<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------
SCHEDULE 14D-1
Tender Offer Statement Pursuant to Section 14(d)(1)
of the Securities Exchange Act of 1934
------------------------------------
TALLEY INDUSTRIES, INC.
(Name of Subject Company)
SCORE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
CARPENTER TECHNOLOGY CORPORATION
(Bidders)
Series A Convertible Preferred Stock
(Title of Class of Securities)
87468720
(CUSIP Number of Class of Securities)
Series B $1 Cumulative Convertible Preferred Stock
(Title of Class of Securities)
87468730
(CUSIP Number of Class of Securities)
Common Stock, $1.00 par value per share
(Including the associated Preferred Stock Purchase Rights)
(Title of Class of Securities)
87468710
(CUSIP Number of Class of Securities)
------------------------------------
JOHN R. WELTY
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
CARPENTER TECHNOLOGY CORPORATION
101 WEST BERN STREET
READING, PENNSYLVANIA 19612-4662
Telephone: (610) 208-2000
(Name, Address and Telephone Number of Persons Authorized to
Receive Notices and Communications on Behalf of Bidders)
------------------------------------
with a copy to:
DECHERT PRICE & RHOADS
4000 BELL ATLANTIC TOWER
1717 ARCH STREET
PHILADELPHIA, PA 19103
(215) 994-4000
ATTENTION: HERBERT F. GOODRICH, JR.
------------------------------------
Calculation of Filing Fee
Transaction Valuation* Amount of Filing Fee**
$184,643,230 $36,929
* For the purpose of calculating the fee only, this amount assumes the
purchase of 13,793 shares of Series A Convertible Preferred Stock at $11.70
per share, 749,486 shares of Series B $1 Cumulative Convertible Preferred
Stock at $16.00 per share, and 14,374,173 shares of Common Stock at $12.00
per share of Talley Industries, Inc. Such number of Shares includes all
outstanding shares as of September 19, 1997, and assumes the exercise of all
stock options to purchase shares of Common Stock issued by Talley
Industries, Inc. which were outstanding as of September 19, 1997.
** The amount of the filing fee, calculated in accordance with Rule 0-11(d) of
the Securities Exchange Act of 1934, as amended, equals 1/50th of one
percent of the aggregate value of cash offered by Score Acquisition Corp.
for such number of Shares.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
Amount Previously Paid: Not Applicable Filing Party: Not Applicable
Form or Registration No.: Not Applicable Date Filed: Not Applicable
<PAGE>
This statement relates to a tender offer by Score Acquisition Corp., a
Delaware corporation (the "Purchaser") and a wholly owned subsidiary of
Carpenter Technology Corporation, a Delaware corporation ("Parent"), to purchase
all outstanding shares of Series A Convertible Preferred Stock ("Series A
Preferred Shares"), Series B $1 Cumulative Convertible Preferred Stock ("Series
B Preferred Shares") and Common Stock, par value $1.00 per share ("Common
Shares") of Talley Industries, Inc., a Delaware corporation (the "Company"),
including the associated Preferred Stock Purchase Rights (the "Rights") issued
pursuant to the Rights Agreement between the Company and ChaseMellon Shareholder
Services L.L.C., as Rights Agent, as amended and restated on February 2, 1996,
(collectively, the "Shares"), at a purchase price of $11.70 per Series A
Preferred Share, $16.00 per Series B Preferred Share and $12.00 per Common
Share, net to the seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated October 2,
1997 (the "Offer to Purchase"), and in the related Letter of Transmittal (which
together constitute the "Offer") copies of which are filed as Exhibit (a)(1) and
(a)(2) hereof, respectively and which are incorporated herein by reference.
ITEM 1. Security and Subject Company.
(a) The name of the subject company is Talley Industries, Inc., a
Delaware corporation. The address of the principal executive offices of the
Company is 2702 North 44th Street, Phoenix, Arizona 85008.
(b) The exact title of the classes of equity securities being sought in
the Offer are the Series A Convertible Preferred Stock, the Series B $1
Cumulative Convertible Preferred Stock and the Common Stock, par value $1.00 per
share, including the associated Rights, of the Company. The information set
forth in the Introduction to the Offer to Purchase is incorporated herein by
reference.
(c) The information set forth in Section 6 ("Price Range of Shares;
Dividends") of the Offer to Purchase is incorporated herein by reference.
ITEM 2. Identity and Background.
(a) through (d), (g): This Statement is being filed by Purchaser and
Parent. The information set forth in the "Introduction" and Section 8 ("Certain
Information Concerning the Purchaser and the Parent"), of the Offer to Purchase,
and in Schedule I thereto is incorporated herein by reference.
(e) through (f): During the last five years, neither the Purchaser nor
Parent nor, to the best of Purchaser or Parent's knowledge, any of the persons
listed in Schedule I to the Offer to Purchase (i) has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction as a result of which any such person was or is subject to
a judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any violation
of such laws.
ITEM 3. Past Contacts, Transactions or Negotiations With the Subject Company.
(a) None.
(b) The information set forth in the "Introduction", Section 10
("Background of the Offer; Past Contacts with the Company") and Section 11 ("The
Merger Agreement") of the Offer to Purchase and in Exhibit (c)(1) of this
Schedule 14D-1 is incorporated herein by reference.
ITEM 4. Source and Amount of Funds or Other Consideration.
(a) and (b): The information set forth in the "Introduction", and
Section 9 ("Source and Amount of Funds") of the Offer to Purchase is
incorporated herein by reference.
<PAGE>
(c) Not applicable.
ITEM 5. Purpose of the Tender Offer and Plans or Proposals of the Bidder.
(a) through (e): The information set forth in the "Introduction",
Section 10 ("Background of the Offer; Past Contacts with the Company"), Section
11 ("The Merger Agreement"), Section 12 ("Purpose of the Offer and the Merger;
Plans for the Company") and Section 13 ("Dividends and Distributions") of the
Offer to Purchase is incorporated herein by reference.
(f) and (g): The information set forth in the "Introduction" and
Section 14 ("Effect of the Offer on the Market for the Series B Preferred Shares
and Common Shares; Exchange Listing and Exchange Act Registration; Margin
Regulations") of the Offer to Purchase is incorporated herein by reference.
ITEM 6. Interest in Securities of the Subject Company.
(a) and (b): The information set forth in the "Introduction", Section 8
("Certain Information Concerning the Purchaser and the Parent") and Section 11
("The Merger Agreement") of, and Schedule I to, the Offer to Purchase is
incorporated herein by reference.
ITEM 7. Contracts, Arrangements, Understandings or Relationships With Respect
to the Subject Company's Securities.
The information set forth in the "Introduction", Section 8 ("Certain
Information Concerning the Purchaser and the Parent"), Section 10 ("Background
of the Offer; Past Contacts with the Company"), Section 11 ("The Merger
Agreement") and Section 12 ("Purpose of the Offer and the Merger; Plans for the
Company") of the Offer to Purchase is incorporated herein by reference.
ITEM 8. Persons Retained, Employed or to be Compensated.
The information set forth in the "Introduction" and in Section 17
("Fees and Expenses") of the Offer to Purchase is incorporated herein by
reference.
ITEM 9. Financial Statements of Certain Bidders.
The information set forth in Section 8 ("Certain Information Concerning
the Purchaser and the Parent") of the Offer to Purchase is incorporated herein
by reference.
The incorporation by reference herein of the above-mentioned financial
information does not constitute an admission that such information is material
to a decision by a security holder of the Company whether to sell, tender or
hold Shares being sought in the Offer.
ITEM 10. Additional Information.
(a) None.
(b) and (c). The information set forth in the "Introduction", and
Section 16 ("Certain Legal Matters and Regulatory Approvals") of the Offer to
Purchase is incorporated herein by reference.
(d) The information set forth in Section 14 ("Effect of the Offer on
the Market for the Series B Preferred Shares and Common Shares; Exchange Listing
and Exchange Act Registration; Margin Regulations") of the Offer to Purchase is
incorporated herein by reference.
(e) None.
<PAGE>
(f) The information set forth in the Offer to Purchase and the Letter
Transmittal and the Agreement and Plan of Merger, dated September 25, 1997,
among Parent, Purchaser and the Company, copies of which are attached hereto as
Exhibits (a)(1), (a)(2) and (c)(1), respectively, is incorporated herein by
reference in its entirety.
ITEM 11. Material to be Filed as Exhibits.
(a)(1) Offer to Purchase, dated October 2, 1997.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter from Credit Suisse First Boston Corporation to Brokers,
Dealers, Commercial Banks, Trust Companies and Other Nominees.
(a)(5) Letter from Brokers, Dealers, Commercial Banks, Trust Companies,
and Other Nominees to Clients.
(a)(6) Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
(a)(7) Summary Advertisement, dated October 2, 1997.
(a)(8) Text of Press Release issued by Parent on September 26, 1997.
(a)(9) Text of Press Release issued by Company on September 26, 1997.
(b)(1) Amended and Restated Credit Agreement dated as of February 21,
1997 among Parent, the Banks listed on the signature pages
thereto, and Morgan Guaranty Trust Company of New York, as
Agent.
(c)(1) Agreement and Plan of Merger, dated September 25, 1997, among
Parent, the Purchaser and the Company.
(c)(2) Confidentiality Letter Agreement, dated as of August 11, 1997,
between Parent and the J.P. Morgan Securities Inc., solely as
Company's representative.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
the information set forth in this statement is true, complete and correct.
CARPENTER TECHNOLOGY CORPORATION
By:_____________________________
Name:
Title:
SCORE ACQUISITION CORP.
By:_____________________________
Name:
Title:
Dated: October 2, 1997
<PAGE>
EXHIBIT INDEX
Exhibit
Number
-------
(a)(1) Offer to Purchase, dated October 2, 1997.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter from Credit Suisse First Boston Corporation to Brokers,
Dealers, Commercial Banks, Trust Companies and Other Nominees.
(a)(5) Letter from Brokers, Dealers, Commercial Banks, Trust
Companies, and Other Nominees to Clients.
(a)(6) Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
(a)(7) Summary Advertisement, dated October 2, 1997.
(a)(8) Text of Press Release issued by Parent on September 26, 1997.
(a)(9) Text of Press Release issued by Company on September 26, 1997.
(b)(1) Amended and Restated Credit Agreement dated as of February 21,
1997 among Parent, the Banks listed on the signature pages
thereto, and Morgan Guaranty Trust Company of New York, as
Agent.
(c)(1) Agreement and Plan of Merger, dated September 25, 1997, among
Parent, the Purchaser and the Company.
(c)(2) Confidentiality Letter Agreement, dated as of August 11, 1997,
between Parent and the J.P. Morgan Securities Inc., solely as
Company's representative.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
<PAGE>
Offer to Purchase for Cash
All Outstanding Shares
of
Series A Convertible Preferred Stock,
Series B $1 Cumulative Convertible Preferred Stock
and
Common Stock
(including the associated Preferred Stock Purchase Rights)
of
Talley Industries, Inc.
at
$11.70 Net Per Share of Series A Convertible Preferred Stock,
$16.00 Net Per Share of Series B $1 Cumulative Convertible Preferred Stock and
$12.00 Net Per Share of Common Stock
by
Score Acquisition Corp.
a wholly owned subsidiary of
Carpenter Technology Corporation
- - - --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON THURSDAY, OCTOBER 30, 1997, UNLESS THE OFFER IS EXTENDED.
- - - --------------------------------------------------------------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING
VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS
DEFINED BELOW) THAT NUMBER OF SHARES OF SERIES A CONVERTIBLE PREFERRED STOCK,
SERIES B $1 CUMULATIVE CONVERTIBLE PREFERRED STOCK AND COMMON STOCK (THE
"SHARES") WHICH, TOGETHER WITH ANY SHARES OWNED BY CARPENTER TECHNOLOGY
CORPORATION (THE "PARENT") OR SCORE ACQUISITION CORP. (THE "PURCHASER"),
REPRESENTS AT LEAST A MAJORITY OF THE VOTING POWER REPRESENTED BY THE SHARES AND
OTHER SECURITIES ENTITLED GENERALLY TO VOTE IN THE ELECTION OF DIRECTORS OF
TALLEY INDUSTRIES, INC. (THE "COMPANY") OUTSTANDING ON A FULLY DILUTED BASIS
(THE "MINIMUM CONDITION") AND (II) ANY WAITING PERIOD
<PAGE>
UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND
THE REGULATIONS THEREUNDER APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE
OFFER HAVING EXPIRED OR BEEN TERMINATED. THE OFFER IS ALSO SUBJECT TO OTHER
TERMS AND CONDITIONS. SEE THE INTRODUCTION AND SECTIONS 1 AND 15.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE OFFER AND
THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY'S
STOCKHOLDERS, HAS APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND RECOMMENDS THAT
THE STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
--------------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such
stockholder's Shares (as defined herein) should either (1) complete and sign the
Letter of Transmittal (or a facsimile thereof in accordance with the
instructions in the Letter of Transmittal, mail or deliver the Letter of
Transmittal (or such facsimile) and any other required documents to the
Depositary (as defined herein), and either deliver the certificates representing
the tendered Shares and any other required documents to the Depositary or tender
such Shares pursuant to the procedure for book-entry transfer set forth in
Section 3 or (2) request such stockholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for such stockholder.
Stockholders having Shares registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such broker,
dealer, commercial bank, trust company or other nominee if they desire to tender
Shares so registered.
A stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available, or who cannot comply
with the procedure for book-entry transfer on a timely basis, may tender such
Shares by following the procedures for guaranteed delivery set forth in Section
3.
Questions and requests for assistance may be directed to Credit Suisse
First Boston Corporation (the "Dealer Manager") or to D. F. King & Co., Inc.
(the "Information Agent") at their respective addresses and telephone numbers
set forth on the back cover of this Offer to Purchase. Additional copies of this
Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed
Delivery may also be obtained from the Information Agent or the Dealer Manager,
or from brokers, dealers, commercial banks or trust companies.
--------------------
The Dealer Manager for the Offer is:
CREDIT SUISSE FIRST BOSTON
October 2, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
INTRODUCTION......................................................................................................4
THE TENDER OFFER..................................................................................................7
1. TERM OF THE OFFER; EXPIRATION DATE................................................................7
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.....................................................9
3. PROCEDURE FOR TENDERING SHARES...................................................................10
4. WITHDRAWAL RIGHTS................................................................................14
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES..........................................................15
6. PRICE RANGE OF SHARES; DIVIDENDS.................................................................15
7. CERTAIN INFORMATION CONCERNING THE COMPANY.......................................................17
8. CERTAIN INFORMATION CONCERNING THE PURCHASER AND THE PARENT......................................19
9. SOURCE AND AMOUNT OF FUNDS.......................................................................20
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY...............................................21
11. THE MERGER AGREEMENT.............................................................................26
12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY.......................................33
13. DIVIDENDS AND DISTRIBUTIONS......................................................................35
14. EFFECT OF THE OFFER ON THE MARKET FOR THE SERIES B PREFERRED
SHARES AND COMMON SHARES; EXCHANGE LISTING AND EXCHANGE
ACT REGISTRATION; MARGIN REGULATIONS ............................................................30
15. CERTAIN CONDITIONS OF THE OFFER..................................................................37
16. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS...................................................39
17. FEES AND EXPENSES................................................................................41
18. MISCELLANEOUS....................................................................................42
SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF
THE PURCHASER AND THE PARENT..................................................................I-1
</TABLE>
<PAGE>
To holders of Series A Convertible Preferred
Stock, Series B $1 Cumulative Convertible
Preferred Stock and Common Stock of
TALLEY INDUSTRIES, INC.:
INTRODUCTION
Score Acquisition Corp., a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of Carpenter Technology Corporation, a Delaware
corporation (the "Parent"), hereby offers to purchase all of the outstanding
shares of Series A Convertible Preferred Stock ("Series A Preferred Shares"),
Series B $1 Cumulative Convertible Preferred Stock ("Series B Preferred Shares"
and together with the Series A Preferred Shares, "Preferred Shares") and Common
Stock, par value $1.00 per share ("Common Shares" and together with the
Preferred Shares, the "Shares"), of Talley Industries, Inc., a Delaware
corporation (the "Company"), including, in the case of Common Shares, the
associated Preferred Stock Purchase Rights (the "Rights") issued pursuant to the
Rights Agreement between the Company and ChaseMellon Shareholder Services
L.L.C., as Rights Agent, as amended and restated on February 2, 1996 (the
"Rights Agreement"), at a purchase price of $11.70 per Series A Preferred Share,
$16.00 per Series B Preferred Share and $12.00 per Common Share, net to the
seller in cash without interest thereon (the respective "Offer Price"), upon the
terms and subject to the conditions set forth in this Offer to Purchase and in
the related Letter of Transmittal (which, as amended or supplemented from time
to time, together constitute the "Offer"). Unless the context requires
otherwise, all references herein to the Common Shares or Shares shall include
the associated Rights, and all references to the Rights shall include all
benefits that may inure to the holders of the Rights pursuant to the Rights
Agreement.
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, subject to Instruction 6 of the Letter of Transmittal, stock
transfer taxes on the transfer and sale of Shares pursuant to the Offer. The
Purchaser will pay all fees and expenses of Credit Suisse First Boston
Corporation ("CSFB"), which is acting as Dealer Manager for the Offer (in such
capacity, the "Dealer Manager"), ChaseMellon Shareholder Services L.L.C., which
is acting as the Depositary (in such capacity, the "Depositary") and D. F. King
& Co., Inc., which is acting as the Information Agent (in such capacity, the
"Information Agent"), incurred in connection with the Offer. See Section 17
hereof.
The Board of Directors of the Company (the "Board of Directors") has
determined that the Offer and the Merger (as defined below) are fair to, and in
the best interests of, the Company's stockholders, has approved the Merger
Agreement (as defined below) and the transactions contemplated thereby,
including the Offer and the Merger, and recommends that the stockholders of the
Company accept the Offer and tender their Shares to the Purchaser pursuant to
the Offer.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING
VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS
DEFINED IN SECTION 1) THAT NUMBER OF SHARES WHICH,
<PAGE>
TOGETHER WITH ANY SHARES OWNED BY THE PARENT OR THE PURCHASER, REPRESENTS AT
LEAST A MAJORITY OF THE VOTING POWER REPRESENTED BY THE SHARES AND OTHER
SECURITIES ENTITLED GENERALLY TO VOTE IN THE ELECTION OF DIRECTORS OF THE
COMPANY OUTSTANDING ON A FULLY-DILUTED BASIS (THE "MINIMUM CONDITION") AND (2)
ANY WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF
1976, AS AMENDED (THE "HSR ACT") AND THE REGULATIONS THEREUNDER APPLICABLE TO
THE PURCHASE OF SHARES PURSUANT TO THE OFFER HAVING EXPIRED OR BEEN TERMINATED.
SEE SECTIONS 1 AND 15 HEREOF. IF THE PURCHASER PURCHASES NOT LESS THAN THAT
NUMBER OF SHARES NEEDED TO SATISFY THE MINIMUM CONDITION, IT WILL BE ABLE TO
EFFECT THE MERGER WITHOUT THE AFFIRMATIVE VOTE OF ANY OTHER STOCKHOLDER OF THE
COMPANY. SEE SECTION 12 HEREOF.
The Offer is being made pursuant to the Agreement and Plan of Merger,
dated September 25, 1997 (the "Merger Agreement"), by and among the Parent, the
Purchaser and the Company. The Merger Agreement provides, among other things,
for the commencement of the Offer by the Purchaser, and further provides that,
following the purchase of the Shares pursuant to the Offer and promptly after
the satisfaction or waiver of certain conditions and in accordance with the
Delaware General Corporation Law (the "DGCL"), the Purchaser will be merged with
and into the Company (the "Merger"). Following consummation of the Merger, the
Company will continue as the surviving corporation (the "Surviving Corporation")
and will be a wholly owned subsidiary of the Parent. See Section 11 hereof.
At the effective time of the Merger (the "Effective Time"), each
outstanding Share (except for Shares held in the treasury of the Company or
owned by the Purchaser, the Parent or any of the Parent's other wholly owned
subsidiaries, and Shares held by stockholders properly exercising their
appraisal rights under Section 262 of the DGCL), issued and outstanding
immediately prior to the Effective Time, together with associated Rights will be
converted into the right to receive $11.70 in cash per Series A Preferred Share,
$16.00 in cash per Series B Preferred Share and $12.00 in cash per Common Share
(the "Merger Consideration"), payable to the holder thereof, without interest,
upon surrender of the certificate formerly representing such Share, less any
required withholding taxes.
The Company has represented to the Parent that as of September 19,
1997, (i) 13,793 Series A Preferred Shares were issued and outstanding, (ii)
749,486 Series B Preferred Shares were issued and outstanding, (iii) 14,113,623
Common Shares were issued and outstanding, and (iv) stock options exercisable
for 260,550 Common Shares were outstanding. In addition, each outstanding
Common Share has a Right attached, allowing the holder upon the occurrence of
certain events described in the Rights Agreement to purchase one one-hundredth
of a share of Series C Junior Participating Preferred Stock of the Company
("Series C Preferred Stock") at an exercise price of $32. No shares of Series C
Preferred Stock have been issued as of September 25, 1997. Based upon the fact
that each Series A Preferred Share is convertible into 0.95 Common Shares
5
<PAGE>
and each Series B Preferred Share is convertible into 1.3125 Common Shares and
each Common Share is entitled to one vote during the election of the Company's
Board of Directors (a "Vote"), the Purchaser believes there are presently
15,370,976 Shares outstanding on a fully diluted basis. Accordingly, Purchaser
believes that the Minimum Condition would be satisfied if at least 7,685,489
Shares are validly tendered pursuant to the Offer. For purposes of the Offer,
"fully diluted basis" assumes exercise or conversion of all options, rights and
securities exercisable or convertible into or exchangeable for Shares. If
Purchaser acquires 90% or more of the outstanding shares of each class of stock
of the Company in the Offer or otherwise, Purchaser would be able to effect the
Merger pursuant to the short-form merger provisions of Section 253 of the DGCL,
without prior notice to, or any action by, any other stockholder of the Company.
The Company has advised the Purchaser that, to the knowledge of the
Company, eight of the ten directors of the Company intend to tender their Shares
pursuant to the Offer.
The Merger Agreement is more fully described in Section 11. Certain
federal income tax consequences of the sale of the Shares pursuant to the Offer
and the exchange of Shares for the Merger Consideration pursuant to the Merger
are described in Section 5.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
THE TENDER OFFER
1. TERM OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to
the conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of such extension or amendment), the Purchaser will accept
for payment and pay for all Shares validly tendered on or prior to the
Expiration Date and not properly withdrawn as permitted by Section 4. The term
"Expiration Date" means 12:00 Midnight, New York City time, on Thursday, October
30, 1997, unless and until the Purchaser, in its sole discretion (but subject to
the terms and conditions of the Merger Agreement), shall have extended the
period during which the Offer is open, in which event the term "Expiration Date"
shall mean the latest time and date at which the Offer, as so extended by the
Purchaser, shall expire.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, SATISFACTION OF THE
MINIMUM CONDITION AND CERTAIN OTHER CONDITIONS. SEE SECTION 15 HEREOF, WHICH
SETS FORTH IN FULL THE CONDITIONS TO THE OFFER. SUBJECT TO THE PROVISIONS OF THE
MERGER AGREEMENT AND THE APPLICABLE RULES AND REGULATIONS OF THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION" OR "SEC"), THE PURCHASER RESERVES THE
RIGHT, IN ITS SOLE DISCRETION, TO WAIVE ANY OR ALL CONDITIONS TO THE OFFER
(OTHER THAN THE MINIMUM CONDITION) AND TO MAKE ANY OTHER CHANGES IN THE TERMS
AND CONDITIONS OF THE OFFER. SUBJECT TO THE PROVISIONS OF THE MERGER AGREEMENT,
INCLUDING THE PROVISIONS OF THE MERGER AGREEMENT SET FORTH IN THE NEXT
PARAGRAPH, AND THE
6
<PAGE>
APPLICABLE RULES AND REGULATIONS OF THE COMMISSION, IF BY THE EXPIRATION DATE
ANY OR ALL OF SUCH CONDITIONS TO THE OFFER HAVE NOT BEEN SATISFIED, THE
PURCHASER RESERVES THE RIGHT (BUT SHALL NOT BE OBLIGATED) TO (i) TERMINATE THE
OFFER AND RETURN ALL TENDERED SHARES TO TENDERING STOCKHOLDERS, (ii) WAIVE SUCH
UNSATISFIED CONDITIONS AND PURCHASE ALL SHARES VALIDLY TENDERED OR (iii) EXTEND
THE OFFER AND, SUBJECT TO THE TERMS OF THE OFFER (INCLUDING THE RIGHTS OF
STOCKHOLDERS TO WITHDRAW THEIR SHARES), RETAIN THE SHARES WHICH HAVE BEEN
TENDERED, UNTIL THE TERMINATION OF THE OFFER, AS EXTENDED.
Subject to the applicable rules and regulations of the Commission and
the terms of the Merger Agreement, the Purchaser expressly reserves the right,
in its sole discretion, at any time and from time to time, and regardless of
whether or not any of the events hereinafter set forth in Section 15 shall have
occurred, to (i) extend the period of time during which the Offer is open and
thereby delay acceptance for payment of, and the payment for, any Shares, by
giving oral or written notice of such extension to the Depositary and (ii) amend
the Offer in any respect by giving oral or written notice of such amendment to
the Depositary. During any such extension, all Shares previously tendered and
not properly withdrawn will remain subject to the Offer, subject to the right of
a tendering stockholder to withdraw such stockholder's Shares. Under the terms
of the Merger Agreement, however, unless previously approved by the Company in
writing, the Purchaser will not decrease the consideration payable in the Offer,
change the form of consideration payable in the Offer, decrease the number of
Shares sought pursuant to the Offer, adversely change the conditions to the
Offer, impose additional conditions to the Offer, waive the Minimum Condition,
or amend any term of the Offer in any manner adverse to holders of Shares. The
Purchaser shall have no obligation to pay interest on the purchase price of
tendered Shares. The rights reserved by the Purchaser in this paragraph are in
addition to the Purchaser's rights to terminate the Offer pursuant to Section
15.
Any extension, delay, termination, waiver or amendment will be followed
as promptly as practicable by public announcement thereof, and such announcement
in the case of an extension will be made in accordance with Rule 14e-1(d) under
the Securities Exchange Act of 1934, as amended (the "Exchange Act") no later
than 9:00 A.M., New York City time, on the next business day after the
previously scheduled Expiration Date. Without limiting the manner in which the
Purchaser may choose to make any public announcement, except as provided by
applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act,
which require that material changes be promptly disseminated to holders of
Shares), the Purchaser shall have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by issuing a
release to the Dow Jones News Service.
If the Purchaser makes a material change in the terms of the Offer or
if it waives a material condition of the Offer, the Purchaser will disseminate
additional tender offer materials and extend the Offer to the extent required by
Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period
during which an offer must remain open following material changes in the terms
of the offer, other than a change in price or a change in the percentage of
securities sought, will depend upon the facts and circumstances, including the
materiality, of the changes. With
7
<PAGE>
respect to a change in price or, subject to certain limitations, a change in the
percentage of securities sought, a minimum ten business day period from the day
of such change is generally required to allow for adequate dissemination to
stockholders. For purposes of the Offer, a "business day" means any day other
than a Saturday, Sunday, or a federal holiday and consists of the time period
from 12:01 A.M. through 12:00 Midnight, New York City time.
The Company has provided the Purchaser with the Company's stockholder
list and security position listings for the purpose of disseminating the Offer
to holders of Shares. This Offer to Purchase and the related Letter of
Transmittal and other relevant materials will be mailed by the Purchaser to
record holders of Shares and furnished to brokers, dealers, commercial banks,
trust companies and similar persons whose names, or the names of whose nominees,
appear on the stockholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing, for subsequent transmittal to
beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and
subject to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any such extension or amendment), the
Purchaser will accept for payment and will pay for all Shares validly tendered
and not properly withdrawn on or prior to the Expiration Date as soon as
practicable after the later to occur of (i) the Expiration Date and (ii) the
satisfaction or waiver of the conditions of the Offer set forth in Section 15,
including without limitation the expiration or termination of the waiting period
applicable to the acquisition of Shares pursuant to the Offer and the Merger
under the HSR Act, and satisfaction of any applicable foreign regulatory
requirements. In addition, subject to applicable rules of the Commission, the
Purchaser expressly reserves the right to delay acceptance for payment of or
payment for Shares pending receipt of any other regulatory approvals specified
in Section 16. Any such delays will be effected in compliance with Rule 14e-1(c)
under the Exchange Act.
For information with respect to approvals required to be obtained prior
to the consummation of the Offer, including the HSR Act, see Section 16 hereof.
In all cases, payment for Shares tendered and accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of (i) certificates for such Shares ("Share Certificates") or timely
confirmation of a book-entry transfer of such Shares (a "Book-Entry
Confirmation") into the Depositary's account at The Depository Trust Company or
The Philadelphia Depository Trust Company (each a "Book-Entry Transfer Facility"
and, collectively, the "Book-Entry Transfer Facilities") pursuant to the
procedures set forth in Section 3, (ii) the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or an Agent's Message (as defined below) in connection
with a book-entry transfer, and (iii) any other documents required by the Letter
of Transmittal.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to and received by the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against such participant.
8
<PAGE>
For purposes of the Offer, the Purchaser will be deemed to have
accepted for payment (and thereby purchased) Shares validly tendered and not
properly withdrawn as, if and when the Purchaser gives oral or written notice to
the Depositary of the Purchaser's acceptance for payment of such Shares pursuant
to the Offer. Payment for Shares accepted for payment pursuant to the Offer will
be made by deposit of the purchase price therefor with the Depositary, which
will act as agent for tendering stockholders for the purpose of receiving
payments from the Purchaser and transmitting such payments to stockholders whose
Shares have been accepted for payment.
UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR SHARES
BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY
IN MAKING SUCH PAYMENT.
If for any reason whatsoever acceptance for payment of or payment for
any Shares tendered pursuant to the Offer is delayed or the Purchaser is unable
to accept for payment or pay for Shares tendered pursuant to the Offer, then
without prejudice to the Purchaser's rights set forth herein, the Depositary may
nevertheless, on behalf of the Purchaser and subject to Rule 14e-1(c) under the
Exchange Act, retain tendered Shares and such Shares may not be withdrawn except
to the extent that the tendering stockholder is entitled to and duly exercises
withdrawal rights as described in Section 4.
If any tendered Shares are not accepted for payment for any reason or
if Share Certificates are submitted for more Shares than are tendered, Share
Certificates evidencing unpurchased or untendered Shares will be returned
without expense to the tendering stockholder (or, in the case of Shares tendered
by book-entry transfer into the Depositary's account at a Book-Entry Transfer
Facility pursuant to the procedures set forth in Section 3, such Shares will be
credited to an account maintained at such Book-Entry Transfer Facility), as
promptly as practicable following the expiration, termination or withdrawal of
the Offer.
The Purchaser reserves the right to transfer or assign, in whole or
from time to time in part, to one or more of its affiliates the right to
purchase all or any portion of the Shares tendered pursuant to the Offer, but
any such transfer or assignment will not relieve the Purchaser of its
obligations under the Offer and will in no way prejudice the rights of tendering
stockholders to receive payment for Shares validly tendered and accepted for
payment pursuant to the Offer.
3. PROCEDURE FOR TENDERING SHARES. Valid Tenders. For Shares to be
validly tendered pursuant to the Offer, the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, together with any
required signature guarantees, or, in the case of book-entry transfers, an
Agent's Message, and any other documents required by the Letter of Transmittal,
must be received by the Depositary at one of its addresses set forth on the back
cover of this Offer to Purchase on or prior to the Expiration Date and either
(i) Share Certificates evidencing tendered Shares must be received by the
Depositary at such address or such Shares must be tendered pursuant to the
procedure for book-entry transfer described below and a Book-Entry Confirmation
must be received by the Depositary, in each case on or prior to the Expiration
Date, or (ii) the guaranteed delivery procedures described below must be
complied with.
9
<PAGE>
Book-Entry Transfer. The Depositary will make a request to establish
accounts with respect to the Shares at the Book-Entry Transfer Facilities for
purposes of the Offer within two business days after the date of this Offer to
Purchase. Any financial institution that is a participant in the system of any
Book-Entry Transfer Facility may make book-entry delivery of Shares by causing
such Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at such Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for such transfer. However, although delivery of
Shares may be effected through book-entry transfer at a Book-Entry Transfer
Facility, the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, together with any required signature guarantees, or an
Agent's Message in connection with a book-entry transfer, and any other
documents required by the Letter of Transmittal, must in any case be received by
the Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase on or prior to the Expiration Date, or the guaranteed delivery
procedures described below must be complied with.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE
WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY
TO THE DEPOSITARY.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER AND THE DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF
BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Signature Guarantees. Signatures on Letters of Transmittal must be
guaranteed by a firm which is a bank, broker, dealer, credit union, savings
association or other entity which is a member in good standing of the Securities
Transfer Agents Medallion Program (each of the foregoing being referred to as an
"Eligible Institution"), except in cases where Shares are tendered (i) by a
registered holder of Shares who has not completed either the box labeled
"Special Payment Instructions" or the box labeled "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. See Instructions 1 and 5 of the Letter of Transmittal.
If the Share Certificates are registered in the name of a person other
than the signer of the Letter of Transmittal, or if payment is to be made, or
Share Certificates not accepted for payment or not tendered are to be returned,
to a person other than the registered holder, the Share Certificates must be
endorsed or accompanied by appropriate stock powers, in either case, signed
exactly as the name of the registered holder appears on such certificates, with
the signatures on such certificates or stock powers guaranteed as aforesaid. See
Instructions 1 and 5 of the Letter of Transmittal.
10
<PAGE>
If Share Certificates are forwarded separately to the Depositary, a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof) must accompany each such delivery.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant
to the Offer and such stockholder's Share Certificates are not immediately
available, or such stockholder cannot deliver the Share Certificates and all
other required documents to reach the Depositary on or prior to the Expiration
Date, or such stockholder cannot complete the procedure for delivery by
book-entry transfer on a timely basis, such Shares may nevertheless be tendered,
provided that all of the following conditions are satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed Delivery
substantially in the form made available by the Purchaser is received by the
Depositary as provided below on or prior to the Expiration Date; and
(iii) the Share Certificates (or a Book-Entry Confirmation), representing all
tendered Shares in proper form for transfer, together with the Letter of
Transmittal (or a facsimile thereof) properly completed and duly executed, with
any required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message) and any other documents required by the Letter of Transmittal
are received by the Depositary within three New York Stock Exchange, Inc. (the
"NYSE") trading days after the date of execution of such Notice of Guaranteed
Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or
transmitted by telegram, telex, facsimile transmission or mail to the Depositary
and must include a guarantee by an Eligible Institution and a representation
that the stockholder owns the Shares tendered within the meaning of, and that
the tender of the Shares effected thereby complies with, Rule 14e-4 under the
Exchange Act, each in the form set forth in such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted
for payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of Share Certificates for, or of Book-Entry
Confirmation with respect to, such Shares, a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof), together with any
required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message), and any other documents required by the Letter of
Transmittal. Accordingly, payment might not be made to all tendering
stockholders at the same time and will depend upon when Share Certificates or
Book-Entry Confirmations of such Shares are received into the Depositary's
account at a Book-Entry Transfer Facility.
Appointment as Proxy. By executing the Letter of Transmittal, a
tendering stockholder irrevocably appoints designees of the Purchaser and each
of them as such stockholder's attorneys-in-fact and proxies, with full power of
substitution, in the manner set forth in the Letter of Transmittal, to the full
extent of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser (and with respect to any
and all other Shares or other securities issued or issuable in respect of such
Shares on or after the date hereof. All such powers of attorney and proxies
shall be considered irrevocable and coupled with
11
<PAGE>
an interest in the tendered Shares. Such appointment will be effective when, and
only to the extent that, the Purchaser accepts such Shares for payment. Upon
such acceptance for payment, all prior powers of attorney and proxies given by
such stockholder with respect to such Shares (and such other Shares and
securities) will be revoked without further action, and no subsequent powers of
attorney and proxies may be given nor any subsequent written consents executed
(and, if given or executed, will not be deemed effective). The designees of the
Purchaser will, with respect to the Shares (and such other Shares and
securities) for which such appointment is effective, be empowered to exercise
all voting and other rights of such stockholder as they in their sole discretion
may deem proper at any annual or special meeting of the Company's stockholders
or any adjournment or postponement thereof, by written consent in lieu of any
such meeting or otherwise. The Purchaser reserves the right to require that, in
order for Shares to be deemed validly tendered, immediately upon the Purchaser's
payment for such Shares, the Purchaser must be able to exercise full voting
rights with respect to such Shares and other securities, including voting at any
meeting of stockholders.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by the Purchaser in its sole discretion, which
determination shall be final and binding on all parties. The Purchaser reserves
the absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance for payment of which may in the opinion of its
counsel be unlawful. The Purchaser also reserves the absolute right to waive any
of the conditions of the Offer or any defect or irregularity in any tender of
Shares of any particular stockholder whether or not similar defects or
irregularities are waived in the case of other stockholders. No tender of Shares
will be deemed to have been validly made until all defects and irregularities
have been cured or waived. None of the Purchaser, the Parent, any of their
affiliates or assigns, the Dealer Manager, the Depositary, the Information Agent
or any other person will be under any duty to give notification of any defects
or irregularities in tenders or incur any liability for failure to give any such
notification. The Purchaser's interpretation of the terms and conditions of the
Offer (including the Letter of Transmittal and the instructions thereto) will be
final and binding.
Backup Federal Income Tax Withholding and Substitute Form W-9. Under
the "backup withholding" provisions of federal income tax law, the Depositary
may be required to withhold 31% of the amount of any payments of cash pursuant
to the Offer or the Merger. In order to avoid backup withholding, each
stockholder surrendering Shares in the Offer or the Merger must, unless an
exemption applies, provide the payor of such cash with such stockholder's
correct taxpayer identification number ("TIN") on a substitute Form W-9 and
certify, under penalties of perjury, that such TIN is correct. If a stockholder
does not provide its certified correct TIN or fails to provide the
certifications described above, the Internal Revenue Service ("IRS") may impose
a penalty on such stockholder and payment of cash to such stockholder pursuant
to the Offer or the Merger may be subject to backup withholding of 31%. All
stockholders surrendering Shares pursuant to the Offer should complete and sign
the substitute Form W-9 included in the Letter of Transmittal to provide the
information and certification necessary to avoid backup withholding (unless an
applicable exemption exists and is proved in a manner satisfactory to the
Depositary). Certain stockholders (including, among others, all corporations and
certain foreign individuals and entities) are not subject to backup withholding.
12
<PAGE>
Noncorporate foreign stockholders should complete and sign a Form W-8,
Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instruction 9 of the
Letter of Transmittal.
Other Requirements. The Purchaser's acceptance for payment of Shares
tendered pursuant to any of the procedures described above will constitute a
binding agreement between the tendering stockholder and the Purchaser upon the
terms and subject to the conditions of the Offer, including the tendering
stockholder's representation and warranty that the stockholder is the holder of
the Shares within the meaning of, and that the tender of the Shares complies
with, Rule 14e-4 under the Exchange Act.
4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are
irrevocable, except that Shares tendered pursuant to the Offer may be withdrawn
at any time on or prior to the Expiration Date and, unless theretofore accepted
for payment by the Purchaser pursuant to the Offer, may also be withdrawn at any
time after November 30, 1997. If the Purchaser extends the Offer, is delayed in
its acceptance for payment of Shares or is unable to purchase Shares validly
tendered pursuant to the Offer for any reason, then without prejudice to the
Purchaser's rights under the Offer, the Depositary may nevertheless, on behalf
of the Purchaser, retain tendered Shares and such Shares may not be withdrawn
except to the extent that tendering stockholders are entitled to withdrawal
rights as described in this Section 4. Any such delay in acceptance for payment
will be accompanied by an extension of the Offer to the extent required by law.
For a withdrawal of Shares to be effective, a written, telegraphic,
telex or facsimile transmission notice of withdrawal must be timely received by
the Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase. Any notice of withdrawal must specify the name of the person who
tendered the Shares to be withdrawn, the number of Shares to be withdrawn and
the name of the registered holder, if different from that of the person who
tendered such Shares. If Share Certificates to be withdrawn have been delivered
or otherwise identified to the Depositary, then prior to the physical release of
such certificates, the serial numbers shown on such certificates must be
submitted to the Depositary and the signatures on the notice of withdrawal must
be guaranteed by an Eligible Institution unless such Shares have been tendered
for the account of an Eligible Institution. If Shares have been tendered
pursuant to the procedure for book-entry transfer as set forth in Section 3, any
notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares, in which
case a notice of withdrawal will be effective if delivered to the Depositary by
any method of delivery described in the first sentence of this paragraph.
All questions as to the form and validity (including time of receipt)
of any notice of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding. No withdrawal of
Shares shall be deemed to have been properly made until all defects and
irregularities have been cured or waived. None of the Purchaser, the Parent, any
of their affiliates or assigns, the Dealer Manager, the Depositary, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
13
<PAGE>
Withdrawals of Shares may not be rescinded. Any Shares properly
withdrawn will thereafter be deemed not to have been validly tendered for
purposes of the Offer. However, withdrawn Shares may be re-tendered at any time
prior to the Expiration Date by following one of the procedures described in
Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The summary of tax
consequences set forth below is for general information only and is based on the
law as currently in effect. The tax treatment of each stockholder will depend in
part upon such stockholder's particular situation. Special tax consequences not
described herein may be applicable to particular classes of taxpayers, such as
financial institutions, broker-dealers, persons who are not citizens or
residents of the United States, stockholders who acquired their Shares through
the exercise of an employee stock option or otherwise as compensation, and
persons who received payments in respect of options to acquire Shares. ALL
STOCKHOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICABILITY
AND EFFECT OF THE ALTERNATIVE MINIMUM TAX AND ANY STATE, LOCAL OR FOREIGN INCOME
AND OTHER TAX LAWS AND CHANGES IN SUCH TAX LAWS.
The receipt of cash pursuant to the Offer or the Merger will be a
taxable transaction for Federal income tax purposes under the Internal Revenue
Code of 1986, as amended, and may also be a taxable transaction under applicable
state, local, foreign income or other tax laws. Generally, for Federal income
tax purposes, a tendering stockholder will recognize gain or loss in an amount
equal to the difference between the cash received by the stockholder pursuant to
the Offer or the Merger and the stockholder's adjusted tax basis in the Shares
tendered by the stockholder and purchased pursuant to the Offer or the Merger.
Gain or loss must be determined separately for each block of Shares (i.e.,
Shares acquired at the same cost in a single transaction) sold pursuant to the
Offer or the Merger. For Federal income tax purposes, such gain or loss will be
a capital gain or loss if the Shares are a capital asset in the hands of the
stockholder, and a long-term capital gain or loss if the stockholder's holding
period is more than one year as of the date the Purchaser accepts such Shares
for payment pursuant to the Offer or the effective date of the Merger, as the
case may be. Under recently enacted legislation, net capital gain of
individuals, estates and trusts from assets held for more than 18 months is
subject to Federal income tax at a maximum rate of 20%, while net capital gain
from assets held more than one year but not more than 18 months is subject to
Federal income tax at a maximum rate of 28%. There are limitations on the
deductibility of capital losses.
6. PRICE RANGE OF SHARES; DIVIDENDS. The Common Shares and Series B
Preferred Shares are listed and traded on the NYSE under the symbols "TAL" and
"TALB", respectively. The Series A Preferred Shares are traded occasionally in
the over-the-counter market. The following tables set forth, for the quarters
indicated, the high and low sales prices for the Common Shares and Series B
Preferred Shares on the NYSE as reported by the Company's Annual Report on Form
10-K for the year ended December 31, 1996 (the "1996 Annual Report") with
respect to periods occurring in 1995 and 1996 and as reported by the Dow Jones
News Service thereafter, and the amount of cash dividends paid or declared per
share for each quarter based on publicly available sources.
14
<PAGE>
<TABLE>
<CAPTION>
Common Shares (TAL) High Low Cash Dividends
- - - ------------------- ---- --- --------------
<S> <C> <C> <C>
Year Ended December 31, 1995
First Quarter $10.25 $7.38 $0.00
Second Quarter 11.00 7.50 0.00
Third Quarter 9.75 7.63 0.00
Fourth Quarter 9.25 7.63 0.00
Year Ended December 31, 1996
First Quarter 8.63 6.75 0.00
Second Quarter 9.13 6.50 0.00
Third Quarter 9.38 7.25 0.00
Fourth Quarter 8.00 6.63 0.00
Year Ended December 31, 1997:
First Quarter 9.75 7.38 0.00
Second Quarter 9.38 7.13 0.00
Third Quarter 13.00 7.81 0.00
Fourth Quarter (through October 1, 1997) 12.31 12.19 0.00
Series B Preferred Shares (TALB)
- - - --------------------------------
High Low Cash Dividends
---- --- --------------
Year Ended December 31, 1995:
First Quarter $15.50 $12.50 $0.00
Second Quarter 17.13 13.50 0.00
Third Quarter 16.50 14.50 0.00
Fourth Quarter 16.50 12.88 0.00
Year Ended December 31, 1996:
First Quarter 17.75 15.75 0.00
Second Quarter 21.00 16.25 0.00
Third Quarter 20.75 18.25 0.00
Fourth Quarter 20.00 13.25 5.50(1)
Year Ended December 31, 1997:
First Quarter 16.63 13.88 0.25
Second Quarter 16.38 14.00 0.25
Third Quarter 18.00 15.69 0.25
Fourth Quarter (through October 1, 1997) 16.50 16.38 0.00
</TABLE>
1. In December 1996 the Company paid a dividend arrearage on its Series A
Preferred Shares of $6.05 per share. The Company paid further cash dividends
on its Series A Preferred Shares of $0.275 per share in March 1997, June 1997
and September 1997.
15
<PAGE>
On August 6, 1997, the last full trading day prior to the date that the
Parent sent a letter to the Company expressing interest in acquiring the
Company, the closing sale price reported on the NYSE was $8.56 per Common Share
and $15.94 per Series B Preferred Share. On September 25, 1997, the last full
trading day prior to announcement of the Offer, the closing sale price reported
on the NYSE was $11.44 per Common Share and $17.63 per Series B Preferred Share.
On October 1, 1997, the last full trading day before commencement of the Offer,
the closing sale price reported on the NYSE was $12.25 per Common Share and
$16.50 per Series B Preferred Share. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT
MARKET QUOTATION FOR THE SHARES.
Pursuant to the Merger Agreement, the Company has agreed not to
declare, set aside, make or pay any dividend or other distribution, other than
regular quarterly dividends consistent with past practice, in an amount not to
exceed $.275 per share with respect to the Series A Preferred Shares and $.25
per share with respect to the Series B Preferred Shares.
7. CERTAIN INFORMATION CONCERNING THE COMPANY. The information
concerning the Company contained in this Offer to Purchase, including financial
information, has been taken from or based upon publicly available documents and
records on file with the Commission and other public sources. The summary
information concerning the Company in this Section 7 and elsewhere in this Offer
to Purchase is derived from the 1996 Annual Report and other publicly available
information. The summary information set forth below is qualified in its
entirety by reference to such reports (which may be obtained and inspected as
described below) and should be considered in conjunction with the more
comprehensive financial and other information in such reports and other publicly
available reports and documents filed by the Company with the Commission and
other publicly available information. Although the Purchaser and the Parent do
not have any knowledge that would indicate that any statements contained herein
based upon such reports are untrue, neither the Purchaser nor the Parent assumes
any responsibility for the accuracy or completeness of the information contained
therein, or for any failure by the Company to disclose events that may have
occurred and may affect the significance or accuracy of any such information but
which are unknown to the Purchaser and the Parent.
General. The Company is a Delaware corporation with principal executive
offices located at 2702 North 44th Street, Phoenix, Arizona 85008. The telephone
number of the Company at such offices is (602) 957-7711. The Company is a
diversified manufacturer of a wide range of proprietary and other specialized
products for defense, industrial and commercial applications.
Financial Information. Set forth below are certain selected
consolidated financial data for the Company's last three fiscal years which were
derived from the 1996 Annual Report and other publicly available information.
More comprehensive financial information is included in the reports (including
management's discussion and analysis of financial condition and results of
operations) and other documents filed by the Company with the Commission, and
the following financial data is qualified in its entirety by reference to such
reports and other documents including the financial information and related
notes contained therein. Such reports and other documents may be examined and
copies thereof may be obtained from the offices of the Commission and the NYSE
in the manner set forth below.
16
<PAGE>
TALLEY INDUSTRIES, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1996 1995 1994
<S> <C> <C> <C>
INCOME STATEMENT DATA
Total Revenues $502,698. $385,286. $327,760.
Cost and expenses 460,958. 346,018. 297,492.
Earnings (loss) before income taxes and extraordinary gains (loss) 32,629. 6,973. (799.)
Income tax provision (benefit) 1,836. 3,418. (4,305.)
Earnings before extraordinary gains (loss) 30,793. 3,555. 3,506.
Extraordinary gains (loss), net of income taxes (12,052.) 14,409. --
Net earnings 18,741. 17,964. 3,506.
Net earnings per common share .40 1.28 .13
Weighted average number of common shares outstanding 13,913. 14,001. 10,412.
BALANCE SHEET DATA (AT PERIOD END)
Total assets $280,385. $372,599. $369,903.
Total liabilities 205,899. 314,265. 329,737.
Total stockholders' equity 74,486. 58,334. 40,166.
</TABLE>
The Company is subject to the informational filing requirements of the
Exchange Act and in accordance therewith is obligated to file periodic reports,
proxy statements and other information with the Commission relating to its
business, financial condition and other matters.
17
<PAGE>
Information as of particular dates concerning the Company's directors and
officers, their remuneration, options granted to them, the principal holders of
the Company's securities and any material interest of such persons in
transactions with the Company is required to be disclosed in such proxy
statements and distributed to the Company's stockholders and filed with the
Commission. Such reports, proxy statements and other information should be
available for inspection at the public reference facilities of the Commission
located in Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
should also be available for inspection and copying at prescribed rates at the
regional offices of the Commission located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, Suite
1300, New York, New York 10048. Such reports, proxy statements and other
information may also be obtained at the Web site that the Commission maintains
at http://www.sec.gov. Copies of this material may also be obtained by mail,
upon payment of the Commission's customary fees, from the Commission's principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, such
material should also be available for inspection at offices of the NYSE, 20
Broad Street, New York, New York 10005. Except as otherwise noted in this Offer
to Purchase, all of the information with respect to the Company set forth in
this Offer to Purchase has been derived from publicly available information.
8. CERTAIN INFORMATION CONCERNING THE PURCHASER AND THE PARENT.
The Purchaser, a Delaware corporation and a wholly owned subsidiary of the
Parent, was organized in connection with the Offer and has not carried on any
activities to date other than those incident to its formation and the
commencement of the Offer. Accordingly, no meaningful financial information with
respect to the Purchaser is available. The Purchaser is located at 101 West Bern
Street, Reading, Pennsylvania 19612-4662.
The Parent, a Delaware corporation, has its principal executive office
at 101 West Bern Street, Reading, Pennsylvania 19612-4662. The Parent is engaged
in the manufacture, fabrication, and distribution of specialty metals and
engineered products.
The name, citizenship, business address, principal occupation or
employment, and five-year employment history of each of the directors and
executive officers of the Purchaser and the Parent and certain other information
are set forth in Schedule I hereto.
Set forth below are certain selected consolidated financial data
relating to the Parent and its subsidiaries for the Parent's last three fiscal
years which have been derived from the financial statements contained in the
Parent's Annual Report on Form 10-K for the fiscal year ended June 30, 1997
filed by the Parent with the Commission and other publicly available
information. More comprehensive financial information is included in the reports
(including management's discussion and analysis of financial condition and
results of operations) and other documents filed by the Parent with the
Commission, and the following financial data is qualified in its entirety by
reference to such reports and other documents, including the financial
information and related notes contained therein. Such reports and other
documents may be examined and copies thereof may be obtained from the offices of
the Commission and the NYSE in the manner set forth below.
18
<PAGE>
CARPENTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FOR THE YEAR ENDED JUNE 30,
1997 1996 1995
INCOME STATEMENT DATA
Net sales $939,000. $865,324. $757,532.
Cost and expenses 841,129. 770,154. 682,961.
Income before income taxes 97,871. 95,170. 74,571.
Net income 59,993. 60,148. 47,492.
Earnings per common share -- primary 3.30 3.51 2.81
Weighted average common shares outstanding 17,703. 16,677. 16,327.
BALANCE SHEET DATA (AT PERIOD END)
Total assets $1,223,001. $911,971. $831,775.
Total liabilities 773,694. 602,894. 567,830.
Shareholders' equity 449,307. 309,077. 263,945.
</TABLE>
The Parent is subject to the informational filing requirements of the
Exchange Act and in accordance therewith is obligated to file periodic reports,
proxy statements and other information with the Commission relating to its
business, financial condition and other matters. Information as of particular
dates concerning the Parent's directors and officers, their remuneration,
options granted to them, the principal holders of the Parent's securities and
any material interest of such persons in transactions with the Parent is
required to be disclosed in such proxy statements and distributed to the
Parent's stockholders and filed with the Commission. Such reports, proxy
statements and other information should be available for inspection at the
public reference facilities of the Commission located in Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and should also be available for
inspection and copying at prescribed rates at the regional offices of the
Commission located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and Seven World Trade Center, Suite 1300, New York, New
York 10048. Such reports, proxy statements and other information may also be
obtained at the Web site that the Commission maintains at http://www.sec.gov.
Copies of this material may also be obtained by mail, upon payment of the
Commission's customary fees, from the Commission's principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549. Such material is also available for
inspection at the offices of the NYSE, 20 Broad Street, New York, New York
10005.
None of the Purchaser, the Parent nor, to the best knowledge of the
Purchaser and the Parent, any of the persons listed on Schedule I hereto or any
associate or majority-owned subsidiary of the Purchaser, the Parent or any of
the persons so listed, beneficially owns or has a right to acquire directly or
indirectly any Shares, and none of the Purchaser, the Parent nor, to the best
knowledge of the Purchaser and the Parent, any of the persons or entities
referred to above, or any of the respective executive officers, directors or
subsidiaries of any of the foregoing, has effected any transactions in the
Shares during the past 60 days.
9. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by
the Purchaser to purchase all outstanding Shares pursuant to the Offer and to
pay fees and expenses
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<PAGE>
related to the Offer and the proposed Merger is estimated to be approximately
$188 million. The Purchaser plans to obtain all funds needed for the Offer and
the Merger through a capital contribution and/or a loan which will be made by
the Parent to the Purchaser.
To finance the acquisition, Parent will expand its revolving
credit agreement and will issue short-term debt. Shortly thereafter, Parent
plans to issue $100 million of common stock in the fourth calendar quarter and
expects to use the proceeds to pay down debt.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY.
On May 27, 1997 the Company announced that its Chairman and Chief
Executive William Mallender was not re-elected to the Company's Board of
Directors (the "Board") and in early June, the Board approved Admiral Paul L.
Foster as Mr. Mallender's replacement. The Board also announced that it had
retained J. P. Morgan Securities Inc. ("JPMorgan") to assist the Company in
reviewing and evaluating its strategic alternatives and to issue recommendations
to the Board. Shortly thereafter, Parent contacted JPMorgan and expressed
interest in acquiring two of the Company's subsidiaries: Talley Metals
Technology, Inc.("Talley Metals") and Amcan Specialty Steels, Inc. ("Amcan").
Talley Metals operates a stainless steel minimill which produces hot rolled and
cold finished bar and wire rod, and Amcan is a master distributor, supplying
stainless steel bars to service centers. Parent identified these two companies
as a strategic fit with its current steel operations.
At the beginning of July 1997, Parent retained CSFB to evaluate the
Company as a whole and the two steel subsidiaries. On July 14, the Board of
Directors of Parent considered CSFB's recommendations concerning the Company and
approved proceeding with an offer to the Company's steel group and, if
necessary, the Company as a whole. On July 18, R.W. Cardy, Parent's Chief
Executive Officer, contacted Admiral Foster with an offer for Talley Metals and
Amcan. Admiral Foster declined this offer but indicated that the Board would be
interested in an offer for the entire Company. On August 1, Parent submitted the
following letter to the Company addressed to Admiral Foster:
It was a pleasure to speak with you this week. Thank you for
briefing me on the results of your recent Board meeting.
We appreciate the opportunity to express our non-binding
indication of interest in acquiring all of the outstanding common shares of
Talley Industries on an exclusive basis. The recent market price of Talley
is $8-11/16 per share and we are willing to express a non-binding
indication of interest at a price of $10.00 per share in cash representing
a premium over market of 15 percent. Our judgment is that the market has
anticipated a "transaction" involving Talley and the price has risen
substantially in recent months reflecting this. We are willing to consider
increasing our price somewhat after discussions with you regarding the
20
<PAGE>
airbag business as we currently have insufficient information to determine
its value. Our tax basis assumptions are based on publicly available
information. Carpenter is an "A" rated credit and our offer will be fully
backed by credit lines.
We agree with your request of confidentiality on materials to be
provided to us and have enclosed an agreement executed by us for your
consideration and acceptance. This agreement proposes a 45-day period to do
due diligence and to work with you to develop a definitive agreement.
Talley is a complex organization consisting of many operations. As a large
customer, we have a reasonable knowledge of your Stainless Steel
Operations, but we need time to review the other aspects of your company
which are new to us. We feel it is very important to have a due diligence
period of 45 days.
Our expression of interest is subject to customary due diligence
(including environmental due diligence), regulatory approval and approval
by Carpenter's Board of the definitive agreement. We have discussed this
transaction with our Board in principle and they are supportive of it. We
have retained Credit Suisse First Boston who is assisting us in our
evaluation of your company.
We are prepared to move promptly to work with you to deliver what
we believe will be a very fair, fully financed, cash offer to your
shareholders. We have attached an initial list of the information which we
need to begin our due diligence.
I know you are familiar with Carpenter, but I thought you might
appreciate a copy of our Annual Report and several brochures about our
Company.
I enjoyed our conversation and look forward to hearing from you.
On August 4, Parent received the following letter from Admiral
Foster addressed to Mr. Cardy, on behalf of the Board, rejecting this bid but
offering to provide further information about the Company pursuant to a
confidentiality agreement:
21
<PAGE>
I am writing in response to your letter of August 1, 1997, respecting your
non-binding indication of interest to acquire all of the outstanding common
shares of Talley Industries, Inc. ("Talley") and for Talley to negotiate
with you on an exclusive basis in the first instance. As you are aware, our
willingness to provide Carpenter Technology Corporation ("Carpenter") with
an exclusive opportunity is predicated on our understanding that (1)
Carpenter could proceed expeditiously with a transaction based on
Carpenter's understanding of our Stainless Steel Operations coupled with
Carpenter's financial backing and (2) your indication of interest (although
non-binding at this stage) would ensure a full valuation for Talley
shareholders.
In this regard, your letter of August 1 indicated that Carpenter was
willing to express a non-binding indication of interest at a price of
$10.00 per share in cash. You also indicated that you would be willing to
increase your price "somewhat" after discussions regarding the airbag
business.
