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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
Solicitation/Recommendation Statement
Pursuant to Section 14 (d) (4) of the
Securities Exchange Act of 1934
NATIONAL PICTURE & FRAME COMPANY
(Name of Subject Company)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class of Securities)
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637152 10 9 (COMMON STOCK)
(CUSIP Number of Class of Securities)
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M. WESLEY JORDAN, JR.
CHIEF FINANCIAL OFFICER
NATIONAL PICTURE & FRAME COMPANY
702 HIGHWAY 82 WEST
GREENWOOD, MISSISSIPPI 38930
(601) 451-4800
(Name, address, and telephone number of person authorized to receive notices
and communications on behalf of the person(s) filing statement)
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COPY TO:
KEVIN R. EVANICH
KIRKLAND & ELLIS
200 EAST RANDOLPH DRIVE
CHICAGO, ILLINOIS 60601
(312) 861-2000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is National Picture & Frame Company, a
Delaware corporation (the "Company"), and the address of the principal executive
office of the Company is 702 Highway 82 West, Greenwood, Mississippi 38930. The
title of the class of equity securities to which this statement relates is the
common stock, par value $0.01 per share, of the Company (the "Shares").
ITEM 2. TENDER OFFER OF PURCHASER.
This statement relates to a cash tender offer by NPF Acquisition
Corporation, a Delaware corporation ("Purchaser") and a direct wholly owned
subsidiary of NPF Holding Corporation, a Delaware corporation ("Parent"), each
formed by Colonnade Capital, L.L.C. ("Colonnade"), to purchase all outstanding
Shares at $12.00 per Share, net to the seller in cash, 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 with any amendments or supplements thereto, collectively
constitute the "Offer"). The Offer is disclosed in a Tender Offer Statement on
Schedule 14D-1 dated September 11, 1997 (the "Schedule 14D-1").
The Offer is being made by Purchaser pursuant to an Agreement and Plan of
Merger, dated as of September 4, 1997, among the Company, Purchaser, Parent and
Colonnade (the "Merger Agreement"). The Merger Agreement provides, among other
things, for the commencement of the Offer by Purchaser and further provides
that, following the consummation of the Offer and subject to the satisfaction or
waiver of certain conditions, Purchaser will be merged with and into the Company
(the "Merger"), with the Company surviving the Merger (the "Surviving
Corporation"). In the Merger, each issued and outstanding Share (excluding
Shares directly or indirectly owned by the Company, Shares owned by Parent,
Purchaser, Colonnade or any subsidiary of any of them and Shares owned by
stockholders of the Company who shall not have voted in favor of the Merger or
consented thereto in writing and who shall have demanded proper appraisal for
such Shares under Delaware law) will be converted at the effective time of the
Merger (the "Effective Time") into the right to receive the per Share amount
actually paid in the Offer, in cash, without any interest thereon (the "Merger
Consideration"), less any required withholding taxes. Certain terms and
conditions of the Merger Agreement are described below in Item 3. A copy of the
Merger Agreement is filed as Exhibit 1 and is incorporated herein by reference.
Certain stockholders of the Company, including all directors and executive
officers of the Company, have entered into stockholder tender agreements (the
"Stockholder Tender Agreements") with Parent and Purchaser, pursuant to which
such stockholders have agreed to tender and sell their Shares pursuant to the
Offer (other than certain Shares being exchanged). The Stockholder Tender
Agreements cover approximately 2,787,671 Shares, representing approximately
56.1% of the issued and outstanding Shares as of September 4, 1997. Certain
terms and conditions of the Stockholder Tender Agreements are described below in
Item 3. The forms of the Stockholder Tender Agreements are filed as Exhibit 12
and are incorporated herein by reference.
Based on information furnished to the Company by Purchaser, the principal
executive offices of Purchaser are located at Riverfront Plaza, West Tower, 901
East Byrd Street, Suite 1300, Richmond, Virginia 23219.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) (1) Certain contracts, agreements, arrangements and understandings
between the Company and certain of its directors and executive officers are
described in the Company's Information Statement dated September 11, 1997 under
"Directors and Executive Officers of the Company," "Executive Compensation" and
"Security Ownership." The Information Statement is attached hereto as Schedule
1. In addition, certain contracts, agreements, arrangements and understandings
relating to the Company and/or the Company's directors and executive officers
are described below under "The Merger Agreement" and "Other Agreements."
DIRECTOR LIABILITY AND INDEMNIFICATION. Under the Delaware General
Corporation Law ("DGCL"), a corporation has the power to indemnify any director
or officer against expenses, judgments, fines, and settlements incurred in a
proceeding, other than an action by or in the right of the corporation, if the
person acted in good faith and in a manner that the person reasonably believed
to be in the best interests of the corporation or not opposed to the best
interests of the corporation, and, in the case of a criminal proceeding, had no
reason to believe the conduct of the person was unlawful. In the case of an
action by or in the right of the corporation, the corporation has the power to
indemnify any officer or director against expenses incurred in defending or
settling the action if such person acted in good faith and in a manner such
person reasonably believed to be in or
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not opposed to the best interests of the corporation; provided, however, that no
indemnification may be made when a person is adjudged liable to the corporation,
unless a court determines such person is entitled to indemnity for expenses, and
then such indemnification may be made only to the extent such court shall
determine. The DGCL requires that to the extent an officer or director of a
corporation is successful on the merits or otherwise in defense of any
third-party or derivative proceeding, or in defense of any claim, issue, or
matter therein, the corporation must indemnify the officer or director against
expenses incurred in connection therewith.
Under the DGCL, a corporation may adopt a provision in its certificate of
incorporation that eliminates or limits the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided, however, that such provision may not eliminate or
limit director monetary liability for (i) breaches of the director's duty of
loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of laws;
(iii) the payment of unlawful dividends or unlawful stock repurchases or
redemptions; or (iv) transactions in which the director received an improper
personal benefit. The Company's Certificate of Incorporation includes such a
provision.
The Company's By-Laws provide that the Company will, to the fullest extent
permitted by the DGCL, indemnify all persons whom it has the power to indemnify
against all of the costs, expenses, and liabilities incurred by them by reason
of having been officers or directors of the Company, or any subsidiary of the
Company or any other corporation for which such persons acted as officer or
director at the request of the Company. The Merger Agreement contains covenants
that will require the Surviving Corporation to continue such indemnification for
a period of 54 months after the Effective Time.
The Merger Agreement also contains covenants that will require the
Surviving Corporation to maintain the Company's current director and officer
liability coverage (or replacement insurance with similar coverage) for a period
of 54 months after the Effective Time. See "The Merger Agreement -- Director and
Officer Liability."
(2) ARRANGEMENTS WITH PURCHASER OR ITS AFFILIATES.
THE MERGER AGREEMENT
The following is a summary of the Merger Agreement. Such summary is
qualified in its entirety by reference to the text of the Merger Agreement, a
copy of which is filed as Exhibit 1 hereto and is incorporated herein by
reference. 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. Purchaser has expressly reserved the
right to amend or modify the terms of the Offer and to waive certain conditions
of the Offer; however, without the prior written consent of the Company,
Purchaser has agreed not to (i) decrease the Offer Price or the form of
consideration therefor, (ii) decrease the number of Shares sought pursuant to
the Offer or (iii) change any condition or impose additional conditions to the
Offer or amend any other term of the Offer in any manner adverse to the holders
of Shares. Assuming the prior satisfaction or waiver of the conditions to the
Offer, Purchaser has agreed to accept for payment, and pay for, in accordance
with the terms of the Offer, all Shares validly tendered and not withdrawn
pursuant to the Offer as soon as practicable after the expiration date thereof.
BOARD REPRESENTATION. The Merger Agreement provides that, subject to
compliance with applicable law, promptly upon the payment by Purchaser for
Shares pursuant to the Offer, and from time to time thereafter, Purchaser shall
be entitled to designate such number of directors, rounded up to the next whole
number as will give Purchaser representation on the Company's Board of Directors
(the "Board") equal to the product of (x) the total number of directors on the
Board (giving effect to any increase in the number of directors pursuant to the
Merger Agreement) and (y) the percentage that the aggregate number of Shares
beneficially owned by Purchaser or its affiliates bears to the total number of
Shares then outstanding. The Company has agreed, upon request of Purchaser, to
promptly take all actions necessary to cause Purchaser's designees to be so
elected, including, if necessary, seeking the resignations of one or more
existing directors. The Company's obligations to appoint Purchaser's designees
to the Board shall be subject to Section 14(f) of the Securities Exchange Act of
1934 and Rule 14f-1 promulgated thereunder. The Company has agreed to promptly
take all actions required pursuant to such Section 14(f) and Rule 14f-1 in order
to fulfill its obligations under the Merger Agreement. Following the election or
appointment of Purchaser's designees pursuant to the Merger Agreement and prior
to the Effective Time of the Merger, any amendment or termination of the Merger
Agreement, extension for the performance or waiver of the obligations or other
acts of Parent or Purchaser or waiver of the Company's rights thereunder shall
require the concurrence of a majority of the directors of the
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Company then in office who are not designated by Purchaser if such amendment,
termination, extension or waiver would be reasonably likely to have an adverse
effect on the minority stockholders of the Company.
CONSIDERATION TO BE PAID IN THE MERGER. The Merger Agreement provides that
upon the terms and subject to the conditions set forth in the Merger Agreement
and in accordance with the DGCL, Purchaser will be merged with and into the
Company. At the Effective Time, by virtue of the Merger and without any action
on the part of the holders of any of the Shares, Purchaser, or the Company, each
Share issued and outstanding immediately prior to the Effective Time (excluding
Shares owned directly or indirectly by (i) the Company or by Parent, Purchaser,
or any other subsidiary of Parent and (ii) stockholders of the Company who shall
not have voted in favor of the Merger or consented thereto in writing and who
shall have demanded proper appraisal for such Shares under Delaware law (such
Shares to be referred to as "Dissenting Shares")) shall be converted into the
right to receive the actual amount per Share in cash paid to holders in the
Offer, without any interest thereon, less any required withholding taxes. Each
share of the capital stock of Purchaser issued and outstanding immediately prior
to the Effective Time shall be converted into and become one fully paid and
nonassessable share of common stock, par value $.001 per share, of the Surviving
Corporation.
