existing
agreements or policies), or enter into any employment or severance agreement
with, any director, executive officer or other employee of the Company or any
subsidiary or adopt or amend any employee benefit plan;
(ix) take any action, other than reasonable and usual actions in the
ordinary course of the business and consistent with the past practice, with
respect to accounting policies or procedures;
(x) settle or compromise any suit or claim or threatened suit or claim
where the amount involved is greater than $100,000;
(xi) other than in the ordinary course of business consistent with past
practice, (i) modify, amend or terminate any contract, (ii) waive, release,
relinquish or assign any contract (or any of the Company's rights thereunder),
right or claim, or (iii) cancel or forgive any indebtedness owed to the Company
or any subsidiary;
(xii) make any tax election not required by law or settle or compromise any
tax liability;
(xiii) permit any insurance policy naming it as a beneficiary or a loss
payable payee to be canceled or terminated without notice to the Purchaser,
except in the ordinary course of business consistent with past practice;
(xiv) enter into any contract or agreement other than in the ordinary
course of business consistent with past practice; or
(xv) agree in writing or otherwise to take any of the foregoing actions
prohibited under the Merger Agreement or any action which would cause any
representation or warranty in the Merger Agreement to be or become untrue or
incorrect.
DIRECTORS
The Merger Agreement provides that, promptly upon the purchase by the
Purchaser of the Shares pursuant to the Offer, and from time to time thereafter,
the Purchaser will be entitled to designate such number of directors, rounded up
to the next whole number, on the Board as will give the Purchaser representation
on the Board equal to the product of the total number of directors on the Board
(giving effect to the directors elected pursuant to this sentence) multiplied by
the percentage that the aggregate number of Shares beneficially owned by the
Purchaser or any of its affiliates following such purchase bears to the number
of Shares then outstanding, and the Company will, at such time, promptly take
all actions necessary to cause the Purchaser's designees to be elected as
directors of the Company, including, if necessary, securing the resignation of
incumbent directors or both.
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Pursuant to the Merger Agreement, following the election or appointment of
the Purchaser's designees pursuant to the preceding paragraph and prior to the
Effective Time, any amendment or 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 the Purchaser or waiver of any of the Company's
rights thereunder will require the concurrence of a majority of the directors of
the Company then in office who are not designated by the Purchaser if such
amendment, termination, extension or waiver would be reasonably likely to have
an adverse effect on the minority stockholders of the Company.
NO SOLICITATION
The Company, its affiliates, and their respective officers, directors, and
employees shall not, directly or indirectly, solicit any corporation,
partnership, person or other entity or group (other than the Purchaser or an
affiliate or an associate of the Purchaser) concerning a Competing Transaction
(as defined below). Notwithstanding the foregoing, the Company may, directly or
indirectly, furnish information and access, in each case in response to
unsolicited requests therefor, to any corporation, partnership, person or other
entity or group pursuant to confidentiality agreements, and may participate in
discussions and negotiate with such entity or group concerning any merger, sale
of assets, sale of shares of capital stock or similar transaction involving the
Company or any subsidiary or division of the Company, if the Board of Directors
of the Company determines in good faith, after receiving the advice of its legal
counsel, that the failure to take such action is likely to violate the fiduciary
obligation of the Board under applicable law.
From and after the execution of the Merger Agreement, the Company shall
immediately advise the Purchaser in writing of the receipt, directly or
indirectly, of any discussions, negotiations or proposals relating to a
Competing Transaction, identify the offeror and furnish to the Purchaser a copy
of any such proposal, if it is in writing, or a written summary of any such
proposal relating to a Competing Transaction if it is not in writing. The
Company shall promptly advise the Purchaser of any development relating to such
proposal, including the results of any discussions or negotiations with respect
thereto unless the Board of Directors of the Company determines in good faith,
after receiving the advice of its legal counsel, that such disclosure is likely
to violate the fiduciary obligation of the Board under applicable law.
"Competing Transaction" means any of the following (other than the
transactions contemplated under the Merger Agreement): (i) any merger
consolidation, share exchange, business combination, or other similar
transaction involving the Company or any material subsidiary; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition of 50% of the
assets of the Company and its subsidiaries, taken as a whole, in a single
transaction or series of transactions; (iii) any tender offer or exchange offer
for 50% or more of the outstanding shares of capital stock of the Company or the
filing of a registration statement under the Securities Act in connection
therewith; (iv) any sale of any shares of capital stock or any similar
transaction involving the Company or any subsidiary; or (v) any public
announcement of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing.
DIRECTORS' AND OFFICERS' INDEMNIFICATION
The Merger Agreement provides that the Certificate of Incorporation and
Bylaws of the Surviving Corporation shall contain no less favorable provisions
with respect to indemnification set forth in the Certificate of Incorporation
and Bylaws of the Company on the date of the Merger Agreement, which provisions
shall not be amended, repealed or otherwise modified for a period of 54 months
after the Effective Time in any manner that would adversely affect the rights
thereunder of individuals who at any time prior to the Effective Time were
directors or officers of the Company in respect of actions or omissions
occurring at or prior to the Effective Time (including, without limitation, the
transactions contemplated by the Merger Agreement), unless such modification is
required by law.
The Merger Agreement provides that from the Effective Time, the Surviving
Corporation will indemnify, defend and hold harmless the present and former
officers and directors of the Company (collectively, the "Indemnified Parties")
against all losses, expenses, claims, damages, liabilities or amounts that are
paid in settlement of, with the approval of the Surviving Corporation (which
approval shall not be unreasonably withheld), or otherwise incurred in
connection with any claim, action, suit, proceeding or investigation (a
"Claim"), based in whole or in part by reason of the fact that such person is or
was a director or officer of the Company and arising out of actions, events, or
omissions occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated by the Merger Agreement), in each case
to the full extent permitted under Delaware Law (and shall pay expenses in
advance of the final disposition of any such action or proceeding to each
Indemnified Party to the fullest extent permitted under Delaware Law, upon
receipt from the Indemnified Party to whom expenses are advanced of any required
undertaking to repay such advances contemplated by Section 145(e) of Delaware
Law.
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The Merger Agreement provides that for a period of 54 months from the
Effective Time, the Surviving Corporation will maintain in effect the liability
insurance policies for directors and officers most recently maintained by the
Company (provided that the Surviving Corporation may substitute therefor
policies with reputable and financially sound carriers of at least the same
coverage and containing terms and conditions no less advantageous as long as
such substitution does not result in gaps or lapses in coverage with respect to
claims arising from or related to matters occurring prior to the Effective
Time); PROVIDED THAT, in no event will the Surviving Corporation be required to
expend more than an amount per year equal to 150% of the current annual premiums
paid by the Company (the "Premium Amount") to maintain or procure insurance
coverage pursuant to the Merger Agreement; PROVIDED, FURTHER, that the Surviving
Corporation will obtain as much comparable insurance as is available for the
Premium Amount per year and may pay for such insurance in one lump sum.
EMPLOYEE DISCOUNT STOCK PURCHASE PLAN
The Merger Agreement provides that effective as of September 5, 1997, the
Company will suspend indefinitely its Employee Discount Stock Purchase Plan, and
the Company will not issue any rights to acquire shares of Company common stock
under such plan after such date (provided that the Company may issue or sell
shares under such plan for which payroll deductions have already been made).
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various customary representations and
warranties of the parties. The Company has represented that its Board of
Directors has unanimously (a) duly adopted and approved the Offer, the Merger
Agreement and the Merger, (b) determined that each of the Offer and the Merger
is fair to and in the best interests of its stockholders, (c) resolved to
recommend acceptance of the Offer, (d) resolved to recommend adoption and
approval of the Merger by its stockholders and (e) taken all other actions
necessary to render Section 203 of Delaware Law inapplicable to the Offer and
the Merger. The Purchaser has represented that it has received a commitment to
provide sufficient funds available to purchase Shares pursuant to the Offer and
to pay all fees and expenses related to the transactions contemplated by the
Merger Agreement. The Company made certain other representations and warranties
to the Purchaser regarding, among other things: (i) its organization,
subsidiaries and capitalization; (ii) its authority to enter into and perform
its obligations under the Merger Agreement; (iii) the compliance of the
transactions contemplated by the Merger Agreement with its Certificates of
Incorporation and Bylaws, certain agreements and applicable laws; (iv) the
accuracy and completeness of its financial statements and Exchange Act filings
with the Commission, including the Schedule 14D-9 filed in connection with the
Offer and the proxy statement to be filed in connection with the Merger, if any;
(v) the absence of undisclosed liabilities; (vi) the absence of material adverse
changes in the condition, results of operations, business and assets of the
Company and each of its subsidiaries, taken as a whole, since April 30, 1996;
(vii) litigation matters; (viii) environmental matters; (ix) employee benefit
plans and contracts; (x) tax matters; (xi) brokers' fees; (xii) labor matters;
(xiii) customers, suppliers, distributors and sales representatives; (xiv)
material contracts; (xv) employment matters; and (xvi) receipt of the opinion of
Bowles Hollowell; and (xvii) satisfaction of the conditions set forth in the
Letter of Intent.
CONDITIONS TO CONSUMMATION OF THE MERGER
The Merger Agreement provides that the respective obligations of each party
to effect the Merger are subject to the following conditions: (i) the Merger
Agreement, the Merger and the transactions contemplated thereby will have been
approved and adopted by the affirmative vote of the stockholders of the Company
to the extent required by Delaware Law and the Certificate of Incorporation of
the Company (except that this condition is deemed satisfied if the Purchaser
acquires 90% or more of the then outstanding Shares pursuant to the Offer); (ii)
any waiting period (and any extension thereof) applicable to the consummation of
the Merger under the HSR Act will have expired or been terminated; (iii) no
foreign, United States or state governmental authority or other agency or
commission or foreign, United States or state court of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any law, rule,
regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which has become final and nonapplicable
and which prohibits consummation of the Merger; and (iv) with respect to the
obligations of the Purchaser, (a) each of the representations and warranties of
the Company contained in the Merger Agreement shall be true and correct as of
the Effective Time as though made on and as of the Effective Time, except in any
case for such failures to be true and correct which would not, individually or
in the aggregate, have a material adverse effect, except (1) for changes
specifically permitted by the Merger Agreement and (2) that those
representations and warranties which address matters only as of a particular
date shall remain true and correct as of such date, and (b) the Company shall
have performed and complied in all material respects with all agreements and
covenants required by the Merger Agreement to be performed or complied with by
the Company on or prior to the Effective Time; and with respect to the
obligations of the Company, (ii) each of the representations and
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warranties of the Purchaser contained in the Merger Agreement shall be true and
correct as of the Effective Time, as though made on and as of the Effective
Time, except in any case for such failures to be true and correct that would
not, individually or in the aggregate, have a material adverse effect, except
(A) for changes specifically permitted by the Merger Agreement and (B) that
those representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date, and (ii) the
Purchaser shall have performed and complied in all material respects with all
agreements and covenants required by the Merger Agreement to be performed or
complied with by the Purchaser on or prior to the Effective Time.
The obligation of the Purchaser to consummate the Merger is also subject to
the following conditions: (i) the proceeds of the Credit Facilities, on
substantially the terms and conditions described in the related commitment
letter are available to the Purchaser, and (ii) the Minimum Condition and each
of the other conditions set forth in Annex I to the Merger Agreement shall have
been satisfied or waived by the Purchaser, and the Purchaser shall have accepted
for payment and made payment for all Shares validly tendered and not withdrawn
pursuant to the Offer. See Section 13.
TERMINATION
The Merger Agreement may be terminated and the transactions contemplated
thereby may be abandoned at any time prior to the Effective Time
(notwithstanding any approval of the Merger Agreement by the stockholders of the
Company): (i) by mutual written consent of the Company and the Purchaser; (ii)
by either the Purchaser or the Company, if any permanent injunction or action by
any governmental entity preventing the consummation of the Merger shall have
become final and nonappealable; (iii) by either the Purchaser or the Company, if
(x) the Offer is terminated or withdrawn pursuant to its terms without any
Shares being purchased thereunder or (y) the Merger shall not have been
consummated before October 31, 1997; PROVIDED, HOWEVER, that if the Merger shall
not have been consummated as a direct result of the Purchaser or the Company
having failed by October 31, 1997, to receive all required approvals or consents
with respect to the Merger then the Merger Agreement shall automatically be
extended until the date that is 10 days following the receipt of such approval
or consent, but in no event later than December 31, 1997; PROVIDED, FURTHER,
that neither the Purchaser nor the Company may terminate the Merger Agreement
because the Merger shall fail to receive the requisite vote for approval and
adoption by the stockholders of the Company at the Company Stockholders Meeting
if such party shall have materially breached the Merger Agreement; (iv) by the
Company, if the Purchaser terminates the Offer without purchasing Shares
thereunder or the Offer shall have expired without the purchase of the Shares
thereunder; PROVIDED, HOWEVER, that the Company may not terminate the Merger
Agreement if the Purchaser terminates the Offer without purchasing Shares
thereunder or the Offer shall have expired without the purchase of the Shares
thereunder unless the Company shall have materially breached the Merger
Agreement; (v) by either the Purchaser or the Company, if the Merger shall fail
to receive the requisite vote for approval and adoption by the stockholders of
the Company at the Company's annual or special meeting of the Stockholders; (vi)
by the Company, if the Board withdraws or modifies (or fails to make) its
recommendation of the Merger Agreement so long as the Board, after consultation
with and based upon the advice of independent legal counsel (who may be the
Company's regularly engaged independent legal counsel), concludes in good faith
that the failure to take such action is likely to violate the fiduciary
obligation of the Board under applicable law; (vii) by the Purchaser prior to
the purchase of Shares pursuant to the Offer, if the Company's Board of
Directors shall have (x) withdrawn or modified (including by amendment to the
Schedule 14D-9) in a manner adverse to the Purchaser the Board's approval or
recommendation of the Offer or the Merger; (y) approved or recommended a
Competing Transaction; or (z) shall have resolved to effect any of the
foregoing; or (viii) by the Purchaser prior to the purchase of Shares pursuant
to the Offer, if the Minimum Condition or any other condition set forth in Annex
I to the Merger Agreement has not been satisfied in connection with the Offer
and as a result the Purchaser does not accept for payment the Shares. See
Section 13.
The right of either the Company or the Purchaser to terminate the Merger
Agreement shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any party thereto, any person controlling
or controlled by any such party or any of their respective officers or
directors, whether prior to or after the execution of the Merger Agreement.
FEES, EXPENSES AND OTHER PAYMENTS
All out-of-pocket costs and expenses, including, without limitation, fees
and disbursements of counsel, financial advisors and accountants, incurred
directly or indirectly by the parties in respect of the transactions
contemplated by the Merger Agreement shall be borne by the party which has
incurred such costs and expenses (with respect to such party, its "Expenses");
PROVIDED, HOWEVER, that if the Merger is consummated all Expenses of the Company
shall be paid by the Surviving Corporation.
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Pursuant to the Merger Agreement, the Company has agreed that if the Merger
Agreement shall be terminated (i) by either party, because the Merger shall fail
to receive the requisite vote for approval by the stockholders of the Company
and at the time of the Company stockholder meeting there shall exist a Competing
Transaction, (ii) by the Purchaser, prior to the purchase of the Shares pursuant
to the Offer if the Minimum Condition or certain other conditions set forth in
the Merger Agreement have not been satisfied in connection with the Offer and as
a result the Purchaser does not accept for payment the Shares and at the time of
such termination there shall exist a Competing Transaction, (iii) by the
Company, if the Board withdraws or modifies (or fails to make) its
recommendation so long as the Board, after consultation with and based upon the
advice of independent legal counsel (who may be the Company's regularly engaged
independent legal counsel), concludes in good faith that the failure to take
such action is likely to violate the fiduciary obligation of the Board under
applicable law or (iv) by the Purchaser prior to the purchase of Shares pursuant
to the Offer, if the Company's Board of Directors shall have (x) withdrawn or
modified (including by amendment to the Schedule 14D-9) in a manner adverse to
the Purchaser the Board's approval or recommendation of the Offer or the Merger,
(y) approved or recommended a Competing Transaction, or (z) shall have resolved
to effect any of the foregoing, at any time, then in any such event the Company
shall pay to the Purchaser a fee in an amount equal to $2,500,000 plus the
reasonable Expenses of the Purchaser not exceeding $750,000. The same amounts
shall also be paid by the Company to the Purchaser if (i) (A) any person, or any
persons acting as a group, acquires more than one-third of the outstanding
Shares after the date of, and prior to the termination of, the Merger Agreement,
and (B) such person or group obtains control of the Company or enters into an
agreement providing for the merger with, or acquisition of all or substantially
all of the assets of the Company from, the Company (a "Change of Control")
within 12 months after termination of the Merger Agreement, or (ii) (X) a Change
of Control occurs within 12 months after the termination of the Merger Agreement
with a party who had communicated after the date of, and prior to the
termination of, the Merger Agreement with an affiliate of the Company or any
representative thereof of such party's intent to acquire control of the Company
by verbal or written communication, and (Y) the price per share received by the
stockholders of the Company in connection with such Change of Control exceeds
the Merger Consideration.
Any payment required to be made in connection with the preceding paragraph
shall be made as promptly as practicable by wire transfer of immediately
available funds to an account designated by the Purchaser. The Company's payment
of a termination fee pursuant to the Merger Agreement shall be the sole and
exclusive remedy of the Purchaser and Colonnade against the Company and any of
its subsidiaries and their respective directors, officers, employees, agents,
advisors or other representatives with respect to the occurrences giving rise to
such payment; PROVIDED that this limitation shall not apply in the event of a
willful breach of the Merger Agreement by the Company with respect to such
occurrence.
THE STOCKHOLDER TENDER AGREEMENTS
Concurrently with the execution of the Merger Agreement, the Parent and the
Purchaser entered into stockholder tender agreements (the "Stockholder Tender
Agreements") with certain stockholders of the Company, including Code, Hennessy
& Simmons Limited Partnership and each director and executive officer of the
Company (the "Selling Stockholders"). Pursuant to the Stockholder Tender
Agreements, each Selling Stockholder has agreed to tender and sell all Shares
owned by it, or hereafter acquired through the exercise of Stock Options or
othewise, to the Purchaser pursuant to and in accordance with the terms of the
Offer, other than Shares being exchanged by the Management Investors as
described herein. The Selling Stockholders own an aggregate of 2,787,671 Shares
(in each case, excluding Shares issuable upon exercise of Stock Options)
representing approximately 56.1% of the issued and outstanding Shares as of
September 4, 1997, of which 2,707,587 Shares representing approximately 54.4% of
the issued and outstanding Shares are required to be tendered pursuant to the
Stockholder Tender Agreements, and 80,084 Shares represent approximately 1.6% of
the issued and outstanding Shares will be exchanged pursuant to the Subscription
and Exchange Agreements (as defined below).
During the term of the Stockholder Tender Agreements, no Selling
Stockholder shall (a) offer to sell, sell, pledge or otherwise dispose of or
transfer any interest in or encumber with any lien any of such Selling
Stockholder's Shares, except for transfer or sale to any affiliate of such
Selling Stockholder who agrees to be bound by the respective Stockholder Tender
Agreement, (b) deposit such Selling Stockholder's Shares into a voting trust,
enter into a voting agreement or arrangement with respect to such Shares or
grant any proxy or power of attorney with respect to such Shares, or (c) enter
into any contract, option or other arrangement or undertaking with respect to
the direct or indirect acquisition or sale, assignment or other disposition of
or transfer of any interest in or the voting of any Shares or any other
securities of the Company, except that a Selling Stockholder may transfer their
Shares to a charitable organization that agrees to be bound by the terms of the
Stockholder Tender Agreements.
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During the term of the Stockholder Tender Agreements, each Selling
Stockholder agrees not to directly or indirectly, initiate, solicit (including
by way of furnishing information), encourage or respond to or take any other
action knowingly to facilitate, any inquiries or the making of any proposal by
any person or entity (other than the Parent, the Purchaser or any affiliate of
the Parent or the Purchaser) with respect to the Company contemplating or
providing for any public or private offering of equity, merger, share exchange,
acquisition, purchase or sale of a significant amount of shares or assets or
other business combination or change in control of the Company (collectively, a
"Takeover Proposal"), or enter into or maintain or continue discussions or
negotiate with any person or entity in furtherance of such inquiries or to
obtain any Takeover Proposal, or agree to or endorse any Takeover Proposal, or
authorize or permit any person or entity acting on behalf of such Selling
Stockholder to do any of the foregoing unless the Board of Directors of the
Company concludes in good faith, after receiving advice of its counsel, that the
failure to take such action is likely to violate the fiduciary obligation of the
directors of the Company under applicable law. If a Selling Stockholder receives
any Takeover Proposal, such Selling Stockholder agrees to promptly notify the
Parent and the Purchaser of that inquiry or proposal and the details thereof.
During the term of the Stockholder Tender Agreements, each Selling
Stockholder agrees to vote each of its Shares at any annual, special or
adjourned meeting of the stockholders of the Company (a) in favor of the Merger,
the execution and delivery by the Company of the Merger Agreement and the
approval and adoption of the terms thereof and of the Stockholder Tender
Agreements; and (b) against the following actions (other than the Merger and the
other transactions contemplated by the Merger Agreement): (i) any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving the Company or its subsidiaries; (ii) a sale, lease or
transfer of a material amount of assets of the Company or one of its
subsidiaries, or a reorganization, recapitalization, dissolution or liquidation
of the Company or its subsidiaries; (iii) (A) any change in a majority of the
persons who constitute the Company's Board of Directors as of the date hereof;
(B) any change in the present capitalization of the Company or any amendment of
the Company's certificate of incorporation or bylaws, as amended to date; (C)
any other material change in the Company's corporate structure or business; or
(D) any action that is intended, or could reasonably be expected, to impede,
interfere with, delay, postpone, or adversely affect the Merger and the other
transactions contemplated by the Stockholder Tender Agreements and the Merger
Agreement. The Selling Stockholders have granted John T. Herzog and James C.
Wheat, III an irrevocable proxy coupled with an interest to vote such Selling
Stockholder's Shares in accordance with the foregoing.
The Stockholder Tender Agreements will terminate on the earlier of (a) the
purchase of all the Shares pursuant to the Offer, (b) the effective time of the
Merger and (c) the date on which the Merger Agreement is terminated in
accordance with its terms.
A copy of the form of the Stockholder Tender Agreements has been filed as
an Exhibit to this Schedule 14D-1 and the foregoing summary is qualified in its
entirety by references to such Exhibit.
SUBSCRIPTION AND EXCHANGE AGREEMENTS
The Parent has entered into subscription and exchange agreements (the
"Subscription and Exchange Agreements") with Billy D. Moore, Richard A. Beattie
and Robert T. Littlejohn (collectively the "Management Investors"), all of whom
are currently executive officers of the Company. None of the Management
Investors are directors of the Company. Pursuant to the Subscription and
Exchange Agreements, each Management Investor thereto has agreed to subscribe
for shares of common stock of the Parent (the "Parent Common Stock") in exchange
for Shares held by such executive officer at an exchange ratio of 8.33 Shares
per share of Parent Common Stock pursuant to a transaction that is intended to
be a tax-free exchange under Section 351 of the Code. The Parent has required
that each executive officer of the Company make an investment in the Parent and
the Subscription and Exchange Agreements permit the Management Investors to
effect such investment through a transaction that is intended to be a tax-free
roll-over of such executive officer's Shares. The exchange shall be consummated
immediately after acceptance of and prior to payment for all Shares properly
tendered and not withdrawn pursuant to the Offer. As a result of such exchange,
such Management Investors will exchange 80,084 Shares representing approximately
1.6% of the issued and outstanding Shares as of September 4, 1997, and will own
in the aggregate, approximately 6.7% of the outstanding shares of Parent Common
Stock. The remaining 185,936 Shares will be tendered pursuant to the Offer and
the Stockholder Tender Agreements. The chart below sets forth the number of
Shares to be exchanged and the number of shares of Parent Common Stock to be
received by each executive officer of the Company.
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<TABLE>
<CAPTION>
NUMBER
OF % OF NUMBER OF NUMBER OF SHARES % OF PARENT
NAME SHARES SHARES SHARES TO BE OF PARENT COMMON COMMON STOCK
OF OFFICER OWNED(1) OUTSTANDING EXCHANGED(1) STOCK RECEIVED OUTSTANDING
- --------------------------------------------------- -------- ----------- ------------ ---------------- ------------
<S> <C>
Billy D. Moore..................................... 158,504 3.2% 41,667 5,000 3.5%
Richard A. Beattie................................. 57,771 1.2 15,500 1,860 1.3
Robert T. Littlejohn............................... 49,745 1.0 22,917 2,750 1.9
-------- --- ------------ ------ ---
Total......................................... 266,020 5.3% 80,084 9,610 6.7%
-------- --- ------------ ------ ---
-------- --- ------------ ------ ---
</TABLE>
- ---------------
(1) Does not include any Stock Options owned by such persons.
A copy of the form of the Subscription and Exchange Agreements has been
filed as an Exhibit to this Schedule 14D-1 and the foregoing summary is
qualified in its entirety by references to such Exhibit.
EMPLOYMENT AND CONSULTING AGREEMENTS
The Purchaser has entered into employment agreements (the "Employment
Agreements") with each of Richard A. Beattie and Billy D. Moore (the
"Executives") effective as of the Effective Time. The Employment Agreements will
establish base salaries for each of the Executives equal to their current base
salaries of $212,713 during the relevant employment period, subject to annual
increases at the discretion of the Board of Directors. The Employment Agreements
provide, in part, for the payment of annual cash incentive bonuses. In addition,
the Employment Agreements provide for the Parent to grant to each of the
Executives options to acquire shares of the Parent Common Stock representing up
to an aggregate of 2.7% of the outstanding shares of the Parent Common Stock on
a fully diluted basis measured on the date the Purchaser acquires control of the
Company.
Each of the Employment Agreements will expire on April 30, 1999, PROVIDED
that (i) the Employment Agreements will terminate prior to such date upon the
executive's resignation, death or permanent disability or incapacity (as
determined by the Board of Directors of the Purchaser in its reasonable and good
faith judgment) and (ii) the employment period may be terminated by the
Purchaser at any time prior to April 30, 1999, for "Good Cause" (as defined in
the Employment Agreements) or without "Good Cause". The Employment Agreements
provide that in the event an Executive's employment is terminated without "Good
Cause," as the case may be, such Executive will receive severance payments equal
to his base salary for one year following the date of termination. In addition,
the Employment Agreements provide for a one year noncompetition period following
the date of termination of the Employment Agreements.
In addition, the Purchaser has entered into a consulting agreement (the
"Consulting Agreement") with Jesse C. Luxton, the President and Chief Executive
Officer of the Company, dated as of August 1, 1997. The Consulting Agreement
provides that Mr. Luxton will receive $150,000 per year during the relevant
consulting period. The Consulting Agreement grants an option to Mr. Luxton to
invest $100,000 in the Parent, representing less than 1% of the issued and
outstanding shares of Parent Common Stock. As of the date of this Offer to
Purchase, Mr. Luxton has advised the Parent that he does not intend to invest in
the Parent. The Consulting Agreement terminates one year after the Merger is
consummated, subject to renewal thereafter for additional one year periods upon
mutual agreement of the Purchaser and Mr. Luxton. The Consulting Agreement
provides the Purchaser may terminate the Consulting Agreement at any time,
PROVIDED, that the Purchaser pays to Mr. Luxton the difference between the
monies paid to Mr. Luxton up to that time pursuant to the Consulting Agreement
and $150,000. In addition, the Consulting Agreement provides for a two year
noncompetition period following the effective date of the Merger or one year
following the termination of the Consulting Agreement, whichever is later.
Copies of the forms of the Employment Agreements and the Consulting
Agreement have been filed as Exhibits to this Schedule 14D-1 and the foregoing
summary is qualified in its entirety by references to such Exhibits.
11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY AFTER THE OFFER AND THE MERGER.
PURPOSE OF THE OFFER
The purpose of the Offer and the Merger is to permit the business
combination of the Purchaser and the Company. The purpose of the Merger is for
the Purchaser to acquire all Shares not purchased pursuant to the Offer. Upon
consummation of the Merger, the Company will become a wholly owned subsidiary of
the Parent. The Offer is being made pursuant to the Merger Agreement. Following
(i) completion of the Offer, (ii) approval of the Merger by the stockholders of
the Company (if applicable) and (iii) the satisfaction or waiver of the other
conditions set forth in the Merger Agreement, the Company and the Purchaser
intend to consummate the Merger.
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<PAGE>
PLANS FOR MERGER CONSUMMATION
Under Delaware Law, the approval of the Board and the affirmative vote of
the holders of a majority of the then outstanding Shares is required to approve
and adopt the Merger Agreement and the transactions contemplated thereby,
including the Merger. The Board of Directors of the Company has unanimously
approved and adopted the Merger Agreement and the transactions contemplated
thereby, and, unless the Merger is consummated pursuant to the short-form merger
provisions under Delaware Law described below, the only remaining required
corporate action of the Company is the approval and adoption of the Merger
Agreement and the transactions contemplated thereby by the affirmative vote of
the holders of a majority of the outstanding Shares. Accordingly, if the
Purchaser acquires, pursuant to the Offer or otherwise, at least a majority of
the outstanding Shares, the Purchaser will have sufficient voting power to cause
the approval and adoption of the Merger Agreement and the transactions
contemplated thereby without the affirmative vote of any other stockholder.
Pursuant to the Stockholder Tender Agreements and the Subscription and Exchange
Agreements, the Purchaser and the Parent will control and have a right to vote
approximately 56.1% of the issued and then outstanding Shares and would have
enough votes necessary to approve the Merger.
In the Merger Agreement, the Company has agreed to take all action
necessary to convene a meeting of its stockholders as soon as practicable after
the consummation of the Offer for the purpose of considering and taking action
on the Merger Agreement and the transactions contemplated thereby, if such
action is required by Delaware Law.
If the Purchaser purchases Shares pursuant to the Offer, the Merger
Agreement provides that the Purchaser will be entitled to designate
representatives to serve on the Board in proportion to the Purchaser's ownership
of Shares following such purchase. See Section 10. The Purchaser expects that
such representation would permit the Purchaser to exert substantial influence
over the Company's conduct of its business and operations.
Under Delaware Law, if the Purchaser acquires, pursuant to the Offer or
otherwise, at least 90% of the then outstanding Shares, the Purchaser will be
able to approve the Merger without a vote of the Company's stockholders. In such
event, the Parent, the Purchaser and the Company have agreed in the Merger
Agreement to take, at the request of the Purchaser, all necessary and
appropriate action to cause the Merger to become effective as soon as reasonably
practicable after such acquisition, without a meeting of the Company's
stockholders. If, however, the Purchaser does not acquire at least 90% of the
outstanding Shares pursuant to the Offer or otherwise and the Purchaser elects
to waive the Minimum Condition, then a vote of the Company's stockholders would
be required under Delaware Law and a significantly longer period of time would
be required to effect the Merger. The satisfaction of the Minimum Condition is
also a condition to AT&T-CFC's obligation to lend the funds necessary to pay for
the Shares validly tendered and accepted for payment pursuant to the Commitment
Letter, and the Purchaser believes that it is unlikely that AT&T-CFC will waive
this condition. See Section 9.
APPRAISAL RIGHTS
No appraisal rights are available in connection with the Offer. However, if
the Merger is consummated, stockholders will have certain rights under Delaware
Law to dissent and demand appraisal of, and to receive payment in cash of the
fair value of, their Shares. Such rights to dissent, if the statutory procedures
are complied with, could lead to a judicial determination of the fair value of
the Shares, as of the day prior to the date on which the stockholders' vote was
taken approving the Merger or similar business combination (excluding any
element of value arising from the accomplishment or expectation of the Merger),
required to be paid in cash to such dissenting holders for their Shares. In
addition, such dissenting stockholders would be entitled to receive payment of a
fair rate of interest from the date of consummation of the Merger on the amount
determined to be the fair value of their Shares. In determining the fair value
of the Shares, the court is required to take into account all relevant factors.
Accordingly, such determination could be based upon considerations other than,
or in addition to, the market value of the Shares, including, among other
things, asset values and earning capacity. In WEINBERGER V. UOP, INC., the
Delaware Supreme Court stated, among other things, that "proof of value by any
techniques or methods which are generally considered acceptable in the financial
community and otherwise admissible in court" should be considered in an
appraisal proceeding. Therefore, the value so determined in any appraisal
proceeding could be the same, more or less than the purchase price per Share in
the Offer or the Merger Consideration.
In addition, several decisions by Delaware courts have held that, in
certain circumstances, a controlling stockholder of a company involved in a
merger has a fiduciary duty to other stockholders which requires that the merger
be fair to such other stockholders. In determining whether a merger is fair to
minority stockholders, Delaware courts have considered, among other things, the
type and amount of consideration to be received by the stockholders and whether
there was fair dealing among the parties. The Delaware Supreme Court stated in
WEINBERGER and RABKIN V. PHILIP, A HUNT CHEMICAL CORP., that the remedy
ordinarily available to minority stockholders in a cash-out merger is the right
to appraisal described above. However,
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<PAGE>
a damages remedy or injunctive relief may be available if a merger is found to
be the product of procedural unfairness, including fraud, misrepresentation or
other misconduct.
RULE 13E-3
The Commission has adopted Rule 13e-3 under the Exchange Act which is
applicable to certain "going private" transactions and which may under certain
circumstances be applicable to the Merger or another business combination
following the purchase of Shares pursuant to the Offer in which the Purchaser
seeks to acquire the remaining Shares not held by it. The Purchaser believes,
however, that Rule 13e-3 will not be applicable to the Merger. Rule 13e-3
requires, among other things, that certain financial information concerning the
Company and certain information relating to the fairness of the proposed
transaction and the consideration offered to minority stockholders in such
transaction, be filed with the Commission and disclosed to stockholders prior to
consummation of the transaction.
PLANS FOR THE COMPANY
It is expected that, initially following the Merger, the business and
operations of the Company will, except as set forth in this Offer to Purchase,
be continued by the Company substantially as they are currently being conducted.
The Purchaser will continue to evaluate the business and operations of the
Company during the pendency of the Offer and after the consummation of the Offer
and the Merger, and will take such actions as it deems appropriate under the
circumstances then existing. The Purchaser intends to seek additional
information about the Company during this period. Thereafter, the Purchaser
intends to review such information as part of a comprehensive review of the
Company's business, operations, capitalization and management with a view to
optimizing the Company's potential.
Upon completion of the Merger, the Purchaser intends to cause each direct
and indirect subsidiary of the Company to merge with and into the Surviving
Corporation pursuant to a short-form merger without stockholder approval as
permitted under Delaware law. Except as indicated in this Offer to Purchase, the
Purchaser does not have any present plans or proposals which relate to or would
result in an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any subsidiary, a sale
or transfer of a material amount of assets of the Company or any subsidiary or
any material change in the Company's capitalization or dividend policy or any
other material changes in the Company's corporate structure or business.
12. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES EXCHANGE LISTING AND
EXCHANGE ACT REGISTRATION.
The purchase of Shares by the Purchaser pursuant to the Offer will reduce
the number of Shares that might otherwise trade publicly and will reduce the
number of holders of Shares, which could adversely affect the liquidity and
market value of the remaining Shares held by the public.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the requirements for continued inclusion in Nasdaq.
According to Nasdaq published guidelines, the Shares would not continue to be
eligible for inclusion in Nasdaq, if, among other things, the number of publicly
held Shares should fall below 200,000, the Shares are not held by at least 400
stockholders or 300 stockholders of round lots or the aggregate market value of
publicly held Shares should fall below $1.0 million. If these standards are not
met, the Shares might nevertheless continue to be included in the Nasdaq Stock
Market, but if the number of holders of the Shares were to fall below 300, or if
the number of publicly held Shares were to fall below 200,000 or there were not
at least two registered and active market makers for the Share, the Shares would
no longer be "qualified" for Nasdaq Stock Market reporting and the Nasdaq Stock
Market would cease to provide any quotations. Shares held directly or indirectly
by directors, officers or beneficial owner of more than 10% of the Shares are
not considered as being publicly held for this purpose. The Company has advised
the Purchaser that, as of September 4, 1997, there were 4,972,686 Shares
outstanding, held by approximately 875 holders of record. If, as a result of the
purchase of Shares pursuant to the Offer or otherwise, the Shares no longer meet
the requirements for inclusion in Nasdaq, Nasdaq rules provide that the Shares
would no longer qualify for inclusion in Nasdaq and Nasdaq would cease to
provide any quotations for the Shares. As a result, the market for the Shares
could be adversely affected.
If Nasdaq were to cease to provide quotations for the Shares, it is
possible that the Shares would continue to trade on another securities exchange
or in the over-the-counter market and that price or other quotations would be
reported by such exchange or other sources. The extent of the public market
therefor and the availability of such quotations would depend, however, upon
such factors as the number of stockholders and/or the aggregate market value of
such securities remaining at such time, the interest in maintaining a market in
the Shares on the part of securities firms, the possible termination of
26
<PAGE>
registration under the Exchange Act as described below, and other factors. The
Purchaser cannot predict whether the reduction in the number of Shares that
might otherwise trade publicly would have an adverse or beneficial effect on the
market price for or marketability of the Shares or whether it would cause future
market prices to be greater or less than the Merger Consideration.
The Shares are currently "margin securities", as such term is defined under
the rules of the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), which has the effect, among other things, of allowing brokers
to extend credit on the collateral of such securities. Depending upon factors
similar to those described above regarding listing and market quotations,
following the Offer it is possible that the Shares might no longer constitute
"margin securities" for purposes of the margin regulations of the Federal
Reserve Board, in which event such Shares could no longer be used as collateral
for loans made by brokers.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application by the Company to the Commission
if the Shares are not listed on a national securities exchange and there are
fewer than 300 record holders. The termination of the registration of the Shares
under the Exchange Act would substantially reduce the information required to be
furnished by the Company to holders of Shares and to the Commission and would
make certain provisions of the Exchange Act, such as the short-swing profit
recovery provisions of Section 16(b), the requirement of furnishing a proxy
statement in connection with stockholders' meetings and the requirements of Rule
13e-3 under the Exchange Act with respect to "going private" transactions, no
longer applicable to the Shares. In addition, "affiliates" of the Company and
persons holding "restricted securities" of the Company may be deprived of the
ability to dispose of such securities pursuant to Rule 144 promulgated under the
Securities Act of 1933, as amended. If registration of the Shares under the
Exchange Act were terminated, the Shares would no longer be "margin securities"
or be eligible for Nasdaq reporting. The Purchaser currently intends to seek to
cause the Company to terminate the registration of the Shares under the Exchange
Act as soon after consummation of the Offer as the requirements for termination
of registration are met.
13. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Offer, the Purchaser will not be
required to accept for payment or pay for any Shares tendered pursuant to the
Offer, and may terminate or amend the Offer (subject to the provisions of the
Merger Agreement) and may postpone the acceptance for payment of (subject to any
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act) and payment for Shares tendered, if (i) the Minimum
Condition will not have been satisfied, (ii) any applicable waiting period under
the HSR Act will not have expired or been terminated prior to the expiration of
the Offer, or (iii) at any time on or after the date of the Merger Agreement,
and prior to the acceptance for payment of Shares, any of the following
conditions will exist:
(a) there will have been enacted, issued, enforced or instituted by any
government or governmental, administrative or regulatory authority or agency,
domestic or foreign, any action or proceeding before any court or any
governmental, administrative or regulatory authority or agency, domestic or
foreign (including such authority or agency instituting or initiating such
action or proceeding), any statute, regulation, decree, injunction or other
order (whether temporary, preliminary or permanent) which is in effect and which
would reasonably be expected to result in any of the following consequences: (i)
make illegal, materially delay or otherwise directly or indirectly restrain or
prohibit the consummation of the Offer or the Merger, or seek to obtain material
damages in connection therewith; (ii) seeking to prohibit or limit materially
the ownership or operation by the Parent or Purchaser of all or any material
portion of the business or assets of all or any material portion of the business
or assets of the Company or any of its subsidiaries taken as a whole, or seek to
impose any material limitation on the ability of the Parent or the Purchaser to
conduct its business or own such assets; (iii) seek to impose material
limitations on the ability of the Parent or the Purchaser to exercise
effectively full rights of ownership of any Shares, including, without
limitation, the right to vote any Shares acquired by the Purchaser pursuant to
the Offer or otherwise on all matters properly presented to the Company's
stockholders, including, without limitation, the approval and adoption of the
Merger Agreement and the transactions contemplated thereby; (iv) seek to require
divestiture by the Parent or the Purchaser of any Shares; or (v) which, in the
reasonable judgment of the Purchaser, be expected to result in a change in or
effect on the Company, any subsidiary or any circumstance, change in or effect
on the business that is, or is reasonably likely to be, materially adverse to
the value of the Company and the subsidiaries, taken as a whole;
(b) there will have been any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or injunction enacted,
entered, enforced, promulgated, amended, issued or deemed applicable to (i) the
Parent, the Company or any subsidiary or affiliate of the Parent or the Company
or (ii) any transaction contemplated by the Merger Agreement, by
27
<PAGE>
any legislative body, court, government or governmental, administrative or
regulatory authority or agency, domestic or foreign, other than the routine
application of the waiting period provisions of the HSR Act to the Offer or the
Merger, which is reasonably likely to result, directly or indirectly, in any of
the consequences referred to in clauses (i) through (v) of paragraph (a) above;
(c) any of the representations and warranties of the Company contained in
the Merger Agreement shall not be true and correct except in any case for such
failures to be true and correct which would not, individually or in the
aggregate, have a material adverse effect as of the date of consummation of the
Offer as though made on and as of such date, except (i) for changes specifically
permitted by the Merger Agreement and (ii) that those representations and
warranties which address matters only as of a particular date shall remain true
and correct as of such date;
(d) the Company shall not have performed or complied in all material
respects with all agreements and covenants required by the Agreement to be
performed or complied with by the Company on or prior to the date of
consummation of the Offer;
(e) any change shall have occurred (or any development shall have occurred
involving prospective changes) in the business, assets, liabilities, results of
operations or condition (financial or otherwise) of the Company or any
subsidiary that has, or could reasonably be expected to have, a material adverse
effect;
(f) there shall have occurred, and continued to exist for a period of at
least 48 hours, (i) any general suspension of, or limitation on prices for,
trading in securities on the New York Stock Exchange or on the over-the-counter
stock market, as reported by Nasdaq, (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, armed hostilities or other national or international
crisis involving the United States or a material limitation (whether or not
mandatory) by any governmental entity on the extension of credit by banks or
other lending institutions, or (iv) in the case of any of the foregoing existing
at the time of the commencement of the Offer, a material acceleration or
worsening thereof;
(g) the Merger Agreement shall have been terminated in accordance with its
terms;
(h) the Purchaser and the Company shall have agreed that the Purchaser
shall terminate the offer; or
(i) (i) the Board of Directors of the Company shall have withdrawn or
adversely modified its approval or recommendation of the Offer or the Merger or
approved or recommended a Competing Transaction, (ii) the Company shall have
entered into an agreement with respect to a Competing Transaction, or (iii) the
Board of Directors of the Company shall have resolved to do any of the
foregoing.
The foregoing conditions are for the sole benefit of the Parent and the
Purchaser and may be asserted by the Parent and the Purchaser regardless of the
circumstances giving rise to any such condition or may be waived by the
Purchaser in whole or in part at any time and from time to time in their sole
discretion, subject in each case to the terms of the Merger Agreement. The
failure by the Parent or the Purchaser at any time to exercise any of the
foregoing rights will not be deemed a waiver of any such right; the waiver of
any such right with respect to particular facts and other circumstances will not
be deemed a waiver with respect to any other facts and circumstances; and each
such right will be deemed an ongoing right that may be asserted at any time and
from time to time.
28
<PAGE>
14. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS.