We are assuming that the $10.00 level of your initial indication of
interest excludes Talley Defense and Universal Propulsion entirely (the
different airbag product lines are held by both companies). While we can
appreciate the difficulty in evaluating the airbag business, we are not in
a position to grant Carpenter any exclusive period of due diligence without
an indication of interest from Carpenter which: (1) expresses a value on a
per share basis for all of Talley (including the airbag business); (2) sets
forth your assumptions as to the tax bases of the various Talley assets;
(3) expresses the support of the Board of Directors of Carpenter for your
indication; and (4) provides a list of documents you would require to
complete your due diligence.
In an effort to help you achieve the type of indication of interest we
require to proceed with Carpenter on an exclusive basis, may I suggest the
following. Upon your execution of the Confidentiality Agreement
accompanying this letter, our financial advisor J.P. Morgan will seek to
provide you with certain financial information regarding the airbag
business, as well as the opportunity to conduct a due diligence discussion
by conference call with several members of the senior management of two
components of the airbag business (the joint venture with Delphi/General
Motors and the ceramic initiator business). If after such a review,
Carpenter were in a position to submit to Talley a non-binding indication
of interest at an acceptable valuation in accordance with the conditions
set forth in (1) - (4) above, by Thursday, August 7 we could proceed to
discuss the precise terms of an exclusive to Carpenter.
22
<PAGE>
Thank you for your interest in Talley, and I hope we will be in a position
to move forward promptly.
Accepting this proposal on the same day, Parent signed a
Confidentiality Agreement with the Company and proceeded to do further due
diligence concerning the Company and its operations. On August 7, CSFB reviewed
the evaluation of the Company with the Parent and the Parent submitted the
following revised non-binding indication of interest for the Company of $12 per
share addressed to Admiral Foster, subject to additional investigation of the
Company's operations:
Thank you for your letter of August 4, 1997. As you know, we have executed
an initial confidentiality agreement and want to thank you for making Ed
Ryan and Hal Watson available to discuss the airbag business with us and
our Credit Suisse First Boston representatives.
We now have a better understanding of Talley's position in the airbag
business and the business prospects for your Aegis joint venture. As a
result, we are willing to increase our non-binding indication of interest
in acquiring all of the outstanding common shares of Talley Industries on
an exclusive basis. The recent market price of Talley is $8-9/16 per share
and we are willing to express a non-binding indication of interest at a
price of $12.00 per share in cash representing a premium over market of 40
percent. Our judgment is that this is a substantial premium over the market
price given that the market has anticipated a "transaction" involving
23
<PAGE>
Talley and the price has risen substantially in recent months reflecting
this. Carpenter is an "A" rated credit and our cash offer will be fully
backed by credit lines.
Mr. Cottrell, our CFO, has explained to Ms. Hitscherich of JPM how our tax
basis assumptions were determined based on publicly available information.
We agree with your request of confidentiality on materials to be provided
to us and have enclosed an agreement executed by us for your consideration
and acceptance. This agreement proposes a 45 day period of exclusivity to
do due diligence and to work with you to develop a definitive agreement.
Talley is a complex organization consisting of many operations. As a large
customer, we have a reasonable knowledge of your Stainless Steel
Operations, but we need time to review the other aspects of your company
which are new to us. We feel it is very important to have a due diligence
period of 45 days.
Our expression of interest is subject to customary due diligence (including
environmental due diligence), regulatory approval and approval by
Carpenter's Board of the definitive agreement. We have discussed this
transaction with our Board in principle and they are supportive of it at
the indicated price. We have retained Credit Suisse First Boston who is
assisting us in our evaluation of your company.
We are prepared to move promptly to work with you to deliver what we
believe will be a very fair, fully financed, cash offer to your
shareholders. We have attached an initial list of the information which we
need to begin our due diligence and a list of documents we will need.
I enjoyed our conversation and look forward to hearing from you by the
close of business Monday, August 11, 1997.
As of August 11, Parent signed a revised Confidentiality Agreement with
JPMorgan, solely as the Company's representative. This Agreement contained
24
<PAGE>
customary confidentiality and standstill provisions, giving the Parent a period
of limited exclusivity until September 25.
After further evaluation of the Company, the legal advisors to
Parent and the Company conducted negotiations on the terms and conditions of the
Offer, the Merger and the Merger Agreement. The Merger Agreement was unanimously
approved by the Board of Directors of Parent on September 24, 1997. The
completed Merger Agreement was presented to the Company's Board on September 25
and approved by eight of ten directors. Mr. Cardy executed the Merger Agreement
on behalf of Parent that day and the proposed merger was publicly announced on
September 26.
11. THE MERGER AGREEMENT. The following is a summary of the Merger
Agreement, which summary is qualified in its entirety by reference to the Merger
Agreement which is filed as an exhibit to the Tender Offer Statement on Schedule
14D-1.
The Offer. The Merger Agreement provides for the commencement of the Offer as
soon as reasonably practicable after the date of the Merger Agreement, but in no
event later than the fifth business day after the public announcement of the
execution of the Merger Agreement. The obligation of Purchaser and Parent to
consummate the Offer, to accept for payment and to pay for any Shares tendered
shall be subject to only those conditions set forth in the Merger Agreement, any
of which may be waived by Purchaser in its sole discretion (other than the
Minimum Tender Condition). Under the Merger Agreement, the Purchaser and the
Parent expressly reserve the right to modify the terms of the Offer, except that
neither Purchaser nor Parent shall, without the prior written consent of the
Company, (a) decrease the consideration payable in the Offer; (b) change the
form of consideration payable in the Offer, (c) decrease the number of Shares
sought pursuant to the Offer, (d) change or modify the conditions to the Offer
in a manner adverse to the Company or holders of Shares, (e) impose additional
conditions to the Offer, (f) waive the Minimum Tender Condition, or (g) amend
any term of the Offer in any manner adverse to the Company or holders of Shares.
Notwithstanding the foregoing, Purchaser, without the consent of the Company,
(i) shall extend the Offer, if at the then scheduled expiration date of the
Offer any of the conditions to Purchaser's obligation to accept for payment and
pay for Shares shall not have been satisfied, until such time as such condition
is satisfied or waived, if such condition may in the reasonable judgment of
Purchaser be satisfied in a time period reasonable for such satisfaction, (ii)
may, if any such condition is not waived, extend the Offer until such condition
is waived, (iii) may extend the Offer for any period required by any rule,
regulation, interpretation or position of the Commission or the staff thereof
applicable to the Offer and (iv) may extend the Offer on one or more occasions
for an aggregate period of not more than five business days if the Minimum
Tender Condition has been satisfied and there has theretofore been validly
tendered and not withdrawn Shares representing at least 70% but less than 90% of
each class of the outstanding Shares (on a fully diluted basis).
25
<PAGE>
The Merger. The Merger Agreement provides that, upon the terms and subject to
the conditions thereof and in accordance with the relevant provisions of the
DGCL, Purchaser shall be merged with and into the Company (the "Merger") as soon
as practicable following the satisfaction or waiver of the conditions set forth
in the Merger Agreement. Following the Merger, the Company shall continue as the
Surviving Corporation under the name "Talley Industries, Inc." and shall
continue its existence under the laws of the State of Delaware, and the separate
corporate existence of Purchaser shall cease. At the election of Parent, and
subject to the execution of an appropriate amendment to the Merger Agreement,
any direct or indirect wholly owned subsidiary of Parent may be substituted for
Purchaser as a constituent corporation in the Merger.
At the Effective Time, by virtue of the Merger and without any action
on the part of Parent, Purchaser, the Company or the holders of any of the
following securities: (a) each Share held by the Company as treasury stock and
each issued and outstanding Share owned by Parent, Purchaser or any other
subsidiary of Parent shall be canceled and retired and no payment made with
respect thereto; (b) each issued and outstanding Share, other than those Shares
referred to in (a) above, or Dissenting Shares (as defined below), shall be
converted into the right to receive from the Surviving Corporation an amount of
cash, without interest, equal to the respective Offer Prices applicable to such
Share (the "Merger Consideration"); and (c) each common share, par value $1 per
share, of Purchaser issued and outstanding immediately prior to the Effective
Time shall be converted into one fully-paid and nonassessable share of common
stock, par value $1 per share, of the Surviving Corporation.
Any issued and outstanding Shares held by a person who objects to the
Merger and complies with all the provisions of Delaware law concerning the right
of holders of Shares to require appraisal of their Shares ("Dissenting Shares")
shall become the right to receive such consideration as may be determined to be
due to such stockholder pursuant to the laws of the State of Delaware. If, after
the Effective Time, such stockholder withdraws his demand for appraisal or fails
to perfect or otherwise loses his right of appraisal, in any case pursuant to
the DGCL, his Shares shall be deemed to be converted as of the Effective Time
into the right to receive the Merger Consideration.
Organizational Documents. The Merger Agreement also provides that at the
Effective Time and without any further action on the part of the Company and the
Purchaser, the Certificate of Incorporation of the Company as in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation from and after the Effective Time
until amended in accordance with applicable law. At the Effective Time and
without any further action from the part of the Company and the Purchaser, the
Bylaws of Purchaser in effect at the Effective Time shall be the Bylaws of the
Surviving Corporation from and after the Effective Time until amended in
accordance with applicable law. The directors of Purchaser and the officers of
the Company immediately prior to the Effective Time shall be the directors and
officers of the Surviving Corporation until their respective successors are duly
elected and qualified, except that the President and Chief Executive Officer of
Purchaser will become the Chairman and Chief Executive Officer of the Surviving
Corporation.
26
<PAGE>
Stockholders' Meeting. After consummation of the Offer, to the extent required
by applicable law, the Company shall promptly take all action necessary in
accordance with the DGCL and its Certificate of Incorporation and Bylaws to
convene a stockholders' meeting (the "Meeting") to consider and vote on the
Merger Agreement and the transactions contemplated thereby. At the Meeting, all
of the Shares then owned by Parent, Purchaser or any other subsidiary of Parent
shall be voted to approve the Merger Agreement. Subject to its fiduciary duties,
the Board of Directors of the Company shall recommend that the Company's
stockholders vote to approve the Merger Agreement if such vote is sought, shall
use its best efforts to solicit from stockholders of the Company proxies in
favor of the Merger and shall take all other reasonable action in its judgment
necessary and appropriate to secure the vote of stockholders required by the
DGCL to effect the Merger.
Notwithstanding the foregoing, in the event that Purchaser shall acquire
Preferred Shares representing at least 90% of the votes represented by all
outstanding Preferred Shares and Common Shares representing at least 90% of the
votes represented by all outstanding Common Shares, the parties to the Merger
Agreement agree, at the request of Purchaser, to take all necessary and
appropriate action to cause the Merger to become effective, in accordance with
Section 253 of the DGCL, as soon as reasonably practicable after such
acquisition, without a meeting of the stockholders of the Company.
Proxy Statement. If required under applicable law, the Company and Parent shall
prepare the Proxy Statement, file it with the Commission under the Exchange Act
as promptly as practicable after Purchaser purchases Shares pursuant to the
Offer, and use all reasonable efforts to have it cleared by the Commission. As
promptly as practicable after the Proxy Statement has been cleared by the
Commission, the Company shall mail the Proxy Statement to the stockholders of
the Company as of the record date for the Meeting.
Company Board Representation. The Merger Agreement provides that, promptly upon
the acceptance for payment of and payment for any Shares by Purchaser, Purchaser
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 will give Purchaser,
subject to compliance with Section 14(f) of the Exchange Act, representation on
the Board of Directors of the Company equal to the product of (i) the number of
directors on the Board of Directors of the Company and (ii) the percentage that
such number of votes represented by Shares so purchased bears to the number of
votes represented by Shares outstanding, and the Company shall at such time,
subject to applicable law, including applicable fiduciary duties, cause
Purchaser's designees to be so elected by its existing Board of Directors.
Conduct of Business Pending Merger. Except as contemplated by the Merger
Agreement or as approved in writing by Parent, during the period from the date
of the Merger Agreement to the acceptance of Shares for payment, the Company and
the subsidiaries will each conduct its operations according to its ordinary and
usual course of business. Without limiting the generality of the foregoing,
neither the Company nor any Subsidiary, without the prior written consent of
Parent, will (i) issue, sell or pledge, or authorize or propose the issuance,
sale or pledge of (A)
27
<PAGE>
additional shares of capital stock of any class (including the Shares), or
securities convertible into any such shares, or any rights, warrants or options
to acquire any such shares or other convertible securities, or grant or
accelerate any right to convert or exchange any securities of the Company for
shares, other than (1) Shares issuable pursuant to the terms of outstanding
stock options and commitments disclosed in the Merger Agreement, or (2) issuance
of shares of capital stock to the Company by a wholly-owned Subsidiary, or (B)
any other securities in respect of, in lieu of or in substitution for Shares
outstanding on the date thereof or split, combine or reclassify any of the
Company's capital stock; (ii) purchase, redeem or otherwise acquire, or propose
to purchase or otherwise acquire, any of its outstanding securities (including
the Shares); (iii) declare, set aside or pay any dividend or other distribution
on any shares of capital stock of the Company other than the regular quarterly
dividends of $.275 per share with respect to the Series A Preferred Shares and
$.25 per share with respect to the Series B Preferred Shares, except that a
direct or indirect wholly-owned Subsidiary may pay a dividend or distribution to
its parent; (iv) except as disclosed to Parent prior to the date of the Merger
Agreement, make any acquisition of a material amount of assets or securities,
any disposition (including by way of mortgage, license, encumber or any Lien) of
a material amount of assets or securities, or enter into a material contract or
release or relinquish any material contract rights, or make any amendments, or
modifications thereto, except in all instances for actions in the ordinary
course of business; (v) (A) except in the ordinary course of business, incur any
indebtedness for borrowed money or guarantee any such indebtedness of another
person, issue or sell any debt securities or warrants or other rights to acquire
any debt securities of the Company or any Subsidiary, guarantee any debt
securities of another person, enter into any "keep well" or other agreement to
maintain any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing or (B) make any
loans, advances of capital contributions to, or investments in, any other
person, other than to the Company or any direct or indirect wholly owned
Subsidiary; (vi) pay, discharge, settle or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement or
satisfaction, in the ordinary course of business or in accordance with their
terms; (vii) propose or adopt any amendments (initiated by the Board of
Directors) to the Certificate of Incorporation or Bylaws of the Company (or any
such similar organizational documents of the Company's Subsidiaries); (viii)
except as disclosed in the Merger Agreement, enter into any new employment,
severance or termination agreements with, or grant any increase in severance or
termination pay to, any officers, directors or key employees or grant any
material increases in the compensation or benefits to officers, directors and
key employees; (ix) change any accounting methods, principles or practices
materially affecting their assets, liabilities or business, except insofar as
may be required by a change in generally accepted accounting principles; (x)
make any material tax election or settle or compromise any material income tax
liability; (xi) except as disclosed to Parent prior to the date of the Merger
Agreement, make or agree to make any new capital expenditure or expenditures not
previously committed to which individually is in excess of $500,000 or which in
the aggregate are in excess of $1 million; or (xii) agree in writing or
otherwise to take any of the foregoing actions or any action which would make
any representation or warranty in the Merger Agreement untrue or incorrect at
any time prior to acceptance of Shares for payment in the Offer.
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<PAGE>
Access to Information. Between the date of the Merger Agreement and the
Effective Time, the Company will upon reasonable notice (i) give Parent and its
authorized representatives reasonable access during regular business hours to
the Company's and each Subsidiary's plants, offices, warehouses and other
facilities and to its books and records, (ii) permit Parent to make such
inspections as it may require, and (iii) cause its officers and those of the
Company's Subsidiaries to furnish Parent with such financial and operating data
and other information with respect to the business and properties of the Company
and its subsidiaries as Parent may from time to time reasonably request.
Information obtained by Parent shall be subject to the provisions of the
confidentiality agreement between the Company and Parent, dated August 7, 1997
(the "Confidentiality Agreement"), which remains in full force and effect, but
shall terminate upon the acceptance for payment of the Shares pursuant to the
Offer.
No Solicitation of Transactions. The Merger Agreement provides that the Company
shall not, nor shall it permit any Subsidiary to, nor shall it authorize or
permit any officer, director or employee of or any representative of the Company
or any of its subsidiaries to, directly or indirectly, (i) solicit, initiate or
knowingly encourage the submission of any proposal with respect to a merger or
other business combination involving the Company or any proposal or offer to
acquire in any manner, an equity interest in not less than 20% of the
outstanding voting securities of, or assets representing not less than 20% of
the annual revenues or net earnings of the Company and its subsidiaries taken as
a whole (a "Takeover Proposal") or (ii) participate in any discussions or
negotiations regarding, or furnish to any person any information with respect to
any inquiries or the making of any proposal that constitutes or may reasonably
be expected to lead to a Takeover Proposal; provided, however, that prior to the
acceptance for payment of Shares pursuant to the Offer, to the extent consistent
with the fiduciary obligations of the Board of Directors of the Company, as
determined in good faith by the Board of Directors after consultation with
outside counsel, the Company may upon receipt by the Company of an unsolicited
written, bona fide Takeover Proposal, furnish information with respect to the
Company pursuant to a customary confidentiality agreement containing
"standstill" provisions no less onerous than in the Confidentiality Agreement
and participate in negotiations regarding such Takeover Proposal.
Reasonable Best Efforts. The Merger Agreement provides that, upon the terms and
subject to the conditions thereof, each of the parties thereto will use its
reasonable best efforts to take, or cause to be taken, all appropriate action,
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by the Merger Agreement, including, without
limitation, (i) obtaining all necessary consents, approvals or waivers from
third parties and governmental authorities necessary to the consummation of the
transactions contemplated by the Merger Agreement and (ii) opposing vigorously
any litigation or administrative proceeding relating to the Merger Agreement or
the transactions contemplated thereby.
Representations and Warranties. The Merger Agreement contains various customary
representations and warranties of the parties thereto, including, without
limitation, representations and warranties by the Company as to the Company's
capitalization, the absence of any required filings and consents, the absence of
conflicts with charter documents and contracts, SEC filings
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and financial statements, absence of certain changes or events, business,
compliance with the law, the absence of litigation, employee benefits plans, the
filing and compliance of reports with the requirements of the Commission,
environmental matters, brokers and taxes.
Indemnification. All rights to indemnification and exculpation from liabilities
for acts or omissions occurring at or prior to the Effective Time now existing
in favor of the current or former directors or officers of the Company and its
Subsidiaries as provided in their respective certificates of incorporation or
by-laws (or comparable organizational documents) and any indemnification
agreements of the Company, the existence of which does not constitute a breach
of the Merger Agreement, shall be assumed by the Surviving Corporation in the
Merger, without further action, as of the Effective Time and shall survive the
Merger and shall continue in full force and effect (to the extent consistent
with applicable law) in accordance with their terms. For six years after the
Effective Time, Parent shall cause the Surviving Corporation to honor its
commitments and obligations pursuant to the indemnification procedures listed in
the Merger Agreement; and the Surviving Corporation shall provide officers' and
directors' liability insurance in respect of acts or omissions occurring prior
to the Effective Time, including but not limited to the transactions
contemplated by this Agreement, covering each person currently covered by the
Company's officers' and directors' liability insurance policy, or who becomes
covered by such policy prior to the Effective Time, on terms with respect to
coverage and amount no less favorable than those of such policy in effect on the
date of the Merger Agreement (provided that in satisfying its obligation under
this Section the Surviving Corporation shall not be obligated to pay annual
premiums in excess of 175% of the amount per annum the Company paid in its last
full fiscal year).
Employee Plans and Benefits. As soon as practicable following the date of the
Merger Agreement, the Board of Directors of the Company (or, if appropriate, any
committee administering the stock plans) shall adopt such resolutions or take
such other actions as are required in accordance with the stock plans to adjust
the terms of all outstanding stock options to provide that, at the Effective
Time, each stock option, whether vested or not, outstanding immediately prior to
the Effective Time be canceled in exchange for a cash payment by the Company of
an amount equal to (i) the excess, if any, of (x) the price per Share to be paid
pursuant to the Offer over (y) the exercise price per Share subject to such
stock option, multiplied by (ii) the number of Shares for which such stock
option shall not theretofore have been exercised. The stock plans shall
terminate as of the Effective Time, and the provisions in any other Benefit Plan
providing for the potential issuance, transfer or grant of any capital stock of
the Company or any Subsidiary or any interest in respect of any capital stock of
the Company or any Subsidiary shall be deleted as of the Effective Time, and the
Company shall ensure that following the Effective Time no holder of a stock
option or any participant in the stock plans or other benefit plan shall have
any right thereunder to acquire any capital stock of the Company or any
Subsidiary or the Surviving Corporation.
Employment Contracts. From and after the Effective Time, Parent shall cause the
Surviving Corporation to honor in accordance with their terms all existing
employment, severance, consulting or other compensation agreements, plans or
contracts between the Company or any Subsidiary and any officer, director or
employee of the Company or any Subsidiary. For the
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one-year period immediately following the Effective Time, Parent shall cause the
Company to provide such benefit plans, programs and arrangements that are no
less favorable in the aggregate than the existing benefit plans.
Termination. The Merger Agreement may be terminated, and the Merger may be
abandoned at any time prior to the Effective Time, notwithstanding approval
thereof by the stockholders of the Company: (a) by mutual written consent of the
Company and Parent; (b) by either the Company or Parent, if (1) the Offer
terminates or expires in accordance with its terms without Purchaser's having
purchased any Shares pursuant to the Offer because of a failure of any of the
conditions set forth in the Merger Agreement (provided, however, that the right
to terminate shall not be available to any party whose failure to fulfill any of
its obligations under the Merger Agreement results in the failure to have
satisfied any such condition); (2) Shares have not been accepted for payment
pursuant to the Offer on or prior to December 31, 1997; (provided, however, that
the right to terminate shall not be available to any party whose failure to
fulfill any of its obligations under the Merger Agreement results in the failure
of the Offer to be consummated by such time); (3) any Governmental Entity shall
have issued a final order, injunction, decree, judgment or ruling or taken any
other final action restraining or otherwise prohibiting consummation of the
Merger or any of the other transactions contemplated by the Merger Agreement and
such action shall have become final and nonappealable; (provided, however, that
the party seeking to terminate pursuant to this clause shall have used all
reasonable efforts to prevent the entry of and to remove such action; or (4) the
Board of Directors of the Company shall have (A) withdrawn or modified in a
manner adverse to Parent and Purchaser its approval or recommendation of the
Offer or the Merger or (B) approved or recommended any Takeover Proposal in
respect of the Company. In the event that the Merger Agreement is terminated by
the Company or Parent pursuant to clause (4) the Company shall promptly, but in
no event later than two business days after such event, pay Parent a fee of $6
million in cash in immediately available funds by wire transfer to an account
designated by Parent.
Conditions of the Merger. The respective obligation of each party to effect the
Merger is subject to the satisfaction or waiver, where permissible, prior to the
Effective Time, of the following conditions: (a) if required by applicable law,
the Merger Agreement shall have been approved by the affirmative vote of the
stockholders of the Company by the requisite vote in accordance with applicable
law; (b) Purchaser shall have accepted for payment and purchased Shares tendered
pursuant to the Offer; and (c) no judgment, order, decree, statute, law,
ordinance, rule, regulation, temporary restraining order, preliminary or
permanent injunction or other order enacted, entered, promulgated, enforced or
issued by any court of competent jurisdiction or other Government Entity or
other legal restraint or prohibition (collectively, "Restraints") preventing the
consummation of the Merger shall be in effect, provided, however, that the party
seeking to assert this condition shall have used reasonable efforts to prevent
the entry of any such Restraints and to appeal as promptly as possible any such
Restraints that may be entered.
Except as otherwise specifically provided in the Merger Agreement, each
party shall bear its own expenses in connection with the Merger Agreement and
the transactions contemplated thereby.
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12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY.
The purpose of the Offer is to acquire control of, and the entire equity
interest in, the Company. The Offer is being made pursuant to the Merger
Agreement. As promptly as practicable following consummation of the Offer and
after satisfaction or waiver of all conditions to the Merger set forth in the
Merger Agreement, the Purchaser intends to acquire the remaining equity interest
in the Company not acquired in the Offer by consummating the Merger.
Vote Required to Approve the Merger. The Board of Directors of the
Company has approved the Merger Agreement in accordance with the DGCL. If
required for approval of the Merger, the Company has agreed, subject to the
satisfaction of the conditions to the Merger set forth in the Merger Agreement,
in accordance with and subject to the DGCL, to duly convene a meeting of its
stockholders as soon as practicable following consummation of the Offer for the
purpose of considering and taking action on the Merger Agreement. If stockholder
approval is required, the Merger Agreement must be approved by a majority of the
votes represented by all of the outstanding Shares voting as a single class.
Each Series A Preferred Share is entitled to four-tenths (0.4) of a vote, while
each Series B Preferred Share and each Common Share are entitled to one vote. As
a result, if the Minimum Condition is satisfied, the Purchaser will have the
power to approve the Merger Agreement without the affirmative vote of any other
stockholder. In such case, the Parent and the Purchaser have agreed to cause all
Shares then owned by them and their subsidiaries to be voted in favor of the
approval of the Merger Agreement and the Merger. If the Purchaser acquires
Preferred Shares representing at least 90% of the votes represented by all
outstanding Preferred Shares and Common Shares representing at least 90% of the
votes represented by all outstanding Common Shares, the Purchaser intends to
take, and the Company has agreed, at the request of the Purchaser, to take all
necessary and appropriate action to cause the Merger to become effective as soon
as reasonably practicable after such acquisition, without a meeting of the
Company's stockholders, in accordance with the DGCL. In such event, the Merger
would be accomplished without such a meeting.
Appraisal Rights. Stockholders do not have appraisal rights as a
result of the Offer. However, if the Merger is consummated, stockholders of the
Company at the time of the Merger who do not vote in favor of the Merger and
comply with all statutory requirements will have the right under the DGCL to
demand appraisal of, and receive payment in cash of the fair value of, their
Shares outstanding immediately prior to the effective date of the Merger in
accordance with Section 262 of the DGCL.
Under the DGCL, stockholders who properly demand appraisal and
otherwise comply with the applicable statutory procedures will be entitled to
receive a judicial determination of the fair value of their Shares (exclusive of
any element of value arising from the accomplishment or expectation of the
Merger) and to receive payment of such fair value in cash. Any such judicial
determination of the fair value of such Shares could be based upon
considerations other than or in addition to the price paid in the Offer and the
Merger and the market value of the Shares. In Weinberger v. UOP, Inc., the
Delaware Supreme Court stated, among other things, that "proof of value by any
techniques or methods which are generally considered acceptable in the financial
community and otherwise admissible in court" should be considered in an
appraisal proceeding. Stockholders should recognize that the value so determined
could be equal to or higher or lower than the price per Share paid pursuant to
the Offer or the consideration per Share to be paid in the Merger.
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In addition, several decisions by Delaware courts have held that in
certain circumstances a controlling stockholder of a corporation involved in a
merger has a fiduciary duty to other stockholders that requires that the merger
be fair to other stockholders. In determining whether a merger is fair to
minority stockholders, Delaware courts have considered, among other things, the
type and amount of the consideration to be received by the stockholders and
whether there was fair dealing among the parties. The Delaware Supreme Court
stated in Weinberger and Rabkin v. Philip A. Hunt Chemical Corp. that the remedy
ordinarily available to minority stockholders in a cash-out merger is the right
to appraisal described above. However, a damages remedy or injunctive relief may
be available if a merger is found to be the product of unfairness, including
fraud, misrepresentation or other misconduct.
THE FOREGOING SUMMARY OF THE RIGHTS OF STOCKHOLDERS DOES NOT
PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY
STOCKHOLDERS DESIRING TO EXERCISE ANY AVAILABLE APPRAISAL RIGHTS. THE
PRESERVATION AND EXERCISE OF APPRAISAL RIGHTS REQUIRE STRICT ADHERENCE TO THE
APPLICABLE PROVISIONS OF THE DELAWARE LAW.
The foregoing description of the DGCL is not necessarily complete
and is qualified in its entirely by reference to the DGCL.
Rule 13e-3. The Commission has adopted Rule 13e-3 under the
Exchange Act which is applicable to certain "going private" transactions and
which may under certain circumstances be applicable to the Merger following the
purchase of Shares pursuant to the Offer in which the Purchaser seeks to acquire
any remaining Shares. Rule 13e-3 should not be applicable to the Merger if the
Merger is consummated within one year after the expiration or termination of the
Offer and the price paid in the Merger is not less than the per Share price paid
pursuant to the Offer. However, in the event that the Purchaser is deemed to
have acquired control of the Company pursuant to the Offer and if the Merger is
consummated more than one year after completion of the Offer or an alternative
acquisition transaction is effected whereby stockholders of the Company receive
consideration less than that paid pursuant to the Offer, in either case at a
time when the Shares are still registered under the Exchange Act, the Purchaser
may be required to comply with Rule 13e-3 under the Exchange Act. If applicable,
Rule 13e-3 would require, among other things, that certain financial information
concerning the Company and certain information relating to the fairness of the
Merger or such alternative transaction and the consideration offered to minority
stockholders in the Merger or such alternative transaction, be filed with the
Commission and disclosed to stockholders prior to consummation of the Merger or
such alternative transaction. The purchase of a substantial number of Shares
pursuant to the Offer may result in the Company being able to terminate its
Exchange Act registration. See Section 14 hereof. If such registration were
terminated, Rule 13e-3 would be inapplicable to any such future Merger or such
alternative transaction.
