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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
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DEFLECTA-SHIELD CORPORATION
(Name of Subject Company)
DEFLECTA-SHIELD CORPORATION
(Name of Person Filing Statement)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class of Securities)
244764 10 6
(CUSIP Number of Class of Securities)
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RUSSELL E. STUBBINGS
PRESIDENT
AND
CHIEF EXECUTIVE OFFICER
DEFLECTA-SHIELD CORPORATION
1800 NORTH NINTH STREET
INDIANOLA, IA 60016
(515) 961-6100
(Name, address and telephone number of person authorized to receive
notice and communications on behalf of the person filing statement)
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COPIES TO:
John E. Lowe, Esq.
Altheimer & Gray
10 South Wacker Drive
Suite 4000
Chicago, Illinois 60606
(312) 715-4000
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Deflecta-Shield Corporation, a Delaware
corporation (the "Company"). The address of the principal executive offices of
the Company is 1800 North Ninth St., Indianola, IA 60016. The title of the class
of equity securities to which this Statement relates is shares of common stock,
par value $.01 per share (the "Common Stock" or "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER
This Statement relates to a tender offer by Zephyros Acquisition
Corporation, a Delaware corporation ("Purchaser"), which is a wholly-owned
subsidiary of Lund International Holdings, Inc. ("Parent"), to purchase all of
the outstanding Shares at a purchase price of $16.00 per share, net to the
seller in cash (the "Offer Price"), upon the terms and subject to the conditions
set forth in the Offer to Purchase dated November 28, 1997 (the "Offer to
Purchase") and the related Letter of Transmittal (which together, with the Offer
to Purchase and any amendments or supplements thereto constitute the "Offer").
The Offer is disclosed in the Tender Offer Statement on Schedule 14D-1 dated
November 28, 1997 (the "Schedule 14D-1"), as filed by Purchaser and Parent with
the Securities and Exchange Commission (the "Commission"). The Schedule 14D-1
states that the address of the principal executive offices of Purchaser and
Parent is 911 Lund Boulevard, Anoka, MN 55303.
The Offer is being made pursuant to an Agreement and Plan of Merger dated as
of November 25, 1997 among Parent, Purchaser and the Company (the "Merger
Agreement"). The Merger Agreement provides for the making of the Offer and the
terms and conditions thereof. The Merger Agreement further provides that if the
Offer is consummated, then upon the terms and subject to the conditions
contained therein, and in accordance with the Delaware General Corporation Law
("DGCL"), Purchaser will be merged with and into the Company (the "Merger" and,
together with the Offer, the "Transaction"), with the Company surviving the
Merger (the Company following the Merger is sometimes referred to as the
"Surviving Corporation"). In the Merger, the holders of Shares as of the
effective time of the Merger (other than Parent and its affiliates) will receive
an amount in cash equal to the Offer Price, without interest thereon. The shares
of common stock of Purchaser outstanding immediately prior to the Merger shall
be converted into shares of Common Stock of the Surviving Corporation.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the Company, which is the person filing
this Statement, are set forth in Item 1 above, which information is incorporated
herein by reference.
(b)(1) Certain contracts, agreements, arrangements and understandings
between the Company or its affiliates and certain of its executive officers,
directors, or affiliates are described in the Company's Information Statement
pursuant to Section 14(f) of the Securities Exchange Act of 1934 and Rule 14f-1
thereunder (the "Information Statement") dated the date hereof under "Ownership
of Common Stock", Directors and Executive Officers of the Company", "Meetings of
the Board of Directors", "Committees of the Board", "Director Compensation
Arrangements", "Other Transactions and Certain Relationships", "Summary of
Executive Compensation", "Option Grants and Exercises", "Compensation Committee
Interlocks and Insider Participation" and "Employment and Severance Agreements".
The Information Statement is attached hereto as Schedule I, filed as Exhibit 1
hereto and incorporated herein by reference. In addition, certain contracts,
agreements, arrangements and understandings relating to the Company and/ or the
Company's directors and executive officers are contained in the Merger Agreement
and are described below under "Merger Agreement."
ARRANGEMENTS WITH DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
EMPLOYMENT AND SEVERANCE AGREEMENTS. The Company and certain executive
officers are parties to employment agreements, which were described in the
Company's Proxy Statement for its 1997 Annual Meeting of Stockholders. The
Company and certain members of its management have entered into letter
agreements providing for severance payments in the event their employment is
terminated following the
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successful consummation of a transaction involving a change of control of the
Company, including the Offer. Pursuant to such letter agreements, those persons
will receive severance payment of from six months to 18 months of their base
salary if they are terminated on or prior to the second anniversary of the
successful consummation of the Offer.
Specifically, the Company has entered into such severance agreements with
ten members of management, including all of the Company's executive officers.
The agreements provide that if the employee's employment with the Company and
its affiliates is terminated by the Company other than for "cause" or by the
employee for "good reason" (each as defined therein) within 18 months following
the occurrence of a change in control (as defined below), the Company will pay
to the employee a severance benefit equal to 12 months' base pay (except in the
case of the agreements with Mr. Russell Stubbings, the Company's President and
Chief Executive Officer, and Mr. Ronald Fox, the Company's Vice President and
Chief Financial Officer, which provide for a benefit equal to 18 months' base
pay); and if such a termination occurs more than 18 months after, but less than
24 months after, the occurrence of a change in control, the Company will pay to
the employee a severance benefit equal to 6 months' base pay (except in the case
of the agreements with Mr. Stubbings and Mr. Fox, which provide for a benefit
equal to 9 months' base pay). In addition, if the employee voluntarily
terminates employment with the Company and its affiliates following a change in
control because of a relocation of such employee's place of employment which
would reasonably require a change in personal residence, the Company will pay to
the employee a severance benefit equal to 3 months' base pay. If the employee is
also party to an employment agreement with the Company, the employee may instead
elect to receive severance benefits under the terms of such employment
agreement, rather than under the terms of the severance agreement. A "change in
control" under these agreements is deemed to occur if any of the following
events occur prior to November 25, 1999: (i) any person or entity becomes the
beneficial owner, directly or indirectly, of securities representing in excess
of fifty (50%) of the voting securities of the Company, except for Charles Meyer
or Mark Mamolen; (ii) the Company sells or otherwise disposes of all or
substantially all of its assets; (iii) persons who, at the beginning of any
twelve (12) consecutive month period, constitute the Board of Directors of the
Company, at the end of such period cease to constitute a majority of the Board
of Directors of the Company, unless the nomination or appointment of each new
Director was approved by a vote of at least two-thirds (2/3) of the Directors
then still in office who were Directors at the beginning of such period; or (iv)
the Company merges or combines with or into any other person or entity and the
shareholders of the Company immediately prior to the consummation of the merger
own less than fifty percent (50%) of the outstanding voting securities of the
surviving entity upon consummation of such merger.
The preceding discussion of certain provisions relating to the employment of
the Company's executive officers is qualified in its entirety by reference to
the full text of the severance agreements for each of the executive officers of
the Company filed as Exhibits 5 through 9 to this Schedule 14D-9.
(b)(2) Purchaser and the Company have entered into the Merger Agreement, the
material terms of which are described below. As a condition to Parent's
willingness to enter into the Merger Agreement, certain stockholders (the
"Stockholders") of the Company entered into Stockholder Agreements (each, a
"Stockholder Agreement") with Parent pursuant to which each such Stockholder
agreed to tender, subject to certain conditions, all of the Shares held by such
Stockholder pursuant to the terms of the Offer. The aggregate number of Shares
to be tendered under the Stockholder Agreements represents approximately 39.8%
of the Shares outstanding on the date of the Merger Agreement.
The following are summaries of certain provisions of the Merger Agreement
and the Stockholder Agreements. Such summaries do not purport to be complete and
are qualified in their entirety by reference to the full text of the Merger
Agreement, which is filed as Exhibit 2 hereto and is incorporated herein by
reference, and the full texts of the Stockholder Agreements, which are filed as
Exhibits 3 and 4, respectively, hereto and are incorporated herein by reference.
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THE MERGER AGREEMENT
Capitalized terms not otherwise defined herein have the meanings set forth
in the Merger Agreement.
THE OFFER. The Merger Agreement provides for the making of the Offer by the
Purchaser. The obligations of the Purchaser to accept for payment and to pay for
any Shares validly tendered on or prior to the Expiration Date and not withdrawn
are subject only to the Minimum Condition and the other conditions set forth in
Annex I to the Merger Agreement. The Merger Agreement further provides that
without the prior written consent of the Company, which may be given or withheld
in its sole and absolute discretion, neither the Parent nor the Purchaser will
(i) amend or waive the Minimum Condition; (ii) decrease the Offer Price; (iii)
decrease the number of Shares sought; (iv) amend the Offer in any way other than
to increase the Offer Price, including by means of adding any conditions to the
Offer; (v) change the form of consideration payable in the Offer; or (vi) extend
the expiration of the Offer (except as provided below); PROVIDED, HOWEVER, that,
subject to the termination rights set forth in the Merger Agreement, if on the
initial scheduled expiration date of the Offer, which shall be 20 business days
after the date the Offer is commenced (i.e., December 26, 1997), all conditions
to the Offer shall not have been satisfied or waived at such time, the Purchaser
may extend the expiration date of the Offer for a period of 30 business days;
and PROVIDED, FURTHER, that if at any scheduled Expiration Date of the Offer,
the condition set forth in paragraph (d) of Annex I to the Merger Agreement
shall not have been satisfied but all of the other conditions set forth on such
Annex I shall then have been satisfied, then, at the request of the Company, the
Purchaser will, and the Parent will cause the Purchaser to, extend the Offer
from time to time, subject to the right of the Purchaser and the Parent to
terminate the Merger Agreement pursuant to Section 8.1 thereof. The Purchaser
will, and the Parent will cause the Purchaser to, subject only to the prior
satisfaction or waiver of the conditions of the Offer, accept for payment and
pay for Shares validly tendered as soon as it is legally permitted to do so
under applicable law; PROVIDED, HOWEVER, that if, immediately prior to the
initial Expiration Date of the Offer in accordance with the foregoing, the
Shares tendered and not withdrawn pursuant to the Offer equal less than 90% of
the then outstanding Shares, but not less than 70% of such Shares, the Purchaser
may extend the Offer on one or more occasions for an aggregate period not to
exceed ten business days, notwithstanding that all conditions to the Offer are
satisfied as of such expiration date of the Offer; PROVIDED, FURTHER, that if
the Purchaser extends the Offer pursuant to the foregoing proviso, all
conditions set forth on Annex I to the Merger Agreement will be irrevocably
waived and deemed satisfied in full. Notwithstanding anything to the contrary
contained in this paragraph, the Purchaser may not extend the Offer without the
prior written consent of the Company which may be given or withheld in its sole
and absolute discretion, if the failure of any condition was a result directly
or proximately from a state of facts or action or inaction which constitutes a
breach of a representation, warranty or covenant of the Purchaser or the Parent.
CONDITIONS OF THE OFFER. Notwithstanding any other provision of the Offer,
the Purchaser will not be required to accept for payment any Shares tendered
pursuant to the Offer, and, subject to the terms of the Merger Agreement, may
terminate the Offer if (i) by the Expiration Date of the Offer, the Minimum
Condition shall not have been satisfied or (ii) at any time on or after the date
of the Merger Agreement, and prior to the time for acceptance for payment for
any such Shares, any of the following events shall occur and remain in effect
other than as a result directly or proximately from a state of facts or action
or inaction which constitutes a breach of a representation, warranty or covenant
of the Purchaser or the Parent:
(a) there shall be instituted or pending any suit, action or proceeding by a
Governmental Entity seeking to (1) make illegal or otherwise directly restrain
or prohibit the making of the Offer, the acquisition of any Shares by the
Purchaser pursuant to the Offer or the consummation of the Merger, (2) restrain
or prohibit the Parent's or the Purchaser's ownership or operation (or that of
their respective subsidiaries or affiliates) of all or any material portion of
the business or assets of the Company and its Subsidiaries, taken as a whole,
or, following consummation of the Offer or the Merger and as a result thereof,
of the Parent and its subsidiaries, taken as a whole, or to compel the Parent or
any of its
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subsidiaries or affiliates to dispose of or hold separate all or any material
portion of the business or assets of the Company and its Subsidiaries, taken as
a whole, or, following consummation of the Offer or the Merger and as a result
thereof, of the Parent and its subsidiaries, taken as a whole, (3) impose
material limitations on the ability of the Parent or any of its subsidiaries or
affiliates effectively to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote any Shares to be acquired
pursuant to the Offer on all matters properly presented to the Company's
stockholders, or (4) require divestiture by the Parent or any of its
subsidiaries or affiliates of any Shares to be acquired pursuant to the Offer;
(b) there shall be any statute, rule, regulation, injunction, order or
decree issued, promulgated, enacted, entered or enforced that results in any of
the consequences referred to in clauses (1) through (4) of paragraph (a) above;
(c) there shall have occurred (and the adverse effect of such occurrence
shall be continuing for more than three business days) (1) any general
suspension of trading in, or limitation on prices for, securities on the New
York Stock Exchange or on the NASDAQ National Stock Market (excluding any
trading halt triggered solely as a result of a specified decrease in a market
index), (2) a declaration of a banking moratorium or any suspension of payments
in respect of banks in the United States or any limitation by United States
federal or state authorities on the extension of credit by banks or other
financial institutions, (3) a commencement of a war directly involving the armed
forces of the United States, a material commitment of the armed forces of the
United States or other international or national calamity directly involving the
armed forces of the United States, if, as a result of such war, commitment of
armed forces or other calamity, banks generally stop lending funds for middle
market acquisition transactions, but specifically other than in connection with
increases in interest rates or (4) in the case of any of the foregoing existing
at the time of the commencement of the Offer, a material acceleration or
worsening thereof;
(d) the Company shall have (1) breached in any material respect any material
covenant or other agreement contained in the Merger Agreement, (2) any
representation or warranty of the Company made in the Merger Agreement which is
qualified as to Material Adverse Effect shall fail to be true and correct at any
time prior to expiration of the Offer as if made at such time or (3) any other
representation or warranty of the Company made in the Merger Agreement shall
fail to be true and correct at any time prior to expiration of the Offer as if
made at such time, which failure to be true and correct would have a Material
Adverse Effect, in each case which breach or which failure to be true and
correct cannot be or has not been cured within ten business days of the receipt
of written notice thereof;
(e) the Merger Agreement shall have been terminated in accordance with its
terms;
(f) the Board of Directors of the Company shall have withdrawn or materially
modified in a manner adverse to the Parent or the Purchaser its approval or
recommendation of the Offer, the Merger or the Merger Agreement; or
(g) the Company shall have entered into, or shall have publicly announced
its intention to enter into, a definitive written agreement or agreement in
principle providing for a Takeover Proposal.
The foregoing conditions are for the sole benefit of the Parent and the
Purchaser, other than the Minimum Condition and other than the termination of
the Merger Agreement in accordance with its terms, and other than the Minimum
Condition and such termination, may be waived by the Purchaser, in whole or in
part. The failure by the Purchaser, at any time, to exercise any of the
foregoing rights shall not be deemed a waiver of any such rights; the waiver of
any such right with respect to particular facts and circumstances shall not be
deemed a waiver with respect to any other facts and circumstances; and each such
right shall be deemed an ongoing right which may be asserted at any time or from
time to time.
DESIGNATION OF DIRECTORS. The Merger Agreement provides that promptly upon
the purchase of Shares by the Purchaser pursuant to the Offer which when added
to any other Shares beneficially owned
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by the Parent, the Purchaser and their affiliates, represent at least a majority
of the Shares on a fully diluted basis, and from time to time thereafter as
Shares are acquired by the Purchaser, the Parent will be entitled to designate
such number of directors, rounded up to the next whole number, on the Board of
Directors of the Company as is equal to the product of the total number of
directors on such Board of Directors (giving effect to the directors designated
by the Parent pursuant to this sentence) multiplied by the percentage that the
number of Shares beneficially owned by the Purchaser or any affiliate of the
Purchaser bears to the total number of Shares then outstanding. In furtherance
thereof, the Company has agreed to increase promptly the size of the Board of
Directors or use its best efforts to secure the resignations of such number of
its incumbent directors as is necessary to enable the Parent's designees to be
elected to the Board of Directors in accordance with the terms of the Merger
Agreement, and the Board of Directors has agreed to take all actions available
to the Company to cause the Parent's designees to be so elected as provided in
the Merger Agreement. The Parent and the Purchaser have agreed not to seek any
greater representation on the Board of Directors of the Company prior to the
Effective Time.
The Company's obligation to appoint the Parent's designees to the Board of
Directors of the Company is subject to compliance with Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder. Pursuant to the Merger
Agreement, the Company promptly shall take all actions required pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order
to fulfill the foregoing obligations. In addition, in the event that the
Parent's designees are elected to the Company's Board of Directors after the
acceptance for payment of Shares pursuant to the Offer and prior to the
Effective Time of the Merger, the affirmative vote of a majority of the
Independent Directors of the Company will be required to (i) amend or terminate
the Merger Agreement on behalf of the Company, (ii) amend the Amended and
Restated Certificate of Incorporation or By-Laws of the Company, (iii) waive any
condition to the obligations of the Company under the Merger Agreement or
exercise or waive any of the Company's rights, benefits or remedies under the
Merger Agreement or grant any consents or provide any agreements of the Company
under the Merger Agreement, (iv) extend the time for performance of the
Purchaser's or the Parent's obligations or other acts under the Merger
Agreement, (v) approve any other action by the Company which would adversely
affect the rights of the stockholders of the Company under the or contemplated
by the Merger Agreement, or (vi) take any other action by the Company under or
in connection with the Merger Agreement required to be taken by the Board of
Directors of the Company (provided that if no Independent Directors are members
of the Board of Directors, no such action may be taken).
THE MERGER. The Merger Agreement provides that, at the Effective Time, the
Purchaser will be merged with and into the Company, the separate corporate
existence of the Purchaser will cease, and the Company will continue as the
Surviving Corporation. The Merger will become effective at the time of filing
with the Secretary of State of the State of Delaware of a Certificate of Merger,
or at such later time as may be specified in the Certificate of Merger (the
"Effective Time"). The parties expect to file the Certificate of Merger as soon
as practicable following the closing of the Merger, which will take place not
later than the second business day after the conditions to the parties'
obligation to effect the Merger have been satisfied or waived, unless another
date is otherwise agreed.
Each Share issued and outstanding immediately before the Effective Time
(other than Shares with respect to which appraisal rights have been properly
exercised and perfected and Canceled Shares (as defined below) will be converted
into the right to receive the Offer Price in cash. Each Share held in the
treasury of the Company and each Share owned by the Parent, the Purchaser or any
direct or indirect wholly-owned subsidiary of the Parent or the Purchaser
immediately prior to the Effective Time (collectively, the "Canceled Shares"),
will be canceled and extinguished and no payment or other consideration will be
made with respect thereto. Each share of common stock of the Purchaser issued
and outstanding immediately prior to the Effective Time will automatically be
converted into one share of Common Stock of the Surviving Corporation.
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The Merger Agreement provides that the Certificate of Incorporation and
By-laws of the Purchaser will be the Certificate of Incorporation and By-laws of
the Surviving Corporation following the Effective Time. The Merger Agreement
also provides that the directors of the Purchaser at the Effective Time will be
the directors of the Surviving Corporation and that the officers of the Company
at the Effective Time will be the officers of the Surviving Corporation.
RECOMMENDATION. The Company represents in the Merger Agreement that the
Board of Directors of the Company has (i) determined that the Merger Agreement
and the transactions contemplated thereby, including the Merger and the Offer,
are fair to, and in the best interests of, the Company and the holders of the
Shares, (ii) duly authorized and approved the Merger Agreement and approved the
Merger and the other transactions contemplated thereby (including, but not
limited to, the Offer), and (iii) resolved to recommend that the stockholders of
the Company accept the Offer, tender their Shares pursuant to the Offer and to
the extent required by applicable law, authorize and approve the Merger
Agreement and the transactions contemplated thereby, including the Merger. The
Company has agreed to file with the Commission a Solicitation/Recommendation
Statement on Schedule 14D-9 containing the aforementioned recommendations and to
mail such Schedule 14D-9 to the stockholders of the Company contemporaneous with
the commencement of the Offer.
The Merger Agreement provides that except as set forth therein and as may be
inconsistent with the fiduciary duties of the Board of Directors or any
applicable law (including, without limitation, the Exchange Act and the rules
promulgated thereunder), neither the Board of Directors of the Company nor any
committee thereof will (i) withdraw or modify, or propose to withdraw or modify,
in a manner adverse to the Parent or the Purchaser, the approval or
recommendation by the Board of Directors or any such committee of the Offer, the
Merger Agreement or the Merger, (ii) approve or recommend or propose to approve
or recommend, any Takeover Proposal (as defined below), or (iii) enter into any
agreement with respect to any Takeover Proposal.
STOCK OPTIONS. At or immediately prior to the Effective Time, each then
outstanding option to purchase Shares (the "Options") granted under the
Company's 1993 Stock Option Plan, its 1996 Stock Option Plan and any other
stock-based incentive plan or arrangement of the Company (collectively, the
"Stock Plans"), whether or not then exercisable or vested, will be canceled and
the Company will purchase options to purchase 100,000 Shares issued in
connection with the acquisition by the Company of Trailmaster Products, Inc.
(the "Trailmaster Options") upon delivery by the holders thereof of certificates
or other documents representing the Trailmaster Options or reasonable
representations or indemnities of such holders reasonably acceptable to the
Company with respect thereto in connection with such purchase. In consideration
of such cancellation and purchase, the holders of such Options and Trailmaster
Options shall receive for each Share subject to such Option or Trailmaster
Option an amount (subject to any applicable withholding tax) in cash equal to
the product of (i) the excess, if any, of the Offer Price over the per Share
exercise price of such Option or Trailmaster Option and (ii) the number of
Shares subject to such Option or Trailmaster Option.
INTERIM OPERATIONS; COVENANTS. Pursuant to the Merger Agreement, the
Company has agreed that prior to the acceptance for payment of Shares or, if the
Company fails to comply with the obligations under Section 1.3 of the Merger
Agreement, the time the designees of the Parent have been elected to, and shall
constitute a majority of, the Board of Directors of the Company pursuant to
Section 1.3 of the Merger Agreement, without the prior written approval of the
Parent and except as otherwise contemplated or permitted by the Merger
Agreement: (a) the business of the Company and its Subsidiaries will be
conducted only in the ordinary and usual course and each of the Company and its
Subsidiaries will, subject to the other restrictions contained in the Merger
Agreement, use its best efforts to preserve its business organization intact and
maintain its existing relations with customers, suppliers, employees, creditors
and business associates; (b) the Company will not, directly or indirectly, (i)
except upon exercise of the Options or other rights to purchase Shares
outstanding on the date of the Merger Agreement, issue, sell, transfer or
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pledge or agree to sell, transfer or pledge any treasury stock of the Company or
any capital stock of any of its Subsidiaries beneficially owned by it; (ii)
amend its or any of its Subsidiaries' Certificate of the Incorporation or
By-laws or similar organizational documents; or (iii) split, combine or
reclassify the outstanding Shares or any outstanding capital stock of any of the
Subsidiaries of the Company; (c) other than the payment of dividends or other
distribution by Subsidiaries to the Company or to other Subsidiaries, neither
the Company nor any of its Subsidiaries will: (i) declare, set aside or pay any
dividend or other distribution payable in cash, stock or property with respect
to its capital stock; (ii) issue, sell, pledge, dispose of or encumber any
additional shares of, or securities convertible into or exchangeable for, or
options, warrants, calls, commitments or rights of any kind to acquire (or stock
appreciation rights with respect to), capital stock of any class of the Company
or its Subsidiaries other than Shares reserved for issuance on the date of the
Merger Agreement, other than Shares reserved for issuance on the date of the
Merger Agreement pursuant to the exercise of Options or Trailmaster Options
outstanding on the date of the Merger Agreement; (iii) transfer, lease, license,
sell, mortgage, pledge, dispose of, or encumber any assets, other than in the
ordinary and usual course of business and consistent with past practice; or (iv)
redeem, purchase or otherwise acquire, directly or indirectly, any of its
capital stock; (d) neither the Company nor any of its Subsidiaries will make any
change in the compensation payable or to become payable to any of its officers,
directors, employees, agents or consultants, or to Persons providing management
services, enter into or amend any employment, severance, consulting, termination
or other employment-related agreement, arrangement or Benefit Plan or make any
loans to any of its officers, directors, employees, affiliates, agents or
consultants or make any change in its existing borrowing or lending arrangements
for or on behalf of any of such Persons pursuant to a Benefit Plan or otherwise,
in each case except for changes, agreements, amendments or loans made in the
ordinary course of business consistent with past practice; (e) except (i)
pursuant to Benefit Plans, agreements or arrangements existing at the date of
the Merger Agreement or as disclosed in the schedules thereto, or made in the
ordinary course of business consistent with past practice, (ii) as required by
any law, rule or regulation of any Governmental Entity, (iii) as disclosed in
the schedules to the Merger Agreement, (iv) accruals required by GAAP, and (v)
pursuant to Section 2.4 of the Merger Agreement, neither the Company nor any of
its Subsidiaries will pay or make, or amend or agree to amend any Benefit Plan,
agreement or arrangement existing at the date of the Merger Agreement to provide
for any accrual or arrangement for payment of any pension, retirement allowance
or other employee benefit pursuant to any existing Benefit Plan, agreement or
arrangement to any officer, director, employee or affiliate or pay or agree to
pay or make any accrual or arrangement for payment to any officers, directors,
employees or affiliates of the Company of any amount relating to unused vacation
adopt or pay, grant, issue, accelerate or accrue salary or other payments or
benefits pursuant to any pension, profit-sharing, bonus, extra compensation,
incentive, deferred compensation, stock purchase, stock option, stock
appreciation right or other stock based incentive, group insurance, severance
pay, retirement or other employee benefit plan, agreement or arrangement, or any
employment or consulting agreement with or for the benefit of any director,
officer, employee, agent or consultant, whether past or present; (f) the Company
will not modify, amend or terminate any of the material Company Agreements or
waive, release or assign any material rights on claims, except in the ordinary
course of business; (g) neither the Company nor any of its Subsidiaries will
cancel or terminate any material insurance policy naming it as a beneficiary or
loss payable payee without notice to the Parent; (h) neither the Company nor any
of its Subsidiaries will (i) incur or assume any long-term debt, or any
short-term indebtedness, in each case, for borrowed money except in the ordinary
course of business under lines of credit in existence on the date of the Merger
Agreement; (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for any material
obligations of any other Person (other than, with respect to (x) the Company,
any Subsidiary or (y) any Subsidiary, the Company or any other Subsidiary)
except in the ordinary course of business or make any loans, advances or capital
contributions to, or investments in, any other Person (other than, with respect
to (x) the Company, any Subsidiary of (y) any Subsidiary, the Company or any
other Subsidiary), except for any such matter undertaken in the ordinary course
of business consistent with past practice; or (iii) make any commitments for, or
make or authorize any, capital expenditures other than in amounts less
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than $50,000 individually and $500,000 in the aggregate other than as disclosed
in the schedules to the Merger Agreement or the SEC Documents; (i) neither the
Company nor any of its Subsidiaries will (i) change any of the accounting
methods used by it unless required by GAAP or (ii) except as required by
applicable law, make any Tax election or change any Tax election already made,
adopt any Tax accounting method, change any Tax accounting method unless
required by applicable law, enter into any closing agreement, settle any Tax
claim or assessment or consent to any Tax claim or assessment or any waiver of
the statute of limitations for any such claim or assessment; (j) neither the
Company nor any or its Subsidiaries will pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction of
any such claims, liabilities or obligations, in the ordinary course of business
or any such payment, discharge or satisfaction that the Company or any of its
Subsidiaries is required to make by any law, rule or regulation of any
Government Entity or by any contractual obligation not prohibited by the Merger
Agreement; (k) neither the Company nor any of its Subsidiaries will adopt a plan
of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or any of
its Subsidiaries (other than the Merger); (l) neither the Company nor any of its
Subsidiaries will knowingly take, or agree to commit to take, any action that
would result in any of the conditions to the Offer set forth in Annex I to the
Merger Agreement not being satisfied, or that would give rise to a right of
termination of the Merger Agreement for the Parent or the Purchaser pursuant to
the Merger Agreement; (m) the Company will not enter into an agreement,
contract, commitment or arrangement to do any of the foregoing, or to authorize
any of the foregoing; and (n) except to the extent disclosed in the Schedules to
the Merger Agreement, neither the Company nor any of its Subsidiaries will (i)
effect a plant closing or mass layoff affecting any site of employment or one or
more facilities or operating units within any site of employment or facility of
the Company or any Subsidiary without the prior written consent of the Parent or
(ii) terminate more than 49 employees within a site of employment or facility of
the Company or any Subsidiary or operating unit within a site of employment or
facility or operating unit of the Company or any Subsidiary without providing
prior written notice to the Parent.
TAKEOVER PROPOSALS. Pursuant to the Merger Agreement, the Company has
agreed that it will immediately cease and cause to be terminated any existing
discussions or negotiations, if any, with any Person conducted prior to the date
of the Merger Agreement with respect to any possibility or consideration of
making a Takeover Proposal. The Company has agreed to notify the Parent promptly
in writing if any proposals are received by, any information is requested from,
or any negotiations or discussions are sought to be initiated or continued with
the Company, its Subsidiaries or any of their officers, directors, employees,
investment bankers, attorneys, accountants or other agents, in each case in
connection with any Takeover Proposal, including, in connection with such
notice, a reasonable summary of the terms and conditions of any proposals or
offers and the identity of the Person making such proposal or offer, unless such
notice would violate the terms of any confidentiality or similar agreement
binding on the Company existing at the date of the Merger Agreement or, in
addition, with respect to the identity of such Person, except to the extent that
the Board of Directors is advised by outside legal counsel that identifying such
Person may be inconsistent with its fiduciary duties; PROVIDED, HOWEVER, that
such notice will only be required to be given with respect to any of the
foregoing directed to an officer or an employee of the Company or any of its
Subsidiaries following such time as an executive officer or director of the
Company shall have actual knowledge thereof. Except to the extent that the
following may be inconsistent with the fiduciary duties of the Board of
Directors of the Company or violate, or subject the Board of Directors of the
Company or the Company to liability under, applicable law, in each case as
advised by outside legal counsel, the Company agrees that it will keep the
Parent informed promptly of any developments in the status and terms of any
Takeover Proposal, unless such notice would violate the terms of any
confidentiality or similar agreement binding on the Company existing at the date
of the Merger Agreement. "Takeover Proposal" means any tender or exchange offer
involving more than 35% of the Shares, any proposal for a merger, consolidation
or other business combination involving the Company, any proposal or offer to
acquire in any manner more than 35% of the Shares or a substantial portion of
the business or assets of the
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Company (other than (i) immaterial or insubstantial assets; (ii) inventory in
the ordinary course of business; (iii) assets held for sale; or (iv) other
assets sold or to be sold in the ordinary course of business), or any proposal
or offer with respect to any recapitalization or restructuring with respect to
the Company.
NO SOLICITATION. In the Merger Agreement, the Company has agreed that it
will not, nor will it authorize or permit its officers, directors, investment
bankers, attorneys, accountants, employees and other agents to, directly or
indirectly; (i) initiate or solicit any offer or proposal which constitutes any
Takeover Proposal; (ii) in the event of an unsolicited Takeover Proposal for the
Company, engage in negotiations or discussions with, or provide any information
to, any Person (other than the Parent, any of its affiliates or representatives
and except for information which has been previously publicly disseminated by
the Company) relating to or in connection with any Takeover Proposal; or (iii)
enter into any agreement with respect to any Takeover Proposal; PROVIDED,
HOWEVER, that nothing contained in the Merger Agreement prohibits the Company or
the Company's Board of Directors or any of its or their representatives from (i)
taking and disclosing to the Company's stockholders a position with respect to a
tender or exchange offer by a third party pursuant to Rules 14d-9 and 14e-2
promulgated under the Exchange Act or (ii) making such disclosure to the
Company's stockholders as the Board of Directors may determine in good faith is
required under applicable law after advice from outside legal counsel.
Notwithstanding the foregoing, prior to the acceptance for payment of Shares
pursuant to the Offer, the Company may furnish information concerning its
business, properties or assets to any person pursuant to a customary
confidentiality agreement (provided that if any such confidentiality agreement
contains terms or provisions more favorable to such Person than the terms or
provisions with respect to the Parent and the Purchaser pursuant to the
Confidentiality Agreement (as hereinafter defined), then any confidentiality
terms of the Merger Agreement and of the Confidentiality Agreement shall be
deemed amended (without further action of the parties thereto), to conform to
such terms and provisions) and may discuss and negotiate and participate in
discussions and negotiations with such Person concerning a Takeover Proposal if
(x) such entity or group has made an inquiry or proposal unsolicited after the
date of the Merger Agreement relating to any such transaction and the Board of
Directors of the Company determines in good faith, after receiving advice from
WP&Co. or another nationally recognized investment banking firm, that to do so
could lead to a Superior Proposal (as defined below) or (y) in the good faith
judgment of the Board of Directors of the Company, after receiving advice from
outside legal counsel to the Company, the failure to provide such information or
to engage in such discussions or negotiations would be inconsistent with the
fiduciary obligations of the Board of Directors to the Company's stockholders or
otherwise be inconsistent with applicable law. A "Superior Proposal" means any
Takeover Proposal which the Board of Directors of the Company determines, in
good faith after consultation with its financial advisor, is on terms more
favorable to the stockholders of the Company than the Offer and the Merger
pursuant to the Merger Agreement. In making its determination whether a Takeover
Proposal constitutes a Superior Proposal pursuant to the preceding sentence, the
Board of Directors shall take into account (x) the extent to which financing for
such Takeover Proposal is required and, to the extent required, whether firm
written commitments with respect to such financing have been provided to the
Company and, based upon the advice of WP&Co. or any other financial adviser
selected by the Company, the extent to which the third party making such
Takeover Proposals is financially capable of obtaining such required financing
and (y) whether such Takeover Proposal has a reasonable prospect of being
consummated prior to June 30, 1998. The Company has agreed promptly, and in any
event within one business day following any determination by the Board of
Directors that a Takeover Proposal (or any amendment thereto) is a Superior
Proposal, to notify the Parent in writing (the "Notice of Superior Proposal") of
such determination of the same, which notice shall include the identity of the
bidder and a reasonable summary of the terms and conditions of the Superior
Proposal or, if a Superior Proposal is amended, the terms and conditions as so
amended. If the Parent does not, within five business days after the Parent's
receipt of a Notice of Superior Proposal or of such notice with respect to any
amended proposal (or, if earlier, prior to two business days before the
expiration of the Offer), make an irrevocable written offer or enter into a
definitive written agreement amending the Merger Agreement to provide for a
transaction which the
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Board of Directors has determined in its good faith judgment (based on the
advice of WP&Co. or another nationally recognized investment banking firm) to be
more favorable to the Company's stockholders than the Superior Proposal, the
Company, by action of its Board of Directors, may terminate the Merger Agreement
and enter into an agreement with respect to a Superior Proposal.
Except as set forth above and as may be inconsistent with the fiduciary
duties of the Board of Directors or any applicable law (including, without
limitation, the Exchange Act and the rules promulgated thereunder), neither the
Board of Directors of the Company nor any committee thereof shall (i) withdraw
or modify, or propose to withdraw or modify, in a manner adverse to the Parent
or the Purchaser, the approval or recommendation by the Board of Directors or
any such committee of the Offer, the Merger Agreement or the Merger, (ii)
approve or recommend or propose to approve or recommend, any Takeover Proposal,
or (iii) enter into any agreement with respect to any Takeover Proposal.
COMPANY STOCKHOLDERS' MEETING. If required by applicable law to consummate
the Merger, the Company has agreed to: (i) duly call, give notice of, convene
and hold a special meeting of its stockholders (the "Special Meeting") as
promptly as practicable following the acceptance for payment and purchase of
Shares by the Purchaser pursuant to the Offer for the purpose of considering and
taking action upon the approval of the Merger and the adoption of the Merger
Agreement; (ii) prepare and file with the Commission a preliminary proxy or
information statement relating to the Merger and the Merger Agreement and use
its best efforts, subject to the terms of the Merger Agreement, to obtain and
furnish the information required to be included by the Commission in the Proxy
Statement (as hereinafter defined) and, after consultation with the Parent, to
respond promptly to any comments made by the Commission with respect to the
preliminary proxy or information statement and cause a definitive proxy or
information statement, including any amendment or supplement thereto (the "Proxy
Statement") to be mailed to its stockholders, provided that no amendment or
supplement to the Proxy Statement will be made by the Company without
consultation with the Parent and its outside legal counsel, and to obtain the
necessary approvals of the Merger and the Merger Agreement by its stockholders;
and (iii) subject to the terms of the Merger Agreement and fiduciary obligations
under applicable laws as advised by counsel, include in the Proxy Statement the
recommendation of the Board of Directors that stockholders of the Company vote
in favor of the approval of the Merger and the adoption of the Merger Agreement.
The Parent has agreed to vote, or cause to be voted, all of the Shares then
owned by it, the Purchaser or any of its other subsidiaries and affiliates in
favor of the approval of the Merger and the approval and adoption of the Merger
Agreement. However, in the event that the Parent, the Purchaser and any other
subsidiaries of the Parent shall acquire in the aggregate at least 90% of the
then outstanding Shares, pursuant to the Offer or otherwise, the parties to the
Merger Agreement will take all necessary and appropriate action to cause the
Merger to become effective as soon as practicable after such acquisition,
without a meeting of stockholders of the Company, in accordance with Section 253
of the DGCL.
INDEMNIFICATION OF COMPANY OFFICERS AND DIRECTORS; LIABILITY INSURANCE. In
the event of any threatened or actual claim, action, suit, proceeding or
investigation, whether civil, criminal or administrative, in which any of the
present or former officers, directors, employees and agents (the "Indemnified
Person(s)") of the Company or any of its Subsidiaries is, or is threatened to
be, made a party by reason of the fact that he or she is or was, at or prior to
the Effective Time, a director, officer, employee or agent of the Company or any
of its Subsidiaries or is or was, at or prior to the Effective Time, serving as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise at the request of the Company or any of
its Subsidiaries, whether such claim arises before or after the Effective Time,
the Parent and the Surviving Corporation each have agreed to indemnify and hold
harmless, as and to the fullest extent permitted by applicable law, each such
Indemnified Person(s) against any losses, claims, damages, liabilities, costs,
expenses (including reasonable attorneys' fees and expenses), judgments, fines
and amounts paid in settlement in connection with any such claim, action, suit,
proceeding or investigation (including, without limitation, any of the foregoing
arising out of or related to the Merger Agreement and/ or any of the
transactions contemplated by the Merger Agreement). Pursuant to the Merger
Agreement,
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any Indemnified Person(s) wishing to claim indemnification, upon learning of any
such claim, action, suit, proceeding or investigation, shall promptly notify the
Parent and the Surviving Corporation thereof (but the failure so to notify the
Parent and the Surviving Corporation shall not relieve the Parent or the
Surviving Corporation from any liability which they may have under the Merger
Agreement except to the extent such failure materially prejudices the Parent or
the Surviving Corporation). The right to indemnification under the Merger
Agreement includes the right to receive reimbursement of reasonable expenses
incurred in connection therewith, upon (i) written request by the Indemnified
Person(s) accompanied by a copy of bills, invoices or other documentation of
such expenses and (ii) receipt of an undertaking by the Indemnified Person(s) to
repay any such amounts if it shall ultimately be determined that such Person is
not entitled to be indemnified as provided therein.
The Merger Agreement further provides that until the Effective Time, the
Company will keep in effect Articles Tenth and Eleventh of its Certificate of
Incorporation and Section 6.7 of its By-Laws, and thereafter for a period of six
years the Surviving Corporation shall keep in effect in its Certificate of
Incorporation provisions which provide for indemnification and exculpation of
the Indemnified Person(s) to the extent provided by Articles Tenth and Eleventh
of the Company's Certificate of Incorporation on the date of the Merger
Agreement.
The Merger Agreement also provides that the Parent or the Surviving
Corporation shall maintain the Company's and its Subsidiaries' existing
officers' and directors' liability insurance (the "D&O Insurance") for a period
of six years after the Effective Time; PROVIDED, HOWEVER, that the Parent may
substitute therefor policies of substantially equivalent coverage and amounts
containing terms no less favorable to such former directors or officers (but
without creating any gaps in coverage); PROVIDED, FURTHER, that in no event
shall the Parent or the Surviving Corporation be required to pay aggregate
premiums for insurance pursuant to the Merger Agreement in excess of 200% of the
aggregate premiums paid by the Company in 1997 (the "1997 Premium"); and
PROVIDED, FURTHER, that if the Parent or the Surviving Corporation is unable to
obtain the amount of insurance required by the Merger Agreement for such
aggregate premium, the Parent or the Surviving Corporation shall obtain as much
insurance as can be obtained for an annual premium not in excess of 200% of the
1997 Premium.
The Merger Agreement provides further that in the event of any such claim,
action, suit, proceeding or investigation (whether arising before or after the
Effective Time), (i) the Parent and the Surviving Corporation will have the
right to assume the defense thereof and the Parent and the Surviving Corporation
will not be liable to any such Indemnified Person(s) for any legal expenses of
other counsel or any other expenses subsequently incurred by such Indemnified
Person(s) in connection with the defense thereof, (ii) the Parent and the
Surviving Corporation will vigorously prosecute the defense of any such matter,
(iii) the Indemnified Person(s) will cooperate in all respects as reasonably
requested by the Parent and the Surviving Corporation in the defense of any such
matter, (iv) the Parent and Surviving Corporation will not be liable for any
settlement effected without their prior consent (which consent shall not be
unreasonably withheld), and (v) the Parent and the Surviving Corporation will
not settle any claim the defense of which has been assumed by the Parent and the
Surviving Corporation pursuant to the Merger Agreement without the prior written
consent of the Indemnified Person(s) (which consent shall not be unreasonably
withheld); PROVIDED, HOWEVER, if the Parent or the Surviving Corporation does
not assume the defense of any claim, action, suit, proceeding or investigation
pursuant to the Merger Agreement within a reasonable period of time from the
receipt of notice of such claim, the Indemnified Person(s) as a group with
respect to the same claim shall be entitled to retain only one law firm to
represent them with respect to any such matter unless there is, under applicable
standards of professional conduct, a conflict of interest on any significant
issue between the positions of any two or more Indemnified Person(s), or any
similar impediment to the joint representation of multiple Indemnified Person(s)
by a single law firm; PROVIDED, FURTHER, that the Parent and the Surviving
Corporation shall have no obligation under the Merger Agreement to any
Indemnified Person(s) when and if a court of competent jurisdiction shall
ultimately
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determine, and such determination shall have become final and non-appealable,
that indemnification of such Indemnified Person(s) in the manner contemplated
thereby is prohibited by applicable law.
In the Merger Agreement, the Parent, the Purchaser, the Company and the
Surviving Corporation have expressly acknowledged the provisions of Articles
Tenth and Eleventh of the Company's Certificate of Incorporation and Section 6.7
of the Company's By-Laws, as in effect on the date of the Merger Agreement, and
have agreed, from and after the Expiration Date, to honor in accordance with
their terms all such obligations and further acknowledged that said obligations
(along with the indemnification and like obligations in the Certificate of
Incorporation and By-Laws of the Surviving Corporation) constitute, to the
extent set forth therein, a contract between the Company or the Surviving
Corporation, as the case may be, on the one hand, and the Person entitled to the
benefits thereof (in accordance therewith), on the other hand, creating binding
obligations on the part of the Company and binding rights on the part of any
Person entitled to the benefit thereof (in accordance therewith).
EMPLOYEE BENEFITS. The Merger Agreement provides that on and after the
Effective Time, directors, officers and employees of the Company and its
Subsidiaries will be provided employee benefits, plans and programs which are no
less favorable in the aggregate than those generally available to similarly
situated directors, officers and employees of the Parent and its significant
subsidiaries. For purposes of eligibility to participate and vesting, waiting
periods, pre-existing conditions, limitations and all other purposes (but not
benefit accrual attributable to the period before the Effective Time) in all
benefits provided to directors, officers and employees, the directors, officers
and employees of the Company and its Subsidiaries will be credited with their
years of service with the Company and its Subsidiaries and prior employers to
the extent service with the Company and its Subsidiaries and prior employers is
taken into account under plans of the Company and its Subsidiaries. Nothing in
the Merger Agreement, however, shall be construed as restricting the ability of
the Parent and the Surviving Corporation and its Subsidiaries to establish such
types and levels of compensation and benefits or to modify or terminate such
compensation or benefits as they determine to be appropriate from time to time.