GENERAL
Based upon its examination of publicly available information with respect
to the Company and the review of certain information furnished by the Company to
the Purchaser and discussions of representatives of the Purchaser with
representatives of the Company during the Purchaser's investigation of the
Company, (see Section 10) , the Purchaser is not aware of any license or other
regulatory permit that appears to be material to the business of the Company and
its subsidiaries, taken as a whole, which might be adversely affected by the
acquisition of Shares by the Purchaser pursuant to the Offer or, except as set
forth below, of any approval or other action by any domestic (federal or state)
or foreign governmental, administrative or regulatory authority or agency which
would be required prior to the acquisition of Shares by the Purchaser pursuant
to the Offer. Should any such approval or other action be required, it is the
Purchaser's present intention to seek such approval or action. The Purchaser
does not currently intend, however, to delay the purchase of Shares tendered
pursuant to the Offer pending the outcome of any such action or the receipt of
any such approval (subject to the Purchaser's right to decline to purchase
Shares if any of the conditions in Section 13 shall have occurred). There can be
no assurance that any such approval or other action, if needed, would be
obtained without substantial conditions or that adverse consequences might not
result to the business of the Company, the Purchaser or that certain parts of
the businesses of the Company or the Purchaser might not have to be disposed of
or held separate or other substantial conditions complied with in order to
obtain such approval or other action or in the event that such approval was not
obtained or such other action was not taken. The Purchaser's obligation under
the Offer to accept for payment and pay for Shares is subject to certain
conditions, including conditions relating to the legal matters discussed in this
Section 14. See Section 13.
STATE TAKEOVER LAWS
The Company is incorporated under the laws of the State of Delaware. In
general, Section 203 of Delaware Law prevents an "interested stockholder"
(generally a person who owns or has the right to acquire 15% or more of a
corporation's outstanding voting stock, or an affiliate or associate thereof)
from engaging in a "business combination" (defined to include mergers and
certain other transactions) with a Delaware corporation for a period of three
years following the date such person became an interested stockholder unless,
among other things, prior to such date the board of directors of the corporation
approved either the business combination or the transaction in which the
interested stockholder became an interested stockholder. On September 4, 1997,
prior to the execution of the Merger Agreement, the Board of Directors of the
Company, by unanimous vote of all directors present at a meeting held on such
date, approved the Merger Agreement, determined that each of the Offer and the
Merger is fair to, and in the best interest of, the stockholders of the Company
and approved the Merger Agreement, the Offer and the Merger. Accordingly,
Section 203 of Delaware Law is inapplicable to the Offer and the Merger.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In EDGAR V. MITE CORP., the Supreme Court of
the United States invalidated on constitutional grounds the Illinois Business
Takeover Statute, which, as a matter of state securities law, made takeovers of
corporations meeting certain requirements more difficult. However, in 1987, in
CTS CORP. V. DYNAMICS CORP. OF AMERICA, the Supreme Court held that the State of
Indiana may, as a matter of corporate law and, in particular, with respect to
those aspects of corporate law concerning corporate governance, constitutionally
disqualify a potential acquiror from voting on the affairs of a target
corporation without the prior approval of the remaining stockholders. The state
law before the Supreme Court was by its terms applicable only to corporations
that had a substantial number of stockholders in the state and were incorporated
there.
The Company, directly or through subsidiaries, conducts business in a
number of states throughout the United States, some of which have enacted
takeover laws. The Purchaser does not know whether any of these laws will, by
their terms, apply to the Offer or the Merger and has not complied with any such
laws. Should any person seek to apply any state takeover law, the Purchaser will
take such action as then appears desirable, which may include challenging the
validity or applicability of any such statute in appropriate court proceedings.
In the event it is asserted that one or more state takeover laws is applicable
to the Offer or the Merger, and an appropriate court does not determine that it
is inapplicable or invalid as applied to the Offer, the Purchaser might be
required to file certain information with, or receive approvals from, the
relevant state authorities. In addition, if enjoined, the Purchaser might be
unable to accept for payment any Shares tendered pursuant to the Offer, or be
delayed in continuing or consummating the Offer, and the Merger. In such case,
the Purchaser may not be obligated to accept for payment any Shares tendered.
See Section 13.
29
<PAGE>
ANTITRUST
Under the HSR Act and the rules that have been promulgated thereunder by
the FTC, certain acquisition transactions may not be consummated unless certain
information has been furnished to the Antitrust Division and the FTC and certain
waiting period requirements have been satisfied. The Parent and the Company have
determined that the acquisition of Shares by the Purchaser pursuant to the Offer
are not subject to such requirements. See Section 2. The discussion set forth
below with respect to the HSR Act would be applicable to the Offer and the
Merger only in the event that it is determined that a filing were required.
If it were determined that the Offer and the Merger were subject to the HRS
Act, then the Parent would be required to file a Premerger Notification and
Report Form in connection with the purchase of Shares pursuant to the Offer with
the Antitrust Division and the FTC. If the provisions of the HSR Act applied to
the Offer, the purchase of Shares pursuant to the Offer could not be consummated
until the expiration of a 15-calendar day waiting period following the filing by
the Parent. Such waiting period may be earlier terminated by the FTC and the
Antitrust Division or extended by a request from the FTC or the Antitrust
Division for additional information or documentary material prior to the
expiration of the waiting period. There can be no assurance, however, that the
15-day HSR Act waiting period would be terminated early. If either the FTC or
the Antitrust Division were to request additional information or documentary
material from the Parent with respect to the Offer, the waiting period with
respect to the Offer would expire at 11:59 p.m., New York City time, on the
tenth calendar day after the date of substantial compliance by the Parent with
such request. Thereafter, the waiting period could be extended only by court
order. If the acquisition of Shares were to be delayed pursuant to a request by
the FTC or the Antitrust Division for additional information or documentary
material pursuant to the HSR Act, the Offer may, but need not, be extended and,
in any event, the purchase of and payment for Shares would be deferred until ten
days after the request was substantially complied with, unless the extended
period expired on or before the date when the initial 15-day period would
otherwise have expired, or unless the waiting period was sooner terminated by
the FTC and the Antitrust Division. Only one extension of such waiting period
pursuant to a request for additional information is authorized by the HSR Act
and the rules promulgated thereunder, except by court order. Any such extension
of the waiting period would not give rise to any withdrawal rights not otherwise
provided for by applicable law. See Section 4. It is a condition to the Offer
that the waiting period, if any, applicable under the HSR Act to the Offer
expire or be terminated. See Section 3 and Section 13.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
the Purchaser pursuant to the Offer. At any time before or after the purchase of
Shares pursuant to the Offer by the Purchaser, the FTC or the Antitrust Division
could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or seeking the divestiture of Shares purchased by
the Purchaser or the divestiture of substantial assets of the Parent, the
Company or their respective subsidiaries. Private parties and state attorneys
general may also bring legal action under federal or state antitrust laws under
certain circumstances. Based upon an examination of information available to the
Parent relating to the businesses in which the Parent, the Company and their
respective subsidiaries are engaged, the Parent and the Purchaser believe that
the Offer will not violate the antitrust laws. Nevertheless, there can be no
assurance that a challenge to the Offer on antitrust grounds will not be made
or, if such a challenge is made, what the result would be. See Section 13, for
certain conditions to the Offer, including conditions with respect to
litigation.
15. FEES AND EXPENSES.
Except as set forth below, the Purchaser will not pay any fees or
commissions to any broker, dealer or other person for soliciting tenders of
Shares pursuant to the Offer.
Prudential is acting as Dealer Manager in connection with the Offer and has
provided certain financial advisory services in connection with the acquisition
of the Company. The Purchaser has agreed to pay Prudential $25,000 upon
commencement of the Offer and a fee of $50,000 to be paid upon the acquisition
by the Purchaser of an aggregate of more than 75% of the issued and outstanding
Shares pursuant to the Offer. The Purchaser has also agreed to reimburse
Prudential for all reasonable out-of-pocket expenses incurred by Prudential not
to exceed $10,000, including the reasonable fees and expenses of legal counsel,
and to indemnify Prudential against certain liabilities and expenses in
connection with its engagement, including certain liabilities under the federal
securities laws.
The Purchaser has retained MacKenzie Partners, Inc., as the Information
Agent, and First Union National Bank, as the Depositary, in connection with the
Offer. The Information Agent may contact holders of Shares by mail, telephone,
telex, telecopy, telegraph and personal interview and may request banks,
brokers, dealers and other nominee stockholders to forward materials relating to
the Offer to beneficial owners.
30
<PAGE>
As compensation for acting as Information Agent in connection with the
Offer, the Information Agent will be paid a fee of $7,500 and will also be
reimbursed for certain out-of-pocket expenses and may be indemnified against
certain liabilities and expenses in connection with the Offer, including certain
liabilities under the federal securities laws. The Purchaser will pay the
Depositary reasonable and customary compensation for its services in connection
with the Offer, plus reimbursement for out-of-pocket expenses, and will
indemnify the Depositary against certain liabilities and expenses in connection
therewith, including under federal securities laws. Brokers, dealers, commercial
banks and trust companies will be reimbursed by the Purchaser for customary
handling and mailing expenses incurred by them in forwarding material to their
customers.
16. MISCELLANEOUS.
The Purchaser is not aware of any jurisdiction where the making of the
Offer is prohibited by any administrative or judicial action pursuant to any
valid state statute. If the Purchaser becomes aware of any valid state statute
prohibiting the making of the Offer or the acceptance of Shares pursuant
thereto, the Purchaser will make a good faith effort to comply with any such
state statute. If, after such good faith effort, the Purchaser cannot comply
with any such state statute, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of Shares in such state. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of the Purchaser by the Dealer Manager or by one or more registered
brokers or dealers licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR THE COMPANY NOT CONTAINED IN THIS
OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Pursuant to Rule 14d-3 of the General Rules and Regulations under the
Exchange Act, the Parent and the Purchaser have filed with the Commission the
Schedule 14D-1, together with exhibits, furnishing certain additional
information with respect to the Offer. The Schedule 14D-1 and any amendments
thereto, including exhibits, may be inspected at, and copies may be obtained
from, the same places and in the same manner as set forth in Section 7 (except
that they will not be available at the regional offices of the Commission).
September 11, 1997 NPF ACQUISITION CORPORATION
31
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER AND THE PARENT
The following table sets forth the name, business address and present
principal occupation or employment, and material occupations, positions, offices
or employment for the past five years of each director and executive officer of
the Parent and the Purchaser. Each such person is a citizen of the United States
of America and, unless otherwise indicated below, the business address of each
such person is c/o the Parent, 901 East Byrd Street, Suite 1300, Richmond,
Virginia 23219.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME AND BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- -------------------------- ------------------------------------------------------------------------------------------
<S> <C>
John T. Herzog John T. Herzog, age 35, has been the President and a director of the Parent and the Vice
President, Secretary and Treasurer and a director of the Purchaser since September 3, 1997
(the date of formation). Mr. Herzog joined Colonnade as a Managing Partner in September
1995 after serving as the Chief Financial Officer, Treasurer and Secretary of Eskimo Pie
Corporation ("Eskimo Pie") since the June 1993. Prior to Eskimo Pie, Mr. Herzog was a
Corporate Finance Vice President at Wheat First Butcher Singer since May 1991 where he
focused upon mergers and acquisitions as well as public and private capital markets.
Previously, Mr. Herzog spent six years in the Mergers and Acquisitions Department of The
First Boston Corporation, working in the firm's New York, London and Melbourne offices.
James C. Wheat, III James C. Wheat, III, age 45, has been the Vice President, Secretary and Treasurer and a
director of the Parent and the President and a director of the Purchaser since September
3, 1997 (the date of formation). Mr. Wheat joined Riverfront Partners as a Managing
Partner in August 1992 and Colonnade as a Managing Partner in May 1993. Mr. Wheat joined
Wheat First Butcher Singer in September 1984 where he last served as Managing Director and
headed equity sales and trading, fixed income and strategic planning. Mr. Wheat had
previously worked in institutional sales at Salomon Brothers Inc and Merrill Lynch.
Concurrently, Mr. Wheat was actively involved in private equity as a principal investor in
companies through their growth and exit stages. Mr. Wheat is a member of the Board of
Directors of Huddle House, Max Media, Tredegar Trust Company, and State Affairs Company.
</TABLE>
I-1
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each stockholder
of the Company or his broker, dealer, commercial bank or other nominee to the
Depositary at one of its addresses set forth below.
<TABLE>
<S> <C>
THE DEPOSITARY FOR THE OFFER IS:
FIRST UNION NATIONAL BANK
BY MAIL OR OVERNIGHT COURIER: BY FACSIMILE TRANSMISSION: BY HAND:
First Union National Bank (800) 829-8432 First Union National Bank
Corporate Trust Operations or 40 Broad Street
1525 West W.T. Harris Blvd. (704) 590-7408 5th Floor
3C3 CONFIRM BY FACSIMILE Suite 550
Charlotte, NC 28288-1153 (704) 590-7628 New York, NY 10004
Attn: Mike Klotz -- Reorg Attn: Keith Williams
</TABLE>
Any questions or requests for assistance or additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Dealer Manager at its telephone numbers and locations listed
below. You may also contact your broker, dealer, commercial bank or trust
company or nominee for assistance concerning this Offer.
The Information Agent for the Offer is:
[LOGO]
Mackenzie Partners, Inc.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
Call Toll-Free (800) 322-2885
THE DEALER MANAGER FOR THE OFFER IS:
PRUDENTIAL SECURITIES INCORPORATED
One New York Plaza
18th Floor
New York, New York 10292
Call Toll-Free (888) 889-8374
EXHIBIT (A)(2)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
NATIONAL PICTURE & FRAME COMPANY
PURSUANT TO THE OFFER TO PURCHASE
DATED SEPTEMBER 11, 1997
OF
NPF ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY
OF
NPF HOLDING CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON THURSDAY, OCTOBER 9, 1997, UNLESS THE OFFER IS EXTENDED.
TO: FIRST UNION NATIONAL BANK
<TABLE>
<S> <C>
BY HAND: BY OVERNIGHT COURIER: BY MAIL:
First Union National Bank Corporate Trust Operations Corporate Trust Operations
40 Broad Street 1525 West W.T. Harris Blvd., 1525 West W.T. Harris Blvd.,
5th Floor, Suite 550 3C3 3C3
New York, NY 10004 Charlotte, N.C. 28288-1153 Charlotte, N.C. 28288-1153
Attn: Keith Williams Attn: Mike Klotz-Reorg Attn: Mike Klotz-Reorg
BY FACSIMILE:
(704) 590-7628
CONFIRM BY TELEPHONE:
(800) 829-8432
or
(704) 590-7408
</TABLE>
Delivery of this instrument and all other documents to the address or
transmission of instructions to a facsimile number other than as set forth above
does not constitute a valid delivery.
PLEASE READ THE ENTIRE LETTER
OF TRANSMITTAL, INCLUDING THE ACCOMPANYING INSTRUCTIONS,
CAREFULLY BEFORE CHECKING ANY BOX BELOW.
This Letter of Transmittal is to be used only if (a) certificates for Shares
(as defined below) are to be forwarded herewith or, unless an Agent's Message
(as defined in Section 2 of the Offer to Purchase) is utilized, (b) a tender of
Shares is being made concurrently by book-entry transfer to the account
maintained by First Union National Bank (the "Depositary") at The Depository
Trust Company or Philadelphia Depository Trust Company (hereinafter,
collectively referred to as the "Book-Entry Transfer Facilities") pursuant to
<TABLE>
<CAPTION>
Section 3 of the Offer to Purchase. See Instruction 2.
<S> <C>
NAME(S) AND ADDRESS(ES) OF REGISTRED HOLDER(S)
(Please Fill in, if Blank, Exactly as Name(s) Appear(s) on Certificate(s))
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
DESCRIPTION OF SHARES TENDERED
CERTIFICATE(S) TENDERED
(ATTACH ADDITIONAL LIST IF NECESSARY)
<CAPTION>
TOTAL NUMBER OF SHARES
CERTIFICATE NUMBER(S)* REPRESENTED BY CERTIFICATE(S)** NUMBER OF SHARES TENDERED**
<S> <C>
TOTAL SHARES......................................................................
* Does not need to be completed if Shares are tendered by book-entry transfer.
** If you desire to tender fewer than all Shares evidenced by any certificates listed above, please indicate in this column
the number of Shares you wish to tender. Otherwise, all Shares evidenced by such certificates will be deemed to have been
tendered. See Instruction 4.
</TABLE>
NOTE: SIGNATURE MUST BE PROVIDED BELOW
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
STOCKHOLDERS WHO CANNOT DELIVER THE CERTIFICATES FOR THEIR SHARES TO THE
DEPOSITARY PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE (AS
DEFINED BELOW)) OR WHO CANNOT COMPLETE THE PROCEDURE FOR BOOK-ENTRY TRANSFER ON
A TIMELY BASIS OR WHO CANNOT DELIVER A LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE DEPOSITARY PRIOR TO THE EXPIRATION DATE MUST, IN EACH
CASE, TENDER THEIR SHARES PURSUANT TO THE GUARANTEED DELIVERY PROCEDURE SET
FORTH IN SECTION 3 OF THE OFFER TO PURCHASE. SEE INSTRUCTION 2.
STOCKHOLDERS WHO DESIRE TO TENDER SHARES PURSUANT TO THE OFFER (AS DEFINED
BELOW) AND WHO CANNOT DELIVER THEIR CERTIFICATES FOR THEIR SHARES (OR WHO ARE
UNABLE TO COMPLY WITH THE PROCEDURES FOR BOOK-ENTRY TRANSFER ON A TIMELY BASIS)
AND ALL OTHER DOCUMENTS REQUIRED BY THIS LETTER OF TRANSMITTAL TO THE DEPOSITARY
AT OR BEFORE THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE) MAY
TENDER THEIR SHARES ACCORDING TO THE GUARANTEED DELIVERY PROCEDURES SET FORTH IN
SECTION 3 OF THE OFFER TO PURCHASE. SEE INSTRUCTION 2. DELIVERY OF DOCUMENTS TO
ONE OF THE BOOK-ENTRY TRANSFER FACILITIES DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
2
<PAGE>
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO
AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH ONE OF THE BOOK ENTRY-TRANSFER
FACILITIES AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: _____________________________________
Check Box of Applicable Book-Entry Facility:
[ ] The Depository Trust Company
[ ] The Philadelphia Depository Company
Account Number: _______________________________________________________
Transaction Code Number: ______________________________________________
[ ] CHECK HERE IF CERTIFICATES FOR TENDERED SHARES ARE BEING DELIVERED PURSUANT
TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s): __________________________________
Date of Execution of Notice of Guaranteed Delivery: ___________________
Name of Institution which Guaranteed Delivery: ________________________
Check Box of Applicable Book-Entry Transfer Facility and Give Account
Number if Delivered by Book-Entry
Transfer:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Company
Account Number: _______________________________________________________
3
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
TO FIRST UNION NATIONAL BANK:
The undersigned hereby tenders to NPF Acquisition Corporation, a Delaware
corporation (the "Purchaser"), and wholly owned subsidiary of NPF Holding
Corporation, a Delaware corporation (the "Parent"), the above described shares
of common stock, $0.01 par value per share (the "Shares"), of National Picture &
Frame Company, a Delaware corporation (the "Company") pursuant to the
Purchaser's offer to purchase any and all outstanding Shares at a purchase price
of $12.00 per Share (the "Purchase Price"), net to the seller in cash, without
interest thereon upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated September 11, 1997 (the "Offer to Purchase"), receipt
of which is hereby acknowledged, and in this Letter of Transmittal (which,
together with the Offer to Purchase, as it may be amended and supplemented from
time to time, constitute the "Offer").
Subject to, and effective upon, acceptance for payment of the Shares
tendered hereby in accordance with the terms and subject to the conditions of
the Offer (including, if the Offer is extended or amended, the terms and
conditions of such extension or amendment), the undersigned hereby sells,
assigns and transfers to, or upon the order of, the Purchaser all right, title
and interest in and to all the Shares that are being tendered hereby and orders
the registration of all such Shares if tendered by book-entry transfer and
hereby irrevocably constitutes and appoints the Depositary as the true and
lawful agent and attorney-in-fact of the undersigned (with full knowledge that
said Depositary also acts as the agent of the Company) with respect to such
Shares with full power of substitution (such power of attorney being deemed to
be an irrevocable power coupled with an interest), to:
(a) deliver certificate(s) for such Shares or transfer ownership of
such Shares on the account books maintained by any of the Book-Entry
Transfer Facilities, together in either such case with all accompanying
evidences of transfer and authenticity, to, or upon the order of, the
Company upon receipt by the Depositary, as the undersigned's agent, of the
aggregate Purchase Price with respect to such Shares;
(b) present certificates for such Shares for cancellation and transfer
on the Company's books; and
(c) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares, subject to the next paragraph, all in
accordance with the terms of the Offer.
The undersigned hereby represents and warrants to the Company that:
(a) the undersigned understands that tenders of Shares pursuant to any
one of the procedures described in Section 3 of the Offer to Purchase and
in the instructions hereto will constitute the undersigned's acceptance of
the terms and conditions of the Offer, including the undersigned's
representation and warranty that:
(i) the undersigned has a net long position in Shares or equivalent
securities at least equal to the Shares tendered within the meaning of
Rule 14e-4 under the Securities Exchange Act of 1934, as amended, and
(ii) such tender of Shares complies with Rule 14e-4;
(b) when and to the extent the Company accepts such Shares for
purchase, the Purchaser will acquire good, marketable and unencumbered
title to them, free and clear of all security interests, liens, charges,
encumbrances, conditional sales agreements or other obligations relating to
their sale or transfer, and not subject to any adverse claim;
(c) on request, the undersigned will execute and deliver any
additional documents the Depositary or the Purchaser deems necessary or
desirable to complete the assignment, transfer and purchase of the Shares
tendered hereby; and
(d) the undersigned has read and agrees to all of the terms of the
Offer.
The undersigned irrevocably appoints the Purchaser, its officers and its
designees, and each of them, the attorneys-in-fact and proxies of the
undersigned, with full power of substitution, to the full extent of such
stockholder's rights with respect to the Shares tendered by such stockholder and
accepted for payment by the Purchaser and with respect to any and all other
Shares or other securities issued or issuable in respect of such Shares on or
after September 11, 1997. This proxy and power of attorney is coupled with an
interest in the Shares tendered hereby and is irrevocable and is granted in
consideration of, and is effective upon, the acceptance for payment of such
Shares by the Purchaser in accordance with the terms of the Offer. Upon such
acceptance for payment, all prior proxies given by such stockholder with respect
to such Shares (and such other shares and securities) will be revoked without
further action, and no subsequent proxies may be given nor any subsequent
written consents executed (and, if given or executed, will not be deemed
effective) with respect thereto by the undersigned.
4
<PAGE>
The Purchaser, its officers and its designees will, with respect to the Shares
(and such other securities) tendered, be empowered to exercise all voting and
other rights of such stockholder as they in their sole discretion may deem
proper at any annual or special meeting of the Company's stockholders or any
adjournment or postponement thereof, by written consent in lieu of any such
meeting or otherwise. The Purchaser reserves the right to require that, in order
for Shares to be deemed validly tendered, immediately upon the Purchaser's
payment for such Shares the Purchaser must be able to exercise full voting
rights with respect to such Shares and other securities, including voting at any
meeting of stockholders.
The undersigned hereby represents and warrants that (a) the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and (b) when the Shares are accepted for payment by the
Purchaser, the Purchaser will acquire good, marketable and unencumbered title to
the Shares, free and clear of all liens, restrictions, charges and encumbrances,
and the same will not be subject to any adverse claim. The undersigned, upon
request, will execute and deliver any additional documents deemed by the
Depositary or the Purchaser to be necessary or desirable to complete the sale,
assignment and transfer of the Shares tendered hereby.
All authorities conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned, and any
obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, executors, administrators, successors, assigns,
trustees in bankruptcy, and legal representatives of the undersigned. Except as
stated in the Offer to Purchase, this tender is irrevocable.
The name(s) and address(es) of the registered holder(s) should be printed
above, if they are not already printed above, exactly as they appear on the
certificates representing Shares tendered hereby. The certificate numbers, the
number of Shares represented by such certificates and the number of Shares that
the undersigned wishes to tender, should be set forth in the appropriate boxes
above.
The undersigned recognizes that, under certain circumstances set forth in
the Offer to Purchase, the Purchaser may terminate or amend the Offer or may
postpone the acceptance for payment of, or the payment for, Shares tendered or
may accept for payment fewer than all of the Shares tendered hereby. In any such
event, the undersigned understands that certificate(s) for any Shares delivered
herewith but not tendered or not purchased will be returned to the undersigned
at the address indicated above, unless otherwise indicated under the "Special
Payment Instructions" or "Special Delivery Instructions" below. The undersigned
recognizes that the Company has no obligation, pursuant to the Special Payment
Instructions, to transfer any certificate for Shares from the name of its
registered holder, or to order the registration or transfer of Shares tendered
by book-entry transfer, if the Company purchases none of the Shares represented
by such certificate or tendered by such book-entry transfer.
The undersigned understands that acceptance of Shares by the Purchaser for
payment will constitute a binding agreement between the undersigned and the
Company upon the terms and subject to the conditions of the Offer. The
undersigned acknowledges that no interest will be paid on the Purchase Price for
tendered Shares regardless of any extension of the Offer or any delay in making
such payment.
The check for the aggregate Purchase Price for such of the Shares tendered
hereby as are purchased will be issued to the order of the undersigned and
mailed to the address indicated above, unless otherwise indicated under the
Special Payment Instructions or the Special Delivery Instructions below.
5
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
<TABLE>
<CAPTION>
<S> <C>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 5, 6 AND (SEE INSTRUCTIONS 1, 4, 5, 6 AND 7)
7) To be completed ONLY if certificates for Shares not tendered
To be completed ONLY if certificates for Shares not or not purchased and/or any check for the Purchase Price of
tendered or not purchased and/or any check for the aggregate Shares purchased, issued in the name of the undersigned, are
Purchase Price of Shares purchased are to be issued in the to be mailed to someone other than the undersigned, or to
name of and sent to someone other than the undersigned. the undersigned at an address other than that shown above.
Mail:
Issue: [ ] Check to:
[ ] Check to: [ ] Certificates to:
[ ] Certificates to: Name(s):
Name(s): (Please Print)
(Please Print) Address:
Address: (Zip Code) (Zip Code)
(Taxpayer Identification or Social Security No.)
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL STOCKHOLDERS)
(PLEASE COMPLETE AND RETURN THE ENCLOSED FORM W-9)
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on certificate(s) or on a security position listing
or by person(s) authorized to become registered holder(s) by certificate(s) and documents transmitted with this Letter of
Transmittal. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or
another person acting in a fiduciary or representative capacity, please set forth full title and see Instruction 5.)
Signature(s) of
Owner(s)
Dated: , 1997
Name(s):
(Please Print)
Capacity (full title):
Address:
(Include Zip Code)
Area Code(s) and
Telephone Number(s):
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 6)
NAME OF FIRM:
AUTHORIZED SIGNATURE:
NAME:
(Please Print)
Title:
Address:
(Include Zip Code)
Area Code and
Telephone Number:
Dated: , 1997
</TABLE>
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required if either:
(a) this Letter of Transmittal is signed by the registered holder of
the Shares (which term, for purposes of this document, shall include any
participant in a Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of such Shares) exactly as the name
of the registered holder appears on the certificate tendered with this
Letter of Transmittal and payment and delivery are to be made directly to
such owner unless such owner has completed either the box entitled "Special
Payment Instructions" or "Special Delivery Instructions" above; or
(b) such Shares are tendered for the account of a member firm of a
registered national securities exchange, a member of the National
Association of Securities Dealers, Inc. or a commercial bank or trust
company (not a savings bank or savings and loan association) having an
office, branch or agency in the United States (each such entity, an
"Eligible Institution").
In all other cases, an Eligible Institution must guarantee all signatures
on this Letter of Transmittal. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be used only if certificates for
Shares are delivered with it to the Depositary (or such certificates will be
delivered pursuant to a Notice of Guaranteed Delivery previously sent to the
Depositary) or if a tender for Shares is being made concurrently pursuant to the
procedure for tender by book-entry transfer set forth in Section 3 of the Offer
to Purchase. Certificates for all physically tendered Shares or confirmation of
a book-entry transfer into the Depositary's account at a Book-Entry Transfer
Facility of Shares tendered electronically, together in each case with a
properly completed and duly executed Letter of Transmittal or duly executed and
manually signed facsimile of it, or an Agent's Message in connection with a
book-entry transfer, and any other documents required by this Letter of
Transmittal, should be mailed or delivered to the Depositary at the appropriate
address set forth herein and must be delivered to the Depositary on or before
the Expiration Date (as defined in the Offer to Purchase). DELIVERY OF DOCUMENTS
TO ONE OF THE BOOK-ENTRY TRANSFER FACILITIES DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
Stockholders whose certificates are not immediately available or who cannot
deliver certificates for their Shares and all other required documents to the
Depositary before the Expiration Date, or whose Shares cannot be delivered on a
timely basis pursuant to the procedures for book-entry transfer, must, in any
such case, tender their Shares by or through any Eligible Institution by
properly completing and duly executing and delivering a Notice of Guaranteed
Delivery (or facsimile of it) and by otherwise complying with the guaranteed
delivery procedure set forth in Section 3 of the Offer to Purchase. Pursuant to
such procedure, certificates for all physically tendered Shares or book-entry
confirmations, as the case may be, as well as a properly completed and duly
executed Letter of Transmittal (or facsimile of it) and all other documents
required by this Letter of Transmittal, must be received by the Depositary
within four Nasdaq National Market trading days after receipt by the Depositary
of such Notice of Guaranteed Delivery, all as provided in Section 3 of the Offer
to Purchase.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Depositary and must include a
signature guarantee by an Eligible Institution in the form set forth in such
Notice. For Shares to be tendered validly pursuant to the guaranteed delivery
procedure, the Depositary must receive the Notice of Guaranteed Delivery on or
before the Expiration Date.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES,
IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY.
8
<PAGE>
The Purchaser will not accept any alternative, conditional or contingent
tenders, nor will it purchase any fractional Shares, except as expressly
provided in the Offer to Purchase. All tendering stockholders, by execution of
this Letter of Transmittal (or a facsimile of it), waive any right to receive
any notice of the acceptance of their tender.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Shares Tendered" is inadequate, the certificate numbers and/or
the number of Shares should be listed on a separate signed schedule and attached
to this Letter of Transmittal.
4. PARTIAL TENDERS AND UNPURCHASED SHARES. (Not applicable to stockholders
who tender by book-entry transfer.) If fewer than all of the Shares evidenced by
any certificate are to be tendered, fill in the number of Shares that are to be
tendered in the column entitled "Number of Shares Tendered," in the box
captioned "Description of Shares Tendered." In such case, if any tendered Shares
are purchased, a new certificate for the remainder of the Shares (including any
Shares not purchased) evidenced by the old certificate(s) will be issued and
sent to the registered holder(s), unless otherwise specified in either the
"Special Payment Instructions" or "Special Delivery Instructions" box on this
Letter of Transmittal, as soon as practicable after the Expiration Date. Unless
otherwise indicated, all Shares represented by the certificate(s) listed and
delivered to the Depositary will be deemed to have been tendered.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS.
(a) If this Letter of Transmittal is signed by the registered
holder(s) of the Shares tendered hereby, the signature(s) must correspond
exactly with the name(s) as written on the face of the certificate(s)
without any change whatsoever.
(b) If the Shares are registered in the names of two or more joint
holders, each such holder must sign this Letter of Transmittal.
(c) If any tendered Shares are registered in different names on
several certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal (or facsimiles of it) as there are
different registrations of certificates.
(d) When this Letter of Transmittal is signed by the registered
holder(s) of the Shares listed and transmitted hereby, no endorsement(s) of
certificate(s) representing such Shares or separate stock power(s) are
required unless payment is to be made or the certificate(s) for Shares not
tendered or not purchased are to be issued to a person other than the
registered holder(s). SIGNATURE(S) ON SUCH CERTIFICATE(S) MUST BE
GUARANTEED BY AN ELIGIBLE INSTITUTION. If this Letter of Transmittal is
signed by a person other than the registered holder(s) of the
certificate(s) listed, or if payment is to be made or their certificate(s)
for Shares not tendered or not purchased are to be issued to a person other
than the registered holder(s), the certificate(s) must be endorsed or
accompanied by appropriate stock power(s), in either case signed exactly as
the name(s) of the registered holder(s) appears on the certificate(s), and
the signature(s) on such certificate(s) or stock power(s) must be
guaranteed by an Eligible Institution. See Instruction 1.
(e) If this Letter of Transmittal or any certificate(s) or stock
power(s) are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing
and must submit proper evidence satisfactory to the Company of their
authority so to act.
6. STOCK TRANSFER TAXES. Except as provided in this Instruction 6, no stock
transfer tax stamps or funds to cover such stamps need accompany this Letter of
Transmittal. The Purchaser will pay or cause to be paid any stock transfer taxes
payable on the transfer to it of Shares purchased pursuant to the Offer. If,
however:
(a) payment of the aggregate Purchase Price for Shares tendered hereby
and accepted for purchase is to be made to any person other than the
registered holder(s);
(b) Shares not tendered or not accepted for purchase are to be
registered in the name(s) of any person(s) other than the registered
holder(s); or
9
<PAGE>
(c) tendered certificates are registered in the name(s) of any
person(s) other than the person(s) signing this Letter of Transmittal;
then the Depositary will deduct from such aggregate Purchase Price the amount of
any stock transfer taxes (whether imposed on the registered holder, such other
person or otherwise) payable on account of the transfer to such person, unless
satisfactory evidence of the payment of such taxes or any exemption from them is
submitted.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If certificate(s) for Shares
not tendered or not purchased and/or check(s) are to be issued in the name of a
person other than the signer of the Letter of Transmittal or if such
certificates and/or checks are to be sent to someone other than the person
signing the Letter of Transmittal or to the signer at a different address, the
boxes captioned "Special Payment Instructions" and/or "Special Delivery
Instructions" on this Letter of Transmittal should be completed as applicable
and signatures must be guaranteed as described in Instruction 1. Shareholders
tendering Shares by book-entry transfer may request that Shares not purchased be
credited to such account at any of the Book-Entry Transfer Facilities as such
stockholder any designate under "Special Payment Instructions." If no such
instructions are given, any such Shares not purchased will be returned by
crediting the account at the Book-Entry Transfer Facilities designated above.
8. IRREGULARITIES. All questions as to the number of Shares to be accepted
and the validity, form, eligibility (including time of receipt) and acceptance
for payment of any tender of Shares will be determined by the Purchaser in its
sole discretion, which determinations shall be final and binding on all parties.
The Purchaser reserves the absolute right to reject any or all tenders of Shares
it determines not to be in proper form or the acceptance of which or payment for
which may, in the opinion of the Purchaser's counsel, be unlawful. The Purchaser
also reserves the absolute right to waive any of the conditions of the Offer and
any defect or irregularity in the tender of any particular Shares, and the
Purchaser's interpretation of the terms of the Offer (including these
instructions) will be final and binding on all parties. No tender of Shares will
be deemed to be properly made until all defects and irregularities have been
cured or waived. Unless waived, any defects or irregularities in connection with
tenders must be cured within such time as the Purchaser shall determine. None of
the Purchaser, the Dealer Manager (as defined in the Offer to Purchase), the
Depositary, the Information Agent (as defined in the Offer to Purchase) or any
other person is or will be obligated to give notice of any defects or
irregularities in tenders and none of them will incur any liability for failure
to give any such notice.
9. QUESTIONS AND REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions
and requests for assistance may be directed to, or additional copies of the
Offer to Purchase, the Notice of Guaranteed Delivery and this Letter of
Transmittal may be obtained from, the Information Agent or the Dealer Manager at
their addresses and telephone numbers set forth at the end of this Letter of
Transmittal or from your broker, dealer, commercial bank or trust company.
10. FORM W-9 AND FORM W-8. Stockholders other than corporations and certain
foreign persons may be subject to backup federal income tax withholding. Each
tendering stockholder who does not otherwise establish to the satisfaction of
the Depositary an exemption from backup federal income tax withholding is
required to provide the Depositary with a correct taxpayer identification number
("TIN") on Form W-9, which is provided with this Letter of Transmittal. For an
individual, his or her TIN will generally be his or her social security number.
Failure to provide the information requested or to make the certification on the
Form W-9 may subject the tendering stockholder to 31% backup federal income tax
withholding on the payments made to or for the stockholder with respect to
Shares purchased pursuant to the Offer. Failing to furnish a correct TIN may
subject the stockholder to a $50.00 penalty imposed by the Internal Revenue
Service. Providing false information may result in additional penalties. Backup
withholding is not an additional tax. Rather, the tax liability of a person
subject to backup withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be obtained.
Shareholders who are foreign persons should submit Form W-8 to certify that they
are exempt from backup withholding. Form W-8 may be obtained from the
Depositary.
11. WITHHOLDING ON FOREIGN STOCKHOLDERS. Even if a foreign stockholder has
provided the required certification to avoid backup withholding, the Depositary
will withhold federal income taxes equal to 30% of the gross payments payable to
a foreign stockholder or his agent unless the Depositary determines that an
exemption from or a reduced rate of withholding is available pursuant to a tax
treaty or an exemption from withholding is applicable because such gross
proceeds are effectively connected with the conduct of a trade or business in
the United States. In order to obtain an exemption from or a reduced rate of
withholding pursuant to a tax treaty, a foreign stockholder must deliver to the
Depositary a properly completed Form 1001. For this purpose, a foreign
stockholder is a stockholder that is not (i) a citizen or resident of the United
States, (ii) a corporation, partnership or other entity created or organized in
or under the laws of the United States, any State or any political
10
<PAGE>
subdivision thereof or (iii) any estate or trust the income of which is subject
to United States federal income taxation regardless of the source of such
income. In order to obtain an exemption from withholding on the grounds that the
gross proceeds paid pursuant to the Offer are effectively connected with the
conduct of a trade or business within the United States, a foreign stockholder
must deliver to the Depositary a properly completed Form 4224. The Depositary
will determine a stockholder's status as a foreign stockholder and eligibility
for a reduced rate of, or an exemption from, withholding by reference to
outstanding certificates or statements concerning eligibility for a reduced rate
of, or exemption from, withholding (E.G., Form 1001 or Form 4224) unless facts
and circumstances indicate that such reliance is not warranted. A foreign
stockholder may be eligible to obtain a refund of all or a portion of any tax
withheld if such stockholder meets one of the tests for sale treatment described
in Section 14 of the Offer to Purchase or is otherwise able to establish that no
tax or a reduced amount of tax is due. Backup withholding generally will not
apply to amounts subject to the 30% or treaty-reduced rate of withholding.
Foreign stockholders are urged to consult their tax advisors regarding the
application of federal income tax withholding, including eligibility for a
withholding tax reduction or exemption and refund procedures.
11
<PAGE>
THE DEPOSITARY FOR THE OFFER IS:
FIRST UNION NATIONAL BANK
<TABLE>
<S> <C>
BY HAND: BY OVERNIGHT COURIER: BY MAIL:
First Union National Bank Corporate Trust Operations Corporate Trust Operations
40 Broad Street 1525 West W.T. Harris Boulevard 1525 West W.T. Harris Boulevard
5th Floor, Suite 550 3C3 3C3
New York, NY 10004 Charlotte, North Carolina 28288-1153 Charlotte, North Carolina 28288-1153
Attn: Keith Williams Attn: Mike Klotz-Reorg Attn: Mike Klotz-Reorg
BY FACSIMILE:
(704) 590-7628
CONFIRM BY TELEPHONE:
(800) 829-8432
or
(704) 590-7408
</TABLE>
The Information Agent for the Offer is:
[LOGO]
Mackenzie Partners, Inc.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
Call Toll-Free (800) 322-2885
THE DEALER MANAGER FOR THE OFFER IS:
PRUDENTIAL SECURITIES INCORPORATED
One New York Plaza
18th Floor
New York, New York 10292
(888) 889-8374
IMPORTANT: This Letter of Transmittal or a facsimile hereof (together with
certificates for the Shares being tendered and all other required documents), or
a Notice of Guaranteed Delivery must be received prior to 5:00 p.m., New York
City time, on the Expiration Date. STOCKHOLDERS ARE ENCOURAGED TO RETURN A
COMPLETED FORM W-9 WITH THEIR LETTER OF TRANSMITTAL.
12
EXHIBIT (A)(3)
<PAGE>
NOTICE OF GUARANTEED DELIVERY FOR
TENDER OF SHARES OF COMMON STOCK
OF
NATIONAL PICTURE & FRAME COMPANY
PURSUANT TO THE OFFER TO PURCHASE
DATED SEPTEMBER 11, 1997
OF
NPF ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY
OF
NPF HOLDING CORPORATION
This form or a facsimile hereof must be used to accept the Offer (as
defined below) if:
(a) certificates for shares of common stock, $0.01 par value per share
(the "Shares"), of National Picture & Frame Company, a Delaware corporation
(the "Company"), cannot be delivered to the Depositary prior to the
Expiration Date (as defined in Section 1 of the Company's Offer to Purchase
dated September 11, 1997 (the "Offer to Purchase")); or
(b) the procedure for book-entry transfer (set forth in Section 3 of
the Offer to Purchase) cannot be completed on a timely basis; or
(c) the Letter of Transmittal (or a facsimile thereof) and all other
required documents cannot be delivered to the Depositary prior to the
Expiration Date.
This form, properly completed and duly executed, may be delivered by hand,
mail or facsimile transmission to the Depositary. See Section 3 of the Offer to
Purchase.
TO: FIRST UNION NATIONAL BANK
<TABLE>
<S> <C>
BY HAND: BY OVERNIGHT COURIER: BY MAIL:
First Union National Bank Corporate Trust Operations Corporate Trust Operations
40 Broad Street 1525 West W.T. Harris Boulevard 1525 West W.T. Harris Boulevard
5th Floor, Suite 550 3C3 3C3
New York, NY 10004 Charlotte, North Carolina 28288-1153 Charlotte, North Carolina 28288-1153
Attn: Keith Williams Attn: Mike Klotz-Reorg Attn: Mike Klotz-Reorg
BY FACSIMILE:
(704) 590-7628
CONFIRM BY TELEPHONE:
(800) 829-8432
or
(704) 590-7408
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to NPF Acquisition Corporation, a Delaware
corporation (the "Purchaser") a wholly owned subsidiary of NPF Holding
Corporation, a Delaware corporation ("Parent"), upon the terms and subject to
the conditions set forth in the Offer to Purchase and the related Letter of
Transmittal (which, as amended and supplemental from time to time, together
constitute the "Offer"), receipt of both of which is hereby acknowledged,
Shares pursuant to the guaranteed delivery procedure
set forth in Section 3 of the Offer to Purchase.
(Please type or print)
Certificate Nos. (if available):
------------------------------------------------------
------------------------------------------------------
Name(s)
------------------------------------------------------
Address(es)
------------------------------------------------------
------------------------------------------------------
Area Code(s) and Telephone Number(s)
SIGN HERE
------------------------------------------------------
Signature(s)
Dated: _________________________________________________________________________
If Shares will be tendered by book-entry transfer, check one box:
[ ] The Depository Trust Company
[ ] The Philadelphia Depository Company
Account Number: ________________________________________________________________
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned is a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office, branch, or agency in the
United States and represents that: (a) the above-named person(s) "own(s)" the
Shares tendered hereby within the meaning of Rule 14e-4 promulgated under the
Securities Exchange Act of 1934, as amended, and (b) such tender of Shares
complies with such Rule 14e-4, and guarantees that the Depositary will receive
(i) certificates of the Shares tendered hereby in proper form for transfer, or
(ii) confirmation that the Shares tendered hereby have been delivered pursuant
to the procedure for book-entry transfer (set forth in Section 3 of the Offer to
Purchase) into the Depositary's account at The Depository Trust Company or The
Philadelphia Depository Company, as the case may be, together with a properly
completed and duly executed Letter of Transmittal (or facsimile thereof), or an
Agent's Message (as defined in the Offer to Purchase) in the case of a
book-entry delivery, and any other documents required by the Letter of
Transmittal, all within four Nasdaq National Market trading days after the date
the Depositary receives this Notice of Guaranteed Delivery.