Plans for the Company. If the Purchaser obtains control of the
Company pursuant to the Offer, the Parent expects to operate the Company's
stainless steel products group consisting of Talley Metals and Amcan. Parent
intends to further invest in Talley Metals. Parent intends to
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divest the companies in the Company's government products and services group and
industrial products group. The companies expected to be sold include Talley
Defense Systems, Inc.; Universal Propulsion Company, Inc.; Electrodynamics,
Inc.; John J. McMullen Associates, Inc.; Rowe Industries, Inc.; Dimetrics, Inc.;
Porcelain Products Co.; and Waterbury Companies, Inc. No agreement has been
entered into, or understanding reached, relating to a sale of any such companies
as of the date hereof.
Except as described in this Offer to Purchase, none of the
Purchaser, the Parent nor, to the best knowledge of the Purchaser and the
Parent, any of the persons listed on Schedule I have any present plans or
proposals that would relate to or result in an extraordinary corporate
transaction such as a merger, reorganization or liquidation involving the
Company or any of its subsidiaries or a sale or other transfer of a material
amount of assets of the Company or any of its subsidiaries, any material change
in the capitalization or dividend policy of the Company or any other material
change in the Company's corporate structure or business or the composition of
its Board of Directors or management.
13. DIVIDENDS AND DISTRIBUTIONS. The Company and its Subsidiaries
have agreed not to (except as otherwise expressly provided in the Merger
Agreement), without the prior written consent of Parent, declare, set aside or
pay any dividend or other distribution on any shares of capital stock of the
Company other than the regular quarterly dividends of $.275 per share with
respect to the Series A Preferred Shares and $.25 per share with respect to the
Series B Preferred Shares, except that a direct or indirect wholly-owned
Subsidiary may pay a dividend or distribution to its parent.
14. EFFECT OF THE OFFER ON THE MARKET FOR THE SERIES B PREFERRED
SHARES AND COMMON SHARES; EXCHANGE LISTING AND EXCHANGE ACT REGISTRATION; MARGIN
REGULATIONS. The purchase of Series B Preferred Shares and Common Shares
pursuant to the Offer will reduce the number of Series B Preferred Shares and
Common Shares that might otherwise trade publicly and could reduce the number of
holders of Series B Preferred Shares and Common Shares, which could adversely
affect the liquidity and market value of the remaining Series B Preferred Shares
and Common
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Shares held by the public. The Series A Preferred Shares are not traded on any
established market and, to the Company's knowledge, no broker or dealer "makes a
market" in Series A Preferred Shares. Following consummation of the Offer, a
large percentage of the outstanding Series A Preferred Shares, Series B
Preferred Shares and Common Shares will be owned by Purchaser.
According to the NYSE's published guidelines, the NYSE would
consider delisting the Series B Preferred Shares and/or Common Shares if, among
other things, the number of record holders of at least 100 Series B Preferred
Shares and 100 Common Shares, respectively, should fall below 1,200, the number
of publicly held Series B Preferred Shares and Common Shares (exclusive of
holdings of officers, directors and their families and other concentrated
holdings of 10% or more (the "NYSE Excluded Holdings")), respectively, should
fall below 600,000 or the aggregate market value of publicly held Series B
Preferred Shares and Common Shares (exclusive of NYSE Excluded Holdings),
respectively, should fall below $5,000,000. If, as a result of the purchase of
Series B Preferred Shares and Common Shares pursuant to the Offer or otherwise,
the Series B Preferred Shares and/or Common Shares no longer meet the
requirements of the NYSE for continued listing and the listing of the Series B
Preferred Shares and/or Common Shares is discontinued, the market for the Series
B Preferred Shares and/or Common Shares could be adversely affected.
If the NYSE were to delist the Series B Preferred Shares and/or
Common Shares, it is possible that the Series B Preferred Shares and/or Common
Shares would continue to trade on another securities exchange or in the
over-the-counter market and that price or other quotations would be reported by
such exchange or through the National Association of Securities Dealers
Automated Quotation System ("Nasdaq") or other sources. The extent of the public
market therefor and the availability of such quotations would depend, however,
upon such factors as the number of shareholders and/or the aggregate market
value of such securities remaining at such time, the interest in maintaining a
market in the Series B Preferred Shares and/or Common Shares on the part of
securities firms, the possible termination of registration under the Exchange
Act as described below and other factors. Purchaser cannot predict whether the
reduction in the number of Series B Preferred Shares and Common Shares that
might otherwise trade publicly would have an adverse or beneficial effect on the
market price for or marketability of the Series B Preferred Shares and Common
Shares, respectively, or whether it would cause future market prices to be
higher or lower than the applicable Offer Price.
Both the Series B Preferred Shares and Common Shares are currently
registered under the Exchange Act. Either registration may be terminated upon
application by the Company to the Commission if the Series B Preferred Shares or
Common Shares, respectively, are not listed on a national securities exchange
and there are fewer than 300 record holders of the Series B Preferred Shares and
Common Shares, respectively. The termination of registration of the Series B
Preferred Shares and/or Common Shares under the Exchange Act would substantially
reduce the information required to be furnished by the Company to holders of
Series B Preferred Shares and/or Common Shares and to the Commission and would
make certain provisions of the Exchange Act, such as the short-swing profit
recovery provisions of Section 16(b), the requirement of furnishing a proxy
statement in connection with shareholders' meetings pursuant to Section 14(a),
and the requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions, no longer applicable to the Series B Preferred Shares
and/or Common Shares. In addition, "affiliates" of the Company and persons
holding "restricted securities" of the Company may be
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deprived of the ability to dispose of such securities pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended (the "Securities Act").
If registration of the Series B Preferred Shares and/or Common
Shares under the Exchange Act were terminated, the Series B Preferred Shares
and/or Common Shares would no longer be eligible for Nasdaq reporting.
The Shares are currently "margin securities," as such term is
defined under the rules of the Federal Reserve Board, which has the effect,
among other things, of allowing brokers to extend credit on the collateral of
such securities. Depending upon factors similar to those described above
regarding listing and market quotations, following the Offer it is possible that
the Shares might no longer constitute "margin securities" for purposes of the
margin regulations of the Federal Reserve Board, in which event such Shares
could no longer be used as collateral for loans made by brokers.
15. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other
provision of the Offer or the Merger Agreement, Purchaser shall not be required
to accept for payment or pay for, subject to Rule 14e-1(c) of the Exchange Act,
any Shares not theretofore accepted for payment, and may terminate or amend the
Offer if (i) that number of Shares which would represent at least a majority of
the voting power represented by the Shares and other securities entitled
generally to vote in the election of directors of the Company outstanding on a
fully diluted basis after giving effect to the exercise or conversion of all
options, rights and securities exercisable or convertible into or exchangeable
for Shares or such voting securities shall not have been validly tendered and
not withdrawn immediately prior to the expiration of the Offer (the "Minimum
Condition"), (ii) any applicable waiting period under the HSR Act shall not have
expired or been terminated prior to the expiration of the Offer or (iii) at any
time on or after the date of commencement of the Offer and before the acceptance
of such Shares for payment or the payment therefor, any of the following
conditions exist or shall occur:
(a) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on the NYSE or in
the over-the-counter market, (ii) any declaration of a banking
moratorium or any suspension of payments in respect of banks in the
United States, (iii) any limitation, whether or not mandatory, by any
Federal, state or local government or any court, administrative or
regulatory agency or commission or other governmental authority or
agency, domestic or foreign (a "Governmental Entity") on, or other
event that materially affects, the extension of credit by banks or
other lending institutions, (iv) any commencement of a war, armed
hostilities or other national or international calamity involving the
armed forces of the United States, (v) any decline, measured from the
date of the Merger Agreement, in either the Dow Jones Industrial
Average or the Standard & Poor's Index of 400 Industrial Companies by
an amount in excess of 20%, (vi) in the case of any of the foregoing
occurrences existing on or at the time of the commencement of the
Offer, a material acceleration or worsening thereof; or
(b) there shall be pending by any Governmental Entity, or
threatened by the staff of any Governmental Entity, any suit, action or
proceeding, (i) challenging the acquisition by Parent or Purchaser of
any Shares, seeking to restrain or prohibit the making or consummation
of the Offer or the Merger or the performance of any of the other
transactions contemplated by the Merger Agreement (ii) seeking to
prohibit or limit the ownership or operation by the Company, Parent or
any of their respective subsidiaries of a material portion of the
business or assets of the Company or its Subsidiaries, or Parent or its
subsidiaries, or to compel the Company or Parent to dispose of or hold
separate any material portion of the business or assets of the Company
or its Subsidiaries, or Parent or its subsidiaries, as a result of the
Offer or any of the other transactions
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contemplated by the Merger Agreement, (iii) seeking to impose
limitations on the ability of Parent or Purchaser to acquire or hold,
or exercise full rights of ownership of, any Shares accepted for
payment pursuant to the Offer including, without limitation, the right
to vote the Shares accepted for payment by it on all matters properly
presented to the stockholders of the Company, or (iv) seeking to
prohibit Parent or any of its subsidiaries from effectively controlling
in any material respect the business or operations of the Company or
its Subsidiaries;
(c) there shall be any statute, rule, regulation, judgment,
order or injunction enacted, entered, enforced, promulgated or deemed
applicable to the Offer or the Merger, or any other action shall be
taken by any Governmental Entity or court, other than the application
to the Offer or the Merger of applicable waiting periods under the HSR
Act, that is reasonably likely to result, directly or indirectly, in
any of the consequences referred to in clauses (i) though (iv) of
paragraph (b) above;
(d) the Company shall have entered into an agreement concerning
any Superior Proposal (as defined in the Merger Agreement), or the
Board of Directors of the Company or any committee thereof shall have
resolved to enter into such an agreement;
(e) any person or group (as defined in Section 13(d)(3) of the
Exchange Act) (other than Parent, Purchaser or any affiliate thereof)
shall have become the beneficial owner (as defined in Rule 13d-3
promulgated under the Exchange Act) of Shares representing a majority
of the total votes represented by all outstanding Shares;
(f) the Merger Agreement shall have been terminated in
accordance with its terms; or
(g) any of the representations and warranties of the Company
set forth in the Merger Agreement were inaccurate in any material
respect when made or become inaccurate in any material respect at any
time thereafter, or the Company shall have failed in any material
respect to perform any obligation or covenant required by the Merger
Agreement to be performed or complied with by it;
which, in the reasonable judgment of Purchaser and regardless of the
circumstances giving rise to any such condition, makes it inadvisable to proceed
with the Offer or with such acceptance for payment, purchase of, or payment for
Shares.
The foregoing conditions are for the sole benefit of Purchaser and
Parent and may be asserted by Purchaser or Parent regardless of the
circumstances giving rise to any such condition and may be waived by Purchaser
or Parent, in whole or in part, at any time and from time to time, in the sole
discretion of Purchaser or Parent. The failure by Purchaser or Parent at any
time to
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exercise any of the foregoing rights will not be deemed a waiver of any right
and each right will be deemed an ongoing right which may be asserted at any time
and from time to time.
16. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS.
General. Except as set forth below, based upon its examination of
publicly available filings by the Company with the Commission and other publicly
available information concerning the Company, neither the Purchaser nor the
Parent is aware of any licenses or other regulatory permits that appear to be
material to the business of the Company and its Subsidiaries, taken as a whole,
that might be adversely affected by the Purchaser's acquisition of Shares (and
the indirect acquisition of the stock of the Company's Subsidiaries) as
contemplated herein, or of any filings, approvals or other actions by or with
any domestic (federal or state), foreign or supranational governmental authority
or administrative or regulatory agency that would be required prior to the
acquisition of Shares (or the indirect acquisition of the stock of the Company's
Subsidiaries) by the Purchaser pursuant to the Offer as contemplated herein.
Should any such approval or other action be required, it is the Purchaser's
present intention to seek such approval or action. There can be no assurance
that any such approval or other action, if needed, would be obtained without
substantial conditions or that adverse consequences might not result to the
business of the Company, the Parent or the Purchaser or that certain parts of
the businesses of the Company, the Parent or the Purchaser might not have to be
disposed of or held separate or other substantial conditions complied with in
order to obtain such approval or other action or in the event that such approval
was not obtained or such other action was not taken, any of which could cause
the Purchaser to elect (subject to the terms of the Merger Agreement) to
terminate the Offer without the purchase of the Shares thereunder. The
Purchaser's obligation under the Offer to accept for payment and pay for Shares
is subject to certain conditions, including conditions relating to the legal
matters discussed in this Section 16.
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State Takeover Laws. The Board of Directors of the Company has
approved the Offer, the Merger and the other transactions contemplated by the
Merger Agreement in accordance with the provisions of Section 203 of the DGCL.
Purchaser is not aware that any other state takeover law or regulation is
applicable to the Offer, the Merger or the other transactions contemplated by
the Merger Agreement and therefore has not attempted to comply with any state
takeover statutes other than Section 203 of the DGCL. The Purchaser reserves the
right to challenge the validity or applicability of any state law allegedly
applicable to the Offer, and nothing in this Offer to Purchase nor any action
taken in connection herewith is intended as a waiver of that right. In the event
that any state takeover statute is found applicable to the Offer, the Purchaser
might be unable to accept for payment or purchase Shares tendered pursuant to
the Offer or be delayed in continuing or consummating the Offer. In such case,
the Purchaser may not be obligated to accept for purchase or pay for any Shares
tendered. See Section 15 hereof.
Article Fifth of the Company's Amended Certificate of
Incorporation. Under Article Fifth of the Company's Amended Certificate of
Incorporation, certain extraordinary transactions require the prior approval of
at least four-fifths of the directors then in office or the vote of at least
four-fifths of the outstanding stock of the Company entitled to vote thereon or
compliance with specified procedural requirements. In accordance with Article
Fifth, the Company's Board by a vote of not less than four-fifths of the
directors then in office approved the transactions contemplated by the Merger
Agreement, thereby exempting such transactions from such provisions.
Antitrust. Under the HSR Act and the rules that have been
promulgated thereunder by the Federal Trade Commission ("FTC"), certain
acquisition transactions may not be consummated unless certain information has
been furnished to the Antitrust Division of the Department of Justice (the
"Antitrust Division") and the FTC and certain waiting period requirements have
been satisfied. The acquisition of Shares pursuant to the Offer is subject to
such requirements. See Section 2 hereof.
The Parent intends, as soon as reasonably practicable following the
date hereof, to file with the FTC and the Antitrust Division a Premerger
Notification and Report Form in connection with the purchase of Shares pursuant
to the Offer. Under the provisions of the HSR Act applicable to the Offer, the
purchase of Shares pursuant to the Offer may not be consummated until the
expiration of a 15-calendar day waiting period following the filing by the
Parent, unless both the Antitrust Division and the FTC terminate the waiting
period prior thereto. If, within such 15-calendar day waiting period, either the
Antitrust Division or the FTC requests additional information or documentary
material from the Parent, the waiting period would be extended for an additional
10 calendar days following substantial compliance by the Parent with such
request. Thereafter, the waiting period could be extended only by court order.
If the acquisition of Shares is delayed pursuant to a request by the FTC or the
Antitrust Division for additional information or documentary material pursuant
to the HSR Act, the Offer may, but need not (other than as may be requested by
the Company pursuant to the Merger Agreement), be extended and in any event the
purchase of and payment for Shares will be deferred until 10 days after the
request is substantially complied with, unless the waiting period is sooner
terminated by the FTC and the Antitrust Division. See Section 2 hereof. Only one
extension of such waiting period pursuant to a request for additional
information is authorized by the HSR Act and the rules promulgated thereunder,
except by court order. Any such extension of the waiting period will not give
rise to any withdrawal rights not otherwise provided for by applicable law. See
Section 4 hereof.
39
<PAGE>
The FTC and the Antitrust Division frequently scrutinize the
legality under the antitrust laws of transactions such as the proposed
acquisition of Shares by the Purchaser pursuant to the Offer. At any time before
or after the purchase by the Purchaser of Shares pursuant to the Offer, either
of the FTC or the Antitrust Division could take such action under the antitrust
laws as it deems necessary or desirable in the public interest, including
seeking to enjoin the purchase of Shares pursuant to the Offer or seeking the
divestiture of Shares purchased by the Purchaser or the divestiture of
substantial assets of the Parent, its subsidiaries or the Company. Private
parties and state attorneys general may also bring legal action under federal or
state antitrust laws under certain circumstances.
Based upon an examination of publicly available information
relating to the businesses in which the Company and its Subsidiaries are
engaged, the Purchaser has determined that the Company and the Parent both
produce and distribute similar product lines in certain geographic areas.
Although the Purchaser believes that the acquisition of Shares pursuant to the
Offer would not violate the antitrust laws, there can be no assurance that a
challenge to the Offer on antitrust grounds will not be made or, if such
challenge is made, what the outcome will be. See Section 15 hereof for certain
conditions to the Offer, including conditions with respect to litigation and
certain government actions.
Rights Agreement. The Rights Agreement contains certain provisions
that may delay, defer or prevent a takeover of the Company. Pursuant to the
Merger Agreement, the Company's Board of Directors has undertaken all action
necessary to render the Rights Agreement inapplicable to the Offer, the Merger
and any other transaction contemplated by the Merger Agreement. The Company's
Board of Directors adopted a resolution prior to the execution of the Merger
Agreement to the effect that neither the approval, execution or delivery of the
Merger Agreement nor consummation of the Offer, the Merger or any other
transaction contemplated by the Merger Agreement will trigger the exercisability
of the Rights, or any other provisions of the Rights Agreement, including
causing the occurrence of a Distribution Date (as defined in the Rights
Agreement) or a Shares Acquisition Date (as defined in the Rights Agreement).
17. FEES AND EXPENSES. CSFB is acting as Dealer Manager in
connection with the Offer and serving as financial advisor to the Parent and the
Purchaser in connection with the acquisition of the Company. The Parent has
agreed, pursuant to an engagement letter dated July 9, 1997 (the "Engagement
Letter"), to pay to CSFB a financial advisory fee of $100,000 upon execution of
the Engagement Letter (the "Financial Advisory Fee") and a fee of $750,000
payable upon public announcement of the Parent's proposed acquisition of the
Company (the "Announcement Fee"). The Financial Advisory Fee and the
Announcement Fee will be fully creditable against the Transaction Fee (as
defined below). The Parent has also agreed, pursuant to the Engagement Letter,
to pay CSFB a fee of 0.85% of the Aggregate Consideration (defined as the total
fair market value of all consideration paid to the Company and its security
holders plus all debt remaining on the Company's financial statements net of any
cash balance) in connection with the acquisition of the Company (the
"Transaction Fee"), payable by Parent upon the acquisition of 50% or more of the
voting power of the Company's outstanding voting securities in the case of the
Offer or, in the case of a merger, asset acquisition or other form of
acquisition or investment transaction, upon the closing of such transaction. The
Parent will also reimburse CSFB for reasonable out-of-pocket expenses, including
attorneys' fees, and has also agreed to indemnify CSFB against certain
liabilities and expenses in connection with the Offer.
The Purchaser has retained D. F. King & Co., Inc. to act as the
Information Agent and ChaseMellon Shareholder Services L.L.C. to act as the
Depositary in connection with the Offer. The Information Agent may contact
holders of Shares by mail, telephone, telex, telegraph and
40
<PAGE>
personal interview and may request brokers, dealers and other nominee
stockholders to forward the Offer materials to beneficial owners. The
Information Agent and the Depositary will receive reasonable and customary
compensation for services relating to the Offer and will be reimbursed for
certain out-of-pocket expenses. The Purchaser and the Parent have also agreed to
indemnify the Information Agent and the Depositary against certain liabilities
and expenses in connection with the Offer, including certain liabilities under
the federal securities laws.
The Purchaser will not pay any fees or commissions to any broker or
dealer or any other person for soliciting tenders of Shares pursuant to the
Offer (other than to the Dealer Manager). Brokers, dealers, commercial banks
and trust companies will, upon request, be reimbursed by the Purchaser for
customary mailing and handling expenses incurred by them in forwarding offering
materials to their customers.
18. MISCELLANEOUS. The Offer is being made solely by this Offer to
Purchase and the related Letter of Transmittal and is being made to all holders
of Shares. The Purchaser is not aware of any state where the making of the Offer
is prohibited by administrative or judicial action pursuant to any valid state
statute. If the Purchaser becomes aware of any valid state statute prohibiting
the making of the Offer or the acceptance of Shares pursuant thereto, the
Purchaser will make a good faith effort to comply with any such state statute.
If after such good faith effort, the Purchaser cannot comply with such state
statute, the Offer will not be made to nor will tenders be accepted from or on
behalf of the holders of Shares in such state. In any jurisdiction where the
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on behalf of the
Purchaser by the Dealer Manager or one or more registered brokers or dealers
that are licensed under the laws of such jurisdiction.
The Purchaser and the Parent have filed with the Commission a
Schedule 14D-1 (including exhibits) pursuant to Rule 14d-3 under the Exchange
Act, furnishing certain additional information with respect to the Offer. Such
statement and any amendments thereto, including exhibits, may be inspected and
copies may be obtained from the offices of the Commission (except that they will
not be available at the regional offices of the Commission) in the manner set
forth in Section 8 of this Offer to Purchase.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR THE PARENT NOT CONTAINED HEREIN OR
IN THE LETTER OF TRANSMITTAL AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
SCORE ACQUISITION CORP.
October 2, 1997
41
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
OF THE PURCHASER AND THE PARENT
1. Directors and Executive Officers of the Purchaser. The name and position with
the Purchaser of each director and executive officer of the Purchaser are set
forth below. The other required information with respect to each such person is
set forth under "Directors and Executive Officers of the Parent." All directors
and executive officers listed below are citizens of the United States.
NAME POSITION
ROBERT W. CARDY Director, President and Chief Executive Officer
G. WALTON COTTRELL Director and Vice President
JOHN R. WELTY Director and Secretary
DAVID A. CHRISTIANSEN Assistant Secretary
ROBERT J. DICKSON Treasurer
WALTER L. PEASE Assistant Treasurer
2. Directors and Executive Officers of the Parent. The name, business address,
present principal occupation or employment and material occupations, positions,
offices or employments during the last five years of each director and executive
officer of the Parent and certain other information are set forth below. Unless
otherwise indicated, the business address of each such director and executive
officer is 101 West Bern Street, Reading, Pennsylvania 19612. Unless otherwise
indicated, each occupation set forth opposite an individual's name refers to
employment with the Parent. All directors and executive officers listed below
are citizens of the United States.
<TABLE>
<CAPTION>
- - - -------------------------------------------------------------------------------------------------
NAME AND ADDRESS PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR
EMPLOYMENT HELD DURING THE LAST FIVE YEARS
- - - -------------------------------------------------------------------------------------------------
<S> <C>
ROBERT W. CARDY Chairman of the Board, President and Chief Executive Officer (since
July 1992) and Director (since November 1990) of Parent. Mr.
Cardy joined Carpenter in 1962 and held a variety of management
positions, becoming Executive Vice President in 1989, President and
Chief Operating Officer in 1990, and Chairman of the Board,
President and Chief Executive Officer in 1992. He also serves as
Director of CoreStates Financial Corporation, the Reading Hospital
& Medical Center, United Way of Berks County, and the Executive
Committee of the Pennsylvania Business Round Table. Mr. Cardy
has been a Director of the Parent since 1990 and is a member of the
Finance Committee.
G. WALTON COTTRELL Senior Vice President Finance and Chief Financial Officer (since
January 1993). Mr. Cottrell joined the Parent in 1989 as Vice
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
- - - -------------------------------------------------------------------------------------------------
NAME AND ADDRESS PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR
EMPLOYMENT HELD DURING THE LAST FIVE YEARS
- - - -------------------------------------------------------------------------------------------------
<S> <C>
President and Chief Financial Officer. Prior to that he served as
Vice President and Treasurer at Squibb Corporation. He serves on the
Board of Directors of Andersen Laboratories, Inc., the National
Association of Corporate Treasurers and the United Way of Berks
County.
DENNIS M. DRAEGER Senior Vice President Steel Operations (since July 1996). Prior to
joining the Parent, Mr. Dragger served as President of Worldwide
Floor Products Operations, Armstrong World Industries, Inc. from
1993 to 1996, and as Group Vice President, Armstrong World
Industries, Inc., from 1988 to 1993. He is a member of the Berks
Chamber of Commerce.
NICHOLAS F. FIORE Senior Vice President - Engineered Products Group (since July
1996). Mr. Fiore joined the Parent in 1990 as Vice President for
Research and Development. In 1993 he became Senior Vice
President for Strategic Businesses and since 1996 he has served as
Senior Vice President, Engineered Products Group. He is a member
of the Board of Trustees of the American Society for Metals and of
Albright College and a member of the Materials Advisory Council,
Carnegie-Mellon University.
ROBERT W. LODGE Vice President for Human Resources (since September 1991). Mr.
Lodge joined the Parent in 1991 as Vice President for Human
Resources. From 1988 to 1991 he served as Vice President of
Human Resources for Johnson-Matthey. He is a board member of
the Employment Policy Foundation and a member of the
Manufacturer's Alliance, the Human Resource Planning Society and
the Labor Policy Association.
JOHN R. WELTY Vice President, General Counsel and Secretary (since January 1993).
Mr. Welty joined the Parent in 1976 as a staff attorney. He has
served as General Counsel since 1991 and as Vice President, General
Counsel and Secretary since 1993. He is a member of the American
Corporate Counsel Association, and the American Society of Corporate
Secretaries.
C. McCOLLISTER EVARTS Dr. Evarts is Chief Executive Officer, Senior Vice President for
HERSHEY MEDICAL CENTER Health Affairs, Dean, College of Medicine, and Professor of
500 UNIVERSITY DRIVE Orthopedics, The Pennsylvania State University, College of
ROOM C1701 Medicine and University Hospitals, The Milton S. Hershey Medical
HERSHEY, PA 17033 Center. He has held these positions since 1987. He also became
President and Chief Academic Officer of the Pennsylvania State
Health System in July 1997. He is past Chair of the Board of
Directors of the Association of Academic Health Centers, a member
</TABLE>
I-2
<PAGE>
<TABLE>
<CAPTION>
- - - -------------------------------------------------------------------------------------------------
NAME AND ADDRESS PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR
EMPLOYMENT HELD DURING THE LAST FIVE YEARS
- - - -------------------------------------------------------------------------------------------------
<S> <C>
of the Association of American Medical Colleges, Society of
Medical Administrators, and serves on the Board of Directors of
Hershey Foods Corporation, Hershey Trust Company, M.S. Hershey
Foundation, the Board of Managers of Milton Hershey School,
Capital Region Health Futures Project, the Capital Region
Economic Development Corporation, and the Lehigh Valley
Hospital. Dr. Evarts has been a Director of the Parent since
1990, and is a member of the Audit Committee and Human Resources
Committee.
WILLIAM J. HUDSON, JR. Mr. Hudson is Chief Executive Officer and President and Director
AMP INCORPORATED of AMP Incorporated. Mr. Hudson joined AMP Incorporated in 1961,
470 FRIENDSHIP ROAD and he has held a variety of management positions, becoming
MALL STOP 176-40 Executive Vice President, International in 1991, a Director in
P.O. Box 3608 (17105-3608) 1992, and elected Chief Executive Officer and President in 1993.
HARRISBURG, PA 17111 He also serves as a Director of The Goodyear Tire & Rubber
Company. Mr. Hudson has been a Director of the Parent since
1992, chairs the Corporate Governance Committee and serves as a
member of the Human Resources Committee.
PETER C. ROSSIN Mr. Rossin is the Chairman, Chief Executive Officer and founder of
ROSETREE INC. Dynamet, Incorporated. Before founding Dynamet, Incorporated in
400 SOUTHPOINTE BLVD. 1967, Mr. Rossin had held various production and operations
SUITE 220 positions at Crucible Steel Corporation, Fansteel Metallurgical
CANONSBURG, PA 15317 Corporation, and Cyclops Corporation. He has been a Director of
the Parent since February 28, 1997, and is a member of the Finance
Committee and Human Resources Committee.
KENNETH L. WOLFE Mr. Wolfe is Chairman of the Board, Chief Executive Officer and
HERSHEY FOODS CORPORATION Director of Hershey Foods Corporation. Mr. Wolfe was elected
100 CRYSTAL A DRIVE President and Chief Operating Officer in 1985, positions he held
P.O. BOX 810 through 1993. He was elected Vice President, Finance and Chief
HERSHEY, PA 17033-0810 Financial Officer of the Parent in 1981, and Senior Vice President,
Chief Financial Officer and Director in 1984. He serves as a Director
of Bausch & Lomb Inc., the Hershey Trust Company and is a member of
the Board of Managers, Milton Hershey School. Mr. Wolfe has been a
Director of the Parent since 1995, and is a member of the Corporate
Governance Committee and Finance Committee.
EDWARD W. KAY Mr. Kay is retired Co-Chairman and Chief Operating Officer, Ernst
ERNST & YOUNG & Whinney, now in practice as Ernst & Young LLP. Mr. Kay
1225 CONNECTICUT AVENUE., N.W. served as Co-Chairman and Chief Operating Officer of
WASHINGTON, D.C. 20036 Ernst & Whinney from 1984 to his retirement in 1988. He held
numerous positions with Ernst & Young LLP, including Managing
Partner of the Pittsburgh office from 1966 to 1978, and Regional Managing
</TABLE>
I-3
<PAGE>
<TABLE>
<CAPTION>
- - - -------------------------------------------------------------------------------------------------
NAME AND ADDRESS PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR
EMPLOYMENT HELD DURING THE LAST FIVE YEARS
- - - -------------------------------------------------------------------------------------------------
<S> <C>
Partner of the Mid-Atlantic region from 1978 to 1984. He also
serves as a Director of Constellation Holdings, Inc., and
Meridian International Center. Mr. Kay has been a Director of the
Parent since 1989, chairs the Audit Committee and serves as a
member of the Corporate Governance Committee.