PREPARATION OF THE PROXY STATEMENT; MERGER WITHOUT A COMPANY STOCKHOLDERS
MEETING. The Merger Agreement provides that 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: (i) hold a special
meeting of its stockholders for the purpose of considering and taking action
upon the Merger Agreement as soon as practicable following the acceptance for
payment and payment for Shares by Purchaser pursuant to the Offer, (ii) prepare
and file with the Securities and Exchange Commission (the "Commission") a
preliminary proxy statement relating to the Merger Agreement, and use its
reasonable efforts to (x) obtain and furnish the information required to be
included by the Commission in the Company Proxy Statement (as hereinafter
defined) and after consultation with Purchaser, to respond promptly to any
comments made by the Commission with respect to the preliminary proxy statement
and cause a definitive proxy statement (the "Company Proxy Statement") to be
mailed to the Company's stockholders and (y) to obtain the necessary approvals
of the Merger and the Merger Agreement by the stockholders of the Company and
(iii) subject to the fiduciary obligations of the Board under applicable law,
include in the Company Proxy Statement the recommendation of the Board that the
stockholders of the Company vote in favor of the approval of the Merger and the
Merger Agreement. Notwithstanding the foregoing, the Merger Agreement provides
that in the event that Purchaser acquires at least 90% of the then outstanding
Shares in the Offer, the Merger may be effected without a meeting of the
stockholders of the Company in accordance with Section 253 of the DGCL.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
representations and warranties. 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
Merger. Purchaser has represented that it has received a commitment to provide
sufficient funds 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 has made certain other representations and warranties to 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 Certificate 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 this Schedule 14D-9 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; (xvi) receipt of the opinion of Bowles Hollowell; and (xvii)
satisfaction of the conditions set forth in the Letter of Intent.
CONDUCT OF BUSINESS PENDING THE MERGER. The Company has agreed as to the
Company and its subsidiaries that during the period from the date of the Merger
Agreement to the Effective Time, except as otherwise provided in the Merger
Agreement or consented to by Purchaser, each of the Company and its subsidiaries
will conduct its business in the usual, regular, and ordinary course of business
in substantially the same manner as conducted prior to the date of the Merger
Agreement and shall use all reasonable efforts to preserve substantially intact
its business organization, keep available the services of its current officers
and employees and preserve relationships with customers, suppliers and others
having business dealings with it. The Company has further agreed that it shall
not nor shall it permit any of its subsidiaries to: (i) amend or otherwise
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change the Certificate of Incorporation or Bylaws of the Company; (ii) issue or
sell, or authorize the issuance or sale of (x) any shares of capital stock of
any class or any options (other than the grant of options previously disclosed
by the Company to Purchaser prior to the date of the Merger Agreement),
warrants, or other convertible securities (other than the issuance of shares of
capital stock (A) in connection with the purchase of Shares pursuant to the
Employee Discount Stock Purchase Plan with the proceeds of payroll deductions
made prior to the date of the Merger Agreement, (B) in connection with the
exercise of options (including, without limitation, the stock options held by
employees or directors of the Company) and in accordance with the terms of such
options in effect on the date of the Merger Agreement, or (C) otherwise
permitted pursuant to the Merger Agreement) or (y) any of its assets, 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 of the Company; (iv)
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 subsidiary of
the Company); (v) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock other than
acquisitions under any plan of the Company or a subsidiary of the Company with
an employee stock fund or employee stock ownership plan feature, consistent with
applicable securities laws; (vi) (A) acquire, mortgage, encumber, sell, lease,
license or dispose of any assets (including intellectual property) or
securities, except pursuant to existing contracts or commitments for 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; (B) 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; (C) 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 (x) in
connection with the Merger Agreement and the transactions contemplated
thereunder, (y) borrowings under existing bank lines of credit in the ordinary
course of business, or (z) the refinancing of existing indebtedness; (D)
authorize or make capital expenditures which are in excess of $100,000; (E)
accelerate or delay collection of notes or accounts receivable in advance of or
beyond their due dates or the dates when the same would have been collected in
the ordinary course of business consistent with past practice; (F) delay or
accelerate payment of accounts payable beyond or in advance of their due dates
or the dates when the same would have been paid in the ordinary course of
business consistent with past practice; (G) vary the Company's inventory
practices in any material respect from the Company's past practices; or (H)
enter into or amend any contract, agreement, commitment or arrangement to
effectuate any prohibited matter set forth in Section 6.1(f) of the Merger
Agreement; (vii) 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 of its subsidiaries (other than as required
by existing agreements or policies described in the disclosure schedule to the
Merger Agreement), 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 of its subsidiaries or adopt or amend any
employee benefit plan; (viii) 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; (ix) settle or compromise any
suit or claim or threatened suit or claim where the amount involved is greater
than $100,000; (x) other than in the ordinary course of business consistent with
past practice, (A) modify, amend or terminate any contract, (B) waive, release,
relinquish or assign any contract (or any of the Company's rights thereunder),
right or claim, or (C) cancel or forgive any indebtedness owed to the Company or
any subsidiary of the Company; (xi) make any tax election not required by law or
settle or compromise any tax liability; (xii) permit any insurance policy naming
it as a beneficiary or a loss payable payee to be canceled or terminated without
notice to Purchaser, except in the ordinary course of business consistent with
past practice; (xiii) enter into any contract or agreement other than in the
ordinary course of business consistent with past practice; or (xiv) agree in
writing or otherwise to take any of the foregoing actions.
ACCESS TO INFORMATION. The Company will give Purchaser, its counsel,
financial advisors, auditors and other authorized representatives full access to
the offices, properties, books and records of the Company and the subsidiaries
of the Company at reasonable times, will furnish to Purchaser, 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 Purchaser in its investigation of the business of the Company and
the subsidiaries of the Company.
NO SOLICITATION. The Merger Agreement provides that from and after the date
of the Merger Agreement until the termination thereof, 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 Purchaser or an affiliate or associate of
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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 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 of its
subsidiaries or divisions, if the Board 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.
The Company has agreed, to the extent consistent with the Board's fiduciary
duties to its stockholders under applicable law, to immediately advise Purchaser
in writing of any discussions, negotiations or proposals relating to a Competing
Transaction, identify the offeror and furnish to 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 Purchaser of any development relating to such proposal,
including the results of any discussions or negotiations with respect thereto
unless the Board determines in good faith, after receiving the advice of its
legal counsel, that the disclosure to Purchaser of such proposal is likely to
violate the fiduciary obligation of the Board under applicable law. For purposes
of the Merger Agreement, "Competing Transaction" shall mean 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% or more
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 of the Company; 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.
NOTICES OF CERTAIN EVENTS. The Company has agreed to promptly notify
Purchaser of: (i) 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 the Merger Agreement; (ii) any notice or other
communication from any governmental or regulatory agency or authority in
connection with the transactions contemplated by the Merger Agreement; and (iii)
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 subsidiary of the Company which would reasonably be
expected to interfere with the consummation of the transactions contemplated by
the Merger Agreement.
SUSPENSION OF EMPLOYEE DISCOUNT STOCK PURCHASE PLAN. Effective as of
September 5, 1997, the Company has agreed to suspend indefinitely its Employee
Discount Stock Purchase Plan, and the Company shall not issue any rights to
acquire Common Stock of the Company 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).
FEES AND EXPENSES. The Merger Agreement provides that all out-of-pocket
costs and expenses incurred in connection with the Merger shall be borne by the
party which has incurred such costs and expenses; provided, however, that if the
Merger is consummated all expenses of the Company shall be paid by the Surviving
Corporation. In addition, the Company has agreed that if the Merger Agreement
shall be terminated (i) by mutual written consent of the Company and Purchaser
and at the time of such termination there shall exist a Competing Transaction,
(ii) by Purchaser prior to the purchase of Shares pursuant to the Offer, if the
Minimum Condition (as defined below) or any other condition to the purchase of
Shares has not been satisfied in connection with the Offer and as a result
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 of the
Offer to the shareholders or (iv) by Purchaser prior to the purchase of Shares
pursuant to the Offer, if the Company's Board shall have (A) withdrawn or
modified (including by amendment to this Schedule 14D-9) in a manner adverse to
Purchaser the Board's approval or recommendation of the Offer or the Merger; (B)
approved or recommended a Competing Transaction; or (C) resolved to effect any
of the foregoing at any time, then in any such event the Company shall pay to
Purchaser a fee in an amount in immediately available funds equal to $2,500,000
plus the reasonable expenses of Purchaser not exceeding $750,000. The same
amounts shall also be paid by the Company to 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 the 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
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(Y) the price per share received by the stockholders of the Company in
connection with such Change of Control exceeds the Merger Consideration. The
Merger Agreement provides that the Company's payment of a termination fee
pursuant to the above shall be the sole and exclusive remedy of 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 this Agreement by
the Company with respect to such occurrence.
CONDITIONS TO THE TENDER OFFER. Notwithstanding any other provision of the
Offer, Purchaser 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,
the Minimum Condition (as defined below) shall not have been satisfied 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 Purchaser, would be
expected to, directly or indirectly: (v) make illegal or otherwise prohibit or
materially delay consummation of the Offer or the Merger or seek to obtain
material damages, (w) prohibit or materially limit the ownership or operation by
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 compel Parent or Purchaser to dispose of or
hold separately all or any material portion of the business or assets of Parent
or Purchaser or the Company and its subsidiaries taken as a whole, or seek to
impose any material limitation on the ability of Parent or Purchaser to conduct
its business or own such assets, (x) impose material limitations on the ability
of Parent or Purchaser 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 Purchaser or Parent on all matters properly
presented to the Company's stockholder, (y) require divestiture by Parent or
Purchaser of any Shares, or (z) may, in the reasonable judgment of Purchaser, 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 (x)
would reasonably be expected to result in any of the consequences referred to in
clauses (v) through (z) of (A) above or (y) prohibits consummation of the Offer,
the Merger or any transaction contemplated by the Merger Agreement; PROVIDED
that Purchaser 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 as of the date of consummation of the
Offer as though made on and as of such date, except (x) for changes specifically
permitted by the Merger Agreement, (y) that those representations and warranties
which address matters only as of a particular date shall remain true and correct
as of such date, and (z) 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; (D) the Company shall not have performed or 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
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 of its subsidiaries 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, (w) 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, (x) a declaration of a banking moratorium or any suspension of payments
in respect of banks in the United States, (y) 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 (z)
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) Purchaser
and the Company shall have agreed that Purchaser shall terminate the Offer; or
(I) (x) 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, (y) the Company shall have entered into
an agreement with respect to a Competing Transaction, or (z) the Board of
Directors of the Company shall have resolved to do any of the foregoing.