The Parent and the Surviving Corporation have jointly and severally agreed that
the Surviving Corporation will (i) credit directors, officers and employees of
the Company and its Subsidiaries with any amounts paid by such persons toward
applicable deductible amounts and copayment and deductible maximums for the
calendar year under the medical and dental plans of the Company and its
Subsidiaries prior to the transition to any new medical or dental program toward
satisfaction of the applicable deductible amounts and copayment and deductible
maximums under any such new medical or dental program that covers such
directors, officers and employees; (ii) cause all benefits of directors,
officers and employees under Benefit Plans vested and accrued, prior to the
Effective Time to be provided to such directors, officers and employees in
accordance with the terms of such Benefit Plans as in effect on the date of the
Merger Agreement; and (iii) become the "Employer" under the Deflecta-Shield
Corporation Employee Profit Sharing and 401(k) Plan.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
representations and warranties of the parties thereto, including representations
by the Company as to, among other things, organization and qualification,
capitalization, subsidiaries, authorization, Commission documents, conflicts,
financial statements, undisclosed liabilities, absence of certain changes or
events, tax matters, litigation, ERISA compliance, environmental matters, real
property and leased property, change of control payments, takeover restrictions,
intellectual property, contracts, compliance with laws, insurance coverage,
personnel, labor relations, customers, brokers and finders and the opinion of
Wasserstein Perella. The Parent and the Purchaser have represented as to, among
other things, organization and power, authorization, conflicts, consents and
approvals, financing of the Offer and the Merger, Hart-Scott-Rodino filing
matters and finder's fees.
CONDITIONS TO THE MERGER. The obligations of each of the Parent, the
Purchaser and the Company to effect the Merger are subject to the satisfaction
on or prior to the Closing Date of each of the following conditions, any and all
of which may be waived in whole or in part by the Company, the Parent or the
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Purchaser, as the case may be, to the extent permitted by applicable law: (i)
the Merger and the Merger Agreement shall have been approved and adopted by the
requisite vote of the holders of the Shares, if required by the DGCL; (ii) no
statute, rule or regulation shall have been enacted or promulgated by any
governmental authority which prohibits the consummation of the Merger; and there
shall be no order or injunction of a court of competent jurisdiction in effect
which prohibits consummation of the Merger; PROVIDED, HOWEVER, that each of the
Parent, the Purchaser and the Company shall have used reasonable efforts to
prevent the entry of any such order or injunction and to appeal as promptly as
possible any such order or injunction that may be entered; and (iii) the
Purchaser shall have made, or caused to be made, the Offer and shall have
accepted for payment the Shares tendered pursuant to the Offer; provided, that
this condition shall be deemed to have been satisfied with respect to the
obligation of the Parent and the Purchaser to effect the Merger if the Purchaser
fails to announce and make the Offer or accept for payment Shares tendered
pursuant to the Offer in violation of the terms of the Offer or of the Merger
Agreement. Further, the Purchaser shall not be required to accept for payment
any Shares tendered pursuant to the Offer, and, subject to the terms of the
Merger Agreement, may terminate the Offer if (i) by the Expiration Date of the
Offer, the Minimum Condition shall not have been satisfied or (ii) at any time
on or after the date of the Merger Agreement, and prior to the time for
acceptance for payment for any such Shares, any of the events set forth on Annex
I to the Merger Agreement shall occur and remain in effect other than as a
result directly or proximately from a state of facts or action or inaction which
constitutes a breach of a representation, warranty or covenant of the Purchaser
or the Parent.
TERMINATION. The Merger Agreement may be terminated and the transactions
contemplated therein may be abandoned at any time before the Effective Time,
whether before or after stockholder approval: (i) by mutual written consent of
the Parent and the Company, in each case acting through its Board of Directors;
or (ii) (a) by the Parent if the Offer shall have expired or been terminated in
accordance with its terms without any Shares being purchased thereunder by the
Purchaser, but only as a result of the occurrence of any of the events set forth
on Annex I to the Merger Agreement that shall not have resulted directly or
proximately from a state of facts or action or inaction which constitutes a
breach of a representation, warranty or covenant by the Purchaser or the Parent;
or (b) by the Company if any of the events specified in paragraph (a) of Annex I
to the Merger Agreement occurs prior to the Purchaser's acceptance for payment
of the Shares in the Offer; or (iii) by either the Parent or the Company if a
U.S. Court shall have issued an order, decree or ruling (which order, decree or
ruling the parties hereto shall use their best efforts to vacate), in each case
permanently restraining, enjoining or otherwise prohibiting the Offer and/or the
Merger and such order, decree, ruling or other action shall have become final
and nonappealable and shall not have resulted directly or proximately, from a
state of facts or action or inaction which constitutes a breach of a
representation, warranty or covenant by the Purchaser or Parent; or (iv) by the
Parent if, without any material breach by the Parent or the Purchaser of its
representations, warranties or obligations under the Merger Agreement or the
Offer, the purchase of Shares pursuant to the Offer shall not have occurred on
or before June 30, 1998; or (v) by the Company if, without any material breach
by the Company of its representations, warranties or obligations under the
Merger Agreement, the purchase of Shares pursuant to the Offer shall not have
occurred on or before June 30, 1998; or (vi) by the Company (a) if the Parent or
the Purchaser shall have breached in any material respect any material covenant
or other agreement contained in the Merger Agreement or if any representation or
warranty of the Parent or the Purchaser made in the Merger Agreement shall fail
to be true and correct as if made at such time in any material respect, in each
case which breach or which failure to be true and correct cannot be or has not
been cured within ten business days of the receipt of written notice thereof; or
(b) to allow the Company to enter into an agreement in accordance with the
Merger Agreement with respect to a Superior Proposal; or (vii) by the Parent, if
prior to the time the Purchaser is required to accept Shares for payment in the
Offer, (a) the Company shall have breached in any material respect any material
covenant or other agreement contained in the Merger Agreement or (b) any
representation or warranty of the Company made in the Merger Agreement which is
qualified as to Material Adverse Effect shall not be true and correct when made
or as if made at such time or (c) any other representation or
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warranty of the Company made in the Merger Agreement shall not be true and
correct when made or as if made at such time, which failure to be true and
correct would have a Material Adverse Effect, in each case which breach or which
failure to be true and correct cannot be or has not been cured within ten
business days of the receipt of written notice thereof; or (viii) by the Parent,
at any time prior to the time the Purchaser is required to accept Shares for
payment in the Offer, (a) if the Board of Directors of the Company shall have
withdrawn or materially modified in a manner adverse to the Purchaser its
approval or recommendation of the Offer, the Merger or the Merger Agreement or
(b) the Company shall have entered into, or shall have publicly announced its
intention to enter into, a definitive written agreement or written agreement in
principle providing for a Takeover Proposal.
TERMINATION FEE AND EXPENSES. In the event of termination of the Merger
Agreement as provided for in Section 8.1 of the Merger Agreement, written notice
thereof shall forthwith be given to the other party or parties specifying the
provision of the Merger Agreement pursuant to which such terminations is made.
In the event of termination of the Merger Agreement by either the Company, on
one hand, or the Parent and the Purchaser on the other hand, as provided in
Section 8.1 of the Merger Agreement, except as provided in Sections 8.2 (d) and
(e) thereof, the Merger Agreement shall forthwith become null and void and there
shall be no liability on the part of the Parent, the Purchaser or the Company,
except (i) as set forth in Section 8.2(c) of the Merger Agreement and (ii)
nothing therein shall relieve the Parent or the Purchaser from liability for any
breach of the Merger Agreement, other than an immaterial breach, and nothing
therein shall relieve the Company from liability for any willful and material
breach of the Merger Agreement.
The Merger Agreement provides further that if the Parent terminates the
Merger Agreement pursuant to Section 8.1(g) thereof, then the Company will pay
to the Parent an amount, not in excess of $1,000,000, equal to the Purchaser's
actual and reasonably documented out-of-pocket expenses (including without
limitation, fees payable to all banks, investment banking firms and other
financial institutions and their respective counsel, and all fees of counsel,
accountants, financial printers, experts and consultants to the Parent, but
specifically excluding any fees payable to Harvest (the "Expense Reimbursement
Amount")) incurred by the Parent and the Purchaser in connection with the Offer,
the Merger, the Merger Agreement and the consummation of the transactions
contemplated thereby. Moreover, if (i) the Parent terminates the Merger
Agreement pursuant to Section 8.1(h) thereof or (ii) the Company terminates the
Merger Agreement pursuant to Section 8.1(f)(ii) thereof, then the Company will
pay to the Parent a termination fee (the "Termination Fee") of $2,300,000. The
Termination Fee and the Expense Reimbursement Fee shall be payable not later
than one business day after the date of termination by wire transfer. Upon
payment of such fees, the Company shall have no further obligation to the Parent
or the Purchaser under the Merger Agreement or otherwise; PROVIDED, FURTHER,
that if the Company fails to pay promptly the foregoing amounts, and in order to
obtain such payment, the Parent or the Purchaser commences a suit which results
in a final nonappealable judgment against the Company for such amounts, the
Company will pay to the Parent or the Purchaser (i) the costs and expenses
(including attorneys' fees) incurred by the Parent or the Purchaser in
connection with such suit and (ii) interest on all such amounts required to be
paid at the rate announced by Citibank N.A. as its "reference rate" in effect on
the date such amounts were required to be paid.
PURCHASER COMPLIANCE. In the Merger Agreement, the Parent agreed to cause
the Purchaser to timely perform and comply with all of its obligations under or
related to the Merger Agreement, including, without limitation, all obligations
in or with respcet to the Offer. The stockholders of the Company are each third
party beneficiaries of the foregoing provision of the Merger Agreement and may
seek relief for breach of the Merger Agreement individually and in their own
name.
FEES AND EXPENSES. Except as set forth in the Merger Agreement, each party
to the Merger Agreement shall bear all fees and expenses incurred by such party
in connection with, relating to or arising
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out of the execution, delivery and performance of the Merger Agreement and the
consummation of the Offer and the Merger.
AMENDMENT. The Merger Agreement may be amended by the parties thereto by
action taken by or on behalf of their respective Boards of Directors at any time
before or after approval thereof by the stockholders of the Company, but, after
such approval, no amendment shall be made which reduces the amount or changes
the form of consideration to be paid in the Offer or in any way adversely
affects the rights of holders of the Shares without the further approval of such
holders.
PRESS RELEASE. The text of the press release issued by the Company
announcing the execution of the Merger Agreement is filed as Exhibit 10 hereto
and is incorporated herein by reference.
THE STOCKHOLDER AGREEMENTS
In the Stockholder Agreements, each Stockholder agrees to tender and sell to
Purchaser all of his Shares pursuant to and in accordance with the terms of the
Offer. Each Stockholder agrees that he will deliver to the depositary for the
Offer, no later than the fifth business day following the commencement of the
Offer pursuant to the Merger Agreement, a letter of transmittal together with
any and all certificates representing such Shares (or such documentation as
required by the terms of the Offer with respect to lost stock certificates).
Notwithstanding any term of the Offer to the contrary, in the Stockholder
Agreements, each Stockholder agrees not to withdraw any such Shares tendered
into the Offer pursuant thereto during the term of the Stockholder Agreement.
Purchaser's obligation to accept for payment a Stockholders' Shares in the Offer
is subject to the terms and conditions of the Offer. Notwithstanding anything in
the Stockholder Agreements to the contrary, the Stockholder Agreements provide
that the foregoing shall not restrict a Stockholder from taking actions in his
capacity as a director, officer or employee of the Company to the extent and in
the circumstances permitted by the Merger Agreement or as required by applicable
law or by his fiduciary duty as a director, officer or employee of the Company.
In the Stockholder Agreements, each Stockholder, solely in his capacity as a
stockholder and not as a director, officer or employee of the Company, agrees
that, until the Termination Date (as defined below), at any meeting of the
stockholders of the Company, however called at which the following matters are
considered for a vote, such Stockholder will vote (or cause to be voted) his
Shares (a) in favor of the Merger, the execution and delivery by the Company of
the Merger Agreement and the approval of the terms thereof and each of the other
actions contemplated by the Merger Agreement and this Agreement and any actions
required in furtherance hereof and thereof; (b) against any action or agreement
that would result in a breach of any covenant, representation or warranty or any
other obligation or agreement of the Company under the Merger Agreement or this
Agreement; and (c) except as specifically requested or agreed to in writing by
Parent in advance, against the following actions (other than the Merger and the
transactions contemplated by the Merger Agreement): (i) any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving the Company; (ii) a sale, lease or transfer of a material
amount of assets of the Company or reorganization, recapitalization, dissolution
or liquidation of the Company; and (iii)(A) any change in the majority of the
board of directors of the Company; (B) any change in the present capitalization
of the Company or any amendment of the Company's Certificate of Incorporation or
By-Laws; (C) any other material change in the Company's corporate structure or
business; or (D) any other action which is intended, or could reasonably be
expected, to impede, interfere with, delay, postpone, discourage or adversely
affect the Offer, the Merger or the transactions contemplated by the Merger
Agreement or the Stockholder Agreement. Each Stockholder also agreed not to
enter into any agreement with or grant any proxy to any person or entity prior
to the Termination Date to vote or give instructions in any manner inconsistent
with clauses (i), (ii) or (iii) of the preceding sentence. It was agreed that
the foregoing will not limit or prohibit either Stockholder from entering into
any agreement simultaneously with or after termination of the Stockholder
Agreement.
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Also in the Stockholder Agreements, each Stockholder agreed that he would
not (directly or indirectly through advisors, agents or other intermediaries),
(a) solicit or initiate inquiries, proposals or offers from any Person (other
than Parent or any of its affiliates) relating to any Takeover Proposal or (b)
in connection with any of the foregoing, enter into or participate in any
discussions (knowingly) or negotiations or furnish to any other Person any
information with respect to the business, properties or assets of the Company or
any of its subsidiaries; provided, however, that the foregoing will not restrict
such Stockholder as a director, officer or employee of the Company from taking
actions in any such capacity to the extent and in the circumstances permitted by
the Merger Agreement or as required by applicable law or his fiduciary duties as
such director, officer or employee. If a Stockholder receives any inquiry or
proposal, in his capacity as a Stockholder and with respect to his Shares, then
such Stockholder promptly will inform Parent of the terms and conditions, if
any, of such inquiry or proposal and the identity of the person making it. Each
Stockholder agreed to immediately cease and cause his advisors, agents and other
intermediaries to cease any and all existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing.
Prior to the Termination Date, each Stockholder agrees that he will not
directly or indirectly: (a) except pursuant to the terms of the Offer and the
Merger Agreement, and to Parent pursuant to the Stockholder Agreements, offer
for sale, sell, transfer, tender, pledge, encumber, assign or otherwise dispose
of, enforce or permit the execution of the provisions of any redemption
agreement with the Company or enter into any contract, option or other binding
agreement or understanding with respect to or consent to the offer for sale,
sale, transfer, tender, pledge, encumbrance, or other disposition of, or
exercise any discretionary powers to distribute, any or all of the Shares owned
by him or any interest therein; (b) except as contemplated hereby, grant any
proxies or powers of attorney with respect to any such Shares, deposit any such
Shares into a voting trust or enter into a voting agreement with respect to any
such Shares; or (c) take any action that would make any representation or
warranty of such Stockholder contained in a Stockholder Agreement untrue or
incorrect in any material respect or have the effect of preventing or disabling
such Stockholder from performing its obligations under his Stockholder
Agreement. Anything to the contrary in a Stockholder Agreement notwithstanding,
each Stockholder may sell, dispose of and/or transfer all or any portion of his
Shares for tax, securities or estate planning purposes, for charitable donation
purposes or to any Section 501(c)(3) organization as long as the purchaser or
transferee of such Shares agrees to be bound by the provisions of and becomes a
party to the appropriate Stockholder's Stockholder Agreement.
In the Stockholder Agreements, each Stockholder waives any rights of
appraisal or rights to dissent from the Merger that such Stockholder may have.
Each of the Stockholder Agreements provides that if (a) the Merger Agreement
is terminated in accordance with Section 8.1(f)(ii) or Section 8.1(h) of the
Merger Agreement, (b) within three months after the Merger Agreement is
terminated, a contract or agreement relating to a Third Party Business
Combination, as defined below, is entered into and (c) a Stockholder receives,
within twelve months after the Merger Agreement is terminated, from any person
(other than Parent, Purchaser or any of their affiliates) any cash or non-cash
consideration in an amount per share greater than $16.00 (the "Third Party
Consideration") in respect of any sale or disposition of all or any portion of
his Shares in connection with and as part of a Third Party Business Combination,
then such Stockholder within two (2) Business Days of receipt thereof shall pay
to Parent or its designee an aggregate amount equal to fifty percent (50%) of
(A) the excess of the Third Party Consideration over $16.00 multiplied by (B)
the number of Shares with respect to which such Third Party Consideration was
received; provided that, (x) if the consideration received by the Stockholder
shall be securities listed on a national securities exchange or traded on the
NASDAQ National Market ("NASDAQ"), the per share value of such consideration
shall be equal to the closing price per share listed on such national securities
exchange or NASDAQ National Market on the date such transaction is consummated,
(y) if the consideration received by the Stockholder shall be in a form other
than such listed securities, the per share value shall be determined as of the
date such transaction is consummated in good faith by Parent or its designee and
the Stockholder or his designee or
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if the Parent and its designee and the Stockholder and his designee cannot reach
agreement, by a nationally recognized investment banking firm reasonably
acceptable to the parties and (z) the Stockholder will pay Parent or its
designee in kind and on a pro rata basis (i.e., if the Third Party Consideration
includes cash, listed securities and/or other consideration, Parent or its
designee will receive its pro rata portion of each such item). The term "Third
Party Business Combination" means the occurrence of any of the following events:
(i) the Company or any subsidiaries whose assets constitute all or substantially
all of the business or assets of the Company is acquired by merger or otherwise
by any person or group, other than Parent or any affiliate thereof (a "Third
Party"); (ii) the sale to a Third Party of all or substantially all of the
business or assets of the Company and its subsidiaries, taken as a whole; and
(iii) the Company, or both Stockholders enter into a merger or other agreement
with a Third Party which contemplates, in a single transaction or series of
related transactions, the acquisition of all or substantially all of the Shares
owned by both Stockholders.
All obligations of the Stockholders under the Stockholder Agreements except
for the obligations in the immediately preceding paragraph (which obligations
will only survive for the period set forth therein), shall terminate upon the
first to occur of (a) the acceptance for payment of Shares of a Stockholder in
the Offer, (b) the Effective Time of the Merger and (c) the time the Merger
Agreement is terminated in accordance with its terms (such earlier time being
the "Termination Date").
CONFIDENTIALITY AGREEMENT
Effective October 31, 1997, the Company, Parent and Harvest Partners, Inc.
("Harvest") entered into the Confidentiality Agreement. Pursuant to the
Confidentiality Agreement, Parent and Harvest agreed to treat in strict
confidence all information furnished by the Company, and the Company agreed to
treat in strict confidence all information furnished by Parent. In addition,
Parent and Harvest agreed to not purchase any Shares or pursue an acquisition of
the Company in any manner for a period of eighteen months without the prior
written consent of the Company. The Confidentiality Agreement specifically
amends, restates and supersedes a prior confidentiality agreement between the
parties dated October 9, 1997. The foregoing summary of the Confidentiality
Agreement does not purport to be complete and is qualified in its entirety by
reference to the full text of the Confidentiality Agreement which is filed as
Exhibit 11 to this Schedule 14D-9.
Except as described above, to the best knowledge of the Company, as of the
date hereof, there exists no material contract, agreement, or understanding and
no material actual or potential conflict of interest between the Company or its
affiliates and (i) the Company, its executive officers, directors or affiliates
or (ii) Parent, Harvest, or either's executive officers, directors or
affiliates.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(A) RECOMMENDATION
The Board of Directors of the Company has unanimously approved the Merger
Agreement, the Offer and the Merger and determined that the Offer and the
Merger, are fair to, and in the best interests of, the stockholders of the
Company. The Board of Directors recommends that all holders of Shares accept the
Offer and tender their Shares pursuant to the Offer.
(B)(I) BACKGROUND
In May 1997, the Company, through LaSalle Capital Group, Inc., was
approached by representatives of Mr. Allan Lund, the founder and then a
principal stockholder of Parent, in an effort to determine whether the Company
would be interested in buying the shares of Parent then held by Mr. Lund. The
Company considered this offer and responded, through LaSalle Capital Group,
Inc., that it was not interested in buying a minority position in Parent, but
might be interested in buying all of the stock of Parent. When Parent indicated
that it was not interested in pursuing such a transaction, those discussions
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were terminated. In September 1997, the shares held by Mr. Lund were purchased
by an affiliate of Harvest.
In early September 1997, representatives of Parent contacted the Company
concerning a possible purchase of the Company by Parent. On September 26, 1997,
Parent indicated that it would be interested in discussing an acquisition of the
Company at a price in the range of $13.00 per share. Representatives of the
Company indicated that, although the Company was not for sale, and although the
Company was disappointed in the valuation of the Company indicated by Parent,
the Company might be interested in pursuing further discussions as to potential
synergies in connection with a possible transaction.
On September 29, 1997, representatives of the Company and Wasserstein
Perella & Co., Inc. ("WP&Co.") met to discuss strategic alternatives. On
September 30, 1997, the Board met and authorized Mark C. Mamolen and Charles S.
Meyer, two of its members, to act as representatives to enter into discussions
on behalf of the Company with respect to Parent's proposal.
On October 14, 1997, representatives of the Company, WP&Co., Parent and
Harvest and their respective legal advisors, met in New York to discuss a
possible transaction between the Company and Parent. On October 17, 1997, the
Board met to discuss the status of the discussions. Between October 14, 1997 and
October 24, 1997, discussions continued between representatives of the Company
and representatives of Parent and Harvest with respect to the potential
synergistic value of a combination of the Company and Parent, potential
allocation of such synergy values and resulting valuation with respect to
possible transactions. On October 24, 1997, Parent indicated that its valuation
of the Company for purposes of a transaction, taking account of potential
synergies, had increased to $16.00 per share, subject to completion of due
diligence and acceptable legal documentation.
On October 27, 1997, representatives of the Company, Parent and Harvest,
including counsel and WP&Co., met to continue discussions with respect to the
proposed transaction, possible conditions and due diligence schedules. On
October 29, 1997, representatives of the Company, Parent and Harvest, including
counsel and WP&Co., conducted a conference call to advise a limited group of
executive officers of the Company and Parent of the existence of negotiations
and to discuss the due diligence process.
On October 31, 1997, the Company, Parent and Harvest entered into the
Confidentiality Agreement. Also on October 31, 1997, representatives of the
Company, Parent and Harvest, including Parent's accountants, met in Chicago with
respect to Parent's due diligence investigation with respect to the Company.
During the weeks of November 3 and 10, 1997, due diligence meetings and
conference calls were conducted on an almost daily basis. During the week of
November 3, 1997, such due diligence activities included site visits by
representatives of the Company, Parent and one of Parent's potential financing
sources. On November 5, representatives of the Company and Parent met to discuss
the status of the due diligence process. On November 7, 1997, the Board met to
discuss the progress of the proposed transaction.
On November 6, 1997, counsel to Parent provided an initial draft of a merger
agreement. Throughout the next several weeks, extensive negotiations were
conducted with respect to the merger agreement and drafts were exchanged. The
Board met and held extensive discussions on November 19, 1997, and November 20,
1997, at which meetings the Board considered presentations from, and reviewed
the terms and conditions of the then current draft of the merger agreement with,
among others, senior executive officers of the Company, the Company's legal
counsel and WP&Co.
Negotiations continued through November 25, 1997, on which date the parties
reached an agreement with respect to the Merger Agreement. Accordingly, on
November 25, 1997, the Board met to consider the terms of the proposed
transaction. WP & Co. made a presentation to the Board and delivered its opinion
as to the fairness, from a financial point of view, of the $16.00 cash
consideration to be paid in the Offer and the Merger to the holders of the
outstanding Shares. The Board then unanimously approved and adopted the Merger
Agreement and approved the transactions contemplated thereby. That evening, the
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parties executed the Merger Agreement. The parties announced the transaction the
next morning, pursuant to a press release, a copy of which is attached hereto as
Exhibit 10.
Concurrently with the execution of the Merger Agreement, certain
stockholders of the Company executed the Stockholder Agreements.
(B)(II) REASONS FOR THE RECOMMENDATIONS
Prior to approving the Merger Agreement and the transactions contemplated
thereby, the Board held meetings on September 30, October 17, October 31,
November 7, November 17, November 19, November 20 and November 25. At its
meetings on November 19 and November 20, 1997 the Board considered presentations
from, and reviewed the terms and conditions of the Merger Agreement and the
Transaction with senior executive officers of the Company, the Company's legal
counsel and the Company's financial advisors, WP&Co. At the November 25, 1997
meeting, the Board received final reports from senior management, legal counsel
and WP&Co. and approved the Merger Agreement. In reaching the conclusions set
forth in paragraph (a) above, the Board of Directors of the Company considered a
number of factors including, without limitation, the following:
(A) The consideration offered by Purchaser, and in particular the fact
that the $16.00 per Share to be received by the Company's stockholders in
both the Offer and the Merger represents a 33.3% premium over the closing
market price of $12.00 per Share on November 25, 1997 (the last trading day
prior to the Board of Directors meeting referred to in paragraph (a) of this
Item 4); and an approximately 70.7% premium over the market price of the
Shares on August 29, 1997 (prior to the day negotiations commenced between
the Company and Parent with respect to the Offer and the Merger);
(B) The Company's financial condition, results of operations, assets,
liabilities, business and prospects and industry, economic and market
conditions, including the inherent risks and uncertainties in the Company's
lines of business and in the Company's expansion plans, in each case on a
historical, current and prospective basis;
(C) The fact that the Company had seriously considered pursuing an
acquisition of Parent because it believed that the two companies' strengths
were complimentary and that the combination of the two companies would
permit the achievement of certain economies of scale and other synergies,
but that Parent had rejected an overture by the Company to accomplish this
combination through the acquisition of Parent by the Company. The Board of
Directors ultimately determined, after consideration of views of senior
management, that in its view the combination of the two companies presented
the best available means of acheiving a synergistic transaction for the
Company which would best acheive the greatest value for holders of its
Shares;
(D) Management's analysis of the future prospects of the Company on a
stand alone basis;
(E) The historical and recent market prices for the Shares and potential
future share prices;
(F) The Board's view, after consultation with management, counsel to the
Company and WP&Co., regarding the likelihood of the existence of other
viable purchasers on terms as favorable as those in the Offer and Merger;
(G) The opinion of WP&Co. to the effect that, based upon and subject to
the various assumptions and considerations set forth therein and as of the
date thereof, the cash consideration to be offered to the stockholders of
the Company in the Offer and the Merger is fair to such stockholders, from a
financial point of view. A copy of the written opinion of WP&Co. dated
November 25, 1997, which sets forth the factors considered, assumptions made
and limitations on the review conducted by WP&Co. is attached as Annex A
hereto, and is incorporated herein by reference. STOCKHOLDERS ARE ENCOURAGED
TO READ THE OPINION OF WP&CO. CAREFULLY AND IN ITS ENTIRETY;
(H) The availability of appraisal rights under Section 262 of the DGCL
for Dissenting Shares;
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(I) The terms and conditions of the Merger Agreement, including
provisions that (a) although prohibiting the Company and its representatives
from soliciting or initiating submissions of Takeover Proposals, permit the
Company and its representatives to furnish information to, and negotiate and
otherwise engage in discussions with, any third party in response to
unsolicited inquiries, to the extent the Board determines in good faith,
that to do so could lead to a Superior Proposal or that the failure to do so
would be inconsistent with the fiduciary obligations of the Board, and (b)
permit the Company to terminate the Merger Agreement to accept a Superior
Proposal (upon which termination of the Merger Agreement, the Stockholder
Agreements would also terminate), subject to payment of a termination fee of
$2,300,000;
(J) The Principal Stockholders' expressed support of the Merger
Agreement and the transactions contemplated thereby and their willingness to
enter into the Stockholder Agreements, the fact that the Principal
Stockholders would receive the same consideration as the other stockholders
of the Company, and the fact that the Stockholder Agreements would not
preclude an alternative third-party proposal, as the Stockholder Agreements
would terminate in the event the Merger Agreement were terminated in
connection with a Superior Proposal;
(K) The conditions to the Offer, and the fact that there would be no
financing contingency to the Offer. In this connection, the Board also
considered the likelihood that the proposed acquisition would be
consummated, including the likelihood of satisfaction of the conditions to,
the Offer and the Merger contained in the Merger Agreement, and the risks to
the Company if the acquisition were not consummated; and
(L) The recommendation of the Company's management with respect to the
proposed transaction.
The Board evaluated the factors listed above in light of the directors'
knowledge of the business and operations of the Company and in their business
judgment. In view of the variety of factors considered by the Board in
connection with its evaluation of the Merger Agreement and the Transaction, the
Board did not find it practicable to and did not quantify or otherwise assign
relative weight to the specific factors considered in reaching its
determination. In addition, individual members of the Board may have given
different weights to different factors in making their individual
determinations.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
Pursuant to a letter agreement dated as of October 20, 1997 (the "Engagement
Letter"), between the Company and WP&Co., the Company engaged WP&Co. on an
exclusive basis as its financial advisor with respect to the possible
disposition of the Company, in one or a series of transactions, including
through the sale or exchange of capital stock, a merger, consolidation or other
business combination, an exchange or tender offer, the formation of a joint
venture, partnership or similar entity, or any similar transaction. The
Engagement Letter provides for the payment to WP&Co. of a financial advisory fee
of $50,000, payable upon execution of the Engagement Letter, to be credited
against any transaction fee payable to WP&Co. In the event of the occurrence of
any of the transactions described above, the Engagement Letter provides for the
payment to WP&Co. of a transaction fee of $800,000, plus two percent (2%) of the
product of (x) the positive difference between the per share consideration to be
received in such transaction and $16.00, times (y) the number of fully-diluted
shares of Common Stock. The Company also agreed to reimburse WP&Co. for its
out-of-pocket expenses, including fees and expenses of its legal counsel. In
addition, the Company agreed to indemnify WP&Co. against certain liabilities,
including liabilities arising under federal securities laws.
The Company retained WP&Co. based on its experience and expertise. WP&Co. is
a internationally recognized investment banking and advisory firm. WP&Co., as
part of its investment banking business, is continuously engaged in the
valuation of businesses and securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. In the course of its market
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making and other trading activities, WP&Co. and its affiliates may, from time to
time, have a long or short position in, and may buy and sell, securities of the
Company.
Neither the Company nor any person acting on its behalf has employed,
retained or compensated any other person to make solicitations or
recommendations to security holders of the Company on its behalf concerning the
Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) To the best of the Company's knowledge, other than the transactions
disclosed in this Item 6 and the execution of the Shareholder Agreements, no
transactions in Shares have been effected during the past 60 days by the Company
or by any executive officer, director, affiliate or subsidiary of the Company.
(b) To the best of the Company's knowledge, all of its executive officers
and directors who own shares intend to tender pursuant to the Offer all Shares
which are owned beneficially or of record by such persons.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as described under Item 3(b), the Company is not presently
engaged in any negotiation in response to the Offer which relates to or would
result in: (i) an extraordinary transaction such as a merger or reorganization
involving the Company or any subsidiary of the Company; (ii) a purchase, sale or
transfer of a material amount of assets by the Company or any subsidiary of the
Company; (iii) a tender offer for or other acquisition of securities by or of
the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as described in Item 4, there are no transactions, board
resolutions, agreements in principle or signed contracts in response to the
Offer which relate to or would result in one or more of the matters referred to
in paragraph (a) of this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
DELAWARE LAW. The Company opted out of Section 203 of the DGCL effective
October 28, 1993. Accordingly, the restrictions of Section 203 do not apply to
the transactions contemplated by the Merger Agreement including the Offer,
Merger and Stockholder Agreements. Section 203 of the DGCL prevents an
"interested stockholder" (generally, a stockholder owning 15% or more of a
corporation's outstanding voting stock or an affiliate or associate thereof)
from engaging in a "business combination" (defined to include a merger and
certain other transactions) with a Delaware corporation for a period of three
years following the date on which such stockholder became an interested
stockholder unless (i) prior to such date, the corporation's board of directors
approved either the business combination or the transaction which resulted in
such stockholder becoming an interested stockholder, (ii) upon consummation of
the transaction which resulted in such stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the corporation's
voting stock outstanding at the time the transaction commenced (excluding shares
owned by certain employee stock plans and persons who are directors and also
officers of the corporation) or (iii) on or subsequent to such date the business
combination is approved by the corporation's board of directors and authorized
at an annual or special meeting of stockholders, and not by written consent, by
the affirmative vote of at least 66 2/3% of the outstanding voting stock not
owned by the interested stockholder.
APPRAISAL RIGHTS. No appraisal rights are available to holders of Shares in
connection with the Offer. However, if the Merger is consummated, holders of
Shares will have certain rights under Section 262 of the DGCL to dissent and
demand appraisal of, and payment in cash for the fair value of, their Shares.
Such rights, if the statutory procedures are complied with, could lead to a
judicial determination of the fair value (excluding any element of value arising
from accomplishment or expectation of the Merger) required to be paid in cash to
such dissenting holders for their Shares. The value so determined could be more
or less than the price paid in the Offer or the consideration to be received in
the Merger.
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If any holder of Shares who demands appraisal under Section 262 of the DGCL
fails to perfect, or effectively withdraws or loses his or her right to
appraisal, as provided in the DGCL, the Shares of such holder will entitle such
holder to receive the consideration provided for in the Merger Agreement. A
stockholder may withdraw his or her demand for appraisal by delivery to the
Company of a written withdrawal of his or her demand for appraisal. Failure to
follow the steps required by Section 262 of the DGCL for perfecting appraisal
rights may result in the loss of such rights.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<S> <C> <C>
Exhibit 1. -- Information Statement pursuant to Section 14(f) of the Securities Exchange
Act of 1934 and Rule 14f-1 thereunder.*
Exhibit 2. -- Agreement and Plan of Merger by and among Parent, Purchaser and the Company
dated as of November 25, 1997.
Exhibit 3. -- Stockholder Agreement by and between Parent and Charles S. Meyer, dated as
of November 25, 1997.
Exhibit 4. -- Stockholder Agreements by and between Parent and Mark C. Mamolen, dated as
of November 25, 1997.
Exhibit 5. -- Severance Agreement with Russell Stubbings, dated as of November 25, 1997.
Exhibit 6. -- Severance Agreement with Ronald Fox, dated as of November 25, 1997.
Exhibit 7. -- Severance Agreement with John Daniels, dated as of November 25, 1997.
Exhibit 8. -- Severance Agreement with Richard Minehart, dated as of November 25, 1997.
Exhibit 9. -- Severance Agreement with James Jurinak, dated as of November 25, 1997.
Exhibit -- Press release issued by the Company, dated November 26, 1997.
10.
Exhibit -- Confidentiality Agreement dated October 31, 1997 among Parent, the Company
11. and Harvest.
Exhibit -- Letter to Stockholders of the Company, dated November 28, 1997.*
12.
Exhibit -- Opinion of Wasserstein Perella & Co., Inc. dated November 25, 1997.*
13.
</TABLE>
- ------------------------
* Included in copies mailed to stockholders.
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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.
DEFLECTA-SHIELD CORPORATION
By: /s/ RUSSELL E. STUBBINGS____________
Name: Russell E. Stubbings
Title: President and Chief Executive
Officer
Dated: November 28, 1997
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SCHEDULE I
INFORMATION STATEMENT PURSUANT TO SECTION 14(F) OF THE
SECURITIES EXCHANGE ACT OF 1934 AND RULE 14F-1
THEREUNDER; CERTAIN INFORMATION CONCERNING
DIRECTORS AND OFFICERS OF THE COMPANY
This Information Statement is being mailed on or about November 28, 1997 as
part of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") to holders of the common stock, par value $.01 per share (in
this Information Statement, "Common Stock" or "Shares"), of Deflecta-Shield
Corporation (the "Company"). Capitalized terms used and not otherwise defined
herein shall have the meaning set forth in the Schedule 14D-9. This information
is being furnished in connection with the possible designation by Parent,
pursuant to the Merger Agreement, of persons to be selected or appointed to the
Board following the consummation of the Offer. Pursuant to the Merger Agreement,
the Company adopted a resolution appointing certain designees of Parent as
directors of the Board upon the conditions set forth in the Merger Agreement
with respect to the designation of directors of the Company by Parent. At such
time and from time to time thereafter, Parent shall be entitled to designate up
to that number of directors of the Board as will make the percentage of the
Company's directors designated by Parent (the "Parent Designees") equal to the
aggregate voting power of the Common Stock then held by Purchaser or any
affiliate of Purchaser (rounded up to the next whole number, provided that there
remain at least two directors who are directors on the date of the Merger
Agreement and who are neither officers of the Company nor designees,
stockholders, affiliates or associates of Parent ("Continuing Directors"),
subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder. Parent and Purchaser agreed, prior to the effective time of the
Merger, not to seek greater representation on the Board. Upon the consummation
of the Offer, it is expected that Messrs. Meyer and Mamolen will be the
Continuing Directors.
None of the executive officers or directors of Parent currently is a
director of, or holds any position with, the Company. The Company has been
advised by Parent that, to the best of Parent's knowledge, none of its directors
or executive officers or any of their associates beneficially owns any equity
securities, or rights to acquire any equity securities, of the Company or have
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 Commission.
The information contained herein concerning Parent, Purchaser and the Parent
Designees has been furnished to the Company by Parent. The Company assumes no
responsibility for the accuracy or completeness of such information.
<PAGE>
INFORMATION WITH RESPECT TO THE COMPANY
VOTING SECURITIES
As of November 25, 1997 there were outstanding 4,800,000 shares of Common
Stock, all of one class and, each of which entitles the holder to one vote. The
Company has no voting securities outstanding other than the Common Stock. The
following table sets forth the beneficial ownership, as of November 25, 1997, of
the Company's Common Stock (i) by each person who is a director of the Company,
(ii) by each of the executive officers of the Company for whom compensation
information is set forth herein (the "Named Executive Officers") (none of whom,
except the individuals listed, beneficially owns any Common Stock of the
Company), (iii) by each person who is known to be a beneficial owner of more
than 5% of any class of the Company's equity securities and (iv) by all
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
-----------------------
<S> <C> <C>
SHARES PERCENT
---------- -----------
Mark C. Mamolen(1).......................................................................... 954,687 19.9
Charles S. Meyer(2)......................................................................... 954,687 19.9
William V. Glastris, Jr..................................................................... 120,625 2.5
Douglas T. Mergenthaler(3).................................................................. 94,000 1.9
Russell E. Stubbings(4)..................................................................... 33,333 0.7
Ronald C. Katz(5)........................................................................... 15,000 0.3
Richard D. Minehart(6)...................................................................... 25,000 0.5
John A. Daniels(7).......................................................................... 54,500 1.1
James T. Jurinak(8)......................................................................... 13,533 0.3
Lowell A. Swarthout......................................................................... 47,000 1.0
First Bank System, Inc.(9).................................................................. 517,000 10.8
Woodland Partners LLC(10)................................................................... 510,400 10.6
William Blair & Company, L.L.C. (11)........................................................ 358,001 7.5
Gregory J. Pacer(12)........................................................................ 282,001 5.9
All directors and executive officers as a group (12 persons)(13)............................ 2,272,032 45.4%
</TABLE>
- ------------------------
(1) Mr. Mamolen's business address is 155 W. Burton Place, Chicago, Illinois.
(2) Mr. Meyer's business address is c/o LaSalle Capital Group, Inc., Three First
National Plaza, Suite 5710, Chicago, Illinois.
(3) Includes 94,000 shares of Common Stock which may be acquired by Mr.
Mergenthaler pursuant to options exercisable on November 25, 1997.
(4) Includes 33,333 shares of Common Stock which may be acquired by Mr.
Stubbings pursuant to options exercisable on November 25, 1997.
(5) Includes 4,000 shares of Common Stock which may be acquired by Mr. Katz
pursuant to options exercisable on November 25, 1997.
(6) Includes 25,000 shares of Common Stock which may be acquired by Mr. Minehart
pursuant to options exercisable on November 25, 1997.
(7) Includes 30,000 shares of Common Stock which may be acquired by Mr. Daniels
pursuant to options exercisable on November 25, 1997.
(8) Includes 13,333 shares of Common Stock which may be acquired by Mr. Jurinak
pursuant to options which become exercisable on December 2, 1997.
I-2
<PAGE>
(9) Reflects shares beneficially owned as of December 31, 1996, according to a
statement on Schedule 13G filed with the SEC. First Bank System, Inc.'s
business address is 601 Second Avenue South, Minneapolis, MN 55402-4302.
(10) Reflects shares beneficially owned as of December 31, 1996, according to a
statement on Schedule 13G filed with the SEC. Woodland Partners LLC's
business address is 60 South Sixth Street, Suite 3750, Minneapolis,
Minnesota 55402.
(11) Reflects shares beneficially owned as of December 31, 1996, according to a
statement on Schedule 13G filed with the SEC. William Blair & Company,
L.L.C.'s business address is 222 West Adams Street, Chicago, IL 60606-53l2.
(12) Reflects shares beneficially owned as of January 27, 1994, according to a
statement on Schedule 13D filed with the SEC. Mr. Pacer s address is 13
Sugar Creek Lane, Waukee, IA 50263. Mr. Pacer resigned as a director and
President and Chief Executive Officer of the Company on August 28, 1995.
(13) Includes 193,000 shares of Common Stock which may be acquired by directors
or executive officers pursuant to options exercisable on November 25, 1997
and 13,333 shares of Common Stock which may be acquired by an executive
officer pursuant to options which become exercisable on December 2, 1997.
CHANGE OF CONTROL
The completion of the Offer and Merger pursuant to the terms of the Merger
Agreement described herein would result in a change of control of the Company.
BOARD OF DIRECTORS AND THE PARENT DESIGNEES
THE PARENT DESIGNEES
Pursuant to the terms of the Merger Agreement, it is expected that the
Parent Designees will take office as directors of the Company upon the
acceptance for payment by Purchaser of at least a majority of Shares in the
Offer.
Parent has advised the Company that the Parent Designees are Ira D.
Kleinman, William J. McMahon, Robert R. Schoeberl and Dennis W. Vollmershausen.
The business address of each of the following persons is 911 Lund Boulevard,
Anoka, Minnesota 55303, other than for Mr. Kleinman, whose business address is
767 Third Avenue, New York, NY 10022 and Mr. Vollmershausen, whose business
address in P.O. Box 10, 160 Maitland Road, Godderich, Ontario N7A3Y6. Each such
person is a citizen of the United States. Set forth below is certain information
with respect to the Parent Designees.
IRA D. KLEINMAN, age 41, has served as General Partner of Harvest Partners,
Inc., a private equity investment firm ("Harvest"), since 1991. From 1984 to
1987, Mr. Kleinman served as controller of Harvest and since 1987, Mr. Kleinman
has served as Chief Financial Officer of Harvest.
WILLIAM J. MCMAHON, age 51, has served as President and Chief Executive
Officer of the Parent since September 1994. From May 1991 to September 1994, Mr.
McMahon served as Chief Operating Officer for Anagram International, Inc., a
manufacturer and distributor of consumer products and industrial packaging.
ROBERT R. SCHOEBERL, age 61, is a retired executive of Montgomery Ward since
1994, where Mr. Schoeberl spent 35 years. Mr. Schoeberl is a member of the board
of Directors of the Automotive Foundation for the Aftermarket and a member of
the Automotive Parts and Accessories Association.
DENNIS VOLLMERSHAUSEN, age 54, has served as Chairman of the Board of London
Machinery, Inc., an equipment manufacturing company, since 1990. In addition,
Mr. Vollmershausen has served as Executive
I-3
<PAGE>
Vice President of Champion Road Machinery, Ltd., a construction company
("Champion"), from August 1996 to June 1997, and as President and Chief
Executive Officer of Champion since June 1997.
During the last five years, none of the above persons, to the best knowledge
of Parent or the Company, has been convicted in a criminal proceeding (excluding
traffic violations and similar misdemeanors) or was a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was, or is, subject to a judgment, decree or final
order enjoining future violations of, or prohibiting activities subject to,
federal or state securities laws or finding any violation of such laws.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The directors and executive officers of the Company as of November 25, 1997
are set forth below.
WILLIAM V. GLASTRIS, JR., age 37, has been a director of the Company since
its inception in October 1993 and was a director of DFM Corp, a wholly-owned
subsidiary of the Company, from June 1990 until May 1996. Mr. Glastris has been
a principal of Kenter Glastris & Tuttle, L.L.C., a private investment firm,
since July, 1996. Mr. Glastris has been a private investor for more than five
years and served as an officer and director of LaSalle Capital Group, Inc., a
private investment firm, from February 1990 to July 1996. Mr. Glastris is
chairman, a director and treasurer of Copperfield Chimney Supply, Inc.,
co-chairman and a director of Equestrian Products Corporation and a director of
the corporate managing general partners of GolfMark, L.P. and Elm Packaging
Company, L.P.