ROBERT J. LAWLESS Mr. Lawless is President and Chief Executive Officer of McCormick
MCCORMICK & COMPANY, INC. & Company, Incorporated. Mr. Lawless had been serving as
18 LOVETON CIRCLE President and Chief Operating Officer since 1995. Mr. Lawless
SPARKS, MD 21152-6000 serves as a member of the Board of Directors of the United Way of
Central Maryland, the Greater Baltimore Committee and the
Grocery Manufacturers of America, Inc., is a member of the
Maryland Economic Development Commission and serves on the
Junior Achievement of Central Maryland Executive Council. Mr.
Lawless has been a Director of the Parent since April 1997, and
serves on the Corporate Governance Committee and Finance
Committee.
KATHRYN C. TURNER Ms. Turner is Chairman and Chief Executive Officer of Standard
STANDARD TECHNOLOGY, INC. Technology, Inc. Ms. Turner founded Standard Technology, Inc., an
6116 EXECUTIVE BLVD. engineering and manufacturing firm in 1985. Standard Technology,
SEVENTH FLOOR Inc., is headquartered in Rockville, Maryland, with offices in
ROCKVILLE, MD 20852 Northern Virginia and Jacksonville, Florida. She was appointed to
the President's Export Council in 1994, and also serves as a
Director of COMSAT Corporation and Phillips Petroleum Company.
She is actively involved in both the Urban League and The Boy
Scouts. Ms. Turner has been a Director of the Parent since 1994,
and is a member of the Audit Committee and Human Resources
Committee.
MARCUS C. BENNETT Mr. Bennett is Executive Vice President and Chief Financial Officer
LOCKHEED MARTIN CORPORATION and a Director of Lockheed Martin Corporation. He joined Martin
6801 ROCKLEDGE DRIVE Marietta Corporation in 1959 and has held various administrative
BETHESDA, MD 20817-1877 and finance positions with Martin Marietta and Lockheed Martin
Corporation. He also is a Director of COMSAT Corporation and
Martin Marietta Materials, Inc. and a member of the Board of
Directors of the Private Sector Council and the Georgia Tech
Advisory Board. Mr. Bennett has been a Director of the Parent since
1993, chairs the Human Resources Committee and serves on the
Audit Committee.
</TABLE>
I-4
<PAGE>
<TABLE>
<CAPTION>
- - - -------------------------------------------------------------------------------------------------
NAME AND ADDRESS PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR
EMPLOYMENT HELD DURING THE LAST FIVE YEARS
- - - -------------------------------------------------------------------------------------------------
<S> <C>
WILLIAM S. DIETRICH II Mr. Dietrich is President of Dietrich Industries, Inc. Mr. Dietrich has
DIETRICH INDUSTRIES, INC. served as President of Dietrich Industries, Inc., since 1968. Dietrich
500 GRANT STREET Industries, a subsidiary of Worthington Industries, Inc. is a
SUITE 2226 manufacturer of metal framing for commercial and residential
PITTSBURGH, PA 15219 construction markets. Mr. Dietrich serves on the Board of Directors
of Worthington Industries, Inc. He is an active community leader,
serving on 11 boards in western Pennsylvania, that include the
Greater Pittsburgh Chamber of Commerce, the Allegheny
Conference on Community Development, the University of
Pittsburgh, and the Pittsburgh Ballet Theater. Mr. Dietrich has been
a Director of the Parent since 1996 and is a member of the
Corporate Governance Committee and Human Resources
Committee.
J. MICHAEL FITZPATRICK Dr. Fitzpatrick is Vice President and Chief Technology Officer of
ROHM AND HAAS COMPANY Rohm and Haas. Dr. Fitzpatrick was named Chief Technology
INDEPENDENCE MALL WEST Officer in 1995. He was elected Vice President and Director of
PHILADELPHIA, PA 19105 Research in 1993. Dr. Fitzpatrick is a member of The Scientific
Advisory Board of Ampersand Ventures and is also a member of the
Corporate Advisory Board of the southeastern Pennsylvania region
of the American Cancer Society. Dr. Fitzpatrick has been a Director
of the Parent since January 1997, and is a member of the Audit
Committee and Corporate Governance Committee.
MARLIN MILLER, JR. Mr. Miller is President, Chief Executive Officer and Director, Arrow
ARROW INTERNATIONAL, INC. International, Inc. Mr. Miller founded Arrow International, Inc. in
3000 BERNVILLE ROAD 1975. Arrow is located in Reading, Pennsylvania, and is a leading
P.O. BOX 12888 producer of medical devices for critical care medicine. He is also a
READING, PA 19612 Director of CoreStates Financial Corporation, and Conners
Investor Services, Inc. He serves as a member of the Board of
Trustees of Alfred University and of the Reading Hospital &
Medical Center. Mr. Miller has been a Director of the Parent
since 1989, chairs the Finance Committee and serves as a member
of the Audit Committee.
CARL R. GARR Dr. Garr is Director and retired Chairman of the Board and Chief
2017 MEADOW GLEN Executive Officer, Bank of Pennsylvania. Dr. Garr served as
WYOMISSING, PA 19610 Chairman of the Board and Chief Executive Officer of the Bank of
Pennsylvania and Vice Chairman of Dauphin Deposit Corporation
from 1988 until his retirement in 1992. From 1984 to 1987, Dr.
Garr was President and Chief Executive Officer of The Polymer
Corporation, then an affiliate of Chesebrough-Pond's Inc. Dr.
Garr has been a Director of the Parent since 1977, and is a
member of the Corporate Governance Committee and the Finance
Committee.
</TABLE>
I-5
<PAGE>
<TABLE>
<CAPTION>
- - - -------------------------------------------------------------------------------------------------
NAME AND ADDRESS PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR
EMPLOYMENT HELD DURING THE LAST FIVE YEARS
- - - -------------------------------------------------------------------------------------------------
<S> <C>
PAUL R. ROEDEL Mr. Roedel is Director and retired Chairman of the Board and Chief
BERKS BUSINESS EDUCATION Executive Officer of the Parent. Mr. Roedel joined the Parent in
COALITION 1948 and became President and Chief Executive Officer in 1981.
1015 PENN AVENUE, SUITE 201 He became Chairman of the Board and Chief Executive Officer in
WYOMISSING, PA 19610 1987, until his retirement in 1992. He is a Director of General
Public Utilities Corporation and P. H. Glatfelter Company. He is
Chairman of the Berks Business Education Coalition, Treasurer of
the Wyomissing Foundation, and a member of ASM International. He
is also Chairman of the Board of Gettysburg College and a
Director of the Pennsylvania 2000 Education Coalition. Mr. Roedel
has been a Director of the Parent since 1973 and is a member of
the Finance Committee.
ARTHUR E. HUMPHREY Dr. Humphrey is Professor of Chemical Engineering, Pennsylvania
128 COLONIAL COURT State University and a Biotechnology consultant. Until 1992, Dr.
STATE COLLEGE, PA 16801 Humphrey served as Academic Vice President and Provost of
Lehigh University. In 1986, he became T. L. Diamond Professor of
Chemical Engineering and Director of the Center of Molecular
Bioscience and Biotechnology at Lehigh. He is the co-author of a
number of technical books, is the holder of four U.S. Patents, and is
a member of the National Academy of Engineering, the American
Institute of Chemical Engineers (past President), the American
Chemical Society and the American Society of Microbiology. He
has been a Fulbright lecturer in Japan and Australia and has received
other scientific awards. Dr. Humphrey has been a Director of the
Parent since 1980, and serves on the Audit Committee and Finance
Committee.
FREDERICK C. LANGENBERG Dr. Langenberg is Director and retired Chairman of the Board and
LANGAND CORPORATION Chief Executive Officer of The Interlake Corporation. Dr.
2535 WASHINGTON ROAD Langenberg joined Interlake, Inc. (predecessor of The Interlake
SUITE 1131 Corporation) in 1979 as President and Chief Operating Officer,
UPPER ST. CLAIR, PA 15241 became Chief Executive Officer in 1982, and was elected Chairman
of the Board in 1983, until his retirement in 1991. He is also a
Director of Peoples' Energy Corporation, Chicago and Dietrich
Industries. Dr. Langenberg has been a Director of the Parent
since 1981, and serves as a member of the Corporate Governance
Committee and the Human Resources Committee.
</TABLE>
I-6
<PAGE>
The Information Agent for the Offer is:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
Call Toll Free (800) 347-4750
The Dealer Manager for the Offer is:
CREDIT SUISSE FIRST BOSTON
LOGO
Eleven Madison Avenue
New York, New York 10010-3629
Call Toll Free (800) 881-8320
<PAGE>
LETTER OF TRANSMITTAL
To Tender of Shares of
Series A Convertible Preferred Stock,
Series B $1 Cumulative Convertible
Preferred Stock and Common
Stock (including the associated
Preferred Stock Purchase Rights)
of
TALLEY INDUSTRIES, INC.
Pursuant to the Offer to Purchase
Dated October 2, 1997
by
SCORE ACQUISITION CORP.
a wholly owned subsidiary of
CARPENTER TECHNOLOGY CORPORATION
- - - -------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, OCTOBER 30, 1997 UNLESS THE OFFER IS EXTENDED.
- - - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES L.L.C.
By Mail: By Overnight Courier: By Hand:
Post Office Box 3305 85 Challenger Road-Mail Drop-Reorg. 120 Broadway, 13th Floor
South Hackensack, NJ 07606 Ridgefield Park, NJ 07660 New York, NY 10271
Attn: Reorganization Department Attn: Reorganization Department
By Facsimile Transmission:
(201) 329-8936
For Facsimile Confirmation of Receipt
of Guaranteed Delivery:
(201) 296-4860
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION
OF INSTRUCTIONS VIA A FACSIMILE, OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY. YOU MUST SIGN THIS LETTER OF
TRANSMITTAL IN THE APPROPRIATE SPACE THEREFOR PROVIDED BELOW AND COMPLETE THE
SUBSTITUTE FORM W-9 SET FORTH BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by Shareholders of Talley
Industries, Inc. (the "Company") if certificates evidencing Shares (as defined
below) are to be forwarded herewith or, unless an Agent's Message (as defined in
the Offer to Purchase) is utilized, if delivery of Shares is to be made by
book-entry transfer to the Depository's account at The Depository Trust Company
or the Philadelphia Depository Trust Company hereinafter collectively referred
to as the "Book-Entry Transfer Facilities") pursuant to the procedures set forth
in Section 3 of the Offer to Purchase (as defined below). Delivery of documents
to a Book-Entry Transfer Facility does not constitute delivery to the
Depositary.
Shareholders whose certificates for Shares are not immediately
available or who cannot deliver their Shares and all other documents required
hereby to the Depositary by the Expiration Date (as defined in the Offer to
Purchase), or who cannot comply with the book-entry transfer procedures on a
timely basis, may nevertheless tender their Shares pursuant to the guaranteed
delivery procedures set forth in Section 3 of the Offer to Purchase. See
Instruction 2.
<PAGE>
<TABLE>
<CAPTION>
- - - ---------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- - - ---------------------------------------------------------------------------------------------------------------------
Name(s) and Address(es) of Registered
Holder(s) Shares Tendered
(Please fill in, if blank) (Attach additional list if necessary)
- - - ---------------------------------------------------------------------------------------------------------------------
Share Class and Number of Number of Shares
Certificate Series of Shares Tendered**
Number(s)* Shares Represented
Represented by
by Certificate(s)*
Certificate(s)
<S> <C> <C> <C> <C>
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
Total Series A Preferred Shares
----------------------------------------------------------------------
Total Series B Preferred Shares
----------------------------------------------------------------------
Total Common Shares
- - - ---------------------------------------------------------------------------------------------------------------------
* Need not be completed by Shareholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares represented by any certificates delivered to
the Depositary are being tendered. See Instruction 4.
- - - ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The names and addresses of the registered holders should be printed, if
not already printed above, exactly as they appear on the certificates
representing Shares tendered hereby. The certificates and number of Shares that
the undersigned wishes to tender should be indicated in the appropriate boxes.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO
THE DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution ____________________________________________
Account No._______________________________________________________________
Check Box of Applicable Book-Entry Transfer Facility:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Transaction Code No.______________________________________________________
<PAGE>
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s)___________________________________________
Date of Execution of Notice of Guaranteed Delivery________________________
Window Ticket Number (if any)_____________________________________________
Name of Institution which Guaranteed Delivery_____________________________
Account No._______________________________________________________________
If Delivered by Book-Entry Transfer, Check Box of Book-Entry Transfer
Facility:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Transaction Code No.______________________________________________________
Ladies and Gentlemen:
The undersigned hereby tenders to Score Acquisition Corp. (the
"Offeror"), a Delaware corporation and a wholly owned subsidiary of Carpenter
Technology Corporation, a Delaware corporation ("Parent"), the above-described
shares of Series A Convertible Preferred Stock ("Series A Preferred Shares"),
Series B $1 Cumulative Convertible Preferred Stock ("Series B Preferred Shares")
and Common Stock, par value $1.00 per share ("Common Shares" and, together with
the Series A Preferred Shares and Series B Preferred Shares, the "Shares") of
Talley Industries, Inc., a Delaware corporation (the "Company"), including the
associated Preferred Stock Purchase Rights (the "Rights") issued pursuant to the
Rights Agreement between the Company and ChaseMellon Shareholder Services
L.L.C., as Rights Agent, as amended and restated on February 2, 1996 (the
"Rights Agreement"), at a purchase price of $11.70 per Series A Preferred Share,
$16.00 per Series B Preferred Share and $12.00 per Common Share, net to the
seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated October 2, 1997 (the "Offer
to Purchase")), receipt of which is hereby acknowledged, and in this Letter of
Transmittal (which, together with the Offer to Purchase, and any amendments or
supplements hereto or thereto, collectively constitute the "Offer"). The Offer
is being made in connection with the Agreement and Plan of Merger, dated
September 25, 1997 (the "Merger Agreement"), among the Parent, the Offeror and
the Company. Unless the context requires otherwise, all references herein to the
Common Shares or Shares shall include the associated Rights, and all references
to the Rights shall include all benefits that may inure to the holders of the
Rights pursuant to the Rights Agreement.
Subject to, and effective upon, acceptance of repayment of and payment
for the Shares tendered herewith, the undersigned hereby sells, assigns and
transfers to or upon the order of the Offeror all right, title and interest in
and to all the Shares that are being tendered hereby (and any and all other
Shares or other securities issued or issuable in respect thereof
("Distributions")) and appoints the Depositary the true and lawful agent and
attorney-in-fact of the undersigned with respect to such Shares (and all such
other Shares or securities), with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest), to
(a) deliver certificates for such Shares and all Distributions, or transfer
ownership of such Shares and all Distributions on the account books maintained
by any of the Book-Entry Transfer Facilities, together, in any such case, with
all accompanying evidences of transfer and authenticity, to or upon the order of
the Offeror, (b) present such Shares and all Distributions for transfer on the
books of the Company and (c) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Shares and all Distributions, all in
accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints each designee of the
Offeror as the attorney-in-fact and proxy of the undersigned, each with full
power of substitution, to exercise all voting and other rights of the
undersigned in such manner as each such attorney and proxy or his substitute
shall in his sole judgment deem proper, with respect to all of the Shares
tendered hereby which have been accepted for payment by the Offeror prior to the
time of any vote or other action (and any and all Distributions) at any meeting
of Shareholders of the Company (whether annual or special and whether or not an
adjourned meeting), any actions by written consent in
<PAGE>
lieu of any such meeting or otherwise. This proxy is irrevocable and is granted
in consideration of, and is effective upon, the acceptance for payment of such
Shares by the Offeror in accordance with the terms of the Offer. Such acceptance
for payment shall revoke any other proxy or written consent granted by the
undersigned at any time with respect to such Shares and Distributions (and all
such other securities or rights), and no subsequent proxies will be given or
written consents will be executed by the undersigned (and if given or executed,
will not be deemed effective).
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and all Distributions and that when the same are accepted for
payment by the Offeror, the Offeror will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claims. The undersigned, upon request, will execute
and deliver any additional documents deemed by the Depositary or the Offeror to
be necessary or desirable to complete the sale, assignment and transfer of the
Shares tendered hereby and all Distributions.
All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned, and any obligation of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned. Except as stated in the Offer, this
tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one
of the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute an agreement between the undersigned and the
Offeror upon the terms and subject to the conditions of the Offer. The Offeror's
acceptance of such Shares for payment will constitute a binding agreement
between the undersigned and the Offeror upon the terms and subject to the
conditions of the Offer, including, without limitation, the undersigned's
representation and warranty that the undersigned owns the Shares being tendered.
Unless otherwise indicated under "Special Payment Instructions," please
issue the check for the purchase price of any Shares purchased, and return any
certificates evidencing Shares not tendered or not purchased, in the name(s) of
the undersigned. Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the purchase price of any Shares
purchased and return any certificates for Shares not tendered or not purchased
(and accompanying documents, as appropriate) to the undersigned at the address
shown below the undersigned's signature(s). In the event that both "Special
Payment Instructions" and "Special Delivery Instructions" are completed, please
issue the check for the purchase price of any Shares purchased and return any
Shares not tendered or not purchased in the name(s) of, and mail said check and
any certificates to, the person(s) so indicated. The undersigned recognizes that
the Offeror has no obligation, pursuant to the "Special Payment Instructions,"
to transfer any Shares from the name of the registered holder(s) thereof if the
Offeror does not accept for payment any of the Shares so tendered.
<PAGE>
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SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 5, 6 and 7) (See Instructions 1, 5, 6 and 7)
To be completed ONLY if the check for the purchase To be completed ONLY if the check for the
price of Shares purchased or certificates for purchase price of Shares purchased or
Shares not tendered or not purchased are to be certificates for Shares not tendered or not
issued in the name of someone other than the purchased are to be mailed to someone other than
undersigned or if Shares tendered hereby and the undersigned or to the undersigned at an
delivered by book-entry transfer which are not address other than that shown below the
accepted for payment are to be returned by credit undersigned's signature(s).
to an account at one of the Book-Entry Transfer
Facilities other than designated above. Mail check and/or certificates to:
Issue [ ] Check [ ] Certificate to: Name_________________________________
Name___________________________________________ (Please Print)
(Please Print) Address_________________________________________
Address________________________________________
________________________________________________
_______________________________________________ (Zip Code)
(Zip Code) ________________________________________________
(Taxpayer Identification or Social Security No.)
_______________________________________________
(Taxpayer Identification or Social Security No.)
(See Substitute Form W-9) (See Substitute Form W-9)
[ ] Credit Shares delivered by book-entry
transfer and not purchased to the account set
forth below
Check appropriate box.
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
- - - ----------------------------------------------------- ---------------------------------------------------
</TABLE>
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. Except as otherwise provided below,
signatures on all Letters of Transmittal must be guaranteed by a firm that is a
bank, broker, dealer, credit union, savings association or other entity which is
a member in good standing of the Securities Transfer Agents Medallion Program,
the New York Stock Exchange Medallion Signature Guarantee Program, the Stock
Exchange Medallion Program, or by any other bank, broker, dealer, credit union,
savings association or other entity which is an "eligible guarantor
institution," as such term is defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended (each of the foregoing constituting an
"Eligible Institution"), unless the Shares tendered thereby are tendered (i) by
a registered holder of Shares who has not completed either the box labeled
"Special Payment Instructions" or the box labeled "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. See Instruction 5. If the certificates are registered in
the name of a person or persons other than the signer of this Letter of
Transmittal, or if payment is to be made or delivered to, or certificates
evidencing unpurchased Shares are to be issued or returned to, a person other
than the registered owner or owners, then the tendered certificates must be
endorsed or accompanied by duly executed stock powers, in either case signed
exactly as the name or names of the registered owner or owners appear on the
certificates or stock powers, with the signatures on the certificates or stock
powers guaranteed by an Eligible Institution as provided herein. See
Instruction 5.
2. Delivery of Letter of Transmittal and Shares. This Letter of
Transmittal is to be used either if certificates are to be forwarded herein or,
unless an Agent's Message (as defined in the Offer to Purchase) is utilized, if
the delivery of Shares is to be made by book-entry transfer pursuant to the
procedures set forth in Section 3 of the Offer to Purchase. Certificates for all
physically delivered Shares, or a confirmation of a book-entry transfer into the
Depositary's account at one of the Book-Entry Transfer Facilities of all Shares
delivered electronically, as well as a properly completed and duly executed
Letter of Transmittal (or a manually signed facsimile thereof) and any other
documents required by this Letter of Transmittal, or an Agent's Message in the
case of a book-entry delivery, must be received by the Depositary at one of its
addresses set forth on the front page of this Letter of Transmittal by the
Expiration Date. If certificates are forwarded to the Depositary in multiple
deliveries, a properly completed and duly executed Letter of Transmittal must
accompany each such delivery. Shareholders who cannot deliver their Shares and
all other required documents to the Depositary by the Expiration Date must
tender their Shares pursuant to the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase. Pursuant to such procedures: (a) such tender
must be made by or through an Eligible Institution; (b) a properly completed and
duly executed Notice of Guaranteed Delivery, substantially in the form provided
by the Offeror, must be received by the Depositary prior to the Expiration Date;
and (c) the certificates for all tendered Shares, in proper form for tender, or
a confirmation of a book-entry transfer into the Depositary's account at one of
the Book-Entry Transfer Facilities of all Shares delivered electronically, as
well as a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile thereof), and any other documents required by this
Letter of Transmittal must be received by the Depositary within three trading
days after the date of execution of such Notice of Guaranteed Delivery, all as
provided in Section 3 of the Offer to Purchase. The term "trading day" is any
day on which the New York Stock Exchange is open for business.
The method of delivery of certificates evidencing Shares, the Letter of
Transmittal and all other required documents, including delivery through a
Book-Entry Transfer Facility, is at the option and risk of the tendering
Shareholder. Shares will be deemed delivered only when actually received by the
Depositary (including, in the case of a book-entry transfer, by a confirmation
of a book-entry transfer). If delivery is by mail, registered mail with return
receipt requested, properly insured, is recommended. In all cases, sufficient
time should be allowed to ensure timely delivery.
No alternative, conditional or contingent tenders will be accepted, and
no fractional Shares will be purchased. By executing this Letter of Transmittal
(or a manually signed facsimile thereof), the tendering Shareholder waives any
right to receive any notice of the acceptance for payment of the Shares.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
4. Partial Tenders (not applicable to Shareholders who tender by
book-entry transfer). If fewer than all the Shares represented by any
certificate delivered to the Depositary are to be tendered, fill in the number
of Shares which are to be tendered in the box entitled "Number of Shares
Tendered." In such case, a new
<PAGE>
certificate of the remainder of the Shares represented by the old certificate
will be sent to the person(s) signing this Letter of Transmittal unless
otherwise provided in the appropriate box on this Letter of Transmittal, as
promptly as practicable following the expiration or termination of the Offer.
All Shares evidenced by certificates delivered to the Depositary will be deemed
to have been tendered unless otherwise indicated.
5. Signatures on Letter of Transmittal; Stock Powers and Endorsements.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, the signature(s) must correspond with the name(s) as
written on the face of the certificate without alteration, enlargement or any
change whatsoever.
If any of the Shares tendered hereby are held of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names
on different certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal is signed by the registered holder(s) of
the Shares tendered hereby, no endorsements of certificates or separate stock
powers are required unless payment of the purchase price is to be made, or
certificates evidencing Shares not tendered or not purchased are to be returned,
in the name of any person other than the registered holder(s), in which case the
certificate(s) for such Shares tendered hereby must be endorsed, or accompanied
by, appropriate stock powers, in either case signed exactly as the name(s) of
the registered holder(s) appear(s) on the certificate for such Shares.
Signatures on any such certificates or stock powers must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal or any certificate evidencing Shares or
stock power is signed by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, such person should so indicate when signing, and
proper evidence satisfactory to the Offeror of the authority of such person so
to act must be submitted.
6. Stock Transfer Taxes. Except as otherwise provided in this
Instruction 6, the Offeror will pay any stock transfer taxes with respect to the
sale and transfer of any Shares to it or its order pursuant to the Offer. If,
however, payment of the purchase price is to be made to, or Shares not tendered
or not purchased are to be returned in the name of, any person other than the
registered holder(s), then the amount of any stock transfer taxes (whether
imposed on the registered holder(s), such other person or otherwise) payable on
account of the transfer to such person will be deducted from the purchase price
unless satisfactory evidence of the payment of such taxes, or exemption
therefrom, is submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter of
Transmittal.
<PAGE>
7. Special Payment and Delivery Instruction. If the check for the
purchase price of any Shares purchased is to be issued, or any Shares not
tendered or not purchased are to be returned, in the name of a person other than
the person(s) signing this Letter of Transmittal or if the check or any
certificates for Shares not tendered or not purchased are to be mailed to
someone other than the person(s) signing this Letter of Transmittal or to the
person(s) signing this Letter of Transmittal at an address other than that shown
above, the appropriate boxes on this Letter of Transmittal should be completed.
Shareholders tendering Shares by book-entry transfer may request that Shares not
purchased be credited to such account at any of the Book-Entry Transfer
Facilities as such Shareholder may designate under "Special Payment
Instructions." If no such instructions are given, any such Shares not purchased
will be returned by crediting the account at the Book-Entry Transfer Facilities
designated above.
8. Substitute Form W-9. The tendering Shareholder is required to
provide the Depositary with such Shareholder's correct TIN on Substitute Form
W-9, which is provided below, unless an exemption applies. Failure to provide
the information on the Substitute Form W-9 will subject the tendering
Shareholder to a $50 penalty and to 31% federal income tax backup withholding on
the payment of the purchase price for the Shares.
9. Foreign Holders. Foreign holders must submit a completed IRS Form
W-8 to avoid 31% backup withholding. IRS Form W-8 may be obtained by contacting
the Depositary at one of the addresses on the face of this Letter of
Transmittal.
10. Requests for Assistance or Additional Copies. Questions and
requests for assistance may be directed to the Dealer Manager or the Information
Agent at their respective addresses or telephone numbers set forth below.
Additional copies of the Offer to Purchase, this Letter of Transmittal and the
Notice of Guaranteed Delivery may be obtained from the Information Agent or from
brokers, dealers, commercial banks or trust companies.
11. Waiver of Conditions. The conditions of the Offer may be waived by
the Offeror (subject to certain limitations in the Merger Agreement), in whole
or in part, at any time or from time to time, in the Offeror's sole discretion.
12. Lost, Destroyed or Stolen Certificates. If any certificate
representing Shares has been lost, destroyed or stolen, the Shareholder should
promptly notify the Depositary. The Shareholder will then be instructed as to
the steps that must be taken in order to replace the certificate. This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE
COPY HEREOF (TOGETHER WITH CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER
AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE
OFFER TO PURCHASE).
<PAGE>
IMPORTANT TAX INFORMATION
Under federal income tax law, a Shareholder whose tendered Shares are
accepted for payment is required to provide the Depositary with such
Shareholder's correct TIN on the Substitute Form W-9. If such Shareholder is an
individual, the TIN is such Shareholders' Social Security Number. If the
Depositary is not provided with the correct TIN, the Shareholder may be subject
to a $50 penalty imposed by the Internal Revenue Service. In addition, payments
that are made to such Shareholder with respect to Shares purchased pursuant to
the Offer may be subject to backup withholding.
Certain Shareholders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, that Shareholder must submit a statement, signed under
penalties of perjury, attesting to that individual's exempt status. Such
statements may be obtained from the Depositary. All exempt recipients (including
foregoing persons wishing to qualify as exempt recipients) should see the
enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional instructions.
If backup withholding applies, the Depositary is required to withhold
31% of any payments made to the Shareholder. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If backup withholding
results in an overpayment of taxes, a refund may be obtained.
Purpose of Substitute Form W-9
To prevent backup federal income tax withholding on payments that are
made to a Shareholder with respect to Shares purchased pursuant to the Offer,
the Shareholder is required to notify the Depositary of such Shareholder's
correct TIN by completing the form certifying that the TIN provided on the
Substitute Form W-9 is correct.
What Number to Give the Depositary
The Shareholder is required to give the Depositary the Social Security
Number or Employer Identification Number of the record owner of the Shares. If
the Shares are in more than one name or are not in the name of the actual owner,
consult the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional guidelines on which number to
report.
<PAGE>
- - - -------------------------------------------------------------------------------
SIGN HERE
(Complete Substitute Form W-9 below)
_______________________________________________________________________________
_______________________________________________________________________________
(Signature(s) of Owner(s))
_______________________________________________________________________________
Name(s)________________________________________________________________________
_______________________________________________________________________________
Capacity (full title)__________________________________________________________
Address________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Include Zip Code)
_______________________________________________________________________________
Area Code and Telephone Number_________________________________________________
Taxpayer Identification or Social Security Number______________________________
(See Substitute Form W-9)
Dated:___________________________________________________________ , 1997
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
stock certificate(s) or on a security position listing or by the person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, agent, officer of a corporation or other person
acting in a fiduciary or representative capacity, please set forth full title
and see Instruction 5).
GUARANTEE OF SIGNATURE(S)
(See Instructions 1 and 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY. PLACE MEDALLION GUARANTEE IN SPACE
BELOW.
Authorized signature(s)________________________________________________________
Name___________________________________________________________________________
Name of Firm___________________________________________________________________
Address________________________________________________________________________
_______________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number_________________________________________________
Dated:______________________________________________________________ , 1997
- - - -------------------------------------------------------------------------------
<PAGE>
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PAYOR'S NAME: CHASEMELLON SHAREHOLDER SERVICES L.L.C.
- - - ---------------------------------------------------------------------------------------------------------------------
SUBSTITUTE Part I - PLEASE PROVIDE YOUR TIN IN TIN:________________________________
THE BOX AT THE RIGHT AND CERTIFY BY Social Security
SIGNING AND DATING BELOW. Number or Employer
Identification Number
Form W-9 -----------------------------------------------------------------------------
Department of the Treasury, Part II - For Payees exempt from backup withholding, see the enclosed
Internal Revenue Service Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 and complete as instructed therein.