6
<PAGE>
CONDITIONS TO THE MERGER. Pursuant to the Merger Agreement, the respective
obligation of each party to effect the Merger is subject to the satisfaction
prior to the Closing Date (as defined in the Merger Agreement) of the following
conditions: (i) the Merger Agreement and the Merger shall have been approved and
adopted by the affirmative vote of the holders of a majority of the outstanding
Shares entitled to vote thereon if such vote is required by applicable law
(except that this condition shall be deemed satisfied if Purchaser shall have
acquired 90% or more of the outstanding Shares); (ii) the waiting period (and
any extension thereof) applicable to the Merger under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, shall have been terminated or
shall have expired; (iii) 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; (iv) with
respect to the obligations of Purchaser, (A) each of the representations and
warranties of the Company contained in the Merger 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, be materially adverse to the business,
assets, liabilities, results of operation or condition, financial or otherwise,
of the Company and its subsidiaries taken as a whole (a "Company Material
Adverse Effect"), as of the Effective Time as though made on and as of the
Effective Time, except (x) for changes specifically permitted by the Merger
Agreement, (y) 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; (v) with respect
to the obligations of the Company, (A) each of the representations and
warranties of Purchaser contained in the Merger 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 Company Material Adverse Effect; as
of the Effective Time, as though made on and as of the Effective Time, except
(x) for changes specifically permitted by the Merger Agreement and (y) 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) 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 Purchaser on or prior to the Effective Time. The obligation of Purchaser to
consummate the Merger is subject to the following additional conditions: (i)
Purchaser shall have received the debt financing contemplated by the Merger
Agreement on terms substantially as outlined in the commitment letters obtained
by Purchaser, (ii) 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 Purchaser, represents at least 90% of the outstanding
Shares (the "Minimum Condition") and (iii) each of the other conditions set
forth in Annex I to the Merger Agreement shall have been satisfied or waived by
Purchaser, and Purchaser shall have accepted for payment and made payment for
all Shares validly tendered and not withdrawn pursuant to the Offer. Holders of
Shares should carefully review the Schedule 14D-1 for a discussion of the
commitment letter obtained by Purchaser for the financing of the Offer and the
Merger, and the terms and conditions of such financing.
TERMINATION. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
approval of the matters presented in connection with the Merger by the
stockholders of the Company: (a) by mutual written consent of the Company and
Purchaser; (b) by either 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; (c) by either Purchaser 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 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 Purchaser nor the Company may terminate the Merger Agreement
pursuant to (c) above if such party shall have materially breached the Merger
Agreement; (d) by the Company, if 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 pursuant to (d) above if the Company shall have
materially breached the Merger Agreement; (e) by either Purchaser or the
Company, if the Merger shall fail to receive the requisite vote for approval and
adoption by the stockholders of the Company.
DIRECTOR AND OFFICER LIABILITY. The Merger Agreement provides that the
Certificate of Incorporation and Bylaws of the Surviving Corporation shall
contain provisions with respect to indemnification no less favorable than those
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
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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. In addition,
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
the Merger Agreement), in each case to the full extent permitted under 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 by law,
upon receipt from the Indemnified Party to whom expenses are advanced of any
required undertaking to repay such advances contemplated by Section 145(c) of
DGCL). 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) Purchaser 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 Purchaser or the Surviving Corporation and the Indemnified
Parties shall have been advised by counsel that representation of such
Indemnified Parties and the either Purchaser 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 the Merger Agreement 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 the Merger Agreement,
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. Each Indemnified Party shall have rights as a third party beneficiary
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.
DIRECTORS AND OFFICER'S INSURANCE. 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; 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.
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 6, 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, Purchaser has
agreed to 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
8
<PAGE>
interest, if any, on all debt securities issued by the Company under the
respective Debt Documents and the due and punctual performance of all terms,
covenants and conditions of the respective Debt Documents to be kept or
performed by the Company, and has agreed to deliver such supplemental agreements
to the respective lenders under the Debt Documents.
AMENDMENT. Subject to applicable law, any provision of the Merger Agreement
may be amended or waived prior to the Effective Time if, and only if, such
amendment of waiver is in writing and signed, in the case of a waiver, by the
party against whom the waiver is to be effective; provided that after the
adoption of the Merger 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 the Merger Agreement if such alteration or change would
adversely affect the holders of any shares of capital stock of the Company.
TIMING. The Merger Agreement provides that the closing of the Merger shall
occur no later than five business days after satisfaction and/or waiver of the
conditions set forth in the Merger Agreement (or as soon as practicable
thereafter following satisfaction or waiver of such conditions). The Merger
shall become effective upon such filing or at such time thereafter as may be
provided in the certificate of merger to be filed with the Secretary of State of
the State of Delaware, as provided in the DGCL, on the date of the closing of
the Merger or at such later time as is specified in such Certificate of Merger.
The exact timing and details of the Merger will depend upon legal
requirements and a variety of other factors, including the number of Shares
acquired by Purchaser pursuant to the Offer. Although Purchaser has agreed to
cause the Merger to be consummated on the terms set forth above, there can be no
assurance as to the timing of the Merger.
OTHER AGREEMENTS
STOCKHOLDER TENDER AGREEMENTS
Concurrently with the execution of the Merger Agreement, Parent and
Purchaser entered into 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 otherwise, to 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 representing 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.
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 Parent, Purchaser or any affiliate of Parent or
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
9
<PAGE>
applicable law. If a Selling Stockholder receives any Takeover Proposal, such
Selling Stockholder agrees to promptly notify Parent and 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.
INCENTIVE AND SEVERANCE AGREEMENTS WITH MANAGEMENT
Each of the Company's five executive officers (Messrs. Luxton, Jordan,
Beattie, Moore and Littlejohn) is a party to letter agreements with the Company
dated November 7, 1996 and April 30, 1997. The letters provide that, in the
event that a change of control transaction is consummated with Colonnade on or
prior to October 31, 1997, each executive will be entitled to receive an amount
equal to the unpaid portion of the maximum annual cash incentive bonus under his
employment agreement for the fiscal year ended April 30, 1997. Each executive
has to date received approximately 39% of the maximum cash incentive bonus for
the fiscal year ended April 30, 1997, and hence approximately 61% of the maximum
cash incentive bonus for the fiscal year ended April 30, 1997 is payable under
the letter agreements. The amounts which would be payable to the executives
under the letter agreements are as follows: approximately $123,000 in the case
of Mr. Luxton, approximately $49,000 each in the case of Messrs. Moore and
Beattie and approximately $24,000 each in the case of Messrs. Littlejohn and
Jordan. Agreements in place with the executives also provide for severance
payments equal to one year's base salary if their employment is terminated
without cause (actually or constructively) on or prior to October 31, 1997.
See the Information Statement for a description of the employment
agreements between the Company and certain executive officers.
EMPLOYMENT AND CONSULTING AGREEMENTS WITH PURCHASER
Purchaser has advised the Company that it has entered into employment
agreements (the "Employment Agreements") with each of Messrs. Beattie and Moore
(the "Executives"), effective as of the Effective Time. Mr. Beattie presently
serves as the Company's Vice President of Sales and Marketing and Mr. Moore
presently serves as the Company's Vice President of Operations and General
Manager. Neither Mr. Beattie nor Mr. Moore is a director of the Company. The
Employment Agreements establish base salaries for each of the Executives equal
to such executive's current salary of $212,713 during the relevant employment
period, subject to annual increases at the discretion of the Board of Directors
of Purchaser. The Employment Agreements provide, in part, for the payment of
annual cash incentive bonuses. In addition, the Employment Agreements provide
for Parent to grant to each of the Executives options to acquire shares of
Parent Common Stock (as defined below) representing up to an aggregate of 2.7%
of the outstanding shares of Parent Common Stock on a fully diluted basis
measured on the date 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 Purchaser in its reasonable and good faith judgment) and
(ii) the employment period may be terminated by 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
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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, Purchaser has advised the Company that it has entered into a
consulting agreement (the "Consulting Agreement") with Mr. Luxton, the President
and Chief Executive Officer of the Company, dated as of August 1, 1997. Mr.
Luxton is a director of the Company. 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
Parent, representing less than 1% of the issued and outstanding shares of Parent
Common Stock. As of the date of this Schedule 14D-9, Mr. Luxton has advised
Parent that he does not intend to invest in 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 Purchaser
and Mr. Luxton. The Consulting Agreement provides Purchaser may terminate the
Consulting Agreement at any time, provided, that 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.
SUBSCRIPTION AND EXCHANGE AGREEMENTS.
Purchaser has advised the Company as follows:
The Parent has entered into subscription and exchange agreements (the
"Subscription and Exchange Agreements") with Messrs. Moore, Beattie and
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 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. Parent has required that each executive officer of the
Company make an investment in 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 issued and outstanding shares of Parent Common Stock.
The remaining 185,931 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.
<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 STOCK RECEIVED OUTSTANDING
- ---------------------------------------------------- -------- ----------- ------------ ---------------- ------------
<S> <C> <C> <C> <C> <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) Share amount does not include exercisable options granted to Messrs. Moore,
Beattie and Littlejohn under the Company's Long Term Incentive Plan covering
61,000, 58,000 and 41,000 Shares, respectively.
CONFIDENTIALITY AGREEMENT.
On August 12, 1996, Colonnade and Bowles Hollowell Connor & Co. ("Bowles
Hollowell") entered into a Confidentiality Agreement (the "Confidentiality
Agreement") pursuant to which Colonnade agreed to treat all information supplied
by the Company or Bowles Hollowell as confidential and to use such information
solely in connection with the evaluation of a possible transaction with the
Company. The foregoing is a summary of the Confidentiality Agreement. Such
summary is qualified in its entirety by reference to the text of the
Confidentiality Agreement, a copy of which is filed as Exhibit 3 hereto, and is
incorporated herein by reference.
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ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS.
The Board of Directors has unanimously approved the Merger Agreement and
the transactions contemplated thereby and recommends that the stockholders of
the Company tender their Shares pursuant to the Offer.