RONALD C. KATZ, age 61, has been a director of the Company since October 26,
1994. Throughout the past five years, Mr. Katz has been Chairman and Chief
Executive Officer of Elkay Manufacturing Company, a plumbing products and
kitchen cabinet manufacturer.
MARK C. MAMOLEN, age 51, has been a director of the Company since its
inception in October 1993 and was a director of DFM Corp. from June 1990 until
May 1996. Mr. Mamolen was a director and Vice President of CSM-Belmor, Inc.
("CSM"), the managing general partner of Belmor Manufacturing Limited
Partnership, the predecessor to the Company (the "Predecessor Partnership"), and
a director, President and the sole stockholder of MCM Holdings, Inc. ("MCM"),
the associate general partner of the Predecessor Partnership from March 1988
until the merger of CSM and MCM with and into the Company in January 1994. Mr.
Mamolen founded Carl Street Partners, a private investment firm, in 1987 and has
served as the managing general partner of Carl Street Partners since that time.
Mr. Mamolen is a stockholder of several privately-held corporations.
DOUGLAS T. MERGENTHALER, age 48, has been a director of the Company since
August 23, 1994. Mr. Mergenthaler has been Chief Executive Officer of Ashton
Corporation, a holding company, since 1988, Chief Executive Officer of Kwikee
Products Company, Inc., a transportation accessory manufacturing company, since
1984, and Chief Executive Officer of Davidson Plastic Corporation since 1993.
Since 1991, Mr. Mergenthaler has been a director and a member of the Executive
Committee of the Specialty Equipment Manufacturers Association ("SEMA"). SEMA is
the primary trade association of the automotive aftermarket industry. From 1989
to 1994, Mr. Mergenthaler was Chief Executive Officer of Trailmaster Products,
Inc. and between 1986 and 1994 he was a director of Summit Savings Bank Corp.
CHARLES S. MEYER, age 46, has been a director of the Company since its
inception in October 1993, and was Chairman of the Board of DFM Corp. from June
1990 until May 1996. He served as a director, President and sole stockholder of
CSM from March 1988 until the merger of CSM with and into the Company in January
1994. Mr. Meyer founded LaSalle Capital Group, Inc., a private investment firm,
in 1984 and serves as Chairman of LaSalle Capital Group, Inc. Mr. Meyer is also
a director and stockholder of numerous privately-held corporations
RUSSELL E. STUBBINGS, age 57, has been a director of the Company since
November 1, 1995. Mr. Stubbings has been President of the Company since
September 6, 1995 and was appointed Chief
I-4
<PAGE>
Executive Officer of the Company on March 11, 1996. Prior thereto, he was
employed by Lund International Holdings, Inc. from November 1991 to August 1995
where he served as Vice President of Sales and Marketing and additionally was
promoted to Chief Operating Officer in February 1993. Mr. Stubbings served in a
number of senior management positions of increasing responsibility with Fey
Automotive Products, a division of Standum Inc., from September 1989 to November
1991. Mr. Stubbings currently serves on the Board of Directors of SEMA.
RICHARD D. MINEHART, JR., age 54, has been Vice President of Operations and
Chief Operating Officer of the Company since March 11, 1996. Prior thereto, he
served as Vice President of Operations for Coleman Cable Systems, Inc., a
manufacturer of insulated wire and cable products, from February 1991 to March
1996.
RONALD C. FOX, age 57, has been Vice President and Chief Financial Officer
of the Company since October 28, 1996 and Secretary and Treasurer of the Company
since April 18, 1997. Prior thereto, he served as Vice President and Chief
Financial Officer of SSDS, Inc., a computer integration company from December
1994 to October 1996. Mr. Fox served as Vice President and Chief Financial
Officer of Bestop, Inc., an automotive accessory company from August 1988 to
December 1994.
JOHN A. DANIELS, age 61, has been Vice President, Heavy Truck Operations of
the Company since its inception in October 1993 and Vice President of DFM Corp.
since June 1990.
JAMES T. JURINAK, age 48, has been Vice President, General Manager Light
Truck Operations since December 13, 1996. Prior thereto, he served as Vice
President, General Manager of Poly Hi Solidun, a division of Menasha Corporation
engaged in the conversion, fabrication and sale of engineered polymers, from
November 1994 to December 1996. Mr. Jurinak was Vice President, Operations for
Tyton Corporation, a cable television manufacturer, from September 1993 to
October 1994. From August 1991 to August 1993, Mr. Jurinak served as Senior Vice
President, Operations of Cleveland Pneumatic, an aircraft landing gear
manufacturing division of Pneumo Abex Corp.
MEETINGS, COMMITTEES AND OTHER INFORMATION
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors of the Company holds regular meetings at a minimum of
once each fiscal quarter. The Board held five regular meetings and no special
meetings in 1996. Each of the directors, other than Mr. Vinyard, who served as a
director during the 1996 fiscal year, attended 75% or more of the aggregate
number of meetings held during 1996 of the Board and of the committees of which
such Director was a member.
COMMITTEES OF THE BOARD
The Board of Directors of the Company currently has an Audit Committee and a
Compensation Committee. The Company does not currently have a nominating
committee.
AUDIT COMMITTEE. The Audit Committee of the Company consists of Messrs.
Mamolen and Mergenthaler. The Audit Committee met one time in 1996 and all of
the members attended the meeting. The primary functions of the Audit Committee
are to recommend independent public accountants to the Board, to review the
scope of the independent public accountants' audit, to review the fees for audit
and non-audit services by the independent public accountants and to consider the
results of the independent public accountants' review of the internal accounting
controls and other matters resulting from the audit.
COMPENSATION COMMITTEE. The Compensation Committee of the Company consists
of Messrs. Mamolen and Meyer. The Compensation Committee met one time in 1996
and all of the members attended the meeting. The function of the Compensation
Committee is to review and make recommendations upon proposals by management as
to compensation, bonuses, officers' severance arrangements and other benefits
and policies with respect to such matters for the officers and employees of the
Company and its affiliates.
I-5
<PAGE>
DIRECTOR COMPENSATION ARRANGEMENTS
Independent directors of the Company receive an annual retainer of $10,000,
paid quarterly. All directors are reimbursed for out-of-pocket expenses related
to the Company's business. In addition at the discretion of the Board, directors
may be granted options to purchase shares of Common Stock of the Company.
OTHER TRANSACTIONS AND CERTAIN RELATIONSHIPS
REGISTRATION RIGHTS. Messrs. Mamolen, Meyer, Glastris, Daniels, and certain
other parties and the Company have entered into a Registration Rights Agreement,
pursuant to which each of Mr. Mamolen and Mr. Meyer has the right to require the
Company to file two registration statements under the Securities Act of 1933, as
amended (the "Securities Act") (on any available form), provided that the number
of shares of Common Stock to be included in each such registration exceeds
250,000 shares. In addition, under the Registration Rights Agreement, Mr.
Mamolen and Mr. Meyer have the right to require the Company to file a
registration statement which the Company will be obligated to keep effective
under the Securities Act for a period not to exceed 18 months. Each of Messrs.
Mamolen and Meyer also has the right to require the Company to file two
additional registration statements on Form S-3, provided that the number of
shares of Common Stock to be included in each such registration would exceed
100,000 shares. Registration statements filed pursuant to the Registration
Rights Agreement may cover sales in underwritten offerings or from time to time
in open market transactions. Parties to the Registration Rights Agreement also
have the right to require the Company to include their shares of Common Stock in
any future registered offering by the Company, subject to certain conditions and
limitations. In addition, the Registration Rights Agreement contains certain
other customary provisions with respect to registration rights, including
indemnification provisions and provisions requiring the Company to bear the
costs and expenses of the registrations described above.
Mr. Mergenthaler and certain other holders of options to purchase 100,000
shares of Common Stock granted in connection with the acquisition by the Company
of the assets of Trailmaster Products, Inc. in 1994, have certain "piggy-back"
rights to register the shares to be issued upon exercise of such options.
FILINGS UNDER SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended ("Section
16(a)") requires the Company's directors, officers and beneficial owners of more
than 10% of its common stock to file reports of holdings and transactions of the
Company's Common Stock with the Securities and Exchange Commission. Based upon
Company records and other information, the Company believes that with respect to
the fiscal year ended December 31, 1996, each of the Company's directors,
officers and beneficial owners of more than 10% of its Common Stock were in
compliance with the filing requirements of Section 16(a), except that James T.
Jurinak filed his Form 3, which reported ownership of the options disclosed
herein, four months late and a Form 4 reporting one transaction one month late.
EXECUTIVE COMPENSATION
SUMMARY OF EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation paid by
the Company and its predecessor, subsidiaries and affiliates to (i) the
Company's chief executive officer (the "CEO") and (ii) the Company's three most
highly compensated executive officers other than the CEO who were the only other
executive officers whose total annual salary and bonus for the fiscal year ended
on December 31, 1996 exceeded $100,000 (collectively, the "Named Executive
Officers") for services in all capacities during the years ended December 31,
1996, 1995 and 1994.
I-6
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING ALL OTHER
NAME AND ---------------------- OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) (#) ($)
- --------------------------------------------------- --------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Russell E. Stubbings(1)............................ 1996 $ 160,000 $ 120,000 50,000 46,733(2)
President 1995 49,231 0 50,000 1,267(3)
Richard D. Minehart(4)............................. 1996 110,385 55,160 50,000 --
Vice President, Operations and Chief Operating
Officer
John A. Daniels.................................... 1996 110,000 40,000 -- 6,354(5)
Vice President, Heavy Truck Operations 1995 99,603 35,000 -- 9,170(5)
1994 82,452 35,000 30,000 12,423(5)
Lowell A. Swarthout(6)............................. 1996 90,000 27,000 -- 3,950(5)
Vice President, Secretary and Treasurer 1995 89,855 0 -- 8,681(5)
1994 82,452 35,000 -- 12,615(5)
</TABLE>
- ------------------------
(1) Mr. Stubbings joined the Company on September 6, 1995.
(2) The Company reimbursed Mr. Stubbings $4,600 in taxes paid by Mr. Stubbings
with respect to moving expenses of $35,279 which the Company paid to Mr.
Stubbings. The Company also paid $2,610 for the life insurance premium on
Mr. Stubbings. The Company contributed $4,244 to Mr. Stubbings' retirement
plan.
(3) The Company paid $1,267 for the life insurance premium on Mr. Stubbings.
(4) Mr. Minehart joined the Company on March 11, 1996.
(5) The Company contributed to the retirement plans of Messrs. Daniels and
Swarthout in 1996, 1995 and 1994, respectively.
(6) Mr. Swarthout resigned from all his positions with the Company on April 7,
1997.
OPTION GRANTS AND EXERCISES
The following tables set forth summaries of the terms of stock options
granted to Mr. Stubbings and Mr. Minehart during the Company's 1996 fiscal year
and the value of unexercised options held by Messrs. Stubbings, Minehart,
Daniels and Swarthout as of December 31, 1996. No other Named Executive Officer
received options during the 1996 fiscal year. None of the Named Executive
Officers exercised any stock options during the 1996 fiscal year. No stock
appreciation rights were granted to or exercised by any of the Named Executive
Officers during the 1996 fiscal year.
I-7
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE OF
ASSUMED ANNUAL RATES
OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
-------------------------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
NO. OF
SECURITIES PERCENTAGE OF
UNDERLYING TOTAL OPTIONS
OPTIONS GRANTED TO EXERCISE OR
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION
NAME (#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- -------------------------------------- ----------- --------------- ------------- ----------- ---------- ----------
Russell E. Stubbings.................. 50,000 29.4% $ 4.50 3/10/06 $ 141,501 $ 358,592
Richard D. Minehart................... 50,000 29.4% $ 4.50 3/10/06 $ 141,501 $ 358,592
</TABLE>
AGGREGATED OPTION EXERCISE IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FY-END(#) OPTIONS AT FY-END
-------------------------- --------------------------
<S> <C> <C> <C> <C>
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------------- ----------- ------------- ----------- -------------
Russell E. Stubbings.................. 16,667 83,333 $ 14,584 $ 235,416
Richard D. Minehart................... 12,550 37,500 $ 51,563 $ 154,688
John A. Daniels....................... 20,000 10,000 -- --
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, the current members of the Compensation Committee are
Messrs. Mamolen and Meyer and Vinyard, none of whom is or has been an executive
officer or employee of the Company or its subsidiaries.
Messrs. Mamolen and Meyer and certain other persons are parties to a
registration rights agreement with the Company pursuant to which the Company has
agreed to register their shares of Common Stock under the Securities Act of 1933
and state securities laws See "Other Transactions and Certain
Relationships--Registration Rights Agreement".
EMPLOYMENT AND SEVERANCE AGREEMENTS
EMPLOYMENT AGREEMENTS. In connection with the commencement of his service
as President of the Company, Mr. Stubbings and the Company entered into an
Employment Agreement dated as of September 1, 1995 (the "Stubbings Employment
Agreement"), with a term of three years. The Stubbings Employment Agreement
provides that Mr. Stubbings will serve as President of the Company and will
report to the Board of the Company. The Stubbings Employment Agreement provides
for (i) base salary at an initial rate of $160,000, with annual reviews at the
discretion of the Board; (ii) bonus as determined in the discretion of the
Board, with the financial performance of the Company to be a significant factor
in the determination of such bonus; (iii) a grant of options to purchase 50,000
shares of Common Stock at an exercise price equal to the closing price of the
Company's Common Stock on The Nasdaq Stock Market ("Nasdaq") on September 1,
1995; (iv) participation in the Company's employee benefit plans; (v)
Company-paid life insurance with a death benefit in the amount of $500,000; (vi)
reimbursement of relocation expenses; (vii) three weeks of paid vacation per
year; and (viii) provision of a late-model vehicle. The Stubbings Employment
Agreement also contains certain confidentiality and non-competition
restrictions. The Stubbings Employment Agreement provides that upon the
termination of Mr. Stubbings'
I-8
<PAGE>
employment, other than by reason of his voluntary resignation or termination for
Just Cause (as defined in the Stubbings Employment Agreement), he will be paid
severance pay equal to six months of his then-current base salary.
In connection with the commencement of his service as Vice President of
Operations and Chief Operating Officer of the Company, Mr. Minehart and the
Company entered into an Employment Agreement dated as of February 7, 1996 (the
"Minehart Employment Agreement"). The Minehart Employment Agreement provides
that Mr. Minehart will serve as Vice President of Operations and Chief Operating
Officer of the Company and will report to the President of the Company. The
Minehart Employment Agreement provides for (i) base salary at an initial rate of
$140,000, with annual reviews at the discretion of the President of the Company;
(ii) bonus of 60% of base salary if the Company achieves a targeted goal
(earnings per share of $1.00 for 1996), which bonus will be earned and funded on
a prorated basis, plus a discretionary bonus as determined in the discretion of
the Board if such target is met; (iii) a grant of options to purchase 50,000
shares of Common Stock at an exercise price equal to the closing price of the
Company's Common Stock on Nasdaq on March 11, 1996; (iv) participation in the
Company's employee benefit plans; (v) reimbursement of reasonable relocation
expenses; (vi) three weeks of paid vacation per year; and (vii) provision of a
late-model light truck. The Minehart Employment Agreement also contains certain
confidentiality and non-competition restrictions. The Minehart Employment
Agreement provides that upon the termination of Mr. Minehart's employment, other
than by reason of his voluntary resignation or termination for Cause (as defined
in the Minehart Employment Agreement), he will be paid severance pay equal to
nine months of his then-current base salary. In addition, the Minehart
Employment Agreement provides that in the event of the termination of his
employment within two years of a "change of control" (as defined in the Minehart
Employment Agreement) of the Company, Mr. Minehart will be paid a lump sum
severance payment equal to one year of his then-current base salary and 100% of
one year's bonus potential.
In connection with the commencement of his service as Vice President and
General Manager of the Company's Autotron Division, Mr. James T. Jurinak and the
Company entered into an Employment Letter Agreement dated October 14, 1996 (the
"Jurinak Employment Agreement"). The Jurinak Employment Agreement provides that
Mr. Jurinak will serve as Vice President and General Manager of the Company's
Autotron Division and will report to the Chief Operating Officer of the Company.
The Jurinak Employment Agreement provides for (i) base salary at an initial rate
of $130,000, with annual reviews at the discretion of the President of the
Company; (ii) bonus of 30% of base salary if the Company achieves its budgeted
goals, plus a discretionary bonus as determined by the Board if DFM exceeds
budgeted goals; (iii) a grant of options to purchase 40,000 shares of Common
Stock at an exercise price equal to the closing price of the Company's Common
Stock on Nasdaq on December 2, 1996; (iv) participation in the Company's
employee benefit plans; (v) reimbursement of reasonable relocation expenses;
(vi) three weeks of paid vacation per year; and (vii) provision of a late-model
light truck or sport utility vehicle. The Jurinak Employment Agreement also
contains certain confidentiality and non-competition restrictions. The Jurinak
Employment Agreement provides that upon termination of Mr. Jurinak's employment
with the Company, other than by reason of his voluntary resignation or
termination for Cause (as defined in the Jurinak Employment Agreement), he will
be paid severance pay equal to six months of his then-current base salary.
In connection with the commencement of his service as Vice President and
Chief Financial Officer of the Company, Mr. Ronald C. Fox and the Company
entered into an Employment Letter Agreement dated October 28, 1996 (the "Fox
Employment Agreement"), with a term of three years. The Fox Employment Agreement
provides that Mr. Fox will serve as Vice President and Chief Financial Officer
of the Company. The Fox Employment Agreement provides for (i) base salary at an
initial rate of $110,000; (ii) bonus comparable to other senior level executives
at the Company's corporate headquarters; (iii) a grant of options to purchase
20,000 shares of Common Stock at an exercise price equal to the closing price of
the Company's Common Stock on Nasdaq on October 28, 1996; (iv) participation in
the Company's employee
I-9
<PAGE>
benefit plans; (v) reimbursement of all cost of travel expenses from Colorado to
Iowa; (vi) three weeks of paid vacation per year; and (vii) provision of a
late-model light truck or sport utility vehicle. The Fox Employment Agreement
also contains certain confidentiality and non-competition restrictions. The Fox
Employment Agreement provides that upon termination of Mr. Fox's employment with
the Company, other than by reason of his voluntary resignation or termination
for Just Cause (as defined in the Fox Employment Agreement, he will be paid
severance pay equal to six months of his then-current base salary. Mr. Fox is
permitted to terminate the Fox Employment Agreement at his election and receive
six months severance and group insurance in the event that an office move to
Colorado is not made within eighteen months of his start date.
SEVERANCE AGREEMENTS. In connection with the acquisition by the Predecessor
Partnership of DFM Corp., each of Messrs. Swarthout and Daniels entered into a
Severance Agreement (collectively, the "DFM Severance Agreements") with DFM
Corp. Under the DFM Severance Agreements, in the event of termination of
employment without Just Cause (as defined in such DFM Severance Agreements),
each of Messrs. Daniels and Swarthout will be entitled to receive severance
compensation equal to one-half of their annual base compensation at the rate
then paid. Such severance compensation is to be paid in 12 monthly installments.
Mr. Swarthout resigned from the Company in April 1997.
Reference is made to Item 3(b)(i) of this Form 14D-9 with respect to
Severance Agreements entered into on November 25, 1997.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION PHILOSOPHY. The Compensation Committee ("Committee") is
composed of independent, non-employee directors. The Committee reviews and makes
recommendations to the Board upon proposals by management as to compensation,
bonuses, officers' severance arrangements and other benefits and policies with
respect to such matters for the officers and employees of the Company and its
subsidiaries. Effective November 13, 1996 the entire Board, including the
members of the Committee, administers the Company's stock plans. The member's of
the Committee served on the committee administering the employee stock plan
prior to that date.
The Committee and the Board believe that the compensation of the Chief
Executive Officer and other officers of the Company should be aligned with the
performance of the Company and the creation of value for its stockholders. The
Committee and the Board also believe that the Company must provide competitive
levels of compensation to its officers in order to attract individuals of the
highest caliber.
To align pay with performance, a significant portion of the officers'
compensation is in the form of bonuses contingent upon the Company's financial
performance. Stock options are used to provide a link to the market value of the
Company's Common Stock and are used to a greater extent with respect to the
compensation of senior members of management. In determining bonuses within its
discretion, the Board and the Committee will consider the overall operating
performance of the Company, the overall individual performance of the executive
officers in executing the Company's business plan and the overall
responsibilities of the executive officers.
BASE SALARIES. Officers' base salaries are reviewed annually by the
Committee. The Committee evaluates management's recommendations based upon the
results achieved by each officer relative to the officer's assigned
responsibilities as well as competitive salary practices of other similar
employers. The Committee does not obtain formal salary surveys and the employers
considered similar for this purpose are companies included in the Peer Group
used for the performance graph that have similar levels of total sales and are
more directly competitive with the Company.
Mr. Stubbings' base salary was set at $160,000 per annum, at the time he
became an employee of the Company in 1995 and recently increased to $168,000 for
fiscal 1997
I-10
<PAGE>
BONUS PROGRAM. Executives whom the Board has determined have had a
significant impact on the Company's financial results through their positions
and performance are eligible to participate in the Company's Bonus Program. The
Bonus Program for 1996 was comprised of bonuses based on two components: (i)
achievement of a targeted level of net income per share established by the Board
and
(ii) performance of that portion of the Company's business with respect to
which the applicable employee had management responsibility or in which he or
she was employed.
For 1996, Mr. Stubbings received a bonus of $120,000. The Committee
determined to award Mr. Stubbings with a bonus based upon Mr. Stubbing's
performance as CEO for the year and the Company's favorable financial
performance for the year, which was evidenced by, among other things, a
substantial increase in net income and earnings per share over the previous
year. Other executive officers received bonuses for 1996 as follows: Richard D.
Minehart, $55,160; John A. Daniels, $40,000; Lowell A. Swarthout, $27,000. These
bonuses reflected the substantial improvement in the Company's results in 1996
compared to 1995 when the only bonus paid to an executive officer was a bonus of
$35,000 paid to Mr. Daniels, in keeping with the Committee's view that the
bonuses should be paid for success and creation of value for shareholders and
should only be granted for superior performance. The Committee considered the
contribution of each executive officer toward achieving the Company's prior year
and long term strategic objectives and in this connection the Chief Executive
Officer made recommendations regarding the components of each executive
officer's compensation package except his own.
In its considerations the Committee did not assign quantitative relative
weights to different factors or follow mathematical formulae. Rather the
Committee exercised its discretion and made a judgment after considering the
facts it deemed relevant The Committee's decisions were designed to: (a) align
the interests of executive officers with the interest of the Company's
stockholders by providing awards based on performance; and (b) allow the Company
to compete for and retain executive officers critical to its success by
providing an opportunity for compensation that is comparable to levels offered
by other companies in its markets.
Section 162(m) of the Internal Revenue Code generally denies a deduction to
any publicly held corporation for compensation paid to a "covered employee" in a
taxable year to the extent that the employee's compensation (other than
qualified performance-based compensation) exceeds $1 million. In December 1995,
the Internal Revenue Service published regulations governing the $1 million
deductibility cap. Pursuant to those regulations, the Company's "covered
employees" will be those who, at the end of the year, are the chief executive
officer and the four other highest compensated executive officers of the Company
as determined under the Rules of the Securities and Exchange Commission
governing executive compensation disclosure. The Board has determined that
administration of the stock plans by the entire board is advisable because,
under the recent changes to Rule 16b-3 members of the Committee would not meet
the definition of a "non-employee director" for purposes of exemptions from
recapture of short-swing profits under Section 16(b) with respect to grants of
options thereunder for any year in which a Committee member received fees or
other compensation in excess of $60,000. However, compensation represented by
the spread between fair market value and the exercise price at the date of
exercise of non-qualified share options will not be performance-based
compensation for purposes of Section 162(m) so long as the entire Board
administers the stock plans and any of the Directors is not an "outside
director" as described in Section 162(m) and the regulations promulgated
thereunder.
It is the Committee's policy to consider deductibility under Section 162(m)
in determining compensation arrangements for the Company's "covered employees,"
and the Committee intends to optimize the deductibility of compensation to the
extent deductibility is consistent with the objectives of the executive
compensation program. The Committee, however, intends to weigh the benefits of
full deductibility with the objectives of the executive compensation plan and,
if the Committee believes to do so is in the best interest of the Company and
its stockholders, will make compensation arrangements which may not be fully
deductible under Section 162(m). The Board will also consider deductibility as
well as compensation
I-11
<PAGE>
objectives in administering the stock plans and this may result in the grant of
incentive stock options, which may not result in tax deductible compensation,
rather than non-qualified stock options, which may result in tax deductible
compensation.
STOCK PLANS. Beginning in fiscal 1994, long-term incentives have been
provided through the grants of stock options or awards of restricted stock under
the 1993 Stock Plan, and, since last year the 1996 Stock Plan. Options to
purchase substantially' all of the shares available under the 1993 Stock Plan
have been granted. The Committee believes that equity ownership provides
significant motivation to executives to maximize value for the Company's
shareholders. The 1996 Stock Plan provides that stock options will be granted at
no less than the prevailing market price and therefore, will only have value if
the Company's stock price increases after the grant. The Committee believes that
stock options and stock awards provide a direct link between compensation and
shareholder return, measured by the same index used by shareholders to measure
Company performance. The terms of options granted as well as the terms of any
restrictions on stock awarded will be determined at the time of the grant or
award by the Committee established under the 1996 Stock Plan.
During 1996, options to purchase 160,000 shares of Common Stock were granted
to executive officers of the Company and options to purchase 10,000 Shares of
Common Stock were granted to other employees.
COMPENSATION COMMITTEE
Mark C Mamolen
Charles S Meyer
BOARD OF DIRECTORS (solely with
respect to the Stock Plans)
William V. Glastris, Jr.
Ronald C. Katz
Mark C. Mamolen
Douglas T. Mergenthaler
Charles S Meyer
Russell E. Stubbings
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<PAGE>
PERFORMANCE GRAPH
The graph below compares cumulative total return on investment (based on the
change in year-end stock price from the prior year and assuming reinvestment of
all dividends) assuming a $100 investment in the Common Stock of the Company,
the Nasdaq Market Index and a peer group of companies consisting of 50 motor
vehicle parts and accessories companies, including the Company (collectively,
the "Peer Group") for the period commencing January 21, 1994 and ended December
31, 1996. The Peer Group consists of companies with the same Standard Industrial
Classification Code as the Company. Total returns exclude trading commissions
and taxes.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
JAN 21 1994 DEC 31 1994 DEC 31 1995 DEC 31 1996
<S> <C> <C> <C> <C>
Delta-Shield Corp 100 53.17 30.16 54.76
Peer Group 100 80.89 88.74 109.49
Nasdaq Market Index 100 97.24 126.13 156.74
</TABLE>
I-13
<PAGE>
Exhibit 99.2
=============================================================
AGREEMENT AND PLAN OF MERGER
AMONG
LUND INTERNATIONAL HOLDINGS, INC.,
ZEPHYROS ACQUISITION CORPORATION
AND
DEFLECTA-SHIELD CORPORATION
DATED AS OF NOVEMBER 25, 1997
=============================================================
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
TABLE OF CONTENTS
Page
----
ARTICLE I THE OFFER..................................................... 2
SECTION 1.1 The Offer................................................ 2
SECTION 1.2 Action by the Company.................................... 4
SECTION 1.3 Directors................................................ 5
SECTION 1.4 The Merger............................................... 6
SECTION 1.5 Effective Time........................................... 7
SECTION 1.6 Closing.................................................. 7
SECTION 1.7 Directors and Officers of the Surviving Corporation...... 7
SECTION 1.8 Effect of the Merger..................................... 7
SECTION 1.9 Subsequent Actions....................................... 7
SECTION 1.10 Certificate of Incorporation; By-Laws.................... 8
SECTION 1.11 Stockholders' Meeting.................................... 8
SECTION 1.12 Merger Without Meeting of Stockholders................... 9
ARTICLE II CONVERSION OF SECURITIES...................................... 9
SECTION 2.1 Conversion of Securities................................. 9
SECTION 2.2 Dissenting Shares........................................ 10
SECTION 2.3 Surrender of Shares; Stock Transfer Books................ 10
SECTION 2.4 Stock Plans.............................................. 12
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY................. 13
SECTION 3.1 Organization and Qualification........................... 13
SECTION 3.2 Capitalization........................................... 13
SECTION 3.3 Subsidiaries............................................. 14
SECTION 3.4 Authorization............................................ 15
SECTION 3.5 SEC Documents............................................ 15
SECTION 3.6 No Conflicts............................................. 16
SECTION 3.7 Financial Statements..................................... 16
SECTION 3.8 No Undisclosed Liabilities............................... 17
SECTION 3.9 Absence of Certain Changes or Events..................... 17
SECTION 3.10 Tax Matters.............................................. 17
SECTION 3.11 Litigation............................................... 19
SECTION 3.12 ERISA Compliance......................................... 19
SECTION 3.13 Environmental Matters.................................... 21
SECTION 3.14 Real Property and Leased Property........................ 21
SECTION 3.15 Change of Control Payments; Takeover Restrictions........ 22
i
<PAGE>
Page
----
SECTION 3.16 Intellectual Property.................................... 22
SECTION 3.17 Contracts................................................ 23
SECTION 3.18 Compliance with Laws..................................... 23
SECTION 3.19 Insurance Coverage....................................... 23
SECTION 3.20 Personnel; Labor Relations............................... 24
SECTION 3.21 Customers................................................ 24
SECTION 3.22 Brokers and Finders...................................... 25
SECTION 3.23 Opinion of Financial Advisor............................. 25
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER........ 25
SECTION 4.1 Organization and Power................................... 25
SECTION 4.2 Authorization............................................ 26
SECTION 4.3 No Conflicts............................................. 26
SECTION 4.4 Consents and Approvals................................... 26
SECTION 4.5 Financing of the Offer and the Merger.................... 26
SECTION 4.6 No Obligation to Make a Hart-Scott-Rodino Filing......... 26
SECTION 4.7 Finder's Fees............................................ 27
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER........................ 27
SECTION 5.1 Interim Operations of the Company........................ 27
SECTION 5.2 Takeover Proposals....................................... 30
SECTION 5.3 No Solicitation.......................................... 31
ARTICLE VI ADDITIONAL AGREEMENTS......................................... 32
SECTION 6.1 Proxy Statement.......................................... 32
SECTION 6.2 Meeting of Stockholders of the Company................... 32
SECTION 6.3 Additional Agreements.................................... 33
SECTION 6.4 Notification of Certain Matters.......................... 33
SECTION 6.5 Access; Confidentiality.................................. 33
SECTION 6.6 Publicity................................................ 34
SECTION 6.7 Directors' and Officers' Insurance and Indemnification... 35
SECTION 6.8 Employee Benefits........................................ 37
SECTION 6.9 Purchaser Compliance..................................... 38
SECTION 6.10 Best Efforts............................................. 38
ARTICLE VII CONDITIONS.................................................... 39
SECTION 7.1 Conditions to Each Party's Obligation to Effect the
Merger................................................... 39
ARTICLE VIII TERMINATION................................................... 39
SECTION 8.1 Termination.............................................. 39
ii
<PAGE>
Page
----
SECTION 8.2 Effect of Termination.................................... 41
ARTICLE IX GENERAL PROVISIONS............................................ 42
SECTION 9.1 Amendment................................................ 42
SECTION 9.2 Waiver................................................... 42
SECTION 9.3 Non-Survival of Representations and Warranties........... 42
SECTION 9.4 Notices.................................................. 43
SECTION 9.5 Headings................................................. 43
SECTION 9.6 Exhibits, Schedules and Annexes.......................... 44
SECTION 9.7 Counterparts............................................. 44
SECTION 9.8 Governing Law............................................ 44
SECTION 9.9 Pronouns................................................. 44
SECTION 9.10 Time Periods............................................. 44
SECTION 9.11 No Strict Construction................................... 44
SECTION 9.12 Entire Agreement......................................... 44
SECTION 9.13 Severability............................................. 45
SECTION 9.14 Successors and Assigns................................... 45
SECTION 9.15 Fees and Expenses........................................ 45
iii
<PAGE>
ANNEX I
Conditions of the Offer............................................... A-1
ANNEX II
Form of Stockholder Agreement...........................................B-1
EXHIBITS
Exhibit 6.6 - Form of Press Release
Exhibit 8.2 - Wire Transfer Instructions
INDEX OF DEFINED TERMS
----------------------
TERM LOCATION
- ---- --------
Affidavit of Loss.........................................................2.3(e)
Agreement...............................................................Preamble
Appointment Date............................................................ 5.1
Benefit Plan.............................................................3.12(a)
Board of Directors......................................................Recitals
Certificates..............................................................2.3(b)
Closing......................................................................1.6
Closing Date.................................................................1.6
Code.....................................................................3.12(a)
Common Stock..............................................................3.2(a)
Company.................................................................Preamble
Company Agreements...........................................................3.6
Company Letter.......................................................Article III
Confidentiality Agreement.................................................6.5(a)
D&O Insurance.............................................................6.7(c)
Delaware Law............................................................Recitals
Dissenting Shares.........................................................2.2(a)
Effective Time...............................................................1.5
Encumbrances.............................................................3.14(a)
ERISA....................................................................3.12(a)
ERISA Affiliate..........................................................3.12(a)
Exchange Agent............................................................2.3(a)
Exchange Act..............................................................1.1(a)
Expense Reimbursement Amount..............................................8.2(c)
Financial Statements.........................................................3.7
GAAP......................................................................3.2(b)
Governmental Entity..........................................................3.6
HSR Act......................................................................4.6
Indemnified Person(s).....................................................6.7(a)
Independent Directors.....................................................1.3(c)
Intellectual Property.......................................................3.16
Leased Property..........................................................3.14(b)
Material Adverse Effect...................................................3.1(b)
Merger.......................................................................1.4
Merger Consideration......................................................2.l(a)
Minimum Condition.........................................................1.1(a)
1997 Premium..............................................................6.7(c)
1996 Fiscal Year............................................................3.21
Notice of Superior Proposal...............................................5.3(b)
v
<PAGE>
Offer...................................................................Recitals
Offer Documents...........................................................1.l(b)
Offer Price.............................................................Recitals
Offer to Purchase.........................................................1.1(a)
Options......................................................................2.4
Other Intellectual Property.................................................3.16
Parent..................................................................Preamble
Permitted Encumbrance....................................................3.14(a)
Person....................................................................2.3(d)
Preferred Stock...........................................................3.2(a)
Purchaser...............................................................Preamble
Proxy Statement......................................................1.11(a)(ii)
Real Property............................................................3.14(a)
Registered Intellectual Property............................................3.16
Schedule 14D-1............................................................1.1(b)
Schedule 14D-9............................................................1.2(b)
SEC.......................................................................1.l(b)
SEC Documents.............................................................3.5(a)
Securities Act............................................................3.5(a)
Shares..................................................................Recitals
Special Meeting.......................................................1.11(a)(i)
Stock Plans..................................................................2.4
Stockholder Agreements..................................................Recitals
Subsidiary...................................................................3.3
Superior Proposal.........................................................5.3(b)
Surviving Corporation........................................................1.4
Takeover Proposal............................................................5.2
Tax...................................................................3.10(f)(i)
Taxable...............................................................3.10(f)(i)
Taxes.................................................................3.10(f)(i)
Tax Return...........................................................3.10(f)(ii)
Termination Fee...........................................................8.2(c)
U.S. Court..................................................................3.11
WARN Act....................................................................3.20
Wasserstein.................................................................3.23
Trailmaster Options..........................................................2.4
vi
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of November 25, 1997,
among Lund International Holdings, Inc., a Delaware corporation ("Parent"),
Zephyros Acquisition Corporation., a Delaware corporation and a wholly-owned
subsidiary of Parent (the "Purchaser"), and Deflecta-Shield Corporation, a
Delaware corporation (the "Company").
RECITALS:
WHEREAS, the Board of Directors of each of Parent, the Purchaser and the
Company has approved, and deems it advisable and in the best interests of its
respective stockholders to consummate, the acquisition of the Company by Parent
upon the terms and subject to the conditions set forth herein; and
WHEREAS, in furtherance thereof, it is proposed that the Purchaser will
make a cash tender offer (the "Offer") to acquire all shares (the "Shares") of
the issued and outstanding common stock, $.01 par value, of the Company for
$16.00 per Share, net to the seller in cash (such price, or any such higher
price per Share as may be paid in the Offer, being referred to herein as the
"Offer Price"); and
WHEREAS, also in furtherance of such acquisition, the Boards of Directors
of the Company, Parent and the Purchaser have each approved the Merger (as
defined hereinafter) following the Offer in accordance with the General
Corporation Law of the State of Delaware (the "Delaware Law") and upon the terms
and subject to the conditions set forth herein; and
WHEREAS, the Board of Directors of the Company (the "Board of Directors")
has determined that the consideration to be paid for each Share in the Offer and
the Merger is fair to the holders of such Shares and has resolved to recommend
that the holders of such Shares accept the Offer and approve this Agreement and
each of the transactions contemplated hereby upon the terms and subject to the
conditions set forth herein; and
WHEREAS, as a condition and inducement to Parent's and the Purchaser's
entering into this Agreement and incurring the obligations set forth herein,
Mark C. Mamolen and Charles S. Meyer (the "Stockholders"), who in the aggregate
beneficially own 1,909,374 Shares, concurrently herewith are entering into
Stockholder Agreements (the "Stockholder Agreements"), dated as of the date
hereof, with Parent, in the form attached hereto as Annex II, pursuant to which
the Stockholders have agreed, among other things, to tender the Shares held by
them in the Offer, upon the terms and subject to the conditions set forth
therein; and
WHEREAS, the Company, Parent and the Purchaser desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and Merger.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
THE OFFER
SECTION 1.1 THE OFFER.
(a) Provided that this Agreement shall not have been terminated in
accordance with Section 8.1 hereof and none of the events set forth in Annex I
shall have occurred and be continuing, the Purchaser shall, and Parent shall
cause the Purchaser to, (i) not later than 9:00 a.m. New York City time on the
first business day after the execution of this Agreement, publicly announce the
execution of this Agreement and the intention to commence the Offer pursuant to
the terms hereof, (ii) as promptly as practicable (but in no event later than
five (5) business days after the public announcement of the execution of this
Agreement), commence (within the meaning of Rule 14d-2(a) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), the Offer at the Offer
Price, and (iii) subject only to there being validly tendered and not withdrawn
prior to the expiration of the Offer that number of Shares which represents at
least a majority of the Shares then outstanding on a fully diluted basis (after
giving effect to the conversion, exchange or exercise of all outstanding options
and other rights and securities convertible into or exchangeable for Shares)
(the "Minimum Condition") and to the other conditions set forth in Annex I
hereto, consummate the Offer promptly in accordance with its terms. The
obligations of the Purchaser to accept for payment and to pay for any Shares
validly tendered on or prior to the expiration of the Offer and not withdrawn
shall be subject only to the Minimum Condition and the other conditions set
forth in Annex I hereto. The Offer shall be made by means of an offer to
purchase (the "Offer to Purchase") containing only the terms set forth in this
Agreement, the Minimum Condition and the other conditions set forth in Annex I
hereto. Without the prior written consent of the Company, which may be given or
withheld in its sole and absolute discretion, neither Parent nor the Purchaser
shall (i) amend or waive the Minimum Condition; (ii) decrease the Offer Price;
(iii) decrease the number of Shares sought; (iv) amend the Offer in any way
other than to increase the Offer Price, including by means of adding any
conditions to the Offer; (v) change the form of consideration payable in the
Offer; or (vi) extend the expiration of the Offer (except as specifically
provided in this Section 1.1); PROVIDED, HOWEVER, that, subject to Section 8.1,
if on the initial scheduled expiration date of the Offer, which shall be twenty
(20) business days after the date the Offer is commenced, all conditions to the
Offer shall not have been satisfied or waived at such time, the Purchaser may
extend the expiration date of the Offer for a period of thirty (30) business
days; and PROVIDED, FURTHER, that if at any scheduled expiration date of the
Offer, the condition set forth in paragraph (d) of Annex I hereto shall not have
been satisfied but all of the other conditions set forth on Annex I hereto shall
then have been satisfied, then, at the request of the
-2-
<PAGE>
Company (which shall subsequently be confirmed in writing), the Purchaser shall,
and Parent shall cause the Purchaser to, extend the Offer from time to time,
subject to the right of the Purchaser and Parent to terminate this Agreement
pursuant to Section 8.1 hereto. The Purchaser shall, and Parent shall cause the
Purchaser to, subject only to the prior satisfaction or waiver of the conditions
of the Offer, accept for payment and pay for Shares validly tendered as soon as
it is legally permitted to do so under applicable law; PROVIDED, HOWEVER, that
if, immediately prior to the initial expiration date of the Offer in accordance
with the foregoing, the Shares tendered and not withdrawn pursuant to the Offer
equal less than 90% of the then outstanding Shares, but not less than 70% of
such Shares, the Purchaser may extend the Offer on one or more occasions for an
aggregate period not to exceed ten (10) business days, notwithstanding that all
conditions to the Offer are satisfied as of such expiration date of the Offer;
PROVIDED, FURTHER, that if the Purchaser extends the Offer pursuant to the
foregoing proviso, all conditions set forth on Annex I hereto shall be
irrevocably waived and deemed satisfied in full. Notwithstanding anything to
the contrary contained in this Section 1.1(a), the Purchaser may not extend the
Offer, without the prior written consent of the Company which may be given or
withheld in its sole and absolute discretion, if the failure of any condition
resulted directly or proximately from a state of facts or action or inaction
which constitutes a breach of a representation, warranty or covenant of Parent
or the Purchaser.
(b) As soon as practicable on the date the Offer is commenced, Parent and
the Purchaser shall file with the United States Securities and Exchange
Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with respect
to the Offer (together with all amendments and supplements thereto and including
the exhibits thereto, the "Schedule 14D-1"). The Schedule 14D-1 shall include,
as exhibits, and incorporate by reference, the Offer to Purchase and a form of
letter of transmittal and summary advertisement (which documents, together with
any amendments and supplements thereto, and any other SEC schedule or form which
is filed in connection with the Offer and related transactions, are referred to
collectively herein as the "Offer Documents"). The Offer Documents shall comply
in all material respects with the provisions of applicable federal securities
laws and, on the date filed with the SEC and on the date first published, mailed
or given to the Company's stockholders and at all times thereafter, shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by Parent or the Purchaser
with respect to information furnished by the Company to Parent or the Purchaser,
in writing, expressly for inclusion in the Offer Documents. The information
supplied by the Company to Parent or the Purchaser, in writing, expressly for
inclusion in the Offer Documents and by Parent or the Purchaser to the Company,
in writing, expressly for inclusion in the Schedule 14D-9 (as hereinafter
defined) shall not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Parent and the Purchaser agree promptly to correct the
Offer Documents if and to the extent that they shall have become false or
misleading in any material respect (and the Company, with respect to written
information supplied by it specifically for use
-3-
<PAGE>
in the Offer Documents, promptly shall notify Parent and the Purchaser of any
required corrections of such information and cooperate with the Parent and the
Purchaser with respect to correcting such information) and to supplement the
information contained in the Offer Documents to include any information that
shall become necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading in any material
respect. Parent and the Purchaser further agree to take all steps necessary to
cause the Offer Documents so corrected to be filed with the SEC and to be
disseminated to holders of Shares, in each case as and to the extent required by
applicable federal securities laws. The Company and its outside legal counsel
shall be given a reasonable opportunity to review and comment on the Offer
Documents before such documents are filed with the SEC. In addition, the
Purchaser agrees to provide the Company and its outside legal counsel, in
writing, with any comments, whether written or oral, that the Purchaser or its
outside legal counsel may receive from time to time from the SEC or its staff
with respect to the Offer Documents promptly after the receipt of such comments
or other communications.
SECTION 1.2 ACTION BY THE COMPANY.
(a) The Company hereby approves of and consents to the making of the Offer
and represents that the Board of Directors, at a meeting duly called and held on
November 25, 1997, at which a majority of the Directors was present, has
unanimously (i) determined that this Agreement and the transactions contemplated
hereby, including the Merger and the Offer, are fair to, and in the best
interests of, the Company and the holders of the Shares, (ii) duly authorized
and approved this Agreement and approved the Merger and the other transactions
contemplated hereby (including but not limited to the Offer), and (iii) resolved
to recommend that the stockholders of the Company accept the Offer, tender their
Shares pursuant to the Offer and, to the extent required by applicable law,
authorize and approve this Agreement and the transactions contemplated hereby,
including the Merger. Subject to the terms of this Agreement, the Company
hereby consents to the inclusion in the Offer Documents prepared in connection
with the Offer of the recommendation of the Board of Directors of the Company
described in the preceding sentence.