Authorized Signature: __________________________________________________________
Name: __________________________________________________________________________
(Please Print)
Title: _________________________________________________________________________
Name of Firm: __________________________________________________________________
Address: _______________________________________________________________________
------------------------------------------------------
(Including Zip Code)
Area Code and Telephone Number: ________________________________________________
Date: ____________________________________________________________________, 1997
DO NOT SEND STOCK CERTIFICATES WITH THIS FORM. YOUR STOCK CERTIFICATES MUST BE
SENT WITH THE LETTER OF TRANSMITTAL.
EXHIBIT (A)(4)
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
NATIONAL PICTURE & FRAME COMPANY
AT
$12.00 NET PER SHARE
BY
NPF ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
NPF HOLDING CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON THURSDAY, OCTOBER 9, 1997, UNLESS THE OFFER IS EXTENDED.
September 11, 1997
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
NPF Acquisition Corporation, a Delaware corporation (the "Purchaser"), and
wholly owned subsidiary of NPF Holding Corporation, a Delaware corporation (the
"Parent"), has appointed us to act as Dealer Manager in connection with the
Purchaser's offer to purchase for cash all outstanding shares of Common Stock,
$0.01 par value per share (the "Shares"), of National Picture & Frame Company, a
Delaware corporation (the "Company"), at a purchase price of $12.00 per Share,
net to the seller in cash, without interest thereon, upon the terms and subject
to the conditions set forth in the Purchaser's Offer to Purchase, dated
September 11, 1997, (the "Offer to Purchase") and in the related Letter of
Transmittal (which together constitute the "Offer"). All capitalized terms used
but not defined herein shall have the meanings ascribed to them in the Offer to
Purchase.
THE OFFER IS SUBJECT TO THERE BEING VALIDLY TENDERED AND NOT PROPERLY
WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF SHARES WHICH
CONSTITUTE AT LEAST 90% OF THE OUTSTANDING SHARES OF THE COMPANY ON THE DATE
SHARES ARE ACCEPTED FOR PAYMENT, INCLUDING SHARES OWNED BY THE PARENT OR THE
PURCHASER. THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 13
OF THE OFFER TO PURCHASE.
Please furnish copies of the following enclosed materials to those of your
clients for whose account you hold Shares in your name or in the name of your
nominee:
1. Offer to Purchase, dated September 11, 1997;
2. Letter of Transmittal for your use and for the information of your
clients (together with accompanying Form W-9);
3. A form of letter which may be sent to your clients for whose
accounts you hold Shares registered in your name or in the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Offer;
4. Letter, dated September 11, 1997, from Daniel J. Hennessy, Chairman
of the Board of the Company, to stockholders of the Company, together with
a Solication/Recommendation Statement on Schedule 14D-9 filed with the
Securities and Exchange Commission by the Company and mailed to the
stockholders of the Company, each recommending that the Company's
stockholders accept the Offer and tender their Shares; and
5. Notice of Guaranteed Delivery to be used to accept the Offer if the
Share certificates and all other required documents cannot be delivered to
the Depositary by the Expiration Date or if the procedure for book-entry
transfer cannot be completed on a timely basis.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE OFFER AND
WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON THURSDAY,
OCTOBER 9, 1997, UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE").
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will be deemed to have accepted for payment, and
will pay for, all Shares validly tendered and not properly withdrawn prior to
the Expiration Date when, as and if the Purchaser gives oral or written notice
to the Depositary of the Purchaser's acceptance of such Shares for payment
pursuant to the Offer.
<PAGE>
Payment for Shares purchased pursuant to the Offer will be made only after
timely receipt by the Depositary of certificates for such Shares (or
confirmation of a book-entry transfer of such Shares into the Depositary's
account at one of the Book-Entry Transfer Facilities (as described in the Offer
to Purchase), a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) (unless, in the case of a book-entry transfer, an Agent's
Message (as defined in the Offer to Purchase) is utilized) and any other
documents required by the Letter of Transmittal.
No fees or commissions will be payable to brokers, dealers or any person
for soliciting tenders of Shares pursuant to the Offer other than fees paid to
the Dealer Manager, the Information Agent or the Depositary as described in the
Offer to Purchase. The Purchaser will, however, upon request, reimburse you for
customary mailing and handling expenses incurred by you in forwarding any of the
enclosed materials to the beneficial owners of Shares held by you as a nominee
or in a fiduciary capacity. The Purchaser will pay or cause to be paid any stock
transfer taxes applicable to its purchase of Shares, except as otherwise
provided in Instruction 6 of the Letter of Transmittal.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal and any other required documents should be sent
to the Depositary with either certificate(s) representing the tendered Shares or
confirmation of their book-entry transfer all in accordance with the
instructions set forth in the Letter of Transmittal and the Offer to Purchase.
As described in Section 3 of the Offer to Purchase, tenders may be made
without the concurrent deposit of stock certificates or concurrent compliance
with the procedure for book-entry transfer, if such tenders are made by or
through a broker or dealer which is a member firm of a registered national
securities exchange, or a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office, branch or
agency in the United States. Certificates for Shares so tendered (or a
confirmation of a book-entry transfer of such Shares into the Depositary's
account at one of the "Book-Entry Transfer Facilities" described in the Offer to
Purchase), together with a properly completed and duly executed Letter of
Transmittal and any other documents required by the Letter of Transmittal, must
be received by the Depositary within four Nasdaq National Market trading days
after timely receipt by the Depositary of a properly completed and duly executed
Notice of Guaranteed Delivery.
Any inquiries you may have with respect to the Offer should be addressed to
Prudential Securities Incorporated or to the Information Agent at their
respective addresses and telephone numbers set forth on the back cover page of
the Offer to Purchase.
Additional copies of the enclosed material may be obtained from the
Information Agent, MacKenzie Partners, Inc., telephone: (800) 322-2885 (toll
free) or (212) 929-5500.
Very truly yours,
PRUDENTIAL SECURITIES INCORPORATED
Enclosures
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON AS AN AGENT OF THE PURCHASER OR ANY OF ITS AFFILIATES, THE
PARENT, THE COMPANY, THE DEALER MANAGER, THE INFORMATION AGENT OR THE
DEPOSITARY, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY
STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE
DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN.
EXHIBIT (A)(5)
<PAGE>
OFFER TO PURCHASE
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
NATIONAL PICTURE & FRAME COMPANY
AT
$12.00 NET PER SHARE
BY
NPF ACQUISITION CORPORATION,
A WHOLLY OWNED SUBSIDIARY OF
NPF HOLDING CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON THURSDAY, OCTOBER 9, 1997, UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated September
11, 1997, and the related Letter of Transmittal (which together constitute the
"Offer") in connection with the Offer by NPF Acquisition, a Delaware corporation
(the "Purchaser") and wholly owned subsidiary of NPF Holding Corporation, a
Delaware Corporation (the "Parent"), to purchase for cash all outstanding shares
of Common Stock, $0.01 par value per share (the "Shares") of National Picture &
Frame Company, a Delaware corporation (the "Company"), at a purchase price of
$12.00 per Share, net to the seller in cash, without interest therein, upon the
terms and subject to the conditions set forth in the Offer.
We are the owner of record of Shares held for your account. As such, we are
the only ones who can tender your Shares, and then only pursuant to your
instructions. WE ARE SENDING YOU THE LETTER OF TRANSMITTAL FOR YOUR INFORMATION
ONLY; YOU CANNOT USE IT TO TENDER SHARES WE HOLD FOR YOUR ACCOUNT.
Please instruct us as to whether you wish us to tender any or all of the
Shares we hold for your account on the terms and subject to the conditions of
the Offer.
We call your attention to the following:
1. The offer price is $12.00 per Share, net to the seller in cash,
without interest thereon.
2. The Offer is being made for all outstanding Shares.
3. The Offer is conditioned upon, among other things, there being
validly tendered and not properly withdrawn prior to the Expiration Date
(as defined in the Offer to Purchase) a number of Shares which constitutes
at least 90% of the outstanding shares of the Company on the date Shares
are accepted for payment, including Shares owned by the Parent or the
Purchaser. The Offer is also subject to other terms and conditions. See the
Introduction and Section 13 of the Offer to Purchase.
4. The Offer and withdrawal rights will expire at 5:00 P.M., New York
City time, on October 11, 1997, unless the Purchaser extends the Offer.
5. Tendering stockholders will not be obligated to pay any brokerage
commissions, solicitation fees, or, subject to Instruction 6 the Letter of
Transmittal, stock transfer taxes on the Purchaser's purchase of Shares
pursuant to the Offer.
6. The Board of Directors of the Company has unanimously approved the
Offer.
<PAGE>
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing, detaching and returning to us the attached
Instruction Form. An envelope to return your Instruction Form to us is enclosed.
If you authorize us to tender your Shares, we will tender all such Shares unless
you specify otherwise on the attached Instruction Form.
YOUR INSTRUCTION FORM SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US
TO SUBMIT A TENDER ON YOUR BEHALF ON OR BEFORE THE EXPIRATION DATE OF THE OFFER.
THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
OCTOBER 9, 1997, UNLESS THE PURCHASER EXTENDS THE OFFER.
The Offer is being made to all holders of Shares. The Purchaser is not
aware of any state where the making of the Offer is prohibited by administrative
or judicial action pursuant to a valid state statute. If the Purchaser becomes
aware of any valid state statute prohibiting the making of the Offer, the
Purchaser will make a good faith effort to comply with such statute. If, after
such good faith effort, the Purchaser cannot comply with such statute, the Offer
will not be made to, nor will tenders be accepted from or on behalf of, holders
of Shares in such state. In those jurisdictions whose securities, blue sky or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of the Purchaser by the Dealer
Manager or one or more registered brokers or dealers licensed under the laws of
such jurisdictions.
INSTRUCTION FORM
INSTRUCTIONS FOR TENDER OF SHARES OF NATIONAL PICTURE & FRAME COMPANY
Please tender to NPF Acquisition Corporation (the "Purchaser"), on (our)
(my) behalf, the number of Shares indicated below, which are beneficially owned
by (us) (me) and registered in your name, upon terms and subject to the
conditions contained in the Offer to Purchase of the Purchaser dated September
11, 1997, and the related Letter of Transmittal, the receipt of both of which is
acknowledged.
Number of Shares to be tendered: ______________________ Shares
THE METHOD OF DELIVERY OF THIS DOCUMENT IS AT THE OPTION AND RISK OF THE
TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE DELIVERY.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED UNANIMOUSLY THE OFFER.
Signature(s): __________________________________________________________________
________________________________________________________________________________
Name(s): _______________________________________________________________________
________________________________________________________________________________
(Please Print)
________________________________________________________________________________
(Taxpayer Identification or
Social Security Number)
Address: _______________________________________________________________________
________________________________________________________________________________
(Including Zip Code)
Area Code and Telephone Number: ________________________________________________
Date: ____________________________________________________________________, 1996
IMPORTANT: STOCKHOLDERS ARE ENCOURAGED TO RETURN A COMPLETED FORM W-9 WITH THEIR
INSTRUCTION FORM.
EXHIBIT (A)(6)
<TABLE>
<CAPTION>
<S> <C>
Form W-9
(Rev. December 1996) | REQUEST FOR TAXPAYER | GIVE FORM TO THE
| IDENTIFICATION NUMBER AND CERTIFICATION | REQUESTER. DO NOT
Department of the Treasury | | SEND TO THE IRS.
Internal Revenue Service | |
- -----------------------------------------------------------------------------------------------------------------------------------
Please print Name (If a joint account or you changed your name, see SPECIFIC INSTRUCTIONS on page 2.)
or type
--------------------------------------------------------------------------------------------------------------------
Business name, if different from above. (See SPECIFIC INSTRUCTIONS on page 2.)
--------------------------------------------------------------------------------------------------------------------
Check appropriate box: [ ] Individual/Sole proprietor [ ] Corporation [ ] Partnership [ ] Other >_______________
--------------------------------------------------------------------------------------------------------------------
Address (number, street, and apt. or suite no.) | Requester's name and address (optional)
|
|
----------------------------------------------------------------------|
City, state, and ZIP code |
|
----------------------------------------------------------------------|---------------------------------------------
PART I TAXPAYER IDENTIFICATION NUMBER (TIN) | List account number(s) here (optional)
- -------------------------------------------------------------------------------------|
Enter your TIN in the appropriate box. For |
individuals, this is your social security number ------------------------------ |
(SSN). However, if you are a resident alien OR a |Social Security Number | |
sole proprietor, see the instructions on page 2. | | | - | - | | | | |
For other entities, it is your employer | | | | | | | | | | |
identification number (EIN). If you do not have a ------------------------------ |---------------------------------------------
number, see HOW TO GET A TIN on page 2. OR | Part II FOR PAYEES EXEMPT FROM BACKUP
NOTE: If the account is in more than one name, -------------------------------- | WITHHOLDING (See the instructions
see the chart on page 2 for guidelines on whose |Employer Identification Number| | on page 2.)
number to enter | | | - | - | | | | | |---------------------------------------------
| | | | | | | | | | | | >
-------------------------------- | >
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PART III CERTIFICATION
- --------------------------------------------------------------------------------
Under penalties of perjury, I certify that:
1. The number shown on this form is my correct taxpayer identification number
(or I am waiting for a number to be issued to me), AND
2. I am not subject to backup withholding because: (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service
(IRS) that I am subject to backup withholding as a result of a failure to
report all interest or dividends, or (c) the IRS has notified me that I am no
longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS.-You must cross out item 2 above if you have been
notified by the IRS that you are currently subject to backup withholding because
you have failed to report all interest and dividends on your tax return. For
real estate transactions, item 2 does not apply. For mortgage interest paid,
acquisition or abandonment of secured property, cancellation of debt,
contributions to an individual retirement arrangement (IRA), and generally,
payments other than interest and dividends, you are not required to sign the
Certification, but you must provide your correct TIN. (See the instructions on
page 2.)
- --------------------------------------------------------------------------------
Sign |
Here | Signature> Date>
- --------------------------------------------------------------------------------
PURPOSE OF FORM.- A person who is required to file an information return with
the IRS must get your correct taxpayer identification number (TIN) to report,
for example, income paid to you, real estate transactions, mortgage interest you
paid, acquisition or abandonment of secured property, cancellation of debt, or
contributions you made to an IRA.
Use Form W-9 to give your correct TIN to the person requesting it (the
requester) and, when applicable, to:
1. Certify the TIN you are giving is correct (or you are waiting for a number
to be issued).
2. Certify you are not subject to backup withholding, or
3. Claim exemption from backup withholding if you are an exempt payee.
NOTE: If a requester gives you a form other than a W-9 to request your TIN, you
must use the requester's form if it is substantially similar to this Form W-9.
WHAT IS BACKUP WITHHOLDING?- Persons making certain payments to you must
withhold and pay to the IRS 31% of such payments under certain conditions. This
is called "backup withholding." Payments that may be subject to backup
withholding include interest, dividends, broker and barter exchange
transactions, rents, royalties, nonemployee pay, and certain payments from
fishing boat operators. Real estate transactions are not subject to backup
withholding.
If you give the requester your correct TIN, make the proper certifications,
and report all your taxable interest and dividends on your tax return, payments
you receive will not be subject to backup withholding. Payments you receive WILL
be subject to backup withholding if:
1. You do not furnish your TIN to the requester, or
2. The IRS tells the requester that you furnished an incorrect TIN, or
3. The IRS tells you that you are subject to backup withholding because you
did not report all your interest and dividends on your tax return (for
reportable interest and dividends only), or
4. You do not certify to the requester that you are not subject to backup
withholding under 3 above (for reportable interest and dividend accounts opened
after 1983 only), or
5. You do not certify your TIN when required. See the Part III instructions on
page 2 for details.
Certain payees and payments are exempt from backup withholding. See the Part
II instructions and the separate INSTRUCTIONS FOR THE REQUESTER OF FORM W-9.
PENALTIES
FAILURE TO FURNISH TIN.- If you fail to furnish your correct TIN to a requester,
you are subject to a penalty of $50 for each such failure unless your failure is
due to reasonable cause and not to willful neglect.
CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.- If you make a
false statement with no reasonable basis that results in no backup withholding,
you are subject to a $500 penalty.
CRIMINAL PENALTY FOR FALSIFYING INFORMATION.- Willfully falsifying
certifications or affirmations may subject you to criminal penalties, including
fines and/or imprisonment.
MISUSE OF TINs.- If the requester discloses or uses TINs in violation of Federal
law, the requester may be subject to civil and criminal penalties.
- --------------------------------------------------------------------------------
Cat. No. 10231X Form W-9 (Rev. 12-96)
<PAGE>
Form W-9 (Rev. 12-96) Page 2
- --------------------------------------------------------------------------------
SPECIFIC INSTRUCTIONS
NAME.- If you are an individual, you must generally enter the name shown on your
social security card. However, if you have changed your last name, for instance,
due to marriage, without informing the Social Security Administration of the
name change, enter your first name, the last name shown on your social security
card, and your new last name.
If the account is in joint names, list first and then circle the name of the
person or entity whose number you enter in Part I of the form.
Sole Proprietor.- You must enter your INDIVIDUAL name as shown on your social
security card. You must enter your business, trade, or "doing business as" name
on the BUSINESS NAME line.
Other Entities.- Enter the business name as shown on required Federal tax
documents. This name should match the name shown on the charter or other legal
document creating the entity. You may enter any business, trade, or "doing
business as" name on the business name line.
PART I- TAXPAYER IDENTIFICATION NUMBER (TIN)
You must enter your TIN in the appropriate box. If you are a resident alien and
you do not have and are not eligible to get an SSN, your TIN is your IRS
individual taxpayer identification number (ITIN). Enter it in the social
security number box. If you do not have an ITIN, see HOW TO GET A TIN below.
If you are a sole proprietor and you have an EIN, you may enter either your
SSN or EIN. However, using your EIN may result in unnecessary notices to the
requester.
NOTE: See the chart on this page for further clarification of name and TIN
combinations.
HOW TO GET A TIN.- If you do not have a TIN, apply for one immediately. To apply
for an SSN, get FORM SS-5 from your local Social Security Administration office.
Get FORM W-7 to apply for an ITIN or FORM SS-4 to apply for an EIN. You can get
Forms W-7 and SS-4 from the IRS by calling 1-800-TAX-FORM (1-800-829-3676).
If you do not have a TIN, write "Applied For" in the space for the TIN, sign
and date the form, and give it to the requester. For interest and dividend
payments, and certain payments made with respect to readily tradable
instruments, you will generally have 60 days to get a TIN and give it to the
requester. Other payments are subject to backup withholding.
NOTE: Writing "Applied For" means that you have already applied for a TIN OR
that you intend to apply for one soon.
PART II-FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING
Individuals (including sole proprietors) are NOT exempt from backup withholding.
Corporations are exempt from backup withholding for certain payments, such as
interest and dividends. For more information on exempt payees, see the separate
Instructions for the Requester of Form W-9.
If you are exempt from backup withholding, you should still complete this form
to avoid possible erroneous backup withholding. Enter your correct TIN in Part
I, write "Exempt" in Part II, and sign and date the form.
If you are a nonresident alien or a foreign entity not subject to backup
withholding, give the requester a completed FORM W-8, Certificate of Foreign
Status.
PART III-CERTIFICATION
For a joint account, only the person whose TIN is shown in Part I should sign
(when required).
1. INTEREST, DIVIDEND, AND BARTER EXCHANGE ACCOUNTS OPENED BEFORE 1984 AND
BROKER ACCOUNTS CONSIDERED ACTIVE DURING 1983. You must give your correct TIN,
but you do not have to sign the certification.
2. INTEREST, DIVIDEND, BROKER, AND BARTER EXCHANGE ACCOUNTS OPENED AFTER 1983
AND BROKER ACCOUNTS CONSIDERED INACTIVE DURING 1983. You must sign the
certification or backup withholding will apply. If you are subject to backup
withholding and you are merely providing your correct TIN to the requester, you
must cross out item 2 in the certification before signing the form.
3. REAL ESTATE TRANSACTIONS. You must sign the certification. You may cross
out item 2 of the certification.
4. OTHER PAYMENTS. You must give your correct TIN, but you do not have to sign
the certification unless you have been notified that you have previously given
an incorrect TIN. "Other payments" include payments made in the course of the
requester's trade or business for rents, royalties, goods (other than bills for
merchandise), medical and health care services (including payments to
corporations), payments to a nonemployee for services (including attorney and
accounting fees), and payments to certain fishing boat crew members.
5. MORTGAGE INTEREST PAID TO YOU, ACQUISITION OR ABANDONMENT OF SECURED
PROPERTY, CANCELLATION OF DEBT, OR IRA CONTRIBUTIONS. You must give your correct
TIN, but you do not have to sign the certification.
PRIVACY ACT NOTICE
Section 6109 of the Internal Revenue Code requires you to give your correct TIN
to persons who must file information returns with the IRS to report interest,
dividends, and certain other income paid to you, mortgage interest you paid, the
acquisition or abandonment of secured property, cancellation of debt, or
contributions you made to an IRA. The IRS uses the numbers for identification
purposes and to help verify the accuracy of your tax return. The IRS may also
provide this information to the Department of Justice for civil and criminal
litigation and to cities, states, and the District of Columbia to carry out
their tax laws.
You must provide your TIN whether or not you are required to file a tax
return. Payers must generally withhold 31% of taxable interest, dividend, and
certain other payments to a payee who does not give a TIN to a payer. Certain
penalties may also apply.
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
- ------------------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: | GIVE NAME AND SSN OF:
- ------------------------------------------------------------------
1. Individual | The individual
|
2. Two or more | The actual owner of the
individuals (joint | account or, if combined
account) | funds, the first individual
| on the account(1)
|
3. Custodian account of | The minor(2)
a minor (Uniform Gift |
to Minors Act) |
|
4. a. The usual | The grantor-trustee(1)
revocable savings |
trust (grantor is |
also trustee) |
|
b. So-called trust | The actual owner(1)
account that is not |
a legal or valid trust |
under state law |
|
5. Sole proprietorship | The owner(3)
- ------------------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: | GIVE NAME AND EIN OF:
- ------------------------------------------------------------------
6. Sole proprietorship | The owner(3)
|
7. A valid trust, estate, or | Legal entity(4)
pension trust |
|
8. Corporate | The corporation
|
9. Association, club, | The organization
religious, charitable, |
educational, or other |
tax-exempt |
organization |
|
10. Partnership | The partnership
|
11. A broker or registered | The broker or nominee
nominee |
|
12. Account with the | The public entity
Department of |
Agriculture in the name |
of a public entity (such |
as a state or local |
government, school |
district, or prison) that |
receives agricultural |
program payments |
- ------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has an SSN, that person's number must be
furnished.
(2) Circle the minor's name and furnish the minor's SSN.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your SSN or EIN (if you have
one).
(4) List first and circle the name of the legal trust, estate, or pension trust.
(Do not furnish the TIN of the personal representative or trustee unless the
legal entity itself is not designated in the account title.)
NOTE: If no name is circled when more than one name is listed, the number will
be considered to be that of the first name listed.
EXHIBIT (A)(7)
NATIONAL PICTURE & FRAME COMPANY
AND COLONNADE CAPITAL, L.L.C.
ENTER INTO DEFINITIVE MERGER AGREEMENT
Greenwood, MS -- Sept. 5, 1997 -- National Picture & Frame
Company and Colonnade Capital, L.L.C. announced today that they have entered
into a definitive merger agreement. The agreement calls for Colonnade to
cause NPF Acquisition Corporation, a newly formed company, to acquire
National, a leading designer, manufacturer and marketer of picture frames,
framed art, framed mirrors and related items.
Under the terms of the accord, NPF Acquisition will commence a cash
tender offer within 5 business days for all of the outstanding shares of
National for $12.00 per share. The transaction is valued at approximately $63
million. Completion of the transaction is subject to customary conditions,
including availability of financing under a commitment letter obtained by
Colonnade and NPF Acquisition and the tender of not less than 90% of National's
shares. Any shares not tendered will be cashed out for $12.00 per share in a
short-form merger. The Company's directors and executive officers, as well as
certain stockholders, have agreed to tender their shares into the offer.
"We have spent the past 18 months seeking alternatives to maximize
shareholder value, and the Colonnade transaction is the result of that process,"
Daniel Hennessy, Chairman of the Board, stated. "A great deal of outstanding
effort has been put forth on both sides to bring us to this point," Mr. Hennessy
concluded.
National trades on The Nasdaq National Market under the symbol "NPAF."
EXHIBIT (A)(8)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase dated
September 11, 1997 and the related Letter of Transmittal, and is being made to
all holders of Shares. The Purchaser is not aware of any state where the making
of the Offer is prohibited by administrative or judicial action pursuant to any
valid state statute. If the Purchaser becomes aware of any valid state statute
prohibiting the making of the Offer or the acceptance of Shares pursuant
thereto, the Purchaser will make a good faith effort to comply with such state
statute. If, after such good faith effort, the Purchaser cannot comply with such
state statute, the Offer will not be made to (nor will tenders be accepted from
or on behalf of) the holders of Shares in such state. In any jurisdiction where
the securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed to be made on behalf of the
Purchaser by Prudential Securities Incorporated or by one or more registered
brokers or dealers licensed under the laws of such jurisdiction.
Notice of Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
National Picture & Frame Company
at
$12.00 Net Per Share
by
NPF Acquisition Corporation
a corporation formed at the direction of
Colonnade Capital, L.L.C.
NPF Acquisition Corporation, a Delaware corporation (the "Purchaser"),
and a wholly owned subsidiary of NPF Holding Corporation, a Delaware corporation
("Parent"), is offering to purchase all outstanding shares of common stock, par
value $0.01 per share (the "Shares"), of National Picture & Frame Company, a
Delaware corporation (the "Company"), at a price of $12.00 per Share, net to the
seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated September 11, 1997 (the
"Offer to Purchase"), and in the related Letter of Transmittal (which together,
as the same may be amended or supplemented from time to time, constitute the
"Offer"). The Parent and the Purchaser have been organized at the direction of
Colonnade Capital, L.L.C. ("Colonnade") to effect the transactions described
herein.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON
THURSDAY, OCTOBER 9, 1997, UNLESS THE OFFER IS EXTENDED.
The Offer is conditioned upon, among other things (i) there being
validly tendered and not withdrawn prior to the expiration of the Offer at least
90% of the Shares outstanding on the date Shares are accepted for payment,
including Shares owned by the Parent or the Purchaser (which includes Shares
exchanged by management of the Company), (ii) the expiration or termination of
any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), if applicable, and (iii) the
satisfaction of certain other terms and conditions.
Certain stockholders of the Company, owning in the aggregate
approximately 56.1% of the outstanding Shares, including all directors and
executive officers of the Company, have entered into agreements with the Parent
and the Purchaser, pursuant to which such stockholders have agreed to tender and
sell all of their Shares to the Purchaser pursuant to the Offer other than
Shares being exchanged. Certain executive officers of the Company have agreed to
exchange Shares representing in the aggregate approximately 1.6% of the
outstanding Shares for shares of common stock of the Parent.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of
September 4, 1997 (the "Merger Agreement"), among the Parent, the Purchaser, the
Company and Colonnade. The Merger Agreement provides that, among other things,
as soon as practicable after the purchase of Shares pursuant to the Offer and
the satisfaction of the other conditions set forth in the Merger Agreement and
in accordance with the relevant provisions of the General Corporation Law of the
State of Delaware ("Delaware Law"), the Purchaser will be merged with and into
the Company (the "Merger"). Following consummation of the Merger, the Company
will continue as the surviving corporation and will become a wholly owned
subsidiary of the Parent. At the effective time of the Merger (the "Effective
Time"), each Share issued and outstanding immediately prior to the Effective
Time (other than Shares held in the treasury of the Company or held by the
Purchaser, the Parent or any direct or indirect wholly owned subsidiary of the
Parent or of the Company, and other than Shares held by stockholders who shall
have demanded and perfected appraisal rights, if any, under Delaware Law) will
be canceled and converted automatically into the right to receive $12.00 in
cash, or any higher price that may be paid per Share in the Offer, without
interest.
The Board of Directors of the Company (the "Board") has unanimously
determined that each of the Offer and the Merger is fair to, and in the best
interests of, the stockholders of the Company, and recommends that stockholders
accept and tender their Shares pursuant to the Offer.
For purposes of the Offer, the Purchaser will be deemed to have
accepted for payment (and thereby purchased) Shares validly tendered and not
properly withdrawn as, if and when the Purchaser gives oral or written notice to
First Union National Bank (the "Depositary") of the Purchaser's acceptance for
payment of such Shares. Upon the terms and subject to the conditions of the
Offer, payment for Shares accepted for payment pursuant to the Offer will be
made by deposit of the aggregate purchase price therefore with the Depositary,
which will act as agent for tendering stockholders for the purpose of receiving
payments from the Purchaser and transmitting such payments to tendering
stockholders whose Shares have been accepted for payment. Under no circumstances
will interest on the purchase price for Shares be paid by the Purchaser,
regardless of any delay in making such payments. In all cases, payment for
Shares accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of (i) the certificates for such Shares (the "Share
Certificates") or timely confirmation (a "Book-Entry Confirmation") of a
book-entry transfer of such Shares into the Depositary's account at one of the
Book-Entry Transfer Facilities (as defined in the Offer to Purchase) pursuant to
the procedures set forth in Section 3 of the Offer to Purchase, (ii) a properly
completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof), with all required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message (as defined below) and (iii) any other
documents required by the Letter of Transmittal. The term "Agent's Message"
means a message transmitted by a Book-Entry Transfer Facility to, and received
by, the Depositary and forming a part of a Book-Entry Confirmation, which states
that such Book-Entry Transfer Facility has received an express acknowledgment
from the participant in such Book-Entry Transfer Facility tendering the Shares
that are the subject of the Book-Entry Confirmation that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that the Purchaser may enforce such agreement against the participant.
The Purchaser expressly reserves the right, in its sole discretion, at
any time and from time to time, to extend the period of time during which the
Offer is open, for any reason, including failure to satisfy any of the
conditions specified in Section 13 of the Offer to Purchase, and thereby delay
acceptance for payment of, and payment for, any Shares, by giving oral or
written notice of such extension to the Depositary, and making a public
announcement, as described below. Any extension, delay, termination, waiver or
amendment will be followed as promptly as practicable by a public announcement
thereof, such announcement in the case of an extension, to be made no later than
9:00 a.m., New York City time, on the next business day after the previously
scheduled expiration date of the Offer. Subject to the applicable regulations of
the Securities and Exchange Commission, the Purchaser also expressly reserves
the right, in its sole discretion (but subject to the terms and conditions of
the Merger Agreement), at any time and from time to time, (i) to delay
acceptance for payment of, or, regardless of whether such Shares were
theretofore accepted for payment, payment for any Shares pending receipt of any
regulatory approvals specified in Section 14 of the Offer to Purchase, (ii) to
terminate the Offer and not accept for payment or pay for any Shares if any of
the conditions referred to in Section 13 of the Offer to Purchase have not been
satisfied or upon the occurrence and during the continuance of any of the
conditions specified in Section 13 of the Offer to Purchase and (iii) to waive
any condition or otherwise amend the Offer in any respect, in each case, by
giving oral or written notice of such delay, termination, waiver or amendment to
the Depositary and by making a public announcement thereof. The Merger Agreement
provides that, without the consent of the Company, the Purchaser will not (i)
decrease the price per Share or change the consideration payable in the Offer,
(ii) decrease the number of Shares to be purchased in the Offer or (iii) change
or impose conditions to the Offer in addition to those set forth in Section 13
of the Offer to Purchase.
Tenders of Shares made pursuant to the Offer are irrevocable, except
that such Shares may be withdrawn at any time on or prior to the expiration date
of the Offer and, unless theretofore accepted for payment by the Purchaser
pursuant to the Offer, may also be withdrawn at any time after November 9, 1997.
If the Purchaser extends the Offer, is delayed in, or delays, its acceptance for
payment of Shares or is unable to accept Shares for payment pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer, the Depositary may, nevertheless, on behalf of the Purchaser, retain
tendered Shares, and such Shares may not be withdrawn except to the extent that
tendering stockholders are entitled to withdrawal rights as described in Section
4 of the Offer to Purchase. Any such delay will be accompanied by an extension
of the Offer to the extent required by law. In order for a withdrawal to be
effective, a written, telegraphic, telex or facsimile transmission notice of
withdrawal must be timely received by the Depositary at one of its addresses or
numbers set forth on the back cover page of this Offer to Purchase. Any such
notice of withdrawal must specify the name of the person who tendered the Shares
to be withdrawn, the number of Shares to be withdrawn and (if Share Certificates
have been delivered or otherwise identified to the Depositary) the name of the
registered holder of such Shares, if different from that of the person who
tendered such Shares. If Share Certificates evidencing Shares to be withdrawn
have been delivered or otherwise identified to the Depositary, then, prior to
the physical release of such Share Certificates, the serial numbers shown on
such Share Certificates to be withdrawn must be submitted to the Depositary and
the signature(s) on the notice of withdrawal must be guaranteed by an Eligible
Institution, unless such Shares have been tendered for the account of an
Eligible Institution. If Shares have been tendered pursuant to the procedures
for book-entry transfer as set forth in Section 3 of the Offer to Purchase, any
notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares, in which
case a notice of withdrawal will be effective if delivered to the Depositary by
any method of delivery described in the first sentence of this paragraph. All
questions as to the form and validity (including time of receipt) of any notice
of withdrawal will be determined by the Purchaser, in its sole discretion, whose
determination will be final and binding on all parties.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of
the General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has provided the Purchaser with the Company's stockholder
list and security position listings for the purpose of disseminating the Offer
to holders of Shares. The Offer to Purchase and the related Letter of
Transmittal will be mailed to record holders of Shares whose names appear on the
Company's stockholder list and will be furnished to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of Shares.
The Offer to Purchase and the related Letter of Transmittal contain
important information which should be read before any decision is made with
respect to the Offer.
Questions and requests for assistance or for copies of the Offer to
Purchase and the related Letter of Transmittal, and other tender offer
materials, may be directed to the Information Agent or the Dealer Manager as set
forth below, and copies will be furnished promptly at the Purchaser's expense.
No fees or commissions will be paid to brokers, dealers or other persons (other
than the Information Agent or the Dealer Manager) for soliciting tenders of
Shares pursuant to the Offer.
The Information Agent for the Offer is:
[MacKenzie Partners, Inc. Logo]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
CALL TOLL-FREE (800) 322-2885
The Dealer Manager for the Offer is:
Prudential Securities Incorporated
One New York Plaza
18th Floor
New York, New York 10292
Call Toll-Free (888) 889-8374
September 11, 1997
EXHIBIT (B)(1)
September 3, 1997
Via Telecopier - 804-782-6606
Colonnade Capital L.L.C.
901 E. Byrd Street
Suite 1300
Richmond, Virginia 23219
Attention: Mr. John T. Herzog
Managing Partner
Re: Acquisition of National Picture & Frame Company
Gentlemen:
Based on our discussion concerning your proposed acquisition of
National Picture & Frame Company, a Delaware corporation ("National Picture"),
and the related refinancing of the indebtedness of National Picture, AT&T
Commercial Finance Corporation ("AT&T-CFC") is pleased to provide you with a
financing commitment for, and agrees to act as administrative agent with respect
to, the credit facilities (the "Facilities") described in Schedule 1 to this
letter upon the terms and conditions described in this letter and in the
attached schedule of Basic Terms (such schedule, attached hereto as Schedule 1
and including Schedules A, B and C thereto (the "Annex"), together with this
letter is herein referred to as the "Commitment Letter").
As we understand your transaction, you have organized a single-purpose
holding company, NPF Holding Corporation, a Delaware corporation (the
"Guarantor"), which in turn has established a single-purpose wholly-owned
subsidiary, NPF Acquisition Corporation, a Delaware corporation (the
"Borrower"), and the Borrower will enter into a merger agreement (the "Merger
Agreement") with National Picture, and will, upon the purchase pursuant to an
offer to purchase all of the issued and outstanding shares of common stock of
National Picture (the "Tender Offer") of at least 90% of such common stock,
merge (the "Merger") into National Picture, with National Picture being the
surviving corporation. The tender price for the shares of common stock of
National Picture will be $12.00 per share, and the shares of any holder of such
common stock that does not tender pursuant to the Tender Offer will be converted
into the right to receive cash consideration of $12.00 per share. The Tender
Offer, the Merger, the refinancing of the existing debt of National Picture
described above and the equity financings contemplated by the foregoing are
collectively referred to as the Transaction. You have asked AT&T-CFC to provide
the Facilities in connection with the Transaction.
Subject to the satisfaction of the conditions contained in this
Commitment Letter and your acceptance hereof, AT&T-CFC commits to lend the
entire amount of the Facilities, on the terms and conditions referred to in this
Commitment Letter.
Please note, however, that the terms and conditions of our
participation in the Transaction and in the Facilities are not limited to those
set forth in this Commitment Letter. Those matters that are not covered or made
clear herein or in the Annex are subject to mutual agreement of the parties. The
terms and conditions of this commitment may be modified only in writing. In
addition, this commitment is subject to (a) the preparation, execution and
delivery of mutually acceptable loan documentation, including, without
limitation, a revolving credit agreement, senior term loan agreement, and
subordinated loan agreement and related security documents incorporating
substantially the terms and conditions outlined herein and in the Annex, and
such other terms, conditions and provisions customary for such transactions with
AT&T-CFC generally, (b) the absence, in the reasonable opinion of AT&T-CFC, of
(i) a material adverse change in the business, condition (financial or
otherwise), operations, performance or properties of National Picture and its
subsidiaries, taken as a whole since April 30, 1997, (ii) a material change in
the nature of the collateral being given to secure the Facilities or a material
diminution in the value thereof, and (iii) any material adverse change in loan
syndication or financial or capital market conditions generally from those
currently in effect (it being understood that a change in interest rates in and
of itself will not constitute such a material adverse change), and (c) the
accuracy and completeness of all representations that you make to us and all
information that you furnish to us in connection with this commitment and your
compliance with the terms of this Commitment Letter. AT&T-CFC's commitment set
forth in this Commitment Letter will terminate on October 31, 1997, unless the
Tender Offer and the Facilities close on or before such date, without any
further action by any person or entity and from and after such date shall have
no further force or effect (except as otherwise provided herein and in the Annex
with respect to indemnification and payment of Costs and the like by Colonnade
Capital L.L.C. and the Borrower and matters of confidentiality).
AT&T-CFC intends to syndicate the Facilities to additional Lenders and,
to the extent that commitments are received from other Lenders, the initial
commitment of AT&T-CFC shall be reduced. AT&T-CFC will manage all aspects of the
syndication, including the timing of all offers to potential Lenders and the
acceptance of commitments, the amounts offered and the compensation provided. By
acceptance of this Commitment Letter, you agree to take all actions that
AT&T-CFC may reasonably request to assist it in forming a syndicate acceptable
to AT&T-CFC. Your assistance in forming such a syndicate shall include but not
be limited to: (a) making your senior management and representatives and senior
management and representatives of National Picture and its subsidiaries
available to participate in information meetings with potential Lenders at such
times and places as AT&T-CFC may reasonably request; (b) using your best efforts
to ensure that the syndication efforts of AT&T-CFC benefit from your
relationships; and (c) providing AT&T-CFC with all information reasonably deemed
necessary by them to complete a successful syndication, including, without
limitation, a summary of the operating prospects (including financial
projections) of National Picture.
To ensure an orderly and effective syndication of the Facilities, you
agree that until the termination of the syndication by written notification
received by you from AT&T-CFC, you will not, and will not permit any of your
affiliates to, syndicate or issue, attempt to syndicate or issue, announce or
authorize the announcement of the syndication or issuance of, or engage in
discussions concerning the syndication or issuance of, any debt facility or debt
security (including any renewals thereof) in the commercial bank market or
institutional finance market, without the prior written consent of AT&T-CFC.
You agree that AT&T-CFC will act as the sole administrative and
collateral agent and sole arranger for the Facilities and that no additional
agents, co-agents or arrangers will be appointed, or other titles conferred,
except as designated by AT&T-CFC acting in consultation with you. You agree that
no Lender will receive any compensation of any kind for its participation in the
Facilities, except as expressly provided for in the Fee Letter (as hereinafter
defined) or in the Annex.
In addition to the fees described in the Annex, you hereby confirm your
agreement to pay the non-refundable fees set forth in the fee letter dated the
date hereof with AT&T-CFC (the "Fee Letter").
You agree that each of this Commitment Letter and the Fee Letter is for
your confidential use only and neither its existence nor the terms hereof will
be disclosed by you to any person or entity other than your officers, directors,
accountants, attorneys and other advisors, and then only on a "need to know"
basis in connection with the Transaction and on a confidential basis, except
that, following your return of an executed counterpart hereof to AT&T-CFC, you
may (a) make public disclosure of the existence and amount of AT&T-CFC's
commitment hereunder, (b) file a copy of this Commitment Letter in any public
record in which it is required by law to be filed,(c) provide a copy of this
Commitment Letter on a confidential basis to National Picture and its
accountants, attorneys and other advisors, (d) make such public disclosures of
this Commitment Letter as are necessary in connection with the Tender Offer and
the Merger and (e) make such other public disclosures of the terms and
conditions of this Commitment Letter as you are required by law, in the opinion
of your counsel, to make. You agree that you will permit AT&T-CFC to review and
approve any reference to AT&T-CFC or to any of its affiliates or any other agent
or arranger under the Facilities contained in any press release or similar
public disclosure prior to public release.
You represent and warrant that (a) all information that has been or
will hereafter be made available by or on behalf of you or by any of your
representatives in connection with the Transaction and the other transactions
contemplated hereby to AT&T-CFC or any of its affiliates or representatives or
to any Lender or any potential Lender is and will, to the best of your
knowledge, be complete and correct in all material respects and does not and
will not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements contained therein not
misleading in light of the circumstances under which such statements were or are
made and (b) all financial projections, if any, that have been or will be
prepared by you or on your behalf or by any of your representatives and made
available to AT&T-CFC or any of its affiliates or representatives or to any
Lender or any potential Lender in connection with the Transaction and the other
transactions contemplated hereby have been or will be prepared in good faith
based upon reasonable assumptions (it being understood that the reasonableness
of such assumptions is to be determined as of the time such projections are made
and that such projections are subject to significant uncertainties and
contingencies, many of which are beyond your control, and that no assurance can
be given that any particular projections will be realized). You agree to
supplement the information and projections from time to time so that the
representations and warranties contained in this paragraph remains complete and
correct.
In issuing this commitment, AT&T-CFC is relying on the accuracy of the
information furnished to it by you or by National Picture. The obligations of
AT&T-CFC under this Commitment Letter are made solely for your benefit and may
not be relied upon or enforced by any other person or entity. Without limiting
the generality of the foregoing, the commitment evidenced by this Commitment
Letter shall not be assignable by Colonnade Capital L.L.C. or the Borrower.
In the event that any change in law or regulation affecting AT&T-CFC's
entering into the transactions contemplated hereby shall impose upon AT&T-CFC
any potential obligation, fee, liability, loss, claim, cost, expense, or damage
which is not specifically contemplated by this Commitment Letter, the commitment
evidenced by this Commitment Letter may be terminated by AT&T-CFC in its sole
and absolute discretion (with all obligations of Colonnade Capital L.L.C. and
the Borrower for indemnification, payment of Costs and the like and with respect
to matters of confidentiality surviving the same).