(b) BACKGROUND; REASONS FOR THE RECOMMENDATION.
Set forth below is a description of the background of the Offer, including
a brief description of the material contacts between the parties regarding the
transactions described herein.
In late 1995, representatives of the Company began discussions with
representatives of Bowles Hollowell Connor & Co. ("Bowles Hollowell") to review
alternatives to enhance shareholder value, 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 an 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, 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 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 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 3, 1997, Colonnade furnished the Company
with a copy of the Financing Commitment.
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.
On September 5, 1997, Purchaser and the Company issued a press release
announcing the execution and delivery of the Merger Agreement.
On September 11, 1997, Purchaser commenced the Offer.
A copy of the press release of the Company announcing the execution of the
Merger Agreement is attached hereto as Exhibit 4 and is incorporated herein by
reference. A copy of a letter to stockholders of the Company, which accompanies
this Schedule 14D-9, is attached hereto as Exhibit 5 and is incorporated herein
by reference.
12
<PAGE>
In reaching its conclusion and recommendation described above, the Board of
Directors considered a number of factors, including the following:
(1) The financial condition and results of operations of the Company.
(2) The projected financial condition, results of operations, prospects and
strategic objectives of the Company, as well as the risks involved in achieving
those prospects and objectives in the picture frame industry taking into account
economic and market conditions.
(3) The relationship of the offer price to the historical trading prices of
the Common Stock. In this regard, the Board noted that the offer price
represents a premium over the trading prices of the Common Stock since the
initial public offering.
(4) Efforts to identify and have discussions with other parties as to
possible transactions.
(5) The availability of appraisal rights under Section 262 of the DGCL for
Dissenting Shares.
(6) The terms and conditions of the Merger Agreement and the course of the
negotiations resulting in the execution thereof. Among other things, the Board
of Directors considered the terms of the Merger Agreement that permit the Board
of Directors, in the exercise of its fiduciary duties, to furnish information to
or enter into discussions or negotiations with any third party (subject to
verification of financing) that requests such information or initiates such
discussions or negotiations in connection with any proposal or offer for a
tender or exchange offer, a merger, consolidation or other business combination
involving the Company or any proposal to acquire in any manner a substantial
equity interest in, or a substantial portion of the assets of, the Company
(although the Company is not permitted by the Merger Agreement to initiate,
solicit or encourage any such third party proposal or offer or initiate
discussions or negotiations regarding the same), and under certain circumstances
to terminate the Merger Agreement.
(7) The likelihood that the proposed acquisition would be consummated,
including the likelihood of satisfaction of the conditions to the Offer and the
Merger contained in the Merger Agreement, the experience and reputation of
Colonnade, the terms of the Financing Commitment and the risks to the Company if
the acquisition were not consummated.
(8) Presentations to the Board of Directors by Bowles Hollowell, which
included valuation analyses of the Company, and the opinion of Bowles Hollowell
to the effect that, as of the date of its opinion and based upon and subject to
certain matters stated therein, the cash consideration to be paid for the Shares
in the Offer and the Merger was fair, from a financial point of view, to such
holders. The full text of Bowles Hollowell's written opinion, which sets forth
the assumptions made, matters considered, and limitations on the review
undertaken by Bowles Hollowell, is attached hereto as Exhibit 6 and is
incorporated herein by reference. Holders of Shares are urged to read the
opinion of Bowles Hollowell carefully in its entirety;
(9) The provisions of the Merger Agreement that require the Company to pay
Purchaser a termination fee of $2,500,000 plus reasonable expenses of up to
$750,000 under certain circumstances as described above under "Merger
Agreement -- Fees, Expenses and other Payments;" and
(10) The structure of the transaction, including the fact that the Offer
will permit stockholders to receive cash for their Shares.
The Board of Directors did not assign relative weights to the factors or
determine that any factor was of particular importance. Rather, the Board of
Directors viewed their position and recommendations as being based on the
totality of the information presented to and considered by them.
ITEM 5. PERSONS RETAINED, EMPLOYED, OR TO BE COMPENSATED.
Bowles Hollowell has been retained by the Board of Directors to act as a
financial advisor to the Company with respect to the Offer and the Merger.
Pursuant to an engagement letter with Bowles Hollowell, the Company (i) has paid
an engagement fee of $75,000 (the "Engagement Fee"), (ii) will pay a transaction
fee in the amount of 1.5% of the aggregate consideration in the transaction less
the Engagement Fee (the "Transaction Fee") and (iii) will reimburse reasonable
expenses of Bowles Hollowell. The Transaction Fee is contingent upon the closing
of the transaction. The Company has also agreed to indemnify Bowles Hollowell
and certain related parties against certain liabilities, including liabilities
under the Federal Securities Laws.
Neither the Company nor any person acting on its behalf currently intends
to employ, retain, or compensate any other person to make solicitations or
recommendations to security holders on its behalf concerning the Offer.
13
<PAGE>
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except as set forth in Item 3(b), no transactions in the Shares have
been effected during the past 60 days by the Company or, to the best of the
Company's knowledge, by any executive officer, director, affiliate, or
subsidiary of the Company (other than ordinary course purchases of Shares under
the Company's Employee Discount Stock Purchase Plan).
(b) To the best of the Company's knowledge, all of the executive officers,
directors, and affiliates of the Company currently intends to tender, pursuant
to the Offer, or contribute to Purchaser, all Shares over which such person
exercises complete discretionary power. All Options outstanding at the Effective
Time will be canceled for an amount equal to the difference between $12.00 per
Share and the per Share exercise price of such Option.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY SUBJECT COMPANY.
(a) Except as set forth above or in Items 3(b) and 4(b), the Company is not
engaged in any negotiation in response to the Offer which relates to or would
result in (i) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any subsidiary of the Company; (ii) a purchase, sale,
or transfer of a material amount of assets by the Company or any subsidiary of
the Company; (iii) a tender offer for or other acquisition of securities by or
of the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as described above or in Items 3(b) or 4, there are no
transactions, Board of Directors' resolutions, agreements in principle, or
signed contracts in response to the Offer that relate to or would result in one
or more of the events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The Information Statement attached as Schedule I hereto is being furnished
in connection with the possible designation by Purchaser, pursuant to the Merger
Agreement, of certain persons to be appointed to the Board of the Company other
than at a meeting of the Company's stockholders.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<S> <C>
Exhibit 1 Agreement and Plan of Merger, dated as of September 4, 1997, by and among National Picture & Frame Company, NPF
Holding Corporation, NPF Acquisition Corporation and Colonnade Capital, L.L.C.
Exhibit 2 The Company's Information Statement pursuant to Section 14(f) of the Securities Exchange Act of 1934, as
amended and Rule 14f-1 thereunder (Schedule I to the Company's Schedule 14D-9).*
Exhibit 3 Confidentiality Agreement, dated as of August 12, 1996, by and between National Picture & Frame Company and
Colonnade Capital, L.L.C.
Exhibit 4 Press Release issued by National Picture & Frame Company on September 5, 1997.
Exhibit 5 Form of Letter to Stockholders dated September 11, 1997.*
Exhibit 6 Opinion of Bowles Hollowell Connor & Co. dated September 4, 1997.*
Exhibit 7 Letter Agreements dated November 7, 1996 and April 30, 1997 between National Picture & Frame Company and Jesse
C. Luxton (incorporated by reference from Exhibit 10.14 of the Company's Report on Form 10-K for the fiscal
year ended April 30, 1997).
Exhibit 8 Letter Agreements dated November 7, 1996 and April 30, 1997 between National Picture & Frame Company and Billy
D. Moore (incorporated by reference from Exhibit 10.15 of the Company's Report on Form 10-K for the fiscal year
ended April 30, 1997).
Exhibit 9 Letter Agreements dated November 7, 1996 and April 30, 1997 between National Picture & Frame Company and
Richard A. Beattie (incorporated by reference from Exhibit 10.16 of the Company's Report on Form 10-K for the
fiscal year ended April 30, 1997).
Exhibit 10 Letter Agreements dated November 7, 1996 and April 30, 1997 between National Picture & Frame Company and Robert
T. Littlejohn (incorporated by reference from Exhibit 10.17 of the Company's Report on Form 10-K for the fiscal
year ended April 30, 1997).
Exhibit 11 Letter Agreements dated November 7, 1996 and April 30, 1997 between National Picture & Frame Company and M.
Wesley Jordan, Jr. (incorporated by reference from Exhibit 10.18 of the Company's Report on Form 10-K for the
fiscal year ended April 30, 1997).
Exhibit 12 Forms of Stockholder Tender Agreement, by and among NPF Acquisition Corporation and certain stockholders listed
thereto of National Picture & Frame Company.
</TABLE>
- ---------------
* Included in copies mailed to stockholders.
14
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete, and
correct.
NATIONAL PICTURE & FRAME COMPANY
By: /s/ M. WESLEY JORDAN, JR.
-----------------------------------
M. WESLEY JORDAN JR.
VICE PRESIDENT FINANCIAL AND
CHIEF FINANCIAL OFFICER
Dated: September 11, 1997
15
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: /s/ Jesse C. Luxton
-------------------------------------
Jesse C. Luxton
President and Chief Executive Officer
NPF HOLDING CORPORATION
By: /s/ John T. Herzog
------------------------------------
John T. Herzog
President
NPF ACQUISITION CORPORATION
By: /s/ John T. Herzog
-------------------------------------
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: /s/ John T. Herzog
-------------------------------------
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.
SCHEDULE I
NATIONAL PICTURE & FRAME COMPANY
702 Highway 82 West
Greenwood, Mississippi 38930
(601) 451-4800
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF
THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about September 11, 1997
as part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of National Picture & Frame Company, a Delaware corporation
(the "Company"), to holders of record of shares of Common Stock, par value $.01
per share, of the Company (the "Shares") at the close of business on or about
September 4, 1997. You are receiving this Information Statement in connection
with the possible election or appointment of persons designated by NPF
Acquisition Corporation (the "Purchaser") to a majority of the seats on the
Board of Directors of the Company.