(b) As soon as practicable on the date the Offer is commenced, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 (together with any and all amendments or supplements thereto and including
the exhibits thereto, the "Schedule 14D-9"). The Schedule 14D-9 shall comply in
all material respects with the provisions of applicable federal securities laws
and, on the date filed with the SEC and on the date first published, mailed or
given to the Company's stockholders, shall not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information furnished by
Parent or the Purchaser, in writing, expressly for inclusion in the Schedule
14D-9. The Company shall mail, or cause to be mailed, such Schedule 14D-9 to
the stockholders of the Company at the same time the Offer Documents are first
mailed to the
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stockholders of the Company. The Schedule 14D-9 and the Offer Documents shall
contain the recommendations of the Board of Directors described in Section
1.2(a) hereof, subject to the terms of this Agreement. The Company agrees
promptly to correct the Schedule 14D-9 if and to the extent that it shall have
become false or misleading in any material respect (and each of Parent and the
Purchaser, with respect to written information supplied by it specifically for
use in the Schedule 14D-9, promptly shall notify the Company of any required
corrections of such information and cooperate with the Company with respect to
correcting such information) and to supplement the information contained in the
Schedule 14D-9 to include any information that shall become necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading in any material respect. The Company further agrees
to take all steps necessary to cause the Schedule 14D-9 as so corrected to be
filed with the SEC and to be disseminated to holders of Shares, in each case as
and to the extent required by applicable federal securities laws. The Purchaser
and its outside legal counsel shall be given the opportunity to review and
comment on the Schedule 14D-9 before it is filed with the SEC. In addition, the
Company agrees to provide the Purchaser and its outside legal counsel, in
writing, with any comments, whether written or oral, that the Company or its
outside legal counsel may receive from time to time from the SEC or its staff
with respect to the Schedule 14D-9 promptly after the receipt of such comments
or other communications.
(c) In connection with the Offer, the Company shall promptly furnish or
cause to be furnished to the Purchaser mailing labels containing the names and
addresses of all record holders of Shares and security position listings of
Shares held in stock depositories, each as of a recent date, and shall promptly
furnish the Purchaser with such additional information (including, but not
limited to, updated lists of stockholders and their addresses, mailing labels
and security position listing) and related assistance as the Purchaser or its
agents may reasonably request in communicating the Offer to the record and
beneficial holders of the Shares.
SECTION 1.3 DIRECTORS.
(a) Promptly upon the purchase of Shares by the Purchaser pursuant to the
Offer which when added to any other Shares beneficially owned by Parent, the
Purchaser and their affiliates, represent at least a majority of the Shares on a
fully diluted basis, and from time to time thereafter as Shares are acquired by
the Purchaser, Parent shall be entitled to designate such number of directors,
rounded up to the next whole number, on the Board of Directors of the Company as
is equal to the product of the total number of directors on such Board of
Directors (giving effect to the directors designated by Parent pursuant to this
sentence) multiplied by the percentage that the number of Shares beneficially
owned by the Purchaser or any affiliate of the Purchaser bears to the total
number of Shares then outstanding. In furtherance thereof, the Company promptly
shall increase the size of the Board of Directors or use its best efforts to
secure the resignations of such number of its incumbent directors as is
necessary to enable Parent's designees to be elected to the Board of Directors
in accordance with the terms of this Section 1.3, and the Board of Directors
shall take all actions available to the Company to cause Parent's designees to
be so elected as provided herein. Parent and the Purchaser agree not to
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seek any greater representation on the Board of Directors of the Company prior
to the Effective Time (as defined in Section 1.5 hereof).
(b) The Company's obligation to appoint designees to the Board of
Directors of the Company shall be subject to Section 14(f) of the Exchange Act
and Rule 14f-1 promulgated thereunder. The Company promptly shall take all
actions required pursuant to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder in order to fulfill its obligations under Section 1.3(a)
hereof, and shall include in the Schedule 14D-9 mailed to stockholders promptly
after the commencement of the Offer (or an amendment thereof or an information
statement pursuant to Rule 14f-1 if the Purchaser has not theretofore designated
directors) such information with respect to the Company and its officers and
directors as is required to be disclosed under Section 14(f) and Rule 14f-1 in
order to fulfill its obligations under Section 1.3(a) hereof. Parent or the
Purchaser shall timely supply the Company, and be solely responsible for, the
information with respect to either of them and their nominees, officers,
directors and affiliates required to be disclosed by such Section 14(f) and Rule
14f-1.
(c) In the event that Parent's designees are elected to the Board of
Directors, subject to the other terms of this Agreement, until the Effective
Time, the Board of Directors shall have at least two (2) directors who are
directors on the date hereof and who are neither officers of the Company nor a
designee, stockholder, affiliate or associate (within the meaning of the federal
securities laws) of Parent (one or more of such directors, the "Independent
Directors"); PROVIDED, HOWEVER, that if the number of Independent Directors
shall be reduced below two (2) because of death, disability or resignation, the
remaining Independent Director shall be entitled to designate a person to fill
such vacancy, which person shall be deemed an Independent Director for purposes
of this Agreement. Notwithstanding anything in this Agreement to the contrary,
in the event that Parent's designees are elected to the Company's Board of
Directors after the acceptance for payment of Shares pursuant to the Offer and
prior to the Effective Time (as hereinafter defined), the affirmative vote of a
majority of the Independent Directors shall be required to (i) amend or
terminate this Agreement on behalf of the Company, (ii) amend the Amended and
Restated Certificate of Incorporation or By-Laws of the Company, (iii) waive any
condition to the obligations of the Company hereunder or exercise or waive any
of the Company's rights, benefits or remedies hereunder or grant any consents or
authorize or enter into any agreements of the Company hereunder, (iv) extend the
time for performance of the Purchaser's or Parent's obligations or other acts
hereunder, (v) approve any other action by the Company which would adversely
affect the rights of the stockholders of the Company hereunder or contemplated
hereby, or (vi) take any other action by the Company under or in connection with
this Agreement required to be taken by the Board of Directors (it being
understood that if no Independent Directors are members of the Board of
Directors, no such action will be taken).
SECTION 1.4 THE MERGER. Upon the terms and subject to the conditions of
this Agreement and in accordance with the Delaware Law, at the Effective Time,
the Purchaser shall be merged with and into the Company (the "Merger"), the
separate corporate existence of the Purchaser shall cease, and the Company shall
continue as the surviving corporation. The
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Company as the surviving corporation after the Merger is sometimes referred to
hereinafter as the "Surviving Corporation."
SECTION 1.5 EFFECTIVE TIME. Subject to the provisions of this
Agreement, the parties hereto shall cause a certificate of merger to be executed
and filed on the Closing Date (as defined in Section 1.6 hereof) (or on such
other date as Parent and the Company may agree) with the Secretary of State of
Delaware in such form as required by, and executed in accordance with, the
relevant provisions of the Delaware Law. The Merger shall become effective on
the date on which the certificate of merger is duly filed with the Secretary of
State of the State of Delaware or such time as is agreed upon by the parties and
specified in the certificate of merger, and such time is hereinafter referred to
as the "Effective Time."
SECTION 1.6 CLOSING. Unless this Agreement shall have been terminated
pursuant to Section 8.1 hereof and subject to the satisfaction or waiver of all
conditions set forth in Article VII hereof, the closing of the Merger (the
"Closing") shall take place at 10:00 a.m. on a date (the "Closing Date") to be
specified by the parties hereto, which shall be no later than the second
business day after satisfaction or waiver of all of the conditions set forth in
Article VII hereof provided that all such conditions continue to be so satisfied
or waived on such second business day, and if not so satisfied or waived, the
Closing shall be automatically extended from time to time until the first
subsequent business day on which all such conditions are again so satisfied or
waived, subject, however, to Article VIII hereof, at the offices of Reid &
Priest LLP, 40 West 57th Street, New York, New York, unless another date or
place is agreed to in writing by the parties hereto.
SECTION 1.7 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The
directors of the Purchaser immediately before the Effective Time shall be the
initial directors of the Surviving Corporation, and the officers of the Company
immediately before the Effective Time shall be the initial officers of the
Surviving Corporation, in each case until their successors are duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Certificate of Incorporation and the By-laws of the
Surviving Corporation. If, at the Effective Time, a vacancy shall exist on the
board of directors or in any office of the Surviving Corporation, such vacancy
may thereafter be filled in the manner provided by the Delaware Law.
SECTION 1.8 EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of the Delaware
Law. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time all the property, rights, privileges, powers and franchises
of the Company and the Purchaser shall vest in the Surviving Corporation, and
all debts, liabilities and duties of the Company and the Purchaser shall become
the debts, liabilities and duties of the Surviving Corporation.
SECTION 1.9 SUBSEQUENT ACTIONS. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments,
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assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in the Surviving Corporation its
right, title or interest in, to or under any of the rights, properties or assets
of either of the Company or the Purchaser acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger or
otherwise to carry out this Agreement, the officers and directors of the
Surviving Corporation shall be authorized to execute and deliver, in the name
and on behalf of either the Company or the Purchaser, all such deeds, bills of
sale, assignments and assurances and to take and do, in the name and on behalf
of each of such corporations or otherwise, all such other actions and things as
may be necessary or desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out this Agreement.
SECTION 1.10 CERTIFICATE OF INCORPORATION; BY-LAWS.
(a) Unless otherwise determined by the Company before the Effective Time,
at the Effective Time the Certificate of Incorporation of the Company, as in
effect immediately before the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by the Delaware Law and such Certificate of Incorporation.
(b) The By-Laws of the Company, as in effect immediately before the
Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter amended as provided by the Delaware Law, the Certificate of
Incorporation of the Surviving Corporation and such By-Laws.
SECTION 1.11 STOCKHOLDERS' MEETING.
(a) If required by applicable law in order to consummate the Merger, the
Company, acting through its Board of Directors, shall, in accordance with
applicable law:
(i) duly call, give notice of, convene and hold a special meeting of
its stockholders (the "Special Meeting") as promptly as practicable
following the acceptance for payment and purchase of Shares by the
Purchaser pursuant to the Offer for the purpose of considering and taking
action upon the approval of the Merger and the adoption of this Agreement;
(ii) prepare and file with the SEC a preliminary proxy or information
statement relating to the Merger and this Agreement and use its best
efforts, subject to the terms of this Agreement, to obtain and furnish the
information required to be included by the SEC in the Proxy Statement (as
hereinafter defined) and, after consultation with Parent, to respond
promptly to any comments made by the SEC with respect to the preliminary
proxy or information statement and cause a definitive proxy or information
statement, including any amendment or supplement thereto (the "Proxy
Statement"), to be mailed to its stockholders, provided that no amendment
or supplement to the Proxy Statement will be made by the Company without
consultation with Parent
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and its outside legal counsel, and to obtain the necessary approvals of the
Merger and this Agreement by its stockholders; and
(iii) subject to the terms of this Agreement and fiduciary
obligations under applicable laws as advised by outside legal counsel,
include in the Proxy Statement the recommendation of the Board of Directors
that stockholders of the Company vote in favor of the approval of the
Merger and the adoption of this Agreement.
(b) Parent shall vote, or cause to be voted, all of the Shares then owned
by it, the Purchaser or any of its other subsidiaries and affiliates in favor of
the approval of the Merger and the approval and adoption of this Agreement.
SECTION 1.12 MERGER WITHOUT MEETING OF STOCKHOLDERS. Notwithstanding
Section 1.11 hereof, in the event that Parent, the Purchaser and any other
subsidiaries of Parent shall acquire in the aggregate at least 90% of the then
outstanding Shares, pursuant to the Offer or otherwise, the parties hereto shall
take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after such acquisition, without a meeting of
stockholders of the Company, in accordance with Section 253 of the Delaware Law.
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.1 CONVERSION OF SECURITIES. At the Effective Time, by virtue
of the Merger and without any action on the part of the Parent, the Purchaser,
the Company or the holder of any of the following securities:
(a) Each Share issued and outstanding immediately before the Effective
Time (other than any Shares to be canceled pursuant to Section 2.1(b) hereof and
any Dissenting Shares (as defined in Section 2.2(a) hereof, if any)), without
any action on the part of the holder thereof, shall be converted into and
represent the right to receive the Offer Price in cash payable to the holder
thereof, without interest (the "Merger Consideration"), payable to the holder
thereof upon surrender of the certificate representing such Share or an
Affidavit of Loss in the manner provided in Section 2.3 hereof. All such
Shares, when so converted, shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such Shares shall cease to have any rights
with respect thereto, except the right to receive the Merger Consideration
therefor upon the surrender of such certificate or provision of an Affidavit of
Loss in accordance with Section 2.3 hereof, without interest.
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(b) Each Share held in the treasury of the Company and each Share owned by
Parent, the Purchaser or any direct or indirect wholly-owned subsidiary of
Parent or the Purchaser immediately before the Effective Time shall be canceled
and extinguished and no payment or other consideration shall be made with
respect thereto.
(c) Each share of common stock, par value $.01 per share, of the Purchaser
issued and outstanding immediately before the Effective Time shall thereafter
represent one validly issued, fully paid and nonassessable share of common
stock, par value $.01 per share, of the Surviving Corporation.
SECTION 2.2 DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the contrary, any
Shares held by a holder who has demanded and perfected his demand for appraisal
of his Shares in accordance with the Delaware Law and as of the Effective Time
has neither effectively withdrawn nor lost his right to such appraisal
("Dissenting Shares") shall not be converted into or represent a right to
receive cash pursuant to Section 2.1 hereof, but the holder thereof shall be
entitled to only such rights as are granted by the Delaware Law.
(b) Notwithstanding the provisions of Section 2.2(a) hereof, if any holder
of Shares who demands appraisal of his Shares under the Delaware Law shall
effectively withdraw or lose (through failure to perfect or otherwise) his right
to appraisal, then as of the Effective Time or the occurrence of such event,
whichever occurs later, such holder's Shares shall automatically be converted
into and represent only the right to receive the Merger Consideration as
provided in Section 2.1(a) hereof, without interest thereon, upon surrender of
the certificate or certificates representing such Shares or provision of an
Affidavit of Loss pursuant to Section 2.3 hereof.
(c) The Company shall give the Purchaser (i) prompt notice of any written
demands for appraisal, withdrawals of such demands, and any other instruments
served pursuant to Section 262 of the Delaware Law and received by the Company,
and (ii) the opportunity to direct all negotiations and proceedings with respect
to demands for appraisal under the Delaware Law. The Company shall not
voluntarily make any payment with respect to any such demands for appraisal and
shall not, except with the prior written consent of the Purchaser, settle or
offer to settle any such demands.
SECTION 2.3 SURRENDER OF SHARES; STOCK TRANSFER BOOKS.
(a) Before the Effective Time, the Purchaser shall designate a bank or
trust company reasonably acceptable to the Company to act as paying agent for
the Company and agent for holders of Shares in connection with the Merger (the
"Exchange Agent") to receive and pay the funds necessary to make the payments
contemplated by Section 2.l(a) hereof. At the Effective Time, the Purchaser
shall deposit, or cause to be deposited, in trust with the Exchange Agent for
the benefit of holders of Shares the aggregate cash consideration to which such
holders shall
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be entitled at the Effective Time pursuant to Section 2.1(a) hereof. The funds
held by the Exchange Agent pursuant to this Section 2.3 shall not be used for
any purpose other than the payment of the Merger Consideration pursuant hereto.
(b) Each holder of a certificate or certificates representing any Shares
canceled upon the Merger, which immediately prior to the Effective Time
represented outstanding Shares (the "Certificates") whose Shares were converted
pursuant to Section 2.1(a) hereof may thereafter surrender such Certificate or
Certificates to the Exchange Agent, as agent for such holder, to effect the
surrender of such Certificate or Certificates on such holder's behalf for a
period ending six (6) months after the Effective Time. The Purchaser agrees
that promptly after the Effective Time it shall cause the distribution to
holders of record of Shares as of the Effective Time of materials to facilitate
such surrender pursuant to Section 2.3(c) hereof. Upon the surrender of
Certificates, the Purchaser shall cause the Exchange Agent to pay the holder of
such Certificates in exchange therefor cash in an amount equal to the Merger
Consideration multiplied by the number of Shares represented by such
Certificates. Until so surrendered, each Certificate (other than Certificates
representing Dissenting Shares and Certificates representing Shares held by the
Purchaser or in the treasury of the Company) shall represent solely the right to
receive the aggregate Merger Consideration relating thereto.
(c) Promptly after the Effective Time, the Exchange Agent shall send to
each record holder, as of the Effective Time, of a Certificate or Certificates
theretofore evidencing Shares, other than Certificates formerly representing
Shares to be canceled pursuant to Section 2.1 (b) hereof, a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent) and instructions advising such holder of the
procedure for surrendering to the Exchange Agent such Certificates for exchange
into the Merger Consideration. Upon the surrender of a Certificate to the
Exchange Agent together with and in accordance with such transmittal form duly
executed and any other documents reasonably required by such instructions, the
holder thereof shall be entitled to receive promptly in exchange therefor the
Merger Consideration payable in respect of each Share formerly represented
thereby and such Certificate shall forthwith be canceled. Upon such surrender,
the Exchange Agent promptly will pay the Merger Consideration.
(d) If payment of the Merger Consideration is to be made to an individual,
general partnership, limited partnership, corporation, limited liability company
or any other legal entity (each a "Person"), other than the Person in whose name
a surrendered Certificate or instrument is registered, it shall be a condition
to such payment that the Certificate or instrument so surrendered shall be
properly endorsed or shall be otherwise in proper form for transfer and that the
Person requesting such payment in a name other than that of the registered
holder of the Certificate or instrument surrendered shall pay to the Exchange
Agent any transfer or other taxes payable by reason of the foregoing or
establish to the satisfaction of the Purchaser or the Exchange Agent that such
taxes either have been paid or are not applicable.
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(e) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed ("Affidavit of Loss") and the
delivery of an indemnity bond in form and substance and with surety reasonably
satisfactory to the Surviving Corporation, the Surviving Corporation will pay or
cause to be paid in exchange for such lost, stolen or destroyed Certificate the
Merger Consideration deliverable in respect thereof as determined in accordance
with this Article II.
(f) At the Effective Time, the stock transfer books of the Company shall
be closed and there shall not be any further registration of transfers of Shares
or any shares of capital stock thereafter on the records of the Company. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation, they shall be canceled and exchanged for cash as provided in this
Article II. No interest shall accrue or be paid on any cash payable upon the
surrender of a Certificate or Certificates which immediately before the
Effective Time represented outstanding Shares.
(g) Promptly following the date which is six (6) months after the
Effective Time, the Surviving Corporation shall be entitled to require the
Exchange Agent to deliver to it any cash (including any interest received with
respect thereto), Certificates and other documents in its possession relating to
the transactions contemplated hereby, which had been made available to the
Exchange Agent and which have not been disbursed to holders of Certificates, and
thereafter such holders shall be entitled to look to Parent and to the Surviving
Corporation (subject to abandoned property, escheat or similar laws) only as
general creditors thereof with respect to the Merger Consideration payable upon
due surrender of their Certificates, without any interest thereon.
Notwithstanding the foregoing, neither the Surviving Corporation nor the
Exchange Agent shall be liable to any holder of a Certificate for Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(h) The Merger Consideration paid in the Merger shall be net to the holder
of Shares in cash, subject to reduction only for any applicable federal back-up
withholding or, as set forth in Section 2.3(d), stock transfer taxes payable by
such holder.
SECTION 2.4 STOCK PLANS. At or immediately prior to the Effective Time,
each then outstanding option to purchase Shares (the "Options") granted under
the Company's 1993 Stock Option Plan, the 1996 Stock Option Plan and any other
stock-based incentive plan or arrangement of the Company (collectively, the
"Stock Plans") whether or not then exercisable or vested, shall be canceled and
the Company shall purchase options to purchase 100,000 Shares issued in
connection with the acquisition by the Company of Trailmaster Products, Inc.
(the "Trailmaster Options") upon delivery by the holders thereof of certificates
or other instruments, documents or agreements representing or evidencing the
Trailmaster Options or reasonable representations or indemnities of such holders
reasonably acceptable to the Company with respect thereto in connection with
such purchase. In consideration of such cancellation and purchase, the holders
of such Options and Trailmaster Options shall receive for each Share subject to
such Option or Trailmaster Option an amount (subject to any applicable
withholding
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tax) in cash equal to the product of (A) the excess, if any, of the Offer Price
over the per Share exercise price of such Option or Trailmaster Option and (B)
the number of Shares subject to such Option or Trailmaster Option.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and the Purchaser as set
forth in this Article III, except to the extent provided in that certain letter
delivered by the Company to Parent and the Purchaser (the "Company Letter") and
subject to Section 9.6 herein:
SECTION 3.1 ORGANIZATION AND QUALIFICATION.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. The Company has all
requisite corporate power and authority to carry on its business as it is now
being conducted and to own, lease and operate its assets.
(b) The Company is duly qualified or licensed to do business as a foreign
corporation in good standing in every jurisdiction where the character of its
properties, owned or leased, or the nature of its activities make such
qualification necessary, except where the failure to be so qualified would not
have, individually or in the aggregate, a "Material Adverse Effect." As used in
this Agreement, "Material Adverse Effect" means any material adverse change in
or effect on the business, operations, properties (including intangible
properties), financial condition, results of operations or assets and
liabilities of the Company and its Subsidiaries taken as a whole.
(c) The Company has heretofore delivered to Parent complete and correct
copies of the Company's Certificate of Incorporation, as amended, and By-Laws,
as amended, each as in effect on the date hereof.
SECTION 3.2 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 20,000,000
shares of common stock, par value $.01 per share (the "Common Stock"), and
2,500,000 shares of preferred stock ("Preferred Stock"). As of the date hereof,
(i) 4,800,000 Shares are issued and outstanding, (ii) no Shares are issued and
held in the treasury of the Company, (iii) a total of 450,000 Shares are
reserved under the Company's Stock Plans in respect of outstanding and future
awards, of which (A) 139,000 Shares are reserved for issuance pursuant to
outstanding Options and 61,000 Shares are reserved for issuance pursuant to
future awards under the Company's 1996 Stock Option Plan, and (B) 234,000 Shares
are reserved for issuance pursuant
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to outstanding Options and 16,000 Shares are reserved for issuance pursuant to
future awards under the Company's 1993 Stock Option Plan, and (iv) a total of
100,000 Shares are reserved for issuance under the Trailmaster Options. Section
3.2(a) of the Company Letter discloses the number of Shares subject to each
outstanding Option and the exercise price thereof. All the outstanding shares
of the Company's capital stock are, and all Shares which may be issued pursuant
to the exercise of outstanding Options will be, when issued in accordance with
the terms thereof, duly authorized, validly issued, fully paid and
non-assessable. Except as disclosed in this Section 3.2(a) or as set forth in
Section 3.2(a) of the Company Letter, (i) there are no shares of capital stock
of the Company authorized, issued or outstanding, (ii) there are no existing
options, warrants, calls, preemptive rights, subscriptions or other rights,
agreements, arrangements or commitments of any character, relating to the issued
or unissued capital stock of the Company obligating the Company or any of its
Subsidiaries to issue, transfer or sell or cause to be issued, transferred or
sold any shares of capital stock or other equity interest in the Company or
securities convertible or exchangeable for such shares or equity interests or
obligating the Company or any of its Subsidiaries to grant, extend or enter into
any such option, warrant, call, subscription or other right, agreement,
arrangement or commitment, and (iii) except as disclosed in Section 3.2(a) of
the Company Letter, there are no outstanding contractual obligations of the
Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any Shares, or the capital stock of the Company or of any Subsidiary of the
Company. Except as disclosed in Section 3.2(a) of the Company Letter, there are
no voting trusts or other agreements to which the Company or any of its
Subsidiaries is a party with respect to the voting of the capital stock of the
Company.
(b) As of September 30, 1997, other than as set forth in Section 3.2(b) of
the Company Letter, there is no outstanding Indebtedness (as hereinafter
defined) of the Company or any of its Subsidiaries. The Company heretofore has
made available to Parent, true and complete copies of all material agreements,
instruments and documents (including exhibits and schedules thereto) with
respect to such Indebtedness. For purposes of this Agreement, "Indebtedness"
shall mean (i) all indebtedness for borrowed money, (ii) any other indebtedness
which is evidenced by a note, bond or debenture, (iii) all obligations under
capitalized leases under United States generally accepted accounting principles
("GAAP") consistently applied with the Company's financial statements, and (iv)
all guarantees of the foregoing obligations, except as between the Company and
each of its Subsidiaries.
SECTION 3.3 SUBSIDIARIES. Each Subsidiary (as hereinafter defined) of
the Company is duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has the corporate power to carry
on its business as it is now being conducted. Each Subsidiary is duly qualified
to do business, and is in good standing, in each jurisdiction where the
character of its properties owned or leased or the nature of its activities
makes such qualification necessary, except where the failure to be so qualified
would not have, individually or in the aggregate, a Material Adverse Effect.
All of the outstanding shares of capital stock of each Subsidiary are validly
issued, fully paid and nonassessable and owned directly or indirectly by the
Company free and clear of all liens, claims or encumbrances and were not
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issued in violation of any preemptive right. There are no existing options,
calls or commitments of any character relating to the issued or unissued capital
stock of any Subsidiary, or any securities convertible into, or exchangeable or
exercisable for, or otherwise evidencing the right to acquire, any shares of
capital stock of any Subsidiary. No Subsidiary of the Company has been
organized under the laws of any jurisdiction outside of the United States of
America. For purposes of this Agreement, the term "Subsidiary" shall mean any
corporation or other entity a majority of whose outstanding voting stock or
ownership interests ordinarily entitled to vote for the election of a majority
of the Board of Directors or other governing body is owned by the Company or one
or more other Subsidiaries.
SECTION 3.4 AUTHORIZATION.
(a) The Company has all requisite corporate power to execute and deliver
this Agreement and all other documents and instruments to be executed and
delivered by it in connection herewith and, subject to the adoption of this
Agreement by the stockholders of the Company, if required, to consummate the
transactions contemplated hereby. The execution, delivery and performance by
the Company of this Agreement, and the consummation by it of the transactions
contemplated hereby, have been duly and validly authorized by its Board of
Directors and no other corporate action on the part of the Company is necessary
to authorize the execution and delivery by the Company of this Agreement and the
consummation by it of the transactions contemplated hereby, except that the
consummation of the Merger may require approval of the Company's stockholders as
contemplated by Section 1.10 hereof. This Agreement constitutes a valid and
legally binding agreement of the Company enforceable in accordance with its
terms, except to the extent that enforcement thereof may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
similar laws, now or hereafter in effect, relating to creditors' rights
generally and (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
(b) The Company opted out of Section 203 of the Delaware Law effective
October 28, 1993. The affirmative vote of the holders of a majority of the
outstanding shares of Common Stock is the only vote of the holders of any class
or series of the Company's capital stock which is necessary to approve this
Agreement and the other transactions contemplated hereby, including the Merger,
subject to the applicability of Section 253 of the Delaware Law and Section 1.11
hereof.
SECTION 3.5 SEC DOCUMENTS.
(a) The Company has filed with the SEC, and heretofore has made available
to Parent, true and complete copies of all reports, schedules, forms, statements
and other documents required to be so filed by it from January 1, 1995 through
the date hereof under the Exchange Act or the Securities Act of 1933, as amended
(the "Securities Act"), including (i) the annual reports on Form 10-K for all
fiscal years ended during such period, (ii) the quarterly reports on Form 10-Q
required for all fiscal quarters during such period, and (iii) its proxy or
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information statements relating to meetings of, or actions taken without a
meeting by, the stockholders of the Company held during such period (the "SEC
Documents").
(b) As of its respective date, or if amended, as of the date of the last
such amendment, each SEC Document, including, without limitation, any financial
statements or schedules included therein (a) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading and (b) except as
disclosed in Section 3.5(b) of the Company Letter, complied in all material
respects with the applicable requirements of the Exchange Act and the Securities
Act, as the case may be, and the applicable rules and regulations promulgated by
the SEC thereunder. None of the Company's Subsidiaries has any class of
securities registered under the Exchange Act.
SECTION 3.6 NO CONFLICTS. Except as disclosed in Section 3.6 of the
Company Letter and for filings, permits, authorizations, consents and approvals
as may be required under, and other applicable requirements of, the Exchange
Act, the execution, delivery or performance of this Agreement by the Company,
the consummation by the Company of the transactions contemplated hereby or
compliance by the Company with any of the provisions hereof will not (i)
conflict with or result in any breach of any provision of the Certificate of
Incorporation, the By-Laws or similar organizational documents of the Company or
any of its Subsidiaries, (ii) require on the part of the Company any filing
with, or permit, authorization, consent or approval of, any court,
administrative agency or commission or other governmental or other regulatory
authority or agency (a "Governmental Entity"), (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to (x) any right of termination, amendment, cancellation
or acceleration or to receive any other or additional payments or (y) loss of
any benefit) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which the Company or any of its Subsidiaries is a
party or by which any of them or any of their properties or assets is bound (the
"Company Agreements"), or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company, any of its Subsidiaries
or any of their properties or assets, except in the case of clauses (ii), (iii)
and (iv) for any matter otherwise covered by such clauses which would not have,
individually or in the aggregate, a Material Adverse Effect.
SECTION 3.7 FINANCIAL STATEMENTS. The consolidated financial statements
included in the SEC Documents (the "Financial Statements") fairly present, in
all material respects, the consolidated financial position and the consolidated
results of operations and cash flows (and changes in financial position, if any)
of the Company and its consolidated Subsidiaries as of the times and for the
periods referred to therein, subject, in the case of unaudited, interim
financial statements, to the lack of footnotes and normal year-end adjustments
and to any other adjustments or exceptions described therein, all in accordance
with GAAP applied on a consistent basis throughout the periods involved (except
as may be indicated therein or in the notes thereto).
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SECTION 3.8 NO UNDISCLOSED LIABILITIES. Since September 30, 1997, there
have not been incurred any liabilities by the Company or its Subsidiaries of any
kind whatsoever, whether accrued, contingent, absolute, determined, determinable
or otherwise, which would be required by GAAP, applied on a basis consistent
with the Financial Statements, to be disclosed in the consolidated balance sheet
of the Company and its Subsidiaries and the notes thereto, other than: (i)
liabilities disclosed in the Company's SEC Documents or in Section 3.8 of the
Company Letter; (ii) liabilities incurred in the ordinary course of business
consistent with past practice, which would not have, individually or in the
aggregate, a Material Adverse Effect; (iii) liabilities under or in connection
with this Agreement; (iv) liabilities or obligations that otherwise are
disclosed pursuant to any other representation or warranty herein or which are
not required to be disclosed pursuant to any other representation or warranty
herein; or (v) any other liability which would not have, individually or in the
aggregate, a Material Adverse Effect.
SECTION 3.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except to the extent
disclosed in Section 3.9 of the Company Letter or in the SEC Documents filed
prior to the date hereof, or as contemplated by this Agreement, since September
30, 1997 the Company and its Subsidiaries have not suffered a Material Adverse
Effect or conducted their businesses in any material respect other than in the
ordinary course consistent with past practices, except for such changes which
have not had, and are not reasonably expected to have, individually or in the
aggregate, a Material Adverse Effect. From September 30, 1997 through the date
of this Agreement, there has not occurred any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to the equity interests of the Company.
SECTION 3.10 TAX MATTERS.
(a) Each of the Company and its Subsidiaries has properly completed and
timely filed all Tax Returns (as defined below) that are required to be filed by
or with respect to the Company and its consolidated Subsidiaries, except in each
case where the failure to properly complete or file any such Tax Return would
not have, individually or in the aggregate, a Material Adverse Effect. The
Company has afforded Parent the opportunity to examine correct and complete
copies of all material federal and state income Tax Returns, examination
reports, ruling requests and statements of deficiencies assessed against or
agreed to by the Company or any of its consolidated Subsidiaries.
(b) Each of the Company and its Subsidiaries have timely paid all Taxes
(as defined below) reflected on such Tax Returns as due and payable (except for
Taxes that are being contested in good faith by appropriate proceedings) and
except in each case where the failure to so pay such amounts would not have,
individually or in the aggregate, a Material Adverse Effect or for which
reserves, which are adequate under GAAP, have been established.
(c) Each of the Company and its Subsidiaries has complied with all
applicable laws, rules and regulations relating to the withholding of Taxes and
has timely withheld and paid to
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the proper governmental authorities all amounts required to have been withheld
and paid in connection with amounts paid or owing to any employee, independent
contractor, creditor or stockholder, except where any such failure would not
have, individually or in the aggregate, a Material Adverse Effect.
(d) Except as disclosed in Section 3.10(d) of the Company Letter, to the
knowledge of the Company, (i) no audits or other administrative or court
proceedings are presently pending with regard to any Taxes for which the Company
or any of its Subsidiaries could be liable, (ii) no dispute or claim concerning
any Taxes for which the Company or any of its Subsidiaries could be liable has
been claimed or raised by any Tax Authority in writing, and (iii) no claim has
been made in writing by any authority in a jurisdiction where the Company and
its Subsidiaries do not file Tax Returns that the Company or any such Subsidiary
is, or may be, subject to taxation by that jurisdiction, in each case of clauses
(i) through (iii), which is likely to be determined adversely to the Company and
its Subsidiaries and which, if so adversely determined, individually or in the
aggregate with other such matters so adversely determined, would have,
individually or in the aggregate, a Material Adverse Effect.
(e) No claim has been asserted in writing that the Company or any of its
Subsidiaries is liable for any Taxes (i) of the Company or its Subsidiaries or
(ii) with respect to any group of entities other than the Company and its
Subsidiaries (by law, contract or otherwise), in each case, which claim is
likely to be determined adversely to the Company and its Subsidiaries and which,
if so adversely determined, after giving effect to rights and remedies of the
Company and its Subsidiaries under any agreement in force pursuant to which such
liability is the obligation of any third party or pursuant to which any third
party is obligated to provide indemnity with respect thereto, would have,
individually or in the aggregate, a Material Adverse Effect.
(f) For purposes of this Agreement:
(i) "Tax" (including, with correlative meaning, the terms "Taxes" and
"Taxable") means (x) any net income, gross income, gross receipts,
sales, use, ad valorem, transfer, transfer gains, franchise, profits,
license, withholding, payroll, employment, social security (or
similar), unemployment, disability, excise, severance, stamp, rent,
recording, registration, occupation, premium, real or personal
property, intangibles, environmental (including taxes under Section
59A of the Code (as hereinafter defined)) or windfall profits tax,
alternative or add-on minimum tax, capital stock, customs duty or
other tax, fee, duty, levy, impost, assessment or charge of any kind
whatsoever (including but not limited to taxes assessed to real
property and water and sewer rents relating thereto), together with
any interest and any fine, penalty, addition to tax or additional
amount or deductions imposed by any governmental body (domestic or
foreign) (a "Tax Authority") responsible for the imposition of any
such tax, whether disputed or not, including any liability arising
under any tax sharing agreement, with respect to the Company or any of
its Subsidiaries; (y) any liability for the
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payment of any amount of the type described in the immediately
preceding clause (x) as a result of the Company or any of its
Subsidiaries being a member of an affiliated or combined group with
any other corporation at any time on or prior to the Closing Date; and
(z) any liability of the Company or any of its Subsidiaries for the
payment of any amounts of the type described in the immediately
preceding clause (x) as a result of a contractual obligation to
indemnify any other person.
(ii) "Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any
amendment thereof.
SECTION 3.11 LITIGATION. Except as set forth in the SEC Documents or as
disclosed in Section 3.11 of the Company Letter, there is no suit, action or
proceeding pending or, to the knowledge of the Company, threatened in writing
against the Company or any of its Subsidiaries, including but not limited to any
suit or action involving a products liability claim, at law or in equity or
before any United States federal or state court of competent jurisdiction (a
"U.S. Court") which is likely to be determined adversely to the Company and its
Subsidiaries and which, if so adversely determined, individually or in the
aggregate with other such suits, actions or proceedings so adversely determined,
would have, individually or in the aggregate, a Material Adverse Effect.
SECTION 3.12 ERISA COMPLIANCE.
(a) The Company has delivered to Parent correct and complete copies of all
"employee benefit plans," as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and all other material bonus,
deferred compensation, pension, profit-sharing, retirement, medical, life,
disability income, severance, stock purchase, stock option, incentive or other
employee benefit plans (other than any employment or personnel policy, practice
or procedure) currently maintained, or contributed to, or required to be
maintained or contributed to, by the Company or any of its Subsidiaries or any
other Person that, together with the Company, is treated as a single employer
under Sections 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as
amended (the "Code"), (each an "ERISA Affiliate") for the benefit of any current
or former employees, officers or directors of the Company or any ERISA Affiliate
(individually, a "Benefit Plan").
(b) Each Benefit Plan has been established and administered in accordance
with its terms except where the failure to do so would not have, individually or
in the aggregate, a Material Adverse Effect. The Company, each ERISA Affiliate
and each Benefit Plan are in compliance in all material respects with applicable
provisions of ERISA, the Code and other applicable laws, rules and regulations,
except for any noncompliance that would not have, individually or in the
aggregate, a Material Adverse Effect.
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(c) (i) All Benefit Plans intended to be qualified under Section 401(a) of
the Code have been the subject of determination letters from the Internal
Revenue Service to the effect that such Benefit Plans are qualified and exempt
from federal income Taxes under Section 401(a) and 501(a), respectively, of the
Code, and (ii) to the best knowledge of the Company nothing has occurred,
whether by action or failure to act, that could reasonably be expected to cause
the loss of such qualification, except where such loss would not have,
individually or in the aggregate, a Material Adverse Effect. Except as
disclosed in Section 3.12(c) of the Company Letter, no such Benefit Plan
intended to be qualified under Section 401(a) of the Code has been amended since
the date of its most recent determination letter or application therefor in any
respect that would have, individually or in the aggregate, a Material Adverse
Effect. All reports, returns and similar documents with respect to Benefit
Plans required to be filed with any governmental agency or distributed to any
Benefit Plan participant have been fully and timely filed and distributed except
for any failure to file that would not have, individually or in the aggregate, a
Material Adverse Effect.
(d) To the best knowledge of the Company, no event has occurred and no
condition exists that would subject the Company, either directly or by reason of
its affiliation with an ERISA Affiliate, to any Tax, fine, lien, penalty or
other liability imposed by ERISA, the Code or other applicable laws, rules and
regulations in connection with a Benefit Plan that would have, individually or
in the aggregate, a Material Adverse Effect.
(e) Neither the Company nor any ERISA Affiliate maintains, contributes to,
or at any time maintained, contributed to or was obligated to contribute to, any
Benefit Plan which is subject to Title IV of ERISA or Section 412 of the Code,
or which is a multiemployer plan (within the meaning of Section 3(37) or Section
4001(a)(3) of ERISA), except where such maintenance of or contribution to any
such Benefit Plan would not have, individually or in the aggregate, a Material
Adverse Effect.
(f) None of the Company, any ERISA Affiliate, any employee of the Company
or of any ERISA Affiliate, or any other person or persons, has engaged in a
non-exempt "prohibited transaction" (as such term is defined in Section 406 of
ERISA or Section 4975 of the Code) or in any other breach of fiduciary
responsibility that could subject the Company or any ERISA Affiliate, or any
employee of the Company or of any ERISA Affiliate, to a direct or indirect Tax,
penalty or liability under ERISA, the Code or other applicable law which would
have, individually or in the aggregate, a Material Adverse Effect. Neither any
of the Benefit Plans nor any of their related trusts or other funding
arrangements has been terminated which would have, individually or in the
aggregate, a Material Adverse Effect.
(g) With respect to any Benefit Plan that is an employee welfare benefit
plan, no such Benefit Plan is funded (or has during the past six (6) years been
funded) through a voluntary employees' beneficiary association (within the
meaning of Section 501(c)(9) of the Code) or through a "welfare benefit fund,"
as such term is defined in Section 419(e) of the Code, except where such funding
would not have, individually or in the aggregate, a Material Adverse Effect.
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(h) To the knowledge of executive officers of the Company, no
representations or communications in writing with respect to participation,
eligibility for benefits, vesting, benefit accrual coverage or other material
terms of any of the Benefit Plans, which representations or communications would
create additional legal liability of the Company and would have, individually or
in the aggregate, a Material Adverse Effect, have been made prior to the date
hereof to any employee, beneficiary or other Person other than those which are
in accordance with the terms and provisions of each such Benefit Plan as in
effect immediately prior to the date hereof.
SECTION 3.13 ENVIRONMENTAL MATTERS. The Company and its Subsidiaries
are, and at all times in the past have been, in compliance with all applicable
legal requirements, laws, rules, orders, regulations, licenses and permits
related to environmental, natural resource, health or safety matters, including
but not limited to those promulgated, adopted or enforced by the United States
Environmental Protections Agency and by similar agencies in states in which the
Company or its Subsidiaries conduct their business, except where non-compliance
would not have, individually or in the aggregate, a Material Adverse Effect. To
the knowledge of the Company, neither the Company nor any of its Subsidiaries is
a party to any suit, action or proceeding now pending before any U.S. Court or
United States federal, state or local administrative body or threatened in
writing by any Person which is likely to be determined adversely to the Company
and its Subsidiaries and which, if so adversely determined, individually or in
the aggregate with other such suits, actions or proceedings so adversely
determined, would have, individually or in the aggregate, a Material Adverse
Effect, (i) for alleged noncompliance with any environmental law, rule,
regulation, license or permit or (ii) relating to the discharge or release into
the environment of any hazardous substance, pollutant, or waste at or on a site
presently or formerly owned, leased, operated or used for off-site treatment or
disposal by the Company or any Subsidiary.
SECTION 3.14 REAL PROPERTY AND LEASED PROPERTY.
(a) Section 3.14(a) of the Company Letter sets forth a complete list of
all real property owned by the Company or any of its Subsidiaries (the "Real
Property"). Except as set forth in Section 3.14(a) of the Company Letter, the
Company or one of its Subsidiaries has good and valid title to the Real
Property, free and clear of all liens, claims, restrictions and encumbrances
("Encumbrances"), other than Permitted Encumbrances (as hereinafter defined),
except in all cases where the failure to have such title would not have a
Material Adverse Effect. As used in this Agreement, the term "Permitted
Encumbrances" means (i) those Encumbrances set forth in Section 3.14(a) of the
Company Letter, (ii) Encumbrances, including, without limitation, by easements,
granted in favor of any governmental entity or utility company for the customary
provision of utilities and services to the Real Property or any improvements
thereon, (iii) Encumbrances for water and sewage charges and current taxes not
yet due and payable or being contested in good faith, (iv) mechanics',
carriers', workers', repairers', materialmen's, warehousemen's and other similar
Encumbrances arising or incurred in the ordinary course of business,
(v) Encumbrances arising or resulting from any action taken by Parent or the
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Purchaser, or (vi) such other Encumbrances as would not have, individually or in
the aggregate, a Material Adverse Effect.
(b) Set forth in Section 3.14(b) of the Company Letter is a correct and
complete list of all leases under which the Company or any Subsidiary is a
lessee ("Leased Property"). The Company and each of its Subsidiaries enjoys
peaceful and undisturbed possession under all such leases, all of such leases
are valid and none of them is in default under any such lease, except for any
matters otherwise covered by this sentence which do not have, individually or in
the aggregate, a Material Adverse Effect.
(c) The Company and its Subsidiaries have obtained all appropriate
licenses, permits, easements and rights of way required to use and operate the
Real Property in the manner in which the Real Property and Leased Property
currently is being used and operated, except for such licenses, permits,
easements or rights of way the failure of which to have obtained would not have,
individually or in the aggregate, a Material Adverse Effect.
SECTION 3.15 CHANGE OF CONTROL PAYMENTS; TAKEOVER RESTRICTIONS.
(a) Except as disclosed in Section 3.15(a) of the Company Letter or as
required by law, neither the Company nor its Subsidiaries has any plans or
agreements to which they are parties, or by which they or their properties are
bound, pursuant to which payments, including with respect to the acceleration of
benefits, will be required upon (i) or as a result of a "change of control" of
the Company or (ii) the termination or closing of any of the Company's
operations or facilities.
(b) To the best knowledge of the Company, no state takeover statute or
similar statute or regulation of any state or other jurisdiction applies to this
Agreement or any of the transactions contemplated hereby, including the Merger.
No provision of the Certificate of Incorporation or By-laws of the Company or
any Subsidiary would, directly or indirectly, restrict or impair the ability of
the Purchaser or its affiliates to vote, or otherwise to exercise the rights of
a stockholder with respect to, securities of the Company or any Subsidiary that
may be acquired or controlled by the Purchaser or its affiliates pursuant to
this Agreement or permit any stockholder to acquire securities of the Company on
a basis not available to the Purchaser in the event that the Purchaser were to
acquire securities of the Company.