In consideration of the delivery of this Commitment Letter, Colonnade
Capital L.L.C. and Borrower hereby agree jointly and severally, to indemnify and
hold harmless AT&T-CFC, its subsidiaries and affiliates, and all of its and
their respective officers, directors, employees, agents, attorneys, accountants,
consultants and representatives (collectively, the "AT&T-CFC Parties") from and
against any and all losses, claims, damages, liabilities and expenses arising
prior to the closing of the Facilities which may be incurred by or asserted
against AT&T-CFC or any of the AT&T-CFC Parties in connection in any way with
any transactions which are the subject of, or arising out of, this commitment
(excluding any matters arising out of the assignment by AT&T-CFC of its
commitment hereunder to any third party) or use of the proceeds of the
transaction described herein, including, without limitation, any expenses
incurred in connection with investigating or defending any loss, claim, damage,
liability or action (whether or not AT&T-CFC or one or more of the AT&T-CFC
Parties is a party thereto), and Colonnade Capital L.L.C. and the Borrower
hereby agree jointly and severally to hold harmless the AT&T-CFC Parties from
and against any and all losses, claims, damages, liabilities and expenses
arising from and against any and all losses, claims, damages, liabilities and
expenses arising from and after the closing of the Facilities which may be
incurred by or asserted against AT&T-CFC or any of the AT&T-CFC Parties in
connection in any way with any transactions which are the subject of, or arising
out of, this commitment (excluding any matters arising out of the assignment by
AT&T-CFC of its commitment hereunder to any third party) or use of the proceeds
of the transaction described herein, including, without limitation, any expenses
incurred in connection with investigating or defending any loss, claim, damage,
liability or action (whether or not AT&T-CFC or one or more of the AT&T-CFC
Parties is a party thereto); provided that, neither Colonnade Capital L.L.C. nor
the Borrower shall be required to indemnify AT&T-CFC or any of the AT&T Parties
for any such loss, claim, damage, liability or expense arising our of the gross
negligence or willful misconduct of AT&T-CFC or any of the AT&T Parties. The
obligations described in this paragraph are independent of all obligations of
Colonnade Capital L.L.C. and the Borrower hereunder and shall survive the
expiration or termination of this commitment and shall be payable whether or not
any of the transactions contemplated by this Commitment Letter ever occurs.
THIS COMMITMENT LETTER SHALL BE GOVERNED, CONSTRUED AND ENFORCED, AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED, IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (EXCLUDING CHOICE-OF-LAW
PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE
LAWS OF A JURISDICTION OTHER THAN SUCH STATE). IF THIS COMMITMENT LETTER BECOMES
THE SUBJECT OF A DISPUTE, COLONNADE CAPITAL L.L.C. AND THE BORROWER EACH CONSENT
TO THE EXCLUSIVE JURISDICTION OF ANY LOCAL, STATE AND FEDERAL COURTS LOCATED
WITHIN THE STATE OF NEW YORK AND ANY APPELLATE COURTS THEREOF AND WAIVES ANY AND
ALL RIGHT TO CONTEST SUCH JURISDICTION, WHETHER ON THE GROUNDS OF VENUE OR FORUM
NON CONVENIENS OR OTHERWISE, AND WAIVES ANY RIGHT TO TRIAL BY JURY.
This Commitment Letter embodies the entire understanding between the
parties hereto relating to the matters discussed herein, and supersedes all
prior or contemporaneous discussions, negotiations, proposals, agreement and
understanding, whether oral or written, relating to the subject matter hereof.
No course of prior conduct or dealings between the parties hereto, no usage of
trade, and no parol or extrinsic evidence of any nature, shall be used or be
relevant to supplement, explain or modify any term used herein. Any modification
or waiver of this Commitment Letter or the terms hereof must be in writing, must
be stated to be such and must be signed by an authorized representative of each
party hereto.
This Commitment Letter may be executed in two or more counterparts (and
by different parties on separate counterparts), each of which shall be an
original, but all of which together shall constitute one and the same
instrument.
If you wish to accept this commitment, please sign and return to us the
original of this Commitment Letter and of the Fee Letter on or before September
3, 1997, the date after which (unless earlier terminated in accordance with the
terms hereof) AT&T-CFC reserves the right to deem this Commitment Letter
terminated and of no further force or effect (except as otherwise provided
herein and in the Annex with respect to indemnification and payment of Costs and
the like by Colonnade Capital L.L.C. and the Borrower and matters of
confidentiality), if such signed Commitment Letter and Fee Letter are not
received by it. Upon AT&T-CFC's receipt of such signed Commitment Letter and Fee
Letter from you, this Commitment Letter shall constitute the commitment of the
Colonnade Capital L.L.C. and the Borrower to accept and consummate, and our
commitment to provide, the Facilities described herein substantially on the
terms and subject to the conditions set forth hereinabove.
Very truly yours,
AT&T COMMERCIAL FINANCE CORPORATION
By:
Name:_________________________________
Title:________________________________
The Foregoing Is Hereby Accepted And
Agreed To In All Respects By The
Undersigned:
COLONNADE CAPITAL L.L.C.
By:____________________________
Name:_____________________
Title:____________________
Date:__________________________
NPF ACQUISITION CORPORATION
By:____________________________
Name:_____________________
Title:____________________
Date:__________________________
<PAGE>
Schedule 1
(to the Commitment Letter)
SCHEDULE 1
BASIC TERMS
The more basic terms and conditions for the proposed transaction are
the following:
Lender: AT&T Commercial Finance Corporation, a
Delaware corporation ("AT&T-CFC"), and such
other banks, financial institutions and
institutional lenders as may be acceptable
to AT&T-CFC, including where the context
permits AT&T-CFC, as administrative agent,
and any Collateral Trustee.
Administrative
Agent: AT&T-CFC.
Borrower: NPF Acquisition Corporation, a Delaware
corporation.
Guarantor: NPF Holding Corporation, a Delaware
corporation.
Facilities: A revolving credit facility of $20,000,000
(the "Revolving Credit Facility") with a
term of 5 years; a senior term loan facility
of $30,000,000 (the "Senior Term Loan
Facility"), comprised of $10,000,000
("Tranche A") with a 5.5 year term and
$20,000,000 ("Tranche B") with a 8.5 year
term; and, a Senior Subordinated Loan
Facility of $14,000,000 (the "Subordinated
Loan Facility", and together with the
Revolving Credit Facility and the Senior
Term Loan Facility, the "Facilities") with a
term of 10 years.
Guaranty: Each of the Facilities, and the obligations
of the Borrower under the Transaction
Documents, will be guaranteed by the
Guarantor.
Purpose: To finance the purchase by the Borrower of
the shares of National Picture & Frame
Company ("National Picture"), to pay fees
and expenses in connection with the
Transaction and negotiation and closing of
the Facilities and to refinance the
borrowings of National Picture and to
provide working capital for National
Picture.
Closing Fee: A closing fee as specified in the Fee
Letter.
Interest Rates: Any Loan under the Revolving Credit Facility
shall bear interest for each Interest
Period, as elected by the Borrower for such
Interest Period, at a non-default rate of
(i) LIBOR plus 250 basis points (provided
that if an Adverse Determination with
respect to any Interest Period shall be
made, the Revolving Credit Facility shall
bear interest at a non-default rate of 1%
over the Prime Rate for such Interest
Period), or (ii) 1% over the Prime Rate.
The Tranche A Senior Term Loan Facility
shall bear interest for each Interest
Period, as elected by the Borrower for such
Interest Period, at a non-default rate of
(i) LIBOR plus 275 basis points (provided
that if an Adverse Determination with
respect to any Interest Period shall be
made, the Tranche A Senior Term Loan
Facility shall bear interest at a
non-default rate of 1.25% over the Prime
Rate for such Interest Period), or (ii)
1.25% over the Prime Rate.
The Tranche B Senior Term Loan Facility
shall bear interest for each Interest
Period, as elected by the Borrower for such
Interest Period, at a non-default rate of
(i) LIBOR plus 350 basis points (provided
that if an Adverse Determination with
respect to any Interest Period shall be
made, the Tranche B Senior Term Loan
Facility shall bear interest at a
non-default rate of 2% over the Prime Rate
for such Interest Period), or (ii) 2% over
the Prime Rate.
The Subordinated Loan Facility shall bear
interest at a non-default rate of 4.75% over
the Treasury Rate determined as of closing
prior to the fifth anniversary of the
closing, payable semiannually, and
thereafter for each Interest Period, as
elected by the Borrower for such Interest
Period, at a non-default rate of (i) LIBOR
plus 475 basis points (provided that if an
Adverse Determination with respect to any
Interest Period shall be made, the
Subordinated Loan Facility shall bear
interest at a non-default rate of 3.25% over
the Prime Rate for such Interest Period), or
(ii) 3.25% over the Prime Rate.
The default rate for each Facility shall be
2% over the non-default rate for such
Facility and shall apply during the
continuance of an Event of Default under the
Transaction Documents relating to such
Facility.
Interest shall be computed on the basis of
(i) a 360-day year based on actual days
elapsed for any Loans bearing at interest
calculated on the basis of LIBOR, (ii) a
360-day year comprised of 12 consecutive
30-day months for any Loans bearing interest
calculated on the basis of the Treasury
Rate, and (iii) a 365 or 366-day year, as
the case may be, based on actual days
elapsed for any Loans bearing interest
calculated on the basis of Prime Rate.
Related Definitions
"Adverse Determination" means, with respect
to any Loan calculated on the basis of
LIBOR, a determination made prior to any
Interest Period, that (i) adequate and fair
means do not exist for ascertaining the
applicable interest rates by reference to
which LIBOR is to be determined hereunder
for such Interest Period, (ii) United States
Dollar deposits in the principal amount of
such indebtedness are not generally
available in the London interbank market for
a period equal to such Interest Period,
(iii) LIBOR as determined hereunder for such
Interest Period, after taking into account
payments to be made by the Borrower in
respect of increased costs and taxes
associated with carrying such indebtedness,
will not adequately and fairly reflect the
cost of funding such indebtedness, or (iv)
the making or continuation by the Lender of
a loan bearing interest calculated with
reference to LIBOR shall, as a result of any
change in any law or regulation or in the
interpretation thereof by any governmental
authority charged with the administration or
interpretation thereof, be unlawful or
impermissible.
"Interest Period" means a one, two or three
month period, as elected by the Borrower,
commencing on the date of Closing and ending
on the last day of such period and
thereafter commencing on the last day of the
immediately preceding period and ending on
the last day of such one, two or three month
period; provided that the foregoing
provisions relating to Interest Periods are
subject to the following:
(i) if any Interest Period would
otherwise end on a day which is not
a Business Day, that Interest Period
shall be extended to the next
succeeding Business Day, unless the
result of such extension would be to
carry such Interest Period into
another calendar month in which
event such Interest Period shall end
on the immediately preceding
Business Day;
(ii) no Interest Period may extend
beyond the final maturity date of
the subject Facility; and
(iii) the interest rate to be
applicable for each Interest Period
shall apply from and including the
first day of such Interest Period to
but excluding the last day thereof.
For purposes of determining an
Interest Period, a month means a period
starting on one day in a calendar month and
ending on a numerically corresponding day in
the next calendar month, provided, however,
if an Interest Period begins on the last day
of a month or if there is no numerically
corresponding day in the month in which an
Interest Period is to end, then such
Interest Period shall end on the last
Business Day of such month.
"LIBOR" shall mean, with respect to any
Interest Period, an interest rate per annum
equal to the London Interbank Offered Rate
for such Interest Period, adjusted for
applicable reserve requirements, determined
in a manner satisfactory to AT&T-CFC and the
Borrower.
"Prime Rate" shall mean, with respect to any
date, a fluctuating interest rate per annum
equal to the Prime Rate based on a source
selected by the AT&T-CFC and the Borrower.
"Treasury Rate" means 6.05% plus or minus,
as the case may be, 85% of the difference
between 6.05% and the highest ask yield rate
per annum for the 6.375% United States
Treasury Notes due May, 2002, as published
or announced two (2) business days prior to
closing, or (if not so published or
announced at such time) interpolated in a
manner to be mutually agreed upon by the
Lender and the Borrower from publications or
announcements of such rate, in the Eastern
Edition of the Journal or, in the event that
the Journal ceases for any reason to publish
or announce such rate of interest, any other
source selected by Lender.
Facility Fees: The Revolving Credit Facility will include a
commitment fee of 0.5% of the unused
commitment payable quarterly in arrears.
Conditions
Precedent: The Lender's obligation to make any Loan
under any of the Facilities shall be subject
to such conditions precedent as shall be
customary in transactions of this type and
in any event shall include the conditions
precedent set forth on Schedule B to this
Schedule 1.
Availability: Loans under the Revolving Credit Facility
will be made on a borrowing base formula
limited to the lesser of (i) the unused
portion of the Revolving Credit Facility and
(ii) the sum of 85% of Eligible Accounts and
50% of Eligible Inventory (such terms to be
defined by AT&T-CFC).
Amortization: The Senior Term Loan Facility shall amortize
according to the schedule of principal
payments attached hereto as Schedule A to
this Schedule 1.
Prepayments: Mandatory Prepayments: Borrower will be
required to make mandatory prepayments of
the principal amounts outstanding from time
to time under the Senior Term Loan Facility
(and after the Senior Term Loan Facility is
paid in full, on the Subordinated Loan
Facility) on a date selected by the Borrower
between May 1 and December 31, inclusive, of
each year, at par, without premium, in an
amount equal to 50% of the Excess Cash Flow
for the immediately preceding fiscal year.
In addition, if the Borrower shall
permanently reduce (through repayment or
otherwise) the amount available to it under
the Revolving Credit Facility (which will
not be permitted for 12 months following the
closing), the Borrower will, on the date of
such permanent reduction, be required to
make a mandatory prepayment of the principal
amounts outstanding from time to time under
the Senior Term Loan Facility (and after the
Senior Term Loan Facility is paid in full,
on the Subordinated Loan Facility), at par,
together in the case of the Tranche B Senior
Term Loan Facility with the Premium Amount,
in an amount equal to the amount of such
permanent reduction.
Other mandatory prepayments as may be
required by the Lender upon determination of
applicable financial and other negative
covenants.
Optional Prepayments. The Borrower may, at
its option, upon appropriate notice, prepay
at any time all, or from time to time any
part of, the Senior Term Loan Facility (or
after the Senior Term Loan Facility is paid
in full and the Revolving Loan Facility is
no longer outstanding, the Subordinated Loan
Facility), in an amount not less than
$1,000,000 in the case of a partial
prepayment, at par, together, in the case of
the Tranche B Senior Term Loan Facility and
the Subordinated Loan Facility, with the
Premium Amount determined for the prepayment
date with respect to such principal amount.
Optional prepayments of the Senior Term Loan
Facility shall be applied pro rata to the
Tranche A and Tranche B Senior Term Loan
Facilities.
Optional prepayments of the principal amount
outstanding from time to time under a
tranche of the Senior Term Loan Facility
shall be allocated to reduce pro rata the
scheduled prepayments of such tranche.
Related Definitions
"Excess Cash Flow" means, for any period,
cash flow (to be defined to the your and
AT&T-CFC's mutual satisfaction) for such
period, minus (a) capital expenditures for
such period and (b) all scheduled
prepayments on the Senior Term Loan Facility
for such period.
"Make-Whole Amount" means, with respect to
the Subordinated Loan Facility, an amount
equal to the excess, if any, of the
Discounted Value of the Remaining Scheduled
Payments with respect to the Called
Principal of Subordinated Loan Facility over
the amount of such Called Principal,
provided that the Make-Whole Amount may in
no event be less than zero. For the purposes
of determining the Make-Whole Amount, the
following terms have the following meanings:
"Called Principal" means, with
respect to the Subordinated Loan
Facility, the principal of the
Subordinated Loan Facility that is
to be prepaid or has become or is
accelerated upon default, as the
context requires.
"Discounted Value" means, with
respect to the Called Principal of
the Subordinated Loan Facility, the
amount obtained by discounting all
Remaining Scheduled Payments with
respect to such Called Principal
from their respective scheduled due
dates to the Settlement Date with
respect to such Called Principal, in
accordance with accepted financial
practice and at a discount factor
(applied on the same periodic basis
as that on which interest on the
Subordinated Loan Facility is
payable) equal to the Reinvestment
Yield with respect to such Called
Principal.
"Reinvestment Yield" means, with
respect to the Called Principal of
any Fixed Rate Note, 1.50% over the
yield to maturity implied by (i) the
yields reported, as of 10:00 A.M.
(New York City time) on the second
Business Day preceding the
Settlement Date with respect to such
Called Principal, on the display
designated as "Page 678" on the
Telerate Access Service (or such
other display as may replace Page
678 on the Telerate Access Service)
for actively traded U.S. Treasury
securities having a maturity equal
to the Remaining Average Life of
such Called Principal as of such
Settlement Date, or (ii) if such
yields are not reported as of such
time or the yields reported as of
such time are not ascertainable, the
Treasury Constant Maturity Series
Yields reported, for the latest day
for which such yields have been so
reported as of the second Business
Day preceding the Settlement Date
with respect to such Called
Principal, in Federal Reserve
Statistical Release H.15 (519) (or
any comparable successor
publication) for actively traded
U.S. Treasury securities having a
constant maturity equal to the
Remaining Average Life of such
Called Principal as of such
Settlement Date. Such implied yield
will be determined, if necessary, by
(a) converting U.S. Treasury bill
quotations to bond-equivalent yields
in accordance with accepted
financial practice and (b)
interpolating linearly between (1)
the actively traded U.S. Treasury
security with the duration closest
to and greater than the Remaining
Average Life and (2) the actively
traded U.S. Treasury security with
the duration closest to and less
than the Remaining Average Life.
"Remaining Average Life" means, with
respect to any Called Principal, the
number of years (calculated to the
nearest one-twelfth year) obtained
by dividing (i) such Called
Principal into (ii) the sum of the
products obtained by multiplying (a)
the principal component of each
Remaining Scheduled Payment with
respect to such Called Principal by
(b) the number of years (calculated
to the nearest one-twelfth year)
that will elapse between the
Settlement Date with respect to such
Called Principal and the scheduled
due date of such Remaining Scheduled
Payment.
"Remaining Scheduled Payments"
means, with respect to the Called
Principal of the Subordinated Loan
Facility, all payments of the
Subordinated Loan Facility and
interest thereon that would be due
after the Settlement Date and on or
prior to the fifth anniversary of
the closing with respect to such
Called Principal if no payment of
such Called Principal were made
prior to its scheduled due date,
provided that if such Settlement
Date is not a date on which interest
payments are due to be made under
the terms of the Subordinated Loan
Facility, then the amount of the
next succeeding scheduled interest
payment will be reduced by the
amount of interest accrued to such
Settlement Date and required to be
paid.
"Settlement Date" means, with
respect to the Called Principal of
the Subordinated Loan Facility, the
date on which such Called Principal
is to be prepaid or paid in the case
of acceleration, as the context
requires.
"Premium Amount" means, (i) with respect to
the prepayment of principal of the Tranche B
Senior Term Loan Facility, an amount equal
to 2% of such prepayment in respect of any
prepayment made during the first year
following the date of closing, 1% of such
prepayment during the second year following
the date of closing and 0% thereafter, and
(ii) with respect to the prepayment of
principal of the Subordinated Loan Facility
at any time on or prior to the fifth
anniversary of the closing, the Make-Whole
Amount.
Collateral: The Facilities and the Borrower's (and, as
its successor, National Picture's)
obligations and liabilities under the
Transaction Documents will be secured by all
of National Picture's present and future
assets, both real and personal and both
tangible and intangible (in all cases
whether now owned or hereafter acquired, and
wherever located) and all proceeds
(including, but not limited to, insurance
proceeds) and products thereof. More
specifically, Lender (or its Collateral
Trustee) will receive a perfected
first-priority lien and security interest
in, among other things:
1) All of National Picture's license
rights, chattel paper, accounts,
insurance proceeds, contract rights,
tax refunds, documents, notes, trade
names, trademarks, patents, general
and other intangibles;
2) All of National Picture's fixed
assets (including, without
limitation, inventory, rolling
stock, tractors, trucks, vans,
automobiles, trailers, etc.); and
3) All of National Picture's other
assets and properties, including,
but not limited to, all real
property and any leases thereof,
leasehold interests, machinery and
equipment.
In addition, to the collateral described
above securing the Facilities, the Guarantor
will enter into a full recourse, irrevocable
and unconditional guaranty of the Facilities
and the obligations of the Borrower under
the Transaction Documents, which guaranty
shall be secured by the Guarantor's pledge
of 100% of the common stock of the Borrower
(and, as its successor, National Picture)
and all proceeds and products thereof. The
guaranty shall be in form and substance
satisfactory to the Lender and shall in any
event include the covenant of the Guarantor
(i) to maintain an ownership of 100% of the
capital stock of the Borrower, (ii) not to
merge or consolidate with any other
corporation, (iii) to pay its taxes and
otherwise comply with applicable law, (iv)
to maintain its corporate existence and
necessary franchises, (v) to limit its
business to the direct ownership of the
Borrower (and, as its successor, National
Picture), (vi) not to own any Material
Property other than the common stock of the
Borrower (and, as its successor, National
Picture), and (vii) not to incur or have
outstanding any indebtedness for borrowed
money other than such as shall be
outstanding on the date of closing in an
amount and subject to terms and conditions
acceptable to the Lender (which indebtedness
shall be subordinated to the obligations of
the Guarantor under the Guaranty pursuant to
subordination provisions acceptable to the
Lender).
Perfection: All filings deemed necessary or appropriate
by the Lender will be made under the Uniform
Commercial Code and all other federal,
state, local or foreign laws to perfect the
Lender's liens, security interests and
mortgage or deed of trust liens in the
Collateral. The Borrower (and, as its
successor, National Picture) will execute
and deliver such documents, instruments or
agreements and take such other and further
actions, as the Lender may request in order
to perfect or protect the Lender's liens,
security interests and mortgage or deed of
trust liens in the Collateral.
Insurance: All risk of loss of the Collateral shall be
borne solely by the Borrower. The Borrower
shall purchase and maintain at all times
during the term of the Facilities general
liability insurance and products liability
insurance (in each case naming the Lender
and its subsidiaries and affiliates as
additional insureds), all risk physical
damage insurance and business income
insurance (naming the Lender and its
subsidiaries and affiliates as additional
insureds and as first loss payees under a
standard loss payee rider), business
interruption (income) insurance, flood and
such other insurance coverages (including,
but not limited to, key person life
insurance coverages) as the Lender may from
time to time deem reasonably necessary or
appropriate, in each case in such amounts,
with such carriers, and having such terms
and conditions as the Lender may from time
to time deem reasonably necessary or
appropriate. Without limiting the generality
of the foregoing, each policy of insurance
shall provide at least thirty (30) days'
prior written notice to the Lender of any
cancellation or modification thereof,
include a waiver of subrogation rights by
the carrier thereunder, and shall not be
invalidated by, and shall maintain coverage
of the Lender's and its subsidiaries' and
affiliates' interests continuously
irrespective of, any breach of
representation, warranty or covenant by any
other party. At or prior to closing and
periodically thereafter (as the Lender may
require), the Borrower shall provide the
Lender with certificates or other written
evidence satisfactory to the Lender
confirming the existence, carriers and terms
and conditions of the above described
insurance coverages.
Representations
and Warranties: Representations and Warranties as are
customary shall be provided by the Borrower
and the Guarantor (and, in connection with
National Picture's assumption of the
Facilities and the obligations of the
Borrower under the Transaction Documents, by
National Picture) including, but not limited
to, those relating to due organization,
power and authority to execute and deliver
the Transaction Documents and related
documentation and to undertake the
transactions contemplated thereby; legal,
valid, binding and enforceable Transaction
Documents and related documentation;
receiving required approvals and consents;
compliance with applicable laws; and no
arbitrations, actions, proceedings or
litigation that may have a material adverse
effect on the Borrower, the Guarantor or
National Picture, the Transaction Documents
and related documentation or the Collateral,
or performance by the Borrower, the
Guarantor or National Picture thereunder.
Affirmative Covenants: Affirmative covenants as are customary
shall be provided by the Borrower (and, as
its successor, National Picture),
including, but not limited to, those
relating to maintaining corporate
existence; compliance with applicable
laws; maintenance of all tangible Collateral
in good condition, repair and appearance
and in accordance with any applicable
manufacturers' specifications and
recommendations; continuous maintenance of
all required insurance coverages; payment of
all taxes, fees and assessments in respect
of the Collateral, the Transaction Documents
and related documentation; performance of
obligations; permitting access to the
Borrower's (and, as its successor, National
Picture's) premises for purposes of
inspecting the Collateral and books and
records; preparation of financial statements
in accordance with generally accepted
accounting principles and as to fairly
represent the Borrower's financial position;
and providing financial statements and other
required materials and information in a
timely manner.
Negative Covenants: Financial and other negative covenants
as are customary and in any event
including the covenants set forth in
Schedule C to this Schedule 1.
Financial Reporting: The Borrower (and, as its successor,
National Picture) shall furnish to the
Lender during the term of the Facilities,
among other things, the following:
1) Within ninety (90) days after the
end of each of the Borrower's fiscal
years, audited annual financial
statements for the Borrower
certified by an independent
accounting firm acceptable to the
Lender;
2) Within forty-five (45) days after
the end of each of the Borrower's
fiscal quarters (other than the
fourth fiscal quarter) of each of
its fiscal years, quarterly
financial statements for the
Borrower, internally prepared and
certified by the Chief Financial
Officer of the Borrower;
3) Annual budgets and projections
prepared on a monthly basis,
including a monthly balance sheet,
income statement and statement of
cash flow, certified by the Chief
Financial Officer of the Borrower;
and
4) Any other reports (including
borrowing base reports),
certificates, materials or other
information, as the Lender may
reasonably deem necessary or
appropriate at any time or from time
to time.
Events of
Default: The Transaction Documents shall contain
events of default (with certain grace
periods where appropriate) as are customary,
including, but not limited to, those
relating to non-payment of any indebtedness
or other amounts due under the Transaction
Documents or related documentation; failure
by the Borrower (and, as its successor,
National Picture) or the Guarantor to
perform or observe any other covenant,
condition or agreement under the Transaction
Documents or related documentation, any
other agreement with AT&T Capital
Corporation or any subsidiary or affiliate
or any other agreement deemed material by
the Lender; any breach of warranty or
misrepresentation by the Borrower, National
Picture or the Guarantor; the Borrower (and,
as its successor, National Picture) or the
Guarantor making a voluntary or involuntary
assignment for the benefit of creditors or
becoming insolvent or generally failing to
pay debts as they come due; voluntary or
involuntary proceedings under any
bankruptcy, insolvency, receivership or
other similar laws by or against Borrower
(and, as its successor, National Picture) or
the Guarantor; revocation, rescission or
termination of any Transaction Document; any
Collateral being levied against, seized or
attached; and the Borrower (and, as its
successor, National Picture) or the
Guarantor voluntarily or involuntarily
dissolving or being terminated.
Governing Law: New York (excluding choice-of-law principles
of the law of such State that would require
the application of the laws of a
jurisdiction other than such State).
Other Matters: All reasonable fees, assessments, closing
costs and other expenses and disbursements
(including, but not limited to, legal fees
and disbursements (including the reasonable
legal fees and expenses of Chapman and
Cutler, AT&T-CFC's special counsel in the
subject transaction), appraisal, valuation
and examination expenses, title and lien
search fees, insurance fees, filing and
recording fees and taxes, corporate search
fees and the initial and on-going fees and
expenses of AT&T-CFC's Collateral Trustee)
incurred in connection with this proposed
transaction ("Costs") will be borne by the
Colonnade Capital L.L.C. and the Borrower,
jointly and severally, and will be
reimbursed to AT&T-CFC on demand, whether or
not the proposed transaction contemplated
herein is consummated and regardless of the
reasons for which such transaction is not
consummated, unless the proposed transaction
is not consummated solely as a result of
AT&T-CFC's breach of its obligations under
the Commitment Letter. After the closing
date for this proposed transaction, the
Borrower shall bear all fees, costs and
expenses (including, but not limited, to,
legal fees and disbursements) incurred by
the Lender during the administration of the
Facilities or the Transaction Documents, or
as a result of any breach of representation,
warranty, covenant, condition or agreement,
or in respect of the collection or
enforcement of any of Lender's (or its
Collateral Trustee's) rights or remedies,
under any of the Transaction Documents,
which Costs shall not include ATT-CFC's
costs in connection with the syndication of
the Facilities. Payment of all such amounts
shall be payable upon demand and be secured
by the Collateral and the Guaranty.
<PAGE>
Schedule A
(to Schedule 1 to the Commitment Letter)
SCHEDULE A
SCHEDULE OF PRINCIPAL PAYMENTS
TRANCHE A SENIOR TRANCHE B SENIOR
DATE(1) TERM LOAN FACILITY TERM LOAN FACILITY
- ------- ------------------ ------------------
9/30/98 $ 250,000 $ 125,000
3/30/99 $ 375,000 $ 125,000
9/30/99 $ 375,000 $ 125,000
3/30/00 $ 750,000 $ 125,000
9/30/00 $ 750,000 $ 125,000
3/30/01 $1,250,000 $ 125,000
9/30/01 $1,250,000 $ 125,000
3/30/02 $1,625,000 $ 437,500
9/30/02 $1,625,000 $ 437,500
3/30/03 $1,750,000 $1,625,000
9/30/03 $1,625,000
3/30/04 $2,750,000
9/30/04 $2,750,000
3/30/05 $3,125,000
9/30/05 $3,125,000
3/30/06 $3,250,000
- --------
(1) Assuming a September 30, 1997 closing
<PAGE>
SCHEDULE B
CONDITIONS PRECEDENT TO CLOSING
(1) Satisfactory Due Diligence. The Lender has completed substantial due
diligence on the Borrower, the Guarantor and National Picture. If the
ongoing due diligence investigation discloses information not
previously disclosed to AT&T-CFC, or AT&T-CFC otherwise discovers
information which is inconsistent in a material and adverse manner with
any such information previously disclosed to it, that AT&T-CFC believes
has had or could have, individually or in the aggregate, a material
adverse impact on the business, condition (financial or otherwise),
operations, performance or properties of the Borrower, the Guarantor or
National Picture, then (a) AT&T-CFC shall be entitled to decline to
participate in the financing contemplated herein or (b) AT&T-CFC may
suggest alternative financing amounts or structures that ensure
adequate protection for AT&T-CFC, in each case in AT&T-CFC's sole
discretion.
(2) Inventory Report. Receipt by the Lender of a net orderly liquidation
value inventory report prepared by Daley-Hodkin, Inc., in form and
substance satisfactory to the Lender, with respect to the fair market
value of National Picture's and its subsidiaries' inventory, and the
Lender shall be satisfied that there shall have been no material
diminution in value of such inventory since the date of such reports.
(3) Other Reports. (a) Receipt by the Lender of (i) a financial condition
certificate, in form and substance satisfactory to the Lender, from the
Borrower, executed by its senior financial officer, and from National
Picture, executed by its senior financial officer, and (ii) a solvency
opinion and an appraisal report, in each case in form and substance
satisfactory to the Lender, from Valuation Research Corporation, and
the Lender shall be satisfied that there shall have been no material
change in the facts and circumstances thereof or to the assumptions
made therein or any material diminution in the value stated in such
reports, and (b) the Lender shall be satisfied that there shall have
been no material change in the facts and circumstances of any of the
foregoing or of any other report on the condition (financial or
otherwise) of the Borrower or National Picture received prior to the
date hereof or on the assumptions made therein.
Schedule B
(to Schedule 1 to the Commitment Letter)
<PAGE>
(4) Revolver Availability. After giving effect to the consummation of the
Related Transactions referred to below, the Borrower shall have at
least an amount of $2,000,000 available for borrowing under the
Revolving Credit Facility.
(5) Insurance. Receipt by the Lender of satisfactory evidence of the
required insurance coverages.
(6) Governmental Approvals. The Lender shall be satisfied that all
necessary registrations, filings and requests for approval shall have
been made with the appropriate governmental authorities.
(7) Opinions. Receipt by the Lender of satisfactory opinions of counsel for
the Guarantor, the Borrower and National Picture as shall be customary
in transactions of the type contemplated by this letter and in any
event including such matters as shall be reasonably requested by the
Lender.
(8) Related Transactions. Contemporaneously with the closing,
(i) Borrower shall have purchased 90% of the issued and
outstanding capital stock of National Picture pursuant to the Tender
Offer and the Borrower shall have merged into National Picture pursuant
to a merger agreement, which shall be in form and substance
satisfactory to the Lender, with National Picture being the surviving
corporation;
(ii) National Picture shall have assumed the Facilities and
the obligations of the Borrower under the Transaction Documents
pursuant to an Assumption Agreement, in form and substance satisfactory
to the Lender;
(iii) all subsidiaries of National Picture (whether directly or
indirectly owned) shall have merged into National Picture pursuant to a
merger agreement, which shall be in form and substance satisfactory to
the Lender, with National Picture being the surviving corporation; and
(iv) equity and equity-like interests in the Guarantor shall
have been purchased by Colonnade Capital L.L.C., Commonwealth Investors
II, L.P., Billy D. Moore, Richard A. Beattie, Robert T. Littlejohn and
such other investors as shall be satisfactory to AT&T-CFC for an
aggregate purchase price of $14,725,000.
The foregoing are referred to herein as the "Related Transactions."
(9) Proceedings Satisfactory. All corporate and other proceedings in
connection with the transactions contemplated by this letter and all
documents and instruments incident to such transactions shall be
satisfactory to the Lender, and the Lender shall have received all such
counterpart originals or certified or other copies of such documents as
the Lender may reasonably request.
<PAGE>
SCHEDULE C
FINANCIAL AND OTHER NEGATIVE COVENANTS
Financial covenants applicable to the Borrower and National Picture shall be as
are customary and acceptable to AT&T-CFC, and which are expected to include in
any event a minimum current ratio, maximum total debt-to-ETBITDA, minimum
EBIT-to-interest expense, minimum fixed charge ratio, minimum net worth and
maximum capital expenditures. Other negative covenants applicable to the
Borrower and National Picture shall be as are customary and acceptable to
AT&T-CFC, and which are expected to include in any event limitations and/or
prohibitions on indebtedness, liens, distributions, investments, mergers, sale
of assets, lease rentals, line of business, subsidiaries and salaries and
bonuses.
Schedule C
(to Schedule 1 to the Commitment Letter)
EXHIBIT (C)(1)
Bowles Hollowell Conner & Co.
227 West Trade Street, Suite 2400
Charlotte, North Carolina 28202
Re: Confidentiality Agreement
Ladies and Gentlemen:
We have requested Evaluation Material (as defined below) concerning the business
and affairs of National Picture & Frame Company and its subsidiaries
(collectively, the "Company").
The term "Evaluation Material" includes information (written or oral) furnished
to us or our Representatives (as defined below) by the Company or its
Representatives, and information, analyses, summaries and other work product
derived by us from such information, but does not include information which (i)
was or becomes generally available to the public other than as a result of a
disclosure by us or our Representatives, or (ii) was or becomes available to us
on a nonconfidential basis from a source other than the Company or its
Representatives, provided that such source is not bound by a confidentiality
obligation to the Company.
The term "Representatives" means any party's directors, officers, stockholders,
partners, affiliates, employees, agents, and advisors.
As a condition to you or the Company Furnishing us with any Evaluation Material,
we agree as follows:
(1) We recognize and acknowledge the competitive value and
confidential nature of the Evaluation Material and the damage that could
result to the Company if information contained therein is disclosed to
any third party. The Evaluation Material will not be used by us or our
Representatives in any way detrimental to the Company, including,
without limitation, in competition with the Company.
(2) We agree that the Evaluation Material will be used solely for
the purpose of evaluating a possible purchase by us of the Company. We
also agree that we will keep the Evaluation Material confidential and
will not disclose any of the Evaluation Material now or hereafter
received or obtained from the Company or any of its Representatives to
any third party, without the prior written consent of the Company;
provided, however, that any of the Evaluation Material may be disclosed
(a) to the extent required by applicable law or legal process in
compliance with paragraph (7) hereof or (b) to our Representatives who
need to know the information contained in the Evaluation Material for
the purpose of evaluating the above-described possible transaction with
the Company 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 (it being understood and agreed that our Representatives
<PAGE>
shall be informed by us of the confidential nature of the Evaluation
Material and shall be directed by us to treat the Evaluation Material
confidentially). In any event, we shall be responsible for any improper
use of the Evaluation Material by our Representatives.
(3) In addition, without prior written consent of the Company, we will
not disclose to any person (which includes, without limitation, any
corporation, company, partnership, individual, group, or trust),
including another possible bidder for the Company, (a) the Evaluation
Material has been made available to us, (b) that we have inspected any
portion thereof, (c) that discussions or negotiations are taking place
concerning a possible transaction with the Company, or (d) any of the
terms, conditions or other facts with respect to any such possible
transaction, including the status thereof.
(4) In the event that the transaction contemplated by this Agreement
is not consummated, or upon your or the Company's request, all
Evaluation Material supplied by the Company or its Representatives (and
all copies, extracts or other reproductions in whole or in part thereof)
shall be returned to the Company or (with the Company's written
permission) destroyed and not retained by us or our Representatives in
any form or for any reason. This includes all documents, memoranda,
notes, and other writings whatsoever prepared by us or our
Representatives based on the Evaluation Material.
(5) We understand that the Company has publicly traded securities
outstanding and is subject to the reporting and other requirements of
the Securities Exchange Act of 1934, as amended. The Evaluation
Material (or portions thereof) constitute material information regarding
the Company which has not been disclosed to the public. Therefore, for
so long as we are in possession of such information, we shall not,
without the Company's permission, purchase or sell any equity or debt
security issued by the Company until all such information is disclosed
to the public (other than as a result of our breach of this Agreement).
(6) Neither the Company nor its Representatives make any
representations or warranties as to the accuracy or completeness of the
Evaluation Material. Any representations or warranties with respect to
the Company will be contained only in a definitive agreement, if any,
between the Company and a purchaser of the Company. The Company and its
Representatives expect that we will conduct our own independent
investigation and analysis. We agree that neither the Company nor any
of its Representatives shall have any liabilities to us resulting from
the use of the Evaluation Material supplied by the Company or any of its
Representatives.
(7) Notwithstanding anything to the contrary set forth herein, in
the event that we or any of our Representatives are requested or
become legally compelled (by oral questions, interrogatories, request
for information or documents, subpoena, civil investigative demand or
similar process) to disclose any of the Evaluation Material or take any
other action prohibited hereby, we will provide the Company with prompt
written notice so that the
<PAGE>
Company may seek a protective order or other appropriate remedy and/or
waive compliance with the provisions of this Agreement. In the event
that such protective order or other remedy is not obtained, or that the
Company waives compliance with provisions of this Agreement, we will
furnish only that portion of the Evaluation Material or take only such
action as is legally required by binding order and will exercise our
best efforts to obtain reliable assurance that confidential treatment
will be accorded any Evaluation Material so furnished.
(8) Until the third anniversary of the date of this Agreement, we
shall not (a) induce or attempt to induce any employee of the Company to
leave his or her employ or in any way interfere with the relationship
between the Company and any of its employees, (b) hire any person who
was an employee of the Company as of the date of this Agreement, or (c)
induce or attempt to induce any business relation of the Company to
cease doing business with the Company or in any way interfere with the
relationship between the Company and any such business relation.
(9) This Agreement shall be binding on and inure to the benefit of
the parties hereto and their respective successors and assigns. It is
understood that the Company may institute appropriate proceedings
against us to enforce its rights hereunder, that money damages would not
be a sufficient remedy for any violation of the terms of this Agreement,
that the Company shall accordingly be entitled to specific performance
and injunctive relief as remedies for any violation, and that these
remedies shall not be deemed to be the exclusive remedies for a
violation of the terms of this Agreement, but shall be in addition to
all other remedies available to the Company at law or in equity. This
Agreement shall be governed and construed in accordance with the laws of
the State of Mississippi without giving effect to the conflicts of law
provisions thereof. We hereby irrevocably submit to the exclusive
jurisdiction of any State or Federal court located in Mississippi over
any action or proceeding to enforce or defend any right under this
Agreement and agree not to file any suit or proceeding anywhere else. If
any portion of this Agreement shall be declared invalid or
unenforceable, the remainder of this Agreement shall be unaffected
thereby and shall remain in full force and effect.
(10) The terms of this Agreement shall expire three years from the
date hereof.
Accepted and Agreed
Colonnade Capital LLC
----------------------
By: /s/ JOHN T. HERZOG
----------------------
Its: Managing Partner
----------------------
Date:8/12/1996
----------------------
EXHIBIT (C)(2)
LETTER OF INTENT
May 29, 1997
Board of Directors
National Picture & Frame Company
c/o Mr. John H. Grigg
Managing Director
Bowles Hollowell Conner & Co.
227 West Trade Street
Charlotte, North Carolina 28202
Dear Sirs:
Colonnade Capital, L.L.C., on behalf of itself and one or more of its
affiliates (collectively, "Colonnade"), hereby submits a proposal (the
"Proposal") to acquire National Picture & Frame Company (the "Company")
substantially upon the terms set forth herein. The transaction (the
"Transaction") would be effected by means of a tender offer (the "Tender Offer")
for any and all issued and outstanding shares of common stock of the Company,
par value $.01 per share, followed by a merger (the "Merger") of the Company
with a newly formed company to be organized by Colonnade ("Newco").
If the Proposal is acceptable to the Company, Colonnade and the Company
shall proceed promptly to negotiate a binding, definitive agreement (the
"Agreement") providing for the Tender Offer followed by the Merger. The Proposal
is subject to the arranging of appropriate financing and the satisfactory
completion of Colonnade's due diligence investigation of the Company as set
forth herein. Colonnade has received preliminary commitments from certain
financial institutions with respect to the funds necessary to finance the
proposed transaction.
1. Consideration. The consummation of the proposed Transaction would
result in the holders of the issued and outstanding common stock of the Company
receiving, in exchange for each share, $12.00 cash (the "Consideration"), as
long as, prior to commencement of the Tender Offer, the Company provides written
evidence to Colonnade that the amount that is payable by the Company in
connection with the termination of the employment with the Company of Jesse C.
Luxton as President and Chief Executive Officer of the Company and any related
non-competition payments, and payments due to Bowles Hollowell Conner & Co. and
other brokers and advisors to the Company in connection with the consummation of
the Tender Offer and the Merger do not in the aggregate exceed $1,850,000;
provided, however, that if such expenses exceed $1,850,000 in the aggregate,
there shall be a proportionate reduction in the Consideration. Each issued and
outstanding option to acquire common stock of the Company shall be entitled to
receive a cash payment equal to the difference between the Consideration and
<PAGE>
Board of Directors
May 29, 1997
Page 2
the exercise price per share of common stock of the Company issuable upon
exercise of such option unless such option holders enter into a mutually agreed
upon alternative with Newco.
2. The Agreement. Colonnade and the Company will negotiate in
good faith to agree upon the provisions of the Agreement on the basis set forth
in the Proposal. The Agreement shall reflect customary representations,
warranties, covenants and conditions for transactions of this kind. Execution
of the Agreement by Colonnade shall be subject to the following conditions
precedent:
(a) the receipt by the Company of a fairness opinion from
Bowles Hollowell Conner & Co., a copy of which shall be delivered to
Colonnade, that the Consideration to be received by the stockholders of
the Company is fair to the holders of the Company's issued and
outstanding common stock from a financial point of view;
(b) the approval of the Agreement and the Transaction by
a unanimous vote of the non-executive officer members of the Board of
Directors of the Company;
(c) the receipt by Colonnade of agreements executed by each of
Code, Hennessy & Simmons Limited Partnership, its affiliates and
members of the Board of Directors and the executive officers of the
Company or any entities or individuals controlled by any of the
foregoing pursuant to which all such persons agree to irrevocably
tender in the Tender Offer any and all shares of common stock of the
Company beneficially owned by such persons as of the date of this
Letter of Intent or subsequently purchased;
(d) Newco shall have entered into employment agreements with
certain members of senior management of the Company in form and
substance satisfactory to Colonnade, which agreements shall become
effective simultaneously with the consummation of the Tender Offer;
(e) the senior management of the Company, other than Jesse C.
Luxton, shall agree to invest in the surviving corporation resulting
from the Merger in an amount not less than 25% of the value of each
such person's present investment in the Company (including the value of
any stock options held) using a per share value equal to the
Consideration;
(f) the Company shall have notified Jesse C. Luxton that
he will be terminated as President and Chief Executive Officer of the
Company, effective
<PAGE>
Board of Directors
May 29, 1997
Page 3
simultaneously with the consummation of the Tender Offer, and Mr.