On September 4, 1997, the Company, Purchaser, NPF Holding Corporation (the
"Parent"), and Colonnade Capital, L.L.C. ("Colonnade"), entered into an
Agreement and Plan of Merger (the "Merger Agreement") in accordance with the
terms and subject to the conditions of which (i) Purchaser will commence a
tender offer (the "Offer") for all outstanding Shares at a price of $12.00 per
Share, net to the seller in cash, and (ii) Purchaser will be merged with and
into the Company (the "Merger"). As a result of the Offer and the Merger, the
Company will become a wholly owned subsidiary of the Parent.
The Merger Agreement requires the Company to use all reasonable efforts to
cause Purchaser's designees to be elected or appointed to the Board of Directors
of the Company under the circumstances described therein. This Information
Statement is required by Section 14(f) of the Securities Exchange Act of 1934,
as amended, and Rule 14f-1 promulgated thereunder. See "RIGHT TO DESIGNATE
DIRECTORS; PURCHASER DESIGNEES."
You are urged to read this Information Statement carefully. You are not,
however, required to take any action in connection with the matters herein
discussed. Capitalized terms used herein and not otherwise defined herein have
the meanings set forth in the Schedule 14D-9.
Pursuant to the Merger Agreement, Purchaser commenced the Offer on
September 11, 1997. The Offer is scheduled to expire at 5:00 p.m., New York City
time, on October 9, 1997, unless the Offer is extended.
The information contained in this Information Statement concerning
Purchaser and Purchaser's designees for the Company's Board of Directors (the
"Purchaser Designees") has been furnished to the Company by Purchaser, and the
Company assumes no responsibility for the accuracy or completeness of such
information.
RIGHT TO DESIGNATE DIRECTORS; PURCHASER DESIGNEES
Pursuant to the Merger Agreement, promptly following the purchase by and
payment for Shares pursuant to the terms, and subject to the conditions of the
Offer, Purchaser will be entitled to designate such number of directors as will
give Purchaser representation on the Board of Directors of the Company equal to
the product of (x) the number of directors on the Board (giving effect to any
increase in the number of directors pursuant to the Merger Agreement) and (y)
the percentage that such number of shares so purchased bears to the aggregate
number of shares outstanding. The Merger Agreement requires that the Company
will, upon request by and at the option of the Parent, either increase the size
of the Board of Directors and/or secure the resignation of current directors to
enable Purchaser Designees to be elected or appointed to the Board of Directors
and to constitute a majority of the Company's Board of Directors. The Board of
Directors of the Company currently consists of six members. The Board of
Directors of the Company expects that several directors will resign from the
Board following the consummation of the Offer or, if necessary, the Board will
increase the size of the Board by resolutions to satisfy this requirement.
Purchaser Designees may assume office at any time following the purchase by
Purchaser of Shares pursuant to the terms, and subject to the conditions of the
Offer, which purchase cannot be earlier than October 9, 1997.
I-1
<PAGE>
None of Purchaser Designees (a) is currently a director of, or holds any
position with, the Company, (b) has a familial relationship with any of the
directors or executive officers of the Company or (c) to the best knowledge of
Purchaser, beneficially owns any securities (or rights to acquire any
securities) of the Company. The Company has been advised by Purchaser that, to
the best of Purchaser's knowledge, none of Purchaser Designees has been involved
in any transactions with the Company or any of its directors, executive officers
or affiliates which are required to be disclosed pursuant to the rules and
regulations of the Securities and Exchange Commission, except as may be
disclosed herein or in the Schedule 14D-9.
Purchaser has informed the Company that it will choose Purchaser Designees
from Purchaser's directors and executive officers listed below. Purchaser has
informed the Company that each of Purchaser Designees has consented to act as a
director, if so designated. The names of Purchaser Designees, their ages as of
September 4, 1997, and certain other information about them are set forth below.
All of Purchaser Designees are officers and directors of Purchaser and the
business address of each such executive officer and director is Riverfront Plaza
West, 901 East Byrd Street, Suite 1300, Richmond, Virginia 23219. Unless
otherwise indicated below, each occupation set forth opposite an individual's
name refers to employment with the Parent.
<TABLE>
<CAPTION>
NAME OF PURCHASER DESIGNEE AGE PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
- --------------------------- --- --------------------------------------------------------------------------------------
<S> <C> <C>
John T. Herzog 35 President and a director of Parent (1997-Present); Vice President, Secretary and
Treasurer and a director of Purchaser (1997-present); Managing Partner, Colonnade
(1995-present); Chief Financial Officer, Eskimo Pie Corporation (1993-1995); Corporate
Finance Vice President, Wheat First Butcher Singer (1991-1993).
James C. Wheat, III 45 Vice President, Secretary and Treasurer and a director of Parent (1997-present);
President and a director of Purchaser (1997-present); Managing Partner, Colonnade
(1993-present); Managing Partner, Riverfront Partners (1992-present); Managing
Director, Wheat First Butcher Singer (1984-1992). Mr. Wheat is a director of Huddle
House, Max Media, Tredegar Trust Company and State Affairs Company.
</TABLE>
DIRECTORS OF THE COMPANY
The Board of Directors is currently comprised of six directors. The
following sets forth information as to each director, including age as of
September 4, 1997, principal occupation and employment during the past five
years, directorships in other publicly held companies, membership on committees
of the Board of Directors and period of service as a director of the
Corporation.
PETER B. FOREMAN Age: 61
Mr. Foreman has served as the President of Sirius Corporation, an
investment management company, since 1994. Mr. Foreman was a founding partner of
Harris Associates, L.P., an investment management company, from 1976 to 1994.
Mr. Foreman has served as a director of Eagle Food Centers Inc., a retail food
store company, since 1988. Mr. Foreman has served as a director of Glacier Water
Services, Inc., a bottled water distribution company, since 1991 and has served
as a director of PCA International Inc., a company involved in the photography
business, since 1994. Mr. Foreman has been a Director since July 15, 1994.
ARTHUR L. GOESCHEL Age: 75
Mr. Goeschel is presently retired. Mr. Goeschel served as the Chairman of
the Board of Rexene Corporation, a manufacturer of plastic film and plastic
resins, from March 1992 until his resignation in 1997. Mr. Goeschel has served
as a member of the board of trustees of Laurel Mutual Funds. Mr. Goeschel was
formerly the Executive Vice President of Merck & Company, Inc. and President of
Calgon Corporation, a Merck corporation subsidiary, and is a member of the Board
of Directors of Calgon Corporation, a producer of granular activated carbon. Mr.
Goeschel has been a Director since July 15, 1994.
DANIEL J. HENNESSY Age: 39
Mr. Hennessy has, since August 1988, been a General Partner of CHS
Management, the General Partner of Code, Hennessy & Simmons Limited Partnership
("CHS"), a limited partnership engaged in private equity investing, and a
principal of Code, Hennessy and Simmons, Inc. ("CHSI"), a company engaged in
private equity investing. Mr. Hennessy has served as Chairman of the Board and
has been a Director since July 31, 1992.
I-2
<PAGE>
JOHN F. LEVY Age: 50
Mr. Levy was the President and Chief Executive Officer of Waban Inc., a
retailing company, until May 30, 1993. Mr. Levy is a director of Selfcare, Inc.,
a public biotechnology company. Mr. Levy has been a Director since July 15,
1994.
JESSE C. LUXTON Age: 54
Mr. Luxton has been with the Company for 19 years. He has served as the
Company's President and Chief Executive Officer since 1987 and prior to that Mr.
Luxton served as the Company's General Manager and Vice President of Sales and
Marketing. Mr. Luxton has been a Director since July 31, 1992.
JON S. VESELY Age: 31
Mr. Vesely is a principal of CHSI. Mr. Vesely was an associate of CHS
Management from 1991 to 1994 and a managing director of CHSI from 1994 to 1997.
Prior to such date, he was a Corporate Finance Officer with First Chicago
Corporation. Mr. Vesely has served as a Director since July 31, 1992.
There are no family relationships among the foregoing persons.
BOARD AND COMMITTEE MEETINGS
The Board of Directors held four meetings (exclusive of committee meetings)
during the fiscal year ended April 30, 1997. The Board of Directors has
established the following committees, the functions and current members of which
are noted below. Each current director except Mr. Vesely attended 75% or more of
the number of meetings held during the fiscal year ended April 30, 1997 of the
Board of Directors and any committees on which such director served.
COMPENSATION COMMITTEE. The Compensation Committee of the Board of
Directors consists of Messrs. Hennessy, Foreman, Goeschel, Levy and Vesely. The
Compensation Committee reviews and makes recommendations to the Board of
Directors regarding salaries, compensation and benefits of executive officers
and key employees of the Corporation and grants options to purchase Common Stock
of the Corporation. The Compensation Committee met two times during the fiscal
year ended April 30, 1997.
AUDIT COMMITTEE. The Audit Committee of the Board of Directors consists of
Messrs. Hennessy and Vesely. The Audit Committee, among other duties, reviews
the internal and external financial reporting of the Corporation, reviews the
scope of the independent audit and considers comments by the auditors regarding
internal controls and accounting procedures and management's response to those
comments. The Audit Committee met once during the preceding fiscal year.
The Corporation does not have a nominating committee.
COMPENSATION OF DIRECTORS
Management directors are not entitled to receive any fees for their service
on the Board of Directors. Nonmanagement directors are reimbursed for
out-of-pocket expenses incurred in connection with attending meetings. In
addition, all non-management directors received annual compensation of $10,000
for service on the Board of Directors during 1996. Pursuant to the Non-Employee
Directors' Stock Option Plan (the "Director Plan"), non-management directors may
elect to receive payment of fees for their services as directors in the form of
options to acquire Shares. The Director Plan provides for the issuance of
options to non-employee directors at an option price per share equal to the
closing sale price for Shares as of the most recent trading day preceding the
date the option is granted. Options granted under the Director Plan generally
become exercisable one year after the date of grant, and become immediately
exercisable upon the occurrence of certain change of control events.
EXECUTIVE OFFICERS
Set forth below is information regarding the executive officers of the
Company.
JESSE C. LUXTON Age: 54
Mr. Luxton has been with the Company for 19 years. He has spent the past 10
years as the Company's President and Chief Executive Officer and prior to that
as General Manager and Vice President of Sales and Marketing.