SECTION 3.16 INTELLECTUAL PROPERTY. The Company and each Subsidiary has
exclusive ownership of and title to each issued patent, pending patent
application, registered trademark, registered trade name, registered service
mark and registered copyright owned or used in and material to the business of
the Company and its Subsidiaries taken as a whole (collectively, the "Registered
Intellectual Property"), and to the knowledge of the Company, the Company and
each Subsidiary has exclusive ownership of and rights to use each material
patent application, unregistered trademark, trademark application, unregistered
trade name, unregistered service mark, unregistered copyright and other trade
secret or other proprietary intellectual
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property (the "Other Intellectual Property" and collectively with the Registered
Intellectual Property, the "Intellectual Property") owned by or used in and
material to the business of the Company and its Subsidiaries taken as a whole,
and, to the Company's knowledge, the current use by the Company and each
Subsidiary of such Intellectual Property does not infringe upon the rights of
any other Person, except for any matters otherwise covered by this sentence
which do not, individually or in the aggregate, have a Material Adverse Effect.
To the knowledge of the Company, no other Person is infringing upon the rights
of the Company or any Subsidiary in any such Intellectual Property, except for
any such infringements, that would not be reasonably expected, individually or
in the aggregate, to have a Material Adverse Effect.
SECTION 3.17 CONTRACTS. Except as disclosed in Section 3.17 of the
Company Letter or filed as exhibits to the SEC Documents, there are not any
Company Agreements that are material to the business, financial condition or
results of operations of the Company and its Subsidiaries taken as a whole. To
the knowledge of the Company, (x) each of the Company Agreements is valid,
binding and enforceable and in full force and effect, except where failure to be
valid, binding and enforceable and in full force and effect would not have,
individually or in the aggregate, a Material Adverse Effect, and (y) there are
no defaults (nor does there exist any condition which upon the passage of time
or the giving of notice would cause such a default) under the Company
Agreements, except those defaults that would not have, individually or in the
aggregate, a Material Adverse Effect.
SECTION 3.18 COMPLIANCE WITH LAWS. Except for laws, rules and
regulations relating to tax matters, ERISA compliance, environmental matters and
intellectual property (which are exclusively provided for in Sections 3.10,
3.12, 3.13 and 3.16 hereof), the operations of the business of the Company and
its Subsidiaries as currently conducted are not in violation of, nor is the
Company or any of its Subsidiaries in default under, or violation of, any
federal, state, local or foreign law, statute or regulation or any order,
judgment or decree of any federal, state, local or foreign governmental
authority, regulatory or administrative agency, commission, court or tribunal to
which the Company or any of its Subsidiaries are bound, except for such
violations or defaults as have not had and could not reasonably be expected to
have a Material Adverse Effect. The Company and its Subsidiaries have been duly
granted all authorizations necessary for the conduct of its business as
currently conducted, except those, the failure of which to obtain would not
have, individually or in the aggregate, a Material Adverse Effect.
SECTION 3.19 INSURANCE COVERAGE. The Company and each of its
Subsidiaries have policies of insurance and bonds of the type reasonably
appropriate for the conduct of the business or ownership and operation of the
assets of the Company and its Subsidiaries. There is no claim pending under any
of such policies or bonds as to which coverage has been denied or disputed in
writing by the underwriters of such policies or bonds and which denial or
dispute is likely to be adversely determined to the Company and its
Subsidiaries, and which if so adversely determined, in whole or in part, would
have, individually or in the aggregate, a Material Adverse Effect. All premiums
due and payable under all such policies and bonds have been paid and the Company
and its Subsidiaries are otherwise in compliance with the terms of
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such policies and bonds, except where failure to pay such premiums or to comply
with such terms would have, individually or in the aggregate, any Material
Adverse Effect. The Company has no knowledge of any threatened termination of,
or material premium increase with respect to, any of such policies that would
have, individually or in the aggregate, a Material Adverse Effect.
SECTION 3.20 PERSONNEL; LABOR RELATIONS. Except as disclosed in Section
3.20 of the Company Letter, (i) neither the Company nor any Subsidiary is the
subject of any action, arbitration, governmental or other examination or
investigation, hearing, administrative or other proceeding asserting that the
Company or any Subsidiary has committed an unfair labor practice (within the
meaning of the National Labor Relations Act or comparable state law) or seeking
to compel the Company or any Subsidiary to bargain with any labor organization
as to wages or conditions of employment which is likely to be adversely
determined, which if so adversely determined, individually or in the aggregate
with other such proceedings so adversely determined, would have, individually or
in the aggregate, a Material Adverse Effect, (ii) neither the Company nor any
Subsidiary is party to any collective bargaining agreement, (iii) there is not
any strike or other labor dispute involving the Company or any Subsidiary,
pending or, to the Company's knowledge, threatened, or any activity involving
any of their respective employees seeking to certify a collective bargaining
unit or engaging in any other labor organizing activity, in each case that would
have, individually or in the aggregate, a Material Adverse Effect, and (iv)
since January 1, 1995, neither the Company nor any Subsidiary has effected (A) a
plant closing affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of the Company or any
Subsidiary or (B) a mass layoff affecting any site of employment or facility or
operating unit within any site of employment or facility of the Company or any
Subsidiary, nor has the Company or any Subsidiary engaged in layoffs or
employment terminations sufficient in number to trigger application of the
Worker Adjustment and Retraining Notification Act (the "WARN Act") or of any
state or local law equivalent to the WARN Act, except where any of the foregoing
would not have, individually or in the aggregate, a Material Adverse Effect.
For the purposes of this Section 3.20, "plant closing," "mass layoff," "site of
employment," "operating unit" and "employment loss" shall have the meanings
ascribed to such terms in the WARN Act or the implementing regulations thereof,
or any state or local law equivalent to the WARN Act.
SECTION 3.21 CUSTOMERS. Since September 30, 1997 (but with respect to
the Belmor Heavy Duty Truck Division, since January 1, 1997) and prior to
November 25, 1997, except as disclosed in the SEC Documents, no customer of the
Company or any of its Subsidiaries that accounted for revenues thereof of
$1,500,000 or more during the fiscal year ended December 31, 1996 (the "1996
Fiscal Year") has (i) cancelled in writing its relationship with the Company and
its Subsidiaries or (ii) as of November 25, 1997, to the Company's knowledge,
indicated in writing its intention to so cancel its relationship, including as a
result of any transaction that would result in a "change of control" of the
Company, or to decrease the dollar amount of its purchases from the Company or
its Subsidiaries during the fiscal year ending December 31, 1997 or 1998 by more
than 50% from the dollar amount so purchased during the 1996 Fiscal
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Year. For purposes of this Section 3.21 only, the Company's knowledge shall
mean those facts that are actually known as of November 25, 1997 by any of the
following persons: Keith P. Boulac, James Chick, Ronald C. Fox, James T.
Jurinak, Richard D. Minehart, Jr., Russell Stubbings, James Covone, David L.
Hochstetler, Tony Bednarik and John A. Daniels. As used in this Agreement, the
term "Material Adverse Effect" shall not include the termination or modification
of the relationship of the Company or any of its Subsidiaries after November 25,
1997 with any customer.
SECTION 3.22 BROKERS AND FINDERS. Except for fees and expenses described
in Section 3.16 of the Company Letter, no broker, finder or investment banker is
entitled to any brokerage fees, commissions or finders' fees in connection with
the transactions contemplated hereby based upon arrangements made by or on
behalf of the Company.
SECTION 3.23 OPINION OF FINANCIAL ADVISOR. The Company has received the
opinion of Wasserstein, Perella & Co., Inc. ("Wasserstein"), dated the date
hereof, to the effect that, as of such date, the consideration to be received in
the Offer and the Merger by the Company's stockholders is fair to the Company's
stockholders from a financial point of view, a copy of which opinion has been
delivered to Parent and the Purchaser.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and the Purchaser, jointly and severally, hereby represent and
warrant to the Company as follows:
SECTION 4.1 ORGANIZATION AND POWER.
(a) Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Parent has all requisite
corporate power to enter into this Agreement, and all other documents and
instruments to be executed and delivered by it in connection herewith, and to
carry out its obligations hereunder and thereunder, and to own, operate and
lease its properties and to carry out its business as it is now being conducted.
(b) The Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. The Purchaser has all
requisite corporate power to enter into this Agreement, and all other documents
and instruments to be executed and delivered by it in connection herewith, and
to carry out its obligations hereunder and thereunder. The Purchaser is a
wholly-owned subsidiary of Parent, has been organized solely for the purpose of
consummating the Merger and the Offer, has conducted no business or operations
of any nature and has incurred no obligations or liabilities other than those
created by or in connection with this Agreement.
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SECTION 4.2 AUTHORIZATION. The execution and delivery of this Agreement
and all other documents and instruments to be executed and delivered by them in
connection herewith, and the due consummation by Parent and Purchaser of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of Parent and the Purchaser. This
Agreement constitutes (and each document and instrument contemplated by this
Agreement, when executed and delivered in accordance with the provisions hereof,
will constitute) a valid and legally binding agreement of each of Parent and the
Purchaser and enforceable against them in accordance with its terms.
SECTION 4.3 NO CONFLICTS. The execution, delivery and performance of
this Agreement by Parent and the Purchaser and the consummation of the
transactions contemplated hereby or in connection herewith, including, without
limitation, the financing thereof, will not constitute a conflict with, breach
or violation of or default (or an event which with notice or lapse of time or
both would become a default) under (i) Parent's Certificate of Incorporation or
By-Laws, as amended to date; (ii) the Purchaser's Certificate of Incorporation
or By-laws, as amended to date; (iii) any material agreement, instrument,
license, franchise or permit to which Parent or the Purchaser is subject or by
which Parent or the Purchaser is bound; (iv) any statute, administrative
regulation, order, writ, injunction, decree or arbitration award to which Parent
or the Purchaser is subject or by which Parent or the Purchaser is bound; or (v)
any statutory or decisional law (or any duty or obligation thereunder, derived
therefrom or related thereto), rule or regulation to which Parent, the
Purchaser, their respective officers, directors or affiliates is subject or to
which such Person is bound.
SECTION 4.4 CONSENTS AND APPROVALS. Except for filings, approvals or
consents required by (i) the Secretary of State of the State of Delaware; (ii)
the Exchange Act; and (iii) such other statutes, rules or regulations which may
require registrations, authorizations, consents or approvals relating to matters
that, in the aggregate, are not material to the Purchaser or Parent, neither
Parent nor the Purchaser is required to submit any notice, report, registration,
declaration or other filing with or obtain any consent, approval or
authorization from any governmental authority or third party in connection with
the execution and delivery by Parent or the Purchaser of this Agreement or the
consummation of the transactions contemplated hereby.
SECTION 4.5 FINANCING OF THE OFFER AND THE MERGER. In order to finance
the transactions contemplated by this Agreement, Parent and the Purchaser have
(i) entered into a binding agreement with respect to equity financing in an
amount equal to $30,000,000 and (ii) obtained a binding commitment letter from
Heller Financial, Inc. for additional debt financing. Parent and the Purchaser
have provided to the Company copies of each of such agreements and commitments,
none of which has been amended.
SECTION 4.6 NO OBLIGATION TO MAKE A HART-SCOTT-RODINO FILING. Neither
Parent nor the Purchaser is a "person which has total assets or annual net sales
of $100,000,000 or more" for purposes of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended
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(the "HSR Act"), and no Person "controls" or will "control" (including by virtue
of any debt or equity financing provided in connection with the Offer, the
Merger or any other transaction contemplated hereby), prior to the consummation
of the Merger, the Parent or Purchaser (other than Parent, in the case of
Purchaser) as that term is defined in Section 801.1(a)(3) of the regulations
promulgated under the HSR Act.
SECTION 4.7 FINDER'S FEES. No broker, finder, investment banker or
other Person or entity, other than Piper Jaffray & Co., whose compensation
arrangement is set forth in the letter agreement between such firm and Parent, a
copy of which has been delivered by Parent to the Company in connection
herewith, is entitled, in connection with the transactions contemplated hereby,
to any broker's commission, finder's fee, investment banker's fee or similar
payment from Parent, the Purchaser or the Company based upon arrangements made
by or on behalf of Parent or the Purchaser.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1 INTERIM OPERATIONS OF THE COMPANY. The Company covenants
and agrees that, prior to the acceptance for payment of Shares or, if the
Company fails to comply with the obligations under Section 1.3 hereof, the time
the designees of Parent have been elected to, and shall constitute a majority
of, the Board of Directors of the Company pursuant to Section 1.3 hereof (such
applicable date being the "Appointment Date"), without the prior written
approval of Parent and except as otherwise contemplated or permitted by this
Agreement:
(a) the business of the Company and its Subsidiaries shall be conducted
only in the ordinary and usual course and each of the Company and its
Subsidiaries shall, subject to the other restrictions contained in this
Agreement, use its best efforts to preserve its business organization intact and
maintain its existing relations with customers, suppliers, employees, creditors
and business associates;
(b) the Company shall not, directly or indirectly, (i) except upon
exercise of Options or other rights to purchase Shares outstanding on the date
hereof, issue, sell, transfer or pledge or agree to sell, transfer or pledge any
treasury stock of the Company or any capital stock of any of its Subsidiaries
beneficially owned by it; (ii) amend its or any of its Subsidiaries' Certificate
of Incorporation or By-laws or similar organizational documents; or (iii) split,
combine or reclassify the outstanding Shares or any outstanding capital stock of
any of the Subsidiaries of the Company;
(c) other than the payment of dividends or other distributions by
Subsidiaries to the Company or to other Subsidiaries, neither the Company nor
any of its Subsidiaries shall: (i) declare, set aside or pay any dividend or
other distribution payable in cash, stock or property,
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with respect to its capital stock; (ii) issue, sell, pledge, dispose of or
encumber any additional shares of, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights of any kind
to acquire (or stock appreciation rights with respect to), capital stock of any
class of the Company or its Subsidiaries, other than Shares reserved for
issuance on the date hereof pursuant to the exercise of Options or Trailmaster
Options outstanding on the date hereof; (iii) transfer, lease, license, sell,
mortgage, pledge, dispose of, or encumber any assets, other than in the ordinary
and usual course of business and consistent with past practice; or (iv) redeem,
purchase or otherwise acquire, directly or indirectly, any of its capital stock;
(d) neither the Company nor any of its Subsidiaries shall make any change
in the compensation payable or to become payable to any of its officers,
directors, employees, agents or consultants, or to Persons providing management
services, enter into or amend any employment, severance, consulting, termination
or other employment-related agreement, arrangement or Benefit Plan or make any
loans to any of its officers, directors, employees, affiliates, agents or
consultants or make any change in its existing borrowing or lending arrangements
for or on behalf of any of such Persons pursuant to a Benefit Plan or otherwise,
in each case except for changes, agreements, amendments or loans made in the
ordinary course of business consistent with past practice;
(e) except (i) pursuant to Benefit Plans, agreements or arrangements
existing at the date hereof, or as disclosed in Section 3.15(a) of the Company
Letter or made in the ordinary course of business consistent with past practice,
(ii) as required by any law, rule or regulation of any Governmental Entity,
(iii) as disclosed in Section 5.1(e) of the Company Letter, (iv) accruals
required by GAAP and (v) pursuant to Section 2.4 hereof, neither the Company nor
any of its Subsidiaries shall pay or make, or amend or agree to amend any
Benefit Plan, agreement or arrangement existing at the date hereof to provide
for any accrual or arrangement for payment of any pension, retirement allowance
or other employee benefit pursuant to any existing Benefit Plan, agreement or
arrangement to any officer, director, employee or affiliate or pay or agree to
pay or make any accrual or arrangement for payment to any officers, directors,
employees or affiliates of the Company of any amount relating to unused vacation
days, adopt or pay, grant, issue, accelerate, or accrue salary or other payments
or benefits pursuant to any pension, profit-sharing, bonus, extra compensation,
incentive, deferred compensation, stock purchase, stock option, stock
appreciation right or other stock-based incentive, group insurance, severance
pay, retirement or other employee benefit plan, agreement or arrangement, or any
employment or consulting agreement with or for the benefit of any director,
officer, employee, agent or consultant, whether past or present;
(f) the Company shall not modify, amend or terminate any of the material
Company Agreements or waive, release or assign any material rights or claims,
except in each case in the ordinary course of business;
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(g) neither the Company nor any of its Subsidiaries shall cancel or
terminate any material insurance policy naming it as a beneficiary or a loss
payable payee without notice to Parent;
(h) neither the Company nor any of its Subsidiaries shall (i) incur or
assume any long-term debt or any short-term indebtedness, in each case, for
borrowed money except in the ordinary course of business under lines of credit
in existence on the date hereof; (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
any material obligations of any other Person (other than, with respect to (x)
the Company, any Subsidiary or (y) any Subsidiary, the Company or any other
Subsidiary) except in the ordinary course of business or make any loans,
advances or capital contributions to, or investments in, any other Person,
(other than, with respect to (x) the Company, any Subsidiary or (y) any
Subsidiary, the Company or any other Subsidiary), except for any such matter
undertaken in the ordinary course of business consistent with past practice; or
(iii) make any commitments for, or make or authorize any, capital expenditures
other than in amounts less than $50,000 individually and $500,000 in the
aggregate other than as disclosed in Section 5.1(h) of the Company Letter or the
SEC Documents;
(i) neither the Company nor any of its Subsidiaries shall (i) change any
of the accounting methods used by it unless required by GAAP or (ii) except as
required by applicable law, make any Tax election or change any Tax election
already made, adopt any Tax accounting method, change any Tax accounting method
unless required by applicable law, enter into any closing agreement, settle any
Tax claim or assessment or consent to any Tax claim or assessment or any waiver
of the statute of limitations for any such claim or assessment;
(j) neither the Company nor any of its Subsidiaries shall pay, discharge
or satisfy any claims, liabilities or obligations (absolute, accrued, asserted
or unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction of any such claims, liabilities or obligations, in the ordinary
course of business or any such payment, discharge or satisfaction that the
Company or any of its Subsidiaries is required to make by any law, rule or
regulation of any Governmental Entity or by any contractual obligation not
prohibited by this Section 5.1;
(k) neither the Company nor any of its Subsidiaries shall adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or any of
its Subsidiaries (other than the Merger);
(l) neither the Company nor any of its Subsidiaries shall knowingly take,
or agree to commit to take, any action that would result in any of the
conditions to the Offer set forth in Annex I not being satisfied, or that would
give rise to a right of termination of this Agreement for Parent or Purchaser
pursuant to Section 8.1 hereof;
(m) the Company shall not enter into an agreement, contract, commitment or
arrangement to do any of the foregoing, or to authorize any of the foregoing;
and
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(n) except to the extent disclosed in Section 5.1(n) of the Company
Letter, neither the Company nor any of its Subsidiaries shall (i) effect a plant
closing or mass layoff affecting any site of employment or one or more
facilities or operating units within any site of employment or facility of the
Company or any Subsidiary without the prior written consent of Parent or (ii)
terminate more than forty-nine (49) employees within a site of employment or
facility of the Company or any Subsidiary or operating unit within a site of
employment or facility or operating unit of the Company or any Subsidiary
without providing prior written notice to Parent. For the purposes of this
Section 5.1(n), "plant closing," "operating unit," and "employment loss" shall
have the meanings ascribed to such terms in Section 3.20 of this Agreement.
SECTION 5.2 Takeover Proposals. The Company agrees that it will
immediately cease and cause to be terminated any existing discussions or
negotiations, if any, with any Person conducted heretofore with respect to any
possibility or consideration of making a Takeover Proposal (as hereinafter
defined). The Company shall notify Parent promptly in writing if any proposals
are received by, any information is requested from, or any negotiations or
discussions are sought to be initiated or continued with the Company, its
Subsidiaries or any of their officers, directors, employees, investment bankers,
attorneys, accountants or other agents, in each case in connection with any
Takeover Proposal including, in connection with such notice, a reasonable
summary of the terms and conditions of any proposals or offers and the identity
of the Person making such proposal or offer, unless such notice would violate
the terms of any confidentiality or similar agreement binding on the Company
existing at the date hereof or, in addition, with respect to the identity of
such Person, except to the extent that the Board of Directors is advised by
outside legal counsel that identifying such Person may be inconsistent with its
fiduciary duties; PROVIDED, HOWEVER, that such notice shall only be required to
be given with respect to any of the foregoing directed to an officer or an
employee of the Company or any of its Subsidiaries following such time as an
executive officer or director of the Company shall have actual knowledge
thereof. Except to the extent that the following may be inconsistent with the
fiduciary duties of the Board of Directors of the Company or violate, or subject
the Board of Directors of the Company or the Company to liability under,
applicable law, in each case as advised by outside legal counsel, the Company
agrees that it shall keep Parent informed promptly of any developments in the
status and terms of any Takeover Proposal, unless such notice would violate the
terms of any confidentiality or similar agreement binding on the Company
existing at the date hereof. As used in this Agreement, "Takeover Proposal"
shall mean any tender or exchange offer involving more than 35% of the Shares,
any proposal for a merger, consolidation or other business combination involving
the Company, any proposal or offer to acquire in any manner more than 35% of the
Shares or a substantial portion of the business or assets of the Company (other
than (i) immaterial or insubstantial assets, (ii) inventory in the ordinary
course of business, (iii) assets held for sale or (iv) other assets sold or to
be sold in the ordinary course of business), or any proposal or offer with
respect to any recapitalization or restructuring with respect to the Company.
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SECTION 5.3 NO SOLICITATION.
(a) The Company will not, nor will it authorize or permit its officers,
directors, investment bankers, attorneys, accountants, employees and other
agents to, directly or indirectly: (i) initiate or solicit any offer or
proposal which constitutes any Takeover Proposal; (ii) in the event of an
unsolicited Takeover Proposal for the Company, engage in negotiations or
discussions with, or provide any information to, any Person (other than Parent,
any of its affiliates or representatives and except for information which has
been previously publicly disseminated by the Company) relating to or in
connection with any Takeover Proposal; or (iii) enter into any agreement with
respect to any Takeover Proposal; PROVIDED, HOWEVER, that nothing contained in
this Section 5.3(a) or any other provision of this Agreement shall prohibit the
Company or the Company's Board of Directors or any of its or their
representatives from (i) taking and disclosing to the Company's stockholders a
position with respect to a tender or exchange offer by a third party pursuant to
Rules 14d-9 and 14e-2 promulgated under the Exchange Act or (ii) making such
disclosure to the Company's stockholders as the Board of Directors may determine
in good faith is required under applicable law after advice from outside legal
counsel.
(b) Notwithstanding the foregoing, prior to the acceptance for payment of
Shares pursuant to the Offer, the Company may furnish information concerning its
business, properties or assets to any Person pursuant to a customary
confidentiality agreement (provided that if any such confidentiality agreement
contains terms or provisions more favorable to such Person than the terms or
provisions with respect to Parent and Purchaser pursuant to the Confidentiality
Agreement (as hereinafter defined), then any confidentiality terms of this
Agreement and of the Confidentiality Agreement shall be deemed amended (without
further action of the parties thereto) to conform to such terms and provisions
and may discuss and negotiate and participate in discussions and negotiations
with such Person concerning a Takeover Proposal if (x) such entity or group has
made an inquiry or proposal unsolicited after the date hereof relating to any
such transaction and the Board of Directors determines in good faith, after
receiving advice from Wasserstein or another nationally recognized investment
banking firm, that to do so could lead to a Superior Proposal (as hereinafter
defined) or (y) in the good faith judgment of the Board of Directors, after
receiving advice from outside legal counsel to the Company, the failure to
provide such information or to engage in such discussions or negotiations would
be inconsistent with the fiduciary obligations of the Board of Directors to the
Company's stockholders or otherwise be inconsistent with applicable law. A
"Superior Proposal" shall be any Takeover Proposal which the Board of Directors
determines, in good faith after consultation with its financial advisor, is on
terms more favorable to the stockholders of the Company than the Offer and the
Merger pursuant to this Agreement. In making its determination whether a
Takeover Proposal constitutes a Superior Proposal pursuant to the preceding
sentence, the Board of Directors shall take into account (x) the extent to which
financing for such Takeover Proposal is required and, to the extent required,
whether firm written commitments with respect to such financing have been
provided to the Company and, based upon the advice of Wasserstein or any other
financial adviser selected by the Company, the extent to which the third party
making such
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Takeover Proposal is financially capable of obtaining such required financing
and (y) whether such Takeover Proposal has a reasonable prospect of being
consummated prior to June 30, 1998. The Company shall promptly, and in any
event within one (1) business day following any determination by the Board of
Directors that a Takeover Proposal (or any amendment thereto) is a Superior
Proposal, notify Parent in writing ("Notice of Superior Proposal") of such
determination of the same, which notice shall include the identity of the bidder
and a reasonable summary of the terms and conditions of the Superior Proposal
or, if a Superior Proposal is amended, the terms and conditions as so amended.
If Parent does not, within five (5) business days after Parent's receipt of a
Notice of Superior Proposal or of any such notice with respect to any amended
proposal (or, if earlier, prior to two business days before the expiration of
the Offer), make an irrevocable written offer or enter into a definitive written
agreement amending this Agreement to provide for a transaction which the Board
of Directors has determined in its good faith judgment (based on the advice of
Wasserstein or another nationally recognized investment banking firm) to be more
favorable to the Company's stockholders than the Superior Proposal, the Company,
by action of its Board of Directors, may terminate this Agreement pursuant to
clause (ii) of Section 8.1(f) and enter into an agreement with respect to a
Superior Proposal.
(c) Except as set forth in Sections 5.3(a) or (b), and except as may be
inconsistent with the fiduciary duties of the Board of Directors or any
applicable law (including, without limitation, the Exchange Act and the rules
promulgated thereunder), neither the Board of Directors of the Company nor any
committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Parent or the Purchaser, the approval or
recommendation by the Board of Directors or any such committee of the Offer,
this Agreement or the Merger, (ii) approve or recommend, or propose to approve
or recommend, any Takeover Proposal or (iii) enter into any agreement with
respect to any Takeover Proposal.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 PROXY STATEMENT. As promptly as practicable after the
consummation of the Offer and if required by the Exchange Act, the Company shall
prepare and file with the SEC, and shall use all reasonable efforts to have
cleared by the SEC, and promptly thereafter shall mail to stockholders of the
Company, the Proxy Statement.
SECTION 6.2 MEETING OF STOCKHOLDERS OF THE COMPANY. Subject to Section
5.3 hereof, at the Special Meeting, if any, the Company shall use its best
efforts to solicit from stockholders of the Company proxies in favor of the
Merger and shall take all other action necessary or, in the reasonable opinion
of the Purchaser, advisable to secure any vote or consent of stockholders
required by Delaware Law to effect the Merger. The Purchaser agrees that it
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shall vote, or cause to be voted, in favor of the Merger all Shares directly or
indirectly beneficially owned by it.
SECTION 6.3 ADDITIONAL AGREEMENTS. Subject to the terms and conditions
hereof, the Company, Parent and Purchaser each shall take all reasonable actions
necessary to comply in all material respects with all applicable laws and legal
requirements to achieve the satisfaction of the Minimum Condition and all
conditions set forth in Annex I attached hereto and Article VII hereof, and to
consummate and make effective the Merger and the other transactions contemplated
hereby. Each of the parties hereto agrees to take all reasonable actions
necessary to obtain (and will cooperate with each other in obtaining) in a
timely manner those third party consents mutually agreed to be desirable in
connection with the transactions contemplated by this Agreement. In case at any
time after the Effective Time any further action is necessary or desirable to
carry out the purposes of this Agreement in accordance with its terms, the
proper officers and directors of the Company, Parent and the Purchaser shall use
all reasonable efforts to take, or cause to be taken, all such necessary
actions.
SECTION 6.4 NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to the Purchaser and the Purchaser shall give prompt notice to the
Company, of (i) the occurrence, or non-occurrence of any event whose occurrence,
or non-occurrence would be likely to cause either (A) any representation or
warranty made by the Company contained in this Agreement which is qualified as
to Material Adverse Effect to be untrue or inaccurate at any time from the date
hereof to the Effective Time, (B) any other representation or warranty made by
the Company contained in this Agreement to be untrue or inaccurate at any time
from the date hereof to the Effective Time (other than such untruth or
inaccuracy which would not, individually or in the aggregate, have a Material
Adverse Effect), or (C) any condition set forth in Annex I to be unsatisfied at
any time from the date hereof to the date the Purchaser purchases Shares
pursuant to the Offer and (ii) any failure of the Company, the Purchaser, or
Parent, as the case may be, to comply with or satisfy in any material respect
any material covenant, condition or agreement to be complied with or satisfied
by it hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to
this Section 6.4 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice or the right of such party to
terminate this Agreement.
SECTION 6.5 ACCESS; CONFIDENTIALITY.
(a) Subject to any restrictions under applicable law, the Company shall
continue to give (and shall cause each of its Subsidiaries to give) the
officers, employees, accountants, counsel, financing sources and other
representatives of Parent, reasonable access for reasonable purposes in light of
the transactions contemplated by this Agreement, during normal business hours
during the period prior to the Appointment Date to all its properties, books,
contracts, commitments and records and, during such period, the Company shall
(and shall cause each of its Subsidiaries to) furnish promptly to the Parent (a)
a copy of each report, schedule, registration statement and other document
publicly filed or received by it during such period pursuant to the requirements
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of federal securities laws and (b) all other information concerning its
business, properties and personnel as Parent may reasonably request; PROVIDED,
HOWEVER, that the Company shall not be required to waive any legal privilege by
virtue of this Section 6.5. Parent and the Purchaser expressly agree that from
the date hereof until the Appointment Date, without the prior written consent of
the Company, they shall not undertake any further environmental studies or tests
with respect to the Company, its business or properties requiring sampling of
soil, surface or ground water or air or other types of intrusive testing.
Unless otherwise required by law and until the Appointment Date, Parent and the
Purchaser shall hold any such information which is non-public and information
provided pursuant to Section 1.2(c) in confidence and shall not use such
information in accordance with, and shall otherwise abide by, the provisions of
the Confidentiality Agreement, dated October 31, 1997 entered into between
Parent, Harvest Partners, Inc. and the Company (the "Confidentiality
Agreement"). No investigation pursuant to this Section 6.5(a) shall affect any
representation or warranty made by the Company hereunder.
(b) Prior to the Closing, the Company and its accountants, counsel, agents
and other representatives shall cooperate with the Purchaser by providing
information about the Company which is necessary for the Purchaser and its
accountants, agents, counsel and other representatives to prepare the Disclosure
Documents. Notwithstanding the penultimate sentence of Section 6.5(a), the
Purchaser may disclose, or cause its representatives to disclose, and at the
request of the Purchaser, the Company shall and shall cause its Subsidiaries to,
disclose information concerning the Company and its Subsidiaries, and their
respective businesses, assets and properties, and the transactions contemplated
by this Agreement to prospective financing sources in connection therewith,
provided that such financing sources agree to hold such information in
confidence in accordance with, and shall otherwise abide by, the provisions of
the Confidentiality Agreement.
SECTION 6.6 PUBLICITY. The initial press release with respect to the
execution of this Agreement shall be a joint press release in the form attached
hereto as Exhibit 6.6. Thereafter, so long as this Agreement is in effect and
subject to the other provisions of this Agreement, neither the Company, Parent
nor any of their respective affiliates shall issue or cause the publication of
any press release or other announcement with respect to the Merger, this
Agreement or the other transactions contemplated hereby without the prior
consent of the other party, except after receiving the advice of outside legal
counsel, and after informing all the parties hereto, that such release or
announcement is required by law or by any listing agreement with a national
securities exchange or trading market. If so advised, Parent and Company shall
consult with each other before issuing, and provide each other the opportunity
to comment upon, any such press release or other public statements with respect
to such transactions.
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SECTION 6.7 DIRECTORS' AND OFFICERS' INSURANCE AND INDEMNIFICATION.
(a) In the event of any threatened or actual claim, action, suit,
proceeding or investigation, whether civil, criminal or administrative, in which
any of the present or former officers, directors, employees and agents (the
"Indemnified Person(s)") of the Company or any of its Subsidiaries is, or is
threatened to be, made a party by reason of the fact that he or she is or was,
at or prior to the Effective Time, a director, officer, employee or agent of the
Company or any of its Subsidiaries or is or was, prior to the Effective Time,
serving as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise at the request of the
Company or any of its Subsidiaries, whether such claim arises before or after
the Effective Time, Parent and the Surviving Corporation shall each indemnify
and hold harmless, as and to the fullest extent permitted by applicable law,
each such Indemnified Person(s) against any losses, claims, damages,
liabilities, costs, expenses (including reasonable attorneys' fees and
expenses), judgments, fines and amounts paid in settlement in connection with
any such claim, action, suit, proceeding or investigation (including, without
limitation, any of the foregoing arising out of or related to this Agreement
and/or any of the transactions contemplated hereby). Any Indemnified Person(s)
wishing to claim indemnification hereunder, upon learning of any such claim,
action, suit, proceeding or investigation, shall promptly notify the Parent and
the Surviving Corporation thereof (but the failure so to notify the Parent and
the Surviving Corporation shall not relieve Parent or the Surviving Corporation
from any liability which they may have under this Section 6.7 except to the
extent such failure materially prejudices the Parent or the Surviving
Corporation). The right to indemnification hereunder includes the right to
receive reimbursement of reasonable expenses incurred in connection therewith,
upon (i) written request by the Indemnified Person(s) accompanied by a copy of
bills, invoices or other documentation of such expenses and (ii) receipt of an
undertaking by the Indemnified Person(s) to repay any such amounts if it shall
ultimately be determined that such Person is not entitled to be indemnified as
provided herein.
(b) Until the Effective Time the Company shall keep in effect Articles
Tenth and Eleventh of its Certificate of Incorporation and Section 6.7 of its
By-Laws, and thereafter for a period of six (6) years the Surviving Corporation
shall keep in effect in its Certificate of Incorporation provisions which
provides for indemnification and exculpation of the Indemnified Person(s) to the
extent provided by Articles Tenth and Eleventh of the Company's Certificate of
Incorporation on the date hereof.
(c) Parent or the Surviving Corporation shall maintain the Company's and
its Subsidiaries' existing officers' and directors' liability insurance ("D&O
Insurance") for a period of six (6) years after the Effective Time; PROVIDED,
HOWEVER, that the Parent may substitute therefor policies of substantially
equivalent coverage and amounts containing terms no less favorable to such
former directors or officers (but without creating any gaps in coverage);
PROVIDED, FURTHER, that in no event shall Parent or the Surviving Corporation be
required to pay aggregate premiums for insurance under this Section 6.7(c) in
excess of 200% of the aggregate premium paid by the Company in 1997 (the "1997
Premium"), which true and correct amount
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is set forth in Section 6.7(c) of the Company Letter; and PROVIDED, FURTHER,
that if Parent or the Surviving Corporation is unable to obtain the amount of
insurance required by this Section 6.7(c) for such aggregate premium, Parent or
the Surviving Corporation shall obtain as much insurance as can be obtained for
an annual premium not in excess of 200% of the 1997 Premium.
(d) In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) Parent
and the Surviving Corporation shall have the right to assume the defense thereof
and Parent and the Surviving Corporation shall not be liable to any such
Indemnified Person(s) for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Person(s) in connection with
the defense thereof, (ii) Parent and the Surviving Corporation shall vigorously
prosecute the defense of any such matter, (iii) the Indemnified Person(s) will
cooperate in all respects as reasonably requested by the Parent and Surviving
Corporation in the defense of any such matter, (iv) the Parent and Surviving
Corporation shall not be liable for any settlement effected without its prior
consent (which consent shall not be unreasonably withheld) and (v) Parent and
the Surviving Corporation shall not settle any claim the defense of which has
been assumed by Parent and the Surviving Corporation pursuant to this Section
6.7(d) without the prior written consent of the Indemnified Person(s) (which
consent shall not be unreasonably withheld); PROVIDED, HOWEVER, if Parent or the
Surviving Corporation does not assume the defense of any claim, action, suit,
proceeding or investigation pursuant to this Section 6.7(d) within a reasonable
period of time from the receipt of notice of such claim, the Indemnified Persons
as a group with respect to the same claim shall be entitled to retain only one
(1) law firm to represent them with respect to any such matter unless there is,
under applicable standards of professional conduct, a conflict of interest on
any significant issue between the positions of any two or more Indemnified
Person(s), or any similar impediment to the joint representation of multiple
Indemnified Person(s) by a single law firm; PROVIDED, FURTHER, that the Parent
and Surviving Corporation shall have no obligation hereunder to any Indemnified
Person(s) when and if a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final and non-appealable,
that indemnification of such Indemnified Person(s) in the manner contemplated
hereby is prohibited by applicable law.
(e) Parent, the Purchaser, the Company and the Surviving Corporation
expressly acknowledge the provisions of Article Tenth and Eleventh of the
Company's Certificate of Incorporation and Section 6.7 of the Company's By-Laws,
as in effect on the date hereof, and hereby agree, from and after the Expiration
Date, to honor in accordance with their terms all such obligations and further
acknowledge that said obligations (along with the indemnification and like
obligations in the Certificate of Incorporation and By-Laws of the Surviving
Corporation) constitute, to the extent set forth therein, a contract between the
Company or the Surviving Corporation, as the case may be, on the one hand, and
the Persons entitled to the benefits thereof (in accordance therewith), on the
other hand, creating binding obligations on the part of the Company and binding
rights on the part of any Person entitled to the benefit thereof (in accordance
therewith).
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(f) If Parent or the Surviving Corporation or any of their respective
successors or assigns shall transfer all or substantially all of its properties
and assets to any individual, corporation or other entity, then and in each such
case, proper provisions shall be made so that the successors and assigns thereof
shall assume the obligations set forth in this Section 6.7; PROVIDED, HOWEVER,
no such assignment or assumption shall relieve Parent or the Surviving
Corporation (or any successor or assign) of its obligations set forth in (or
imposed pursuant to) this Section 6.7.
(g) This Section 6.7 is intended for the benefit of, and shall be
enforceable by the Indemnified Person(s), their heirs and personal
representatives and shall be binding upon Parent, the Company and the Surviving
Corporation and their respective successors and assigns. The Surviving
Corporation shall reimburse an Indemnified Person(s) for its reasonable expenses
in enforcing its rights under this Section 6.7, including reasonable attorneys'
fees, unless a court of competent jurisdiction shall determine, and such
determination shall have become final and non-appealable, that indemnification
of such Indemnified Person in the manner contemplated hereby is prohibited by
applicable law.
SECTION 6.8 EMPLOYEE BENEFITS. On and after the Effective Time,
directors, officers and employees of the Company and its Subsidiaries shall be
provided employee benefits, plans and programs which are no less favorable in
the aggregate than those generally available to similarly situated directors,
officers and employees of Parent and its significant subsidiaries. For purposes
of eligibility to participate and vesting, waiting periods, pre-existing
conditions, limitations and all other purposes (but not benefit accrual
attributable to the period before the Effective Time) in all benefits provided
to directors, officers and employees, the directors, officers and employees of
the Company and its Subsidiaries will be credited with their years of service
with the Company and its Subsidiaries and prior employers to the extent service
with the Company and its Subsidiaries and prior employers is taken into account
under plans of the Company and its Subsidiaries. Nothing in this Section 6.8
shall be construed as restricting the ability of Parent and the Surviving
Corporation and its Subsidiaries to establish such types and levels of
compensation and benefits or to modify or terminate such compensation or
benefits as they determine to be appropriate from time to time. Parent and the
Surviving Corporation jointly and severally agree that the Surviving Corporation
shall (i) credit directors, officers and employees of the Company and its
Subsidiaries with any amounts paid by such persons toward applicable deductible
amounts and copayment and deductible maximums for the calendar year under the
medical and dental plans of the Company and its Subsidiaries prior to the
transition to any new medical or dental program toward satisfaction of the
applicable deductible amounts and copayment and deductible maximums under any
such new medical or dental program that covers such directors, officers and
employees; (ii) cause all benefits of directors, officers and employees under
Benefit Plans vested and accrued, prior to the Effective Time to be provided to
such directors, officers and employees in accordance with the terms of such
Benefit Plans as in effect on the date hereof and (iii) become the "Employer"
under the Deflecta-Shield Corporation Employee Profit Sharing and 401(k) Plan.
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SECTION 6.9 PURCHASER COMPLIANCE. Parent shall cause the Purchaser to
timely perform and comply with all of its obligations under or related to this
Agreement, including, without limitation, all obligations in or with respect to
the Offer. Notwithstanding anything to the contrary contained in this Agreement,
the stockholders of the Company are each third party beneficiaries of this
Section 6.9 and may seek relief for breach hereof individually and in their own
name.
SECTION 6.10 BEST EFFORTS.
(a) Prior to the Closing, upon the terms and subject to the terms,
provisions and conditions of this Agreement, the Purchaser and the Company (but
in the case of the Company, not inconsistent with the fiduciary obligations of
the Board of Directors of the Company as advised by outside legal counsel to the
Company) agree to use their respective reasonable best efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective the transactions
contemplated by this Agreement as promptly as practicable.
(b) Prior to the Closing, each party shall promptly consult with the other
parties hereto with respect to, provide any necessary information with respect
to, and provide the other (or its counsel) copies of, all filings made by such
party with any governmental authority or any other information supplied by such
party to a Governmental Entity in connection with this Agreement and the
transactions contemplated by this Agreement. Each party hereto shall promptly
inform the other of any communication from any Governmental Entity regarding any
of the transactions contemplated by this Agreement. If any party hereto or
affiliate thereof receives a request for information or documentary material
from any such Government Entity with respect to the transactions contemplated by
this Agreement, then such party shall endeavor in good faith to make, or cause
to be made, as soon as reasonably practicable and after consultation with the
other party, an appropriate response in compliance with such request. To the
extent that transfers of permits are required as a result of execution of this
Agreement or consummation of the transactions contemplated hereby, the Company
will reasonably cooperate with Purchaser to effect such transfers.
(c) No party shall wilfully perform any act which if performed, or
wilfully omit to perform any act which if omitted to be performed, would prevent
or excuse the consummation of the Offer and/or the Merger.
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ARTICLE VII
CONDITIONS
SECTION 7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger shall be subject
to the satisfaction on or prior to the Closing Date of each of the following
conditions, any and all of which may be waived in whole or in part by the
Company, Parent or the Purchaser, as the case may be, to the extent permitted by
applicable law:
(a) The Merger and this Agreement shall have been approved and adopted by
the requisite vote of the holders of the Shares, if required by the Delaware
Law;
(b) No statute, rule or regulation shall have been enacted or promulgated
by any governmental authority which prohibits the consummation of the Merger;
and there shall be no order or injunction of a court of competent jurisdiction
in effect which prohibits consummation of the Merger; PROVIDED, HOWEVER, that
each of the parties hereto shall have used reasonable efforts to prevent the
entry of any such order or injunction and to appeal as promptly as possible any
such order or injunction that may be entered; and
(c) The Purchaser shall have made the Offer and shall have accepted for
payment the Shares tendered pursuant to the Offer; provided, that this condition
shall be deemed to have been satisfied with respect to the obligation of Parent
and the Purchaser to effect the Merger if the Purchaser fails to announce and
make the Offer or accept for payment Shares tendered pursuant to the Offer in
violation of the terms of the Offer or of this Agreement.
ARTICLE VIII
TERMINATION
SECTION 8.1 TERMINATION. This Agreement may be terminated and the
transactions contemplated herein may be abandoned at any time before the
Effective Time, whether before or after stockholder approval:
(a) By mutual written consent of the Parent and the Company, in each case
acting through its board of directors; or
(b) (i) By Parent if the Offer shall have expired or been terminated in
accordance with its terms without any Shares being purchased thereunder by the
Purchaser, but only as a result of the occurrence of any of the events set forth
in Annex I that shall not have resulted directly or proximately from a state of
facts or action or inaction which constitutes a breach of a representation,
warranty or covenant by the Purchaser or Parent; or
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(ii) By the Company if any of the events specified in paragraph (a) of
Annex I occurs prior to Purchaser's acceptance for payment of the Shares in the
Offer; or
(c) By either Parent or the Company if a U.S. Court shall have issued an
order, decree or ruling (which order, decree or ruling the parties hereto shall
use their best efforts to vacate), in each case permanently restraining,
enjoining or otherwise prohibiting the Offer and/or the Merger and such order,
decree, ruling or other action shall have become final and nonappealable and
shall not have resulted directly or proximately from a state of facts or action
or inaction which constitutes a breach of a representation, warranty or covenant
by the Purchaser or Parent; or
(d) By Parent if, without any material breach by Parent or the Purchaser
of its representations, warranties or obligations under this Agreement or the
Offer, the purchase of Shares pursuant to the Offer shall not have occurred on
or before June 30, 1998; or
(e) By the Company if, without any material breach by the Company of its
representations, warranties or obligations under this Agreement, the purchase of
Shares pursuant to the Offer shall not have occurred on or before June 30, 1998;
or
(f) By the Company (i) if Parent or the Purchaser shall have breached in
any material respect any material covenant or other agreement contained in this
Agreement or if any representation or warranty of Parent or the Purchaser made
in this Agreement shall fail to be true and correct as if made at such time in
any material respect, in each case which breach or which failure to be true and
correct cannot be or has not been cured within ten (10) business days of the
receipt of written notice thereof; or (ii) to allow the Company to enter into an
agreement in accordance with Section 5.3(b) hereof with respect to a Superior
Proposal; or
(g) By Parent, if prior to the time Purchaser is required to accept Shares
for payment in the Offer, (i) the Company shall have breached in any material
respect any material covenant or other agreement contained in this Agreement or
(ii) any representation or warranty of the Company made in this Agreement which
is qualified as to Material Adverse Effect shall not be true and correct when
made or as if made at such time or (iii) any other representation or warranty of
the Company made in this Agreement shall not be true and correct when made or as
if made at such time, which failure to be true and correct would have a Material
Adverse Effect, in each case which breach or which failure to be true and
correct cannot be or has not been cured within ten (10) business days of the
receipt of written notice thereof; or
(h) By Parent, at any time prior to the time Purchaser is required to
accept Shares for payment in the Offer, (i) if the Board of Directors of the
Company shall have withdrawn or materially modified in a manner adverse to the
Purchaser its approval or recommendation of the Offer, the Merger or this
Agreement or (ii) the Company shall have entered into, or shall have publicly
announced its intention to enter into, a definitive written agreement or written
agreement in principle providing for a Takeover Proposal.