Luxton shall agree that the terms of such termination shall be as set
forth in the employment agreement between the Company and Mr. Luxton,
dated as of April 30, 1993, and the letter agreement between the
Company and Mr. Luxton, dated as of April 30, 1997 (which expenses are
included in the expense amount referred to in paragraph 1);
(g) Newco shall have entered into an employment agreement
with Mr. Luxton's successor as President and Chief Executive Officer of
the Company in form and substance satisfactory to Colonnade;
(h) Colonnade shall have had discussions, satisfactory to
Colonnade, in its sole and absolute discretion, with Wal-Mart and
K-Mart regarding their intent to continue to use the Company as a
primary vendor on terms substantially similar to terms currently in
effect with such customers;
(i) the Company's revenues, earnings, cash flow and balance
sheet for the period ending April 30, 1997, shall not compare
unfavorably, in a material manner, to the projections provided by the
Company and Bowles Hollowell Conner & Co. on March 5, 1997, to
Colonnade;
(j) there shall not have occurred any dividend, redemption,
stock split, recapitalization or stock issuance of any kind (including
stock options) of the Company since January 31, 1997 other than the
issuance of stock by the Company upon the exercise of outstanding stock
options or pursuant to the Company's employee stock purchase plan;
(k) the Company shall not have entered into any agreement
binding the Company to a material capital expenditure;
(l) the Company (a) shall have conducted its business only in
the ordinary course and shall have maintained and preserved its
organization, goodwill and properties, and (b) shall not have made any
material change to its financial statements, except as required by the
operation of the business in the ordinary course or to conform to
generally accepted accounting principles, or prepaid any indebtedness,
changed depreciation or amortization methods, delayed incurring
budgeted expenses or deviated from usual and customary terms with
suppliers, lessors, customers or buyers; and
(m) Colonnade shall have received commitments,
satisfactory to Colonnade in its sole and absolute discretion, from
investors and financial institutions to provide at
<PAGE>
Board of Directors
May 29, 1997
Page 4
least $50.0 million of debt or debt-like financing with respect to the
Tender Offer and related transactions.
The Agreement shall provide that consummation of the Tender Offer and
Colonnade's and Newco's obligations to accept and pay for shares validly
tendered and not withdrawn pursuant to the Tender Offer shall be subject to the
following conditions:
(1) not less than 90% of the issued and outstanding shares of
common stock of the Company shall have been validly tendered and not
withdrawn pursuant to the Tender Offer, which shall remain open for 20
business days (or such longer period of time as may be required under
applicable federal securities laws); and
(2) the satisfaction of any applicable federal or state
regulatory requirements and approvals, including approval under the
Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended.
3. Due Diligence. Following the execution of this Letter of Intent, the
Company will allow Colonnade, its counsel and other representatives, full access
to all employees, books, records, files, documents, assets, properties,
contracts and agreements of the Company that may be reasonably requested and
shall furnish Colonnade, its counsel and representatives, all such other
information as may be reasonably requested. Colonnade shall have reasonable
access to conduct interviews with Wal-Mart and K-Mart, provided, that, any such
interviews shall be coordinated through the Company.
4. Chief Executive Officer. Colonnade shall use its reasonable best
efforts to identify and secure the services of an individual (as contemplated by
paragraph 2(g)) to serve as the President and Chief Executive Officer of the
Company from and after the consummation of the Tender Offer, which individual
shall be acceptable to Colonnade in its sole and absolute discretion.
5. No Solicitation.
In consideration of Colonnade's due diligence review of the
Company and negotiation of the Agreement, which the parties acknowledge will
cost Colonnade material time and expense, from the date of this Letter of Intent
through the earlier to occur of consummation
<PAGE>
Board of Directors
May 29, 1997
Page 5
of the Merger or the date this Letter of Intent is terminated in accordance with
paragraph 7 below, no stockholder controlled by a director, officer, employee or
affiliate of the Company, director, officer, employee or affiliate of the
Company (collectively, the "Affiliates"), or any representative of such person
or entity, shall institute, pursue or continue any discussions, negotiations or
agreements (whether preliminary or definitive) with any person or entity other
than Colonnade contemplating or providing for any public or private offering of
equity, merger, share exchange, acquisition, purchase or sale of a significant
amount of shares or assets or other business combination or change in control of
the Company, unless the Board of Directors of the Company concludes in good
faith, after receiving the advice of its counsel, that the failure to take such
action is likely to violate the fiduciary obligation of the directors of the
Company under applicable law. The Company and its directors, officers and
advisors shall not furnish any non-public information to any party other than
Colonnade with respect to such a proposed transaction. The Company shall
promptly notify Colonnade to the extent that it receives any inquiry relating to
any such transaction.
6. Conduct of Business in Ordinary Course; Best Efforts. The Agreement
shall contain a provision similar to paragraph 2(l) above. The Company
represents to Colonnade that the Company has not entered into any employment
agreements or severance agreements with any employee of the Company that provide
for severance payments to be made to such employee in connection with the
termination of such employee's employment with the Company after October 31,
1997. The Company agrees to use its good faith reasonable best efforts to enable
Colonnade to meet or have discussions with appropriate representatives of
Wal-Mart and K-Mart, respectively, within two weeks of the date of this Letter
of Intent for the purpose of satisfying the conditions set forth in paragraph
2(h) above.
7. Termination. This Letter of Intent may only be terminated as
set forth in subparagraphs (b), (c), (d) or (e) below.
(a) If this Letter of Intent is terminated by the Company
(other than under the circumstances referred to in subparagraph (e)
below) prior to the execution of the Agreement, and the conditions set
forth in paragraph 2(g), (i) and (m) have been satisfied or waived in
writing by Colonnade, the Company shall, in view of the efforts of
Colonnade, reimburse Colonnade for its reasonable out-of-pocket
expenses in connection with the transactions contemplated by this
Letter of Intent and the financing thereof; provided, that, such
expenses shall not exceed $750,000 in the aggregate (the "Reasonable
Expenses"). Nothing contained herein shall be deemed to limit any
claims Colonnade may have against the Company with respect to a breach
of this Letter of Intent by the Company.
<PAGE>
Board of Directors
May 29, 1997
Page 6
(b) Either party may terminate this Letter of Intent if the
condition set forth in paragraph 2(g) above has not been satisfied on
or before August 4, 1997; provided, however, that if Colonnade can
demonstrate to the Company that Colonnade has identified a bona fide
candidate for the position of President and Chief Executive Officer of
the Company on or before such date with whom Colonnade expects to
complete discussions within 30 days and Colonnade has satisfied or
agreed to waive in writing the conditions set forth in paragraph 2(d),
(e), (h), (i) and (m), then such date shall be extended automatically
until September 3, 1997.
(c) Either party may terminate this Letter of Intent if any of
the conditions set forth in paragraph 2(d), (e), (h), (i) or (m) have
not been satisfied or waived in writing by Colonnade on or before
August 4, 1997.
(d) If the Agreement is not executed on or before September 3,
1997, then this Letter of Intent may be terminated by either party.
(e) Either party may terminate this Letter of Intent at any
time if the Company shall have received a superior proposal from any
other person which provides for the acquisition of all of the issued
and outstanding shares of capital stock of the Company and the Board of
Directors of the Company concludes in good faith, after receiving the
advice of its counsel, that the failure to terminate is likely to
violate the fiduciary duty of the Board of Directors of the Company
under applicable law. In such event, in view of the efforts of
Colonnade and the potential benefits to the stockholders of the Company
and the potential loss to Colonnade, the Company shall pay to Colonnade
a fee of (i) $1,500,000 and reimburse it for its Reasonable Expenses,
if such termination occurs prior to the time that the conditions set
forth in paragraph 2(d), (e) or (h) have been satisfied or waived in
writing by Colonnade, or (ii) $2,500,000 and reimburse it for its
Reasonable Expenses, if such termination occurs on or after the time
that the conditions set forth in paragraph 2(d), (e) or (h) have been
satisfied or waived in writing by Colonnade. The same amounts shall
also be paid by the Company to Colonnade if (i) (A) any person, or any
persons acting as a group, acquires more than one-third of the shares
outstanding after the date of, and prior to the termination of, this
Letter of Intent, and (B) such person or group obtains control of the
Company or enters into an agreement providing for the merger with, or
acquisition of all or substantially all of the assets of the Company
from, the Company (a "Change of Control") within 12 months after
termination of this Letter of Intent, or (ii) (X) a Change of Control
occurs within 12 months after the termination of this Letter of Intent
with a party who had communicated after the date of, and prior to the
termination of, this Letter of Intent with an Affiliate or any
representative thereof of such
<PAGE>
Board of Directors
May 29, 1997
Page 7
party's intent to acquire control of the Company by verbal or written
communication, and (Y) the price per share received by the shareholders
of the Company in connection with such Change of Control exceeds the
Consideration.
8. Expenses. Except as set forth in paragraph 7, each party will
bear its own legal and other fees and expenses incurred in connection with the
transactions, including the expenses of accountants and investment bankers.
9. Nondisclosure. Neither Colonnade nor the Company or any of their
respective members, stockholders, officers or directors shall (i) make any
public statement about the contemplated transaction without the prior written
consent of the other party, unless that party determines in good faith, on the
advice of legal counsel, that public disclosure is required by law or the rules
of the Nasdaq stock market, in which case that party shall consult with the
other party to the extent reasonably practicable prior to making a statement, or
(ii) discuss the potential transaction with any third party, other than
representatives and advisors who are bound to confidence; provided, that, in the
event that the Company decides to issue a press release or make a public
statement regarding this Letter of Intent, then Colonnade shall have the
opportunity to review and comment on such press release or statement prior to
any public disclosure.
10. Board Action. Upon execution of the definitive Agreement, the Board
of Directors of the Company shall prepare and promptly file a Schedule 14D-9
with the Securities and Exchange Commission concurrently with the filing by
Colonnade of a Schedule 14D-1 in which the Board recommends that the
stockholders of the Company tender their shares of common stock of the Company
pursuant to the Tender Offer and mail such Schedule 14D-9 to stockholders
concurrently with the mailing by Colonnade of such Schedule 14D-1; provided,
however, that the Board's obligations under this paragraph 10 shall be subject
to the exercise of its fiduciary duties with respect to a superior proposal by a
third party.
Although this Letter of Intent expresses the intentions of the parties
as herein provided, nothing herein set forth shall be construed as or be deemed
to constitute a legally enforceable or binding right or obligation of any of
them, and no party will be bound, legally or otherwise, until a definitive
Agreement regarding the matters set forth above is executed by the parties and
other persons who shall be appropriate signatories; provided, however, the
covenants set forth in paragraphs 4, 5, 7, 8 and 9 shall be binding in
consideration of the efforts of the parties to proceed toward preparation of a
definitive Agreement respecting the transactions outlined above.
<PAGE>
Board of Directors
May 29, 1997
Page 8
If the Company is in agreement with the foregoing, kindly so indicate
by signing a counterpart in the place indicated below and returning it to the
undersigned. This offer will expire if a signed counterpart is not received by
Colonnade by 12:00 Midnight Central Time on May 29, 1997.
Very truly yours,
COLONNADE CAPITAL, L.L.C.
By: _______________________________
James C. Wheat, III
Managing Partner
ACCEPTED AND AGREED
to as of May 29, 1997
NATIONAL PICTURE & FRAME COMPANY
By: ___________________________
Daniel J. Hennessy
Chairman of the Board
EXHIBIT (C)(3)
AGREEMENT AND PLAN OF MERGER
dated as of
September 4, 1997
among
NATIONAL PICTURE & FRAME COMPANY,
NPF HOLDING CORPORATION,
NPF ACQUISITION CORPORATION,
and
COLONNADE CAPITAL, L.L.C.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I THE OFFER..............................................................................................1
Section 1.1. The Offer...................................................................................1
Section 1.2. Company Action..............................................................................1
Section 1.3. Directors...................................................................................2
ARTICLE II THE MERGER............................................................................................3
Section 2.1. The Merger..................................................................................3
Section 2.2. Conversion of Shares........................................................................4
Section 2.3. Exchange of Shares..........................................................................4
Section 2.4. Dissenting Shares...........................................................................5
Section 2.5. Stock Options...............................................................................5
Section 2.6. Stockholders' Meeting.......................................................................6
Section 2.7. Merger Without Meeting of Stockholders......................................................6
ARTICLE III THE SURVIVING CORPORATION............................................................................6
Section 3.1. Certificate of Incorporation................................................................6
Section 3.2. Bylaws......................................................................................6
Section 3.3. Directors and Officers......................................................................7
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................................7
Section 4.1. Organization and Qualification; Subsidiaries................................................7
Section 4.2. Certificate of Incorporation and Bylaws; Corporate Proceedings..............................7
Section 4.3. Capitalization..............................................................................8
Section 4.4. Authority Relative to this Agreement........................................................8
Section 4.5. No Conflict; Required Filings and Consents..................................................9
Section 4.6. Compliance.................................................................................10
Section 4.7. SEC Filings; Financial Statements..........................................................10
Section 4.8. Disclosure Documents.......................................................................10
Section 4.9. No Undisclosed Liabilities, Absence of Changes.............................................11
Section 4.10. Litigation................................................................................12
Section 4.11. Employee Benefit Plans....................................................................12
Section 4.12. Tax Matters...............................................................................13
Section 4.13. Material Contracts........................................................................14
Section 4.14. Labor Matters.............................................................................14
Section 4.15. Environmental Matters.....................................................................15
Section 4.16. Customers, Suppliers, Distributors and Sales Representatives..............................16
Section 4.17. Employment Matters........................................................................16
Section 4.18. Brokers...................................................................................16
Section 4.19. Opinion of Bowles Hollowell...............................................................16
Section 4.20. Letter of Intent..........................................................................16
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER...............................................................17
Section 5.1. Organization and Qualification; Subsidiaries...............................................17
Section 5.2. Certificate of Incorporation and Bylaws....................................................18
Section 5.3. Authority Relative to this Agreement.......................................................18
Section 5.4. No Conflict; Required Filings and Consents.................................................18
Section 5.5. Compliance.................................................................................19
Section 5.6. Documents Relating to the Offer; Company Proxy Statement...................................19
Section 5.7. Financing..................................................................................19
Section 5.8. Brokers....................................................................................19
ARTICLE VI COVENANTS OF THE COMPANY.............................................................................20
Section 6.1. Conduct of the Company.....................................................................20
Section 6.2. Access to Information......................................................................22
Section 6.3. No Solicitations...........................................................................22
Section 6.4. Notices of Certain Events..................................................................23
Section 6.5. Termination of Employee Discount Stock Purchase Plan.......................................23
ARTICLE VII COVENANTS OF PARENT AND BUYER.......................................................................23
Section 7.1. Confidentiality............................................................................23
Section 7.2. Director and Officer Liability.............................................................24
Section 7.3. Repayment or Assumption of Debt............................................................25
Section 7.4 Voting of Shares............................................................................26
ARTICLE VIII CONVENANTS OF COLONNADE, PARENT, BUYER AND THE COMPANY..............................................26
Section 8.1. Reasonable Best Efforts....................................................................26
Section 8.2. Certain Filings............................................................................26
Section 8.3. Public Announcements.......................................................................26
ARTICLE IX CONDITIONS TO THE MERGER.............................................................................26
Section 9.1. Conditions to the Obligations of Each Party................................................26
Section 9.2. Condition to the Obligations of Buyer......................................................27
ARTICLE X TERMINATION; EXPENSES.................................................................................28
Section 10.1. Termination...............................................................................28
Section 10.2. Effect of Termination.....................................................................29
Section 10.3. Fees, Expenses and Other Payments.........................................................29
ARTICLE XI MISCELLANEOUS........................................................................................30
Section 11.1. Notices...................................................................................30
Section 11.2. Survival of Representations, Warranties and Covenants.....................................31
Section 11.3. Amendments; No Waivers....................................................................31
Section 11.4. Successors and Assigns....................................................................31
Section 11.5. Governing Law.............................................................................32
Section 11.6. Counterparts; Effectiveness...............................................................32
Section 11.7. Headings..................................................................................32
Section 11.8. Third Party Beneficiaries.................................................................32
Section 11.9. Entire Agreement..........................................................................32
Section 11.10. Severability.............................................................................32
ANNEX I .......................................................................................................A-1
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
September 4, 1997, is made by and among National Picture & Frame Company, a
Delaware corporation (the "Company"), and NPF Holding Corporation, a Delaware
Corporation ("Parent") and NPF Acquisition Corporation, a Delaware corporation
("Buyer") and wholly owned subsidiary of Parent, each formed by Colonnade
Capital, L.L.C. ("Colonnade").
ARTICLE I
THE OFFER
Section 1.1. The Offer.
(a) Provided that this Agreement shall not have been terminated in
accordance with Article X hereof and none of the conditions set forth in Annex I
hereto shall have occurred and be continuing, Buyer shall, as promptly as
practicable following the date hereof and in no event later than five business
days after the date hereof, commence a tender offer (the "Offer") to purchase
all of the outstanding shares of Common Stock, $0.01 par value, of the Company
(the "Shares") at a price of $12.00 per Share, net to the seller in cash. The
obligation of Buyer to accept for payment and to pay for any Shares tendered
pursuant to the Offer shall be subject only to the condition that there shall be
validly tendered prior to the expiration date of the Offer and not withdrawn a
number of Shares which, together with the Shares then owned by Buyer, represents
at least 90% of the outstanding Shares (the "Minimum Condition"), and the
obligation of the Buyer to commence the Offer and accept for payment Shares
tendered pursuant to the Offer shall be subject only to the other conditions set
forth in Annex I hereto.
(b) Without the prior written consent of the Company, Buyer shall not
(i) decrease the price per Share or change the form of consideration payable in
the Offer, (ii) decrease the number of Shares sought in the Offer, or (iii)
change or impose additional conditions to the Offer or amend any other term of
the Offer in any manner adverse to the holders of Shares. Upon the terms and
subject to the conditions of the Offer, including without limitation the
conditions set forth in Annex I hereto, Buyer will accept for payment and
purchase, as soon as permitted under the terms of the Offer, all Shares validly
tendered and not withdrawn prior to the expiration of the Offer.
Section 1.2. Company Action.
(a) The Company hereby consents to the Offer and represents that the
Company's Board of Directors (the "Board"), at a meeting duly called and held,
has (i) unanimously determined that each of the transactions contemplated
hereby, including each of the Offer and the Merger (as defined in Section 2.1)
is fair to and in the best interests of the Company and its stockholders, (ii)
unanimously approved this Agreement and the transactions contemplated hereby,
including the Offer and the Merger, (iii) resolved to recommend acceptance of
the Offer and adoption and approval of this Agreement and the Merger by the
Company's stockholders and (iv) taken all other actions necessary to render
Section 203 of the General Corporation Law of the State of Delaware (the "DGCL")
inapplicable to the Offer and the Merger. The Company hereby consents to the
inclusion in the Offer and related documents of the recommendation of the Board
of Directors of the Company described in this Section 1.2(a).
(b) The Company will promptly, but in no event later than two business
days from the date hereof, furnish Buyer 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,
as of the most recent practicable date, and will provide to Buyer such
additional information (including, without limitation, updated lists of
stockholders, mailing labels and lists of securities positions) and such other
assistance as Buyer may reasonably request in connection with the Offer. Subject
to the requirements of applicable law, and except for such steps as are
necessary to disseminate any documents necessary to consummate the Merger or the
Offer, Buyer shall hold in confidence the information contained in such labels,
listings and files, shall use such information only in connection with the
Merger and the Offer, and if this Agreement is terminated in accordance with
Section 10.1, shall deliver to the Company all copies of such information then
in its possession.
(c) Contemporaneously with the commencement of the Offer as provided
for in Section 1.1, the Company shall, after affording Colonnade and Buyer a
reasonable opportunity to review and comment thereon, file with the Securities
and Exchange Commission (the "SEC") a Solicitation/Recommendation Statement on
Schedule 14D-9 (the "Schedule 14D-9"), under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), which shall reflect the recommendations
and actions of the Board referred to above, subject to the fiduciary duties of
the Board under applicable law as advised by independent legal counsel (who may
be the Company's regularly engaged legal counsel) and shall disseminate the
Schedule 14D-9 to the stockholders of the Company.
(d) Each of the Company, on the one hand, and Buyer and Colonnade, on
the other hand, agree promptly to correct any information provided by either of
them for use in the Schedule 14D-9 if and to the extent that it shall have
become false or misleading, and the Company further agrees to take all steps
necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC
and to be disseminated to the holders of Shares, in each case, as and to the
extent required by applicable federal securities law.
Section 1.3. Directors.
(a) Subject to compliance with applicable law, promptly upon the
payment by Buyer for Shares pursuant to the Offer, and from time to time
thereafter, Buyer shall be entitled to designate such number of directors,
rounded up to the next whole number, on the Company's Board of Directors as is
equal to the product of the total number of directors on the Board (determined
after giving effect to the directors elected pursuant to this sentence)
multiplied by the percentage that the aggregate number of Shares beneficially
owned by Buyer or its affiliates bears to the total number of Shares then
outstanding, and the Company shall, upon request of Buyer, promptly take all
actions necessary to cause Buyer's designees to be so elected, including, if
necessary, seeking the resignations of one or more existing directors.
(b) The Company's obligations to appoint Buyer's 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 shall promptly take all actions
required pursuant to such Section 14(f) and Rule 14f-1 in order to fulfill its
obligations under this Section 1.3 and shall include in the Schedule 14D-9 such
information with respect to the Company and its officers and directors as is
required under such Section and Rule in order to fulfill its obligations under
this Section 1.3. Buyer will supply any information with respect to itself and
its officers, directors and affiliates required by such Section and Rule to the
Company.
(c) Following the election or appointment of Buyer's designees
pursuant to this Section 1.3 and prior to the Effective Time, any amendment or
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 Buyer or
waiver of any of the Company's rights hereunder, will require the concurrence of
a majority of the directors of the Company then in office who are not designated
by Buyer if such amendment, termination, extension or waiver would be reasonably
likely to have an adverse effect on the minority stockholders of the Company.
ARTICLE II
THE MERGER
Section 2.1. The Merger.
(a) Upon the terms and subject to the satisfaction or waiver
of the conditions hereof, Buyer shall be merged (the "Merger") with and into the
Company in accordance with the DGCL, whereupon the separate existence of Buyer
shall cease, and the Company shall be the surviving corporation (the "Surviving
Corporation"). The Offer and the Merger are sometimes hereinafter referred to as
the "Transaction."
(b) As soon as practicable, but in no event later than five business
days, after satisfaction or, to the extent permitted hereunder, waiver of all
conditions to the Merger, the Company and Buyer shall cause the Merger to be
consummated by filing a Certificate of Merger with the Secretary of State of the
State of Delaware and make all other filings or recordings required by the DGCL
in connection with the Merger. The Merger shall become effective at such time as
such Certificate of Merger is duly filed with the Secretary of State of the
State of Delaware or at such later time as is specified in such Certificate of
Merger (the "Effective Time").
(c) From and after the Effective Time, the effect of the Merger shall
be as provided in the applicable provisions of the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, the
Surviving Corporation shall succeed to all the assets, rights, privileges,
powers and franchises and be subject to all of the liabilities, restrictions,
disabilities and duties of the Company and Buyer, all as provided under the
DGCL.
Section 2.2. Conversion of Shares.
At the Effective Time:
(a) Each Share of capital stock of the Company held by the Company as
treasury stock or owned by Parent, Buyer, Colonnade or any subsidiary of any of
them immediately prior to the Effective Time shall, by virtue of the Merger,
automatically be canceled and extinguished, and no payment of any kind shall be
made with respect thereto;
(b) Each share of capital stock of Buyer outstanding immediately prior
to the Effective Time shall be converted into and become one share of capital
stock of the Surviving Corporation with the same rights and privileges as the
shares so converted and shall constitute the only outstanding shares of capital
stock of the Surviving Corporation; and
(c) Each Share outstanding immediately prior to the Effective Time
shall, except as otherwise provided in clause (a) above or as provided in
Section 2.4 with respect to Shares as to which appraisal rights have been
exercised, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into the right to receive $12.00, or any higher
price per Share paid in the Offer, in cash without interest (the "Merger
Consideration").
Section 2.3. Exchange of Shares.
(a) Prior to the Effective Time, Buyer shall appoint an agent (the
"Exchange Agent") for the purpose of exchanging certificates representing Shares
for the Merger Consideration. Buyer will make available to the Exchange Agent,
at the Effective Time, the Merger Consideration to be paid in respect of the
Shares. For purposes of determining the Merger Consideration to be made
available, Buyer shall assume that no stockholder of the Company will perfect
his right to appraisal of his Shares. Promptly after the Effective Time, Buyer
will send, or will cause the Exchange Agent to send, to each holder of Shares at
the Effective Time a letter of transmittal for use in such exchange.
(b) Each holder of Shares that have been converted into a right to
receive the Merger Consideration, upon surrender to the Exchange Agent of a
certificate or certificates representing such Shares, together with a properly
completed letter of transmittal covering such Shares, will be entitled to
receive the Merger Consideration payable in respect of such Shares. Until so
surrendered, each such certificate shall, after the Effective Time, represent
for all purposes only the right to receive such Merger Consideration.
(c) If any portion of the Merger Consideration payable in respect of
any Share is to be paid to a person other than the registered holder of the
Shares represented by the certificate or certificates surrendered, it shall be a
condition to such payment that the certificate or certificates so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and that
the person requesting such payment shall pay to the Exchange Agent any transfer
or other taxes required as a result of such payment to a person other than the
registered holder of such shares or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
(d) After the Effective Time, the stock transfer books of the Company
shall be closed, and there shall be no further registration of transfers of
Shares, which were outstanding immediately prior to the Effective Time. On or
after the Effective Time, any certificates presented to the Exchange Agent or
Buyer for any reason shall be converted into the Merger Consideration.
(e) Any portion of the Merger Consideration made available to the
Exchange Agent pursuant to paragraph (a) of this Section 2.3 that remains
unclaimed by the holders of Shares entitled thereto six months after the
Effective Time shall be returned to Buyer, upon demand, and any stockholder of
the Company who has not exchanged his Shares for the Merger Consideration in
accordance with this Section 2.3 prior to that time shall thereafter look only
to Buyer for payment of the Merger Consideration in respect of his Shares.
(f) Any portion of the Merger Consideration made available to the
Exchange Agent pursuant to paragraph (a) of this Section 2.3 to pay for Shares
for which appraisal rights shall have been perfected shall be returned to Buyer,
upon demand.
(g) Neither Buyer, Colonnade nor the Company shall be liable to any
holder of the Shares for any Merger Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
Section 2.4. Dissenting Shares.
Notwithstanding Section 2.2, Shares outstanding immediately prior to
the Effective Time and held by a holder who has not voted in favor of the Merger
or consented thereto in writing and who has demanded appraisal for such Shares
in accordance with the DGCL shall not be converted into a right to receive the
Merger Consideration, unless such holder fails to perfect or withdraws or
otherwise loses his right to appraisal. If, after the Effective Time, such
holder fails to perfect or withdraws or loses his right to appraisal, such
Shares shall be treated as if they had been converted as of the Effective Time
into a right to receive the Merger Consideration payable in respect of such
Shares pursuant to Section 2.2. The Company shall give Buyer (i) prompt notice
of any demands received by the Company for appraisal of Shares, withdrawals of
such demands, and any other instruments served pursuant to the DGCL and received
by the Company and (ii) all negotiations and proceedings with respect to such
demands. The Company shall not, except with the prior written consent of Buyer,
make any payment with respect to any demands for appraisal, or offer to settle,
or settle any such demands.
Section 2.5. Stock Options.
At or immediately prior to the Effective Time, each outstanding
employee or director stock option to acquire Shares (each a "Company Stock
Option" and, collectively, the "Company Stock Options") shall, whether vested or
unvested, by virtue of the Merger and without any further action on the part of
the Company or the holder of such Company Stock Option, be canceled in
consideration for payment by the Company, at or immediately prior to the
Effective Time, to the holder of each such Company Stock Option an amount in
cash equal to the product of (i) the Merger Consideration less the per share
exercise price of such Company Stock Option, and (ii) the number of Shares
subject to such Company Stock Option.
Section 2.6. Stockholders' Meeting.
If required by applicable law in order to consummate the Merger, the
Company, acting through the Company's Board of Directors, shall, in accordance
with applicable law:
(1) duly call, give notice of, convene and hold a
special meeting of its stockholders (the "Company Stockholders
Meeting") as soon as practicable following the acceptance for payment
of and payment for Shares by Buyer pursuant to the Offer for the
purpose of considering and taking action upon this Agreement;
(2) prepare and file with the SEC a preliminary proxy
statement relating to this Agreement, and use its reasonable efforts
(x) to obtain and furnish the information required to be included by
the SEC in the Company Proxy Statement (as hereinafter defined) and,
after consultation with Buyer, to respond promptly to any comments made
by the SEC with respect to the preliminary proxy statement and cause a
definitive proxy statement (the "Company Proxy Statement") to be mailed
to its stockholders and (y) to obtain the necessary approvals of the
Merger and this Agreement by its stockholders; and
(3) subject to the fiduciary obligations of the
Company's Board of Directors under applicable law as provided in
Section 1.2(c), include in the Company Proxy Statement the
recommendation of the Company's Board of Directors that stockholders of
the Company vote in favor of the approval of the Merger and this
Agreement.
Section 2.7. Merger Without Meeting of Stockholders.
Notwithstanding Section 2.6, in the event that Buyer shall acquire at
least 90% of the outstanding Shares pursuant to the Offer or otherwise, the
parties hereto agree to make all necessary and appropriate action to cause the
Merger to become effective as soon as practicable after the acceptance for
payment of and payment for Shares by Buyer pursuant to the Offer without a
meeting of stockholders of the Company, in accordance with Section 253 of the
DGCL.
ARTICLE III
THE SURVIVING CORPORATION
Section 3.1. Certificate of Incorporation.
The Certificate of Incorporation of Buyer in effect at the Effective
Time shall be the Certificate of Incorporation of the Surviving Corporation
until amended in accordance with applicable law.
Section 3.2. Bylaws.
The Bylaws of Buyer in effect at the Effective Time shall be the Bylaws
of the Surviving Corporation until amended in accordance with applicable law.
Section 3.3. Directors and Officers.
From and after the Effective Time, until successors are duly elected or
appointed in accordance with applicable law, (i) the directors of Buyer at the
Effective Time shall constitute the directors of the Surviving Corporation, and
(ii) the individuals specified by Buyer prior to the Effective Time shall be the
initial officers of the Surviving Corporation.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Buyer that:
Section 4.1. Organization and Qualification; Subsidiaries.
(a) Each of the Company and each Material Subsidiary (as defined
below) is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has the requisite
power and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing or in good
standing or to have such power, authority and governmental approvals would not
have a Company Material Adverse Effect (as defined below). The Company and each
Material Subsidiary are duly qualified or licensed as foreign corporations to do
business, and are in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by them or the nature of their business
makes such qualification or licensing necessary, except for such failures to be
so qualified or licensed and in good standing that would not, individually or in
the aggregate, have a Company Material Adverse Effect. The term "Company
Material Adverse Effect" means any change or effect that, individually or when
taken together with all other changes or effects, could reasonably be expected
to be materially adverse to the business, assets, liabilities, results of
operations or condition (financial or otherwise) of the Company and the Company
Subsidiaries (as defined below), taken as a whole.
(b) Each subsidiary of the Company (a "Company Subsidiary") that
constitutes a "significant subsidiary" of the Company within the meaning of Rule
1-02 of Regulation S-X of the SEC is referred to herein as a "Material
Subsidiary." Each Company Subsidiary and Material Subsidiary are set forth in
Section 4.1(b) of the Company's Disclosure Schedule attached hereto (the
"Company Disclosure Schedule").
Section 4.2. Certificate of Incorporation and Bylaws; Corporate
Proceedings.
The Company has heretofore made available to Buyer a complete and
correct copy of the Certificate of Incorporation and the Bylaws, each as amended
to date, of the Company and each Company Subsidiary. Such Certificates of
Incorporation and Bylaws are in full force and effect. Neither the Company nor
any Material Subsidiary is in violation of any provision of its Certificate of
Incorporation or Bylaws. The Company has provided Buyer full access to true and
accurate records of all corporate proceedings of the Company, including the
minutes of all meetings of the Board of Directors and stockholders of the
Company.
Section 4.3. Capitalization.
The authorized capital stock of the Company consists of 20,000,000
shares of Common Stock, par value $0.01 per share (the "Company Voting Common
Stock"), 500,000 shares of Nonvoting Common Stock, par value $0.01 per share
(the "Company Nonvoting Common Stock") and 5,000,000 shares of Preferred Stock,
par value $0.01 per share (the "Preferred Stock"). As of the date hereof there
were, and as of the Effective Time there will be, (a) 4,972,686 shares of
Company Voting Common Stock outstanding, excluding shares of Company Voting
Common Stock issued after the date hereof pursuant to (i) the exercise of
Company Stock Options outstanding on the date hereof or (ii) the Company's
Employee Discount Stock Purchase Plan for contributions made through September
15, 1997 (which shares shall not exceed in the aggregate 3,000), (b) no shares
of Company Nonvoting Common Stock outstanding and (c) no shares of Preferred
Stock outstanding. All outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid and nonassessable. As
of the date hereof there were, and as of the Effective Time there will be,
875,000 Shares reserved for issuance upon exercise of the Company Stock Options
(of which options to acquire 506,674 shares have been granted). Except for the
Company Stock Options, there are no options, warrants or other rights,
agreements, arrangements or commitments of any character obligating the Company
or any Material Subsidiary to issue or sell any shares of capital stock of, or
other equity interests in, the Company or any Material Subsidiary. All shares of
the Company Common Stock subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and nonassessable.
There are no material outstanding contractual obligations of the Company or any
Company Subsidiary to repurchase, redeem or otherwise acquire any shares of the
Company Common Stock or any capital stock of any Material Subsidiary, or make
any material investment (in the form of a loan, capital contribution or
otherwise) in any Company Subsidiary. Each outstanding share of capital stock of
each Material Subsidiary is duly authorized, validly issued, fully paid and
nonassessable and each such share owned by the Company or another Company
Subsidiary is free and clear of all security interests, liens, claims, pledges,
options, rights of first refusal, agreements, limitations on the Company's or
such other Company Subsidiary's voting rights, charges and other encumbrances of
any nature whatsoever. No entity in which the Company owns, directly or
indirectly, less than a 50% equity interest, is individually or when taken
together with all such other entities, material to the business of the Company
and the Company Subsidiaries taken as a whole.
Section 4.4. Authority Relative to this Agreement.
The Company has all necessary power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or to consummate the transactions
contemplated herein (other than, with respect to the Merger, the approval and
adoption of this Agreement by the holders of a majority of the then outstanding
Shares and the filing and recordation of appropriate merger documents as
required by the DGCL). This Agreement has been duly and validly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery of this Agreement by Buyer, constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
Section 4.5. No Conflict; Required Filings and Consents.
(a) Except as set forth in Section 4.5 of the Company Disclosure
Schedule, the execution and delivery of this Agreement by the Company do not,
and the performance of the transactions contemplated herein by the Company will
not, (i) conflict with or violate the Certificate of Incorporation or Bylaws of
the Company or any Material Subsidiary, (ii) conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to any Company or any
Material Subsidiary or by which any property or asset of the Company or any
Material Subsidiary is bound or affected, or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, result in the loss of a material benefit under,
or give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of the Company or any Material Subsidiary pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any Material
Subsidiary is a party or by which the Company or any Material Subsidiary or any
property or asset of the Company or any Material Subsidiary is bound or
affected, except, in the case of clauses (ii) and (iii) above, for any such
conflicts, violations, breaches, defaults or other occurrences which would not
prevent or delay consummation of the Merger in any material respect, or
otherwise prevent the Company from performing its obligations under this
Agreement in any material respect, or would not, individually or in the
aggregate, have a Company Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, agency, commission, tribunal or
body, domestic or foreign (each a "Governmental Entity"), except (i) for (A)
applicable requirements, if any, of the Exchange Act, the Securities Act of
1933, as amended (the "Securities Act"), state securities or "blue sky" laws
("Blue Sky Laws") and state takeover laws, (B) the pre-merger notification
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder (the "HSR Act"), (C) filing
and recordation of appropriate merger documents as required by the DGCL and (D)
the applicable requirements, if any, of any non-United States competition,
antitrust and investment laws, and (ii) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not prevent or delay consummation of the Merger in any material respect,
or otherwise prevent the Company from performing its obligations under this
Agreement in any material respect, and would not, individually or in the
aggregate, have a Company Material Adverse Effect.
Section 4.6. Compliance.
Neither the Company nor any Material Subsidiary is in conflict with, or
in default or violation of, (a) any law, rule, regulation, order, judgment or
decree (including, without limitation, laws, rules and regulations relating to
franchises) applicable to the Company or any Material Subsidiary or by which any
property or asset of the Company or any Material Subsidiary is bound or
affected, or (b) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Company or any Material Subsidiary is a party or by which the Company or any
Material Company Subsidiary or any property or asset of the Company or any
Material Subsidiary is bound or affected, except for any such conflicts,
defaults or violations that would not, individually or in the aggregate, have a
Company Material Adverse Effect.
Section 4.7. SEC Filings; Financial Statements.
(a) The Company has filed all forms, reports and documents
(collectively, the "Company SEC Reports") required to be filed by it with the
SEC since October 13, 1993 (the "IPO Date") and has heretofore made available to
Buyer, in the form filed with the SEC (excluding any exhibits thereto), (i) its
Annual Reports on Form 10-K for the fiscal years ended April 30, 1995, April 30,
1996 and April 30, 1997, (ii) all proxy statements relating to the Company's
meetings of stockholders (whether annual or special) held since the IPO Date and
(iii) all other forms, reports and other registration statements (other than
Quarterly Reports on Form 10-Q and preliminary materials) filed by the Company
with the SEC since the IPO Date. The Company SEC Reports and any forms, reports
and other documents filed by the Company with the SEC after the date of this
Agreement (x) were prepared in accordance with the requirements of the
Securities Act and the Exchange Act, as the case may be, and the rules and
regulations thereunder and (y) did not at the time they were filed contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading. No
Material Subsidiary, is required to file any form, report or other document with
the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the Company SEC Reports was prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated (except as may be indicated in the notes
thereto) and each fairly presented in all material respects the financial
position, results of operations and cash flows of the Company and the
consolidated Company Subsidiaries, as the case may be, as at the respective
dates thereof and for the respective periods indicated therein (subject, in the
case of unaudited statements, to normal and recurring year-end adjustments which
were not and are not expected, individually or in the aggregate, to be material
in amount).
Section 4.8. Disclosure Documents.
(a) Each document required to be filed by the Company with the SEC in
connection with the Transaction (the "Company Disclosure Documents"), including,
without limitation, the Schedule 14D-9 and the Company Proxy Statement, if any,
to be filed with the SEC in connection with the Merger, and any amendments or
supplements to any thereof will comply as to form in all material respects with
the applicable requirements of the 1934 Act.
(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 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 Documents (other than the Company Proxy
Statement) and at the time of any distribution thereof 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 this subsection (b)
will not apply to statements or omissions in the Company Disclosure Documents
based upon information furnished to the Company by Buyer or Colonnade
specifically for use therein.
(c) The information with respect to the Company or any Company
Subsidiary furnished by the Company to Buyer in writing specifically for use in
the Offer and related letter of transmittal pursuant to which the Offer will be
made as provided in Section 1.1 (which together with any amendments or
supplements thereto constitute the "Offer Documents") shall not contain, as of
the date the Offer Documents are filed, any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
Section 4.9. No Undisclosed Liabilities, Absence of Changes.
Except as and to the extent publicly disclosed by the Company in the
Company SEC Reports, the Company does not have any liabilities or obligations of
any nature, whether or not accrued, contingent or otherwise, that would be
required by generally accepted accounting principles to be reflected on a
balance sheet of the Company (including the notes thereto), except for such
liabilities or obligations incurred by the Company in the ordinary course of its
business after the date of the SEC Reports, or that would have a Company
Material Adverse Effect. Except as publicly disclosed by the Company, since
April 30, 1996, (i) there has not been any Company Material Adverse Effect; (ii)
the businesses of the Company and each Company Subsidiary have been conducted
only in the ordinary course and in a manner consistent with past practice; (iii)
neither the Company nor any Company Subsidiary has incurred any liabilities of
any nature, whether or not accrued, contingent or otherwise, which could
reasonably be expected to have, and there have been no events, changes or
effects with respect to the Company having or which reasonably could be expected
to have, a Company Material Adverse Effect; and (iv) there has not been any
revaluation by the Company of any of its assets having a Company Material
Adverse Effect, including, without limitation, any write-down of the value of
any assets or writing off notes or accounts receivable other than in the
ordinary course of business.
Section 4.10. Litigation.
Except as publicly disclosed by the Company in the Company SEC Reports,
there is no suit, claim, action, proceeding or investigation pending or, to the
knowledge of the Company, threatened against the Company or any Company
Subsidiaries or any of their respective properties or assets before any
Governmental Entity which, individually or in the aggregate, could have a
Company Material Adverse Effect or could reasonably be expected to prevent or
delay the consummation of the transactions contemplated by this Agreement.
Except as publicly disclosed by the Company in the Company SEC Reports, the
Company is not subject to any outstanding order, writ, injunction or decree
which, insofar as can be reasonably foreseen in the future, could reasonably be
expected to have a Company Material Adverse Effect or could reasonably be
expected to prevent or delay the consummation of the transactions contemplated
hereby.
Section 4.11. Employee Benefit Plans.
(a) Set forth on Section 4.11(a) of the Company Disclosure Schedule is
a true and complete list of each employee benefit plan (each, an "Employee
Benefit Plan"), as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), at any time contributed to,
maintained or sponsored by or on behalf of the Company or any Company
Subsidiary, for the benefit of any present or former employee, independent
contractor, officer or director of the Company, or any Company Subsidiary or
with respect to which the Company, or any Company Subsidiary has any liability
or potential liability, which list identifies (i) each Employee Benefit Plan
that is a "pension plan" (as defined in Section 3(2) of ERISA but not including
a multiemployer plan within the meaning of Section 3(37) or 4001(a)(3) of ERISA)
(the "Pension Plans"), and denotes those Pension Plans (the "Qualified Plans")
intended to be qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code"), (ii) each Employee Benefit Plan that is a
"multiemployer plan" (as defined in Sections 3(37) and 4001(a)(3) of ERISA (the
"Multiemployer Plans") and (iii) each Employee Benefit Plan that is a "welfare
plan" (as defined in Section 3(1) of ERISA) (the "Welfare Plans"). True and
complete copies of each Employee Benefit Plan have been delivered to the Buyer.
To the knowledge of the Company, each Employee Benefit Plan is enforceable in
accordance with its terms.
(b) Each Qualified Plan complies in all material respects with
applicable law as of the date hereof, and the Internal Revenue Service ("IRS")
has issued favorable determination letters to the effect that the forms of
Qualified Plans (or predecessor plans) satisfy the requirements of Section
401(a) and related Sections of the Code or an application for such a
determination has been filed with the IRS. There are no facts or circumstances
that would jeopardize or adversely affect in any material respect the
qualification under Code Section 401(a) of any Qualified Plan.
(c) As of the Effective Date, full payment will be made to each
Employee Benefit Plan of all contributions that are required by the Company
under the terms thereof and under ERISA or the Code to be made on or prior to
the Effective Date. No "accumulated funding deficiency" (as defined in ERISA
Section 302 or Code Section 412), whether or not waived, exists or will exist as
of the Effective Date with respect to any Pension Plan.