-----------------------------------------------------------------------------
Payor's Request for Taxpayer Certification - Under penalties of perjury, I certify that the number shown
Identification Number ("TIN") on this form is my correct TIN (or I am waiting for a number to be issued to
and Certification me).
-----------------------------------------------------------------------------
SIGNATURE:___________________________________________ Date:_________________
- - - ---------------------------------------------------------------------------------------------------------------------
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Certification Instructions - See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitution Form W-9" for the appropriate TIN
and signature for the certification. Persons awaiting a taxpayer identification
number should complete the additional certification described below. Foreign
persons claiming exemption from these requirements should consult the Depositary
regarding proper establishment of the exemption.
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING YOUR
TIN.
- - - --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a TIN has not been issued to
me, and either (1) I have mailed or delivered an application to receive a TIN to
the appropriate IRS Center or Social Security Administration Officer or (2) I
intend to mail or deliver an application in the near future. I understand that
if I do not provide a TIN by the time of payment, 31% of all payments pursuant
to the Offer made to me thereafter will be withheld until I provide a number.
SIGNATURE:____________________________________________ Date:_________________
- - - --------------------------------------------------------------------------------
The Information Agent for the Offer is:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
Call Toll Free (800) 347-4750
The Dealer Manager for the Offer is:
Credit Suisse First Boston
Eleven Madison Avenue
New York, New York 10010-3629
Call Toll Free (800) 881-8320
<PAGE>
NOTICE OF GUARANTEED DELIVERY
for
Tender of Shares of Series A Convertible Preferred Stock,
Series B $1 Cumulative
Convertible Preferred Stock and Common Stock
(including, in the case of the Common Stock, the associated Preferred Stock
Purchase Rights)
of
Talley Industries, Inc.
- - - --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON THURSDAY, OCTOBER 30, 1997, UNLESS THE OFFER IS EXTENDED.
- - - --------------------------------------------------------------------------------
As set forth in Section 3 of the Offer to Purchase described below,
this instrument or one substantially equivalent hereto must be used to accept
the Offer (as defined below) if (i) certificates evidencing shares of Series A
Convertible Preferred Stock ("Series A Preferred Shares"), Series B $1
Cumulative Convertible Preferred Stock ("Series B Preferred Shares" and together
with the Series A Preferred Shares, "Preferred Shares") or Common Stock, par
value $1.00 per share ("Common Shares" and together with the Preferred Shares,
the "Shares"), of Talley Industries, Inc., a Delaware corporation (the
"Company"), including, in the case of Common Shares, the associated Preferred
Stock Purchase Rights (the "Rights") issued pursuant to the Rights Agreement
between the Company and ChaseMellon Shareholder Services L.L.C., as Rights
Agent, as amended and restated on February 2, 1996 (the "Rights Agreement"), are
not immediately available, (ii) the certificates evidencing Shares and all other
required documents cannot be delivered to the Depositary prior to the Expiration
Date (as defined in Section 1 of the Offer to Purchase), or (iii) the procedure
for delivery by book-entry transfer for the Shares cannot be completed on a
timely basis. This instrument may be transmitted by facsimile transmission or
delivered by hand or mail to the Depositary.
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES L.L.C.
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By Mail: By Overnight Courier: By Hand:
Post Office Box 3305 85 Challenger Road-Mail Drop-Reorg. 120 Broadway, 13th Floor
South Hackensack, NJ 07606 Ridgefield Park, NJ 07660 New York, NY 10271
Attn: Reorganization Department Attn: Reorganization Department
By Facsimile Transmission For Facsimile Confirmation of Receipt of
(For Eligible Institutions Only): Notice of Guaranteed Delivery:
(201) 329-8936 (201) 296-4860
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DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution (as defined in the Offer to Purchase)
under the instructions thereto, the signature guarantee must appear in the
applicable space provided in the signature box in the Letter of Transmittal.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to the Eligible Institution.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tender(s) to Score Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Carpenter Technology Corporation, a
Delaware corporation, upon the terms and subject to the conditions set forth in
the Offer to Purchase dated October 2, 1997 (the "Offer to Purchase") and in the
related Letter of Transmittal (which, as amended or supplemented from time to
time, together constitute the "Offer"), receipt of which is hereby acknowledged,
the number of Shares indicated below of Talley Industries, Inc., a Delaware
corporation, pursuant to the guaranteed delivery procedures set forth in Section
3 of the Offer to Purchase.
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Signature(s)_________________________________ Address(es)__________________________________________
_____________________________________________ _____________________________________________________
Zip Code
Name(s) of Record Holders____________________ Area Code and Tel. No.(s)____________________________
_____________________________________________
Please Type or Print
Check one box if Shares will be
_____________________________________________ tendered by book-entry transfer:
Number of Shares_____________________________ [ ] The Depository Trust Company
Certificate No.(s) (If Available)
_____________________________________________ [ ] Philadelphia Depository Trust Company
_____________________________________________
Dated____________________________________1997 Account Number_______________________________________
THE GUARANTEE SET FORTH BELOW MUST BE COMPLETED
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a member of a registered national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States that is a member in good
standing of the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or
the Stock Exchange Medallion Program, or an "eligible guarantor institution," as such term is defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (a) represents that the above named person(s) "own(s)" the Shares
tendered hereby within the meaning of Rule 14e-4 under the Exchange Act ("Rule 14e-4"), (b) represents that the tender of those
Shares complies with Rule 14e-4, and (c) guarantees to deliver to the Depositary either the certificates evidencing all tendered
Shares, in proper form for transfer, or confirmation of book-entry transfer of such shares into the Depositary's account at The
Depository Trust Company or the Philadelphia Depository Trust Company (each a "Book-Entry Transfer Facility"), in either case
together with the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed with any required signature
guarantees, or an Agent's Message (as defined in Section 3 of the Offer to Purchase) in the case of a book-entry delivery, and any
other required documents, all within three New York Stock Exchange, Inc. trading days after the date hereof.
_____________________________________________ _____________________________________________________
Name of Firm Authorized Signature
_____________________________________________ Name_________________________________________________
Address Please Print or Type
_____________________________________________ Title________________________________________________
Zip Code
Area Code and Tel. No._______________________ Date____________________________________________,1997
NOTE: DO NOT SEND CERTIFICATES EVIDENCING SHARES OR RIGHTS WITH THIS NOTICE.
CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
- - - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CREDIT FIRST CREDIT SUISSE FIRST BOSTON CORPORATION
SUISSE BOSTON Eleven Madison Avenue
New York, New York 10010 Telephone 212 325 2000
Offer to Purchase for Cash
All Outstanding Shares
of
Series A Convertible Preferred Stock,
Series B $1 Cumulative Convertible Preferred Stock
and
Common Stock
(including the associated Preferred Stock Purchase Rights)
of
Talley Industries, Inc.
at
$11.70 Net Per Share of Series A Convertible Preferred Stock,
$16.00 Net Per Share of Series B $1 Cumulative Convertible Preferred Stock and
$12.00 Net Per Share of Common Stock
by
Score Acquisition Corp.
a wholly owned subsidiary of
Carpenter Technology Corporation
- - - --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON THURSDAY, OCTOBER 30, 1997, UNLESS THE OFFER IS EXTENDED.
- - - --------------------------------------------------------------------------------
<PAGE>
October 2, 1997
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Score Acquisition Corp. (the "Purchaser"), a
Delaware corporation and a wholly owned subsidiary of Carpenter Technology
Corporation, a Delaware corporation (the "Parent"), to act as Dealer Manager in
connection with the Purchaser's offer to purchase for cash all of the
outstanding shares of Series A Convertible Preferred Stock ("Series A Preferred
Shares"), Series B $1 Cumulative Convertible Preferred Stock ("Series B
Preferred Shares" and, together with the Series A Preferred Shares, "Preferred
Shares") and Common Stock, par value $1.00 per share ("Common Shares" and
together with the Preferred Shares, the "Shares"), of Talley Industries, Inc., a
Delaware corporation (the "Company"), including, in the case of Common Shares,
the associated Preferred Stock Purchase Rights (the "Rights") issued pursuant to
the Rights Agreement between the Company and ChaseMellon Shareholder Services
L.L.C., as Rights Agent, as amended and restated on February 2, 1996 (the
"Rights Agreement"), at a purchase price of $11.70 per Series A Preferred Share,
$16.00 per Series B Preferred Share and $12.00 per Common Share, net to the
seller in cash without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase and in the related Letter of
Transmittal (which, as amended or supplemented from time to time, together
constitute the "Offer") enclosed herewith. The Offer is being made in connection
with the Agreement and Plan of Merger, dated September 25, 1997, by and among
the Parent, the Purchaser and the Company. Holders whose certificates evidencing
such Shares (the "Certificates") are not immediately available or who cannot
deliver their Certificates and all other required documents to the Depositary
(as defined below) prior to the Expiration Date (as defined in Section 1 of the
Offer to Purchase), or who, if applicable, cannot complete the procedures for
book-entry transfer on a timely basis, must tender their Certificates according
to the guaranteed delivery procedures set forth in Section 3 of the Offer to
Purchase.
Please furnish copies of the enclosed materials to those of your clients
for whose accounts you hold Shares registered in your name or in the name of
your nominee.
The Offer is subject to there being validly tendered and not withdrawn
prior to the Expiration Date that number of Shares which represents at least a
majority of the voting power represented by the Shares and other securities
entitled generally to vote in the election of directors of the Company
outstanding on a fully diluted basis. The Offer is also subject to other terms
and conditions. See the "Introduction" and Section 15 of the Offer to Purchase.
The following are enclosed herewith:
1. The Offer to Purchase, dated October 2, 1997.
2. The Letter of Transmittal to tender Shares and Rights for your use and
for the information of your clients. Facsimile copies of the Letter of
Transmittal may be used to tender Shares.
3. The Notice of Guaranteed Delivery for Shares to be used to accept the
Offer if Share Certificates are not immediately available, if such Certificates
and all other required documents cannot be delivered to ChaseMellon Shareholder
Services L.L.C. (the "Depositary") prior to the Expiration Date, or, if
applicable, the procedure for book-entry transfer cannot be completed by the
Expiration Date.
4. A printed form of letter which may be sent to your clients for whose
accounts you hold Shares registered in your name or in the name of your nominee,
with space provided for obtaining your clients' instructions with regard to the
Offer.
5. Guidelines of the Internal Revenue Service for Certification of Taxpayer
Identification Number on Substitute Form W-9 providing information relating to
backup federal income tax withholding.
6. A return envelope addressed ChaseMellon Shareholder Services L.L.C., the
Depositary.
YOUR PROMPT ACTION IS REQUIRED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, OCTOBER 30, 1997,
UNLESS THE OFFER IS EXTENDED.
<PAGE>
Please note the following:
1. The Offer price is $11.70 per Series A Preferred Share, $16.00 per
Series B Preferred Share and $12.00 per Common Share, net to the seller in
cash without interest thereon, upon the terms and subject to the conditions
set forth in the Offer.
2. The board of directors of the Company has determined that the Offer
and the Merger (as defined in the Offer to Purchase) are fair to, and in
the best interests of, the Company's stockholders, has approved the Merger
Agreement (as defined in the Offer to Purchase) and the transactions
contemplated thereby, including the Offer and the Merger, and recommends
that the Company's stockholders accept the Offer and tender their Shares
pursuant to the Offer.
3. The Offer is conditioned upon, among other things, there being
validly tendered and not withdrawn prior to the Expiration Date that number
of Shares which represents at least a majority of the voting power
represented by the Shares and other securities entitled generally to vote
in the election of directors of the Company outstanding on a fully diluted
basis. The Offer also is subject to certain other conditions, which are set
forth in the Offer to Purchase.
4. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Thursday, October 30, 1997, unless the Offer is
extended.
5. The Offer is being made for all of the outstanding Shares.
6. Tendering stockholders who hold Shares in their names will not be
obligated to pay brokerage fees or commissions to the Dealer Manager, the
Depositary or the Information Agent or, except as otherwise provided in
Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase
of Shares by the Purchaser pursuant to the Offer. However, backup federal
income tax withholding at a rate of 31% may be required, unless an
exemption applies or unless the required taxpayer identification
information is provided. See Instructions 8 and 9 of the Letter of
Transmittal.
7. Notwithstanding any other provision of the Offer, payment for Shares
accepted for payment pursuant to the Offer will in all cases be made only
after timely receipt by the Depositary of (a) certificates for (or a timely
Book-Entry Confirmation (as defined in Section 3 to the Offer to Purchase)
with respect to) such Shares, (b) the Letter of Transmittal (or a facsimile
thereof, properly completed and duly executed with any required signature
guarantees or an Agent's Message (as defined in the Offer to Purchase) in
connection with a book-entry transfer, and (c) any other documents required
by the Letter of Transmittal. Accordingly, payment to all tendering
stockholders may not be made at the same time, depending upon when
certificates for Shares or Book-Entry Confirmation with respect to Shares
are actually received by the Depositary.
In order to take advantage of the Offer, (i) a duly executed and properly
completed Letter of Transmittal with any required signature guarantees, or an
Agent's Message (as defined in Section 3 of the Offer to Purchase) in connection
with a book-entry delivery of Shares, and any other required documents should be
sent to the Depositary, and (ii) Certificates representing the tendered Shares
should be delivered to the Depositary, or, if applicable, Shares should be
tendered by book-entry transfer into the Depositary's account maintained at one
of the Book-Entry Transfer Facilities (as described in Section 3 of the Offer to
Purchase) prior to the Expiration Date, all in accordance with the instructions
set forth in the Letter of Transmittal and the Offer to Purchase.
If Holders of Shares wish to tender, but it is impracticable for them to
forward their Certificates or other required documents on or prior to the
Expiration Date or, if applicable, to comply with the book-entry transfer
procedures on a timely basis, a tender may be effected by following the
guaranteed delivery procedures specified in Section 3 of the Offer to Purchase.
<PAGE>
The Purchaser will not pay any commissions or fees to any broker, dealer or
other person (other than the Dealer Manager) in connection with the solicitation
of tenders of Shares pursuant to the Offer. The Purchaser will, however, upon
request, reimburse you for customary clerical and mailing expenses incurred by
you in forwarding any of the enclosed materials to your clients. The Purchaser
will pay or cause to be paid any stock transfer taxes payable on the transfer of
Shares to it, except as otherwise provided in Instruction 6 of the Letter of
Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
Credit Suisse First Boston Corporation, the Dealer Manager, at its address and
telephone number set forth on the back cover of the Offer to Purchase. Requests
for additional copies of the enclosed materials may be directed to the
Information Agent, D.F. King & Co., Inc. at its address and telephone numbers
set forth on the back cover of the Offer to Purchase.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE PURCHASER, PARENT, THE COMPANY, THE
DEPOSITARY OR THE DEALER MANAGER, OR ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE
YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON BEHALF OF
ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND
THE STATEMENTS CONTAINED THEREIN.
<PAGE>
Offer to Purchase for Cash
All Outstanding Shares
of
Series A Convertible Preferred Stock,
Series B $1 Cumulative Convertible Preferred Stock
and
Common Stock
(including the associated Preferred Stock Purchase Rights)
of
Talley Industries, Inc.
at
$11.70 Net Per Share of Series A Convertible Preferred Stock,
$16.00 Net Per Share of Series B $1 Cumulative Convertible Preferred Stock and
$12.00 Net Per Share of Common Stock
by
Score Acquisition Corp.
a wholly owned subsidiary of
Carpenter Technology Corporation
- - - --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON THURSDAY, OCTOBER 30, 1997, UNLESS THE OFFER IS EXTENDED.
- - - --------------------------------------------------------------------------------
<PAGE>
October 2, 1997
To Our Clients:
Enclosed for your consideration are an Offer to Purchase dated October
2, 1997 (the "Offer to Purchase") and the related Letter of Transmittal relating
to an offer by Score Acquisition Corp. (the "Purchaser"), a Delaware corporation
and a wholly owned subsidiary of Carpenter Technology Corporation, a Delaware
corporation (the "Parent"), to purchase all outstanding shares of Series A
Convertible Preferred Stock ("Series A Preferred Shares"), Series B $1
Cumulative Convertible Preferred Stock ("Series B Preferred Shares" and,
together with the Series A Preferred Shares, "Preferred Shares") and Common
Stock, par value $1.00 per share ("Common Shares" and, together with the
Preferred Shares, the "Shares"), of Talley Industries, Inc., a Delaware
corporation (the "Company"), including, in the case of Common Shares, the
associated Preferred Stock Purchase Rights (the "Rights") issued pursuant to the
Rights Agreement between the Company and ChaseMellon Shareholder Services
L.L.C., as Rights Agent, as amended and restated on February 2, 1996 (the
"Rights Agreement"), at a purchase price of $11.70 per Series A Preferred Share,
$16.00 per Series B Preferred Share and $12.00 per Common Share, net to the
seller in cash without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase and in the related Letter of
Transmittal (which, as amended or supplemented from time to time, together
constitute the "Offer"). Holders of Shares whose certificates for such Shares
are not immediately available or who cannot deliver their certificates and all
other required documents to the Depositary (as defined in the Offer to
Purchase), or complete the procedures for book-entry transfer, if applicable,
prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase)
must tender their Shares according to the guaranteed delivery procedures set
forth in Section 3 of the Offer to Purchase. We are the holder of record of
Shares held by us for your account. A tender of such Shares can be made only by
us as the holder of record and pursuant to your instructions. The Letter of
Transmittal is furnished to you for your information only and cannot be used by
you to tender Shares held by us for your account.
We request instructions as to whether you wish to have us tender on
your behalf any or all of such Shares held by us for your account, pursuant to
the terms and subject to the conditions set forth in the Offer.
Please note the following:
1. The Offer price is $11.70 per Series A Preferred Share, $16.00 per
Series B Preferred Share and $12.00 per Common Share, net to the seller in cash
without interest thereon, upon the terms and subject to the conditions set forth
in the Offer.
2. The board of directors of the Company has determined that the Offer
and the Merger (as defined in the Offer to Purchase) are fair to, and in the
best interests of, the Company's stockholders, has approved the Merger Agreement
(as defined in the Offer to Purchase) and the transactions contemplated thereby,
including the Offer and the Merger, and recommends that the Company's
stockholders accept the Offer and tender their Shares pursuant to the Offer.
3. The Offer is conditioned upon, among other things, there being
validly tendered and not withdrawn prior to the Expiration Date that number of
Shares which represents at least a majority of the voting power represented by
the Shares and other securities entitled generally to vote in the election of
directors of the Company outstanding on a fully diluted basis. The Offer also is
subject to certain other conditions, which are set forth in the Offer to
Purchase.
4. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Thursday, October 30, 1997, unless the Offer is extended.
5. The Offer is being made for all of the outstanding Shares.
6. Tendering stockholders who hold Shares in their names will not be
obligated to pay brokerage fees or commissions to the Dealer Manager, the
Depositary or the Information Agent (as such terms are defined in the Offer to
Purchase) or, except as otherwise provided in Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Shares by the Purchaser pursuant
to the Offer. However, backup federal income tax withholding at a rate of 31%
may be required, unless an exemption applies or unless the required taxpayer
identification information is provided. See Instruction 10 of the Letter of
Transmittal.
<PAGE>
7. Notwithstanding any other provision of the Offer, payment for Shares
accepted for payment pursuant to the Offer will in all cases be made only after
timely receipt by the Depositary of (a) certificates for (or a timely Book-Entry
Confirmation (as defined in Section 3 to the Offer to Purchase) with respect to)
such Shares, (b) the Letter of Transmittal (or a facsimile thereof, properly
completed and duly executed with any required signature guarantees or an Agent's
Message (as defined in the Offer to Purchase) in connection with a book-entry
transfer, and (c) any other documents required by the Letter of Transmittal.
Accordingly, payment to all tendering stockholders may not be made at the same
time, depending upon when certificates for Shares or Book-Entry Confirmation
with respect to Shares are actually received by the Depositary.
If you wish to have us tender any or all of your Shares, please so
instruct us by completing, executing and returning to us the instructions form
contained in this letter. An envelope in which to return your instructions to us
is enclosed. If you authorize the tender of your Shares, all such Shares will be
tendered unless otherwise specified on the instruction form contained in this
letter. Your instructions should be forwarded to us in ample time to permit us
to submit a tender on your behalf prior to the expiration of the Offer.
The Offer is made solely by the Offer to Purchase and the related
Letter of Transmittal.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares residing in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance with the
securities, blue sky or other laws of such jurisdiction. However, the Purchaser
may, in its discretion, take such action as it may deem necessary to make the
Offer to holders of Shares in such jurisdiction.
In any jurisdiction where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer will be
deemed to be made on behalf of the Purchaser by one or more registered brokers
or dealers that are licensed under the laws of such jurisdiction.
<PAGE>
Instructions with Respect to the Offer to Purchase for Cash All
Outstanding Shares of Series A Convertible Preferred Stock,
Series B $1 Cumulative Convertible Preferred Stock and Common
Stock (including the associated Preferred Stock Purchase Rights)
of Talley Industries, Inc.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated October 2, 1997 (the "Offer to Purchase"), and the
related Letter of Transmittal (which, as amended or supplemented from time to
time, together constitute the "Offer"), in connection with the Offer by Score
Acquisition Corp., a Delaware corporation (the "Purchaser") and a wholly owned
subsidiary of Carpenter Technology Corporation, a Delaware corporation, to
purchase all outstanding shares of Series A Convertible Preferred Stock ("Series
A Preferred Shares"), Series B $1 Cumulative Convertible Preferred Stock
("Series B Preferred Shares" and together with the Series A Preferred Shares,
"Preferred Shares") and Common Stock, par value $1.00 per share ("Common Shares"
and together with the Preferred Shares, the "Shares"), of Talley Industries,
Inc., a Delaware corporation (the "Company"), including the associated Preferred
Stock Purchase Rights (the "Rights") issued pursuant to the Rights Agreement
between the Company and ChaseMellon Shareholder Services L.L.C., as Rights
Agent, as amended and restated on February 2, 1996 (the "Rights Agreement"), at
a purchase price of $11.70 per Series A Preferred Share, $16.00 per Series B
Preferred Share and $12.00 per Common Share, net to the seller in cash without
interest thereon.
This will instruct you to tender to the Purchaser the number of Shares
indicated below (or, if no number is indicated below, all Shares) held by you
for the account of the undersigned, upon the terms and subject to the conditions
set forth in the Offer to Purchase.
- - - --------------------------------------------------------------------------------
Number of Shares Tendered:*_____________________________________________________
Account No:_____________________________________________________________________
Dated:__________________________________________________________________________
SIGN HERE
Signature(s):___________________________________________________________________
Please type or print address(es):_______________________________________________
Area Code and Telephone Number:_________________________________________________
Taxpayer Identification or Social Security Number(s):___________________________
- - - --------------------------------------------------------------------------------
* Unless otherwise indicated, it will be assumed that all Shares and Rights
held by us for your account are to be tendered.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the Payer -
Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the Payer.
<TABLE>
<CAPTION>
- - - -------------------------------------------------------- -------------------------------------------------------
<S> <C> <C> <C>
Give the name and
Give the name and EMPLOYER
SOCIAL SECURITY IDENTIFICATION
For this type of account: number of -- For this type of account: number of --
- - - -------------------------------------------------------- -------------------------------------------------------
1. Individual The individual 6. Sole proprietorship The owner(3)
2. Two or more The actual owner of the 7. A valid trust, The legal entity (Do not
individuals (joint account or, if combined estate or pension furnish the identifying
account) funds, the first trust number of the personal
individual on the representative or trustee
account(1) unless the legal entity
itself is not designated
in the account title.)(4)
3. Custodian account of The minor(2) 8. Corporate The corporation
a minor (Uniform Gift/
Transfer to Minors Act)
4. a. The usual The grantor-trustee(1) 9. Association, club, The organization
revocable savings religious,
trust (grantor is charitable,
also trustee) educational, or
other tax-exempt
organization
b. So-called trust The actual owner(1) 10. Partnership The partnership
account that is
not a legal or
valid trust under
state law
5. Sole proprietorship The owner(3) 11. A broker or The broker or nominee
registered nominee
12. Account with the The public entity
Department of
Agriculture in the
name of a public
entity (such as a
State or local
government, school
district, or prison)
that receives
agricultural program
payments
- - - -------------------------------------------------------- -------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has a SSN, that person's number must be
furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your social security number or
employment identification number (if you have one).
(4) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Page 2
Obtaining a Number
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Card, or Form SS-4,
Application for Employer Identification Number (for businesses and all other
entities), or Form W-7 for Individual Taxpayer Identification Number (for alien
individuals required to file U.S. tax returns), at an office of the Social
Security Administration or the Internal Revenue Service.
Payees Exempt from Backup Withholding
Payees specifically exempted from backup withholding on all payments include the
following:
o A financial institution.
o An organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodial account under Section 403(b)(7).
o The United States or any agency or instrumentality thereof.
o A State, the District of Columbia, a possession of the United States, or
any political subdivision or instrumentality thereof.
o A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
o An international organization or any agency, or instrumentality thereof.
Payees that may be exempted from backup withholding:
o A corporation.
o A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
o A real estate investment trust.
o A common trust fund operated by a bank under section 584(a).
o An entity registered at all times during the tax year under the Investment
Company Act of 1940. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
o Payments to nonresident aliens subject to withholding under section 1441.
o Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident alien partner.
o Payments of patronage dividends where the amount receive is not paid in
money.
o Payments made by certain foregoing organizations.
Payments of interest not generally subject to backup withholding include the
following:
o Payments of interest on obligations issued by individuals.
Note: You may be subject to backup withholding if this interest is $600 or more
and is paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
<PAGE>
o Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
o Payments described in section 6049(b)(5) to non-resident aliens.
o Payments on tax-free covenant bonds under section 1451.
o Payments made by certain foreign organizations.
o Mortgage interest paid to you.
Exempt payees described above should file a Substitute Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND
RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS OR PATRONAGE
DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see sections 6041, 6041A(a), 6042, 6044, 6045, 6049,
6050A, and 6050N, and their regulations.
Privacy Act Notice. - Section 6109 requires most recipients of dividend,
interest or other payments to give taxpayer identification numbers to payers who
must report the payments to the IRS. The IRS uses the numbers for identification
purposes and to help verify the accuracy of your tax return. Payers must be
given the numbers whether or not recipients are required to file tax returns.
Payers must generally withhold 31% of taxable interest, dividend and certain
other payments to a payee who does not furnish a taxpayer identification number
to a payer. Certain penalties must also apply.
Penalties.
(1) Penalty for Failure to Furnish Taxpayer Identification Number. - If you fail
to furnish your correct taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) Civil Penalty for False Information With Respect to Withholding. - If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) Criminal Penalty for Falsifying Information. - Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
This announcement is neither an offer to purchase nor a
solicitation of an offer to sell Shares (as defined below). The Offer (as
defined below) is made solely by the Offer to Purchase dated October 2, 1997 and
the related Letter of Transmittal and any amendments or supplements thereto, and
is being made to all holders of Shares. The Offer is not being made to, nor will
tenders be accepted from or on behalf of, holders of Shares in any jurisdiction
in which the making of the Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. In any jurisdiction where
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer will be deemed to be made on behalf of the Purchaser
(as defined below) by Credit Suisse First Boston Corporation ("Credit Suisse
First Boston" or the "Dealer Manager") or one or more registered brokers or
dealers licensed under the laws of such jurisdiction.
Notice of Offer to Purchase for Cash
All Outstanding Shares
of
Series A Convertible Preferred Stock,
Series B $1 Cumulative Convertible Preferred Stock
and
Common Stock
(including the associated Preferred Stock Purchase Rights)
of
Talley Industries, Inc.
at
$11.70 Net Per Share of Series A Convertible Preferred Stock,
$16.00 Net Per Share of Series B $1 Cumulative
Convertible Preferred Stock
and
$12.00 Net Per Share of Common Stock
by
Score Acquisition Corp.
a wholly owned subsidiary of
Carpenter Technology Corporation
Score Acquisition Corp., a Delaware corporation (the
"Purchaser") and a wholly owned subsidiary of Carpenter Technology Corporation,
a Delaware corporation (the "Parent"), is offering to purchase all of the
outstanding shares of Series A Convertible Preferred Stock ("Series A Preferred
Shares"), Series B $1 Cumulative Convertible Preferred Stock ("Series B
Preferred Shares" and, together with the Series A Preferred Shares, the
"Preferred Shares") and Common Stock, par value $1.00 per share ("Common Shares"
and, together with the Preferred Shares, the "Shares"), of Talley Industries,
Inc., a Delaware corporation (the "Company"), including, in the case of Common
Shares, the associated Preferred Stock Purchase Rights (the "Rights") issued
pursuant to the Rights Agreement between the Company and ChaseMellon Shareholder
Services L.L.C., as Rights Agent, as amended and restated on February 2, 1996
(the "Rights Agreement"), at a purchase price of $11.70 per Series A Preferred
Share, $16.00 per Series B Preferred Share and $12.00 per Common Share, net to
the seller in cash, without interest thereon (the respective "Offer Price"),
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated October 2, 1997 (the "Offer to Purchase"), and in the related Letter of
Transmittal (which, as amended or supplemented from time to time, together
constitute the "Offer"). Tendering stockholders who hold Shares in their name
and tender directly will not be obligated to pay brokerage fees or commissions
to the Dealer Manager, the Depositary (as defined below) or the Information
Agent (as defined below) or, subject to instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer. The
purpose of the Offer is to acquire for cash as many outstanding Shares as
possible as the first step in a negotiated acquisition of the entire equity
interest in the Company. Following the consummation of the Offer, the Purchaser
intends to effect the Merger (as defined below).