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SECTION 8.2 EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement as provided in Section
8.1 hereof, written notice thereof shall forthwith be given to the other party
or parties specifying the provision hereof pursuant to which such termination is
made;
(b) In the event of termination of this Agreement by either the Company,
on one hand, or Parent and Purchaser on the other hand, as provided in Section
8.1, except as provided in Sections 8.2 (d) and (e), this Agreement shall
forthwith become null and void and there shall be no liability on the part of
Parent, the Purchaser or the Company, except (i) as set forth in Section 8.2(c)
hereof and (ii) nothing herein shall relieve Parent or Purchaser from liability
for any breach of this Agreement, other than an immaterial breach, and nothing
herein shall relieve the Company from liability for any willful and material
breach of this Agreement. Without implication that the contrary would otherwise
be true and notwithstanding anything to the contrary contained in this Section
8.2 or elsewhere in this Agreement, Section 6.9 shall survive any termination of
this Agreement.
(c) If (i) Parent shall have terminated this Agreement pursuant to Section
8.1(g) then the Company shall pay to Parent an amount, not in excess of
$1,000,000, equal to the Purchaser's actual and reasonably documented
out-of-pocket expenses (including without limitation, fees payable to all banks,
investment banking firms and other financial institutions and their respective
counsel, and all fees of counsel, accountants, financial printers, experts and
consultants to Parent, but specifically excluding any fees payable to Harvest
Partners, Inc. (the "Expense Reimbursement Amount")) incurred by Parent and
Purchaser in connection with the Offer, the Merger, this Agreement and the
consummation of the transactions contemplated hereby. If (i) Parent shall have
terminated this Agreement pursuant to Section 8.1(h) or (ii) the Company shall
have terminated this Agreement pursuant to Section 8.1(f)(ii), then the Company
shall pay to Parent a termination fee (the "Termination Fee") of $2,300,000.
The Termination Fee and the Expense Reimbursement Fee shall be payable not later
than one business day after the date of termination by wire transfer in
accordance with the instructions set forth in Exhibit 8.2(c) attached hereto or
to such other account as Parent may designate in writing to the Company. Upon
payment of the fees required to be paid pursuant to this Section 8.2(c), the
Company shall have no further obligation to Parent or the Purchaser, under this
Agreement or otherwise; PROVIDED, FURTHER, that if the Company fails to pay
promptly the amounts required pursuant to this Section 8.2(c) and in order to
obtain such payment Parent or the Purchaser commences a suit which results in a
final nonappealable judgment against the Company for such amounts, the Company
shall pay to Parent or the Purchaser (i) the costs and expenses (including
attorneys' fees) incurred by Parent or the Purchaser in connection with such
suit and (ii) interest on all such amounts required to be paid at the rate
announced by Citibank N.A. as its "reference rate" in effect on the date such
amounts were required to be paid;
(d) Each party, if so requested by the other party, will return promptly
every document furnished to it by or on behalf of the other party in connection
with the transactions
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contemplated hereby, whether so obtained before or after the execution of this
Agreement, and any copies thereof (except for copies of documents publicly
available) which may have been made, and will use reasonable efforts to cause
its representatives and any representatives of financial institutions and
investors and others to whom such documents were furnished promptly to return
such documents and any copies thereof any of them may have made; and
(e) The obligations of Parent and Purchaser under Section 6.5 shall
continue indefinitely notwithstanding any termination of this Agreement. This
Section 8.2 shall survive any termination of this Agreement and the
Confidentiality Agreement will remain in full force and effect in the event of
such termination.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 AMENDMENT. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time before or after approval hereof by the stockholders of the Company,
but, after such approval, no amendment shall be made which reduces the amount or
changes the form of consideration to be paid in the Offer or in any way
adversely affects the rights of holders of the Shares without the further
approval of such holders. This Agreement may not be amended except by an
instrument in writing signed by or on behalf of each of the parties hereto.
SECTION 9.2 WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken by their respective Boards of Directors, may (a)
extend the time for the performance of any of the obligations or other acts of
the other parties hereto, (b) waive any inaccuracies in the representations and
warranties of the other parties contained herein or in any document delivered
pursuant hereto, and (c) waive compliance with any of the agreements or
satisfaction of any of the conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
SECTION 9.3 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Sections
6.5, 6.7, 6.8 and 6.9 and this Article IX, and, without limitation by the
specific enumeration of the foregoing, each and every other agreement contained
in this Agreement or any certificate or other document delivered pursuant to
this Agreement and which contemplates performance after the Effective Time,
shall survive the Merger. None of the representations, warranties and
agreements (other than those agreements referred to in the previous sentence of
this Section 9.3) contained in this Agreement or in any exhibit, disclosure
schedule, certificate or other instrument delivered pursuant to this Agreement
shall survive the earliest to occur of the Expiration Date, the Effective Time
and the termination of this Agreement.
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SECTION 9.4 NOTICES. Any notice, request, instruction or other document
to be given hereunder by any party to the others shall be deemed given if in
writing and delivered personally or sent by overnight courier (providing proof
of delivery), postage prepaid or by facsimile (which is confirmed).
if to Parent or the Purchaser:
Lund International Holdings, Inc.
911 Lund Boulevard
Anoka, Minnesota 55303
Facsimile: (612) 576-4297
with a copy to:
Leonard Gubar, Esq.
Reid & Priest LLP
40 West 57th Street
New York, New York 10019
Facsimile: (212) 603-2001
if to the Company:
Deflecta-Shield Corporation
1275 Sherman Drive
Longmont, Colorado 80502
Facsimile: (303) 776-4723
with a copy to:
John E. Lowe, Esq.
Peter Lieberman, Esq.
Altheimer & Gray
10 South Wacker Drive
Suite 4000
Chicago, Illinois 60606-7482
Facsimile: (312) 715-4800
or to such other address as may have been designated in a prior notice. Notices
shall be deemed to have been given when received.
SECTION 9.5 HEADINGS. The headings in this Agreement are intended
solely for convenience of reference and shall be given no effect in the
construction or interpretation of this Agreement.
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SECTION 9.6 EXHIBITS, SCHEDULES AND ANNEXES. The Exhibits, Schedules
and Annexes referred to in this Agreement shall be deemed to be an integral part
of this Agreement as if fully rewritten herein. To the extent applicable, a
disclosure set forth on any one such document will serve as a disclosure for
purposes of all other such documents. Without limitation of the foregoing, any
disclosure set forth in any section of the Company Letter shall serve as
disclosure for purposes of all other applicable sections of the Company Letter
and the related representations and warranties if it is reasonably evident that
such disclosure also is applicable to such other sections of the Company Letter
and the related representations and warranties. For purposes of this Agreement,
including Annex I hereto, in addition to any other meaning attributed to it at
law, the word "proximately" includes any event which is a substantial factor in
causing the occurrence of another event.
SECTION 9.7 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same document.
SECTION 9.8 GOVERNING LAW. This Agreement, including all matters of
construction, validity and performance, shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware, as applied to
contracts made, executed and to be fully performed in such state by citizens of
such state, without regard to conflict of laws principles.
SECTION 9.9 PRONOUNS. The use of a particular pronoun herein shall not
be restrictive as to gender or number but shall be interpreted in all cases as
the context may require.
SECTION 9.10 TIME PERIODS. Unless otherwise provided herein, any action
required hereunder to be taken within a certain number of days shall be taken
within that number of calendar days; PROVIDED, HOWEVER, that if the last day for
taking such action falls on a weekend or a holiday, the period during which such
action may be taken shall be automatically extended to the next business day.
SECTION 9.11 NO STRICT CONSTRUCTION. The language used in this Agreement
will be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against either
party.
SECTION 9.12 ENTIRE AGREEMENT. This Agreement and the agreements and
documents referred to in this Agreement or delivered hereunder are the exclusive
statement of the agreement between the parties concerning the subject matter
hereof. All negotiations and prior agreements between the parties (other than
those incorporated herein, including the Confidentiality Agreement) are merged
into this Agreement, and there are no representations, warranties, covenants,
understandings, or agreements, oral or otherwise, in relation thereto among the
parties other than those incorporated herein and to be delivered hereunder.
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SECTION 9.13 SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
SECTION 9.14 SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors 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 Purchaser may
transfer or assign, in whole or from time to time in part, to one or more of its
affiliates, the right to purchase shares pursuant to the Offer, but any such
transfer or assignment will not relieve Parent or the Company of its obligations
under the Offer or prejudice the rights of tendering stockholders to receive
payment for shares of the Company validly tendered and accepted for payment
pursuant to the Offer. Except for Sections 6.7, 6.8 and 6.9, and except as
otherwise provided in this Agreement, nothing in this Agreement is intended or
shall be construed to confer on any Person other than the parties hereto any
rights or benefits hereunder.
SECTION 9.15 FEES AND EXPENSES. Except as otherwise set forth in this
Agreement, each party hereto shall bear all fees and expenses incurred by such
party in connection with, relating to or arising out of the execution, delivery
and performance of this Agreement and the consummation of the Offer and the
Merger.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
LUND INTERNATIONAL HOLDINGS, INC.
By:
------------------------------
Name:
Title:
ZEPHYROS ACQUISITION CORPORATION
By:
------------------------------
Name:
Title:
DEFLECTA-SHIELD CORPORATION
By:
------------------------------
Name:
Title:
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ANNEX I
TO
AGREEMENT AND PLAN OF MERGER
CONDITIONS OF THE OFFER. Notwithstanding any other provision of the Offer,
the Purchaser shall not be required to accept for payment any Shares tendered
pursuant to the Offer, and, subject to the terms of this Agreement, may
terminate the Offer if (i) by the expiration date of the Offer, the Minimum
Condition shall not have been satisfied or (ii) at any time on or after the date
of this Agreement, and prior to the time for acceptance for payment for any such
Shares, any of the following events shall occur and remain in effect other than
as a result directly or proximately from a state of facts or action or inaction
which constitutes a breach of a representation, warranty or covenant of the
Purchaser or Parent;
(a) there shall be instituted or pending any suit, action or proceeding by
a Governmental Entity seeking to (i) make illegal or otherwise directly restrain
or prohibit the making of the Offer, the acquisition of any Shares by the
Purchaser pursuant to the Offer or the consummation of the Merger, (ii) restrain
or prohibit Parent's or the Purchaser's ownership or operation (or that of their
respective subsidiaries or affiliates) of all or any material portion of the
business or assets of the Company and its Subsidiaries, taken as a whole, or,
following consummation of the Offer or the Merger and as a result thereof, of
Parent and its subsidiaries, taken as a whole, or to compel Parent or any of its
subsidiaries or affiliates to dispose of or hold separate all or any material
portion of the business or assets of the Company and its Subsidiaries, taken as
a whole, or, following consummation of the Offer or the Merger and as a result
thereof, of Parent and its subsidiaries, taken as a whole, (iii) impose material
limitations on the ability of Parent or any of its subsidiaries or affiliates
effectively to exercise full rights of ownership of the Shares, including,
without limitation, the right to vote any Shares to be acquired pursuant to the
Offer on all matters properly presented to the Company's stockholders, or (iv)
require divestiture by Parent or any of its subsidiaries or affiliates of any
Shares to be acquired pursuant to the Offer.
(b) there shall be any statute, rule, regulation, injunction, order or
decree issued, promulgated, enacted, entered or enforced that results in any of
the consequences referred to in clauses (i) through (iv) of paragraph (a) above;
(c) there shall have occurred (and the adverse effect of such occurrence
shall be continuing for more than three business days) (i) any general
suspension of trading in, or limitation on prices for, securities on the New
York Stock Exchange or on the NASDAQ National Stock Market (excluding any
trading halt triggered solely as a result of a specified decrease in a market
index), (ii) a declaration of a banking moratorium or any suspension of payments
in respect of banks in the United States or any limitation by United States
federal or state authorities on the extension of credit by banks or other
financial institutions, (iii) a commencement of a war directly involving the
armed forces of the United States, a material
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commitment of the armed forces of the United States, or other international or
national calamity directly involving the armed forces of the United States if,
as a result of such war directly involving the armed forces of the United
States, commitment of armed forces or calamity, banks generally stop lending
funds for middle market acquisition transactions, but specifically other than in
connection with increases in interest rates, 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;
(d) the Company shall have (i) breached in any material respect any
material covenant or other agreement contained in this Agreement, (ii) any
representation or warranty of the Company made in this Agreement which is
qualified as to Material Adverse Effect shall fail to be true and correct at any
time prior to expiration of the Offer as if made at such time, or (iii) any
other representation or warranty of the Company made in this Agreement shall
fail to be true and correct at any time prior to expiration of the Offer as if
made at such time, which failure to be true and correct would have a Material
Adverse Effect, in each case which breach or which failure to be true and
correct cannot be or has not been cured within ten (10) business days of the
receipt of written notice thereof;
(e) this Agreement shall have been terminated in accordance with its
terms;
(f) the Board of Directors of the Company shall have withdrawn or
materially modified in a manner adverse to Parent or the Purchaser its approval
or recommendation of the Offer, the Merger or this Agreement; or
(g) the Company shall have entered into, or shall have publicly announced
its intention to enter into, a definitive written agreement or agreement in
principle providing for a Takeover Proposal.
The foregoing conditions are for the sole benefit of the Parent and
Purchaser other than the Minimum Condition and other than the termination of the
Agreement in accordance with its terms and, other than the Minimum Condition and
such termination, may be waived by the Purchaser, in whole or in part. The
failure by the Purchaser, at any time, to exercise any of the foregoing rights
shall not be deemed a waiver of any such rights; the waiver of any such right
with respect to particular facts and circumstances shall not be deemed a waiver
with respect to any other facts and circumstances; and each such right shall be
deemed an ongoing right which may be asserted at any time or from time to time.
Terms used in this Annex I but not defined herein shall have the meanings
ascribed to such terms in the Agreement to which this Annex I is a part.
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Exhibit 99.3
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT (this "Agreement"), dated as of November 25,
1997, by and among Lund International Holdings, Inc., a Delaware corporation
("Parent"), and Charles S. Meyer (hereinafter referred to as "Stockholder").
W I T N E S S E T H:
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WHEREAS, concurrently herewith, Parent, Zephyros Acquisition
Corporation, a Delaware corporation and a wholly-owned subsidiary of Parent
("Purchaser"), and Deflecta-Shield Corporation, a Delaware corporation (the
"Company"), will enter into an Agreement and Plan of Merger of even date
herewith (the "Merger Agreement"; capitalized terms used but not defined herein
shall have the meanings set forth in the Merger Agreement), pursuant to which
(and subject to the terms and conditions specified therein) Purchaser will make
a cash tender offer (as defined in the Merger Agreement, the "Offer") for all
outstanding shares of Common Stock, par value $.01 per share, of the Company
("Company Common Stock") and, following consummation of the Offer, Purchaser
will be merged with and into the Company, with the Company continuing as the
surviving corporation and as a wholly-owned subsidiary of Parent (the "Merger"),
whereby each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time of the Merger will be converted into the right to
receive the Merger Consideration, other than (i) shares of Company Common Stock
owned, directly or indirectly, by the Company or any subsidiary of the Company
or by Parent, Purchaser or any other affiliate of Parent and (ii) Dissenting
Shares; and
WHEREAS, Stockholder is a stockholder of the Company and, as a
condition to Parent and Purchaser entering into the Merger Agreement, Parent
requires that Stockholder enter into, and Stockholder has agreed to enter into,
this Agreement with Parent.
NOW, THEREFORE, in consideration of the representations and warranties
and covenants set forth herein and in the Merger Agreement, Parent and
Stockholder, intending to be legally bound hereby each agree as follows:
1. Representations and Warranties of the Stockholder. Stockholder
hereby represents and warrants to Parent as follows:
1.1 Validity of Agreement. Stockholder has the legal capacity to
enter into and perform all of Stockholder's obligations under this Agreement.
This Agreement has been duly executed and delivered by Stockholder and
constitutes a valid and binding obligation of Stockholder enforceable against
Stockholder in accordance with its terms,
<PAGE>
except that (a) such enforcement may be subject to applicable bankruptcy,
insolvency or other similar laws, now or hereafter in effect, affecting
creditors' rights generally, (b) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought and (c) no representation is made with respect to the
enforceability, validity or binding effect of the third sentence of Section 4.1
under applicable provisions of the Exchange Act. If Stockholder is married, and
his Stockholder Shares (as hereinafter defined) constitute community property,
this Agreement has been duly authorized, executed and delivered by, and
constitutes a valid and binding agreement of, Stockholder's spouse, enforceable
against such person in accordance with its terms (subject to the exceptions set
forth in the immediately preceding sentence).
1.2 Consents and Approvals; No Violations. The execution, delivery
and performance of this Agreement by Stockholder shall not (a) result in a
violation or breach of, or constitute (with or without notice or lapse of
time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under any
of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, commitment, arrangement, understanding,
agreement or other instrument or obligation of any kind to which Stockholder
is a party or by which Stockholder or any of his properties or assets is
bound or affected or (b) violate any order, writ, injunction, decree or
judgment, specifically applicable by its terms to Stockholder or any of his
properties or assets. No consent, approval, order or authorization of, or
registration, declaration or filing with, or notice to, any state, federal or
foreign public body or authority is required by or with respect to
Stockholder in connection with the execution and delivery of this Agreement
by Stockholder or the consummation by Stockholder of any of the transactions
contemplated by this Agreement, except for filings pursuant to the Exchange
Act and except as may be required by the Merger. Without implication that the
following consent is required by that certain Voting Agreement, dated January
27, 1994, by and between Stockholder and Mark C. Mamolen (the
"Co-Stockholder"), Stockholder hereby (i) consents, if such consent is
required by the Voting Agreement, to Co-Stockholder entering into and
performing a stockholder agreement with Parent, of even date herewith (the
"Co-Stockholder Agreement"), substantially identical to this Agreement and
(ii) acknowledges and agrees that this Agreement and the Co-Stockholder
Agreement supersede the Voting Agreement with respect to the matters set
forth herein and in the Co-Stockholder Agreement. The parties hereto
acknowledge that Co-Stockholder is a third party beneficiary of the foregoing.
1.3 Ownership of Shares. (a) Stockholder is the record and/or
beneficial owner of that number of shares of Company Common Stock set forth
opposite Stockholder's name on Annex 1 attached hereto (such shares hereinafter
referred to as the "Existing Shares," and together with any shares of Company
Common Stock acquired of record or beneficially by Stockholder in any capacity
after the date hereof and prior to the termination hereof, whether upon exercise
of options, conversion of convertible securities, purchase, exchange or
otherwise, referred to as the "Stockholder Shares"). Notwithstanding the
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foregoing, neither the Existing Shares nor the Stockholder Shares include any
shares of Company Common Stock owned of record by Co-Stockholder.
(b) Except for shares of Company Common Stock owned by the
Co-Stockholder subject to the Voting Agreement, on the date hereof, the
Existing Shares constitute all of the outstanding shares of Company Common
Stock owned of record and/or beneficially by Stockholder.
(c) Except as provided by the Voting Agreement, Stockholder has
sole power of disposition with respect to all of the Existing Shares owned
by him and sole voting power with respect to the matters set forth in
Section 3.1 hereof and sole power to demand dissenter's or appraisal
rights, in each case with respect to all of the Existing Shares owned by
him with no restrictions on such rights, subject to any restrictions
imposed by applicable federal securities laws, Delaware law and the terms
of this Agreement.
(d) Except as provided by the Voting Agreement, Stockholder will
have sole power of disposition with respect to shares of Company Common
Stock other than Existing Shares, if any, which become beneficially owned
by Stockholder and will have sole voting power with respect to the matters
set forth in Section 3.1 hereof and sole power to demand dissenter's or
appraisal rights, in each case with respect to all such shares, if any,
which become beneficially owned by Stockholder with no restrictions on such
rights, subject to any restrictions imposed by applicable federal
securities laws and the terms of this Agreement.
1.4 No Encumbrances. The Existing Shares and the certificates
representing such shares are now, and the Stockholder Shares and the
certificates representing such shares at all times during the term hereof will
be, held by Stockholder, free and clear of all claims, liens, charges, security
interests, proxies, voting trusts or agreements, understandings or arrangements
and any other encumbrances of any kind or nature whatsoever, except as otherwise
provided in this Agreement and except as set forth in the Voting Agreement.
Certificates representing the Existing Shares contain legends reflecting the
Voting Agreement and the restrictions on transfer of Existing Shares under the
Securities Act.
1.5 Brokers and Intermediaries. No broker, investment banker,
financial adviser or other person is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
Stockholder. It is agreed and acknowledged that the Company has retained
Wasserstein, Perrella & Co. in connection with the Offer and the Merger and the
transactions contemplated by the Merger Agreement.
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1.6 Reliance. Stockholder understands and acknowledges that Parent
and Purchaser are entering into the Merger Agreement in reliance upon
Stockholder's execution and delivery of this Agreement with Parent.
2. Representations and Warranties of Parent. Parent hereby
represents and warrants to Stockholder as follows:
2.1 Organization; Authorization; Validity of Agreement. Parent is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware and has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and
delivery of this Agreement by Parent and the consummation by Parent of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent and no other corporate proceedings on the
part of Parent are necessary to authorize this Agreement or any of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Parent and constitutes a valid and binding obligation of Parent
enforceable against Parent in accordance with its terms, except that (a) such
enforcement may be subject to applicable bankruptcy, insolvency or other similar
laws, now or hereafter in effect, affecting creditors' rights generally, and (b)
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
2.2 Consents and Approvals; No Violations. The execution, delivery
and performance of this Agreement by Parent shall not (a) conflict with or
result in any breach of the certificate of incorporation or by-laws of Parent,
(b) result in a violation or breach of, or constitute (with or without notice or
lapse of time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, contract, commitment, arrangement, understanding, agreement or other
instrument or obligation of any kind to which Parent is a party or by which
Parent or any of its properties or assets is bound or affected or (c) violate
any order, writ, injunction, decree, judgment, statute, rule or regulation
applicable to Parent or any of Parent's properties or assets. Except as
provided in the Merger Agreement, no consent, approval, order or authorization
of, or registration, declaration or filing with, or notice to, any state,
federal or foreign public body or authority is required by or with respect to
Parent in connection with the execution and delivery of this Agreement by Parent
or the consummation by Parent of any of the transactions contemplated by this
Agreement.
2.3 Broker and Intermediaries. No broker, finder, investment banker
or other Person or entity, other than Piper Jaffray & Co., is entitled in
connection with the transactions contemplated by the Merger Agreement to any
broker's commission, finder's fee, investment banker's fee or similar payment in
connection with the transactions contemplated hereby based upon arrangements
made by or on behalf of Parent or Purchaser.
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<PAGE>
2.4 Reliance. Parent understands and acknowledges that Stockholder
is entering into this Agreement in reliance upon Parent's execution and delivery
of this Agreement with Stockholder and upon Parent's and Purchaser's execution
of the Merger Agreement.
3. Agreement to Vote. Stockholder, solely in his capacity as a
stockholder and not as a director, officer or employee of the Company, hereby
agrees that, until the Termination Date (as defined in Section 9), at any
meeting of the stockholders of the Company, however called at which the
following matters are considered for a vote, Stockholder shall vote (or cause to
be voted) the Stockholder Shares (a) in favor of the Merger, the execution and
delivery by the Company of the Merger Agreement and the approval of the terms
thereof and each of the other actions contemplated by the Merger Agreement and
this Agreement and any actions required in furtherance hereof and thereof; (b)
against any action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement or this Agreement; and (c) except as specifically
requested or agreed to in writing by Parent in advance, against the following
actions (other than the Merger and the transactions contemplated by the Merger
Agreement): (i) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving the Company; (ii) a sale,
lease or transfer of a material amount of assets of the Company or
reorganization, recapitalization, dissolution or liquidation of the Company; and
(iii)(A) any change in the majority of the board of directors of the Company;
(B) any change in the present capitalization of the Company or any amendment of
the Company's Certificate of Incorporation or By-Laws; (C) any other material
change in the Company's corporate structure or business; or (D) any other action
which is intended, or could reasonably be expected, to impede, interfere with,
delay, postpone, discourage or adversely affect the Offer, the Merger or the
transactions contemplated by the Merger Agreement or this Agreement.
Stockholder shall not enter into any agreement with or grant any proxy to any
person or entity prior to the Termination Date to vote or give instructions in
any manner inconsistent with clauses (i), (ii) or (iii) of the preceding
sentence. The foregoing shall not limit or prohibit Stockholder from entering
into any agreement simultaneously with or after termination of this Agreement.
4. Certain Covenants of the Stockholder. Except in accordance with
the terms of this Agreement, Stockholder hereby agrees as follows:
4.1 Tender of Stockholder Shares. Stockholder agrees to tender and
sell to Purchaser all of the Stockholder Shares pursuant to and in accordance
with the terms of the Offer. Stockholder agrees that he shall deliver to the
depositary for the Offer, no later than the fifth Business Day (as defined
below) following the commencement of the Offer pursuant to Section 1.1 of the
Merger Agreement, a letter of transmittal together with any and all certificates
representing the Stockholder Shares owned by him (or such documentation as
required by the terms of the Offer with respect to lost stock certificates).
Notwithstanding
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<PAGE>
any term of the Offer to the contrary, Stockholder agrees not to withdraw any
Stockholder Shares tendered into the Offer pursuant to this Section 4.1 during
the term of this Agreement. Stockholder hereby acknowledges and agrees that
Purchaser's obligation to accept for payment the Stockholder Shares in the Offer
is subject to the terms and conditions of the Offer. Stockholder hereby permits
Parent and Purchaser to publish and disclose in the Offer Documents (including,
without limitation, all documents and schedules filed with the SEC), the
identity of the Stockholder (subject, however, to the prior approval of
Stockholder which approval shall not be unreasonably withheld or delayed) and
the nature of his commitments, arrangements and understandings under this
Agreement. Notwithstanding anything in this Agreement to the contrary, the
foregoing shall not restrict a Stockholder from taking actions in his capacity
as a director, officer or employee of the Company to the extent and in the
circumstances permitted by the Merger Agreement or as required by applicable law
or by his fiduciary duty as a director, officer or employee of the Company. For
purposes of this Agreement, "Business Day" shall mean a day on which banks are
not required or authorized to be closed in the City of New York.
4.2 No Solicitation. Prior to the Termination Date, Stockholder
shall not (directly or indirectly through advisors, agents or other
intermediaries), (a) solicit or initiate inquiries, proposals or offers from any
Person (other than Parent or any of its affiliates) relating to any Takeover
Proposal or (b) in connection with any of the foregoing, enter into or
participate in any discussions (knowingly) or negotiations or furnish to any
other Person any information with respect to the business, properties or assets
of the Company or any of its Subsidiaries; provided, however, that the foregoing
shall not restrict Stockholder as a director, officer or employee of the Company
from taking actions in any such capacity to the extent and in the circumstances
permitted by the Merger Agreement or as required by applicable law or his
fiduciary duties as such director, officer or employee. If Stockholder receives
any inquiry or proposal, in his capacity as a Stockholder and with respect to
the Stockholder Shares, then Stockholder promptly shall inform Parent of the
terms and conditions, if any, of such inquiry or proposal and the identity of
the person making it. Stockholder immediately will cease and cause his
advisors, agents and other intermediaries to cease any and all existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing.
4.3 Restriction on Transfer, Proxies and Non-Interference;
Restriction on Withdrawal. Prior to the Termination Date, Stockholder shall not
directly or indirectly: (a) except pursuant to the terms of the Offer and the
Merger Agreement, and to Parent pursuant to this Agreement, offer for sale,
sell, transfer, tender, pledge, encumber, assign or otherwise dispose of,
enforce or permit the execution of the provisions of any redemption agreement
with the Company or enter into any contract, option or other binding agreement
or understanding with respect to or consent to the offer for sale, sale,
transfer, tender, pledge, encumbrance, or other disposition of, or exercise any
discretionary powers to distribute, any or all of the Stockholder Shares owned
by him or any interest therein; (b) except as contemplated hereby, grant any
proxies or powers of attorney with respect to any
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Stockholder Shares, deposit any Stockholder Shares into a voting trust or enter
into a voting agreement with respect to any Stockholder Shares; or (c) take any
action that would make any representation or warranty of Stockholder contained
herein untrue or incorrect in any material respect or have the effect of
preventing or disabling Stockholder from performing its obligations under this
Agreement. Anything to the contrary in this Agreement notwithstanding,
Stockholder may sell, dispose of and/or transfer all or any portion of the
Stockholder Shares for tax, securities or estate planning purposes, for
charitable donation purposes or to any Section 501(c)(3) organization as long as
the purchaser or transferee of such Stockholder Shares under this subsection
agrees to be bound by the provisions of and becomes a party to this Agreement.
4.4 Waiver of Appraisal and Dissenter's Rights. Stockholder hereby
waives any rights of appraisal or rights to dissent from the Merger that
Stockholder may have.
5. Third Party Business Combination.
If (a) the Merger Agreement is terminated in accordance with Section
8.1(f)(ii) or Section 8.1(h) of the Merger Agreement, (b) within three months
after the Merger Agreement is terminated, a contract or agreement relating to a
Third Party Business Combination, as defined below, is entered into and (c)
Stockholder receives, within twelve months after the Merger Agreement is
terminated, from any Person (other than Parent, Purchaser or any of their
affiliates) any cash or non-cash consideration in an amount per share greater
than $16.00 (the "Third Party Consideration") in respect of any sale or
disposition of all or any portion of the Stockholder Shares in connection with
and as part of a Third Party Business Combination, then Stockholder within two
(2) Business Days of receipt thereof shall pay to Parent or its designee an
aggregate amount equal to fifty percent (50%) of (A) the excess of the Third
Party Consideration over $16.00 multiplied by (B) the number of Stockholder
Shares with respect to which such Third Party Consideration was received;
provided that, (x) if the consideration received by Stockholder shall be
securities listed on a national securities exchange or traded on the NASDAQ
National Market ("NASDAQ"), the per share value of such consideration shall be
equal to the closing price per share listed on such national securities exchange
or NASDAQ National Market on the date such transaction is consummated, (y) if
the consideration received by Stockholder shall be in a form other than such
listed securities, the per share value shall be determined as of the date such
transaction is consummated in good faith by Parent or its designee and the
Stockholder or his designee or if the Parent and its designee and Stockholder
and his designee cannot reach agreement, by a nationally recognized investment
banking firm reasonably acceptable to the parties and (z) Stockholder will pay
Parent or its designee in kind and on a pro rata basis (i.e., if the Third Party
Consideration includes cash, listed securities and/or other consideration,
Parent or its designee will receive its pro rata portion of each such item).
The term "Third Party Business Combination" means the occurrence of any of the
following events: (i) the Company or any Subsidiaries whose assets constitute
all or substantially all of
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the business or assets of the Company is acquired by merger or otherwise by any
person or group, other than Parent or any affiliate thereof (a "Third Party");
(ii) the sale to a Third Party of all or substantially all of the business or
assets of the Company and its Subsidiaries, taken as a whole; and (iii) the
Company, or Stockholder and Co-Stockholder enter into a merger or other
agreement with a Third Party which contemplates, in a single transaction or
series of related transactions, the acquisition of all or substantially all of
the Stockholder Shares and the Shares owned by the Co-Stockholder.
6. Further Assurances. From time to time, at any other party's
reasonable request and without further consideration, each party hereto shall
execute and deliver such additional documents and take all such further action
as may be necessary to consummate and make effective the transactions
contemplated by this Agreement.
7. Certain Events. Stockholder agrees, to the extent permitted by
applicable law, that this Agreement and the obligations hereunder shall attach
to all Stockholder Shares and shall be binding upon any person or entity to
which legal or beneficial ownership of such Stockholder Shares shall pass,
whether by operation of law or otherwise.
8. Stop Transfer. Except in connection with transfers permitted
under Section 4.3, Stockholder agrees with, and covenants to Parent that it
shall not request that the Company register the transfer (book-entry or
otherwise) of any certificate or uncertificated interest representing any of the
Stockholder Shares.
9. Termination. All obligations of Stockholder under this
Agreement, except for the obligations under Section 5 above (which obligations
will only survive for the period set forth therein), shall terminate upon the
first to occur of (a) the acceptance for payment of Stockholder Shares in the
Offer, (b) the Effective Time of the Merger and (c) the time the Merger
Agreement is terminated in accordance with its terms (such earlier time being
the "Termination Date").
10. Miscellaneous.
10.1 Entire Agreement; Assignment. This Agreement (a) constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and (b)
shall not be assigned by operation of law or otherwise without the prior written
consent of the other parties, provided that Parent may assign, in its sole
discretion, its rights and obligations hereunder to any affiliate of Parent, but
no such assignment shall relieve Parent of its obligations hereunder if such
assignee does not perform such obligations.
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10.2 Amendments. This Agreement may not be modified, amended, altered
or supplemented, except upon the execution and delivery of a written agreement
executed by the parties hereto.
10.3 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
(a) if to Parent, to
Lund International Holdings, Inc.
911 Lund Boulevard
Anoka, Minnesota 55303
Telephone: (612) 576-4200
Telecopy: (612) 576-4297
Attention: William J. McMahon
with a copy to
Reid & Priest LLP
40 West 57th Street
New York, New York 10019
Telephone: (212) 603-2000
Telecopy: (212) 603-2001
Attention: Leonard Gubar, Esq.
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(b) if to the Stockholder, to
Charles S. Meyer
Three First National Plaza, #5710
Chicago, IL 60602
Telephone: (312) 236-7041
Telecopy: (312) 236-0720
Attention:
with a copy to:
Barack Ferrazzano Kirschbaum
Perlman & Nagelberg
333 West Wacker Drive
Suite 2700
Chicago, Illinois 60606
Telephone: (312) 984-3100
Telecopy: (312) 984-3150
Attention: David Selmer, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
10.4 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof.
10.5 Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement.
10.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same Agreement.
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10.7 Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
10.8 Severability. Whenever possible, each provision or portion of
any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
10.9 Definitions. For purposes of this Agreement:
(a) "beneficially own" or "beneficial ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act). Except as otherwise
referred to herein, without duplicative counting of the same securities by the
same holder, securities beneficially owned by a Person shall include securities
Beneficially Owned by all other Persons with whom such Person would constitute a
"group" as described in Section 13(d)(3) of the Exchange Act.
(b) "Person" shall mean an individual, corporation, limited liability
company, partnership, joint venture, association, trust, unincorporated
organization or other entity.
(c) In the event of a stock dividend or distribution, or any change
in the Company Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, exchange of shares or the like, the term
"Stockholder Shares" shall be deemed to refer to and include the Stockholder
Shares as well as all such stock dividends and distributions and any shares into
which or for which any or all of the Stockholder Shares may be changed or
exchanged.
10.10 Stockholder Capacity. Notwithstanding anything in this
Agreement to the contrary, if and to the extent that Stockholder is or becomes
during the term hereof a director, officer or employee of the Company,
Stockholder makes no agreement or understanding herein in his or her capacity as
such director, officer or employee, and the agreements set forth herein shall in
no way restrict any director, officer or employee of the Company in the exercise
of his or her fiduciary duties as such director, officer or employee of the
Company. Stockholder has executed this Agreement solely in his capacity as the
record and/or beneficial holder of Stockholder Shares. To the extent that the
Company or its directors, officers, or agents are permitted to engage in
discussions or negotiations with
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respect to any Takeover Proposal (or any inquiry or proposal with respect
thereto) pursuant to the Merger Agreement, Stockholder, in his capacity as such,
also shall be entitled, notwithstanding anything to the contrary contained in
this Agreement, to participate in such discussions and negotiations, including
without limitation, with respect to Existing Shares and the Stockholder Shares
and the related matters subject to this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
LUND INTERNATIONAL HOLDINGS, INC.
By:
------------------------------
Name:
Title:
---------------------------------
Charles S. Meyer
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Exhibit 99.4
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT (this "Agreement"), dated as of November 25,
1997, by and among Lund International Holdings, Inc., a Delaware corporation
("Parent"), and Mark C. Mamolen (hereinafter referred to as "Stockholder").
W I T N E S S E T H:
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WHEREAS, concurrently herewith, Parent, Zephyros Acquisition
Corporation, a Delaware corporation and a wholly-owned subsidiary of Parent
("Purchaser"), and Deflecta-Shield Corporation, a Delaware corporation (the
"Company"), will enter into an Agreement and Plan of Merger of even date
herewith (the "Merger Agreement"; capitalized terms used but not defined herein
shall have the meanings set forth in the Merger Agreement), pursuant to which
(and subject to the terms and conditions specified therein) Purchaser will make
a cash tender offer (as defined in the Merger Agreement, the "Offer") for all
outstanding shares of Common Stock, par value $.01 per share, of the Company
("Company Common Stock") and, following consummation of the Offer, Purchaser
will be merged with and into the Company, with the Company continuing as the
surviving corporation and as a wholly-owned subsidiary of Parent (the "Merger"),
whereby each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time of the Merger will be converted into the right to
receive the Merger Consideration, other than (i) shares of Company Common Stock
owned, directly or indirectly, by the Company or any subsidiary of the Company
or by Parent, Purchaser or any other affiliate of Parent and (ii) Dissenting
Shares; and
WHEREAS, Stockholder is a stockholder of the Company and, as a
condition to Parent and Purchaser entering into the Merger Agreement, Parent
requires that Stockholder enter into, and Stockholder has agreed to enter into,
this Agreement with Parent.
NOW, THEREFORE, in consideration of the representations and warranties
and covenants set forth herein and in the Merger Agreement, Parent and
Stockholder, intending to be legally bound hereby each agree as follows:
1. Representations and Warranties of the Stockholder. Stockholder
hereby represents and warrants to Parent as follows:
1.1 Validity of Agreement. Stockholder has the legal capacity to
enter into and perform all of Stockholder's obligations under this Agreement.
This Agreement has been duly executed and delivered by Stockholder and
constitutes a valid and binding obligation of Stockholder enforceable against
Stockholder in accordance with its terms,
<PAGE>
except that (a) such enforcement may be subject to applicable bankruptcy,
insolvency or other similar laws, now or hereafter in effect, affecting
creditors' rights generally, (b) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought and (c) no representation is made with respect to the
enforceability, validity or binding effect of the third sentence of Section 4.1
under applicable provisions of the Exchange Act. If Stockholder is married, and
his Stockholder Shares (as hereinafter defined) constitute community property,
this Agreement has been duly authorized, executed and delivered by, and
constitutes a valid and binding agreement of, Stockholder's spouse, enforceable
against such person in accordance with its terms (subject to the exceptions set
forth in the immediately preceding sentence).
1.2 Consents and Approvals; No Violations. The execution, delivery
and performance of this Agreement by Stockholder shall not (a) result in a
violation or breach of, or constitute (with or without notice or lapse of
time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under any
of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, commitment, arrangement, understanding,
agreement or other instrument or obligation of any kind to which Stockholder
is a party or by which Stockholder or any of his properties or assets is
bound or affected or (b) violate any order, writ, injunction, decree or
judgment, specifically applicable by its terms to Stockholder or any of his
properties or assets. No consent, approval, order or authorization of, or
registration, declaration or filing with, or notice to, any state, federal or
foreign public body or authority is required by or with respect to
Stockholder in connection with the execution and delivery of this Agreement
by Stockholder or the consummation by Stockholder of any of the transactions
contemplated by this Agreement, except for filings pursuant to the Exchange
Act and except as may be required by the Merger. Without implication that the
following consent is required by that certain Voting Agreement, dated January
27, 1994, by and between Stockholder and Charles S. Meyer (the
"Co-Stockholder"), Stockholder hereby (i) consents, if such consent is
required by the Voting Agreement, to Co-Stockholder entering into and
performing a stockholder agreement with Parent, of even date herewith (the
"Co-Stockholder Agreement"), substantially identical to this Agreement and
(ii) acknowledges and agrees that this Agreement and the Co-Stockholder
Agreement supersede the Voting Agreement with respect to the matters set
forth herein and in the Co-Stockholder Agreement. The parties hereto
acknowledge that Co-Stockholder is a third party beneficiary of the foregoing.
1.3 Ownership of Shares. (a) Stockholder is the record and/or
beneficial owner of that number of shares of Company Common Stock set forth
opposite Stockholder's name on Annex 1 attached hereto (such shares hereinafter
referred to as the "Existing Shares," and together with any shares of Company
Common Stock acquired of record or beneficially by Stockholder in any capacity
after the date hereof and prior to the termination hereof, whether upon exercise
of options, conversion of convertible securities, purchase, exchange or
otherwise, referred to as the "Stockholder Shares"). Notwithstanding the
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foregoing, neither the Existing Shares nor the Stockholder Shares include any
shares of Company Common Stock owned of record by Co-Stockholder.
(b) Except for shares of Company Common Stock owned by the
Co-Stockholder subject to the Voting Agreement, on the date hereof, the
Existing Shares constitute all of the outstanding shares of Company Common
Stock owned of record and/or beneficially by Stockholder.
(c) Except as provided by the Voting Agreement, Stockholder has
sole power of disposition with respect to all of the Existing Shares owned
by him and sole voting power with respect to the matters set forth in
Section 3.1 hereof and sole power to demand dissenter's or appraisal
rights, in each case with respect to all of the Existing Shares owned by
him with no restrictions on such rights, subject to any restrictions
imposed by applicable federal securities laws, Delaware law and the terms
of this Agreement.
(d) Except as provided by the Voting Agreement, Stockholder will
have sole power of disposition with respect to shares of Company Common
Stock other than Existing Shares, if any, which become beneficially owned
by Stockholder and will have sole voting power with respect to the matters
set forth in Section 3.1 hereof and sole power to demand dissenter's or
appraisal rights, in each case with respect to all such shares, if any,
which become beneficially owned by Stockholder with no restrictions on such
rights, subject to any restrictions imposed by applicable federal
securities laws and the terms of this Agreement.
1.4 No Encumbrances. The Existing Shares and the certificates
representing such shares are now, and the Stockholder Shares and the
certificates representing such shares at all times during the term hereof will
be, held by Stockholder, free and clear of all claims, liens, charges, security
interests, proxies, voting trusts or agreements, understandings or arrangements
and any other encumbrances of any kind or nature whatsoever, except as otherwise
provided in this Agreement and except as set forth in the Voting Agreement.
Certificates representing the Existing Shares contain legends reflecting the
Voting Agreement and the restrictions on transfer of Existing Shares under the
Securities Act.
1.5 Brokers and Intermediaries. No broker, investment banker,
financial adviser or other person is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
Stockholder. It is agreed and acknowledged that the Company has retained
Wasserstein, Perrella & Co. in connection with the Offer and the Merger and the
transactions contemplated by the Merger Agreement.
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1.6 Reliance. Stockholder understands and acknowledges that Parent
and Purchaser are entering into the Merger Agreement in reliance upon
Stockholder's execution and delivery of this Agreement with Parent.