(d) Each Employee Benefit Plan (other than any Multiemployer Plan) has
been administered substantially in accordance with its terms. In addition, each
Employee Benefit Plan (other than any Multiemployer Plan) complies, and has been
administered substantially in accordance with, any applicable provisions of
ERISA and the Code and the rulings and regulations promulgated thereunder
(including the continuation coverage requirements of group health plans under
Code Section 4980(f) and ERISA Section 602), and all other applicable laws, and
all reports, returns and other documentation that are required to have been
filed with the IRS, the Department of Labor, the Pension Benefit Guaranty
Corporation or any other governmental agency (federal, state or local) have been
filed on a timely basis, in each instance in which the failure to file such
reports, returns and other documents would result in any material liability or
obligation to the Company or any Company Subsidiary. No lawsuits or complaints
to or by any person or governmental authority have been filed or, to the
knowledge of the Company, are contemplated or threatened, with respect to any
Employee Benefit Plan (other than any Multiemployer Plan). To the knowledge of
the Company, all of the foregoing applies to any Multiemployer Plan.
(e) Neither the Company nor any affiliate of the Company has received
a notice of, or incurred, any withdrawal liability with respect to any
"Multiemployer Plan." Except as set forth in Section 4.11(e) of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary has an
obligation to contribute to any "Multiemployer Plan."
(f) Neither the Company nor any Company Subsidiary has incurred any
material liability with respect to any Welfare Plan or for "welfare benefits"
(as defined in Code Section 419) including, without limitation, any liability
for tax under Code Section 5000 that are not fully reflected in the Company SEC
Reports. Except as required under Code Section 4980B(f) and ERISA Section 602,
neither the Company nor any Company Subsidiary is obligated on or after the
Effective Date to provide or to pay any benefits to former employees or to their
dependents or beneficiaries.
Section 4.12. Tax Matters.
(a) (i) The Company has filed or has had filed on its behalf in a
timely manner (within any applicable extension periods) with the appropriate
Governmental Entity all income and other material Tax Returns (as defined
herein) with respect to Taxes (as defined herein) of the Company and all Tax
Returns were in all material respects true, complete and correct and the Company
is in material compliance with all applicable information reporting and tax
withholding requirements; (ii) all material Taxes with respect to the Company
have been paid in full (including all applicable withholding Taxes) or have been
provided for in accordance with generally accepted accounting principles on the
Company's most recent balance sheet which is part of the Company SEC Documents;
(iii) there are no outstanding agreements or waivers extending the statutory
period of limitations for the assessment of federal, state, local or foreign
income or other material Taxes with respect to the Company; (iv) to the
knowledge of the Company, none of the Tax Returns of, or with respect to, the
Company is currently being audited or examined by any Governmental Entity; and
(v) no deficiency for any income or other material Taxes has been assessed with
respect to the Company which has not been abated or paid in full.
(b) For purposes of this Agreement, (i) "Taxes" shall mean all taxes,
charges, fees, levies or other assessments, including, without limitation,
income, gross receipts, sales, use, ad valorem, goods and services, capital,
transfer, franchise, profits, license, withholding, payroll, employment,
employer health, excise, estimated, severance, stamp, occupation, property or
other taxes, customs duties, fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority and (ii) "Tax Return" shall
mean any report, return, documents, declaration or other information or filing
required to be supplied to any taxing authority or jurisdiction with respect to
Taxes.
Section 4.13. Material Contracts.
The Company has delivered or otherwise made available to Buyer true,
correct and complete copies of all contracts and agreements (and all amendments,
modifications and supplements thereto and all side letters to which the Company
is a party affecting the obligations of any party thereunder) to which the
Company is a party or by which any of its properties or assets are bound that
are, material to the business, properties or assets of the Company taken as a
whole (the "Company Contracts"). Except as set forth on Section 4.13 of the
Company Disclosure Schedule, the Company is not a party to or bound by any
severance, golden parachute or other agreement with any employee or consultant
pursuant to which such person would be entitled to receive any additional
compensation or an accelerated payment of compensation as a result of the
consummation of the transactions contemplated hereby or that would provide for
an "excess parachute payment" under Section 280G of the Code. Each of the
Company Contracts is valid and enforceable in accordance with its terms, and
there is no default under any Company Contract so listed either by the Company
or, to the knowledge of the Company, by any other party thereto, and no event
has occurred that with the lapse of time or the giving of notice or both would
constitute a default thereunder by the Company or, to the knowledge of the
Company, any other party, in any such case in which such default or event could
reasonably be expected to have a Company Material Adverse Effect. No party to
any such Company Contract has given notice to the Company of or made a claim
against the Company with respect to any breach or default thereunder, in any
such case in which such breach or default could reasonably be expected to have a
Company Material Adverse Effect.
Section 4.14. Labor Matters.
With respect to employees of the Company:
(1) the Company is presently a party to a labor
contract with the Southern Council of Industrial Workers, United
Brotherhood of Carpenters and Joiners of America, AFL-CIO, and its
constituent Milliner's Local Union 1409, United Brotherhood of
Carpenters and Joiners of America (the "Union"), a copy of which has
been made available to Buyer. This labor contract, which will expire on
midnight, December 8, 1997, covers approximately 550 employees;
(2) the Company is and has been in substantial
compliance with all applicable laws, governing employment and
employment practices, terms and conditions of employment and wages and
hours, including without limitation any such laws respecting employment
discrimination and occupational safety and health requirements, and the
Company has not engaged in any unfair labor practice;
(3) there is no unfair labor practice charge,
litigation, arbitration proceeding, governmental investigation,
citation or action of any kind pending or, to the knowledge of the
Company, proposed or threatened against the Company relating to
employment, employment practices, terms and conditions of employment or
wages and hours, which could reasonably be expected to have a Company
Material Adverse Effect.
(4) except for the labor contract with the Union
described in paragraph (1) above, the Company has no collective
bargaining relationship or duty to bargain with any labor union or
organization, and the Company has not recognized any labor union or
organization as the collective bargaining representative of any of its
employees relating to the businesses of the Company.
Section 4.15. Environmental Matters.
Except for matters which would not have a Company Material Advance
Effect:
(a) The conduct of the businesses of the Company does not violate or
conflict with any federal, state or local law, regulation, ordinance or order.
The Company has obtained all governmental approvals, authorizations,
registrations, permits and licenses (the "Permits"), including those related to
environmental quality and the emission, discharge, storage, handling, treatment,
use, generation or transportation of petroleum products, pollutants,
contaminants or hazardous or toxic substances, materials or wastes required by
federal, state or local law or otherwise required for the Company to conduct its
business. The Permits are in full force and effect, and are being complied with
in all respects. No other governmental authorizations concerning environmental
matters are necessary to complete the transactions.
(b) There are no conditions or liabilities, known or unknown, absolute
or contingent, related to the generation, use, treatment, storage, release,
disposal, arranging for disposal or transportation of petroleum products,
pollutants, contaminants or hazardous or toxic substances, materials or wastes.
No petroleum products, pollutants, contaminants or hazardous or toxic
substances, materials or wastes have been released from or deposited on or
otherwise affect any real property owned, operated or leased by the Company, nor
has any such real property been used at any time by any person as a hazardous
waste treatment, storage or disposal site.
(c) To the knowledge of the Company, (i) there are no "wetlands" (as
that term has ever been defined by the U.S. Army Corps of Engineers or any other
regulatory agency) on any of the real property owned, operated or leased by the
Company, (ii) there are no threatened or endangered species or critical habitat
of threatened or endangered species located on any of such properties, and (iii)
there are no historically or archaeologically significant sites on any of such
properties that would require study or preservation.
Section 4.16. Customers, Suppliers, Distributors and Sales
Representatives.
The Company has not received written notice that any customer,
supplier, distributor or sales representative intends to cancel, terminate or
otherwise modify its relationship with the Company or any Company Subsidiary
which would reasonably be expected to have a Company Material Adverse Effect.
Section 4.17. Employment Matters.
The Company has made available to Buyer (i) a description of the terms
of employment and compensation arrangements of all officers of the Company and a
copy of each such agreement currently in effect; (ii) copies of all agreements
with consultants who are individuals obligating the Company to make annual cash
payments in an amount exceeding $60,000; (iii) a schedule listing all officers
of the Company who have executed a non-competition agreement with the Company
and a copy of each such agreement currently in effect; (iv) copies (or
descriptions) of all severance agreements, programs and policies of the Company
with or relating to its employees, except programs and policies required to be
maintained by law; and (v) copies of all plans, programs, agreements and other
arrangements of the Company with or relating to its employees which contain
change in control provisions.
Section 4.18. Brokers.
Except for Bowles Hollowell Conner & Co. ("Bowles Hollowell"), whose
fees will be paid by the Company, there is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of the Company or any Company Subsidiary who might be entitled to any fee
or commission from the Company, any Company Subsidiary, Colonnade or Buyer or
any of their affiliates upon consummation of the transactions contemplated by
this Agreement.
Section 4.19. Opinion of Bowles Hollowell.
The Company has received the written opinion of Bowles Hollowell to the
effect that, as of the date hereof, the consideration to be received by the
holders of Shares pursuant to the Offer and the Merger, is fair to the Company's
stockholders from a financial point of view. The Company has previously
delivered to Colonnade a copy of such opinion.
Section 4.20. Letter of Intent.
The Company represents that the following conditions precedent to
Colonnade's obligation to enter into this Agreement have been satisfied on or
prior to the date hereof:
(a) the Agreement and the Transaction have been approved by a
unanimous vote of the non-executive officer members of the Board of Directors
of the Company;
(b) there has not occurred any dividend, redemption, stock split,
recapitalization or stock issuance of any kind (including stock options) of the
Company since January 31, 1997 other than the issuance of stock by the Company
upon the exercise of outstanding stock options or pursuant to the Company's
employee stock purchase plan;
(c) since May 29, 1997, the Company has not entered into any agreement
binding the Company to a material capital expenditure in excess of $50,000
except as set forth in Section 4.20 of the Company Disclosure Schedule; and
(d) the Company (i) has conducted its business only in the ordinary
course and has maintained and preserved its organization, goodwill and
properties, and (ii) has not made any material change to its financial
statements, except as required by the operation of the business in the ordinary
course or to conform to generally accepted accounting principles, or prepaid any
indebtedness, changed depreciation or amortization methods, delayed incurring
budgeted expenses or deviated from usual and customary terms with suppliers,
lessors, customers or buyers.
The Company represents that the amount that is payable by the Company
in connection with the termination of the employment with the Company of Jesse
C. Luxton as President and Chief Executive Officer of the Company and any
related non-competition payments, and payments due to Bowles Hollowell and other
brokers and advisors to the Company in connection with the consummation of the
Offer and the Merger, as described in paragraph 1 of the Letter of Intent, do
not in the aggregate exceed $1,850,000. Section 4.20 of the Company Disclosure
Schedule sets forth an estimated itemized list of all such payments.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company that:
Section 5.1. Organization and Qualification; Subsidiaries.
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
and has the requisite power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as it is now being conducted, except where the failure to be so organized,
existing or in good standing or to have such power, authority and governmental
approvals would not, individually or in the aggregate, have a Buyer Material
Adverse Effect (as defined below). Buyer is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in good
standing that would not, individually or in the aggregate, have a Buyer Material
Adverse Effect. The term "Buyer Material Adverse Effect" means any change or
effect that, individually or when taken together with all other changes or
effects, could reasonably be expected to be materially adverse to the business,
prospects, assets, liabilities, results of operations or condition (financial or
otherwise) of Buyer and each of Buyer's subsidiaries, taken as a whole.
Section 5.2. Certificate of Incorporation and Bylaws.
Buyer has heretofore made available to the Company a complete and
correct copy of the Certificate of Incorporation and the Bylaws or equivalent
organizational documents, each as amended to date, of Buyer. Such Certificates
of Incorporation, Bylaws and equivalent organizational documents are in full
force and effect. Buyer is not is in violation of any provision of its
Certificate of Incorporation, Bylaws or equivalent organizational documents,
except for such violations that would not, individually or in the aggregate,
have a Buyer Material Adverse Effect.
Section 5.3. Authority Relative to this Agreement.
Buyer has all necessary power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated herein. The execution and delivery of this Agreement
by Buyer and the consummation by Buyer of the transactions contemplated herein
have been duly and validly authorized by all necessary corporate action and no
other corporate proceedings on the part of Buyer are necessary to authorize this
Agreement or to consummate the transactions contemplated herein (other than,
with respect to the Merger, the filing and recordation of the appropriate merger
documents as required by the DGCL). This Agreement has been duly and validly
executed and delivered by Buyer and, assuming the due authorization, execution
and delivery by the Company of this Agreement, constitutes a legal, valid and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms.
Section 5.4. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Buyer does not,
and the performance of the transactions contemplated herein by Buyer will not,
(i) conflict with or violate the Certificate of Incorporation or Bylaws or
equivalent organizational documents of Buyer, (ii) conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to Buyer or by which
any property or asset of Buyer is bound or affected, or (iii) result in any
breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, result in the loss of a material
benefit under or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of Buyer pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Buyer is a party or by which Buyer or
any property or asset of Buyer is bound or affected, except in the case of
clauses (ii) and (iii) above, for any such conflicts, violations, breaches,
defaults or other occurrences which would not prevent or delay consummation of
the Merger in any material respect, or otherwise prevent Buyer from performing
its obligations under this Agreement in any material respect, or would not,
individually or in the aggregate, have a Buyer Material Adverse Effect.
(b) The execution and delivery of this Agreement by Buyer does not,
and the performance of this Agreement by Buyer will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity, except (i) for (A) applicable requirements, if any, of the
Exchange Act, Securities Act, state securities or Blue Sky Laws and state
takeover laws, (B) the pre-merger notification requirements of the HSR Act, (C)
filing and recordation of appropriate merger documents as required by the DGCL
and (D) applicable requirements, if any, of any non-United States competition,
antitrust and investment laws, and (ii) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or either
notifications, would not prevent or delay consummation of the Merger in any
material respect, or otherwise prevent Buyer from performing its obligations
under this Agreement in any material respect, and would not, individually or in
the aggregate, have a Buyer Material Adverse Effect.
Section 5.5. Compliance.
Buyer is not in conflict with, or in default or violation of, (a) any
law, rule, regulation, order, judgment or decree applicable to Buyer or by which
any property or asset of Buyer is bound or affected, or (b) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Buyer is a party or by which Buyer or
any property or asset of Buyer is bound or affected, except for any such
conflicts, defaults or violations that would not, individually or in the
aggregate, have a Buyer Material Adverse Effect.
Section 5.6. Documents Relating to the Offer; Company Proxy
Statement.
The Offer Documents and the Offer will comply in all material respects
with the applicable requirements of the Exchange Act, except that no
representation is made by Buyer with respect to information supplied in writing
by the Company specifically for use in the Offer Documents. None of the
information that may be supplied in writing by Buyer or its affiliates
specifically for use in the Company Proxy Statement, the Schedule 14D-9 or any
other document filed or to be filed with the SEC will contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
Section 5.7. Financing.
Buyer has delivered to the Company commitment letters from investors
and financial institutions to provide at least $50 million of debt or debt-like
financing to Buyer and Parent to consummate the Transaction (the "Debt
Financing"). Parent has received commitments from equity investors in amounts
sufficient (the "Equity Financing") when included with the Debt Financing to
enable Parent and Buyer to consummate the Transaction. Buyer knows of no facts,
circumstances or condition that could prevent the availability to Buyer and
Parent of the proceeds of the Equity Financing and Debt Financing at the
Effective Time. Buyer has delivered to the Company copies of all agreements or
arrangements that it has entered into with any persons who are currently
executive officers of the Company.
Section 5.8. Brokers.
Except for Prudential Securities Incorporated and Wheat First Butcher
Singer, whose fees will be paid by the Surviving Corporation, there is no
investment banker, broker, finder or other intermediary acting on behalf of
Buyer who might be entitled to any fee or commission upon consummation of the
transactions contemplated by this Agreement.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1. Conduct of the Company.
The Company covenants and agrees that, between the date of this
Agreement and the Effective Time, unless Buyer shall have consented in writing
(such consent not to be unreasonably withheld), the businesses of the Company
and its Material Subsidiaries shall, in all material respects, be conducted in,
and the Company and its Material Subsidiaries shall not take any material
action, except in the ordinary course of business, consistent with past
practice, and the Company shall use its reasonable best efforts to preserve
substantially intact its business organization, to keep available the services
of its and its Material Subsidiaries' current officers, employees and
consultants and to preserve its and its Material Subsidiaries' relationships
with customers, suppliers and other persons with which it or any of its
subsidiaries has significant business relations. By way of amplification and not
limitation, except (i) as contemplated by this Agreement, or (ii) as set forth
on Section 6.1 of the Company Disclosure Schedule, neither the Company nor any
of the Company Subsidiaries shall, between the date of this Agreement and the
Effective Time, directly or indirectly do, or propose or agree to do, any of the
following without the prior written consent of Buyer (provided that the
following restrictions shall not apply to any subsidiaries which the Company
does not control):
(a) amend or otherwise change the Certificate of Incorporation or
Bylaws of the Company;
(b) issue or sell, or authorize the issuance or sale of, (i) any
shares of capital stock of any class of the Company or any of the Company
Subsidiaries, or any options (other than the grant of options previously
disclosed by the Company to Buyer prior to the date of this Agreement including,
without limitation, the Company Stock Options), warrants or other convertible
securities of the Company or any of the Company Subsidiaries (other than the
issuance of shares of capital stock in connection with (A) the exercise of
options, including, without limitation, the Company Stock Options and in
accordance with the terms of such options in effect on the date of this
Agreement, or (B) otherwise permitted to be granted pursuant to this Agreement)
or (ii) any assets of it or any of the Company Subsidiaries, except for sales in
the ordinary course of business or sales which, individually, do not exceed
$150,000 or which, in the aggregate, do not exceed $500,000;
(c) sell, pledge or encumber any stock owned by it in any Company
Subsidiary;
(d) declare, set aside or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock (other than a dividend or distribution payable solely to the
Company or a Company Subsidiary);
(e) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock other than
acquisitions under any Company or Company Subsidiary plan with an employee stock
fund or employee stock ownership plan feature, consistent with applicable
securities laws;
(f) (i) acquire, mortgage, encumber, sell, lease, license or dispose
of any assets (including intellectual property) or securities, except pursuant
to existing contracts or commitments or the sale or purchase of goods in the
ordinary course of business consistent with past practice, or enter into any
commitment or transactions outside the ordinary course of business consistent
with past practice; (ii) acquire (for cash or shares of stock) (including,
without limitation, by merger, consolidation, or acquisition of stock or assets)
any corporation, partnership, other business organization or any division
thereof; (iii) incur, assume or pre-pay any indebtedness for borrowed money or
issue any debt securities or assume, guarantee or endorse, or otherwise as an
accommodation become liable or responsible for, the obligations of any person,
or make any loans, advances or capital contributions to, or investments in, any
other person, except (A) in connection with this Agreement and the transactions
contemplated hereby, (B) borrowings under existing bank lines of credit in the
ordinary course of business, or (C) the refinancing of existing indebtedness;
(iv) authorize or make capital expenditures not provided for in the Company's
capital budget included in Section 6.1(e) of the Company Disclosure Schedule
which are in excess of $100,000; (v) accelerate or delay collection of notes or
accounts receivable in advance of or beyond their regular due dates or the dates
when the same would have been collected in the ordinary course of business
consistent with past practice; (vi) delay or accelerate payment of accounts
payable beyond or in advance of its due date or the date such liability would
have been paid in the ordinary course of business consistent with past practice;
(vii) vary the Company's inventory practices in any material respect from the
Company's past practices; or (viii) enter into or amend any contract, agreement,
commitment or arrangement to effectuate any prohibited matter set forth in this
Section 6.1(f);
(g) increase the compensation or fringe benefits payable or to become
payable to its directors, executive officers or employees, except for increases
in the ordinary course of business in accordance with past practice, grant any
severance or termination pay to any executive officer, director or other
employee of the Company or any Company Subsidiary (other than as required by
existing agreements or policies described in the Company Disclosure Schedule),
except in accordance with past practice, or enter into any employment or
severance agreement with, any director, executive officer or other employee of
the Company or any Company Subsidiary or adopt or amend any Employee Benefit
Plan; or
(h) take any action, other than reasonable and usual actions in the
ordinary course of business and consistent with past practice, with respect to
accounting policies or procedures.
(i) settle or compromise any suit or claim or threatened suit
or claim where the amount involved is greater than $100,000;
(j) other than in the ordinary course of business consistent with past
practice, (i) modify, amend or terminate any contract, (ii) waive, release,
relinquish or assign any contract (or any of the Company's rights thereunder),
right or claim, or (iii) cancel or forgive any indebtedness owed to the Company
or any Company Subsidiary;
(k) make any tax election not required by law or settle or
compromise any tax liability;
(l) permit any insurance policy naming it as a beneficiary or a loss
payable payee to be canceled or terminated without notice to Buyer, except in
the ordinary course of business consistent with past practice;
(m) enter into any contract or agreement other than in the
ordinary course of business consistent with past practice; or
(n) agree in writing or otherwise to take any of the foregoing actions
prohibited under this Section 6.1 or any action which would cause any
representation or warranty in this Agreement to be or become untrue or
incorrect.
Section 6.2. Access to Information.
The Company will give Buyer, its counsel, financial advisors, auditors
and other authorized representatives full access to the offices, properties,
books and records of the Company and the Company Subsidiaries at reasonable
times, will furnish to Buyer, its counsel, financial advisors, auditors and
authorized representatives such financial and operating data and other
information as such persons may reasonably request and will instruct the
Company's employees, counsel and financial advisors to cooperate with Buyer in
its investigation of the business of the Company and the Company Subsidiaries.
Section 6.3. No Solicitations.
(a) The Company, its affiliates and their respective officers,
directors and employees shall not, directly or indirectly, solicit any
corporation, partnership, person or other entity or group (other than Buyer or
an affiliate or an associate of Buyer) concerning a Competing Transaction (as
defined below). Notwithstanding the foregoing, the Company may, directly or
indirectly, furnish information and access, in each case in response to
unsolicited requests therefor, to any corporation, partnership, person or other
entity or group pursuant to confidentiality agreements, and may participate in
discussions and negotiate with such entity or group concerning any merger, sale
of assets, sale of shares of capital stock or similar transaction involving the
Company or any Company Subsidiary or division of the Company, if the Board of
Directors of the Company determines in good faith, after receiving the advice of
its legal counsel, that the failure to take such action is likely to violate the
fiduciary obligation of the Board under applicable law.
(b) From and after the execution of this Agreement, the Company shall
immediately advise Buyer in writing of the receipt, directly or indirectly, of
any, discussions, negotiations or proposals relating to a Competing Transaction,
identify the offeror and furnish to Buyer a copy of any such proposal, if it is
in writing, or a written summary of any such proposal relating to a Competing
Transaction if it is not in writing. The Company shall promptly advise Buyer of
any development relating to such proposal, including the results of any
discussions or negotiations with respect thereto unless the Board of Directors
of the Company determines in good faith, after receiving the advice of its legal
counsel, that the disclosure to Buyer of such proposal is likely to violate the
fiduciary obligation of the Board under applicable law.
(c) For purposes of this Agreement, "Competing Transaction" shall mean
any of the following (other than the transactions contemplated under this
Agreement): (i) any merger, consolidation, share exchange, business combination,
or other similar transaction involving the Company or any Material Subsidiary;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition
of 50% of the assets of the Company and the Company Subsidiaries, taken as a
whole, in a single transaction or series of transactions; (iii) any tender offer
or exchange offer for 50% or more of the outstanding shares of capital stock of
the Company or the filing of a registration statement under the Securities Act
in connection therewith; (iv) any sale of any shares of capital stock of any
similar transaction involving the Company or any Company Subsidiary; or (v) any
public announcement of a proposal, plan or intention to do any of the foregoing
or any agreement to engage in any of the foregoing.
Section 6.4. Notices of Certain Events.
The Company shall promptly notify Buyer of:
(a) any notice or other communication from any person alleging that
the consent of such person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement; and
(c) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened against, relating to or
involving or otherwise affecting the Company or any Company Subsidiary on the
date of this Agreement which would reasonably be expected to interfere with the
consummation of the transactions contemplated by this Agreement.
Section 6.5. Suspension of Employee Discount Stock Purchase Plan.
Effective as of the September 5, 1997, the Company shall suspend
indefinitely its Employee Discount Stock Purchase Plan, and the Company shall
not issue any rights to acquire Company Common Stock under such plan after such
date (provided that the Company may issue or sell shares under such plan for
which payroll deductions have already been made).
ARTICLE VII
COVENANTS OF PARENT AND BUYER
Section 7.1. Confidentiality.
All information obtained by Buyer in connection with the Transaction
shall be kept confidential in accordance with the confidentiality agreement,
dated August 16, 1996, between Colonnade and the Company (the "Confidentiality
Agreement").
Section 7.2. Director and Officer Liability.
(a) The Certificate of Incorporation and Bylaws of the Surviving
Corporation shall contain no less favorable provisions with respect to
indemnification set forth in the Certificate of Incorporation and Bylaws of the
Company on the date of this Agreement, which provisions shall not be amended,
repealed or otherwise modified for a period of 54 months after the Effective
Time in any manner that would adversely affect the rights thereunder of
individuals who at any time prior to the Effective Time were directors or
officers of the Company in respect of actions or omissions occurring at or prior
to the Effective Time (including, without limitation, the transactions
contemplated by this Agreement), unless such modification is required by law.
(b) From and after the Effective Time, the Surviving Corporation shall
indemnify, defend and hold harmless the present and former officers and
directors of the Company (collectively, the "Indemnified Parties") against all
losses, expenses, claims, damages, liabilities or amounts that are paid in
settlement of, with the approval of the Surviving Corporation (which approval
shall not unreasonably be withheld), or otherwise incurred in connection with
any claim, action, suit, proceeding or investigation (a "Claim"), based in whole
or in part by reason of the fact that such person is or was a director or
officer of the Company and arising out of actions, events or omissions occurring
at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement), in each case to the full extent
permitted under the DGCL (and shall pay expenses in advance of the final
disposition of any such action or proceeding to each Indemnified Party to the
fullest extent permitted under the DGCL, upon receipt from the Indemnified Party
to whom expenses are advanced of any required undertaking to repay such advances
contemplated by Section 145(e) of the DGCL).
(c) Without limiting the foregoing, in the event any Claim is brought
against any Indemnified Party (whether arising before or after the Effective
Time) after the Effective Time (i) the Indemnified Parties may retain the
Company's regularly engaged independent legal counsel or other independent legal
counsel satisfactory to them, provided that such other counsel shall be
reasonably acceptable to the Surviving Corporation, (ii) the Surviving
Corporation shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received and (iii) the
Surviving Corporation will use its reasonable best efforts to assist in the
vigorous defense of any such matter; provided, however, that (A) Buyer or the
Surviving Corporation shall have the right, from and after the purchase of
Shares pursuant to the Offer, to assume the defense thereof, (B) the Company and
the Indemnified Parties will cooperate in the defense of any such matter and (C)
the Surviving Corporation shall not be liable for any settlement of any Claim
effected without its written consent, which consent shall not be unreasonably
withheld; provided, further, that if the defendants in any such action include
both the Indemnified Parties and either Buyer or the Surviving Corporation and
the Indemnified Parties shall have been advised by counsel that representation
of such Indemnified Parties and either Buyer or the Surviving Corporation, as
applicable, may be inappropriate under applicable standards of professional
conduct due to actual or potential differing interests between them, the
Indemnified Parties shall have the right to select separate counsel to defend
such action on behalf of such Indemnified Parties. Any Indemnified Party wishing
to claim indemnification under this Section 7.2 upon learning of any such Claim
shall notify the Surviving Corporation (although the failure so to notify the
Surviving Corporation shall not relieve the Surviving Corporation from any
liability which the Surviving Corporation may have under this Section 7.2,
except to the extent such failure materially prejudices the Surviving
Corporation's position with respect to such claim), and shall deliver to the
Surviving Corporation the undertaking contemplated by Section 145(e) of the
DGCL. The Indemnified Parties as a group may retain no more than one law firm
(in addition to local counsel) to represent them with respect to each such
matter unless there is, under applicable standards of professional conduct (as
determined by counsel to the Indemnified Parties), an actual conflict between
the interests of any two or more Indemnified Parties, in which event such
additional counsel as may be required may be retained by the Indemnified
Parties.
(d) For a period of 54 months from and after the Effective Time, the
Surviving Corporation shall cause to be maintained in effect the liability
insurance policies for directors and officers most recently maintained by the
Company (provided that the Surviving Corporation may substitute therefor
policies with reputable and financially sound carriers of at least the same
coverage and containing terms and conditions no less advantageous as long as
such substitution does not result in gaps or lapses in coverage with respect to
claims arising from or related to matters occurring prior to the Effective
Time); provided that in no event shall the Surviving Corporation be required to
expend more than an amount per year equal to 150% of the current annual premiums
paid by the Company (the "Premium Amount") to maintain or procure insurance
coverage pursuant to this Section 7.2; provided, further, that the Surviving
Corporation shall obtain as much comparable insurance as is available for the
Premium Amount per year and may pay for such insurance in one lump sum.
(e) Each Indemnified Party shall have rights as a third party
beneficiary under this Section 7.2 as separate contractual rights for his or her
benefit and such right shall be enforceable by such Indemnified Party, its heirs
and personal representatives and shall be binding on the Surviving Corporation
and its successors and assigns.
Section 7.3. Repayment or Assumption of Debt.
With respect to debt issued by the Company under (i) the Credit
Facility by and among NationsBank of Tennessee, N.A., National Picture & Frame
Company and NPF Company, dated as of February 16, 1996, (ii) the Loan Agreement
by and between Deposit Guaranty National Bank, National Picture & Frame Company
and NPF Company, dated as) of February 16, 1996 and (iii) the promissory notes
payable to the former stockholders of Universal Cork, Inc. (collectively, the
"Debt Documents"), at the Effective Time, Buyer shall either (A) repay or cause
the Company to repay all indebtedness thereunder (including any premiums or
penalties) or (B) execute and deliver under the respective Debt Documents,
supplemental agreements, in form satisfactory to the respective lenders,
expressly assuming the obligations of the Company with respect to the due and
punctual payment of the principal of (and premium, if any) and interest, if any,
on all debt securities issued by the Company under the respective Debt Documents
and the due and punctual performance of all the terms, covenants and conditions
of the respective Debt Documents to be kept or performed by the Company, and
shall deliver such supplemental agreements to the respective lenders under the
Debt Documents.
Section 7.4 Voting of Shares.
Parent and Buyer each agrees to vote all shares owned by Parent, Buyer
and any of their affiliates in favor of the approval and adoption of the Merger
and this Agreement at the Company Stockholders Meeting.
ARTICLE VIII
CONVENANTS OF COLONNADE, PARENT, BUYER AND THE COMPANY
Section 8.1. Reasonable Best Efforts.
Subject to the terms and conditions of this Agreement, each party will
use its reasonable best efforts to take, or cause to be taken, all action and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate the transactions contemplated by
this Agreement.
Section 8.2. Certain Filings.
The Company, Colonnade, Parent and Buyer shall cooperate with one
another (i) in connection with the preparation of the Company Disclosure
Documents and the Offer Documents, (ii) in determining whether any other action
by or in respect of, or filing with, any governmental body, agency or official,
or authority or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts in connection with the
consummation of the transactions contemplated by this Agreement and (iii) in
seeking any such actions, consents, approvals or waivers or making any such
filings, furnishing information required in connection therewith or with the
Company Disclosure Documents or the Offer Documents and seeking timely to obtain
any such actions, consents, approvals or waivers.
Section 8.3. Public Announcements.
The Company, Colonnade, Parent, and Buyer will consult with each other
before issuing any press release or making any public statement with respect to
this Agreement and the transactions contemplated hereby and will not issue any
such press release or make any such public statement prior to such consultation,
except as may be required by applicable law or any listing agreement with any
national securities exchange.
ARTICLE IX
CONDITIONS TO THE MERGER
Section 9.1. Conditions to the Obligations of Each Party.
The obligations of the Company and Buyer to consummate the Merger are
subject to the satisfaction of the following conditions:
(a) if required by the DGCL, this Agreement shall have been approved
and adopted by the stockholders of the Company in accordance with the DGCL
(except that this condition shall be deemed satisfied if Buyer shall have
acquired 90% or more of the outstanding Shares);
(b) any applicable waiting period under the HSR Act relating
to the Merger shall have expired or been terminated;
(c) no Governmental Entity or federal or state court of competent
jurisdiction shall have enacted, issued or enforced any statute, regulation,
decree, injunction or other order which has become final and nonappealable and
which prohibits the consummation of the Merger;
(d) with respect to the obligations of Buyer, (i) each of the
representations and warranties of the Company contained in this Agreement shall
be true and correct, except in any case for such failures to be true and correct
which would not, individually or in the aggregate, have a Company Material
Adverse Effect, as of the Effective Time as though made on and as of the
Effective Time, except (A) for changes specifically permitted by this Agreement
and (B) that those representations and warranties which address matters only as
of a particular date shall remain true and correct as of such date and (ii) the
Company shall have performed and complied in all material respects with all
agreements and covenants required by this Agreement to be performed or complied
with by the Company on or prior to the Effective Time; and
(e) with respect to the obligations of the Company, (i) each of the
representations and warranties of Buyer contained in this Agreement shall be
true and correct, except in any case for such failures to be true and correct
that would not, individually or in the aggregate, have a Buyer Material Adverse
Effect, as of the Effective Time, as though made on and as of the Effective
Time, except (A) for changes specifically permitted by this Agreement and (B)
that those representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date and (ii) Buyer
shall have performed and complied in all material respects with all agreements
and covenants required by this Agreement to be performed or complied with by
Buyer on or prior to the Effective Time.
Section 9.2. Condition to the Obligations of Buyer.
The obligation of Buyer to consummate the Merger is subject to the
following conditions:
(a) The proceeds of the Debt Financing, on substantially the terms and
conditions described in the related commitment letters referred to in Section
5.7, are available to Buyer.
(b) The Minimum Condition and each of the other conditions set forth
in Annex I shall have been satisfied or waived by Buyer, and Buyer shall have
accepted for payment and made payment for all Shares validly tendered and not
withdrawn pursuant to the Offer.
ARTICLE X
TERMINATION; EXPENSES
Section 10.1. Termination.
This Agreement may be terminated and the Transaction may be abandoned
at any time prior to the Effective Time (notwithstanding any approval of this
Agreement by the stockholders of the Company):
(a) by mutual written consent of the Company and Buyer;
(b) by either Buyer or the Company, if any permanent
injunction or action by any Governmental Entity preventing the consummation of
the Merger shall have become final and nonappealable;
(c) by either Buyer or the Company, if (i) the Offer is terminated or
withdrawn pursuant to its terms without any Shares being purchased thereunder or
(ii) the Merger shall not have been consummated before October 31, 1997;
provided, however, that if the Merger shall not have been consummated as a
direct result of Buyer or the Company having failed by October 31, 1997, to
receive all required approvals or consents with respect to the Merger then this
Agreement shall automatically be extended until the date that is 10 days
following the receipt of such approval or consent, but in no event later than
December 31, 1997; provided, further, that neither Buyer nor the Company may
terminate this Agreement pursuant to this Section 10.1(c) if such party shall
have materially breached this Agreement;
(d) by the Company, if Buyer terminates the Offer without purchasing
Shares thereunder or the Offer shall have expired without the purchase of the
Shares thereunder; provided, however, that the Company may not terminate this
Agreement pursuant to this Section 10.1(d) if the Company shall have materially
breached this Agreement;
(e) by either Buyer or the Company, if the Merger shall fail
to receive the requisite vote for approval and adoption by the stockholders of
the Company at the Company Stockholders Meeting;
(f) by the Company, if the Board withdraws or modifies (or fails to
make) its recommendation referred to in Section 1.2 so long as the Board, after
consultation with and based upon the advice of independent legal counsel (who
may be the Company's regularly engaged independent legal counsel), concludes in
good faith that the failure to take such action is likely to violate the
fiduciary obligation of the Board under applicable law;
(g) by Buyer prior to the purchase of Shares pursuant to the Offer, if
the Company's Board of Directors shall have (i) withdrawn or modified (including
by amendment to the Schedule 14D-9) in a manner adverse to Buyer the Board's
approval or recommendation of the Offer or the Merger referred to in Section 1.2
of this Agreement; (ii) approved or recommended a Competing Transaction; or
(iii) shall have resolved to effect any of the foregoing; or
(h) by Buyer prior to the purchase of Shares pursuant to the Offer, if
the Minimum Condition or any other condition set forth in Annex I has not been
satisfied in connection with the Offer and as a result Buyer does not accept for
payment the Shares.
The right of any party hereto to terminate this Agreement pursuant to
this Section 10.1 shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any party hereto, any person
controlling or controlled by any such party or any of their respective officers
or directors, whether prior to or after the execution of this Agreement.
Section 10.2. Effect of Termination.
If this Agreement is terminated pursuant to Section 10.1, this
Agreement shall become void and of no effect with no liability on the part of
any party hereto, except that the agreements contained in Sections 7.1 and 10.3
shall survive the termination hereof, and except that no such termination shall
relieve any party from liability for willful breach of this Agreement or willful
failure by such party to perform its obligations hereunder.
Section 10.3. Fees, Expenses and Other Payments.
(a) All out-of-pocket costs and expenses, including, without
limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred directly or indirectly by the parties hereto in respect of
the transactions contemplated hereby shall be borne by the party which has
incurred such costs and expenses (with respect to such party, its "Expenses");
provided, however, that if the Merger is consummated all Expenses of the Company
shall be paid by the Surviving Corporation.
(b) The Company agrees that if this Agreement shall be terminated
pursuant to (i) Section 10.1(e) and at the time of the Company Stockholder
Meeting there shall exist a Competing Transaction (as defined below), (ii)
Section 10.1(h) and at the time of such termination there shall exist a
Competing Transaction or (iii) Section 10.1(f) or (g) at any time, then in any
such event the Company shall pay to Buyer a fee in an amount equal to $2,500,000
plus the reasonable Expenses of Buyer not exceeding $750,000. The same amounts
shall also be paid by the Company to Buyer if (i) (A) any person, or any persons
acting as a group, acquires more than one-third of the outstanding Shares after
the date of, and prior to the termination of, this Agreement, and (B) such
person or group obtains control of the Company or enters into an agreement
providing for the merger with, or acquisition of all or substantially all of the
assets of the Company from, the Company (a "Change of Control") within 12 months
after termination of this Agreement, or (ii) (X) a Change of Control occurs
within 12 months after the termination of this Agreement with a party who had
communicated after the date of, and prior to the termination of, this Agreement
with an affiliate of the Company or any representative thereof of such party's
intent to acquire control of the Company by verbal or written communication, and
(Y) the price per share received by the stockholders of the Company in
connection with such Change of Control exceeds the Merger Consideration.
(c) Any payment required to be made pursuant to Section 10.3(b) shall
be made as promptly as practicable by wire transfer of immediately available
funds to an account designated by Buyer. The Company's payment of a termination
fee pursuant to this subsection shall be the sole and exclusive remedy of Buyer
and Colonnade against the Company and any of its subsidiaries and their
respective directors, officers, employees, agents, advisors or other
representatives with respect to the occurrences giving rise to such payment;
provided that this limitation shall not apply in the event of a willful breach
of this Agreement by the Company with respect to such occurrence.
ARTICLE XI
MISCELLANEOUS
Section 11.1. Notices.
All notices, requests and other communications to any party hereunder
shall be in writing including facsimile, telex or similar writing) and shall be
given,
If to Buyer or Colonnade, to:
Colonnade Capital, L.L.C.
901 East Byrd Street
Richmond, VA 23219
Attention: Mr. John T. Herzog
Mr. James C. Wheat, III
with a copy to:
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, VA 23219-4074
Attention: John Owen Gwathmey, Esquire
if to the Company, to:
National Picture & Frame Company
702 Highway 82 West
Greenwood, MS 38930
Attention: Mr. Daniel J. Hennessy
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Kevin R. Evanich, Esquire
Julie A. Rocap, Esquire
or such other address, as such party may hereafter specify for the
purpose by notice to the other parties hereto. Each such notice, request or
other communication shall be effective (i) if given by facsimile, upon
confirmation of receipt, or (ii) if given by any other means, when delivered at
the address specified in this Section 11.1.
Section 11.2. Survival of Representations, Warranties and
Covenants.
The representations and warranties contained herein shall not survive
the Effective Time. The covenants and agreements contained herein shall not
survive the Effective Time or the termination of this Agreement except for the
covenants and agreements set forth in Sections 7.1, 7.2 and 10.3.
Section 11.3. Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or waived prior to
the Effective Time if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the Company and Buyer or in the case of
a waiver, by the party against whom the waiver is to be effective; provided that
after the adoption of this Agreement by the stockholders of the Company, no such
amendment or waiver shall, without the further approval of such stockholders,
alter or change (i) the amount or kind of consideration to be received in
exchange for any shares of capital stock of the Company, (ii) any term of the
Certificate of Incorporation of the Surviving Corporation or (iii) any of the
terms or conditions of this Agreement if such alteration or change would
adversely affect the holders of any shares of capital stock of the Company.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 11.4. Successors and Assigns.
The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successor and assigns;
provided that no party may assign, delegate or otherwise transfer any of its
rights or obligations under this Agreement without the consent of the other
parties hereto, except that Parent, Buyer and Colonnade shall have the right to
assign this Agreement to any of their respective affiliates without the consent
of the Company.
Section 11.5. Governing Law.
All questions concerning the construction, validity and interpretation
of this Agreement will be governed by and construed in accordance with the
domestic laws of the State of Delaware, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of Delaware or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware.
Section 11.6. Counterparts; Effectiveness.
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Agreement shall become effective
when each party hereto shall have received counterparts hereof signed by all of
the other parties hereto.
Section 11.7. Headings.
Section headings used in this Agreement are for convenience only and
shall be ignored in the construction and interpretation hereof.
Section 11.8. Third Party Beneficiaries.
No provision of this Agreement is intended to, or shall, confer any
third party beneficiary or other rights or remedies upon any person other than
the parties hereto.
Section 11.9. Entire Agreement.
This Agreement (together with the Company Disclosure Schedule, the
Buyer Disclosure Schedule and the other documents delivered pursuant hereto) and
the Confidentiality Agreement constitute the entire agreements of the parties
and supersede all prior agreements and undertakings, both written and oral,
between the parties, or any of them, with respect to the subject matter hereof.
Section 11.10. Severability.
If any term or other provisions of this Agreement is invalid, illegal
or incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in an acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
* * * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
NATIONAL PICTURE & FRAME COMPANY
By:
-------------------------------------
Jesse C. Luxton
President and Chief Executive Officer
NPF HOLDING CORPORATION
By:
------------------------------------
John T. Herzog
President
NPF ACQUISITION CORPORATION
By:
-------------------------------------
John T. Herzog
Vice President
The undersigned agrees
only to be bound by the
provisions of Article VII
of this Agreement.
COLONNADE CAPITAL, L.L.C.