<PAGE>
- - - --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, OCTOBER 30, 1997, UNLESS THE OFFER IS EXTENDED.
- - - --------------------------------------------------------------------------------
-2-
<PAGE>
The Offer is being made pursuant to the Agreement and Plan of
Merger, dated September 25, 1997 (the "Merger Agreement"), by and among the
Parent, the Purchaser and the Company. The Merger Agreement provides, among
other things, for the commencement of the Offer by the Purchaser, and further
provides that, following the purchase of Shares pursuant to the Offer and
promptly after the satisfaction or waiver of certain conditions and in
accordance with the Delaware General Corporation Law, the Purchaser will be
merged with and into the Company (the "Merger"). Following consummation of the
Merger, the Company will continue as the surviving corporation and will be a
wholly owned subsidiary of the Parent. At the effective time of the Merger, each
outstanding Share (except for Shares held in the treasury of the Company or
owned by the Purchaser, Parent or any of Parent's other wholly owned
subsidiaries and Shares held by stockholders properly exercising their appraisal
rights under the Delaware General Corporation Law) will be converted into the
right to receive the applicable Offer Price (or any higher price per Share paid
for Shares pursuant to the Offer).
The Board of Directors of the Company has determined that the
Offer and the Merger are fair to, and in the best interests of, the Company's
stockholders, has approved the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger, and recommends that
the stockholders accept the Offer and tender their Shares pursuant to the Offer.
The Offer is conditioned upon, among other things, (1) there
being validly tendered and not properly withdrawn prior to the Expiration Date
(as defined below) that number of Shares, together with any Shares owned by the
Parent or the Purchaser, which represents at least a majority of the voting
power represented by the Shares and other securities entitled generally to vote
in the election of directors of the Company outstanding on a fully-diluted basis
(the "Minimum Condition") and (2) any waiting period under the Hart-Scott Rodino
Antitrust Improvements Act of 1976, as amended, and the regulations thereunder
applicable to the purchase of the Shares pursuant to the Offer having expired or
been terminated.
For purposes of the Offer, the Purchaser will be deemed to
have accepted for payment, and thereby purchased, Shares validly tendered and
not properly withdrawn as, if and when the Purchaser gives oral or written
notice to ChaseMellon Shareholder Services L.L.C., as the Depositary (the
"Depositary"), of the Purchaser's acceptance of such Shares for payment pursuant
to the Offer. In all cases, upon the terms and subject to the conditions of the
Offer, payment for Shares purchased pursuant to the Offer will be made by
deposit of the purchase price therefor with the Depositary, which will act as
agent for tendering stockholders for the purpose of receiving payment from the
Purchaser and transmitting payment to validly tendering stockholders. In all
cases, payment for Shares purchased pursuant to the Offer will be made only
after timely receipt by the Depositary of (i) certificates for such Shares (or a
confirmation of a book-entry transfer of such Shares into the Depositary's
account at The Depository Trust Company or the Philadelphia Depository Trust
Company (each a "Book-Entry Transfer Facility"), pursuant to the procedures set
forth in the Offer to Purchase and the Letter of Transmittal), (ii) the Letter
of Transmittal (or a facsimile thereof), properly completed and duly executed,
with required signature guarantees, or an Agent's Message (as defined in the
Offer to Purchase), in connection with a book-entry transfer and (iii) all other
documents required by the Letter of Transmittal. Under no circumstances will
interest on the purchase price for Shares be paid by the Purchaser by reason of
any delay in making such payment.
The term "Expiration Date" shall mean 12:00 Midnight, New York
City Time, on Thursday, October 30, 1997, unless and until the Purchaser, in
accordance with the terms of the Offer and the Merger Agreement, shall have
extended the period of time during which the Offer is open, in which event the
term "Expiration Date" shall mean the latest time and date at which the Offer,
as so extended by the Purchaser, shall expire. Subject to the terms of the
Merger Agreement and the applicable rules and regulations of the Securities and
Exchange Commission (the "Commission"), the Purchaser expressly reserves the
right, in its sole discretion, at any time or from time to time, and regardless
of whether any of the events set forth in Section 15 of the Offer to Purchase
shall have occurred or shall have been determined by the Purchaser to have
occurred, (a) if, immediately prior to the Expiration Date of the Offer, the
Shares tendered and not withdrawn pursuant to the Offer equal less than 90% of
each class of the outstanding Shares but more than 70% of each class of the
outstanding Shares (on a fully-diluted basis), to extend the Offer for a period
not to exceed five business days, notwithstanding that all conditions to the
offer are satisfied as of such date, and thereby delay acceptance for payment of
and the payment for any Shares, by giving oral or written notice of such
extension to the Depositary and (b) prior to the Expiration Date, to waive any
of the conditions set forth in Section 15 of the Offer to Purchase (other than
the Minimum Condition) and to make any other changes in the terms and conditions
of the Offer by giving oral or written notice of such waiver or amendment to the
Depositary. There can be no assurance that the Purchaser will exercise its right
to extend the Offer.
-3-
<PAGE>
The Offer is subject to certain conditions set forth in the
Offer to Purchase. If, by the Expiration Date any or all of the conditions to
the Offer have not been satisfied or waived, the Purchaser reserves the right
(but shall not be obligated), in its sole discretion, subject to the terms of
the Merger Agreement and the applicable rules and regulations of the Commission,
(a) to terminate the Offer and not accept for payment or pay for any Shares and
return all tendered Shares to tendering stockholders, (b) prior to the
Expiration Date, to waive all the unsatisfied conditions (other than the Minimum
Condition) and accept for payment and pay for all Shares validly tendered prior
to the Expiration Date, or (c) extend the Offer and, subject to the right of
stockholders to withdraw Shares during such extension, retain the Shares that
have been tendered during the period or periods for which the Offer is extended.
Any extension, delay in payment, termination or amendment will be followed as
promptly as practicable by public announcement thereof, the announcement in the
case of an extension to be issued not later than 9:00 A.M., New York City Time,
on the next business day after the previously scheduled Expiration Date. Without
limiting the manner in which the Purchaser may choose to make any public
announcement, the Purchaser currently intends to make announcements by issuing a
press release to the Dow Jones News Service. During any such extension, all
Shares previously tendered and not properly withdrawn will remain subject to the
Offer, subject to the right of a tendering stockholder to withdraw such
stockholder's Shares.
Tenders of Shares made pursuant to the Offer are irrevocable
except as otherwise provided below. Shares tendered pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date and, unless theretofore
accepted for payment by the Purchaser pursuant to the
-4-
<PAGE>
Offer, may also be withdrawn at any time after November 30, 1997. For a
withdrawal to be effective, a written, telegraphic or facsimile transmission
notice of withdrawal must be timely received by the Depositary at its address
set forth on the back cover of the Offer to Purchase. Any such notice of
withdrawal must specify the name of the person who tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and the name of the registered
holder of such Shares, if different from that of the person who tendered such
Shares. If certificates evidencing Shares to be withdrawn have been delivered or
otherwise identified to the Depositary, then, prior to the physical release of
such certificates, the serial numbers shown on such certificates must be
submitted to the Depositary and the signature(s) on the notice of withdrawal
must be guaranteed by an Eligible Institution (as defined in the Offer to
Purchase), unless such Shares have been tendered for the account of an Eligible
Institution. If Shares have been tendered pursuant to the procedure for
book-entry transfer as set forth under Section 3 in the Offer to Purchase, any
notice of withdrawal must also specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares. All
questions as to the form and validity (including time of receipt) of notices of
withdrawal will be determined by the Purchaser, in its sole discretion, whose
determination will be final and binding. No withdrawal of Shares shall be deemed
to have been properly made until all defects and irregularities have been cured
or waived. None of the Purchaser, Parent, the Dealer Manager, the Depositary,
the Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failing to give such notification.
The information required to be disclosed by Rule
14d-6(e)(1)(vii) of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is
incorporated herein by reference.
The Company is providing to the Purchaser its list of
stockholders and security position listings for the purpose of disseminating the
Offer to holders of Shares. The Offer to Purchase and the related Letter of
Transmittal and other relevant materials will be mailed to record holders of
Shares and will be furnished to brokers, dealers, commercial banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on the Company's stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of Shares.
The Offer to Purchase and the related Letter of Transmittal
contain important information which should be read carefully before any decision
is made with respect to the Offer.
Requests for copies of the Offer to Purchase, the Letter of
Transmittal and other tender offer documents may be directed to the Information
Agent as set forth below, and copies will be furnished promptly at the
Purchaser's expense. Questions and requests for assistance may be directed to
the Dealer Manager or the Information Agent at their respective addresses and
telephone numbers set forth below. The Purchaser will not pay any fees or
commissions to any broker or dealer or any other person (other than the Dealer
Manager) for soliciting tenders of Shares pursuant to the Offer.
-5-
<PAGE>
The Information Agent for the Offer is:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
Call Toll Free (800) 347-4750
The Dealer Manager for the Offer is:
Credit Suisse First Boston Coeporation
Eleven Madison Avenue
New York, New York 10010-3629
Call Toll Free (800) 881-8320
October 2, 1997
-6-
<PAGE>
- - - ------------------------
Immediate RELEASE
Carpenter Announces Major Acquisition to Expand Manufacturing Capacity
READING, PA.--(September 26, 1997)--Carpenter Technology Corp. (NYSE:CRS)
announced Friday that it has entered into a definitive agreement to acquire
Talley Industries Inc. (NYSE:TAL) as a way to expand its metals manufacturing
capacity.
On Oct. 2, Carpenter will initiate an all-cash tender offer for all outstanding
shares of common and preferred stock of Talley. The offer prices will be $12.00
per share of common stock, $11.70 per share of Series A convertible preferred
stock and $16.00 per share of Series B convertible preferred stock.
The offer will expire at midnight (Eastern Standard Time) on Oct. 30, unless it
is extended. The offer is conditioned upon shares representing a majority of the
voting power of Talley stock being tendered and upon other customary conditions,
including expiration of the Hart-Scott-Rodino waiting period. Credit Suisse
First Boston will be dealer manager of the tender offer.
Following completion of the tender offer, Carpenter, a specialty materials
manufacturer, intends to acquire the balance of Talley stock in a merger. The
aggregate value of the transaction will be approximately $312 million,
representing $185 million to acquire Talley's 15.4 million outstanding common
and preferred shares and the assumption of debt. In 1996, Talley, based in
Phoenix, Ariz., had revenues of $502.7 million and net earnings of $18.7
million.
To finance the acquisition, Carpenter will expand its revolving credit agreement
and will issue short-term debt to acquire all of Talley's equity. Shortly
thereafter, Carpenter plans to issue $100 million of common stock in a public
offering in the fourth calendar quarter and expects to use the proceeds to pay
down debt.
Talley operates a stainless steel products group, which includes Talley Metals
Technology Inc., a modern mini-mill that produces more than 50 grades of
stainless steels or specialty alloys, and Amcan Specialty Steels Inc., a master
distributor for these and other stainless products. Both units are based in
Hartsville, S.C. Amcan has distribution depots in South Carolina, New Jersey,
Pennsylvania, Illinois and Texas. In calendar 1996, $136.3 million of Talley's
revenues, and $11 million of operating income, came from the Stainless Steel
Products group.
Talley currently supplies Carpenter with stainless bar products to augment the
manufacturing capacity of the Carpenter Specialty Alloys Operations main plant
in Reading, Pa. "Our five-year outlook required us to seek out more
manufacturing capacity, and this acquisition will give us a modern facility
known for its high-quality products and competitive costs," said Robert W.
Cardy, chairman, president and CEO of Carpenter.
<PAGE>
Carpenter intends to further invest in Talley Metals to increase capacity and
reduce costs. Talley also has a government products and services group,
accounting for $148 million of revenue in 1996, and an industrial products
group, which had revenues of $74 million in 1996. Carpenter expects to divest
the companies in these groups and has retained Credit Suisse First Boston to
assist with the divestitures.
The government products group makes components of systems that generally enhance
safety or improve performance. Many of its existing products and new product
development efforts involve mobile, tactical and "smart" military weapons and
systems. The group also provides a broad range of architectural and engineering
design consulting services for the U.S. Navy, various commercial clients and
shipyards. Talley recently entered into a joint venture agreement with the
Delphi Automotive Systems unit of General Motors to make air bag inflators.
Talley's industrial products include high-voltage ceramic insulators, specialty
products to control insects, odors and pests, welding equipment and systems,
power supply systems, humidistats that regulate humidity levels and brass
buttons.
The companies expected to be sold include: Talley Defense Systems Inc., of Mesa,
Ariz.; Universal Propulsion Company Inc. of Phoenix, Ariz.; Electrodynamics Inc.
of Rolling Meadows, Ill.; John J. McMullen Associates Inc., of Arlington, Va.;
Rowe Industries Inc. of Toledo, Ohio; Dimetrics Inc. of Davidson, N.C.;
Porcelain Products Co. of Carey, Ohio; and Waterbury Companies Inc., Waterbury,
Conn.
Carpenter expects the acquisition of Talley to be slightly dilutive to earnings
per share in fiscal 1998 (ending June 30, 1998) and accretive to earnings per
share thereafter.
Carpenter began acquiring companies in 1993 as a way to achieve higher growth.
Since then, the company has completed nine acquisitions, giving the company
access to new materials technologies, a greater international presence, an
expanded product line and additional metals manufacturing capacity. Two other
acquisitions are pending.
As a result, Carpenter's revenues, which were $570 million five years ago, are
expected to exceed the $1 billion mark this fiscal year. Primary earnings per
share grew at a compounded annual growth rate of about 35 percent over the past
five years.
Talley Metals and Amcan will continue to be managed by Don Bailey, president,
who will report to Dennis M. Draeger, senior vice president - Specialty Alloys
Operations. The remaining businesses of Talley will continue to be managed by
Jack C. Crim, president and chief operating officer. Crim will report to Cardy.
Cardy also indicated that, for the quarter ending Sept. 30, 1997, management
expects that Carpenter's primary earnings will be in line with analysts'
estimates of $.75-.80 per share. Carpenter is a leading manufacturer of
stainless steel, specialty alloys including titanium alloys, and various
engineered products. Sales in fiscal 1997 (ended June 30, 1997) were $939
million.
______________________________________
Contact:
Carpenter Technology Corp.
Katharine Marshall, 610/208-3034 or
Daniel Sieger, 212/593-5883
<PAGE>
FOR IMMEDIATE RELEASE Contact: Daniel R. Mullen
V.P. & Treasurer
(602) 957-7711
TALLEY INDUSTRIES ANNOUNCES AGREEMENT
TO BE ACQUIRED BY CARPENTER TECHNOLOGY
PHOENIX, Ariz. (September 26, 1997) (TAL:NYSE) - Talley Industries,
Inc. announced today that it had entered into a definitive Agreement and Plan of
Merger with Carpenter Technology Corporation (NYSE: CRS) to be acquired for
cash.
Under the terms of the Agreement, Carpenter will commence an all-cash
tender offer next week for all outstanding shares of Talley stock at a price of
$12 per share of Talley Common Stock, $16 per share of Talley Series B Preferred
Stock (NYSE: TALprB) and $11.70 per share of Talley Series A Preferred Stock.
Assuming a majority of Talley's stock is duly tendered under the tender offer
and not withdrawn before the expiration date of the offer (October 30, 1997,
unless extended), Carpenter will be obligated under the terms of the Agreement
to complete an all-cash merger whereby all Talley shares remaining outstanding
will be acquired at the same per-share prices as under the tender offer. The
tender offer is subject to customary conditions, including expiration of the
Hart-Scott-Rodino waiting period.
Paul Foster, Chairman of the Board and CEO of Talley, said, "We think
this transaction with Carpenter is an excellent opportunity for our
shareholders. The $12 price represents an attractive premium above the trading
range for our Common Stock the last several years. While we would be optimistic
about the longer-term prospects for Talley were it to remain an independent
company, nevertheless we believe this sale to Carpenter is the best way to
maximize values for all of our shareholders." Admiral Foster continued, "The
Talley Board of Directors reached its decision after an intensive review of the
strategic and financial alternatives realistically available to the Company.
This is the review the Board announced last Spring, and has been conducted
during the last six months by management and our Board of Directors in
conjunction with our outside financial advisers at J.P. Morgan & Co. We think
the Agreement we are announcing today with Carpenter represents a most
successful culmination of our efforts."
Talley Industries, Inc. designs, manufactures, and supplies specialized
industrial, commercial, and aerospace products and services, including stainless
steel bar and wire rod, and high reliability electronic components. The Company
was a pioneer in the automotive airbag industry and is currently developing new
airbag technologies.
<PAGE>
EXECUTION COPY
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDED AND RESTATED CREDIT AGREEMENT dated as of February 21, 1997
among CARPENTER TECHNOLOGY CORPORATION (the "Borrower"), the BANKS listed on the
signature pages hereof (the "Banks"), and MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, as Agent (the "Agent").
W I T N E S S E T H:
WHEREAS, certain of the parties hereto have heretofore entered into a
$125,000,000 Credit Agreement dated as of January 18, 1994, (the "Agreement");
and
WHEREAS, the parties hereto desire to amend the Agreement to increase
the aggregate amount of the Commitments of the Banks from $125,000,000 to
$150,000,000, to provide for changes in the respective Commitments of the Banks
as set forth herein and to restate the Agreement in its entirety to read as set
forth in the Agreement with the amendments specified below;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions; References. (a) Unless otherwise
specifically defined herein, each capitalized term used herein which is defined
in the Agreement shall have the meaning assigned to such term in the Agreement.
Each reference to "hereof", "hereunder", "herein" and "hereby" and each other
similar reference and each reference to "this Agreement" and each other similar
reference contained in the Agreement shall from and after the date hereof
refer to the Agreement as amended and restated hereby.
(b) Each of the following terms shall have the meaning given to such
term for purposes of this Amendment and Restatement:
"Restatement Effective Date" means the date this Amendment and
Restatement becomes effective in accordance with Section 11 hereof.
<PAGE>
SECTION 2. Amendments to Definitions. Section 1.01 of the Agreement is
amended as follows:
(a) The following definitions shall be amended in their entirety to
read as follows:
"Level I Status" exists at any date if, at such date, the Borrower's
long-term debt is rated A+ or higher by S&P and A1 or higher by
Moody's.
"Level II Status" exists at any date if, at such date, (i) the
Borrower's long-term debt is rated A- or higher by S&P and A3 or higher
by Moody's and (ii) Level I Status does not exist.
"Level III Status" exists at any date if, at such date, (i) the
Borrower's long-term debt is rated BBB+ or higher by S&P and Baa1 or
higher by Moody's and (ii) neither Level I Status nor Level II Status
exists.
"Level IV Status" exists at any date if, at such date, (i) the
Borrower's long-term debt is rated BBB or higher by S&P and Baa2 or
higher by Moody's and (ii) none of Level I Status, Level II Status and
Level III Status exists.
"Level V Status" exists at any date if, at such date, no other Status
Level exists. Level V Status also exists at any date if, at such date,
either S&P or Moody's does not rate the Borrower's long-term debt.
(b) The definition of "HLT Classification Period" is deleted.
(c) The definition of "Borrower's 1993 Form 10-K" is replaced with the
following definition of "Borrower's 1996 Form 10-K:"
"Borrower's 1996 Form 10-K" means the Borrower's Annual Report on
Form 10-K for 1996, as filed with the Securities and Exchange
Commission pursuant to the Securities and Exchange Act of 1934.
(d) The definition of "Termination Date" is amended by replacing the
date "January 18, 1998" with the date "February 21, 2002".
SECTION 3. Amendment to Section 2.03(a). The phrase "; provided,
however, that there shall be no Money Market Quotes requested or Money Market
Loans made during an HLT Classification Period" is deleted from the first
sentence of Section 2.03(a).
2
<PAGE>
SECTION 4. Amendment to Section 2.07(h). Section 2.07(h) is amended to
read in its entirety as follows:
(h) The "Applicable Margin" with respect to any Committed Loan at any
date is the applicable percentage amount set forth in the table below based on
the Status Level for such date:
Level I Level II Level III Level IV Level V
Status Status Status Status Status
------- -------- --------- -------- -------
Base Rate Loans .0000% .0000% .0000% .0000% .0000%
Euro Dollar Loans .1300% .1450% .2000% .2500% .3750%
CD Loans .2550% .2800% .3250% .3750% .5000%
SECTION 5. Amendment to Section 2.08.
Section 2.08 is amended to read in its entirety as follows:
SECTION 2.08. Facility Fee. The Borrower shall pay to the Agent for the
account of the Banks ratably in proportion to their respective Commitments a
facility fee at the Facility Fee Rate. Such facility fee shall accrue (i) from
and including the Restatement Effective Date to but excluding the Termination
Date, on the daily aggregate amount of the Commitments (whether used or unused)
and (ii) from and including the Termination Date to but excluding the date the
Loans shall be repaid in their entirety, on the aggregate outstanding principal
amount of the Loans. Such facility fee rate shall be payable quarterly on each
Quarterly Date and upon the date of termination of the Commitments in their
entirety (and, if later, the date the Loans shall be repaid in their entirety).
For this purpose, the "Facility Fee Rate" is a rate per annum equal to
(i) 0.0700% for any day on which Level I Status exists, (ii) 0.0800% for any day
on which Level II Status exists, (iii) 0.1000% for any day on which Level III
Status exists, (iv) 0.1250% for any day on which Level IV Status exists and (v)
0.2500% for any day on which Level V Status exists.
SECTION 6. Amendment to Section 9.06(c).
The first sentence of Section 9.06(c) is amended to read in its
entirety as follows:
3
<PAGE>
Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part
(equivalent to a Commitment of not less than $5,000,000) of all, of its
rights and obligations under this Agreement and the Notes, and such
Assignee shall assume such rights and obligations, pursuant to an
Assignment and Assumption Agreement in substantially the form of
Exhibit G hereto executed by such Assignee and such transferor Bank,
with (and subject to) the subscribed consent of the Borrower and the
Agent (such consents not to be unreasonably withheld); provided that if
an Assignee is an affiliate of such transferor Bank or was a Bank
immediately prior to such assignment, no such consent shall be
required; and provided further that such assignment may, but need not,
include rights of the transferor Bank in respect of outstanding Money
Market Loans.
SECTION 7. Changes in Commitments. With effect from and including the
Restatement Effective Date, the Commitment of each Bank shall be the amount set
forth opposite the name of such Bank on the signature pages hereof.
SECTION 8. Updated Representations. (a) Each reference to "June 30,
1993" in Section 4.04(a) of the Agreement is changed to "June 30, 1996".
(b) Each reference to "September 30, 1993" in Section 4.04 of the
Agreement is changed to "December 31, 1996".
(c) Each reference to "three" in Section 4.04(b) is changed to "six."
(d) Each reference to "Borrower's 1993 Form 10-K" in Section 4.04(a) of
the Agreement is changed to "Borrower's 1996 Form 10-K".
SECTION 9. Representations and Warranties. The Borrower hereby
represents and warrants that as of the Restatement Effective Date and after
giving effect thereto:
(a) no Default has occurred and is continuing; and
(b) each representation and warranty of the Borrower set forth in the
Agreement after giving effect to this Amendment and Restatement is true and
correct as though made on and as of such date.
SECTION 10. Governing Law. This Amendment and Restatement shall be
governed by and contrued in accordance with the laws of the State of New York.
4
<PAGE>
SECTION 11. Counterparts; Effectiveness. This Amendment and Restatement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Amendment and Restatement shall become effective on the date
that each of the following conditions shall have been satisfied:
(i) receipt by the Agent of duly executed counterparts hereof
signed by each of the parties hereto (or, in the case of any party as
to which an executed counterpart shall not have been received, the
Agent shall have received telegraphic, telex or other written
confirmation from such party of execution of a counterpart hereof by
such party);
(ii) receipt by the Agent of an opinion of the General Counsel or
the Associate General Counsel of the Borrower (or such other counsel
for the Borrower as may be acceptable to the Agent), substantially to
the effect of Exhibit E to the Agreement with reference to this
Amendment and Restatement and the Agreement as amended and restated
hereby; and
(iii) receipt by the Agent of all documents it may reasonably
request relating to the existence of the Borrower, the corporate
authority for and the validity of the Agreement as amended and restated
hereby and any other matters relevant hereto, all in form and substance
satisfactory to the Agent;
provided that this Amendment and Restatement shall not become effective or
binding on any party hereto unless all of the foregoing conditions are satisfied
not later than February 28, 1997. The Agent shall promptly notify the Borrower
and the Banks of the Restatement Effective Date, and such notice shall be
conclusive and binding on all parties hereto.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the
day and year first above written.
CARPENTER TECHNOLOGY CORPORATION
By /s/ John R. Schuler
------------------------------
Title: Treasurer
6
<PAGE>
Commitments
- - - -----------
$50,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Laura E. Reim
---------------------------
LAURA E. REIM
Title: Vice President
$25,000,000 BANK OF AMERICA ILLINOIS
By /s/ Donald J. Chin
--------------------------
Title:
$25,000,000 MELLON BANK, N.A.
By /s/ R. K. James
--------------------------
Title:
$25,000,000 CORESTATES BANK, N.A.
By___________________________
Title:
$25,000,000 PNC BANK, NATIONAL ASSOCIATION
By___________________________
Title:
7
<PAGE>
Commitments
- - - -----------
$50,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By___________________________
Title:
$25,000,000 BANK OF AMERICA ILLINOIS
By___________________________
Title:
$25,000,000 MELLON BANK, N.A.
By___________________________
Title:
$25,000,000 CORESTATES BANK, N.A.
By /s/ Joseph M. Finley
---------------------------
Title: Vice President
$25,000,000 PNC BANK, NATIONAL ASSOCIATION
By___________________________
Title:
8
<PAGE>
Commitments
- - - -----------
$50,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By___________________________
Title:
$25,000,000 BANK OF AMERICA ILLINOIS
By___________________________
Title:
$25,000,000 MELLON BANK, N.A.
By___________________________
Title:
$25,000,000 CORESTATES BANK, N.A.
By___________________________
Title:
$25,000,000 PNC BANK, NATIONAL ASSOCIATION
By /s/ xxxxxx
---------------------------
Title: Vice President
9
<PAGE>
- - - ------------------
Total Commitments
$150,000,000
==================
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By /s/ Laura E. Reim
---------------------------
LAURA E. REIM
Title: Vice President
10
<PAGE>
CARPENTER TECHNOLOGY CORPORATION
GENERAL OFFICE: READING, PENNSYLVANIA 19512-4862
[CAR TECH LOGO]
P.O. BOX 14682
READING, PA USA 18812-4862
DIRECT DIAL: (810) 208-2673
FAX: (810) 208-3068
JOHN R. WELTY
Vice President
General Counsel and Secretary
February 21, 1997
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
I am General Counsel of Carpenter Technology Corporation (the "Borrower")
and I and members of my staff have acted as counsel for the Borrower in
connection with the Amended and Restated Credit Agreement dated as of February
21, 1997 which amends and restates the Credit Agreement (said Amended and
Restated Credit Agreement and said Credit Agreement as amended and restated
thereby herein collectively referred to as the "Credit Agreement") dated as of
January 18, 1994 among the Borrower, the banks listed on the signature pages
thereof and Morgan Guaranty Trust Company of New York, as Agent. Terms defined
in the Credit Agreement are used herein as therein defined.
As to various questions of fact material to this opinion, I have, to the
extent deemed appropriate, relied upon certificates of officers of the Borrower
and, with respect to matters of public record, relied upon certificates of
public officials. I or members of my staff have also examined originals or
copies, certified or otherwise identified to my satisfaction, of such
certificates of public officials, corporate documents and records and other
certificates, opinions and instruments, and have made such other investigations
as I have deemed appropriate or necessary in connection with this opinion,
including an examination of the Credit Agreement.
In my examination of documents, I have assumed the genuineness of all
signatures (other than signatures of officers of the Borrower), the authenticity
of all documents submitted to me or my staff as originals and the conformity to
authentic original documents of all documents submitted to me or my staff as
photostatic or certified copies.
Upon the basis of the foregoing, I am of the opinion that:
1. The Borrower is a corporation duly incorporated, validly existing and
in good standing under the laws of Delaware, and has all corporate powers and
all material governmental
<PAGE>
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
2. The execution, delivery and performance by the Borrower of the Credit
Agreement is within the Borrower's corporate powers, have been duly authorized
by all necessary corporate action, require no action by or in respect of, or
filing with, any governmental body, agency or official and do not contravene, or
constitute a default under, any provision of applicable law or regulation or of
the certificate of incorporation or by-laws of the Borrower or of any agreement,
judgement, injunction, order, decree or other instrument binding upon the
Borrower or any of its Subsidiaries or result in the creation or imposition of
any Lien on any asset of the Borrower or any of its Subsidiaries.
3. The Credit Agreement constitutes a valid and binding agreement of the
Borrower.
4. There is no action, suit or proceeding pending against, or to the best
of my knowledge threatened against or affecting, the Borrower or any of its
Subsidiaries before any court or arbitrator or any governmental body, agency or
official, in which there is a reasonable possibility of an adverse decision
which could materially adversely affect the business, consolidated financial
position or consolidated results of operations of the Borrower and its
Consolidated Subsidiaries, considered as a whole or which in any manner draws
into question the validity of the Credit Agreement.