I-3
<PAGE>
M. WESLEY JORDAN, JR. Age: 48
Mr. Jordan is the Company's chief financial officer. Mr. Jordan joined the
Company as Vice President of Finance on May 8, 1995. Prior to joining the
Company, he was the Senior Vice President of Finance and Administration for the
Georgia Lottery Corporation for approximately one year. Prior to the Georgia
Lottery Corporation, Mr. Jordan was a partner with the accounting firm of
Coopers & Lybrand. Mr. Jordan is a Certified Public Accountant in the States of
Georgia and Texas.
BILLY D. MOORE Age: 56
Mr. Moore has worked with the Company for over 23 years in various
manufacturing positions. He has served as Vice President of Operations and
General Manager since 1989. Prior to joining the Company, Mr. Moore held several
manufacturing positions with Baldwin Piano Company.
RICHARD A. BEATTIE Age: 45
Mr. Beattie has been with the Company for the past 11 years in various
sales and marketing positions. He has held his most recent position as Vice
President of Sales and Marketing for the past five years. Prior to joining the
Company, Mr. Beattie worked with Jack Shine & Associates, a manufacturer's
representative organization, for eight years.
ROBERT T. LITTLEJOHN Age: 52
Mr. Littlejohn has been with the Company as Controller for the past 15
years. Prior to joining the company, Mr. Littlejohn worked in several accounting
functions with various companies. He is a Certified Public Accountant in the
State of Mississippi.
There are no family relationships among the foregoing persons.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers, directors and persons who beneficially own more than ten
percent of a registered class of the Company's equity securities to file reports
of securities ownership and changes in such ownership with the Securities and
Exchange Commission (the "SEC"). Officers, directors and greater than
ten-percent beneficial owners also are required by rules promulgated by the SEC
to furnish the Company with copies of all Section 16(a) forms they file.
Based solely upon a review of the copies of such forms furnished to the
Company, or written representations that no Form 5 filings were required, the
Company believes that each of its officers, directors and greater than ten
percent beneficial owners complied with all Section 16(a) filing requirements
applicable to them during the period from May 1, 1996 through September 4, 1997.
I-4
<PAGE>
SECURITY OWNERSHIP
The following information with respect to the outstanding shares of Common
Stock beneficially owned by each Director and nominee for Director, the chief
executive officer and the four other executive officers, and the Directors and
executive officers as a group and all beneficial owners of more than five
percent of the Common Stock is furnished as of September 4, 1997.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
-----------------------
NUMBER OF PERCENT OF
NAME SHARES(2) CLASS(2)
- ------------------------------------------------------------------------------------------------------ ---------- ----------
<S> <C> <C>
Code, Hennessy & Simmons Limited Partnership(3)....................................................... 1,581,625 31.81%
Andrew W. Code(4)(5).................................................................................. 1,582,025 31.81%
Daniel J. Hennessy(4)(6).............................................................................. 1,582,925 31.83%
Brian P. Simmons(4)................................................................................... 1,585,125 31.88%
Hesperus Partners, Ltd.(7)............................................................................ 317,655 6.34%
Peter B. Foreman(7)(8)................................................................................ 328,605 6.59%
White Dwarf Partners, L.P.(9)......................................................................... 279,845 5.63%
Frank C. Meyer(9)..................................................................................... 279,845 5.63%
Arthur L. Goeschel(8)................................................................................. 15,950 *
John F. Levy(8)....................................................................................... 10,950 *
Jesse C. Luxton(10)................................................................................... 468,795 9.17%
M. Wesley Jordan(11).................................................................................. 21,181 *
Billy D. Moore(12).................................................................................... 219,504 4.36%
Richard A. Beattie(13)................................................................................ 112,771 2.24%
Robert T. Littlejohn(14).............................................................................. 90,745 1.81%
Jon S. Vesely(15)..................................................................................... 1,551 *
All executive officers (ten persons).................................................................. 2,856,477 53.65%
</TABLE>
- ---------------
(1) "Beneficial owner" means generally any person who, directly or indirectly,
has or shares voting power or investment power with respect to a security.
All information with respect to the beneficial ownership of any stockholder
has been furnished by such stockholder or is based on reports filed with
the SEC by or on behalf of such stockholder. The Company believes that,
except as otherwise indicated, each stockholder has sole voting and
investment power with respect to shares listed as beneficially owned by
such stockholder.
(2) Based on 4,972,686 shares of Common Stock outstanding as of September 4,
1997 plus, determined with respect to any person, the number of shares of
Common Stock issuable upon exercise of any options held by such person as
of September 4, 1997. Percentages less than 1.0% are denoted by an
asterisk.
(3) The business address of Code, Hennessy & Simmons Limited Partnership
("CHS") is 10 South Wacker Drive, Suite 3175, Chicago, IL 60606.
(4) 1,581,625 of such shares of Common Stock are held of record by CHS and
beneficially by Messrs. Code, Hennessy and Simmons. Such persons are
general partners of the general partner of CHS and share investment and
voting power with respect to its securities held by CHS. Each of Messrs.
Code, Hennessy and Simmons disclaims beneficial ownership of such shares
except to the extent of his pecuniary interest therein. The business
address of each such person is c/o CHS, 10 South Wacker Drive, Suite 3175,
Chicago, IL 60606.
(5) 400 of such shares of Common Stock are held by Mr. Code as custodian for
minor children under the Uniform Gifts to Minors Act.
(6) 800 of such shares of Common Stock are held by Mr. Hennessy as custodian
for minor children under the Uniform Gifts to Minors Act.
(7) All of such shares are held by Hesperus Partners, Ltd., an Illinois limited
partnership. Mr. Foreman controls the general partner of the general
partner of Hesperus and possesses investment and voting power with respect
to securities held by Hesperus. The business address of each of Hesperus
Partners, Ltd. and Mr. Foreman is 225 W. Washington Street, Suite 1650,
Chicago, IL 60606. The foregoing is based solely on information contained
in a Schedule 13D dated April 30, 1997.
(8) Share amount includes exercisable options for 10,950 shares of the Common
Stock granted to each Non-Employee Director participating in the Director
Plan.
I-5
<PAGE>
(9) All of such shares are held by White Dwarf Partners, L.P., a Delaware
limited partnership. Mr. Meyer controls the general partner of White Dwarf
and possesses investment and voting power with respect to the securities
held by White Dwarf. The business address of each of White Dwarf and Mr.
Meyer is 225 W. Washington Street, Suite 1650, Chicago, Illinois 60606. The
foregoing is based solely on information contained in a Schedule 13D dated
April 30, 1997.
(10) The business address of Mr. Luxton is c/o National Picture & Frame Company,
702 Highway 82 West, Greenwood, MS 38930. Share amount shown includes
exercisable options for 139,000 shares of the Common Stock granted to Mr.
Luxton under the Company's Long Term Incentive Plan.
(11) Share amounts for Mr. Jordan includes exercisable options for 20,000 shares
of the Common Stock granted to Mr. Jordan under the Company's Long Term
Incentive Plan.
(12) Share amount shown includes exercisable options for 61,000 shares of the
Common Stock granted to Mr. Moore under the Company's Long Term Incentive
Plan.
(13) Share amount shown includes exercisable options for 58,000 shares of the
Common Stock granted to Mr. Beattie under the Company's Long Term Incentive
Plan.
(14) Share amount shown includes exercisable option for 41,000 shares of the
Common Stock granted to Mr. Littlejohn under the Company's Long Term
Incentive Plan.
(15) Mr. Vesely is an employee of Code, Hennessy & Simmons, Inc., an affiliate
of CHS, but does not share investment or voting discretion with respect to
the securities held by CHS.
I-6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following summary compensation table sets forth the components of the
compensation of the Company's chief executive officer and the other four
executive officers (the "Named Executive Officers") for all services rendered in
all capacities for the fiscal years ended April 30, 1997, April 30, 1996 and
April 30, 1995.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION STOCK
FISCAL --------------------- OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (#) COMPENSATION(1)
- ------------------------------------------------------------------ ------ --------- --------- ------- ---------------
<S> <C> <C> <C> <C> <C>
Jesse C. Luxton 1997 $ 405,169 $ 88,166 0 $ 8,429
President and Chief Executive Officer 1996 385,875 24,473 0 15,910
1995 367,500 191,500 0 18,093
M. Wesley Jordan, Jr. (2) 1997 133,127 18,396 0 7,853
Vice President Financial and Chief Financial Officer 1996 124,386 1,700 40,000(3) 1,388
Billy D. Moore 1997 202,584 36,111 0 8,266
Vice President of Operations 1996 192,937 4,400 0 8,609
and General Manager 1995 183,750 77,700 0 12,603
Richard A. Beattie 1997 202,584 35,861 0 8,241
Vice President of Sales and Marketing 1996 192,937 4,150 0 8,609
1995 183,750 77,450 0 11,548
Robert T. Littlejohn 1997 133,127 18,721 0 7,861
Controller 1996 126,787 2,850 0 6,105
1995 120,750 38,950 0 8,347
</TABLE>
- ---------------
(1) The 1995 amounts represent (i) estimated contributions by the Company to the
Retirement Plan and (ii) insurance premiums paid by the Company for the
benefit of the Named Executive Officers in the following amounts: Mr.
Luxton, $15,208 and $2,885, respectively; Mr. Moore, $10,883 and $1,720,
respectively; Mr. Beattie, $10,712 and $836, respectively; and Mr.
Littlejohn, $7,070 and $1,277, respectively. The 1996 amounts represent (i)
contributions by the Company to the Retirement Plan and (ii) insurance
premiums paid by the Company for the benefit of the Named Executive Officers
in the following amounts: Mr. Luxton, $13,301 and $2,609, respectively; Mr.
Moore, $6,901 and $1,708 respectively; Mr. Beattie, $6,911 and $1,698,
respectively; Mr. Littlejohn, $4,706 and $1,399, respectively; and Mr.
Jordan, $0 and $1,388 respectively. The 1997 amounts represent (i) estimated
contributions by the Company to the Retirement Plan and (ii) insurance
premiums paid by the Company for the benefit of the Named Executive
Officers, in the following amounts: Mr. Luxton, $4,316 and $4,113,
respectively; Mr. Moore, $4,316 and $3,950, respectively; Mr. Beattie,
$4,316 and $3,925, respectively; Mr. Littlejohn, $3,964 and $3,897,
respectively; and Mr Jordan, $3,956 and $3,897, respectively.
(2) Mr. Jordan became an Officer of the Company on May 8, 1995.
(3) Stock Options subject to five year vesting.