By:
-------------------------------------
John T. Herzog
Managing Partner
<PAGE>
ANNEX I
The capitalized terms used in this Annex I 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, Buyer shall not be
required to accept for payment or pay for any tendered Shares and may terminate
or, subject to the terms of the Merger Agreement, amend the Offer, if (i) prior
to the expiration date of the Offer, (A) the Minimum Condition shall not have
been satisfied or (B) the applicable waiting period under the HSR Act shall not
have expired or been terminated or (ii) prior to the acceptance for payment of
or payment for Shares and at any time on or after the date of the Merger
Agreement, any of the following conditions shall have occurred and be
continuing:
(a) There shall be any action taken, or any statute, rule, regulation,
legislation, interpretation, judgment, order or injunction enacted, enforced,
promulgated, amended, issued or deemed applicable to the Offer, by any
legislative body, court, government or governmental, administrative or
regulatory authority or agency, domestic or foreign, other than the application
of the waiting period provisions of the HSR Act to the Offer or to the Merger,
that, in the reasonable judgment of Buyer, would be expected to, directly or
indirectly: (i) make illegal or otherwise prohibit or materially delay
consummation of the Offer or the Merger or seek to obtain material damages in
connection therewith, (ii) prohibit or materially limit the ownership or
operation by Parent or Buyer of all or any material portion of the business or
assets of all or any material portion of the business or assets of the Company
or any Company Subsidiary taken as a whole or compel Parent or Buyer to dispose
of or hold separately all or any material portion of the business or assets of
Parent or Buyer or the Company or any Company Subsidiary taken as a whole, or
seek to impose any material limitation on the ability of Parent or Buyer to
conduct its business or own such assets, (iii) impose material limitations on
the ability of Parent or Buyer effectively to acquire, hold or exercise full
rights of ownership of the Shares, including, without limitation, the right to
vote any Shares acquired or owned by Buyer or Parent on all matters properly
presented to the Company's stockholders, (iv) require divestiture by Parent or
Buyer of any Shares, or (v) may, in the reasonable judgment of Buyer, be
expected to result in a Company Material Adverse Effect;
(b) Any Governmental Entity or federal or state court of competent
jurisdiction shall have enacted, issued or enforced any statute, regulation,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which (i) would reasonably be expected to result in any
of the consequences referred to in clauses (i) through (v) of paragraph (a)
above or (ii) prohibits consummation of the Offer, the Merger or any transaction
contemplated by the Agreement; provided that Buyer shall have used its
reasonable best efforts to cause any such decree, judgment, injunction or other
order to be vacated or lifted;
(c) Any of the representations and warranties of the Company contained
in the Merger Agreement shall not be true and correct except in any case for
such failures to be true and correct which would not, individually or in the
aggregate, have a Company Material Adverse Effect as of the date of consummation
of the Offer as though made on and as of such date, except (i) for changes
specifically permitted by the Agreement and (ii) that those representations and
warranties which address matters only as of a particular date shall remain true
and correct as of such date;
(d) The Company shall not have performed or complied in all material
respects with all agreements and covenants required by the Agreement to be
performed or complied with by the Company on or prior to the date of
consummation of the Offer;
(e) Any change shall have occurred (or any development shall have
occurred involving prospective changes) in the business, assets, liabilities,
results of operations or condition (financial or otherwise) of the Company or
any Company Subsidiary that has, or could reasonably be expected to have, a
Company Material Adverse Effect;
(f) There shall have occurred, and continued to exist for a period of
at least 48 hours, (i) any general suspension of, or limitation on prices for,
trading in securities on the New York Stock Exchange or on the over-the-counter
stock market, as reported by the National Association of Securities Dealers,
Inc. Automated Quotations System ("NASDAQ"), (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, armed hostilities or other national or
international crisis involving the United States or a material limitation
(whether or not mandatory) by any Governmental Entity on the extension of credit
by banks or other lending institutions, or (iv) in the case of any of the
foregoing existing at the time of the commencement of the Offer, a material
acceleration or worsening thereof;
(g) The Merger Agreement shall have been terminated in accordance
with its terms;
(h) Buyer and the Company shall have agreed that Buyer shall
terminate the Offer; or
(i) (i) The Board of Directors of the Company shall have withdrawn or
adversely modified its approval or recommendation of the Offer or the Merger or
approved or recommended a Competing Transaction, (ii) the Company shall have
entered into an agreement with respect to a Competing Transaction, or (iii) the
Board of Directors of the Company shall have resolved to do any of the
foregoing.
The foregoing conditions (including those set forth in clauses (i) and
(ii) of the initial paragraph) are for the benefit of Parent or Buyer regardless
of the circumstances giving rise to any such conditions and may be waived by
Parent or Buyer in whole or in part at any time and from time to time in their
reasonable discretion, in each case, subject to the terms of the Merger
Agreement. The failure by Parent or Buyer at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time.
EXHIBIT (C)(4)
FORM
OF
STOCKHOLDER TENDER AGREEMENT-MANAGEMENT
AMONG
NPF HOLDING CORPORATION.
NPF ACQUISITION CORPORATION
AND
CERTAIN HOLDERS OF SHARES
OF
NATIONAL PICTURE & FRAME COMPANY
------------------------------------------
Dated as of September 4, 1997
------------------------------------------
<PAGE>
STOCKHOLDER TENDER AGREEMENT
THIS STOCKHOLDER TENDER AGREEMENT, dated as of September 4, 1997 (this
"Agreement"), by and among the persons or entities designated as Stockholders on
the signature page hereto (the "Stockholders" and each a "Stockholder"), NPF
Holding Corporation, a Delaware corporation ("Parent"), and NPF Acquisition
Corporation, a Delaware corporation and wholly owned subsidiary of Parent
("Merger Sub") recites and provides as follows.
WHEREAS, the Stockholders collectively own of record and beneficially
certain shares of common stock, par value $.01 per share (the "Company Common
Stock"), of National Picture & Frame Company, a Delaware corporation (the
"Company"), each Stockholder, respectively, owning of record and/or beneficially
the number of shares of Company Common Stock set forth next to its name on Annex
A attached hereto and incorporated by reference herein (such Stockholder's
shares, together with any other voting or equity securities of the Company
hereafter acquired by such Stockholder prior to the termination of this
Agreement, being referred to collectively as the "Shares") provided, however,
that for purposes of this Agreement "Shares" shall be deemed not to include any
shares of the Company Common Stock that are being exchanged (the "Exchanged
Shares") for shares of common stock of Parent pursuant to the Subscription and
Exchange Agreement (each, a "Subscription and Exchange Agreement"), dated as of
the date hereof, between Parent and certain Stockholders;
WHEREAS, concurrently with the execution of this Agreement, Parent,
Merger Sub and the Company, are entering into an Agreement and Plan of Merger,
dated as of the date hereof (as amended from time to time, the "Merger
Agreement"), which provides, among other things, that, upon the terms and
subject to the conditions therein, Merger Sub will make a cash tender offer (the
"Tender Offer") for all outstanding shares of Company Common Stock and will
merge with and into the Company (the "Merger"), in each case at a price of
$12.00 per Share in cash; and
WHEREAS, as a condition to the willingness of Parent and Merger Sub to
enter into the Merger Agreement, Parent and Merger Sub have requested that the
Stockholders agree, and in order to induce Parent and Merger Sub to enter into
the Merger Agreement, the Stockholders have agreed, to enter into this
Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and subject to the terms and conditions set forth herein,
the parties hereto hereby agree as follows:
<PAGE>
1. Representations and Warranties of the Stockholders.
Each Stockholder represents and warrants to Parent and Merger Sub,
severally as to itself and with respect to its Shares, as follows:
(a) Such Stockholder's Shares constitute all of the shares of Company
Common Stock beneficially owned, directly or indirectly, by such Stockholder
other than the Exchanged Shares.
(b) The execution and delivery of this Agreement by such Stockholder
does not, and the performance by such Stockholder of its obligations hereunder
will not, constitute a violation of, conflict with, result in a default (or an
event which, with notice or lapse of time or both, would result in a default)
under, or result in the creation of any Lien on any of such Stockholder's Shares
under (i) any contract, commitment, agreement, understanding, arrangement or
restriction of any kind to which such Stockholder is a party or by which such
Stockholder is bound, (ii) any judgment, writ, decree, order or ruling
applicable to such Stockholder, or (iii) the organizational documents of such
Stockholder, if applicable.
(c) Such Stockholder has full power and authority to execute, deliver
and perform this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized and no other actions on the part of such Stockholder are required in
order to consummate the transaction contemplated hereby. This Agreement has been
duly and validly executed and delivered by such Stockholder and, assuming due
authorization, execution and delivery by Parent and Merger Sub, constitutes a
valid and binding agreement of such Stockholder, enforceable against such
Stockholder in accordance with its terms, except to the extent that
enforceability may be limited by applicable law.
(d) Neither the execution and delivery of this Agreement nor the
performance by such Stockholder of its obligations hereunder will (i) violate
any order, writ, injunction or judgment applicable to such Stockholder or (ii)
violate any law, decree, statute, rule or regulation applicable to such
Stockholder or require any consent, authorization or approval of, filing with or
notice to, any court, administrative agency or other governmental body or
authority, other than any required notices or filings pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder (the "HSR Act") or the federal securities
laws.
2. Representations and Warranties of Parent.
Parent represents and warrants to the Stockholders as follows:
(a) Parent is (i) duly organized and validly existing and in good
standing under the laws of the State of Delaware, (ii) has the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby, and (iii) has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Agreement. This Agreement has been duly and validly executed and
delivered by Parent and constitutes the legal, valid and binding obligation of
Parent, enforceable against Parent in accordance with its terms, except to the
extent that enforceability may be limited by applicable bankruptcy,
organization, insolvency, moratorium or other laws affecting the enforcement of
creditors' rights generally and by general principles of equity, regardless of
whether such enforceability is considered in a proceeding in equity or at law.
(b) The execution and delivery of this Agreement by Parent does not,
and the performance by Parent of its obligations hereunder will not, constitute
a violation of, conflict with, or result in a default (or an event which, with
notice or lapse of time or both, would result in a default) under, its charter
or bylaws or any contract, commitment, agreement, understanding, arrangement or
restriction of any kind to which Parent is a party or by which Parent is bound
or any judgment, writ, decree, order or ruling applicable to Parent.
(c) Neither the execution and delivery of this Agreement nor the
performance by Parent of its obligations hereunder will violate any order, writ,
injunction, judgment, law, decree, statute, rule or regulation applicable to
Parent or require any consent, authorization or approval of, filing with, or
notice to, any court, administrative agency or other governmental body or
authority, other than any required notices or filings pursuant to the HSR Act or
the federal securities laws.
3. Representations and Warranties of Merger Sub.
Merger Sub represents and warrants to the Stockholders as follows:
(a) Merger Sub is (i) duly organized and validly existing and in good
standing under the laws of the State of Delaware, (ii) has the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby, and (iii) has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Agreement. This Agreement has been duly and validly executed and
delivered by Merger Sub and constitutes the legal, valid and binding obligation
of Merger Sub, enforceable against Merger Sub in accordance with its terms,
except to the extent that enforceability may be limited by applicable
bankruptcy, organization, insolvency, moratorium or other laws affecting the
enforcement of creditors' rights generally and by general principles of equity,
regardless of whether such enforceability is considered in a proceeding in
equity or at law.
(b) The execution and delivery of this Agreement by Merger Sub does
not, and the performance by Merger Sub of its obligations hereunder will not,
constitute a violation of, conflict with, or result in a default (or an event
which, with notice or lapse of time or both, would result in a default) under,
its charter or bylaws or any contract, commitment, agreement, understanding,
arrangement or restriction of any kind to which Merger Sub is a party or by
which Merger Sub is bound or any judgment, writ, decree, order or ruling
applicable to Merger Sub.
(c) Neither the execution and delivery of this Agreement nor the
performance by Merger Sub of its obligations hereunder will violate any order,
writ, injunction, judgment, law, decree, statute, rule or regulation applicable
to Merger Sub or require any consent, authorization or approval of, filing with,
or notice to, any court, administrative agency or other governmental body or
authority, other than any required notices or filings pursuant to the HSR Act or
the federal securities laws.
4. Tender of Shares.
(a) During the term of this Agreement, each Stockholder hereby agrees
to validly tender and sell (and not withdraw) pursuant to and in accordance with
the terms of the Tender Offer all of such Stockholder's Shares. Upon the
purchase of all Shares, other than Exchanged Shares, owned by a Stockholder
pursuant to the Tender Offer in accordance with this Section 4(a), this
Agreement shall terminate solely with respect to such Stockholder.
Notwithstanding the provisions of this Section 4(a), in the event any
Stockholder withdraws such Stockholder's Shares from the Tender Offer for any
reason or any such Shares are not purchased pursuant to the Tender Offer, such
Shares shall remain subject to the terms of this Agreement. Each Stockholder
acknowledges that Merger Sub's obligation to accept for payment and pay for the
Shares in the Offer is subject to all the terms and conditions of the Offer.
(b) Each Stockholder hereby agrees to permit Parent and Merger Sub to
publish and disclose in the Offer to Purchase and all other related offering
materials filed by Parent or Merger Sub with the Securities and Exchange
Commission (the "SEC") or otherwise by Parent or Sub in connection with the
Tender Offer and, if approval of the stockholders of the Company is required
under applicable law in connection with the Merger, in the proxy statement sent
to the stockholders of the Company, including all documents and schedules filed
with the SEC, its identity and ownership of Company Common Stock and the nature
of its commitments, arrangements and understandings under this Agreement.
(c) The terms of this Agreement shall apply to all Shares issued
pursuant to the exercise of stock options issued by the Company to any
Stockholder, and each Stockholder agrees to tender all Shares issued upon the
exercise of such stock options. Notwithstanding anything in this Agreement to
the contrary, (i) until the exercise of any such stock options, the term
"Shares" as used herein shall be deemed not to include any such stock options,
and (ii) nothing contained herein shall be deemed to require any Stockholder to
exercise such stock options in order to tender the Shares issued upon such
exercise.
5. Transfer of the Shares.
During the term of this Agreement, except as otherwise provided herein,
no Stockholder shall (a) offer to sell, sell, pledge or otherwise dispose of or
transfer any interest in or encumber with any Lien any of such Stockholder's
Shares, except for transfer or sale to any affiliate of such Stockholder who
agrees to be bound by this Agreement, (b) deposit such Stockholder's Shares into
a voting trust, enter into a voting agreement or arrangement with respect to
such Shares or grant any proxy or power of attorney with respect to such Shares,
or (c) enter into any contract, option or other arrangement or undertaking with
respect to the direct or indirect acquisition or sale, assignment or other
disposition of or transfer of any interest in or the voting of any shares of
Company Common Stock or any other securities of the Company. Notwithstanding the
foregoing, a Stockholder may transfer such Stockholder's Shares to a charitable
organization as long as such charitable organization agrees to be bound by the
terms of this Agreement.
6. No Solicitation.
During the term of this Agreement, no Stockholder or any representative
of such person or entity, shall institute, pursue or continue any discussions,
negotiations or agreements (whether preliminary or definitive ) with any person
or entity other than Parent contemplating or providing for any public or private
offering of equity, merger, share exchange, acquisition, purchase or sale of a
significant amount of shares or assets or other business combination or change
in control of the Company, unless the Board of Directors of the Company
concludes in good faith, after receiving the advice of its counsel, that the
failure to take such action is likely to violate the fiduciary obligation of the
directors of the Company under applicable law.
7. Waiver of Appraisal Rights.
Each Stockholder hereby irrevocably waives any rights of appraisal or
rights to dissent from the Merger that such Stockholder may have.
8. Voting of Shares; Irrevocable Proxy.
(a) During the term of this Agreement, each Stockholder in its
capacity as such hereby agrees to vote each of its Shares at any annual, special
or adjourned meeting of the stockholders of the Company (1) in favor of the
Merger, the execution and delivery by the Company of the Merger Agreement and
the approval and adoption of the terms thereof and hereof; and (2) except as
otherwise agreed to in writing in advance by Parent, against the following
actions (other than the Merger and the other transactions contemplated by the
Merger Agreement): (i) any extraordinary corporate transaction, such as a
merger, consolidation or other business combination involving the Company or its
subsidiaries; (ii) a sale, lease or transfer of a material amount of assets of
the Company or one of its subsidiaries, or a reorganization, recapitalization,
dissolution or liquidation of the Company or its subsidiaries; or (iii) (A) any
change in a majority of the persons who constitute the Board of Directors of the
Company as of the date hereof; (B) any change in the present capitalization of
the Company or any amendment of the Company's certificate of incorporation or
bylaws, as amended to date; (C) any other material change in the Company's
corporate structure or business; or (D) any action that is intended, or could
reasonably be expected, to impede, interfere with, delay, postpone, or adversely
affect the Merger and the other transactions contemplated by this Agreement and
the Merger Agreement.
(b) Each Stockholder hereby irrevocably constitutes and appoints John
T. Herzog and James C. Wheat, III, and each of them as its sole and exclusive
and true and lawful agent and attorney-in-fact, with full power of substitution,
to vote all Company Common Stock that the holder is entitled to vote as
indicated in Section 8(a) above, to the same extent and with the same effect as
the Stockholder might or could do under any applicable laws or regulations
governing the rights and powers of stockholders of a Delaware corporation. This
proxy shall become effective as of the date hereof and shall expire upon
termination of this Agreement. This proxy is coupled with an interest and shall
be irrevocable and binding upon any and all transferees of the Company Common
Stock so long as it remains in effect pursuant to the terms hereof. This
proxy/power of attorney shall not terminate on disability of the principal. Each
Stockholder will take such further action as may be necessary to effect the
foregoing and hereby revokes any proxy previously granted by such Stockholder
with respect to such Stockholder's Company Stock.
9. Enforcement of the Agreement.
Each Stockholder acknowledges 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 Parent and Merger Sub will be entitled (i) to an
injunction or injunctions to prevent breaches of this Agreement and (ii) to
specifically enforce the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which it is entitled at law or in equity.
10. Adjustments.
The number and type of securities subject to this Agreement will be
appropriately adjusted in the event of any stock dividends, stock splits,
recapitalizations, combinations, exchanges of shares or the like or any other
action that would have the effect of changing any Stockholder's ownership of the
Company's capital stock or other securities.
11. Termination.
This Agreement will terminate on the earlier of (a) the purchase of all
the Shares pursuant to the Offer in accordance with Section 4, (b) the effective
time of the Merger and (c) the date on which the Merger Agreement is terminated
in accordance with its terms. Upon termination of this Agreement, all
obligations of the parties hereto shall terminate except to the extent that any
such party has committed a material breach of this Agreement prior to such
termination.
12. Expenses.
All fees and expenses incurred by any of the parties hereto shall be
borne by the party incurring such fees and expenses.
13. Brokerage.
Except as disclosed in the Merger Agreement (including the exhibits and
schedules thereto), each party represents and warrants to the others that there
are no claims for finder's fees or brokerage commissions or other like payments
in connection with this Agreement or the transactions contemplated hereby, and
each party agrees to indemnify and hold harmless the other parties from and
against any and all claims or liabilities for finder's fees or brokerage
commissions or other like payments incurred in connection with the transactions
contemplated hereby.
14. Miscellaneous.
(a) All representations and warranties contained herein shall
expire at the effective time of the Merger.
(b) Any provision of this Agreement may be waived at any time by the
party that is entitled to the benefits thereof. No such waiver, amendment or
supplement shall be effective unless in writing signed by the party or parties
sought to be bound thereby. Any waiver by any party of a breach of any provision
of this Agreement shall not operate as or be construed to be a waiver of any
other breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement or one or more sections hereof shall not be considered a waiver
or deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement.
(c) This Agreement contains the entire agreement among Parent, Merger
Sub and the Stockholders with respect to the subject matter hereof, and
supersedes all prior agreements among Parent, Merger Sub and the Stockholders
with respect to such matters other than a Subscription and Exchange Agreement.
This Agreement may not be amended, changed, supplemented, waived or otherwise
modified, except upon the delivery of a written agreement executed by the
parties hereto.
(d) The descriptive headings contained herein are for convenience and
reference only and shall not affect in any way the meaning or interpretation of
this Agreement.
(e) Any notice provided for in this Agreement will be in writing and
will be either personally delivered, sent by reliable overnight courier,
telecopied or mailed by first class mail, return receipt requested, to the
recipient at the address below indicated, or if to a Stockholder, the address
listed below such Stockholder's name on Annex A hereto.
Notices to the Parent or Merger Sub:
NPF Holding Corporation
NPF Acquisition Corporation
c/o Colonnade Capital, LLC
901 East Byrd Street, Suite 1300
Richmond, Virginia 23219
Attention: Mr. John T. Herzog
Mr. James C. Wheat, III
Telephone Number: (804) 782-3288
Telecopy Number: (804) 782-6606
With a copy (which will not constitute Notice to the Parent or Merger Sub) to:
Hunton & Williams
951 East Byrd Street
Richmond, Virginia 23219
Attention: Mr. John Owen Gwathmey
Telephone Number: (804) 788-8700
Telecopy Number: (804) 788-8218
or to such other address or to the attention of such other party as any party
may have furnished to the other parties in writing in accordance herewith.
(f) This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute one agreement.
(g) This Agreement is binding upon and is solely for the benefit of
the parties hereto and their respective successors, legal representatives and
assigns. Except as provided herein, neither this Agreement nor any of the
rights, interests or obligations under this Agreement may be assigned by any of
the parties hereto without the prior written consent of the other parties,
except that Merger Sub shall have the right to assign to Parent or any other
direct or indirect wholly owned Subsidiary of Parent any and all rights and
obligations of Merger Sub under this Agreement, including the right to purchase
Shares tendered by any Stockholder pursuant to the terms hereof and the Offer,
provided that any such assignment shall not relieve Merger Sub from any of its
obligations hereunder.
(h) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be cumulative
and not alternative, and the exercise of any thereof by either party shall not
preclude the simultaneous or later exercise of any other such right, power or
remedy by such party.
(j) Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable law,
but if 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 any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(k) All questions concerning the construction, validity and
interpretation of this Agreement will be governed by and construed in accordance
with the domestic laws of the State of Delaware, without giving effect to any
choice of law provision or rule (whether of the State of Delaware or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Delaware.
IN WITNESS WHEREOF, each of the parties hereto as caused this Agreement
to be duly executed as of the date first written above.
NPF HOLDING CORPORATION
By: __________________________________
Name:
Title:
NPF ACQUISITION CORPORATION
By: __________________________________
Name:
Title:
_______________________________________
[Stockholder]
ANNEX A
Number of Number of
Shares Shares
Stockholder Name and Address Exchanged Tendered Total
- ---------------------------- --------- -------- -----
Richard A. Beattie 15,500 42,271 57,771
M. Wesley Jordan, Jr. -- 1,180 1,180
Robert T. Littlejohn 22,917 26,828 49,745
Billy D. Moore 41,667 116,837 158,504
EXHIBIT (C)(5)
FORM
OF
STOCKHOLDER TENDER AGREEMENT-NON-MANAGEMENT
AMONG
NPF HOLDING CORPORATION.
NPF ACQUISITION CORPORATION
AND
CERTAIN HOLDERS OF SHARES
OF
NATIONAL PICTURE & FRAME COMPANY
------------------------------------------
Dated as of September 4, 1997
------------------------------------------
<PAGE>
STOCKHOLDER TENDER AGREEMENT
THIS STOCKHOLDER TENDER AGREEMENT, dated as of September 4, 1997 (this
"Agreement"), by and among the persons or entities designated as Stockholders on
the signature page hereto (the "Stockholders" and each a "Stockholder"), NPF
Holding Corporation, a Delaware corporation ("Parent"), and NPF Acquisition
Corporation, a Delaware corporation and wholly owned subsidiary of Parent
("Merger Sub") recites and provides as follows.
WHEREAS, the Stockholders collectively own of record and beneficially
certain shares of common stock, par value $.01 per share (the "Company Common
Stock"), of National Picture & Frame Company, a Delaware corporation (the
"Company"), each Stockholder, respectively, owning of record and/or beneficially
the number of shares of Company Common Stock set forth next to its name on Annex
A attached hereto and incorporated by reference herein (such Stockholder's
shares, together with any other voting or equity securities of the Company
hereafter acquired by such Stockholder prior to the termination of this
Agreement, being referred to collectively as the "Shares");
WHEREAS, concurrently with the execution of this Agreement, Parent,
Merger Sub and the Company, are entering into an Agreement and Plan of Merger,
dated as of the date hereof (as amended from time to time, the "Merger
Agreement"), which provides, among other things, that, upon the terms and
subject to the conditions therein, Merger Sub will make a cash tender offer (the
"Tender Offer") for all outstanding shares of Company Common Stock and will
merge with and into the Company (the "Merger"), in each case at a price of
$12.00 per Share in cash; and
WHEREAS, as a condition to the willingness of Parent and Merger Sub to
enter into the Merger Agreement, Parent and Merger Sub have requested that the
Stockholders agree, and in order to induce Parent and Merger Sub to enter into
the Merger Agreement, the Stockholders have agreed, to enter into this
Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and subject to the terms and conditions set forth herein,
the parties hereto hereby agree as follows:
<PAGE>
1. Representations and Warranties of the Stockholders.
Each Stockholder represents and warrants to Parent and Merger Sub,
severally as to itself and with respect to its Shares, as follows:
(a) Such Stockholder's Shares constitute all of the shares of Company
Common Stock beneficially owned, directly or indirectly, by such Stockholder.
(b) The execution and delivery of this Agreement by such Stockholder
does not, and the performance by such Stockholder of its obligations hereunder
will not, constitute a violation of, conflict with, result in a default (or an
event which, with notice or lapse of time or both, would result in a default)
under, or result in the creation of any Lien on any of such Stockholder's Shares
under (i) any contract, commitment, agreement, understanding, arrangement or
restriction of any kind to which such Stockholder is a party or by which such
Stockholder is bound, (ii) any judgment, writ, decree, order or ruling
applicable to such Stockholder, or (iii) the organizational documents of such
Stockholder, if applicable.
(c) Such Stockholder has full power and authority to execute, deliver
and perform this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized and no other actions on the part of such Stockholder are required in
order to consummate the transaction contemplated hereby. This Agreement has been
duly and validly executed and delivered by such Stockholder and, assuming due
authorization, execution and delivery by Parent and Merger Sub, constitutes a
valid and binding agreement of such Stockholder, enforceable against such
Stockholder in accordance with its terms, except to the extent that
enforceability may be limited by applicable law.
(d) Neither the execution and delivery of this Agreement nor the
performance by such Stockholder of its obligations hereunder will (i) violate
any order, writ, injunction or judgment applicable to such Stockholder or (ii)
violate any law, decree, statute, rule or regulation applicable to such
Stockholder or require any consent, authorization or approval of, filing with or
notice to, any court, administrative agency or other governmental body or
authority, other than any required notices or filings pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder (the "HSR Act") or the federal securities
laws.
2. Representations and Warranties of Parent.
Parent represents and warrants to the Stockholders as follows:
(a) Parent is (i) duly organized and validly existing and in good
standing under the laws of the State of Delaware, (ii) has the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby, and (iii) has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Agreement. This Agreement has been duly and validly executed and
delivered by Parent and constitutes the legal, valid and binding obligation of
Parent, enforceable against Parent in accordance with its terms, except to the
extent that enforceability may be limited by applicable bankruptcy,
organization, insolvency, moratorium or other laws affecting the enforcement of
creditors' rights generally and by general principles of equity, regardless of
whether such enforceability is considered in a proceeding in equity or at law.
(b) The execution and delivery of this Agreement by Parent does not,
and the performance by Parent of its obligations hereunder will not, constitute
a violation of, conflict with, or result in a default (or an event which, with
notice or lapse of time or both, would result in a default) under, its charter
or bylaws or any contract, commitment, agreement, understanding, arrangement or
restriction of any kind to which Parent is a party or by which Parent is bound
or any judgment, writ, decree, order or ruling applicable to Parent.
(c) Neither the execution and delivery of this Agreement nor the
performance by Parent of its obligations hereunder will violate any order, writ,
injunction, judgment, law, decree, statute, rule or regulation applicable to
Parent or require any consent, authorization or approval of, filing with, or
notice to, any court, administrative agency or other governmental body or
authority, other than any required notices or filings pursuant to the HSR Act or
the federal securities laws.
3. Representations and Warranties of Merger Sub.
Merger Sub represents and warrants to the Stockholders as follows:
(a) Merger Sub is (i) duly organized and validly existing and in good
standing under the laws of the State of Delaware, (ii) has the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby, and (iii) has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Agreement. This Agreement has been duly and validly executed and
delivered by Merger Sub and constitutes the legal, valid and binding obligation
of Merger Sub, enforceable against Merger Sub in accordance with its terms,
except to the extent that enforceability may be limited by applicable
bankruptcy, organization, insolvency, moratorium or other laws affecting the
enforcement of creditors' rights generally and by general principles of equity,
regardless of whether such enforceability is considered in a proceeding in
equity or at law.
(b) The execution and delivery of this Agreement by Merger Sub does
not, and the performance by Merger Sub of its obligations hereunder will not,
constitute a violation of, conflict with, or result in a default (or an event
which, with notice or lapse of time or both, would result in a default) under,
its charter or bylaws or any contract, commitment, agreement, understanding,
arrangement or restriction of any kind to which Merger Sub is a party or by
which Merger Sub is bound or any judgment, writ, decree, order or ruling
applicable to Merger Sub.
(c) Neither the execution and delivery of this Agreement nor the
performance by Merger Sub of its obligations hereunder will violate any order,
writ, injunction, judgment, law, decree, statute, rule or regulation applicable
to Merger Sub or require any consent, authorization or approval of, filing with,
or notice to, any court, administrative agency or other governmental body or
authority, other than any required notices or filings pursuant to the HSR Act or
the federal securities laws.
4. Tender of Shares.
(a) During the term of this Agreement, each Stockholder hereby agrees
to validly tender and sell (and not withdraw) pursuant to and in accordance with
the terms of the Tender Offer all of such Stockholder's Shares. Upon the
purchase of all Shares owned by a Stockholder pursuant to the Tender Offer in
accordance with this Section 4(a), this Agreement shall terminate solely with
respect to such Stockholder. Notwithstanding the provisions of this Section
4(a), in the event any Stockholder withdraws such Stockholder's Shares from the
Tender Offer for any reason or any such Shares are not purchased pursuant to the
Tender Offer, such Shares shall remain subject to the terms of this Agreement.
Each Stockholder acknowledges that Merger Sub's obligation to accept for payment
and pay for the Shares in the Offer is subject to all the terms and conditions
of the Offer.
(b) Each Stockholder hereby agrees to permit Parent and Merger Sub to
publish and disclose in the Offer to Purchase and all other related offering
materials filed by Parent or Merger Sub with the Securities and Exchange
Commission (the "SEC") or otherwise by Parent or Sub in connection with the
Tender Offer and, if approval of the stockholders of the Company is required
under applicable law in connection with the Merger, in the proxy statement sent
to the stockholders of the Company, including all documents and schedules filed
with the SEC, its identity and ownership of Company Common Stock and the nature
of its commitments, arrangements and understandings under this Agreement.
(c) The terms of this Agreement shall apply to all Shares issued
pursuant to the exercise of stock options issued by the Company to any
Stockholder, and each Stockholder agrees to tender all Shares issued upon the
exercise of such stock options. Notwithstanding anything in this Agreement to
the contrary, (i) until the exercise of any such stock options, the term
"Shares" as used herein shall be deemed not to include any such stock options,
and (ii) nothing contained herein shall be deemed to require any Stockholder to
exercise such stock options in order to tender the Shares issued upon such
exercise.
5. Transfer of the Shares.
During the term of this Agreement, except as otherwise provided herein,
no Stockholder shall (a) offer to sell, sell, pledge or otherwise dispose of or
transfer any interest in or encumber with any Lien any of such Stockholder's
Shares, except for transfer or sale to any affiliate of such Stockholder who
agrees to be bound by this Agreement, (b) deposit such Stockholder's Shares into
a voting trust, enter into a voting agreement or arrangement with respect to
such Shares or grant any proxy or power of attorney with respect to such Shares,
or (c) enter into any contract, option or other arrangement or undertaking with
respect to the direct or indirect acquisition or sale, assignment or other
disposition of or transfer of any interest in or the voting of any shares of
Company Common Stock or any other securities of the Company. Notwithstanding the
foregoing, a Stockholder may transfer such Stockholder's Shares to a charitable
organization as long as such charitable organization agrees to be bound by the
terms of this Agreement.
6. No Solicitation.
During the term of this Agreement, no Stockholder or any representative
of such person or entity, shall institute, pursue or continue any discussions,
negotiations or agreements (whether preliminary or definitive ) with any person
or entity other than Parent contemplating or providing for any public or private
offering of equity, merger, share exchange, acquisition, purchase or sale of a
significant amount of shares or assets or other business combination or change
in control of the Company, unless the Board of Directors of the Company
concludes in good faith, after receiving the advice of its counsel, that the
failure to take such action is likely to violate the fiduciary obligation of the
directors of the Company under applicable law.
7. Waiver of Appraisal Rights.
Each Stockholder hereby irrevocably waives any rights of appraisal or
rights to dissent from the Merger that such Stockholder may have.
8. Voting of Shares; Irrevocable Proxy.
(a) During the term of this Agreement, each Stockholder in its
capacity as such hereby agrees to vote each of its Shares at any annual, special
or adjourned meeting of the stockholders of the Company (1) in favor of the
Merger, the execution and delivery by the Company of the Merger Agreement and
the approval and adoption of the terms thereof and hereof; and (2) except as
otherwise agreed to in writing in advance by Parent, against the following
actions (other than the Merger and the other transactions contemplated by the
Merger Agreement): (i) any extraordinary corporate transaction, such as a
merger, consolidation or other business combination involving the Company or its
subsidiaries; (ii) a sale, lease or transfer of a material amount of assets of
the Company or one of its subsidiaries, or a reorganization, recapitalization,
dissolution or liquidation of the Company or its subsidiaries; or (iii) (A) any
change in a majority of the persons who constitute the Board of Directors of the
Company as of the date hereof; (B) any change in the present capitalization of
the Company or any amendment of the Company's certificate of incorporation or
bylaws, as amended to date; (C) any other material change in the Company's
corporate structure or business; or (D) any action that is intended, or could
reasonably be expected, to impede, interfere with, delay, postpone, or adversely
affect the Merger and the other transactions contemplated by this Agreement and
the Merger Agreement.
(b) Each Stockholder hereby irrevocably constitutes and appoints John
T. Herzog and James C. Wheat, III, and each of them as its sole and exclusive
and true and lawful agent and attorney-in-fact, with full power of substitution,
to vote all Company Common Stock that the holder is entitled to vote as
indicated in Section 8(a) above, to the same extent and with the same effect as
the Stockholder might or could do under any applicable laws or regulations
governing the rights and powers of stockholders of a Delaware corporation. This
proxy shall become effective as of the date hereof and shall expire upon
termination of this Agreement. This proxy is coupled with an interest and shall
be irrevocable and binding upon any and all transferees of the Company Common
Stock so long as it remains in effect pursuant to the terms hereof. This
proxy/power of attorney shall not terminate on disability of the principal. Each
Stockholder will take such further action as may be necessary to effect the
foregoing and hereby revokes any proxy previously granted by such Stockholder
with respect to such Stockholder's Company Stock.
9. Enforcement of the Agreement.
Each Stockholder acknowledges 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 Parent and Merger Sub will be entitled (i) to an
injunction or injunctions to prevent breaches of this Agreement and (ii) to
specifically enforce the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which it is entitled at law or in equity.
10. Adjustments.
The number and type of securities subject to this Agreement will be
appropriately adjusted in the event of any stock dividends, stock splits,
recapitalizations, combinations, exchanges of shares or the like or any other
action that would have the effect of changing any Stockholder's ownership of the
Company's capital stock or other securities.
11. Termination.
This Agreement will terminate on the earlier of (a) the purchase of all
the Shares pursuant to the Offer in accordance with Section 4, (b) the effective
time of the Merger and (c) the date on which the Merger Agreement is terminated
in accordance with its terms. Upon termination of this Agreement, all
obligations of the parties hereto shall terminate except to the extent that any
such party has committed a material breach of this Agreement prior to such
termination.
12. Expenses.
All fees and expenses incurred by any of the parties hereto shall be
borne by the party incurring such fees and expenses.
13. Brokerage.
Except as disclosed in the Merger Agreement (including the exhibits and
schedules thereto), each party represents and warrants to the others that there
are no claims for finder's fees or brokerage commissions or other like payments
in connection with this Agreement or the transactions contemplated hereby, and
each party agrees to indemnify and hold harmless the other parties from and
against any and all claims or liabilities for finder's fees or brokerage
commissions or other like payments incurred in connection with the transactions
contemplated hereby.
14. Miscellaneous.
(a) All representations and warranties contained herein expire at
the effective time of the Merger.
(b) Any provision of this Agreement may be waived at any time by the
party that is entitled to the benefits thereof. No such waiver, amendment or
supplement shall be effective unless in writing signed by the party or parties
sought to be bound thereby. Any waiver by any party of a breach of any provision
of this Agreement shall not operate as or be construed to be a waiver of any
other breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement or one or more sections hereof shall not be considered a waiver
or deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement.
(c) This Agreement contains the entire agreement among Parent, Merger
Sub and the Stockholders with respect to the subject matter hereof, and
supersedes all prior agreements among Parent, Merger Sub and the Stockholders
with respect to such matters. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified, except upon the delivery of a
written agreement executed by the parties hereto.
(d) The descriptive headings contained herein are for convenience and
reference only and shall not affect in any way the meaning or interpretation of
this Agreement.
(e) Any notice provided for in this Agreement will be in writing and
will be either personally delivered, sent by reliable overnight courier,
telecopied or mailed by first class mail, return receipt requested, to the
recipient at the address below indicated, or if to a Stockholder, the address
listed below such Stockholder's name on Annex A hereto.
Notices to the Parent or Merger Sub:
NPF Holding Corporation
NPF Acquisition Corporation
c/o Colonnade Capital, LLC
901 East Byrd Street, Suite 1300
Richmond, Virginia 23219
Attention: Mr. John T. Herzog
Mr. James C. Wheat, III
Telephone Number: (804) 782-3288
Telecopy Number: (804) 782-6606
With a copy (which will not constitute Notice to the Parent or Merger Sub) to:
Hunton & Williams
951 East Byrd Street
Richmond, Virginia 23219
Attention: Mr. John Owen Gwathmey
Telephone Number: (804) 788-8700
Telecopy Number: (804) 788-8218
or to such other address or to the attention of such other party as any party
may have furnished to the other parties in writing in accordance herewith.
(f) This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute one agreement.
(g) This Agreement is binding upon and is solely for the benefit of
the parties hereto and their respective successors, legal representatives and
assigns. Except as provided herein, neither this Agreement nor any of the
rights, interests or obligations under this Agreement may be assigned by any of
the parties hereto without the prior written consent of the other parties,
except that Merger Sub shall have the right to assign to Parent or any other
direct or indirect wholly owned Subsidiary of Parent any and all rights and
obligations of Merger Sub under this Agreement, including the right to purchase
Shares tendered by any Stockholder pursuant to the terms hereof and the Offer,
provided that any such assignment shall not relieve Merger Sub from any of its
obligations hereunder.
(h) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be cumulative
and not alternative, and the exercise of any thereof by either party shall not
preclude the simultaneous or later exercise of any other such right, power or
remedy by such party.
(j) Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable law,
but if 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 any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(k) All questions concerning the construction, validity and
interpretation of this Agreement will be governed by and construed in accordance
with the domestic laws of the State of Delaware, without giving effect to any
choice of law provision or rule (whether of the State of Delaware or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Delaware.
IN WITNESS WHEREOF, each of the parties hereto as caused this Agreement
to be duly executed as of the date first written above.
NPF HOLDING CORPORATION
By: __________________________________
Name:
Title:
NPF ACQUISITION CORPORATION
By: __________________________________
Name:
Title:
_______________________________________
[Stockholder]
ANNEX A
Stockholder Name and Address Number of Shares Tendered
- ---------------------------- -------------------------
Code, Hennessy & Simmons Limited Partnership 1,581,625
Andrew W. Code 0
Daniel J. Hennessy 1,300
Brian P. Simmons 3,500
Arthur L. Goeschel 5,000
Hesperus Partners Ltd. 317,655
Peter B. Foreman 0
John F. Levy 0
Jesse C. Luxton 329,795*
Jon S. Vesely 1,751
White Dwarf Partners, L.P. 279,845
Frank C. Meyer 0
*This number includes 166,000 shares that Mr. Luxton transferred to a charitable
trust in which he is the sole trustee and has sole voting and investment power.
EXHIBIT (C)(6)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT made as of September , 1997, by and between
NPF Acquisition Corporation, a Delaware corporation (the "Company"), and Richard
A. Beattie (the "Executive").
WHEREAS, the Board of Directors of the Company (the "Board") expects
that the Executive will make substantial contributions to the growth and
prospects of the Company; and
WHEREAS, the Board desires to obtain for the Company the services of
the Executive, and the Executive desires to be employed by the Company, all on
the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Employment. The Company will employ the Executive, and the
Executive accepts employment with the Company, upon the terms and conditions set
forth in this Agreement for the period beginning on the date (the "Effective
Date") that the Company acquires control of National Picture & Frame Company, a
Delaware corporation ("Old NPF"), upon completion of a tender offer or otherwise
and ending as provided in paragraph 4 below (the "Employment Period").
2. Position and Duties.
(a) Generally. During the Employment Period, the Executive
will serve as the Vice President of Sales and Marketing of the Company and will
have duties, responsibilities and authority that are commensurate with those
that the Executive had while he was employed by the Old NPF prior to the date of
this Agreement, subject to the general authority of the Company's Board of
Directors (the "Board").
(b) Reporting. The Executive will report to the Company's
President and Chief Executive Officer and will perform his duties and
responsibilities to the best of his abilities. The Executive shall devote his
full business time, (except for permitted vacation periods and reasonable
periods of illness or other incapacity) skills and attention to the business of
the Company and its Subsidiaries (as defined below), and except as specifically
approved by the Board, shall not engage in any other business activity or have
any other business affiliation. For purposes of this Agreement, "Subsidiaries"
means any corporation of which the securities having a majority of the voting
power in electing directors are, at the time of determination, owned by the
Company, directly or through one or more other Subsidiaries.
3. Base Salary, Bonus and Benefits.
(a) Base Salary. During the Employment Period, the Company
agrees to pay the Executive, for services rendered hereunder, a base salary at
the annual rate of $212,713 or such higher rate as the Compensation Committee of
the Board may designate in its sole and absolute discretion (the "Base Salary").
The Base Salary shall be payable in equal periodic installments, not less
frequently than monthly, less any sums which may be required to be deducted or
withheld under applicable provision of law. The Base Salary for any partial year
shall be prorated based upon the number of days elapsed in such year.
(b) Expenses. The Company shall pay or reimburse the
Executive for all reasonable expenses actually paid or incurred by the Executive
during the Employment Period in the performance of the Executive's duties under
this Agreement in accordance with the Company's employee business expense
reimbursement policies in effect from time to time.
(c) Bonuses, Etc. The Executive shall be entitled to receive
such bonus compensation (the "Bonus"), and to participate in the Company's
fiscal 1998 and fiscal 1999 bonus plan in effect as of the Effective Date which
shall include the terms set forth on Schedule I (which plan shall govern bonuses
for the 1998 and 1999 fiscal years) and such other profit sharing, stock option,
incentive, and performance award plans and programs, if any, as may from time to
time be determined by the President and Chief Executive Officer or the Board of
Directors.
(d) Benefits. During the Employment Period (and thereafter to
the extent expressly provided herein), the Executive shall be entitled to
participate in all of the Company's employee benefit plans (including vacation
policies for executive officers), which plans shall be commensurate in the
aggregate with such employee benefit plans of Old NPF, applicable to, and to the
same extent as the Company's highest ranking executives, according to the terms
of those plans, except that the Executive shall not be eligible for any
severance payments (other than as provided herein).
(e) Life Insurance. During the Employment Period, the
Executive shall be entitled to (and the Company shall carry) term life insurance
in an amount which is not less than two times the Base Salary then in effect.
(f) Stock Options. The Company will grant to the Executive
options to acquire shares of the Company's Common Stock representing 1.5% of the
outstanding Common Stock on a fully diluted basis as of the Effective Date. The
Options will be granted pursuant to the Company's employee stock option program,
which shall include the terms set forth on Schedule II.
4. Term and Termination.
(a) Duration. Unless renewed by the mutual agreement of the
Company and the Executive, the Employment Period will begin on the Effective
Date and end on April 30, 1999; provided that (i) the Employment Period will
terminate prior to such date upon the Executive's resignation, death or
permanent disability or incapacity (as determined by the Board in its reasonable
and good faith judgment) and (ii) the Employment Period may be terminated by the
Company at any time prior to April 30, 1999 as set forth below for Good Cause
(as defined below) or without Good Cause.
(b) Severance.