2. Representations and Warranties of Parent. Parent hereby
represents and warrants to Stockholder as follows:
2.1 Organization; Authorization; Validity of Agreement. Parent is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware and has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and
delivery of this Agreement by Parent and the consummation by Parent of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent and no other corporate proceedings on the
part of Parent are necessary to authorize this Agreement or any of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Parent and constitutes a valid and binding obligation of Parent
enforceable against Parent in accordance with its terms, except that (a) such
enforcement may be subject to applicable bankruptcy, insolvency or other similar
laws, now or hereafter in effect, affecting creditors' rights generally, and (b)
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
2.2 Consents and Approvals; No Violations. The execution, delivery
and performance of this Agreement by Parent shall not (a) conflict with or
result in any breach of the certificate of incorporation or by-laws of Parent,
(b) result in a violation or breach of, or constitute (with or without notice or
lapse of time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, contract, commitment, arrangement, understanding, agreement or other
instrument or obligation of any kind to which Parent is a party or by which
Parent or any of its properties or assets is bound or affected or (c) violate
any order, writ, injunction, decree, judgment, statute, rule or regulation
applicable to Parent or any of Parent's properties or assets. Except as
provided in the Merger Agreement, no consent, approval, order or authorization
of, or registration, declaration or filing with, or notice to, any state,
federal or foreign public body or authority is required by or with respect to
Parent in connection with the execution and delivery of this Agreement by Parent
or the consummation by Parent of any of the transactions contemplated by this
Agreement.
2.3 Broker and Intermediaries. No broker, finder, investment banker
or other Person or entity, other than Piper Jaffray & Co., is entitled in
connection with the transactions contemplated by the Merger Agreement to any
broker's commission, finder's fee, investment banker's fee or similar payment in
connection with the transactions contemplated hereby based upon arrangements
made by or on behalf of Parent or Purchaser.
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2.4 Reliance. Parent understands and acknowledges that Stockholder
is entering into this Agreement in reliance upon Parent's execution and delivery
of this Agreement with Stockholder and upon Parent's and Purchaser's execution
of the Merger Agreement.
3. Agreement to Vote. Stockholder, solely in his capacity as a
stockholder and not as a director, officer or employee of the Company, hereby
agrees that, until the Termination Date (as defined in Section 9), at any
meeting of the stockholders of the Company, however called at which the
following matters are considered for a vote, Stockholder shall vote (or cause to
be voted) the Stockholder Shares (a) in favor of the Merger, the execution and
delivery by the Company of the Merger Agreement and the approval of the terms
thereof and each of the other actions contemplated by the Merger Agreement and
this Agreement and any actions required in furtherance hereof and thereof; (b)
against any action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement or this Agreement; and (c) except as specifically
requested or agreed to in writing by Parent in advance, against the following
actions (other than the Merger and the transactions contemplated by the Merger
Agreement): (i) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving the Company; (ii) a sale,
lease or transfer of a material amount of assets of the Company or
reorganization, recapitalization, dissolution or liquidation of the Company; and
(iii)(A) any change in the majority of the board of directors of the Company;
(B) any change in the present capitalization of the Company or any amendment of
the Company's Certificate of Incorporation or By-Laws; (C) any other material
change in the Company's corporate structure or business; or (D) any other action
which is intended, or could reasonably be expected, to impede, interfere with,
delay, postpone, discourage or adversely affect the Offer, the Merger or the
transactions contemplated by the Merger Agreement or this Agreement.
Stockholder shall not enter into any agreement with or grant any proxy to any
person or entity prior to the Termination Date to vote or give instructions in
any manner inconsistent with clauses (i), (ii) or (iii) of the preceding
sentence. The foregoing shall not limit or prohibit Stockholder from entering
into any agreement simultaneously with or after termination of this Agreement.
4. Certain Covenants of the Stockholder. Except in accordance with
the terms of this Agreement, Stockholder hereby agrees as follows:
4.1 Tender of Stockholder Shares. Stockholder agrees to tender and
sell to Purchaser all of the Stockholder Shares pursuant to and in accordance
with the terms of the Offer. Stockholder agrees that he shall deliver to the
depositary for the Offer, no later than the fifth Business Day (as defined
below) following the commencement of the Offer pursuant to Section 1.1 of the
Merger Agreement, a letter of transmittal together with any and all certificates
representing the Stockholder Shares owned by him (or such documentation as
required by the terms of the Offer with respect to lost stock certificates).
Notwithstanding
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<PAGE>
any term of the Offer to the contrary, Stockholder agrees not to withdraw any
Stockholder Shares tendered into the Offer pursuant to this Section 4.1 during
the term of this Agreement. Stockholder hereby acknowledges and agrees that
Purchaser's obligation to accept for payment the Stockholder Shares in the Offer
is subject to the terms and conditions of the Offer. Stockholder hereby permits
Parent and Purchaser to publish and disclose in the Offer Documents (including,
without limitation, all documents and schedules filed with the SEC), the
identity of the Stockholder (subject, however, to the prior approval of
Stockholder which approval shall not be unreasonably withheld or delayed) and
the nature of his commitments, arrangements and understandings under this
Agreement. Notwithstanding anything in this Agreement to the contrary, the
foregoing shall not restrict a Stockholder from taking actions in his capacity
as a director, officer or employee of the Company to the extent and in the
circumstances permitted by the Merger Agreement or as required by applicable law
or by his fiduciary duty as a director, officer or employee of the Company. For
purposes of this Agreement, "Business Day" shall mean a day on which banks are
not required or authorized to be closed in the City of New York.
4.2 No Solicitation. Prior to the Termination Date, Stockholder
shall not (directly or indirectly through advisors, agents or other
intermediaries), (a) solicit or initiate inquiries, proposals or offers from any
Person (other than Parent or any of its affiliates) relating to any Takeover
Proposal or (b) in connection with any of the foregoing, enter into or
participate in any discussions (knowingly) or negotiations or furnish to any
other Person any information with respect to the business, properties or assets
of the Company or any of its Subsidiaries; provided, however, that the foregoing
shall not restrict Stockholder as a director, officer or employee of the Company
from taking actions in any such capacity to the extent and in the circumstances
permitted by the Merger Agreement or as required by applicable law or his
fiduciary duties as such director, officer or employee. If Stockholder receives
any inquiry or proposal, in his capacity as a Stockholder and with respect to
the Stockholder Shares, then Stockholder promptly shall inform Parent of the
terms and conditions, if any, of such inquiry or proposal and the identity of
the person making it. Stockholder immediately will cease and cause his
advisors, agents and other intermediaries to cease any and all existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing.
4.3 Restriction on Transfer, Proxies and Non-Interference;
Restriction on Withdrawal. Prior to the Termination Date, Stockholder shall not
directly or indirectly: (a) except pursuant to the terms of the Offer and the
Merger Agreement, and to Parent pursuant to this Agreement, offer for sale,
sell, transfer, tender, pledge, encumber, assign or otherwise dispose of,
enforce or permit the execution of the provisions of any redemption agreement
with the Company or enter into any contract, option or other binding agreement
or understanding with respect to or consent to the offer for sale, sale,
transfer, tender, pledge, encumbrance, or other disposition of, or exercise any
discretionary powers to distribute, any or all of the Stockholder Shares owned
by him or any interest therein; (b) except as contemplated hereby, grant any
proxies or powers of attorney with respect to any
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<PAGE>
Stockholder Shares, deposit any Stockholder Shares into a voting trust or enter
into a voting agreement with respect to any Stockholder Shares; or (c) take any
action that would make any representation or warranty of Stockholder contained
herein untrue or incorrect in any material respect or have the effect of
preventing or disabling Stockholder from performing its obligations under this
Agreement. Anything to the contrary in this Agreement notwithstanding,
Stockholder may sell, dispose of and/or transfer all or any portion of the
Stockholder Shares for tax, securities or estate planning purposes, for
charitable donation purposes or to any Section 501(c)(3) organization as long as
the purchaser or transferee of such Stockholder Shares under this subsection
agrees to be bound by the provisions of and becomes a party to this Agreement.
4.4 Waiver of Appraisal and Dissenter's Rights. Stockholder hereby
waives any rights of appraisal or rights to dissent from the Merger that
Stockholder may have.
5. Third Party Business Combination.
If (a) the Merger Agreement is terminated in accordance with Section
8.1(f)(ii) or Section 8.1(h) of the Merger Agreement, (b) within three months
after the Merger Agreement is terminated, a contract or agreement relating to a
Third Party Business Combination, as defined below, is entered into and (c)
Stockholder receives, within twelve months after the Merger Agreement is
terminated, from any Person (other than Parent, Purchaser or any of their
affiliates) any cash or non-cash consideration in an amount per share greater
than $16.00 (the "Third Party Consideration") in respect of any sale or
disposition of all or any portion of the Stockholder Shares in connection with
and as part of a Third Party Business Combination, then Stockholder within two
(2) Business Days of receipt thereof shall pay to Parent or its designee an
aggregate amount equal to fifty percent (50%) of (A) the excess of the Third
Party Consideration over $16.00 multiplied by (B) the number of Stockholder
Shares with respect to which such Third Party Consideration was received;
provided that, (x) if the consideration received by Stockholder shall be
securities listed on a national securities exchange or traded on the NASDAQ
National Market ("NASDAQ"), the per share value of such consideration shall be
equal to the closing price per share listed on such national securities exchange
or NASDAQ National Market on the date such transaction is consummated, (y) if
the consideration received by Stockholder shall be in a form other than such
listed securities, the per share value shall be determined as of the date such
transaction is consummated in good faith by Parent or its designee and the
Stockholder or his designee or if the Parent and its designee and Stockholder
and his designee cannot reach agreement, by a nationally recognized investment
banking firm reasonably acceptable to the parties and (z) Stockholder will pay
Parent or its designee in kind and on a pro rata basis (i.e., if the Third Party
Consideration includes cash, listed securities and/or other consideration,
Parent or its designee will receive its pro rata portion of each such item).
The term "Third Party Business Combination" means the occurrence of any of the
following events: (i) the Company or any Subsidiaries whose assets constitute
all or substantially all of
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the business or assets of the Company is acquired by merger or otherwise by any
person or group, other than Parent or any affiliate thereof (a "Third Party");
(ii) the sale to a Third Party of all or substantially all of the business or
assets of the Company and its Subsidiaries, taken as a whole; and (iii) the
Company, or Stockholder and Co-Stockholder enter into a merger or other
agreement with a Third Party which contemplates, in a single transaction or
series of related transactions, the acquisition of all or substantially all of
the Stockholder Shares and the Shares owned by the Co-Stockholder.
6. Further Assurances. From time to time, at any other party's
reasonable request and without further consideration, each party hereto shall
execute and deliver such additional documents and take all such further action
as may be necessary to consummate and make effective the transactions
contemplated by this Agreement.
7. Certain Events. Stockholder agrees, to the extent permitted by
applicable law, that this Agreement and the obligations hereunder shall attach
to all Stockholder Shares and shall be binding upon any person or entity to
which legal or beneficial ownership of such Stockholder Shares shall pass,
whether by operation of law or otherwise.
8. Stop Transfer. Except in connection with transfers permitted
under Section 4.3, Stockholder agrees with, and covenants to Parent that it
shall not request that the Company register the transfer (book-entry or
otherwise) of any certificate or uncertificated interest representing any of the
Stockholder Shares.
9. Termination. All obligations of Stockholder under this
Agreement, except for the obligations under Section 5 above (which obligations
will only survive for the period set forth therein), shall terminate upon the
first to occur of (a) the acceptance for payment of Stockholder Shares in the
Offer, (b) the Effective Time of the Merger and (c) the time the Merger
Agreement is terminated in accordance with its terms (such earlier time being
the "Termination Date").
10. Miscellaneous.
10.1 Entire Agreement; Assignment. This Agreement (a) constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and (b)
shall not be assigned by operation of law or otherwise without the prior written
consent of the other parties, provided that Parent may assign, in its sole
discretion, its rights and obligations hereunder to any affiliate of Parent, but
no such assignment shall relieve Parent of its obligations hereunder if such
assignee does not perform such obligations.
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10.2 Amendments. This Agreement may not be modified, amended, altered
or supplemented, except upon the execution and delivery of a written agreement
executed by the parties hereto.
10.3 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
(a) if to Parent, to
Lund International Holdings, Inc.
911 Lund Boulevard
Anoka, Minnesota 55303
Telephone: (612) 576-4200
Telecopy: (612) 576-4297
Attention: William J. McMahon
with a copy to
Reid & Priest LLP
40 West 57th Street
New York, New York 10019
Telephone: (212) 603-2000
Telecopy: (212) 603-2001
Attention: Leonard Gubar, Esq.
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(b) if to the Stockholder, to
Mark C. Mamolen
155 W. Burton Place
Unit #2
Chicago, IL 60610
Telephone: (312) 337-4141
Telecopy: (312) 337-4116
Attention:
with a copy to:
Barack Ferrazzano Kirschbaum
Perlman & Nagelberg
333 West Wacker Drive
Suite 2700
Chicago, Illinois 60606
Telephone: (312) 984-3100
Telecopy: (312) 984-3150
Attention: David Selmer, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
10.4 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof.
10.5 Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement.
10.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same Agreement.
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10.7 Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
10.8 Severability. Whenever possible, each provision or portion of
any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
10.9 Definitions. For purposes of this Agreement:
(a) "beneficially own" or "beneficial ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act). Except as otherwise
referred to herein, without duplicative counting of the same securities by the
same holder, securities beneficially owned by a Person shall include securities
Beneficially Owned by all other Persons with whom such Person would constitute a
"group" as described in Section 13(d)(3) of the Exchange Act.
(b) "Person" shall mean an individual, corporation, limited liability
company, partnership, joint venture, association, trust, unincorporated
organization or other entity.
(c) In the event of a stock dividend or distribution, or any change
in the Company Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, exchange of shares or the like, the term
"Stockholder Shares" shall be deemed to refer to and include the Stockholder
Shares as well as all such stock dividends and distributions and any shares into
which or for which any or all of the Stockholder Shares may be changed or
exchanged.
10.10 Stockholder Capacity. Notwithstanding anything in this
Agreement to the contrary, if and to the extent that Stockholder is or becomes
during the term hereof a director, officer or employee of the Company,
Stockholder makes no agreement or understanding herein in his or her capacity as
such director, officer or employee, and the agreements set forth herein shall in
no way restrict any director, officer or employee of the Company in the exercise
of his or her fiduciary duties as such director, officer or employee of the
Company. Stockholder has executed this Agreement solely in his capacity as the
record and/or beneficial holder of Stockholder Shares. To the extent that the
Company or its directors, officers, or agents are permitted to engage in
discussions or negotiations with
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respect to any Takeover Proposal (or any inquiry or proposal with respect
thereto) pursuant to the Merger Agreement, Stockholder, in his capacity as such,
also shall be entitled, notwithstanding anything to the contrary contained in
this Agreement, to participate in such discussions and negotiations, including
without limitation, with respect to Existing Shares and the Stockholder Shares
and the related matters subject to this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
LUND INTERNATIONAL HOLDINGS, INC.
By:
------------------------------
Name:
Title:
---------------------------------
Mark C. Mamolen
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EXHIBIT 99.5
November 25, 1997
Mr. Russell E. Stubbings
Deflecta-Shield Corporation
1275 Sherman Drive
Longmont, CO 80502
Re: Severance Benefit After Change in Control
Dear Russ:
In order to encourage your full attention and dedication to your employment
with Deflecta-Shield Corporation ("Company") and its affiliates, the Company
has decided to provide you with a lump sum severance benefit that will be paid
to you in the event that, after the occurrence of a "Change in Control" (as
herein defined) of the Company, your employment with the Company and its
affiliates is terminated under the circumstances described in this letter
agreement:
1. SEVERANCE BENEFIT. If your employment with the Company and its
affiliates is terminated by the Company and its affiliates other than for
"Cause" (as herein defined) or by you for "Good Reason" (as herein defined)
within eighteen (18) months following the occurrence of a Change in Control, the
Company will pay you a severance benefit equal to eighteen (18) months' base
pay. If your employment with the Company and its affiliates is terminated by
the Company and its affiliates other than for Cause or by you for Good Reason
more than eighteen (18) months after, but less than twenty-four (24) months
after, the occurrence of a Change in Control, the Company will pay you a
severance benefit equal to nine (9) months' base pay. If you voluntarily
terminate your employment with the Company and its affiliates within twenty-four
months following a Change in Control because of a relocation of your place of
employment which would reasonably require you to relocate your personal
residence, the Company will pay you a severance benefit equal to three (3)
months' base pay. The Company, in its sole discretion, may elect to condition
your right to receive a severance benefit pursuant to this paragraph upon your
submission to the Company of a complete and valid waiver and release, in such
form as the Company may reasonably require, of any and all claims you may have
against the Company and its affiliates that may have arisen on or before your
termination of employment ("Waiver"). The Company shall exercise its election
to condition your severance benefit upon your submission of a Waiver to the
Company by written notice to you within five (5) business days after the later
of your termination of employment or the Company's receipt of written notice by
you that your termination of employment was for Good Reason. Such Waiver will
not require you to waive your right to receive the severance benefit described
herein, accrued vacation pay, your account balance under the 401(k) plan or
reimbursement for pending medical claims.
<PAGE>
Mr. Russell E. Stubbings
November 25, 1997
Page 2
2. TIMING AND METHOD OF PAYMENT. In the event you become entitled to a
severance benefit pursuant to paragraph 1, such severance benefit will be paid
in one lump sum within thirty (30) days after the date of your termination of
employment or, in the event that the Company requires that you submit a Waiver
pursuant to paragraph 1, within thirty (30) days after such Waiver becomes
irrevocable.
3. ASSUMPTION OF CAR LEASE. If you become entitled to a severance
benefit pursuant to paragraph 1, and, immediately prior to your termination of
employment, the Company or any of its affiliates was reimbursing you (in whole
or in part) for automobile lease payments made by you, then you may elect to
have the Company assume your remaining lease payment obligations under such
lease. Such election shall be made by giving written notice and delivering the
leased automobile and an assignment of the lease agreement with the consent of
the lessor to the Company within five (5) business days of your termination of
employment. In no event shall the Company or any of its affiliates assume any
liability arising with respect to your leasing and operation of the automobile
prior to the delivery of the automobile to the Company, including, without
limitation, responsibility for any damage to the automobile prior to its
delivery to the Company.
4. NO OTHER SEVERANCE BENEFIT. In the event you become entitled to the
severance benefit pursuant to paragraph 1, such severance benefit shall be in
lieu of any other severance benefit provided by the Company or any of its
affiliates pursuant to any other plan, policy or other arrangement, including
Severance Payments provided under your employment agreement in accordance with
the letter from the Company to you dated September 1, 1995; provided that you
may elect to receive your Severance Payments provided under your employment
agreement in lieu of the severance benefit provided under this letter agreement.
All other rights and obligations between you and the Company or any of its
affiliates pursuant to such employment agreement or any other agreement shall
remain in full force and effect.
5. BASE PAY. Your base pay shall be your highest base salary, without
consideration of bonus or employee benefits of any kind, that is in effect
immediately prior to or at any time after the occurrence of a Change in Control.
6. CHANGE IN CONTROL. A Change in Control shall be deemed to have
occurred if any of the following events occur prior to November 25, 1999:
a) any person or entity becomes the beneficial owner, directly or
indirectly, of securities representing in excess of fifty (50%) of the voting
securities of the Company, except for Chuck Meyer or Mark Mamolen;
<PAGE>
Mr. Russell E. Stubbings
November 25, 1997
Page 3
b) the Company sells or otherwise disposes of all or substantially
all of its assets;
c) persons who, at the beginning of any twelve (12) consecutive
month period, constitute the Board of Directors of the Company, at the end of
such period cease to constitute a majority of the Board of Directors of the
Company, unless the nomination or appointment of each new Director was approved
by a vote of at least two-thirds (2/3) of the Directors then still in office who
were Directors at the beginning of such period; or
d) the Company merges or combines with or into any other person or
entity and the shareholders of the Company immediately prior to the
consummation of the merger own less than fifty percent (50%) of the outstanding
voting securities of the surviving entity upon consummation of the merger.
7. FOR CAUSE. For Cause shall mean one or more of the following:
a) the commission of a felony (other than driving while intoxicated
or while under the influence of alcohol or drugs);
b) a willful dereliction of duty or intentional malicious conduct
contrary to the best interests of the Company or any of its affiliates and their
respective businesses if such dereliction of duty or misconduct is not corrected
within thirty (30) days after written notice thereof from the Company; or
c) a refusal to perform reasonable service customarily performed by
you (other than by reason of a disability) if such refusal is not corrected
within thirty (30) days after written notice thereof from the Company.
8. GOOD REASON. Good Reason shall mean one or more of the following:
a) the reduction of your base salary;
b) your assignment to a position which is inappropriate for an
individual of your ability and experience; or
c) a material reduction in your bonus opportunities or employee
benefits in the aggregate.
<PAGE>
Mr. Russell E. Stubbings
November 25, 1997
Page 4
9. GENERAL PROVISIONS.
a) NOTICES. Any notice required by this letter agreement shall be
deemed sufficient if sent by registered or certified mail postage prepaid, with
return receipt requested. Notices shall be addressed to the parties as follows:
If to you: Mr. Russell E. Stubbings
7060 W. Princeton
Denver, CO 80235
If to the Company: Deflecta-Shield Corporation
1275 Sherman Drive
Longmont, Colorado 80502
Attn: Vice President
Each party may change his or its address by written notice in accordance with
this paragraph. Notices shall be deemed effective at the time of their mailing.
b) WITHHOLDING OF TAXES. The Company may withhold from the
severance benefit payable under this letter agreement all federal, state, city
and local taxes as the Company may determine to be legally required.
c) EMPLOYMENT RIGHTS. This letter agreement does not constitute a
contract of employment and does not give you any right to be rehired or retained
in the employ of the Company or any related entity, or any other right or claim
to any benefit, unless such right or claim has specifically accrued under the
terms of this letter agreement.
d) NO RIGHT TO COMPANY ASSETS. Neither you nor any other person
shall acquire by reason of this letter agreement any right in or title to any
assets, funds or property of the Company or its affiliates. Any benefits which
become payable hereunder shall be unfunded obligations of the Company and shall
be paid from the general assets of the Company.
e) SUCCESSORS. This letter agreement shall be binding upon and
shall inure to the benefit of the successors and assigns of the Company. Any
successor to the Company shall be substituted for the Company with respect to
all provisions of this letter agreement.
f) INTERESTS NOT TRANSFERABLE. Your interest to a severance benefit
under this letter agreement is not subject to your debts or other obligations
and may not be voluntarily or involuntarily sold, transferred (other than by
reason of death), alienated, assigned or encumbered.
<PAGE>
Mr. Russell E. Stubbings
November 25, 1997
Page 5
g) MODIFICATION AND WAIVER. No amendment, modification, or
discharge of this letter agreement shall be valid or binding unless set forth in
writing and duly executed by you and the Company. Any waiver or consent by you
or the Company to any breach of or any variation from any provision of this
letter agreement shall be valid only if in writing and only in the specific
instance in which it is given, and such waiver or consent shall not be construed
as a waiver of any subsequent breach of any other provision or as a consent with
respect to any similar instance or circumstance.
h) SEVERABILITY. If any provision in this letter agreement is held
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall continue in full force and without being impaired or
invalidated in any way.
i) HEADINGS. The paragraph and subparagraph headings are for
reference only and shall not define or limit the provisions hereof.
This letter agreement shall be governed by Delaware law. Please sign and
return to the Company the enclosed copy of this letter if you accept and agree
to its terms and conditions.
Sincerely,
DEFLECTA-SHIELD CORPORATION Accepted:
By: _________________________ _________________________
Russell E. Stubbings
Date:_________________________ Date: ___________________
<PAGE>
EXHIBIT 99.6
November 25, 1997
Mr. Ronald C. Fox
Deflecta-Shield Corporation
1275 Sherman Drive
Longmont, CO 80502
Re: Severance Benefit After Change in Control
Dear Ron:
In order to encourage your full attention and dedication to your employment
with Deflecta-Shield Corporation ("Company") and its affiliates, the Company
has decided to provide you with a lump sum severance benefit that will be paid
to you in the event that, after the occurrence of a "Change in Control" (as
herein defined) of the Company, your employment with the Company and its
affiliates is terminated under the circumstances described in this letter
agreement:
1. SEVERANCE BENEFIT. If your employment with the Company and its
affiliates is terminated by the Company and its affiliates other than for
"Cause" (as herein defined) or by you for "Good Reason" (as herein defined)
within eighteen (18) months following the occurrence of a Change in Control, the
Company will pay you a severance benefit equal to eighteen (18) months' base
pay. If your employment with the Company and its affiliates is terminated by
the Company and its affiliates other than for Cause or by you for Good Reason
more than eighteen (18) months after, but less than twenty-four (24) months
after, the occurrence of a Change in Control, the Company will pay you a
severance benefit equal to nine (9) months' base pay. If you voluntarily
terminate your employment with the Company and its affiliates within twenty-four
months following a Change in Control because of a relocation of your place of
employment which would reasonably require you to relocate your personal
residence, the Company will pay you a severance benefit equal to three (3)
months' base pay. The Company, in its sole discretion, may elect to condition
your right to receive a severance benefit pursuant to this paragraph upon your
submission to the Company of a complete and valid waiver and release, in such
form as the Company may reasonably require, of any and all claims you may have
against the Company and its affiliates that may have arisen on or before your
termination of employment ("Waiver"). The Company shall exercise its election
to condition your severance benefit upon your submission of a Waiver to the
Company by written notice to you within five (5) business days after the later
of your termination of employment or the Company's receipt of written notice by
you that your termination of employment was for Good Reason. Such Waiver will
not require you to waive your right to receive the severance benefit described
herein, accrued vacation pay, your account balance under the 401(k) plan or
reimbursement for pending medical claims.
<PAGE>
Mr. Ronald C. Fox
November 25, 1997
Page 2
2. TIMING AND METHOD OF PAYMENT. In the event you become entitled to a
severance benefit pursuant to paragraph 1, such severance benefit will be paid
in one lump sum within thirty (30) days after the date of your termination of
employment or, in the event that the Company requires that you submit a Waiver
pursuant to paragraph 1, within thirty (30) days after such Waiver becomes
irrevocable.
3. ASSUMPTION OF CAR LEASE. If you become entitled to a severance
benefit pursuant to paragraph 1, and, immediately prior to your termination of
employment, the Company or any of its affiliates was reimbursing you (in whole
or in part) for automobile lease payments made by you, then you may elect to
have the Company assume your remaining lease payment obligations under such
lease. Such election shall be made by giving written notice and delivering the
leased automobile and an assignment of the lease agreement with the consent of
the lessor to the Company within five (5) business days of your termination of
employment. In no event shall the Company or any of its affiliates assume any
liability arising with respect to your leasing and operation of the automobile
prior to the delivery of the automobile to the Company, including, without
limitation, responsibility for any damage to the automobile prior to its
delivery to the Company.
4. NO OTHER SEVERANCE BENEFIT. In the event you become entitled to the
severance benefit pursuant to paragraph 1, such severance benefit shall be in
lieu of any other severance benefit provided by the Company or any of its
affiliates pursuant to any other plan, policy or other arrangement, including
Severance Payments provided under your employment agreement in accordance with
the letter from the Company to you dated October 28, 1996; provided that you may
elect to receive your Severance Payments provided under your employment
agreement in lieu of the severance benefit provided under this letter agreement.
All other rights and obligations between you and the Company or any of its
affiliates pursuant to such employment agreement or any other agreement shall
remain in full force and effect.
5. BASE PAY. Your base pay shall be your highest base salary, without
consideration of bonus or employee benefits of any kind, that is in effect
immediately prior to or at any time after the occurrence of a Change in Control.
6. CHANGE IN CONTROL. A Change in Control shall be deemed to have
occurred if any of the following events occur prior to November 25, 1999:
a) any person or entity becomes the beneficial owner, directly or
indirectly, of securities representing in excess of fifty (50%) of the voting
securities of the Company, except for Chuck Meyer or Mark Mamolen;
<PAGE>
Mr. Ronald C. Fox
November 25, 1997
Page 3
b) the Company sells or otherwise disposes of all or substantially
all of its assets;
c) persons who, at the beginning of any twelve (12) consecutive
month period, constitute the Board of Directors of the Company, at the end of
such period cease to constitute a majority of the Board of Directors of the
Company, unless the nomination or appointment of each new Director was approved
by a vote of at least two-thirds (2/3) of the Directors then still in office who
were Directors at the beginning of such period; or
d) the Company merges or combines with or into any other person or
entity and the shareholders of the Company immediately prior to the
consummation of the merger own less than fifty percent (50%) of the outstanding
voting securities of the surviving entity upon consummation of the merger.
7. FOR CAUSE. For Cause shall mean one or more of the following:
a) the commission of a felony (other than driving while intoxicated
or while under the influence of alcohol or drugs);
b) a willful dereliction of duty or intentional malicious conduct
contrary to the best interests of the Company or any of its affiliates and their
respective businesses if such dereliction of duty or misconduct is not corrected
within thirty (30) days after written notice thereof from the Company; or
c) a refusal to perform reasonable service customarily performed by
you (other than by reason of a disability) if such refusal is not corrected
within thirty (30) days after written notice thereof from the Company.
8. GOOD REASON. Good Reason shall mean one or more of the following:
a) the reduction of your base salary;
b) your assignment to a position which is inappropriate for an
individual of your ability and experience; or
c) a material reduction in your bonus opportunities or employee
benefits in the aggregate.
<PAGE>
Mr. Ronald C. Fox
November 25, 1997
Page 4
9. GENERAL PROVISIONS.
a) NOTICES. Any notice required by this letter agreement shall be
deemed sufficient if sent by registered or certified mail postage prepaid, with
return receipt requested. Notices shall be addressed to the parties as follows:
If to you: Mr. Ronald C. Fox
1315 Sommerset Circle
Longmont, CO 80501
If to the Company: Deflecta-Shield Corporation
1275 Sherman Drive
Longmont, Colorado 80502
Attn: President
Each party may change his or its address by written notice in accordance with
this paragraph. Notices shall be deemed effective at the time of their mailing.
b) WITHHOLDING OF TAXES. The Company may withhold from the
severance benefit payable under this letter agreement all federal, state, city
and local taxes as the Company may determine to be legally required.
c) EMPLOYMENT RIGHTS. This letter agreement does not constitute a
contract of employment and does not give you any right to be rehired or retained
in the employ of the Company or any related entity, or any other right or claim
to any benefit, unless such right or claim has specifically accrued under the
terms of this letter agreement.
d) NO RIGHT TO COMPANY ASSETS. Neither you nor any other person
shall acquire by reason of this letter agreement any right in or title to any
assets, funds or property of the Company or its affiliates. Any benefits which
become payable hereunder shall be unfunded obligations of the Company and shall
be paid from the general assets of the Company.
e) SUCCESSORS. This letter agreement shall be binding upon and
shall inure to the benefit of the successors and assigns of the Company. Any
successor to the Company shall be substituted for the Company with respect to
all provisions of this letter agreement.
f) INTERESTS NOT TRANSFERABLE. Your interest to a severance benefit
under this letter agreement is not subject to your debts or other obligations
and may not be voluntarily or involuntarily sold, transferred (other than by
reason of death), alienated, assigned or encumbered.
<PAGE>
Mr. Ronald C. Fox
November 25, 1997
Page 5
g) MODIFICATION AND WAIVER. No amendment, modification, or
discharge of this letter agreement shall be valid or binding unless set forth in
writing and duly executed by you and the Company. Any waiver or consent by you
or the Company to any breach of or any variation from any provision of this
letter agreement shall be valid only if in writing and only in the specific
instance in which it is given, and such waiver or consent shall not be construed
as a waiver of any subsequent breach of any other provision or as a consent with
respect to any similar instance or circumstance.
h) SEVERABILITY. If any provision in this letter agreement is held
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall continue in full force and without being impaired or
invalidated in any way.
i) HEADINGS. The paragraph and subparagraph headings are for
reference only and shall not define or limit the provisions hereof.
This letter agreement shall be governed by Delaware law. Please sign and
return to the Company the enclosed copy of this letter if you accept and agree
to its terms and conditions.
Sincerely,
DEFLECTA-SHIELD CORPORATION Accepted:
By: _________________________ ____________________________
Ronald C. Fox
Date:_________________________ Date: ______________________
<PAGE>
EXHIBIT 99.7
November 25, 1997
Mr. John A. Daniels
Deflecta-Shield Corporation
1275 Sherman Drive
Longmont, CO 80502
Re: Severance Benefit After Change in Control
Dear John:
In order to encourage your full attention and dedication to your employment
with Deflecta-Shield Corporation ("Company") and its affiliates, the Company
has decided to provide you with a lump sum severance benefit that will be paid
to you in the event that, after the occurrence of a "Change in Control" (as
herein defined) of the Company, your employment with the Company and its
affiliates is terminated under the circumstances described in this letter
agreement:
1. SEVERANCE BENEFIT. If your employment with the Company and its
affiliates is terminated by the Company and its affiliates other than for
"Cause" (as herein defined) or by you for "Good Reason" (as herein defined)
within eighteen (18) months following the occurrence of a Change in Control, the
Company will pay you a severance benefit equal to twelve (12) months' base pay.
If your employment with the Company and its affiliates is terminated by the
Company and its affiliates other than for Cause or by you for Good Reason more
than eighteen (18) months after, but less than twenty-four (24) months after,
the occurrence of a Change in Control, the Company will pay you a severance
benefit equal to six (6) months' base pay. If you voluntarily terminate your
employment with the Company and its affiliates within twenty-four months
following a Change in Control because of a relocation of your place of
employment which would reasonably require you to relocate your personal
residence, the Company will pay you a severance benefit equal to three (3)
months' base pay. The Company, in its sole discretion, may elect to condition
your right to receive a severance benefit pursuant to this paragraph upon your
submission to the Company of a complete and valid waiver and release, in such
form as the Company may reasonably require, of any and all claims you may have
against the Company and its affiliates that may have arisen on or before your
termination of employment ("Waiver"). The Company shall exercise its election
to condition your severance benefit upon your submission of a Waiver to the
Company by written notice to you within five (5) business days after the later
of your termination of employment or the Company's receipt of written notice by
you that your termination of employment was for Good Reason. Such Waiver will
not require you to waive your right to receive the severance benefit described
herein, accrued vacation pay, your account balance under the 401(k) plan or
reimbursement for pending medical claims.
<PAGE>
Mr. John A. Daniels
November 25, 1997
Page 2
2. TIMING AND METHOD OF PAYMENT. In the event you become entitled to a
severance benefit pursuant to paragraph 1, such severance benefit will be paid
in one lump sum within thirty (30) days after the date of your termination of
employment or, in the event that the Company requires that you submit a Waiver
pursuant to paragraph 1, within thirty (30) days after such Waiver becomes
irrevocable.
3. ASSUMPTION OF CAR LEASE. If you become entitled to a severance
benefit pursuant to paragraph 1, and, immediately prior to your termination of
employment, the Company or any of its affiliates was reimbursing you (in whole
or in part) for automobile lease payments made by you, then you may elect to
have the Company assume your remaining lease payment obligations under such
lease. Such election shall be made by giving written notice and delivering the
leased automobile and an assignment of the lease agreement with the consent of
the lessor to the Company within five (5) business days of your termination of
employment. In no event shall the Company or any of its affiliates assume any
liability arising with respect to your leasing and operation of the automobile
prior to the delivery of the automobile to the Company, including, without
limitation, responsibility for any damage to the automobile prior to its
delivery to the Company.
4. NO OTHER SEVERANCE BENEFIT. In the event you become entitled to the
severance benefit pursuant to paragraph 1, such severance benefit shall be in
lieu of any other severance benefit provided by the Company or any of its
affiliates pursuant to any other plan, policy or other arrangement, including
Severance Compensation provided under the agreement between you and DFM Corp.
dated June 15, 1990; provided that you may elect to receive your Severance
Compensation provided under the agreement between you and DFM Corp. in lieu of
the severance benefit provided under this letter agreement. All other rights
and obligations between you and the Company or any of its affiliates pursuant to
such agreement or any other agreement shall remain in full force and effect.
5. BASE PAY. Your base pay shall be your highest base salary, without
consideration of bonus or employee benefits of any kind, that is in effect
immediately prior to or at any time after the occurrence of a Change in Control.
6. CHANGE IN CONTROL. A Change in Control shall be deemed to have
occurred if any of the following events occur prior to November 25, 1999:
a) any person or entity becomes the beneficial owner, directly or
indirectly, of securities representing in excess of fifty (50%) of the voting
securities of the Company, except for Chuck Meyer or Mark Mamolen;
<PAGE>
Mr. John A. Daniels
November 25, 1997
Page 3
b) the Company sells or otherwise disposes of all or substantially
all of its assets;
c) persons who, at the beginning of any twelve (12) consecutive
month period, constitute the Board of Directors of the Company, at the end of
such period cease to constitute a majority of the Board of Directors of the
Company, unless the nomination or appointment of each new Director was approved
by a vote of at least two-thirds (2/3) of the Directors then still in office who
were Directors at the beginning of such period; or
d) the Company merges or combines with or into any other person or
entity and the shareholders of the Company immediately prior to the
consummation of the merger own less than fifty percent (50%) of the outstanding
voting securities of the surviving entity upon consummation of the merger.
7. FOR CAUSE. For Cause shall mean one or more of the following:
a) the commission of a felony (other than driving while intoxicated
or while under the influence of alcohol or drugs);
b) a willful dereliction of duty or intentional malicious conduct
contrary to the best interests of the Company or any of its affiliates and their
respective businesses if such dereliction of duty or misconduct is not corrected
within thirty (30) days after written notice thereof from the Company; or
c) a refusal to perform reasonable service customarily performed by
you (other than by reason of a disability) if such refusal is not corrected
within thirty (30) days after written notice thereof from the Company.
8. GOOD REASON. Good Reason shall mean one or more of the following:
a) the reduction of your base salary;
b) your assignment to a position which is inappropriate for an
individual of your ability and experience; or
c) a material reduction in your bonus opportunities or employee
benefits in the aggregate.
<PAGE>
Mr. John A. Daniels
November 25, 1997
Page 4
9. GENERAL PROVISIONS.
a) NOTICES. Any notice required by this letter agreement shall be
deemed sufficient if sent by registered or certified mail postage prepaid, with
return receipt requested. Notices shall be addressed to the parties as follows:
If to you: Mr. John A. Daniels
34088 N. Lavendar Circle
Grayslake, IL 60030
If to the Company: Deflecta-Shield Corporation
1275 Sherman Drive
Longmont, Colorado 80502
Attn: President
Each party may change his or its address by written notice in accordance with
this paragraph. Notices shall be deemed effective at the time of their mailing.
b) WITHHOLDING OF TAXES. The Company may withhold from the
severance benefit payable under this letter agreement all federal, state, city
and local taxes as the Company may determine to be legally required.
c) EMPLOYMENT RIGHTS. This letter agreement does not constitute a
contract of employment and does not give you any right to be rehired or retained
in the employ of the Company or any related entity, or any other right or claim
to any benefit, unless such right or claim has specifically accrued under the
terms of this letter agreement.
d) NO RIGHT TO COMPANY ASSETS. Neither you nor any other person
shall acquire by reason of this letter agreement any right in or title to any
assets, funds or property of the Company or its affiliates. Any benefits which
become payable hereunder shall be unfunded obligations of the Company and shall
be paid from the general assets of the Company.
e) SUCCESSORS. This letter agreement shall be binding upon and
shall inure to the benefit of the successors and assigns of the Company. Any
successor to the Company shall be substituted for the Company with respect to
all provisions of this letter agreement.
f) INTERESTS NOT TRANSFERABLE. Your interest to a severance benefit
under this letter agreement is not subject to your debts or other obligations
and may not be voluntarily or involuntarily sold, transferred (other than by
reason of death), alienated, assigned or encumbered.
<PAGE>
Mr. John A. Daniels
November 25, 1997
Page 5
g) MODIFICATION AND WAIVER. No amendment, modification, or
discharge of this letter agreement shall be valid or binding unless set forth in
writing and duly executed by you and the Company. Any waiver or consent by you
or the Company to any breach of or any variation from any provision of this
letter agreement shall be valid only if in writing and only in the specific
instance in which it is given, and such waiver or consent shall not be construed
as a waiver of any subsequent breach of any other provision or as a consent with
respect to any similar instance or circumstance.
h) SEVERABILITY. If any provision in this letter agreement is held
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall continue in full force and without being impaired or
invalidated in any way.
i) HEADINGS. The paragraph and subparagraph headings are for
reference only and shall not define or limit the provisions hereof.
This letter agreement shall be governed by Delaware law. Please sign and
return to the Company the enclosed copy of this letter if you accept and agree
to its terms and conditions.
Sincerely,
DEFLECTA-SHIELD CORPORATION Accepted:
By: ___________________________ ___________________________
John A. Daniels
Date:___________________________ Date: _____________________
<PAGE>
EXHIBIT 99.8
November 25, 1997
Mr. Richard D. Minehart, Jr.
Deflecta-Shield Corporation
1275 Sherman Drive
Longmont, CO 80502
Re: Severance Benefit After Change in Control
Dear Dick:
In order to encourage your full attention and dedication to your employment
with Deflecta-Shield Corporation ("Company") and its affiliates, the Company
has decided to provide you with a lump sum severance benefit that will be paid
to you in the event that, after the occurrence of a "Change in Control" (as
herein defined) of the Company, your employment with the Company and its
affiliates is terminated under the circumstances described in this letter
agreement:
1. SEVERANCE BENEFIT. If your employment with the Company and its
affiliates is terminated by the Company and it affiliates other than for "Cause"
(as herein defined) or by you for "Good Reason" (as herein defined) within
eighteen (18) months following the occurrence of a Change in Control, the
Company will pay you a severance benefit equal to twelve (12) months' base pay.
If your employment with the Company and its affiliates is terminated by the
Company and its affiliates other than for Cause or by you for Good Reason more
than eighteen (18) months after, but less than twenty-four (24) months after,
the occurrence of a Change in Control, the Company will pay you a severance
benefit equal to six (6) months' base pay. If you voluntarily terminate your
employment with the Company and its affiliates within twenty-four months
following a Change in Control because of a relocation of your place of
employment which would reasonably require you to relocate your personal
residence, the Company will pay you a severance benefit equal to three (3)
months' base pay. The Company, in its sole discretion, may elect to condition
your right to receive a severance benefit pursuant to this paragraph upon your
submission to the Company of a complete and valid waiver and release, in such
form as the Company may reasonably require, of any and all claims you may have
against the Company and its affiliates that may have arisen on or before your
termination of employment ("Waiver"). The Company shall exercise its election
to condition your severance benefit upon your submission of a Waiver to the
Company by written notice to you within five (5) business days after the later
of your termination of employment or the Company's receipt of written notice by
you that your termination of employment was for Good Reason. Such Waiver will
not require you to waive your right to receive the severance benefit described
herein, accrued vacation pay, your account balance under the 401(k) plan or
reimbursement for pending medical claims.
<PAGE>
Mr. Richard D. Minehart, Jr.
November 25, 1997
Page 2
2. TIMING AND METHOD OF PAYMENT. In the event you become entitled to a
severance benefit pursuant to paragraph 1, such severance benefit will be paid
in one lump sum within thirty (30) days after the date of your termination of
employment or, in the event that the Company requires that you submit a Waiver
pursuant to paragraph 1, within thirty (30) days after such Waiver becomes
irrevocable.
3. ASSUMPTION OF CAR LEASE. If you become entitled to a severance
benefit pursuant to paragraph 1, and, immediately prior to your termination of
employment, the Company or any of its affiliates was reimbursing you (in whole
or in part) for automobile lease payments made by you, then you may elect to
have the Company assume your remaining lease payment obligations under such
lease. Such election shall be made by giving written notice and delivering the
leased automobile and an assignment of the lease agreement with the consent of
the lessor to the Company within five (5) business days of your termination of
employment. In no event shall the Company or any of its affiliates assume any
liability arising with respect to your leasing and operation of the automobile
prior to the delivery of the automobile to the Company, including, without
limitation, responsibility for any damage to the automobile prior to its
delivery to the Company.
4. NO OTHER SEVERANCE BENEFIT. In the event you become entitled to the
severance benefit pursuant to paragraph 1, such severance benefit shall be in
lieu of any other severance benefit provided by the Company or any of its
affiliates pursuant to any other plan, policy or other arrangement, including
Severance Payments provided under your employment agreement in accordance with
the letter from the Company to you dated February 7, 1996; provided that you may
elect to receive your lump sum Severance Payment provided under your employment
agreement in lieu of the severance benefit provided under this letter agreement.
All other rights and obligations between you and the Company or any of its
affiliates pursuant to such employment agreement or any other agreement shall
remain in full force and effect.
5. BASE PAY. Your base pay shall be your highest base salary, without
consideration of bonus or employee benefits of any kind, that is in effect
immediately prior to or at any time after the occurrence of a Change in Control.
6. CHANGE IN CONTROL. A Change in Control shall be deemed to have
occurred if any of the following events occur prior to November 25, 1999:
a) any person or entity becomes the beneficial owner, directly or
indirectly, of securities representing in excess of fifty (50%) of the voting
securities of the Company, except for Chuck Meyer or Mark Mamolen;
<PAGE>
Mr. Richard D. Minehart, Jr.