I-7
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
There were no option grants made to any of the named executive officers
during the last fiscal year.
<TABLE>
<CAPTION>
NUMBER OF
UNEXERCISED OPTIONS
AT FISCAL YEAR END
SHARES ACQUIRED VALUE REALIZED (#) EXERCISABLE/
NAME ON EXERCISE(1) ($)(1) UNEXERCISABLE(1)
- -------------------------------------------------- --------------- -------------- -------------------
<S> <C> <C> <C>
Jesse C. Luxton................................... -0- -0- 139,000/25,000
M. Wesley Jordan, Jr.............................. -0- -0- 10,000/30,000
Billy D. Moore.................................... -0- -0- 61,000/10,000
Richard A. Beattie................................ -0- -0- 57,000/10,000
Robert Littlejohn................................. -0- -0- 41,000/7,000
<CAPTION>
VALUE OF UNEXERCISED
IN-THE-MONEY
OPTIONS AT FISCAL
YEAR END ($)
EXERCISABLE/
NAME UNEXERCISABLE(1)
- -------------------------------------------------- ----------------------
<S> <C>
Jesse C. Luxton................................... 0/0
M. Wesley Jordan, Jr.............................. 3,750/11,250
Billy D. Moore.................................... 0/0
Richard A. Beattie................................ 0/0
Robert Littlejohn................................. 0/0
</TABLE>
- ---------------
(1) No options were exercised by the Named Executive Officers during the last
fiscal year. As of the end of the fiscal year, none of the options held by
the Named Executive Officers (other than Mr. Jordan) was in-the-money. As of
the end of the fiscal year, all of the options held by Mr. Jordan were
in-the-money.
LONG TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
There were no long term incentive plan awards made to any of the named
executives during the fiscal year.
EMPLOYMENT AGREEMENTS WITH THE COMPANY
Each of the Named Executive Officers other than Mr. Jordan is party to an
employment agreement with the Company dated as of April 30, 1993 (the
"Employment Agreements"). The Employment Agreements establish base salaries for
Messrs. Luxton, Moore, Beattie and Littlejohn at $350,000, $175,000, $175,000
and $115,000, respectively, for fiscal year 1994, subject to 5% annual increases
and further increases at the discretion of the Board of Directors. The
Employment Agreements provide, in part, for the payment of annual cash incentive
bonuses. Annual cash incentive bonuses begin to accrue once EBIT growth reaches
10% and fully vest once EBIT growth of 20% is achieved. The maximum annual cash
bonuses (as a percentage of base salary) for Messrs. Luxton, Moore, Beattie and
Littlejohn are 50%, 40%, 40% and 30%, respectively. A 5% increase in Mr.
Jordan's fiscal year 1996 salary of $126,787.50 for fiscal year 1997 was
negotiated at the time Mr. Jordan became Chief Financial Officer of the Company.
The Company also intends that Mr. Jordan will receive annual cash incentive
bonus payments not to exceed 30% of Mr. Jordan's base salary, determined
according to the formula applied in calculating annual bonus payments for the
other Named Executive Officers. In addition to the foregoing, each Named
Executive Officer is entitled to receive a holiday bonus in accordance with the
Company's holiday bonus program. Holiday bonuses for fiscal year 1997 were
$23,275 for the Named Executive Officers in the aggregate, which amounts are
included in the summary compensation table above.
The Employment Agreements expire on October 31, 1997.
INCENTIVE AND SEVERANCE AGREEMENTS WITH THE COMPANY
Each of Messrs. Luxton, Jordan, Beattie, Moore and Littlejohn is a party to
letter agreements with the Company dated November 7, 1996 and April 30, 1997.
The letters provide that, in the event that a change of control transaction is
consummated with Colonnade on or prior to October 31, 1997, each executive will
be entitled to receive an amount equal to the unpaid portion of the maximum
annual cash incentive bonus under his Employment Agreement for the fiscal year
ended April 30, 1997. Each executive has to date received approximately 39% of
the maximum cash incentive bonus for the fiscal year ended April 30, 1997, and
hence approximately 61% of the maximum cash incentive bonus for the fiscal year
ended April 30, 1997 is payable under the letter agreements. The amounts which
would be payable to the executives under the letter agreements are as follows:
approximately $123,000 in the case of Mr. Luxton, approximately $49,000 each in
the case of Messrs. Moore and Beattie and approximately $24,000 each in the case
of Messrs. Littlejohn and Jordan. Agreements in place with the executives also
provide for severance payments equal to one year's base salary if their
employment is terminated without cause (either actually or constructively) on or
prior to October 31, 1997.
I-8
<PAGE>
EMPLOYMENT, CONSULTING AND SUBSCRIPTION AGREEMENTS WITH PURCHASER
Purchaser has advised the Company that it intends to enter into employment
agreements with Messrs. Beattie and Moore and a consulting agreement with Mr.
Luxton. Purchaser has also advised the Company that it intends to enter into
subscription and exchange agreements with Messrs. Beattie, Moore and Littlejohn,
pursuant to which they will subscribe for stock in Purchaser in exchange for a
portion of their shares in the Company. See Item 3(b) of the Schedule 14D-9 for
a description of these agreements.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following is the report of the Compensation Committee on executive
compensation. The Compensation Committee reviews and makes recommendations to
the Board of Directors regarding salaries, compensation and benefits of
executive officers and key employees of the Company and develops and administers
programs providing stock-based incentives. The following Compensation Committee
report documents the components of the Company's executive officer compensation
programs and describes the bases upon which compensation has been determined by
the Committee with respect to the Named Executive Officers.
This Compensation Committee report shall not be deemed incorporated by
reference into any filing under the Securities Act of 1933, as amended, or under
the Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
COMPENSATION PHILOSOPHY. The compensation philosophy of the Company is to
endeavor to link executive compensation to continuous improvements in corporate
performance and increases in stockholder value. The Compensation Committee has
adopted the following objectives as guidelines for compensation decisions.
-- Display a willingness to pay levels of compensation that are necessary
to attract and retain highly qualified executives.
-- Be willing to compensate executive officers in recognition of superior
individual performance, new responsibilities or new positions within
the Company.
-- Take into account historical levels of executive compensation and the
overall competitiveness of the market for high quality executive
talent.
-- Implement a balance between short-term and long-term compensation to
complement the Company's annual and long-term business objectives and
strategy and encourage executive performance in furtherance of the
fulfillment of those objectives.
-- Provide variable compensation opportunities based on the performance of
the Company, encourage stock ownership by executives and align
executive remuneration with the interest of stockholders.
COMPENSATION PROGRAM COMPONENTS. The particular elements of the
compensation program for the Named Executive Officers as set forth in their
respective Employment Agreements are explained below.
BASE SALARIES. The base pay level for each of the Named Executive Officers
is set forth in each such executive's employment agreement. Base pay levels were
negotiated with each Named Executive Officer other than Mr. Jordan in connection
with the Company's initial public offering in 1993. Mr. Jordan's base pay level
was negotiated in connection with his hiring in May 1995. See "Executive
Compensation -- Employment Agreements with the Company."
ANNUAL INCENTIVES. Annual bonuses for each of the Named Executive Officers
other than Mr. Jordan are determined according to formulae set forth in his
respective employment agreement. Annual bonus formulae were negotiated with each
Named Executive Officer other than Mr. Jordan in connection with the Company's
initial public offering. Annual bonuses for Mr. Jordan are determined according
to the formula set forth in Mr. Littlejohn's employment agreement. Annual
bonuses for Mr. Jordan were negotiated in connection with his hiring in May
1995. See "Executive Compensation -- Employment Agreements with the Company."
SPECIAL INCENTIVE. In order to incentivize the Named Executive Officers
during the Company's pursuit of strategic alternatives, special incentive
arrangements were put in place in November 1996 and April 1997. These
arrangements offer the Named Executives an additional opportunity to earn their
maximum annual incentive for fiscal 1997 in the event that a change in control
transaction is consummated prior to October 31, 1997. See "Executive
Compensation -- Incentive and Severance Agreements with the Company."
I-9
<PAGE>
STOCK OWNERSHIP. The Compensation Committee strongly believes that by
providing those persons who have substantial responsibility over the management
and growth of the Company with an opportunity to establish a meaningful
ownership position in the Company, the interest of stockholders and executives
will be closely aligned. See "Security Ownership.".
PRESIDENT AND CHIEF EXECUTIVE OFFICER COMPENSATION. The base pay level and
annual incentive bonus compensation for Mr. Luxton, the Company's President and
Chief Executive Officer, are determined according to formulae set forth in his
employment agreement. Pursuant to his employment agreement, Mr. Luxton's base
salary for fiscal year 1994 was set at $350,000, subject to 5% annual increases
and further increases at the discretion of the Board. Mr. Luxton's base salary
for fiscal year 1997 was $405,169. Mr. Luxton received a bonus for fiscal year
1997 of $88,166. This amount consisted of a formula bonus under his employment
agreement of $79,616 and a holiday bonus of $8,550. See "Security Ownership" and
"Executive Compensation -- Employment Agreements with the Company."
CERTAIN TAX CONSIDERATIONS. Section 162(m) of the Internal Revenue Code of
1986, as amended, limits the deductibility on the Company's tax returns of
compensation over $1 million to any of the Named Executive Officers unless, in
general the compensation is paid pursuant to a plan which is performance-based,
non-discretionary and has been approved by the Company's stockholders. The
Compensation Committee's policy with respect to Section 162(m) is to make
reasonable efforts to ensure that compensation is deductible without limiting
the Company's ability to attract and retain qualified executives.
SUMMARY. The Compensation Committee believes that the total compensation
program for executives of the Company is focused on increasing values for
stockholders and enhancing corporate performance. The Compensation Committee
currently believes that the compensation of executive officers is properly tied
to stock appreciation.
Compensation Committee
Peter B. Foreman
Daniel J. Hennessy
Arthur L. Goeschel
Jon S. Vesely
I-10
<PAGE>
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total stockholder
return since the Common Stock became publicly traded on October 5, 1993 with the
Total Return Index for the Nasdaq Stock Market and with the Total Return Index
for publicly-traded non-financial companies with a market capitalization within
one percentage point of the Company's market capitalization on April 30, 1997.
The Company has chosen this group for comparison because the Company does not
believe that it can reasonably identify a peer group or a published industry or
line-of-business index that contains companies in a similar line of business.