(i) Termination Without Good Cause. If the
Employment Period is terminated by the Company without Good Cause prior
to April 30, 1999, the Executive will be entitled to receive his Base
Salary (at the amount in effect as of such termination) through the
first anniversary of such termination, so long as the Executive has not
breached the provisions of paragraphs 5, 6 or 7 hereof. Upon request
from time to time, the Executive will furnish the Company with a true
and complete certification of any such compensation due to or received
by him. For purposes of this Agreement, termination of employment
includes, in addition to actual termination, termination by the
Executive resulting from a substantial diminution of the Executive's
duties or responsibilities compared to the duties and responsibilities
with Old NPF or any requirement to perform the Executive's duties and
responsibilities for the Company at a location more than 50 miles from
the current location of the Company's corporate headquarters (other
than in connection with supervision of manufacturing or sales
operations at remote sites resulting from expansion of the Company's
operations through acquisition or otherwise).
(ii) Termination Upon Death or Resignation. In the
event that the Employment Period terminates pursuant to Section 4(a)(i)
on account of the death of the Executive or such Executive's
resignation, (i) the Company shall pay to the Executive's surviving
spouse or, if none, his estate, a lump-sum amount equal to the sum of
the Executive's earned and unpaid salary through the date of his death,
additional salary in lieu of Executive's accrued and unused vacation,
any earned and unpaid Bonus pursuant to paragraph 3(c), any
unreimbursed business and entertainment expenses in accordance with the
Company's policies, and any unreimbursed employee benefit expenses that
are reimbursable in accordance with the Company's employee benefit
plans, and (ii) death benefits, if any, under the Company's employee
benefit plans shall be paid to the Executive's beneficiaries as
properly designated in writing by the Executive.
(c) Salary Through Termination With Good Cause. If the
Employment Period is terminated by the Company for Good Cause, the Executive
will be entitled to receive only his Base Salary through the date of termination
and any Bonus which has accrued pursuant to paragraph 3(c) on or prior to the
last day of the Employment Period.
(d) Other Rights. All of the Executive's rights to
fringe benefits and bonuses hereunder (if any) accruing after the termination
of the Employment Period will cease upon such termination.
(e) "Good Cause." For purposes of this agreement,
"Good Cause" means:
(i) the commission of a felony or the
commission of a crime involving moral turpitude;
(ii) embezzlement, misappropriation of
property of the Company or any of its Subsidiaries, or any other
act involving dishonesty or fraud with respect to the Company or any
of its Subsidiaries; or
(iii) any other material breach of this Agreement
which is not cured within 15 days after written notice of such breach
to the Executive.
5. Confidential Information. The Executive understands and
acknowledges that during his employment with the Company he will be exposed to
Confidential Information (as defined below) which is proprietary and which
rightfully belongs to the Company. The Executive agrees that he will not use or
cause to be used for his own benefit, either directly or indirectly, or disclose
any of such Confidential Information at any time, either during or after his
employment with the Company, without the Company's prior written consent. The
Executive shall take all reasonable steps to safeguard such Confidential
Information that is within his possession or control and to protect such
information against disclosure, misuse, loss or theft. The Executive's
obligations under this section with respect to any specific Confidential
Information shall cease when that specific Confidential Information becomes
publicly known or when it is disclosed by any person, firm, corporation or
business entity which is not bound by the terms of a confidentiality agreement
with the Company. The term "Confidential Information" shall mean any information
not generally known in the relevant trade or industry, which was obtained from
the Company, or which was learned as a result of the performance of any services
by the Executive on behalf of the Company, and which falls within the following
general categories:
(i) information concerning trade secrets of the
Company;
(ii) information concerning existing or
contemplated products, services, technology, designs,
processes and research or product developments of the Company;
(iii) information concerning business plans, sales or
marketing methods, methods of doing business, customer lists,
customer usages and/or requirements, or supplier information
of the Company; and
(iv) any other confidential information which the
Company may reasonably have the right to protect by patent,
copyright or by keeping it secret and confidential.
"Confidential Information" shall not include general business skills or
non-proprietary business or industry knowledge of the Executive.
6. Inventions and Patents.
(a) Company Business. The Executive understands that the
Company is engaged in a continuous program of research, development, production
and marketing in connection with its business and that, as an essential part of
the Executive's employment with the Company, the Executive may be expected to
make new contributions to and create inventions of value for the Company.
(b) Disclosure of Inventions. During the Employment Period,
the Executive will promptly disclose in confidence to the Company all
inventions, improvements, designs, original works of authorship, formulas,
processes, compositions of matter, computer software programs, databases, mask
works and trade secrets ("Inventions"), whether or not patentable, copyrightable
or protectible as trade secrets, that are made or conceived or first reduced to
practice or created by the Executive, either alone or jointly with others,
during the Employment Period, whether or not in the course of the Executive's
employment or within the scope of the Company's business.
(c) Work for Hire; Assignment of Inventions. The Executive
acknowledges that copyrightable works prepared by the Executive within the scope
of the Executive's employment are "works for hire" under the Federal Copyright
Act and that the Company will be considered the author thereof. The Executive
agrees that all Inventions that (a) are developed using equipment, supplies,
facilities or trade secrets of the Company, (b) result from work performed by
the Executive for the Company, or (c) relate to the Company's business or
current or anticipated research and development, will be the sole and exclusive
property of the Company and are hereby assigned by the Executive to the Company.
(d) Assignment of Other Rights. The Executive hereby
irrevocably transfers and assigns to the Company: (a) all worldwide patents,
patent applications, copyrights, mask works, trade secrets and other
intellectual property rights in any Invention; and (b) any and all Moral Rights
(as defined below) that the Executive may have in or with respect to any
Invention. The Executive also hereby forever waives and agrees never to assert
any and all Moral Rights the Executive may have in or with respect to any
Invention, even after termination of the Employment Period. "Moral Rights" mean
any rights to claim authorship of an Invention, to object to or prevent the
modification of any Invention, or to withdraw from circulation or control the
publication or distribution of any Invention, and any similar right, existing
under judicial or statutory law of any country in the world, or under any
treaty, regardless of whether or not such right is denominated or generally
referred to as a "moral right."
(e) Assistance. The Executive agrees to assist the Company in
every proper way to obtain for the Company and enforce patents, copyrights, mask
work rights, trade secret rights, other intellectual property rights and other
legal protections for the Company's Inventions in any and all countries. The
Executive will execute any documents that the Company may reasonably request for
use in obtaining or enforcing such patents, copyrights, mask work rights, trade
secrets and other legal protections. The Executive appoints the Secretary of the
Company as the Executive's attorney-in-fact to execute documents on the
Executive's behalf for this purpose. The Executive's obligations under this
paragraph will continue beyond the termination of the Employment Period,
provided that the Company will compensate the Executive at a reasonable rate
after such termination for time or expenses actually spent by the Executive at
the Company's request on such assistance.
7. Non-Compete, Non-Solicitation, Non-Interference.
(a) The Executive acknowledges that in the course of his
employment with the Company he will become familiar, and during his employment
with Old NPF prior to the date of this Agreement he has become familiar, with
the Company's and its Subsidiaries' trade secrets and with other Confidential
Information and that his services have been and will be of special, unique and
extraordinary value to the Company and its Subsidiaries. Therefore, the
Executive agrees that, during the Employment Period and for a period of 12
months thereafter (the "Non-Compete Period"), he will not directly or
indirectly, either for himself or any other person, own, manage, control,
participate in, consult with, render services for, permit his name to be used by
or in any manner engage in any business competing with the businesses of the
Company or its Subsidiaries as such businesses exist or are in process on the
date of the termination of the Executive's employment, within any geographical
area in which the Company or its Subsidiaries engage or plan to engage in such
businesses. Nothing herein will prohibit the Executive from being a passive
owner of not more than 2% of the outstanding stock of any class of a corporation
which is publicly traded, so long as the Executive has no active participation
in the business of such corporation.
(b) During the Non-Compete Period, the Executive will not
directly or indirectly through another person (i) induce or attempt to induce
any employee of the Company or any Subsidiary to leave the employ of the Company
or such Subsidiary, or in any way interfere with the relationship between the
Company or any Subsidiary and any employee thereof, (ii) hire any person who was
an employee of the Company or any Subsidiary at any time during the Employment
Period, or (iii) induce or attempt to induce any customer, supplier, licensee or
other business relation of the Company or any Subsidiary to cease doing business
with the Company or such Subsidiary, or in any way interfere with the
relationship between any such customer, supplier, licensee or business relation
and the Company or any Subsidiary.
(c) During the Non-Compete Period, the Executive agrees not
to take any action that might interfere with or disrupt the Company's business
or its relationships with its customers, suppliers or employees.
8. Enforcement. If, at the time of enforcement of paragraphs 5, 6 or 7
of this Agreement, a court of competent jurisdiction holds that the restrictions
stated herein are unreasonable under circumstances then existing, the parties
hereto agree that the maximum period, scope or geographical area reasonable
under such circumstances will be substituted for the stated period, scope or
area. Because the Executive's services are unique and because the Executive has
access to Confidential Information and Inventions, the parties hereto agree that
money damages would be an inadequate remedy for any breach of paragraphs 5, 6 or
7 of this Agreement. Therefore, in the event of a breach or threatened breach of
paragraphs 5, 6 or 7 of this Agreement, the Company, any of its Subsidiaries or
any of their respective successors or assigns may, in addition to other rights
and remedies existing in their favor, apply to any court of competent
jurisdiction for specific performance or injunctive or other relief in order to
enforce, or prevent any violations of, the provisions hereof (without posting a
bond or other security). The Executive agrees that these restrictions are
reasonable.
9. Investment in the Company. The Executive agrees that, as a
condition to his employment with the Company, the Executive will invest on the
Effective Date $250,000 in the Company, which investment shall be payable either
in cash or with shares of common stock of Old NPF as shall be mutually agreed
between the Company and the Executive, including, if feasible and not
detrimental to the Company, a tax free rollover of options to purchase shares of
common stock of Old NPF into shares of the Company. In connection with this
investment, the Executive agrees to execute a Shareholder's Agreement between
the Company and all of its shareholders.
10. Representations.
(a) The Executive hereby represents and warrants to the
Company that (i) the execution, delivery and performance of this Agreement by
the Executive does not and will not conflict with, breach, violate or cause a
default under any contract, agreement, instrument, order, judgment or decree to
which the Executive is a party or by which he is bound, (ii) the Executive is
not a party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity and (iii) upon the
execution and delivery of this Agreement by the Executive, this Agreement will
be the valid and binding obligation of the Executive, enforceable in accordance
with its terms.
(b) The Company hereby represents and warrants to the
Executive that (i) the execution, delivery and performance of this Agreement by
the Company does not and will not conflict with, breach, violate or cause a
default under any contract, agreement, instrument, order, judgment or decree to
which the Company is a party or by which it is bound and (ii) upon the execution
and delivery of this Agreement by the Company, this Agreement will be the valid
and binding obligation of the Company, enforceable in accordance with its terms.
11. Survival. Paragraphs 5, 6 and 7 will survive and continue
in full force in accordance with their terms notwithstanding any termination
of the Employment Period.
12. Notices. Any notice provided for in this Agreement will
be in writing and will be either personally delivered, sent by reliable
overnight courier, telecopied or mailed by first class mail, return
receipt requested, to the recipient at the address below indicated:
Notices to the Executive:
Richard A. Beattie
Address: 702 Highway 82 West
Greenwood, Mississippi 38930
Telephone Number: (601) 451-4800
Telecopy Number: (601) 451-4805
With a copy (which will not constitute Notice to the Executive) to:
Altheimer & Gray
10 South Wacker Drive, Suite 4000
Chicago, Illinois 60605
Attention: Phillip Gordon, Esq.
Telephone Number: (312) 715-4010
Telecopy Number: (312) 715-4800
Notices to the Company:
NPF Acquisition Corporation
c/o Colonnade Capital, L.L.C.
Riverfront Plaza, West Tower
901 East Byrd Street, Suite 1300
Richmond, Virginia 23219
Attention: Mr. James C. Wheat, III
Mr. John T. Herzog
Telephone Number: (804) 782-3288
Telecopy Number: (804) 782-6606
With a copy (which will not constitute Notice to the Company) to:
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219
Attention: John Owen Gwathmey, Esq.
Telephone Number: (804) 788-8700
Telecopy Number: (804) 788-8218
or such other address or to the attention of such other person as the recipient
party will have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered,
sent, telecopied or mailed.
13. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if 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 any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
14. Complete Agreement. This Agreement, whose documents expressly
referred to herein and other documents of even date herein embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
15. Counterparts. This Agreement may be executed in
separate counterparts, each of which is deemed to be an original and all of
which taken together constitute one and the same agreement.
16. Successors and Assigns. This Agreement is intended to bind and
inure to the benefit of and be enforceable by the Executive, the Company and
their respective heirs, successors and assigns, except that the Executive may
not assign his rights or delegate his obligations hereunder without the prior
written consent of the Company.
17. Choice of Law. All questions concerning the construction, validity
and interpretation of this Agreement will be governed by and construed in
accordance with the domestic laws of the Commonwealth of Virginia, without
giving effect to any choice of law provision or rule (whether of the
Commonwealth of Virginia or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the Commonwealth of
Virginia.
18. Amendment and Waiver. The provisions of this Agreement may be
amended or waived only with the prior written consent of the Company and the
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement will affect the validity, binding effect or
enforceability of this Agreement.
19. Other Definitive Provisions.
(a) Paragraph references contained in this Agreement are
references to paragraphs in this Agreement, unless otherwise specified. Each
defined term used in this Agreement has a comparable meaning when used in its
plural or singular form. Each gender-specific term used in this Agreement has a
comparable meaning whether used in a masculine, feminine or gender-neutral form.
(b) Whenever the term "including" (whether or not that term
is followed by the phrase "but not limited to" or "without limitation" or words
of similar effect) is used in this Agreement in connection with a listing of
items within a particular classification, that listing will be interpreted to be
illustrative only and will not be interpreted as a limitation on, or an
exclusive listing of, the items within that classification.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first written above.
NPF ACQUISITION CORPORATION
By: Colonnade Capital, L.L.C., on behalf of
NPF Acquisition Corporation
By: _____________________________
James C. Wheat, III
Managing Partner
______________________________________
Richard A. Beattie
EXHIBIT (C)(7)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT made as of September , 1997, by and between
NPF Acquisition Corporation, a Delaware corporation (the "Company"), and Billy
D. Moore (the "Executive").
WHEREAS, the Board of Directors of the Company (the "Board") expects
that the Executive will make substantial contributions to the growth and
prospects of the Company; and
WHEREAS, the Board desires to obtain for the Company the services of
the Executive, and the Executive desires to be employed by the Company, all on
the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Employment. The Company will employ the Executive, and the
Executive accepts employment with the Company, upon the terms and conditions set
forth in this Agreement for the period beginning on the date (the "Effective
Date") that the Company acquires control of National Picture & Frame Company, a
Delaware corporation ("Old NPF"), upon completion of a tender offer or otherwise
and ending as provided in paragraph 4 below (the "Employment Period").
2. Position and Duties.
(a) Generally. During the Employment Period, the Executive
will serve as the Vice President and General Manager of the Company and will
have duties, responsibilities and authority that are commensurate with those
that the Executive had while he was employed by the Old NPF prior to the date of
this Agreement, subject to the general authority of the Company's Board of
Directors (the "Board").
(b) Reporting. The Executive will report to the Company's
President and Chief Executive Officer and will perform his duties and
responsibilities to the best of his abilities. The Executive shall devote his
full business time, (except for permitted vacation periods and reasonable
periods of illness or other incapacity) skills and attention to the business of
the Company and its Subsidiaries (as defined below), and except as specifically
approved by the Board, shall not engage in any other business activity or have
any other business affiliation. For purposes of this Agreement, "Subsidiaries"
means any corporation of which the securities having a majority of the voting
power in electing directors are, at the time of determination, owned by the
Company, directly or through one or more other Subsidiaries.
3. Base Salary, Bonus and Benefits.
(a) Base Salary. During the Employment Period, the Company
agrees to pay the Executive, for services rendered hereunder, a base salary at
the annual rate of $212,713 or such higher rate as the Compensation Committee of
the Board may designate in its sole and absolute discretion (the "Base Salary").
The Base Salary shall be payable in equal periodic installments, not less
frequently than monthly, less any sums which may be required to be deducted or
withheld under applicable provision of law. The Base Salary for any partial year
shall be prorated based upon the number of days elapsed in such year.
(b) Expenses. The Company shall pay or reimburse the
Executive for all reasonable expenses actually paid or incurred by the Executive
during the Employment Period in the performance of the Executive's duties under
this Agreement in accordance with the Company's employee business expense
reimbursement policies in effect from time to time.
(c) Bonuses, Etc. The Executive shall be entitled to receive
such bonus compensation (the "Bonus"), and to participate in the Company's
fiscal 1998 and fiscal 1999 bonus plan in effect as of the Effective Date which
shall include the terms set forth on Schedule I (which plan shall govern bonuses
for the 1998 and 1999 fiscal years) and such other profit sharing, stock option,
incentive, and performance award plans and programs, if any, as may from time to
time be determined by the President and Chief Executive Officer or the Board of
Directors.
(d) Benefits. During the Employment Period (and thereafter to
the extent expressly provided herein), the Executive shall be entitled to
participate in all of the Company's employee benefit plans (including vacation
policies for executive officers), which plans shall be commensurate in the
aggregate with such employee benefit plans of Old NPF, applicable to, and to the
same extent as the Company's highest ranking executives, according to the terms
of those plans, except that the Executive shall not be eligible for any
severance payments (other than as provided herein).
(e) Life Insurance. During the Employment Period, the
Executive shall be entitled to (and the Company shall carry) term life insurance
in an amount which is not less than two times the Base Salary then in effect.
(f) Stock Options. The Company will grant to the Executive
options to acquire shares of the Company's Common Stock representing 1.5% of the
outstanding Common Stock on a fully diluted basis as of the Effective Date. The
Options will be granted pursuant to the Company's employee stock option program,
which shall include the terms set forth on Schedule II.
4. Term and Termination.
(a) Duration. Unless renewed by the mutual agreement of the
Company and the Executive, the Employment Period will begin on the Effective
Date and end on April 30, 1999; provided that (i) the Employment Period will
terminate prior to such date upon the Executive's resignation, death or
permanent disability or incapacity (as determined by the Board in its reasonable
and good faith judgment) and (ii) the Employment Period may be terminated by the
Company at any time prior to April 30, 1999 as set forth below for Good Cause
(as defined below) or without Good Cause.
(b) Severance.
(i) Termination Without Good Cause. If the
Employment Period is terminated by the Company without Good Cause prior
to April 30, 1999, the Executive will be entitled to receive his Base
Salary (at the amount in effect as of such termination) through the
first anniversary of such termination, so long as the Executive has not
breached the provisions of paragraphs 5, 6 or 7 hereof. Upon request
from time to time, the Executive will furnish the Company with a true
and complete certification of any such compensation due to or received
by him. For purposes of this Agreement, termination of employment
includes, in addition to actual termination, termination by the
Executive resulting from a substantial diminution of the Executive's
duties or responsibilities compared to the duties and responsibilities
with Old NPF or any requirement to perform the Executive's duties and
responsibilities for the Company at a location more than 50 miles from
the current location of the Company's corporate headquarters (other
than in connection with supervision of manufacturing or sales
operations at remote sites resulting from expansion of the Company's
operations through acquisition or otherwise).
(ii) Termination Upon Death or Resignation. In the
event that the Employment Period terminates pursuant to Section 4(a)(i)
on account of the death of the Executive or such Executive's
resignation, (i) the Company shall pay to the Executive's surviving
spouse or, if none, his estate, a lump-sum amount equal to the sum of
the Executive's earned and unpaid salary through the date of his death,
additional salary in lieu of Executive's accrued and unused vacation,
any earned and unpaid Bonus pursuant to paragraph 3(c), any
unreimbursed business and entertainment expenses in accordance with the
Company's policies, and any unreimbursed employee benefit expenses that
are reimbursable in accordance with the Company's employee benefit
plans, and (ii) death benefits, if any, under the Company's employee
benefit plans shall be paid to the Executive's beneficiaries as
properly designated in writing by the Executive.
(c) Salary Through Termination With Good Cause. If the
Employment Period is terminated by the Company for Good Cause, the Executive
will be entitled to receive only his Base Salary through the date of termination
and any Bonus which has accrued pursuant to paragraph 3(c) on or prior to the
last day of the Employment Period.
(d) Other Rights. All of the Executive's rights to
fringe benefits and bonuses hereunder (if any) accruing after the termination
of the Employment Period will cease upon such termination.
(e) "Good Cause." For purposes of this agreement,
"Good Cause" means:
(i) the commission of a felony or the
commission of a crime involving moral turpitude;
(ii) embezzlement, misappropriation of
property of the Company or any of its Subsidiaries, or any other
act involving dishonesty or fraud with respect to the Company or any
of its Subsidiaries; or
(iii) any other material breach of this Agreement
which is not cured within 15 days after written notice of such breach
to the Executive.
5. Confidential Information. The Executive understands and
acknowledges that during his employment with the Company he will be exposed to
Confidential Information (as defined below) which is proprietary and which
rightfully belongs to the Company. The Executive agrees that he will not use or
cause to be used for his own benefit, either directly or indirectly, or disclose
any of such Confidential Information at any time, either during or after his
employment with the Company, without the Company's prior written consent. The
Executive shall take all reasonable steps to safeguard such Confidential
Information that is within his possession or control and to protect such
information against disclosure, misuse, loss or theft. The Executive's
obligations under this section with respect to any specific Confidential
Information shall cease when that specific Confidential Information becomes
publicly known or when it is disclosed by any person, firm, corporation or
business entity which is not bound by the terms of a confidentiality agreement
with the Company. The term "Confidential Information" shall mean any information
not generally known in the relevant trade or industry, which was obtained from
the Company, or which was learned as a result of the performance of any services
by the Executive on behalf of the Company, and which falls within the following
general categories:
(i) information concerning trade secrets of the
Company;
(ii) information concerning existing or
contemplated products, services, technology, designs,
processes and research or product developments of the Company;
(iii) information concerning business plans, sales or
marketing methods, methods of doing business, customer lists,
customer usages and/or requirements, or supplier information
of the Company; and
(iv) any other confidential information which the
Company may reasonably have the right to protect by patent,
copyright or by keeping it secret and confidential.
"Confidential Information" shall not include general business skills or
non-proprietary business or industry knowledge of the Executive.
6. Inventions and Patents.
(a) Company Business. The Executive understands that the
Company is engaged in a continuous program of research, development, production
and marketing in connection with its business and that, as an essential part of
the Executive's employment with the Company, the Executive may be expected to
make new contributions to and create inventions of value for the Company.
(b) Disclosure of Inventions. During the Employment Period,
the Executive will promptly disclose in confidence to the Company all
inventions, improvements, designs, original works of authorship, formulas,
processes, compositions of matter, computer software programs, databases, mask
works and trade secrets ("Inventions"), whether or not patentable, copyrightable
or protectible as trade secrets, that are made or conceived or first reduced to
practice or created by the Executive, either alone or jointly with others,
during the Employment Period, whether or not in the course of the Executive's
employment or within the scope of the Company's business.
(c) Work for Hire; Assignment of Inventions. The Executive
acknowledges that copyrightable works prepared by the Executive within the scope
of the Executive's employment are "works for hire" under the Federal Copyright
Act and that the Company will be considered the author thereof. The Executive
agrees that all Inventions that (a) are developed using equipment, supplies,
facilities or trade secrets of the Company, (b) result from work performed by
the Executive for the Company, or (c) relate to the Company's business or
current or anticipated research and development, will be the sole and exclusive
property of the Company and are hereby assigned by the Executive to the Company.
(d) Assignment of Other Rights. The Executive hereby
irrevocably transfers and assigns to the Company: (a) all worldwide patents,
patent applications, copyrights, mask works, trade secrets and other
intellectual property rights in any Invention; and (b) any and all Moral Rights
(as defined below) that the Executive may have in or with respect to any
Invention. The Executive also hereby forever waives and agrees never to assert
any and all Moral Rights the Executive may have in or with respect to any
Invention, even after termination of the Employment Period. "Moral Rights" mean
any rights to claim authorship of an Invention, to object to or prevent the
modification of any Invention, or to withdraw from circulation or control the
publication or distribution of any Invention, and any similar right, existing
under judicial or statutory law of any country in the world, or under any
treaty, regardless of whether or not such right is denominated or generally
referred to as a "moral right."
(e) Assistance. The Executive agrees to assist the Company in
every proper way to obtain for the Company and enforce patents, copyrights, mask
work rights, trade secret rights, other intellectual property rights and other
legal protections for the Company's Inventions in any and all countries. The
Executive will execute any documents that the Company may reasonably request for
use in obtaining or enforcing such patents, copyrights, mask work rights, trade
secrets and other legal protections. The Executive appoints the Secretary of the
Company as the Executive's attorney-in-fact to execute documents on the
Executive's behalf for this purpose. The Executive's obligations under this
paragraph will continue beyond the termination of the Employment Period,
provided that the Company will compensate the Executive at a reasonable rate
after such termination for time or expenses actually spent by the Executive at
the Company's request on such assistance.
7. Non-Compete, Non-Solicitation, Non-Interference.
(a) The Executive acknowledges that in the course of his
employment with the Company he will become familiar, and during his employment
with Old NPF prior to the date of this Agreement he has become familiar, with
the Company's and its Subsidiaries' trade secrets and with other Confidential
Information and that his services have been and will be of special, unique and
extraordinary value to the Company and its Subsidiaries. Therefore, the
Executive agrees that, during the Employment Period and for a period of 12
months thereafter (the "Non-Compete Period"), he will not directly or
indirectly, either for himself or any other person, own, manage, control,
participate in, consult with, render services for, permit his name to be used by
or in any manner engage in any business competing with the businesses of the
Company or its Subsidiaries as such businesses exist or are in process on the
date of the termination of the Executive's employment, within any geographical
area in which the Company or its Subsidiaries engage or plan to engage in such
businesses. Nothing herein will prohibit the Executive from being a passive
owner of not more than 2% of the outstanding stock of any class of a corporation
which is publicly traded, so long as the Executive has no active participation
in the business of such corporation.
(b) During the Non-Compete Period, the Executive will not
directly or indirectly through another person (i) induce or attempt to induce
any employee of the Company or any Subsidiary to leave the employ of the Company
or such Subsidiary, or in any way interfere with the relationship between the
Company or any Subsidiary and any employee thereof, (ii) hire any person who was
an employee of the Company or any Subsidiary at any time during the Employment
Period, or (iii) induce or attempt to induce any customer, supplier, licensee or
other business relation of the Company or any Subsidiary to cease doing business
with the Company or such Subsidiary, or in any way interfere with the
relationship between any such customer, supplier, licensee or business relation
and the Company or any Subsidiary.
(c) During the Non-Compete Period, the Executive agrees not
to take any action that might interfere with or disrupt the Company's business
or its relationships with its customers, suppliers or employees.
8. Enforcement. If, at the time of enforcement of paragraphs 5, 6 or 7
of this Agreement, a court of competent jurisdiction holds that the restrictions
stated herein are unreasonable under circumstances then existing, the parties
hereto agree that the maximum period, scope or geographical area reasonable
under such circumstances will be substituted for the stated period, scope or
area. Because the Executive's services are unique and because the Executive has
access to Confidential Information and Inventions, the parties hereto agree that
money damages would be an inadequate remedy for any breach of paragraphs 5, 6 or
7 of this Agreement. Therefore, in the event of a breach or threatened breach of
paragraphs 5, 6 or 7 of this Agreement, the Company, any of its Subsidiaries or
any of their respective successors or assigns may, in addition to other rights
and remedies existing in their favor, apply to any court of competent
jurisdiction for specific performance or injunctive or other relief in order to
enforce, or prevent any violations of, the provisions hereof (without posting a
bond or other security). The Executive agrees that these restrictions are
reasonable.
9. Investment in the Company. The Executive agrees that, as a
condition to his employment with the Company, the Executive will invest on the
Effective Date $500,000 in the Company, which investment shall be payable either
in cash or with shares of common stock of Old NPF as shall be mutually agreed
between the Company and the Executive, including, if feasible and not
detrimental to the Company, a tax free rollover of options to purchase shares of
common stock of Old NPF into shares of the Company. In connection with this
investment, the Executive agrees to execute a Shareholder's Agreement between
the Company and all of its shareholders.
10. Representations.
(a) The Executive hereby represents and warrants to the
Company that (i) the execution, delivery and performance of this Agreement by
the Executive does not and will not conflict with, breach, violate or cause a
default under any contract, agreement, instrument, order, judgment or decree to
which the Executive is a party or by which he is bound, (ii) the Executive is
not a party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity and (iii) upon the
execution and delivery of this Agreement by the Executive, this Agreement will
be the valid and binding obligation of the Executive, enforceable in accordance
with its terms.
(b) The Company hereby represents and warrants to the
Executive that (i) the execution, delivery and performance of this Agreement by
the Company does not and will not conflict with, breach, violate or cause a
default under any contract, agreement, instrument, order, judgment or decree to
which the Company is a party or by which it is bound and (ii) upon the execution
and delivery of this Agreement by the Company, this Agreement will be the valid
and binding obligation of the Company, enforceable in accordance with its terms.
11. Survival. Paragraphs 5, 6 and 7 will survive and continue
in full force in accordance with their terms notwithstanding any termination
of the Employment Period.
12. Notices. Any notice provided for in this Agreement will
be in writing and will be either personally delivered, sent by reliable
overnight courier, telecopied or mailed by first class mail, return
receipt requested, to the recipient at the address below indicated:
Notices to the Executive:
Billy D. Moore
Address: 702 Highway 82 West
Greenwood, Mississippi 38930
Telephone Number: (601) 451-4800
Telecopy Number: (601) 451-4805
With a copy (which will not constitute Notice to the Executive) to:
Altheimer & Gray
10 South Wacker Drive, Suite 4000
Chicago, Illinois 60605
Attention: Phillip Gordon, Esq.
Telephone Number: (312) 715-4010
Telecopy Number: (312) 715-4800
Notices to the Company:
NPF Acquisition Corporation
c/o Colonnade Capital, L.L.C.
Riverfront Plaza, West Tower
901 East Byrd Street, Suite 1300
Richmond, Virginia 23219
Attention: Mr. James C. Wheat, III
Mr. John T. Herzog
Telephone Number: (804) 782-3288
Telecopy Number: (804) 782-6606
With a copy (which will not constitute Notice to the Company) to:
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219
Attention: John Owen Gwathmey, Esq.
Telephone Number: (804) 788-8700
Telecopy Number: (804) 788-8218
or such other address or to the attention of such other person as the recipient
party will have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered,
sent, telecopied or mailed.
13. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if 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 any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
14. Complete Agreement. This Agreement, whose documents expressly
referred to herein and other documents of even date herein embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
15. Counterparts. This Agreement may be executed in
separate counterparts, each of which is deemed to be an original and all of
which taken together constitute one and the same agreement.
16. Successors and Assigns. This Agreement is intended to bind and
inure to the benefit of and be enforceable by the Executive, the Company and
their respective heirs, successors and assigns, except that the Executive may
not assign his rights or delegate his obligations hereunder without the prior
written consent of the Company.
17. Choice of Law. All questions concerning the construction, validity
and interpretation of this Agreement will be governed by and construed in
accordance with the domestic laws of the Commonwealth of Virginia, without
giving effect to any choice of law provision or rule (whether of the
Commonwealth of Virginia or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the Commonwealth of
Virginia.
18. Amendment and Waiver. The provisions of this Agreement may be
amended or waived only with the prior written consent of the Company and the
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement will affect the validity, binding effect or
enforceability of this Agreement.
19. Other Definitive Provisions.
(a) Paragraph references contained in this Agreement are
references to paragraphs in this Agreement, unless otherwise specified. Each
defined term used in this Agreement has a comparable meaning when used in its
plural or singular form. Each gender-specific term used in this Agreement has a
comparable meaning whether used in a masculine, feminine or gender-neutral form.
(b) Whenever the term "including" (whether or not that term
is followed by the phrase "but not limited to" or "without limitation" or words
of similar effect) is used in this Agreement in connection with a listing of
items within a particular classification, that listing will be interpreted to be
illustrative only and will not be interpreted as a limitation on, or an
exclusive listing of, the items within that classification.
IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement
as of the date first written above.
NPF ACQUISITION CORPORATION
By: Colonnade Capital, L.L.C., on behalf of
NPF Acquisition Corporation
By: _____________________________
James C. Wheat, III
Managing Partner
_____________________________________
Billy D. Moore
EXHIBIT (C)(8)
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT, dated as of August 1, 1997, by and between
NPF Acquisition Corporation, a Delaware corporation (the "Company"), and Jesse
C. Luxton ("Consultant") recites and provides as follows.
WHEREAS, Consultant has substantial experience in and knowledge of the
business of the Company to which the Company desires to have access;
WHEREAS, Consultant has been employed as the Chief Executive Officer
and President of National Picture & Frame Company, a Delaware corporation ("Old
NPF"), which is being acquired by the Company in a merger (the "Merger")
pursuant to a merger agreement dated; and
WHEREAS, Consultant desires to make available to the Company such
experience and knowledge following such acquisition during the term of this
Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Duties of Consultant.
Consultant shall provide services and advice to the officers and
directors of the Company on an as needed basis relating to the transition of
customer accounts from Old NPF to the Company, the development of new business
for the Company, and general advisory services in connection with the operations
of the Company and its subsidiaries, but shall not be required to maintain
regular office hours at the Company. Consultant shall provide such services and
advice to the Company as requested for a minimum of 120 business days per year
during the term of this Agreement, which shall consist of a minimum of 15
business days per month for the first three calendar months immediately
following the effective time of the Merger and a minimum of 12 days per month
for the next three calendar months immediately thereafter. In the event that
Consultant works less than 120 days in any year, then he shall work such
additional business days during the first three months of the next year as shall
equal the difference between 120 days and the number of days actually worked by
Consultant during such prior year. Consultant shall not be entitled to
additional compensation pursuant to this Agreement if he provides advice and
services for more than 120 business days during any year. Consultant agrees to
submit a proposed calendar at the beginning of each year setting forth
Consultant's proposed services for the Company for such year, which calendar
shall be approved by the Vice President of Sales of the Company. The Consultant
shall maintain a log of his time spent in providing services under this
Agreement. At the end of each calendar month, Consultant shall submit to the
Company a log detailing the services rendered by Consultant for the Company
during such month. For purposes of this paragraph 1, any day during which the
Consultant provides eight hours or more of services hereunder shall constitute
one full day. During any day in which the Consultant performs less than eight
hours of services hereunder, such time shall be accumulated. Accumulated time
shall constitute one full day of services hereunder at such time as such
accumulated time equals eight full hours.
2. Compensation.
In return for the services to be provided hereunder, Consultant shall
receive a consulting fee of $150,000 per year, payable monthly in arrears, and
shall be reimbursed against receipts for all expenses reasonably incurred by him
in connection with the performance of such services pursuant to paragraph 7
below. Notwithstanding anything to the contrary in the Consultant's existing
employment agreement with Old NPF, as amended (the "Existing Employment
Agreement"), the Company agrees that payments made to the Consultant hereunder
shall not result in any offset of amounts payable to the Consultant under the
Existing Employment Agreement.
3. Reporting.
Consultant will report to an appropriate executive officer of the
Company as determined by the Board of Directors of the Company and will perform
his duties and responsibilities to the best of his abilities. Consultant will
make himself reasonably available to the Company and will undertake his efforts
in good faith on behalf of the best interests of the Company.
4. Other Business of Consultant.
Consultant shall not be required to devote full time to his duties and
responsibilities as set forth herein and may alone, or through any business,
partnership, corporation, affiliate or other related party, engage independently
or with others in other businesses and activities of any nature or description
so long as such activity does not violate paragraphs 1 or 9 hereof.
5. Independent Contractor.
Consultant at all times will act as an independent contractor and will
not act or hold himself out to third parties as an employee or agent of the
Company. Nothing in this Agreement or to be done pursuant to its terms and
conditions is intended to, or shall, create a partnership, joint venture,
principal-agent or employer-employee relationship between the Company and
Consultant. Consultant shall be responsible for all taxes and recordkeeping in
connection with amounts paid to him hereunder and shall have no right to
participate in any of the Company's employee benefit or welfare plans, except to
the extent set forth in paragraph 7 below.
6. Term.
This term of this Agreement will commence as of the effective time of
the Merger and will continue for one year from such date, subject to renewal
thereafter for additional one year periods upon mutual agreement of the Company
and Consultant. The Company may terminate this Agreement at any time, but shall
be obligated to pay Consultant the remaining payments required pursuant to
paragraph 2 through the date that this Agreement would have terminated pursuant
to the preceding sentence; provided that the Company shall have no obligation to
make such payments if such termination of Consultant is a result of a material
breach by Consultant of the terms of this Agreement or Consultant's willful
misconduct or gross negligence in the performance of his services hereunder.
7. Benefits; Investment.
During the term of this Agreement, the Company shall provide Consultant
reasonable access to one administrative person employed at the Company's
principal executive offices and the use of one laptop personal computer and
related Company software. Consultant acknowledges and agrees that the software
is proprietary to and the property of the Company and agrees to promptly return
all such software and the copies thereof upon termination of this Agreement. The
Company shall pay or reimburse Consultant for all reasonable expenses (including
travel) actually paid or incurred by Consultant during the term of this
Agreement in the performance of Consultant's duties under this Agreement in
accordance with the Company's employee business expense reimbursement policies
in effect from time to time. The Company shall make a one time payment to
Consultant of up to $2,500 to cover the costs incurred by Consultant in
establishing an office in his home. The Consultant will have the option of
participating in the Company's health care plans provided to its executive
employees, provided that such health care plans permit participation by
Consultant, and Consultant represents and warrants to the Company that
Consultant is insurable under such plans. The expense of such participation
shall be borne by Consultant. Following the term of this Agreement, Consultant
shall be entitled to such additional benefits as may be available under COBRA.
Consultant shall have the option to invest $100,000 in the Company and
such additional amounts in increments of $10,000 as is approved by the Board of
Directors of the Company. Any such purchase by Consultant shall be consummated
on the date of or prior to the Merger.
8. Confidential Information.
Consultant understands and acknowledges that during the term of this
Agreement, he will be exposed to Confidential Information (as defined below)
which is proprietary and which rightfully belongs to the Company. Consultant
agrees that he will not use or cause to be used for his own benefit, either
directly or indirectly, or disclose any of such Confidential Information at any
time, either during or after termination of this Agreement, without the
Company's prior written consent. Consultant shall take all reasonable steps to
safeguard such Confidential Information that is within his possession or control
and to protect such information against disclosure, misuse, loss or theft.
Consultant's obligations under this paragraph with respect to any specific
Confidential Information shall cease when that specific Confidential Information
becomes publicly known or when it is disclosed by any person, firm, corporation
or business entity which is not bound by the terms of a confidentiality
agreement with the Company. The term "Confidential Information" shall mean any
information not generally known in the relevant trade or industry, which was
obtained from the Company, or which was learned as a result of the performance
of any services by Consultant on behalf of the Company, and which falls within
the following general categories:
(i) information concerning trade secrets of the
Company;
(ii) information concerning existing or
contemplated products, services, technology, designs,
processes and research or product developments of the Company;
(iii) information concerning business plans, sales or
marketing methods, methods of doing business, customer lists,
customer usages and/or requirements, or supplier information
of the Company; and
(iv) any other confidential information which the
Company may reasonably have the right to protect by patent,
copyright or by keeping it secret and confidential (including
the software described in paragraph 7 above).
9. Non-Compete, Non-Solicitation, Non-Interference.
(a) Consultant acknowledges that in the course of providing services
pursuant to this Agreement he will become familiar, and during his employment
with Old NPF prior to the date of this Agreement he has become familiar, with
the Company's and its subsidiaries' trade secrets and with other Confidential
Information and that his services have been and will be of special, unique and
extraordinary value to the Company and its subsidiaries. Therefore, Consultant
agrees that, during the term of this Agreement and for two years from the
effective time of the Merger or one year following termination or expiration of
this Agreement, whichever is later (the "Non-Compete Period"), he will not
directly or indirectly, either for himself or any other person, own, manage,
control, participate in, consult with, render services for, permit his name to
be used by or in any manner engage in any business competing with the businesses
of the Company or its subsidiaries as such businesses exist or are in process on
the date of the termination of Consultant's employment, within any geographical
area in which the Company or its subsidiaries engage or plan to engage in such
businesses. Nothing herein will prohibit Consultant from being a passive owner
of not more than 2% of the outstanding stock of any class of a corporation which
is publicly traded, so long as Consultant has no active participation in the
business of such corporation.
(b) During the Non-Compete Period, Consultant will not directly or
indirectly through another person (i) induce or attempt to induce any employee
of the Company or any subsidiary to leave the employ of the Company or such
subsidiary, or in any way interfere with the relationship between the Company or
any subsidiary and any employee thereof, (ii) hire any person who was an
employee of the Company or any subsidiary at any time during the term of this
Agreement, or (iii) induce or attempt to induce any customer, supplier, licensee
or other business relation of the Company or any subsidiary to cease doing
business with the Company or such subsidiary, or in any way interfere with the
relationship between any such customer, supplier, licensee or business relation
and the Company or any subsidiary.
(c) During the Non-Compete Period, Consultant agrees not to take any
action that might interfere with or disrupt the Company's business or its
relationships with its customers, suppliers or employees.
10. Notices.
Any notice provided for in this Agreement will be in writing and will
be either personally delivered, sent by reliable overnight courier, telecopied
or mailed by first class mail, return receipt requested, to the recipient at the
address below indicated:
Notices to Consultant:
Jesse C. Luxton
702 Highway 82 West
Greenwood, Mississippi 38930
Telephone Number: (601) 451-4800
Telecopy Number: (601) 451-4805
With a copy (which will not constitute Notice to Consultant) to:
Altheimer & Gray
10 South Wacker Drive, Suite 4000
Chicago, Illinois 60605
Attention: Phillip Gordon, Esq.
Telephone Number: (312) 715-4010
Telecopy Number: (312) 715-4800
Notices to the Company:
NPF Acquisition Corporation
c/o Colonnade Capital, L.L.C.
Riverfront Plaza, West Tower
901 East Byrd Street, Suite 1300
Richmond, Virginia 23219
Attention: Mr. James C. Wheat, III
Mr. John T. Herzog
Telephone Number: (804) 782-3288
Telecopy Number: (804) 782-6606
With a copy (which will not constitute Notice to the Company) to:
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219
Attention: John Owen Gwathmey, Esq.
Telephone Number: (804) 788-8700
Telecopy Number: (804) 788-8218
or such other address or to the attention of such other person as the recipient
party will have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered,
sent, telecopied or mailed.
11. Severability.
Whenever possible, each provision of this Agreement will be interpreted
in such manner as to be effective and valid under applicable law, but if 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 any other jurisdiction, but this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein.
12. Complete Agreement.
This Agreement, whose documents expressly referred to herein and other
documents of even date herein embody the complete agreement and understanding
among the parties and supersede and preempt any prior understandings, agreements
or representations by or among the parties, written or oral, which may have
related to the subject matter hereof in any way.
13. Counterparts.
This Agreement may be executed in separate counterparts, each of which
is deemed to be an original and all of which taken together constitute one and
the same agreement.
14. Successors and Assigns.
This Agreement is intended to bind and inure to the benefit of and be
enforceable by Consultant, the Company and their respective heirs, successors
and assigns, except that Consultant may not assign his rights or delegate his
obligations hereunder without the prior written consent of the Company.
15. Choice of Law.
All questions concerning the construction, validity and interpretation
of this Agreement will be governed by and construed in accordance with the
domestic laws of the Commonwealth of Virginia, without giving effect to any
choice of law provision or rule (whether of the Commonwealth of Virginia or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the Commonwealth of Virginia.
16. Amendment and Waiver.
The provisions of this Agreement may be amended or waived only with the
prior written consent of the Company and Consultant, and no course of conduct or
failure or delay in enforcing the provisions of this Agreement will affect the
validity, binding effect or enforceability of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized corporate officers, and Consultant has duly
executed this Agreement as of the day and year first written above.
NPF ACQUISITION CORPORATION
By: Colonnade Capital, L.L.C., on behalf of
NPF Acquisition Corporation
By: _____________________________
James C. Wheat, III
Managing Partner
_______________________________________
Jesse C. Luxton