November 25, 1997
Page 3
b) the Company sells or otherwise disposes of all or substantially
all of its assets;
c) persons who, at the beginning of any twelve (12) consecutive
month period, constitute the Board of Directors of the Company, at the end of
such period cease to constitute a majority of the Board of Directors of the
Company, unless the nomination or appointment of each new Director was approved
by a vote of at least two-thirds (2/3) of the Directors then still in office who
were Directors at the beginning of such period; or
d) the Company merges or combines with or into any other person or
entity and the shareholders of the Company immediately prior to the
consummation of the merger own less than fifty percent (50%) of the outstanding
voting securities of the surviving entity upon consummation of the merger.
7. FOR CAUSE. For Cause shall mean one or more of the following:
a) the commission of a felony (other than driving while intoxicated
or while under the influence of alcohol or drugs);
b) a willful dereliction of duty or intentional malicious conduct
contrary to the best interests of the Company or any of its affiliates and their
respective businesses if such dereliction of duty or misconduct is not corrected
within thirty (30) days after written notice thereof from the Company; or
c) a refusal to perform reasonable service customarily performed by
you (other than by reason of a disability) if such refusal is not corrected
within thirty (30) days after written notice thereof from the Company.
8. GOOD REASON. Good Reason shall mean one or more of the following:
a) the reduction of your base salary;
b) your assignment to a position which is inappropriate for an
individual of your ability and experience; or
c) a material reduction in your bonus opportunities or employee
benefits in the aggregate.
<PAGE>
Mr. Richard D. Minehart, Jr.
November 25, 1997
Page 4
9. GENERAL PROVISIONS.
a) NOTICES. Any notice required by this letter agreement shall be
deemed sufficient if sent by registered or certified mail postage prepaid, with
return receipt requested. Notices shall be addressed to the parties as follows:
If to you: Mr. Richard D. Minehart, Jr.
462 Pine Woods Drive
Barrington, IL 60010
If to the Company: Deflecta-Shield Corporation
1275 Sherman Drive
Longmont, Colorado 80502
Attn: President
Each party may change his or its address by written notice in accordance with
this paragraph. Notices shall be deemed effective at the time of their mailing.
b) WITHHOLDING OF TAXES. The Company may withhold from the
severance benefit payable under this letter agreement all federal, state, city
and local taxes as the Company may determine to be legally required.
c) EMPLOYMENT RIGHTS. This letter agreement does not constitute a
contract of employment and does not give you any right to be rehired or retained
in the employ of the Company or any related entity, or any other right or claim
to any benefit, unless such right or claim has specifically accrued under the
terms of this letter agreement.
d) NO RIGHT TO COMPANY ASSETS. Neither you nor any other person
shall acquire by reason of this letter agreement any right in or title to any
assets, funds or property of the Company or its affiliates. Any benefits which
become payable hereunder shall be unfunded obligations of the Company and shall
be paid from the general assets of the Company.
e) SUCCESSORS. This letter agreement shall be binding upon and
shall inure to the benefit of the successors and assigns of the Company. Any
successor to the Company shall be substituted for the Company with respect to
all provisions of this letter agreement.
f) INTERESTS NOT TRANSFERABLE. Your interest to a severance benefit
under this letter agreement is not subject to your debts or other obligations
and may not be voluntarily or involuntarily sold, transferred (other than by
reason of death), alienated, assigned or encumbered.
<PAGE>
Mr. Richard D. Minehart, Jr.
November 25, 1997
Page 5
g) MODIFICATION AND WAIVER. No amendment, modification, or
discharge of this letter agreement shall be valid or binding unless set forth in
writing and duly executed by you and the Company. Any waiver or consent by you
or the Company to any breach of or any variation from any provision of this
letter agreement shall be valid only if in writing and only in the specific
instance in which it is given, and such waiver or consent shall not be construed
as a waiver of any subsequent breach of any other provision or as a consent with
respect to any similar instance or circumstance.
h) SEVERABILITY. If any provision in this letter agreement is held
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall continue in full force and without being impaired or
invalidated in any way.
i) HEADINGS. The paragraph and subparagraph headings are for
reference only and shall not define or limit the provisions hereof.
This letter agreement shall be governed by Delaware law. Please sign and
return to the Company the enclosed copy of this letter if you accept and agree
to its terms and conditions.
Sincerely,
DEFLECTA-SHIELD CORPORATION Accepted:
By: ______________________ ____________________________
Richard D. Minehart, Jr.
Date: _____________________ Date: ______________________
<PAGE>
EXHIBIT 99.9
November 25, 1997
Mr. James T. Jurinak
Deflecta-Shield Corporation
1275 Sherman Drive
Longmont, CO 80502
Re: Severance Benefit After Change in Control
Dear Jim:
In order to encourage your full attention and dedication to your employment
with Deflecta-Shield Corporation ("Company") and its affiliates, the Company
has decided to provide you with a lump sum severance benefit that will be paid
to you in the event that, after the occurrence of a "Change in Control" (as
herein defined) of the Company, your employment with the Company and its
affiliates is terminated under the circumstances described in this letter
agreement:
1. SEVERANCE BENEFIT. If your employment with the Company and its
affiliates is terminated by the Company and its affiliates other than for
"Cause" (as herein defined) or by you for "Good Reason" (as herein defined)
within eighteen (18) months following the occurrence of a Change in Control, the
Company will pay you a severance benefit equal to twelve (12) months' base pay.
If your employment with the Company and its affiliates is terminated by the
Company and its affiliates other than for Cause or by you for Good Reason more
than eighteen (18) months after, but less than twenty-four (24) months after,
the occurrence of a Change in Control, the Company will pay you a severance
benefit equal to six (6) months' base pay. If you voluntarily terminate your
employment with the Company and its affiliates within twenty-four months
following a Change in Control because of a relocation of your place of
employment which would reasonably require you to relocate your personal
residence, the Company will pay you a severance benefit equal to three (3)
months' base pay. The Company, in its sole discretion, may elect to condition
your right to receive a severance benefit pursuant to this paragraph upon your
submission to the Company of a complete and valid waiver and release, in such
form as the Company may reasonably require, of any and all claims you may have
against the Company and its affiliates that may have arisen on or before your
termination of employment ("Waiver"). The Company shall exercise its election
to condition your severance benefit upon your submission of a Waiver to the
Company by written notice to you within five (5) business days after the later
of your termination of employment or the Company's receipt of written notice by
you that your termination of employment was for Good Reason. Such Waiver will
not require you to waive your right to receive the severance benefit described
herein, accrued vacation pay, your account balance under the 401(k) plan or
reimbursement for pending medical claims.
<PAGE>
Mr. James T. Jurinak
November 25, 1997
Page 2
2. TIMING AND METHOD OF PAYMENT. In the event you become entitled to a
severance benefit pursuant to paragraph 1, such severance benefit will be paid
in one lump sum within thirty (30) days after the date of your termination of
employment or, in the event that the Company requires that you submit a Waiver
pursuant to paragraph 1, within thirty (30) days after such Waiver becomes
irrevocable.
3. ASSUMPTION OF CAR LEASE. If you become entitled to a severance
benefit pursuant to paragraph 1, and, immediately prior to your termination of
employment, the Company or any of its affiliates was reimbursing you (in whole
or in part) for automobile lease payments made by you, then you may elect to
have the Company assume your remaining lease payment obligations under such
lease. Such election shall be made by giving written notice and delivering the
leased automobile and an assignment of the lease agreement with the consent of
the lessor to the Company within five (5) business days of your termination of
employment. In no event shall the Company or any of its affiliates assume any
liability arising with respect to your leasing and operation of the automobile
prior to the delivery of the automobile to the Company, including, without
limitation, responsibility for any damage to the automobile prior to its
delivery to the Company.
4. NO OTHER SEVERANCE BENEFIT. In the event you become entitled to the
severance benefit pursuant to paragraph 1, such severance benefit shall be in
lieu of any other severance benefit provided by the Company or any of its
affiliates pursuant to any other plan, policy or other arrangement, including
Severance Payments provided under your employment agreement in accordance with
the letter from the Company to you dated October 14, 1996; provided that you may
elect to receive your Severance Payments provided under your employment
agreement in lieu of the severance benefit provided under this letter agreement.
All other rights and obligations between you and the Company or any of its
affiliates pursuant to such employment agreement or any other agreement shall
remain in full force and effect.
5. BASE PAY. Your base pay shall be your highest base salary, without
consideration of bonus or employee benefits of any kind, that is in effect
immediately prior to or at any time after the occurrence of a Change in Control.
6. CHANGE IN CONTROL. A Change in Control shall be deemed to have
occurred if any of the following events occur prior to November 25, 1999:
a) any person or entity becomes the beneficial owner, directly or
indirectly, of securities representing in excess of fifty (50%) of the voting
securities of the Company, except for Chuck Meyer or Mark Mamolen;
<PAGE>
Mr. James T. Jurinak
November 25, 1997
Page 3
b) the Company sells or otherwise disposes of all or substantially
all of its assets;
c) persons who, at the beginning of any twelve (12) consecutive
month period, constitute the Board of Directors of the Company, at the end of
such period cease to constitute a majority of the Board of Directors of the
Company, unless the nomination or appointment of each new Director was approved
by a vote of at least two-thirds (2/3) of the Directors then still in office who
were Directors at the beginning of such period; or
d) the Company merges or combines with or into any other person or
entity and the shareholders of the Company immediately prior to the
consummation of the merger own less than fifty percent (50%) of the outstanding
voting securities of the surviving entity upon consummation of the merger.
7. FOR CAUSE. For Cause shall mean one or more of the following:
a) the commission of a felony (other than driving while intoxicated
or while under the influence of alcohol or drugs);
b) a willful dereliction of duty or intentional malicious conduct
contrary to the best interests of the Company or any of its affiliates and their
respective businesses if such dereliction of duty or misconduct is not corrected
within thirty (30) days after written notice thereof from the Company; or
c) a refusal to perform reasonable service customarily performed by
you (other than by reason of a disability) if such refusal is not corrected
within thirty (30) days after written notice thereof from the Company.
8. GOOD REASON. Good Reason shall mean one or more of the following:
a) the reduction of your base salary;
b) your assignment to a position which is inappropriate for an
individual of your ability and experience; or
c) a material reduction in your bonus opportunities or employee
benefits in the aggregate.
<PAGE>
Mr. James T. Jurinak
November 25, 1997
Page 4
9. GENERAL PROVISIONS.
a) NOTICES. Any notice required by this letter agreement shall be
deemed sufficient if sent by registered or certified mail postage prepaid, with
return receipt requested. Notices shall be addressed to the parties as follows:
If to you: Mr. James T. Jurinak
1115 Oak Hurst Drive
Broomfield, CO 80020
If to the Company: Deflecta-Shield Corporation
1275 Sherman Drive
Longmont, Colorado 80502
Attn: President
Each party may change his or its address by written notice in accordance with
this paragraph. Notices shall be deemed effective at the time of their mailing.
b) WITHHOLDING OF TAXES. The Company may withhold from the
severance benefit payable under this letter agreement all federal, state, city
and local taxes as the Company may determine to be legally required.
c) EMPLOYMENT RIGHTS. This letter agreement does not constitute a
contract of employment and does not give you any right to be rehired or retained
in the employ of the Company or any related entity, or any other right or claim
to any benefit, unless such right or claim has specifically accrued under the
terms of this letter agreement.
d) NO RIGHT TO COMPANY ASSETS. Neither you nor any other person
shall acquire by reason of this letter agreement any right in or title to any
assets, funds or property of the Company or its affiliates. Any benefits which
become payable hereunder shall be unfunded obligations of the Company and shall
be paid from the general assets of the Company.
e) SUCCESSORS. This letter agreement shall be binding upon and
shall inure to the benefit of the successors and assigns of the Company. Any
successor to the Company shall be substituted for the Company with respect to
all provisions of this letter agreement.
f) INTERESTS NOT TRANSFERABLE. Your interest to a severance benefit
under this letter agreement is not subject to your debts or other obligations
and may not be voluntarily or involuntarily sold, transferred (other than by
reason of death), alienated, assigned or encumbered.
<PAGE>
Mr. James T. Jurinak
November 25, 1997
Page 5
g) MODIFICATION AND WAIVER. No amendment, modification, or
discharge of this letter agreement shall be valid or binding unless set forth in
writing and duly executed by you and the Company. Any waiver or consent by you
or the Company to any breach of or any variation from any provision of this
letter agreement shall be valid only if in writing and only in the specific
instance in which it is given, and such waiver or consent shall not be construed
as a waiver of any subsequent breach of any other provision or as a consent with
respect to any similar instance or circumstance.
h) SEVERABILITY. If any provision in this letter agreement is held
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall continue in full force and without being impaired or
invalidated in any way.
i) HEADINGS. The paragraph and subparagraph headings are for
reference only and shall not define or limit the provisions hereof.
This letter agreement shall be governed by Delaware law. Please sign and
return to the Company the enclosed copy of this letter if you accept and agree
to its terms and conditions.
Sincerely,
DEFLECTA-SHIELD CORPORATION Accepted:
By: _______________________ __________________________
James T. Jurinak
Date:_______________________ Date: ____________________
<PAGE>
EXHIBIT 99.10
<TABLE>
<S> <C> <C>
Contacts: For Lund For Harvest Partners George For Deflecta-Shield Ron Fox
International Holdings Sard/Anton Nicholas Sard 515/961-6100
William J. McMahon/Kathy Verbinnen & Co 212-687-8080
Smith 612/576-4200
</TABLE>
LUND TO ACQUIRE DEFLECTA-SHIELD FOR $16 PER SHARE IN CASH,
CREATING LEADING MAKER OF LIGHT TRUCK APPEARANCE ACCESSORIES
HARVEST PARTNERS TO INCREASE OWNERSHIP OF LUND
ANOKA, MN, and INDIANOLA, IA, November 26, 1997 -- Lund International
Holdings Inc. (NASDAQ: LUND), a leading manufacturer of appearance accessories
for light trucks, and Deflecta-Shield Corporation (NASDAQ: TRUX), a leading
manufacturer of both light truck and heavy truck accessories, today announced
they have signed a definitive merger agreement that will create the preeminent
manufacturer of light truck appearance accessories and a leader across the
entire truck accessories market.
The agreement, approved unanimously by both Boards of Directors, provides
for Lund to acquire Deflecta-Shield for $16 per share in cash. Under the
agreement, Lund will make a tender offer for all 4.8 million Deflecta-Shield
shares and expects to commence the offer promptly. Two principal shareholders,
who in total own approximately 40% of Deflecta-Shield shares, have already
agreed to tender their shares. Any shares not tendered and purchased pursuant to
the tender offer will be cashed out in a subsequent merger at the net cash price
of $16 per share, subject to appraisal rights under applicable Delaware law.
The transaction, expected to close late next month, has a total value of
approximately $90 million including approximately $10 million in assumed debt.
The acquisition is expected to be accretive to Lund's earnings per share in 1998
and increasingly accretive thereafter. Revenues of the combined companies are
expected to be approximately $130 million in 1998.
As part of the transaction, an affiliate of Harvest Partners, a leading New
York private investment firm, will invest as equity approximately $30 million in
Lund to increase its ownership in the Company. Harvest acquired a 38.4% stake in
Lund from founder Allan Lund on September 9, 1997. Lund International also has
committed debt financing of $87 million from Heller Financial Inc. for the
acquisition of Deflecta-Shield and for working capital.
"This acquisition combines Lund's leading position and brand name strength
in accessories for pick-up trucks, sport utility vehicles and minivans with
Deflecta-Shield's complementary strengths and history of strong revenue growth
to create the leader in the truck appearance accessories market," said William
J. McMahon, Chief Executive of Lund International. "We believe this company will
create tremendous breadth and strength across a wide variety of products and
services for our customers. The acquisition should maximize value for our
shareholders by creating synergies while opening up new sales opportunities for
Lund in the heavy truck category and the OEM market. We are excited by the
superb growth prospects of the combined companies."
Russell E. Stubbings, President and Chief Executive Officer of
Deflecta-Shield, said, "Joining a first-class company like Lund International
- --with operations, products and services that complement our own so
well--creates significant benefits for both companies. This strategic
partnership will create tremendous products and services for our customers while
maximizing value for our shareholders. We look forward to working with Lund to
integrate the two companies quickly and effectively."
"The combination of Lund and Deflecta-Shield will create a powerhouse in the
fragmented $1.5 billion light truck accessories market, where no other company
in the markets we serve has annual sales in excess of $100 million," said Ira
Kleinman, a General Partner of Harvest Partners who recently became Chairman of
the Board of Lund International. "Lund is a superb platform for further growth,
and we intend to seek more acquisitions in this consolidating industry."
<PAGE>
The closing of the tender offer will be subject to a majority of the common
stock of Deflecta-Shield on a fully diluted basis being tendered, as well as to
other customary conditions. The merger agreement restricts Deflecta-Shield from
actively soliciting any other offers while, consistent with the fiduciary duties
of the Deflecta-Shield Board of Directors, providing that Deflecta-Shield may
respond to certain unsolicited offers or indications of interest. The agreement
also provides for appropriate break-up fees for Lund under certain
circumstances, including the termination of the merger agreement by
Deflecta-Shield to accept a superior proposal, in which event the shareholder
agreement to tender to Lund also terminates.
Piper Jaffray Companies Inc. is the financial advisor to Lund. Wasserstein
Perella & Co. LLC is the financial advisor to Deflecta-Shield and provided a
fairness opinion to the Company.
Based in Anoka, MN, Lund International Holdings is a leading designer,
manufacturer and marketer of a broad line of fiberglass and plastic appearance
accessories for new and used light trucks, including pick-up trucks, sport
utility vehicles, mini-vans and other vans.
With annual sales of $72 million, Deflecta-Shield manufactures fiberglass,
plastic and aluminum appearance accessories for light trucks and heavy trucks.
Based in Indianola, IA, the company also supplies suspension systems and shock
absorbers for light trucks.
Harvest Partners, Inc. is a private investment firm which focuses on
management buyouts and growth financings of medium-size manufacturing, specialty
services and distribution businesses. Founded in 1981, Harvest is best known for
its expertise in structuring multinational management buyouts and for its
successful platform acquisitions. Harvest currently has in excess of $600
million in capital under management from leading U.S. and multinational
institutions, including Asea Brown Boveri, Volvo, an equity affiliate of
Deutsche Bank, MassMutual, PPM America, and several leading public and private
U.S. pension funds. # # #
Statements in this press release relating to future financial results,
ongoing company operations, the effects of the acquisition, trends and market
analysis, among others, are forward-looking statements under the Private
Securities Litigation Reform Act of 1995. These statements involve risks and
uncertainties which could cause results to differ materially from those
anticipated. Among the factors that could cause anticipated results of the
acquisition to differ materially are the following: inability to obtain expected
efficiencies, or to obtain them in a timely manner; inability to effectively
manage a larger enterprise, to integrate the two companies, or to control costs
associated with such integration; and the representations, warranties and
covenants made in the merger agreement proving to be materially untrue. In
addition, both Lund's business and Deflecta-shield's business and operations
(and anticipated results) including the following: consumer preference changes,
risk of expansion into new distribution channels, delays in designing,
developing, testing or shipping of products, increased competition, general
economic developments and trends, developments and trends in the light truck and
automotive accessory market and increased costs. This is not an exhaustive list
and the Company may supplement this list in future filings or releases or in
connection with the making of forward-looking statements.
<PAGE>
DEFLECTA-SHIELD CORPORATION
1800 North Ninth Street
Indianola, IA 50125
October 31, 1997
PERSONAL AND CONFIDENTIAL
Harvest Partners, Inc.
767 Third Avenue
New York, New York
Attn: Ira D. Kleinman
Lund International Holdings, Inc.
911 Lund Boulevard
Anoka, Minnesota 55303
Ladies and Gentlemen:
Deflecta-Shield Corporation, a Delaware corporation ("Deflecta") and Lund
International Holdings, Inc. ("Lund"; each of Deflecta and Lund also being
referred to as a "Company" and together as the "Companies") each have expressed
an interest in exploring a significant transaction involving the two companies
(a "Transaction"). In order to allow the Companies to evaluate a possible
Transaction, each would like the other to deliver certain information about
itself. The Companies agree that certain of such information is confidential and
that damage could result if such information were disclosed to a third party or
used for purposes other than to evaluate a possible Transaction. The Companies
have further agreed to certain other matters respecting their respective due
diligence and their conduct should a Transaction not be consummated and
otherwise.
For purposes of this agreement, the following terms will have the
following meanings: (a) "Disclosing Party" -- Deflecta or Lund and its
respective subsidiaries, as applicable, when it is disclosing information to the
other; and (b) "Receiving Party" -- Deflecta or Lund and its respective
subsidiaries, as applicable, when it is receiving information from the other.
For purposes of this agreement, all information concerning the Disclosing
Party to be provided to a Receiving Party or its employees, agents, advisors or
other representatives (including, without limitation, lawyers, accountants,
consultants and investment bankers or advisors), or subsidiaries or affiliates,
or prospective financing sources (collectively, ""Representatives," which term
shall include, without limitation, with respect to Lund, Harvest Partners, Inc.
("Harvest")), together with any other information respecting the Disclosing
Party, or its subsidiaries or affiliates, which has already been provided to a
Receiving Party or its Representatives (whether prepared by
<PAGE>
Harvest Partners, Inc.
Lund International Holdings, Inc.
October 31, 1997
Page 2
a Company, its agents, advisors or otherwise and irrespective of the form of
communication), is hereafter collectively referred to as the "Confidential
Material." The term "Confidential Material" also includes all notes, analyses,
compilations, studies, interpretations or other material prepared by the
Receiving Party or its Representatives containing or based, in whole or in part,
on any Confidential Material furnished by a Company or its representatives.
The term "Confidential Material" does not include information which (i)
was or becomes generally available to the public other than as a result,
directly or indirectly, of any disclosure by the Receiving Party or its
Representatives in violation of the terms hereof; (ii) was or becomes available
to the Receiving Party or its Representatives on a nonconfidential basis from a
source other than the Disclosing Party or its Representatives, provided that
such source is not to the knowledge of the Receiving Party or the knowledge of
its Representatives (x) bound by a confidentiality agreement with the Disclosing
Party or (y) otherwise prohibited from transmitting the information to the
Receiving Party by a contractual, legal or fiduciary obligation; or (iii) was
within the Receiving Party's possession prior to its being furnished to the
Receiving Party or its Representatives by or on behalf of the Disclosing Party,
provided that the source of such information was not known by it or its
Representatives to be bound by a confidentiality agreement with the Disclosing
Party, or to be otherwise prohibited from transmitting the information to the
Receiving Party by a contractual, legal or fiduciary obligation.
Each of the Companies desires to maintain the confidentiality of the
Confidential Material and is making it available to the other and its
Representatives only upon the terms and conditions set forth below. In
consideration of the opportunity to review the Confidential Material, each of
the Companies and Harvest hereby agrees for itself and its Representatives with
respect to the Confidential Information of the other or of the Company other
than the one of which it is an affiliate, and otherwise, as follows:
1. Not to use for any purpose any portion of the Confidential
Material except to evaluate a possible Transaction.
2. Not to disclose to any person any portion of the Confidential
Material except to its Representatives who need to know such information
for the purpose of evaluating a possible Transaction and who, prior to
being provided with the Confidential Material, shall be advised by the
Receiving Party of this agreement and shall agree to comply with the terms
hereof (and you shall cause them to so comply) to the same extent as if
they were parties hereto. Each Receiving Party shall maintain a list of
those Representatives to whom Confidential Information is disclosed, which
list will be available to the Disclosing Party upon request.
<PAGE>
Harvest Partners, Inc.
Lund International Holdings, Inc.
October 31, 1997
Page 3
3. Lund and Harvest agree not to disclose to any person except to
Lund's Representatives (i) that this agreement exists or that the
Confidential Material has been made available to them, (ii) the fact that
discussions or negotiations are taking place concerning a possible
Transaction, and (iii) any of the terms, conditions, or other facts with
respect to such possible Transaction, including the status thereof or the
termination of discussions with respect thereto, unless in the opinion of
its counsel disclosure is required to be made under the Securities Act of
1933, the Securities Exchange Act of 1934 or the corporate governance
rules of or Lund's listing agreement with the National Association of
Securities Dealers, Inc. Stock Market, provided that if either of them
proposes to make any disclosure based upon the opinion of its counsel as
aforesaid it will advise and consult with Deflecta prior to such
disclosure concerning the information proposed to be disclosed. The term
"person" as used herein shall be interpreted broadly to include, without
limitation, any corporation, entity, partnership or individual and shall
also include members or representatives of the media.
4. Not to make copies of the Confidential Material, except as
necessary to assist in its investigation, and to use all reasonable and
prudent efforts to protect and safeguard the Confidential Material from
misuse, loss, theft, publication or the like.
5. To return promptly to the Disclosing Party all copies of the
Confidential Material provided to the Receiving Party or its
Representatives, without retaining, in whole or in part, any copy, extract
or other reproduction thereof, and to destroy any documents, analyses,
memoranda, notes and other writing it or its Representatives may have
prepared in connection therewith (i) in the event the Receiving Party or
one of its affiliates does not proceed with a Transaction within a
reasonable time or (ii) at any earlier time upon written notice from the
Disclosing Party. Any such destruction shall be certified in writing to
the Disclosing Party by an authorized officer supervising the same. The
Receiving Party and its Representatives will continue to be bound by their
obligations hereunder notwithstanding the return or destruction of the
Confidential Material.
6. Without the prior written consent of Deflecta, for a period of
eighteen months from the date hereof, Lund and its Representatives
(including present affiliates and persons who become affiliates in the
future) shall not, directly or indirectly, (i) acquire, offer to acquire,
or agree to acquire, by purchase or otherwise, any assets, businesses or
securities (including direct or indirect warrants, rights or options to
acquire any securities) of Deflecta; (ii) make any public announcement
with respect to, or submit any proposal for, a transaction between
Deflecta or any of its security holders and Lund and/or any of its
affiliates (including, without limitation, any tender or exchange offer,
merger or other business combination, whether or not any other parties are
also involved, directly or indirectly, in such
<PAGE>
Harvest Partners, Inc.
Lund International Holdings, Inc.
October 31, 1997
Page 3
proposal or transaction) unless such proposal is directed and disclosed
solely to the Board of Directors of Deflecta and Deflecta shall have
requested in writing in advance the submission of such proposal; (iii)
submit any proposals for the vote or consideration of shareholders, make,
or in any way participate in any "solicitation" of "proxies" to vote (as
such terms are used in the proxy rules of the Securities and Exchange
Commission) or seek to advise or influence any person or entity with
respect to the voting or not voting of, or giving or withholding of
consents with respect to, any voting securities of Deflecta; (iv) form,
join or in any way participate in a "group" within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended, with respect
to any securities of the Company; (v) otherwise act, alone or in concert
with others, to seek to control or influence the management, Board of
Directors, policies or affairs of Deflecta, or seek representation on the
Board of Directors of Deflecta or (vi) initiate any communications with
any employee of Deflecta concerning the Confidential Material or any
possible transaction involving Deflecta, or solicit the employment of any
current or future employee of Deflecta. Lund and Harvest also agree during
such period not to request Deflecta (or its directors, officers, employees
or agents), directly or indirectly, to amend or waive any provision of
this paragraph, (including this sentence) or to take any action which
would require Deflecta to make a public announcement regarding a proposed
transaction or such request. For purposes of this paragraph, the term
"Deflecta" shall include Deflecta's affiliates. The foregoing restrictions
(i) shall terminate in the event Deflecta enters into an agreement
providing for the sale of all or substantially all of Deflecta's assets,
an acquisition of equity securities representing ownership of more than
50% of Deflecta's outstanding securities, any merger or other
extraordinary transaction involving Deflecta, or any material change in
Deflecta's capital structure, or makes any public announcement to the
effect that Deflecta is "for sale"; (ii) shall not preclude the
acquisition by Lund and its Representative (including present affiliates
and persons who become affiliates in the future) of up to 5% of Deflecta's
outstanding securities and (iii) shall not preclude any investment banking
firm retained by Lund from acting as dealer, underwriter or market maker
of Deflecta's securities in the ordinary course of business without a
control intent.
Deflecta hereby agrees that it will not disclose to any person except to
its Representatives the names of Harvest and Lund in connection with any
disclosure (i) that this agreement exists or that the Confidential Material has
been made available, (ii) that discussions or negotiations are taking place
concerning a possible Transaction or (iii) of any of the terms, conditions, or
other facts with respect to such possible Transaction, including the status
thereof or the termination of discussions, unless disclosure of such names is
required to be made under the Securities Act of 1933, the Securities Exchange
Act of 1934 or the corporate governance rules of or the Company's listing
agreement with the National Associates of Securities Dealers, Inc. Stock Market,
or disclosure of
<PAGE>
Harvest Partners, Inc.
Lund International Holdings, Inc.
October 31, 1997
Page 5
such names is requested or required by legal or regulatory process; provided
that if Deflecta proposes to make any such disclosure, it will use reasonable
efforts to advise and consult with Lund prior to such disclosure.
It is the responsibility of each Company to ensure that its
Representatives who are given access to the Confidential Material will be bound
by and will conduct their investigation in accordance with the terms of this
agreement. Each Company will be responsible for any breach of this agreement by
its Representatives and hereby agrees, at its sole expense, to take all
reasonable measures (including, but not limited to, court proceedings) to
restrain its Representatives from prohibited or unauthorized disclosure or use
of the Confidential Material.
If either Company or any or its Representatives is requested or required
(by oral questions, interrogatories, requests for information or documents in
legal proceedings, subpoenas, civil investigative demands or similar processes)
to disclose any Confidential Material, it is agreed that it will provide the
other Company with prompt notice of such request or requirement so that the
other Company may seek a protective order or other appropriate remedy and/or
waive your compliance with the provisions of this agreement. If in the absence
of a protective order or other remedy or the receipt of a waiver hereunder
either Company or any of its Representatives is, nonetheless, in the opinion of
its counsel, compelled under law to disclose information concerning the other
Company or else stand liable for contempt or suffer other censure or penalty, it
is further agreed that it will give the other Company written notice of the
information to be disclosed as far in advance as is practicable. Each Company
will cooperate with the other Company (at the other Company's expense) in
obtaining a protective order and confidential treatment for information
disclosed pursuant to this paragraph. Neither the Companies nor any of their
respective Representatives shall not be liable hereunder for disclosure pursuant
to the second preceding sentence.
Although each Company has endeavored to include in the Confidential
Material all information it believes to be relevant for the purpose of the other
Company's investigation, neither the Companies nor their respective affiliates
nor their Representatives make any representation or warranty as to the accuracy
or completeness of the Confidential Material, it being understood that only
those representations and warranties that may be made in a definitive written
agreement with respect to a transaction when, as and if executed and subject to
the limitations as may be specified therein, shall have any legal effect.
Accordingly, neither Company nor their affiliates nor their Representatives
shall have any liability to the other Company or its Representatives relating to
or resulting from the Confidential Material or any errors or omissions therein.
<PAGE>
Harvest Partners, Inc.
Lund International Holdings, Inc.
October 31, 1997
Page 6
If during the period beginning on the date of this Agreement and ending
on November 24, 1997 Deflecta or its Representatives, directly or indirectly,
shall contact or be contacted by any person (other than Lund or any subsidiary
or affiliate of Lund) with respect to a possible Acquisition Transaction and, in
such event, not later than December 23, 1997, the Board of Directors of Deflecta
shall authorize entry into, and Deflecta shall enter into a written agreement
providing for an Acquisition Transaction with such person or any subsidiary or
affiliate of such person, then Deflecta shall reimburse Lund by wire transfer
(not later than five business days after receipt of notice from Lund) for all
documented reasonable out-of-pocket fees and expenses up to $500,000 incurred by
or on behalf of Lund in connection with the transactions contemplated hereby,
including, without limitation, fees and expenses payable to investment bankers,
accountants and counsel, due diligence expenses and fees and expenses payable by
Lund to potential financing sources (in each case other than any fees payable by
Lund to Harvest); provided that Lund shall not be entitled to be so reimbursed
if (i) Lund fails to proceed in good faith (in light of the type of possible
Transaction under consideration and the terms considered in connection with
transactions of similar structure and size by potential parties thereto) with
respect to the negotiation of definitive documentation with respect to a
possible Transaction as previously discussed or (ii) Lund does not in good faith
use reasonable efforts to secure financing and complete its due diligence
investigation, in each case with respect to the possible Transaction as
previously discussed, in light of, among other things, the structure and terms
under consideration, then prevailing market conditions for similar transactions
and the respective financial conditions of Deflecta and Lund or (iii) a
definitive written agreement is entered into by Deflecta with Lund or any of its
subsidiaries or affiliates providing for an Acquisition Transaction.
"Acquisition Transaction" shall mean the acquisition of all or substantially all
of the assets of Deflecta or more than 50% of the voting power of Deflecta,
whether by merger, consolidation, share exchange, tender or exchange offer or
other similar transaction other than ordinary course trading of such securities.
It is understood and agreed that money damages would not be a sufficient
remedy for any breach of this agreement and that each Company, its affiliates or
any party described in paragraph numbered 6 above shall be entitled, without the
requirement of the posting of a bond or other security (which requirement is
hereby waived), to specific performance and injunctive or other equitable relief
as a remedy for any such breach. Such remedy shall not be deemed to be the
exclusive remedy for any such breach of this agreement but shall be in addition
to all other remedies available at law or equity. Each Company also agrees to
reimburse the other Company for all reasonable costs and expenses, including
reasonable attorney's fees, incurred by it in enforcing the obligations owed to
it hereunder.
Each party hereto hereby irrevocably and unconditionally submits to the
jurisdiction of any court sitting in Delaware or any federal court sitting in
Delaware for purposes of any suit, action or
<PAGE>
Harvest Partners, Inc.
Lund International Holdings, Inc.
October 31, 1997
Page 7
other proceeding arising out of this agreement (and each party agrees not to
commence any action, suit or proceeding relating thereto except in such courts)
and agrees that service of any process, summons, notice or document by U.S.
registered mail to its address set forth above or below shall be effective
service of process for any action, suit or proceeding brought against it in any
such court. Each party hereby irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising out
of this agreement or of the transactions contemplated hereby, in the courts of
Delaware or any federal court sitting in Delaware and hereby further irrevocably
and unconditionally waives and agrees not to plead or claim in any such court
that any such action, suit or proceeding brought in any such court has been
brought in an inconvenient forum.
Each Company agrees that unless and until a definitive written agreement
with respect to any Transaction has been executed and delivered, neither Company
will be under any legal obligation of any kind whatsoever with respect thereto
except, in the case of this agreement, for the matters specifically agreed to
herein. The agreement set forth in this letter may be modified or waived only by
a separate writing by each party which expressly modifies or waives such
agreement.
Lund acknowledges and agrees that Deflecta reserves the right, in its sole
discretion, to reject any and all proposals made by Lund or any of its
Representatives regarding a proposed transaction and to terminate discussions
and negotiations with Lund and its Representatives at any time. Lund further
acknowledges that if the Board of Directors of Deflecta determines to pursue a
transaction, it may establish procedures and guidelines for the submission of
proposals with respect to any transaction with or involving Deflecta, its
affiliates or their respective securities, businesses or assets if and as it in
its sole discretion shall determine (including, without limitation, negotiating
with any other parties and entering into a definitive agreement without prior
notice to Lund, its Representatives or any other persons), and any procedures
relating to such process or transaction may be changed at any time without
notice to Lund, its Representatives or any other persons.
Each party hereto hereby acknowledges that it is aware and will advise its
Representatives who are informed as to matters which are the subject of this
agreement, that the United States securities laws prohibit any person who has
received from an issuer material, non-public information from purchasing or
selling securities of such issuer or from communicating such information to any
other person under circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell such securities. Each party hereto further
acknowledges that it is aware of the provisions of the Insider Trading and
Securities Fraud Enforcement Act of 1988 and will take precautions adequate to
protect the interests of the other parties in that regard.
It is understood and agreed that no failure or delay by any party hereto,
its affiliates or any party described in paragraph number 6 above in exercising
any right, power or privilege hereunder
<PAGE>
Harvest Partners, Inc.
Lund International Holdings, Inc.
October 31, 1997
Page 8
shall operate as a waiver thereof, nor shall any single or partial exercise
thereof preclude any other or further exercise of any right, power or privilege
hereunder.
In the event any provision of this agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions of this agreement shall not in any way be affected or impaired
thereby. The parties hereto acknowledge that the limitations on disclosure of
Confidential Material imposed by this agreement are reasonable and necessary for
the protection of the Companies' interests. If a court of competent jurisdiction
finally determines that any such limitation is unreasonable, each party hereby
submits to a reduction of such limitation so that it is enforceable against it
to the maximum extent permissible under law.
This agreement shall inure to the benefit of any purchaser of all or
substantially all of the assets of a Company as well as any person that may
acquire after the date hereof any subsidiary or division of a Company with
respect to Confidential Material concerning the business or affairs of such
subsidiary or division. This agreement amends, restates and supersedes the
agreement dated October 9, 1997 among the parties hereto.
This agreement may be executed in two or more counterparts, each of which
shall be deemed to be an original, but all of which shall constitute the same
agreement.
This agreement shall be governed and construed in accordance with the laws
of the State of Delaware.
<PAGE>
Harvest Partners, Inc.
Lund International Holdings, Inc.
October 31, 1997
Page 9
If you are in agreement with the foregoing, please sign and return one
copy of this letter which will constitute our agreement with you and your
affiliates with respect to the subject matter of this letter. Should you have
any questions, please feel free to call Russell E. Stubbings, President and
Chief Executive Officer, at (515) 961-6100.
Very truly yours,
DEFLECTA-SHIELD CORPORATION
By: /s/ Ronald C. Fox
-------------------------
Name: Ronald C. Fox
Title: Vice President
ACCEPTED AND AGREED:
HARVEST PARTNERS, INC.
By: /s/ Ira D. Kleinman
--------------------------
Name: Ira D. Kleinman
Title: General Partner
LUND INTERNATIONAL HOLDINGS, INC.
By: /s/ Jay M. Allsup
--------------------------
Name: Jay M. Allsup
Title: CFO
<PAGE>
[LOGO]
November 28, 1997
Dear Stockholders:
I am pleased to inform you that Deflecta-Shield Corporation (the "Company")
has entered into an Agreement and Plan of Merger dated as of November 25, 1997
(the "Merger Agreement") with Lund International Holdings, Inc. ("Parent") and
Zephyros Acquisition Corporation, a wholly-owned subsidiary of Parent
("Purchaser"), pursuant to which Purchaser has today commenced a cash tender
offer (the "Offer") to purchase all of the outstanding shares of the common
stock, par value $0.01 per share (the "Shares") of the Company at a purchase
price of $16.00 per Share, net to the seller in cash. The Merger Agreement
provides for the making of the Offer which, if consummated, will be followed by
a merger of Purchaser with and into the Company (the "Merger"), with the Company
as the surviving entity.
In the Merger, Shares will be converted into the right to receive an amount
in cash equal to the price per Share paid pursuant to the Offer, without
interest thereon.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE
OFFER AND THE MERGER AND DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO,
AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY. YOUR BOARD OF
DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND
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, among
other things, the opinion of Wasserstein Perella & Co., Inc., the Company's
financial advisors, that the consideration to be offered to the holders of
Common Stock in the Offer and the Merger pursuant to the Merger Agreement is
fair to such stockholders from a financial point of view.
In addition to the attached Schedule 14D-9, enclosed is the Offer to
Purchase dated November 28, 1997, together with related materials, including a
Letter of Transmittal, to be used for tendering your shares pursuant to the
Offer. These documents state the terms and conditions of the Offer and the
Merger, provide detailed information about the transactions and include
instructions as to how to tender your Shares. We urge you to read these
documents carefully in making your decision with respect to tendering your
Shares pursuant to the Offer.
Very truly yours,
/s/ Russell E. Stubbings
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
<PAGE>
EXHIBIT 99.13
[LETTERHEAD OF WASSERSTEIN PERELLA & CO]
November 25, 1997
Board of Directors
Deflecta-Shield Corporation
1800 North Ninth St.
Indianola, IA 50125
Members of the Board:
You have asked us to advise you with respect to the fairness, from a
financial point of view, to the holders of the Common Stock, par value $0.01
per share (the "Shares"), of Deflecta-Shield Corporation (the "Company") of
the consideration to be received by such holders pursuant to the terms of the
Agreement and Plan of Merger, dated as of November 25, 1997 (the "Merger
Agreement"), among the Company, Lund International Holdings, Inc. ("Parent"),
and Zephyros Acquisition Corporation ("Purchaser"). The Merger Agreement
provides for, among other things, a cash tender offer by Purchaser to acquire
all of the outstanding Shares at a price of $16.00 per Share (the "Tender
Offer"), and for a subsequent merger of Purchaser with and into the Company
pursuant to which each outstanding Share will be converted into the right to
receive $16.00 in cash (the "Merger" and, together with the Tender Offer, the
"Transaction"). The terms and conditions of the Transaction are set forth in
more detail in the Merger Agreement relating to the Tender Offer (the "Offer
to Purchase").
In connection with rendering our opinion we have reviewed a draft of
the Merger Agreement, and for purposes hereof we have assumed that the final
form of the Merger Agreement will not differ in any material respect from the
draft provided to us. We have also reviewed and analyzed certain publicly
available business and financial information relating to the Company for
recent years and interim periods to date, as well as certain internal
financial and operating information, including financial forecasts, analyses
and projections prepared by or on behalf of the Company and provided to us
for purposes of our analysis, and we have met with management of the Company
to review and discuss such information and, among other matters, the
Company's business, operations, assets, financial condition and future
prospects.
We have reviewed and considered certain financial and stock market data
relating to the Company, and we have compared that data with similar data for
certain other companies, the securities of which are publicly traded, that we
believe may be relevant or comparable in certain respects to the Company and
we have reviewed and considered the financial terms of certain recent
acquisitions and business combination transactions in the automotive
equipment industry specifically, and in other industries generally, that we
believe to be reasonably comparable to the Transaction or otherwise relevant
to our inquiry. We have also performed such other studies, analyses and
investigations and reviewed such other information as we considered
appriopriate for purposes of this opinion.
In our review and analysis and in formulating our opinion, we have
assumed and relied upon the accuracy and completeness of all the financial
and other information provided to or discussed with us or publicly available,
and we have not assumed any responsibility for
<PAGE>
Board of Directors
November 25, 1997
Page 2
independent verification of any of such information. We have also relied
upon the reasonableness and accuracy of the financial projections, forecasts
and analyses provided to us and we have assumed, with your consent, that such
projections, forecasts and analyses were reasonably prepared in good faith
and on bases reflecting the best currently available judgments and estimates
of the Company's management, and we express no opinion with respect to such
projections, forecasts and analyses or the assumptions upon which they are
based. In addition, we have not reviewed any of the books and records of the
Company, or assumed any responsibility for obtaining an independent valuation
or appraisal of the assets or liabilities of the Company, and no such
independent valuation or appraisal was provided to us. We have assumed that
the transactions described in the Merger Agreement will be consummated on the
terms set forth therein, without material waiver or modification. Our
opinion is necessarily based on business, economic and market conditions and
other circumstances as they exist and can be evaluated by us as of the date
hereof.
It should be noted that in the context of our engagement by the
Company, we have not been authorized to and have not solicited alternative
offers for the Company or its assets, or investigated any other alternative
transactions that may be available to the Company.
We are acting as financial advisor to the Company in connection with
the proposed Transaction and will receive a fee for our services, a major
portion of which is contingent upon the consummation of the Transaction. In
the ordinary course of our business, we may actively trade the debt and
equity securities of the Company and Parent for our own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
Our opinion addresses only the fairness from a financial point of view
to the stockholders of the Company of the consideration to be received by
such stockholders pursuant to the Transaction, and we do not express any
views on any other terms of the Transaction. Specifically, our opinion does
not address the Company's underlying business decision to effect the
transactions contemplated by the Merger Agreement.
It is understood that this letter is for the benefit and use of the
Board of Directors of the Company in its consideration of the Transaction
and, except for inclusion in its entirety in a registration statement or
proxy statement or both relating to the Merger or in a
Solicitation/Recommendation Statement on Schedule 14D-9 of the Company
relating to the Tender Offer, may not be quoted, used or reproduced for any
other purpose without our prior written consent. This opinion does not
constitute a recommendation to any stockholder with respect to whether such
holder should tender Shares pursuant to the Tender Offer or as to how such
holder should vote with respect to the Merger, and should not be relied upon
by any stockholder as such.
Based upon and subject to the foregoing, including the various
assumptions and limitations set forth herein, it is our opinion that, as of
the date hereof, the $16.00 per Share cash consideration to be received by
the stockholders of the Company pursuant to the Transaction is fair to such
stockholders from a financial point of view.
Very truly yours,
/s/ Wasserstein Perella & Co., Inc.