Cumulative total stockholder return is defined as share price appreciation
assuming a $100 initial investment and reinvestment of dividends.
COMPARE CUMULATIVE TOTAL RETURN
AMONG NATIONAL PICTURE & FRAME
NASDAQ MARKET INDEX AND PEER GROUP INDEX
NATIONAL PICTURE
& FRAME PEER GROUP NASDAQ MARKET
10/05/1993 100.00 100.00 100.00
4/29/1994 89.47 90.34 101.58
10/28/1994 107.89 90.51 107.34
4/28/1995 98.68 90.55 110.50
10/30/1995 94.74 80.89 126.80
4/30/1996 102.63 98.27 142.88
10/31/1996 121.05 74.68 146.20
4/30/1997 98.68 66.49 151.37
ASSUMES $100 INVESTED ON OCT. 05, 1993
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING APR. 30, 1997
I-11
<PAGE>
TRANSACTIONS WITH DIRECTORS AND MANAGEMENT
The Company currently does business with Direct Connection Travel, a
company in which Mr. Luxton and his wife each have a 25% interest. During fiscal
1997, the Company made payments to Direct Connection Travel totaling
approximately $169,877. The Company believes that the terms of such arrangement
are substantially comparable to those available with other travel agencies.
The Company currently does business with Butch Chamblee, DBA Disposal
Service, a company wholly owned by Mr. Butch Chamblee who is the brother-in-law
of Mr. Moore. During fiscal 1997, the Company made payments to Disposal Service
totaling approximately $78,150. The Company made certain of those payments
pursuant to a contract for solid waste removal which was negotiated based on a
competitive bidding process involving Disposal Service and other third parties.
The Company believes that the terms of such arrangements are substantially
comparable to those available with other solid waste management companies.
VOTING AGREEMENT
The Company and certain stockholders, including CHS and Messrs. Luxton,
Vesely, Moore, Beattie and Littlejohn, which in the aggregate own approximately
49% of all outstanding shares of the Common Stock, are parties to a Voting
Agreement that provides for, among other things, voting with respect to the
election of Directors. CHS is entitled to designate three Directors and Mr.
Luxton is entitled to be designated as a Director for so long as he is the Chief
Executive Officer, after which time his successor would be designated. The
remaining Directors are to be independent Directors, unaffiliated with CHS. The
agreement automatically terminates at such time when CHS ceases to hold at least
ten percent of the Common Stock. The Voting Agreement was amended on September
4, 1997 to permit CHS and Messrs. Luxton, Vesely, Moore, Beattie and Littlejohn
to enter into Stockholder Tender Agreements in connection with the Merger
Agreement.
I-12
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 contemplates 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
--------------
NATIONAL PICTURE & FRAME COMPANY
AND COLONNADE CAPITAL, L.L.C.
ENTER INTO DEFINITIVE MERGER AGREEMENT
Greenwood, MS -- 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 5
[LOGO] 702 Highway 82 West
Greenwood, Mississippi 38430
(601) 451-4800
September 11, 1997
TO OUR STOCKHOLDERS:
On behalf of the Board of Directors of National Picture & Frame Company
(the "Company"), we are pleased to inform you that the Company entered into an
Agreement and Plan of Merger (the "Merger Agreement") on September 4, 1997 with
Colonnade Capital, L.L.C., NPF Holding Corporation and NPF Acquisition
Corporation ("Purchaser"). Pursuant to the Merger Agreement, Purchaser has today
commenced a cash tender offer (the "Offer") to purchase all of the issued and
outstanding shares of the Company's Common Stock (the "Shares") at $12.00 net
per Share in cash (the "Offer Consideration").
Pursuant to the Merger Agreement, the Offer will be followed by a merger of
the Company and Purchaser whereby each Share will be converted into the right to
receive in cash the amount per Share paid to holders in the Offer.
THE COMPANY'S BOARD OF DIRECTORS HAS APPROVED THE OFFER AND MERGER AND HAS
UNANIMOUSLY DETERMINED THAT THE OFFER AND MERGER ARE FAIR TO AND IN THE BEST
INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY TENDER THEIR SHARES
PURSUANT TO THE OFFER.
In arriving at its recommendation, the Board of Directors gave careful
consideration to the factors described in the attached Schedule 14D-9 that is
being filed today with the Securities and Exchange Commission, including the
written opinion dated September 4, 1997 of Bowles Hollowell Connor & Co., the
Company's financial advisor, to the effect that, as of such date and based upon
and subject to certain matters stated therein, the cash consideration to be paid
for the Shares in the Offer and Merger is fair, from a financial point of view,
to holders. The Schedule14D-9 contains other important information relating to
the Offer, and you are encouraged to read the Schedule 14D-9 carefully.
In addition to the attached Schedule 14D-9, enclosed also is the Offer to
Purchase dated September 11, 1997, together with related materials, including a
Letter of Transmittal, to be used for tendering your Shares in the Offer. These
documents state the terms and conditions of the Offer and provide instructions
on how to tender your Shares. We urge you to read these documents carefully in
making your decision with respect to tendering your Shares pursuant to the
Offer. Questions or requests for assistance may be directed to MacKenzie
Partners, Inc., the Purchaser's Information Agent, at (800) 332-2885.
On behalf of the Board of Directors,
/s/ DANIEL J. HENNESSY
DANIEL J. HENNESSY
CHAIRMAN OF THE BOARD
BOWLES HOLLOWELL CONNER & CO.
INVESTMENT BANKERS
September 4, 1997
Board of Directors
National Picture & Frame Company
702 Highway 82 West
Greenwood, Mississippi 38930
Dear Members of the Board:
National Picture & Frame Company (the "Company"), NPF Holding
Corporation ("Parent"), NPF Acquisition Corporation ("Buyer") and wholly owned
subsidiary of Parent, and Colonnade Capital, L.L.C. ("Colonnade") have entered
into an Agreement and Plan of Merger dated as of September 4, 1997 (the
"Agreement") pursuant to which Buyer will make a tender offer (the "Offer") for
any and all shares of the Company's common stock (the "Shares") for
consideration of $12.00 per share in cash. Following consummation of the Offer,
Buyer will merge with and into the Company (the "Merger"), each remaining Share
will be converted into the right to receive $12.00 in cash, and the Company will
become a wholly owned subsidiary of Parent.
We have been requested by the Board of Directors of the Company to
render our opinion with respect to the fairness, from a financial point of view,
to the Company's shareholders of the consideration to be received in the Offer
and the Merger.
In arriving at our opinion, we have, among other things:
(i) reviewed the financial terms and conditions of the
Agreement;
(ii) analyzed certain historical business and financial
information relating to the Company, including publicly
available information concerning the Company;
(iii) reviewed certain financial forecasts and other data
provided to us by the management of the Company relating to
its business;
(iv) conducted discussions with members of the senior management
of the Company with respect to its business and prospects;
(v) reviewed public information with respect to certain other
companies in lines of businesses we believe to be generally
comparable to the business of the Company;
227 WEST TRADE STKEET - CHARLOTTE, NORTH CAROLINA 28202 - PHONE 704/348-1000 -
FAX 704/348-1099
<PAGE>
BOWLES HOLLOWELL CONNER & CO.
INVESTMENT BANKERS
Board of Directors
National Picture & Frame Company
September 4, 1997
Page 2
(vi) reviewed the financial terms of certain business
combinations involving companies in lines of business we
believe to be generally comparable to the business of the
Company;
(vii) reviewed the historical stock prices and trading volumes of
the Shares; and
(viii) conducted such other financial studies, analyses, and
investigations as we deemed appropriate.
In connection with our review, we have relied upon the accuracy and
completeness of the foregoing financial and other information, and have not
assumed any responsibility for any independent verification of such information
or any independent valuation or appraisal of any of the assets or liabilities of
the Company. With respect to the financial projections, we have assumed that
they have been reasonably prepared and reflect the best current estimates and
judgments of the Company's management as to the future financial performance of
the Company. We assume no responsibility for and express no view as to such
forecasts or the assumptions on which they are based. In arriving at our
opinion, we have conducted only a limited physical inspection of the properties
and facilities of the Company and have not made or obtained any evaluations or
appraisals of the assets or liabilities of the Company.
Further, our opinion is necessarily based on economic, monetary,
market, and other conditions as in effect on, and the information made available
to us as of, the date hereof.
In rendering our opinion, we have assumed that the Offer and the Merger
will be consummated on the terms described in the Agreement that we reviewed,
without any waiver of any material terms or conditions by the Company.
Bowles Hollowell Conner & Co. is an investment banking firm that is
involved on an ongoing basis in the valuation of businesses and their securities
in connection with mergers, acquisitions, divestitures, leveraged buyouts, and
private placements of debt and equity securities.
We have acted as financial advisor to the Board of Directors of the
Company in connection with the Offer and the Merger. In connection with our
engagement, we solicited from independent parties indications of interest in a
possible acquisition of the Company, received proposals, and held preliminary
discussions with certain interested parties prior to the date of the Agreement.
We have received an advisory fee and will receive an additional fee for our
<PAGE>
BOWLES HOLLOWELL CONNER & CO.
INVESTMENT BANKERS
Board of Directors
National Picture & Frame Company
September 4, 1997
Page 3
services which is contingent upon the consummation of the Offer. In addition,
the Company has agreed to indemnify us for certain liabilities that may arise
out of the rendering of this opinion.
Our engagement and the opinion expressed herein are solely for the
benefit of the Company's Board of Directors and are not on behalf of, and are
not intended to confer rights or remedies upon Parent, Buyer, Colonnade, any
shareholders of the Company or Parent, or any other person. This opinion is not
intended to be and does not constitute a recommendation to any shareholder of
the Company as to whether to accept the consideration proposed in the Offer. It
is understood that this letter may not be disclosed or otherwise referred to
without our prior consent.
Based upon our analysis and subject to the foregoing, it is our opinion
that, as of the date hereof, the consideration to be offered to the shareholders
of the Company pursuant to the Offer and the Merger is fair to such shareholders
from a financial point of view.
Sincerely,
BOWLES HOLLOWELL CONNER & CO.
/s/ Robert G. Calton III
-----------------------------
Robert G. Calton III
RGC:sbg
EXHIBIT 12
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
<PAGE>
FORM
FOR
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.