5. Each of the Borrower's corporate Subsidiaries is a corporation validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted, except for such licenses, authorizations, consents
and approvals the lack of which would not have a material adverse effect on the
business, consolidated financial position or consolidated results of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
Very truly yours,
/s/ John R. Welty
____________________
JOHN R. WELTY
Vice President,
General Counsel and Secretary
JRW:cln
<PAGE>
[CONFORMED COPY]
$125,000,000
CREDIT AGREEMENT
dated as of
January 18, 1994
among
Carpenter Technology Corporation,
The Banks Listed Herein
and
Morgan Guaranty Trust Company of New York,
as Agent
<PAGE>
TABLE OF CONTENTS*
Page
----
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions.................................................... 1
1.02 Accounting Terms and Determinations............................ 13
1.03 Types of Borrowings............................................ 13
1.04 Basis for Ratings.............................................. 14
ARTICLE II
THE CREDITS
SECTION 2.01 Commitments to Lend............................................ 14
2.02 Notice of Committed Borrowings................................. 14
2.03 Money Market Borrowings........................................ 15
2.04 Notice to Banks; Funding of Loans.............................. 19
2.05 Notes.......................................................... 20
2.06 Maturity of Loans.............................................. 21
2.07 Interest Rates................................................. 21
2.08 Fees........................................................... 25
2.09 Optional Termination or
Reduction of Commitments..................................... 26
2.10 Mandatory Termination
of Commitments............................................... 26
2.11 Optional Prepayments........................................... 26
2.12 General Provisions as to Payments.............................. 27
2.13 Funding Losses................................................. 27
2.14 Computation of Interest and Fees............................... 28
ARTICLE III
CONDITIONS
SECTION 3.01 Effectiveness.................................................. 28
3.02 Borrowings..................................................... 29
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Corporate Existence and Power.................................. 30
4.02 Corporate and Governmental
Authorization; No Contravention.............................. 30
- - - ----------------
*The Table of Contents is not a part of this Agreement.
i
<PAGE>
Page
----
4.03 Binding Effect................................................. 31
4.04 Financial Information.......................................... 31
4.05 Litigation..................................................... 31
4.06 Compliance with ERISA.......................................... 32
4.07 Environmental Matters.......................................... 32
4.08 Taxes.......................................................... 32
4.09 Subsidiaries................................................... 33
4.10 Not an Investment Company...................................... 33
4.11 Full Disclosure................................................ 33
ARTICLE V
COVENANTS
SECTION 5.01 Information.................................................... 34
5.02 Maintenance of Property; Insurance............................. 36
5.03 Conduct of Business and
Maintenance of Existence..................................... 37
5.04 Compliance with Laws........................................... 37
5.05 Debt........................................................... 37
5.06 Minimum Consolidated Tangible
Net Worth.................................................... 37
5.07 Negative Pledge................................................ 38
5.08 Consolidations, Mergers and
Sales of Assets.............................................. 39
5.09 Use of Proceeds................................................ 39
ARTICLE VI
DEFAULTS
SECTION 6.01 Events of Default.............................................. 40
6.02 Notice of Default.............................................. 42
ARTICLE VII
THE AGENT
SECTION 7.01 Appointment and Authorization.................................. 43
7.02 Agent and Affiliates........................................... 43
7.03 Action by Agent................................................ 43
7.04 Consultation with Experts...................................... 43
7.05 Liability of Agent............................................. 43
7.06 Indemnification................................................ 44
7.07 Credit Decision................................................ 44
7.08 Successor Agent................................................ 44
7.09 Agent's Fee.................................................... 45
ii
<PAGE>
Page
----
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01 Basis for Determining Interest
Rate Inadequate or Unfair.................................... 45
8.02 Illegality..................................................... 45
8.03 Increased Cost and Reduced Return.............................. 46
8.04 Taxes.......................................................... 48
8.05 Base Rate Loans Substituted for Affected
Fixed Rate Loans............................................. 49
8.06 Substitution of Bank........................................... 50
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Notices........................................................ 50
9.02 No Waivers..................................................... 51
9.03 Expenses; Documentary Taxes;
Indemnification.............................................. 51
9.04 Sharing of Set-Offs............................................ 51
9.05 Amendments and Waivers......................................... 52
9.06 Successors and Assigns......................................... 52
9.07 Collateral..................................................... 54
9.08 Governing Law; Submission to
Jurisdiction................................................. 54
9.09 Counterparts; Integration...................................... 54
9.10 WAIVER OF JURY TRIAL........................................... 55
Exhibit A -- Note
Exhibit B -- Money Market Quote Request
Exhibit C -- Invitation for Money Market Quotes
Exhibit D -- Money Market Quote
Exhibit E -- Opinion of Counsel for the Borrower
Exhibit F -- Opinion of Special Counsel for the
Agent
Exhibit G -- Assignment and Assumption Agreement
iii
<PAGE>
CREDIT AGREEMENT
AGREEMENT dated as of January 18, 1994 among CARPENTER TECHNOLOGY
CORPORATION, the BANKS listed on the signature pages hereof and MORGAN GUARANTY
TRUST COMPANY OF NEW YORK, as Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have the
following meanings:
"Absolute Rate Auction" means a solicitation of Money Market Quotes
setting forth Money Market Absolute Rates pursuant to Section 2.03.
"Adjusted CD Rate" has the meaning set forth in Section 2.07(b).
"Adjusted London Interbank Offered Rate" has the meaning set forth in
Section 2.07(c).
"Administrative Questionnaire" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Agent and submitted to
the Agent (with a copy to the Borrower) duly completed by such Bank.
"Agent" means Morgan Guaranty Trust Company of New York in its capacity as
agent for the Banks hereunder, and its successors in such capacity.
"Annual Amount" has the meaning set forth in Section 5.06.
"Applicable Lending Office" means, with respect to any Bank, (i) in the
case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of its
Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of its
Money Market Loans, its Money Market Lending Office.
"Applicable Margin" has the meaning set forth in Section 2.07(h).
1
<PAGE>
"Assessment Rate" has the meaning set forth in Section 2.07(b).
"Assignee" has the meaning set forth in Section 9.06(c).
"Bank" means each bank listed on the signature pages hereof, each Assignee
which becomes a Bank pursuant to Section 9.06(c), and their respective
successors.
"Base Rate" means, for any day, a rate per annum equal to the higher of
(i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal
Funds Rate for such day.
"Base Rate Loan" means a Committed Loan to be made by a Bank as a Base
Rate Loan in accordance with the applicable Notice of Committed Borrowing or
pursuant to Article VIII.
"Benefit Arrangement" means at any time an employee benefit plan within
the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan
and which is maintained or otherwise contributed to by any member of the ERISA
Group.
"Borrower" means Carpenter Technology Corporation, a Delaware corporation,
and its successors.
"Borrower's 1993 Form 10-K" means the Borrower's annual report on Form
10-K for 1993, as filed with the Securities and Exchange Commission pursuant to
the Securities Exchange Act of 1934.
"Borrowing" has the meaning set forth in Section 1.03.
"CD Base Rate" has the meaning set forth in Section 2.07(b).
"CD Loan" means a Committed Loan to be made by a Bank as a CD Loan in
accordance with the applicable Notice of Committed Borrowing.
"CD Reference Banks" means Continental Bank N.A., Mellon Bank, N.A. and
Morgan Guaranty Trust Company of New York.
"Commitment" means, with respect to each Bank, the amount set forth
opposite the name of such Bank on the
2
<PAGE>
signature pages hereof, as such amount may be reduced from time to time pursuant
to Sections 2.09 and 2.10.
"Committed Loan" means a loan made by a Bank pursuant to Section 2.01.
"Consolidated Debt" means at any date the Debt of the Borrower and its
Consolidated Subsidiaries, determined on a consolidated basis as of such date.
"Consolidated Net Income" means, for any period, the consolidated net
income of the Borrower and its Subsidiaries for such period.
"Consolidated Subsidiary" means at any date any Subsidiary or other entity
the accounts of which would be consolidated with those of the Borrower in its
consolidated financial statements if such statements were prepared as of such
date.
"Consolidated Tangible Net Worth" means at any date the consolidated
stockholders' equity of the Borrower and its Consolidated Subsidiaries less
their consolidated Intangible Assets, all determined as of such date. For
purposes of this definition "Intangible Assets" means the amount (to the extent
reflected in determining such consolidated stockholders' equity) of (i) all
write-ups (other than write-ups resulting from foreign currency translations)
subsequent to September 30, 1993 in the book value of any asset owned by the
Borrower or a Consolidated Subsidiary, (ii) all investments in unconsolidated
Subsidiaries and (iii) all unamortized debt discount and expense, unamortized
deferred charges, goodwill, patent applications, trademarks, service marks,
trade names, copyrights, organization or research and development expenses and
other intangible assets.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee which are capitalized in
accordance with generally accepted accounting principles, (v) all Debt secured
by a Lien on any asset of such Person, whether or not such Debt is otherwise an
obligation of such Person, and (vi) all Debt of others Guaranteed by such
Person.
3
<PAGE>
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Domestic Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in New York City are authorized by law to close.
"Domestic Lending Office" means, as to each Bank, its office located at
its address set forth in its Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic Lending Office by
notice to the Borrower and the Agent; provided that any Bank may so designate
separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and
its CD Loans, on the other hand, in which case all references herein to the
Domestic Lending Office of such Bank shall be deemed to refer to either or both
of such offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in Section
2.07(b).
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 3.01.
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes into
the environment including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the clean-up or other
remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
4
<PAGE>
"ERISA Group" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its office, branch or
affiliate located at its address set forth in its Administrative Questionnaire
(or identified in its Administrative Questionnaire as its Euro-Dollar Lending
Office) or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower
and the Agent.
"Euro-Dollar Loan" means a Committed Loan to be made by a Bank as a
Euro-Dollar Loan in accordance with the applicable Notice of Committed
Borrowing.
"Euro-Dollar Reference Banks" means the principal London offices of
Continental Bank N.A., Mellon Bank, N.A. and Morgan Guaranty Trust Company of
New York.
"Euro-Dollar Reserve Percentage" has the meaning set forth in Section
2.07(c).
"Event of Default" has the meaning set forth in Section 6.01.
"Executive Officer" means the chairman, chief executive officer,
president, chief operating officer, chief financial officer, treasurer,
controller or general counsel of the Borrower.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business
5
<PAGE>
Day, and (ii) if no such rate is so published on such next succeeding Domestic
Business Day, the Federal Funds Rate for such day shall be the average rate
quoted to Morgan Guaranty Trust Company of New York on such day on such
transactions as determined by the Agent.
"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or Money Market
Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate
pursuant to Section 8.01(a) or any combination of the foregoing.
"Guarantee" by any Person means any obligation, contingent or otherwise,
of such Person directly or indirectly guaranteeing any Debt or other obligation
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation (whether arising by virtue of partnership arrangements,
by agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or (ii)
entered into for the purpose of assuring in any other manner the obligee of such
Debt or other obligation of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part), provided that the term
Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"HLT Classification Period" means the period from and including the date
of notice to the Borrower of an HLT Classification as set forth below to and
including the date on which the Required Banks notify the Borrower through the
Agent of the termination of such HLT Classification. If, after the date hereof,
the Agent determines that, or the Agent is advised by any Bank that, such Bank
has received notice from any governmental authority, central bank or comparable
agency having jurisdiction over such Bank that Loans hereunder are classified as
a "highly leveraged transaction" for regulatory reporting purposes (an "HLT
Classification"), the Agent shall promptly give notice of such HLT
Classification to the Borrower and the other Banks. Unless the Required Banks
otherwise determine and notify the Borrower through the Agent, such notice of
HLT Classification shall be conclusive and binding upon all parties hereto. The
Banks agree promptly to consider in good faith a timely request by the Borrower
to the effect that by reason of a change in law or regulation or a change in
circumstance, such HLT Classification should be terminated.
6
<PAGE>
"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending one,
two, three or six months thereafter, as the Borrower may elect in the applicable
Notice of Borrowing; provided that:
(a) any Interest Period which would otherwise end on a day which is not
a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall, subject to clause (c) below, end on the last Euro-Dollar Business
Day of a calendar month; and
(c) any Interest Period which would otherwise end after the Termination
Date shall end on the Termination Date.
(2) with respect to each CD Borrowing, the period commencing on the date of such
Borrowing and ending 30, 60, 90 or 180 days thereafter, as the Borrower may
elect in the applicable Notice of Borrowing; provided that:
(a) any Interest Period which would otherwise end on a day which is not
a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the Termination
Date shall end on the Termination Date.
(3) with respect to each Base Rate Borrowing, the period commencing on the date
of such Borrowing and ending 30 days thereafter; provided that:
(a) any Interest Period which would otherwise end on a day which is not
a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the Termination
Date shall end on the Termination Date.
7
<PAGE>
(4) with respect to each Money Market LIBOR Borrowing, the period commencing on
the date of such Borrowing and ending such whole number of months thereafter as
the Borrower may elect in accordance with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day which is not
a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall, subject to clause (c) below, end on the last Euro-Dollar Business
Day of a calendar month; and
(c) any Interest Period which would otherwise end after the Termination
Date shall end on the Termination Date.
(5) with respect to each Money Market Absolute Rate Borrowing, the period
commencing on the date of such Borrowing and ending such number of days
thereafter (but not less than 30 days) as the Borrower may elect in accordance
with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day which is not
a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the Termination
Date shall end on the Termination Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Level I Status" exists at any date if, at such date, (i) the
Borrower's long-term debt is rated A+ or higher by the S&P and A1 or higher by
Moody's and (ii) Level V Status does not exist.
"Level II Status" exists at any date if, at such date, (i) the
Borrower's long-term debt is rated A- or higher by S&P and A3 or higher by
Moody's and (ii) neither Level I Status nor Level V Status exists.
8
<PAGE>
"Level III Status" exists at any date if, at such date, (i) the
Borrower's long-term debt is rated BBB or higher by S&P and Baa2 or higher by
Moody's and (ii) none of Level I Status, Level II Status and Level V Status
exists.
"Level IV Status" exists at any date if, at such date, no other Status
Level exists. Level IV Status also exists at any date if, at such date, either
S&P or Moody's does not rate the Borrower's long-term debt.
"Level V Status" exists at any date if, at such date, an HLT
Classification Period is in effect.
"LIBOR Auction" means a solicitation of Money Market Quotes setting
forth Money Market Margins based on the London Interbank Offered Rate pursuant
to Section 2.03.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, the Borrower or any Subsidiary shall be
deemed to own subject to a Lien any asset which it has acquired or holds subject
to the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such asset.
"Loan" means a Domestic Loan or a Euro-Dollar Loan or a Money Market
Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Money Market Loans
or any combination of the foregoing.
"London Interbank Offered Rate" has the meaning set forth in Section
2.07(c).
"Material Debt" means Debt (other than the Notes) of the Borrower
and/or one or more of its Subsidiaries, arising in one or more related or
unrelated transactions, in an aggregate principal amount exceeding $10,000,000.
"Money Market Absolute Rate" has the meaning set forth in Section
2.03(d).
"Money Market Absolute Rate Loan" means a loan to be made by a Bank
pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Bank, its Domestic
Lending Office or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Money Market Lending Office by notice to the Borrower
and the Agent; provided that any Bank may from time to time by notice to the
Borrower and the Agent
9
<PAGE>
designate separate Money Market Lending Offices for its Money Market LIBOR
Loans, on the one hand, and its Money Market Absolute Rate Loans, on the other
hand, in which case all references herein to the Money Market Lending Office of
such Bank shall be deemed to refer to either or both of such offices, as the
context may require.
"Money Market LIBOR Loan" means a loan to be made by a Bank pursuant to
a LIBOR Auction (including such a loan bearing interest at the Base Rate
pursuant to Section 8.01(a)).
"Money Market Loan" means a Money Market LIBOR Loan or a Money Market
Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section 2.03(d).
"Money Market Quote" means an offer by a Bank to make a Money Market
Loan in accordance with Section 2.03.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.
"1991 Credit Agreement" means the Credit Agreement dated as of July 26,
1991 among the Borrower, the banks listed on the signature pages thereof and
Morgan Guaranty Trust Company of New York, as agent.
"Notes" means promissory notes of the Borrower, substantially in the
form of Exhibit A hereto, evidencing the obligation of the borrower to repay the
Loans, and "Note" means any one of such promissory notes issued hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing (as defined
in Section 2.02) or a Notice of Money Market Borrowing (as defined in Section
2.03(f)).
"Parent" means, with respect to any Bank, any Person controlling such
Bank.
10
<PAGE>
"Participant" has the meaning set forth in Section 9.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"Prime Rate" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.
"Quarterly Date" means the last day of each Quarterly Period.
"Quarterly Period" means a three-month period consisting of (i) January,
February and March (ii) April, May and June, (iii) July, August and September or
(iv) October, November and December.
"Reference Banks" means the CD Reference Banks or the Euro-Dollar
Reference Banks, as the context may require, and "Reference Bank" means any one
of such Reference Banks.
"Refunding Borrowing" means a Committed Borrowing which, after application
of the proceeds thereof, results in no net increase in the outstanding principal
amount of Committed Loans made by any Bank.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"Required Banks" means at any time Banks having at least 66 2/3% of the
aggregate amount of the Commitments or,
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if the Commitments shall have been terminated, holding Notes evidencing at least
66 2/3% of the aggregate unpaid principal amount of the Loans.
"Restricted Payment" means (i) any dividend or other distribution on any
shares of the Borrower's capital stock (except dividends payable solely in
shares of its capital stock) or (ii) any payment on account of the purchase,
redemption, retirement or acquisition of (a) any shares of the Borrower's
capital stock or (b) any option, warrant or other right to acquire shares of the
Borrower's capital stock; provided that, in the event that the Borrower
establishes an employee stock ownership plan, the term Restricted Payment shall
not include any payment on account of the purchase of up to an aggregate of
$30,000,000 of the Borrower's capital stock solely in connection with the
establishment of such employee stock ownership plan.
"Revolving Credit Period" means the period from and including the
Effective Date to but not including the Termination Date.
"S&P" means Standard & Poor's Corporation.
"Status Level" means Level I Status, Level II Status, Level III Status,
Level IV Status or Level V Status, whichever is in effect at the end of the
applicable day (New York City time).
"Subsidiary" means any corporation or other entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned by the Borrower.
"Termination Date" means January 18, 1998 or, if such day is not a
Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day unless
such Euro-Dollar Business Day falls in another calendar month, in which case
the Termination Date shall be the next preceding Euro-Dollar Business Day.
"Total Capitalization" means (x) the sum of (i) capital stock outstanding,
plus (ii) additional paid-in capital, plus (iii) retained earnings, plus (iv)
Consolidated Debt, minus (y) to the extent reflected in (x), treasury stock,
plus or minus (as appropriate) (z) cumulative foreign currency translations of
the Borrower.
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the
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present value of all benefits under such Plan exceeds (ii) the fair market value
of all Plan assets allocable to such benefits (excluding any accrued but unpaid
contributions), all determined as of the then most recent valuation date for
such Plan, but only to the extent that such excess represents a potential
liability of a member of the ERISA Group to the PBGC or any other Person under
Title IV of ERISA.
"Wholly-Owned Subsidiary" means any Subsidiary all of the shares of
capital stock or other ownership interests of which (except directors'
qualifying shares) are at the time directly or indirectly owned by the Borrower.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a basis consistent (except for changes concurred in by the Borrower's
independent public accountants) with the most recent audited consolidated
financial statements of the Borrower and its Consolidated Subsidiaries delivered
to the Banks; provided that, if the Borrower notifies the Agent that the
Borrower wishes to amend any covenant in Article V to eliminate the effect of
any change in generally accepted accounting principles on the operation of such
covenant (or if the Agent notifies the Borrower that the Required Banks wish to
amend Article V for such purpose), then the Borrower's compliance with such
covenant shall be determined on the basis of generally accepted accounting
principles in effect immediately before the relevant change in generally
accepted accounting principles became effective, until either such notice is
withdrawn or such covenant is amended in a manner satisfactory to the Borrower
and the Required Banks.
SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes the
aggregation of Loans of one or more Banks to be made to the Borrower pursuant to
Article II on a single date and for a single Interest Period. Borrowings are
classified for purposes of this Agreement either by reference to the pricing of
Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" is a Borrowing
comprised of Euro-Dollar Loans) or by reference to the provisions of Article II
under which participation therein is determined (i.e., a "Committed Borrowing"
is a Borrowing under Section 2.01 in which all Banks participate in proportion
to their Commitments, while a "Money Market Borrowing" is a Borrowing
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under Section 2.03 in which the Bank participants are determined on the basis
of their bids in accordance therewith).
SECTION 1.04. Basis for Ratings. The credit ratings to be utilized for
purposes of determining rates of interest and fees hereunder are those assigned
to the senior unsecured long-term debt securities of the Borrower without
third-party credit enhancement, and any rating assigned to any other debt
security of the Borrower shall be disregarded.
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend. During the Revolving Credit Period each
Bank severally agrees, on the terms and conditions set forth in this Agreement,
to make loans to the Borrower pursuant to this Section from time to time in
amounts such that the aggregate principal amount of Committed Loans by such Bank
at any one time outstanding shall not exceed the amount of its Commitment. Each
Borrowing under this Section shall be in an aggregate principal amount of
$10,000,000 or any larger multiple of $1,000,000 (except that any such
Borrowing may be in the aggregate amount available in accordance with Section
3.02(b)) and shall be made from the several Banks ratably in proportion to their
respective Commitments. Within the foregoing limits, the Borrower may borrow
under this Section, repay, or to the extent permitted by Section 2.11, prepay
Loans and reborrow at any time during the Revolving Credit Period under this
Section.
SECTION 2.02. Notice of Committed Borrowings. The Borrower shall give the
Agent notice (a "Notice of Committed Borrowing") not later than 10:00 A.M. (New
York City time) on (x) the date of each Base Rate Borrowing, (y) the second
Domestic Business Day before each CD Borrowing and (z) the third Euro-Dollar
Business Day before each Euro-Dollar Borrowing, specifying:
(a) the date of such Borrowing, which shall be a Domestic Business Day
in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the
case of a Euro-Dollar Borrowing,
(b) the aggregate amount of such Borrowing,
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(c) whether the Loans comprising such Borrowing are to be CD Loans,
Base Rate Loans or Euro-Dollar Loans, and
(d) in the case of a Fixed Rate Borrowing, the duration of the
Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
SECTION 2.03. Money Market Borrowings.
(a) The Money Market Option. In addition to Committed Borrowings pursuant
to Section 2.01, the Borrower may, as set forth in this Section, request the
Banks during the Revolving Credit Period to make offers to make Money Market
Loans to the Borrower; provided, however, that there shall be no Money Market
Quotes requested or Money Market Loans made during an HLT Classification Period.
The Banks may, but shall have no obligation to, make such offers and the
Borrower may, but shall have no obligation to, accept any such offers in the
manner set forth in this Section.
(b) Money Market Quote Request. When the Borrower wishes to request offers
to make Money Market Loans under this Section, it shall transmit to the Agent by
telex or facsimile transmission a Money Market Quote Request substantially in
the form of Exhibit B hereto so as to be received no later than 10:00 A.M. (New
York City time) on (x) the fifth Euro-Dollar Business Day prior to the date of
Borrowing proposed therein, in the case of a LIBOR Auction or (y) the Domestic
Business Day next preceding the date of Borrowing proposed therein, in the case
of an Absolute Rate Auction (or, in either case, such other time or date as the
Borrower and the Agent shall have mutually agreed and shall have notified to the
Banks not later than the date of the Money Market Quote Request for the first
LIBOR Auction or Absolute Rate Auction for which such change is to be effective)
specifying:
(i) the proposed date of Borrowing, which shall be a Euro-Dollar
Business Day in the case of a LIBOR Auction or a Domestic Business Day in
the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be
$10,000,000 or a larger multiple of $1,000,000.
(iii) the duration of the Interest Period applicable thereto, subject
to the provisions of the definition of Interest Period, and
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(iv) whether the Money Market Quotes requested are to set forth a
Money Market Margin or a Money Market Absolute Rate.
The Borrower may request offers to make Money Market Loans for more than one
Interest Period in a single Money Market Quote Request. No Money Market Quote
Request shall be given within five Euro-Dollar Business Days (or such other
number of days as the Borrower and the Agent may agree) of any other Money
Market Quote Request.
(c) Invitation for Money Market Quotes. Promptly upon receipt of a Money
Market Quote Request, the Agent shall send to the Banks by telex or facsimile
transmission an Invitation for Money Market Quotes substantially in the form of
Exhibit C hereto, which shall constitute an invitation by the Borrower to each
Bank to submit Money Market Quotes offering to make the Money Market Loans to
which such Money Market Quote Request relates in accordance with this Section.
(d) Submission and Contents of Money Market Quotes. (i) Each Bank may
submit a Money Market Quote containing an offer or offers to make Money Market
Loans in response to any Invitation for Money Market Quotes. Each Money Market
Quote must comply with the requirements of this subsection (d) and must be
submitted to the Agent by telex or facsimile transmission at its offices
specified in or pursuant to Section 9.01 not later than (x) 2:00 P.M. (New York
City time) on the fourth Euro-Dollar Business Day prior to the proposed date of
Borrowing, in the case of a LIBOR Auction or (y) 9:15 A.M. (New York City time)
on the proposed date of Borrowing, in the case of an Absolute Rate Auction (or,
in either case, such other time or date as the Borrower and the Agent shall have
mutually agreed and shall have notified to the Banks not later than the date of
the Money Market Quote Request for the first LIBOR Auction or Absolute Rate
Auction for which such change is to be effective); provided that Money Market
Quotes submitted by the Agent (or any affiliate of the Agent) in the capacity of
a Bank may be submitted, and may only be submitted, if the Agent or such
affiliate notifies the Borrower of the terms of the offer or offers contained
therein not later than (x) one hour prior to the deadline for the other Banks,
in the case of a LIBOR Auction or (y) 15 minutes prior to the deadline for the
other Banks, in the case of an Absolute Rate Auction. Subject to Articles III
and VI, any Money Market Quote so made shall be irrevocable except with the
written consent of the Agent given on the instructions of the Borrower.
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(ii) Each Money Market Quote shall be in substantially the form of Exhibit
D hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan for which each such
offer is being made, which principal amount (w) may be greater than or less than
the Commitment of the quoting Bank, (x) must be $5,000,000 or a larger multiple
of $1,000,000, (y) may not exceed the principal amount of Money Market Loans for
which offers were requested and (z) may be subject to an aggregate limitation as
to the principal amount of Money Market Loans for which offers being made by
such quoting Bank may be accepted,
(C) in the case of a LIBOR Auction, the margin above or below the
applicable London Interbank Offered Rate (the "Money Market Margin") offered for
each such Money Market Loan, expressed as a percentage (specified to the nearest
1/10,000th of 1%) to be added to or subtracted from such base rate,
(D) in the case of an Absolute Rate Auction, the rate of interest per
annum (specified to the nearest 1/10,000th of 1%) (the "Money Market Absolute
Rate") offered for each such Money Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the quoting
Bank with respect to each Interest Period specified in the related Invitation
for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit D hereto or does not
specify all of the information required by subsection (d)(ii);
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those set forth in the
applicable Invitation for Money Market Quotes; or
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(D) arrives after the time set forth in subsection (d)(i).
(e) Notice to Borrower. The Agent shall promptly notify the Borrower of
the terms (x) of any Money Market Quote submitted by a Bank that is in
accordance with subsection (d) and (y) of any Money Market Quote that amends,
modifies or is otherwise inconsistent with a previous Money Market Quote
submitted by such Bank with respect to the same Money Market Quote Request. Any
such subsequent Money Market Quote shall be disregarded by the Agent unless
such subsequent Money Market Quote is submitted solely to correct a manifest
error in such former Money Market Quote. The Agent's notice to the Borrower
shall specify (A) the aggregate principal amount of Money Market Loans for which
offers have been received for each Interest Period specified in the related
Money Market Quote Request, (B) the respective principal amounts and Money
Market Margins or Money Market Absolute Rates, as the case may be, so offered
and (C) if applicable, limitations on the aggregate principal amount of Money
Market Loans for which offers in any single Money Market Quote may be accepted.
(f) Acceptance and Notice by Borrower. Not later than 10:00 A.M. (New York
City time) on (x) the third Euro-Dollar Business Day prior to the proposed date
of Borrowing, in the case of a LIBOR Auction or (y) the proposed date of
Borrowing, in the case of an Absolute Rate Auction (or, in either case, such
other time or date as the Borrower and the Agent shall have mutually agreed and
shall have notified to the Banks not later than the date of the Money Market
Quote Request for the first LIBOR Auction or Absolute Rate Auction for which
such change is to be effective), the Borrower shall notify the Agent of its
acceptance or non-acceptance of the offers so notified to it pursuant to
subsection (e). In the case of acceptance, such notice (a "Notice of Money
Market Borrowing") shall specify the aggregate principal amount of offers for
each Interest Period that are accepted. The Borrower may accept any Money Market
Quote in whole or in part; provided that:
(i) the aggregate principal amount of each Money Market Borrowing may not
exceed the applicable amount set forth in the related Money Market Quote
Request,
(ii) the principal amount of each Money Market Borrowing must be
$10,000,000 or a larger multiple of $1,000,000,
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(iii) acceptance of offers may only be made on the basis of ascending
Money Market Margins or Money Market Absolute Rates, as the case may be, and
(iv) the Borrower may not accept any offer that is described in subsection
(d)(iii) or that otherwise fails to comply with the requirements of this
Agreement.
(g) Allocation by Agent. If offers are made by two or more Banks with the
same Money Market Margins or Money Market Absolute Rates, as the case may be,
for a greater aggregate principal amount than the amount in respect of which
such offers are accepted for the related Interest Period, the principal amount
of Money Market Loans in respect of which such offers are accepted shall be
allocated by the Agent among such Banks as nearly as possible (in multiples of
$1,000,000, as the Agent may deem appropriate) in proportion to the aggregate
principal amounts of such offers. Determinations by the Agent of the amounts of
Money Market loans shall be conclusive in the absence of manifest error.
SECTION 2.04. Notice to Banks; Funding of Loans.
(a) Upon receipt of a Notice of Borrowing, the Agent shall promptly notify
each Bank of the contents thereof and of such Bank's share (if any) of such
Borrowing and such Notice of Borrowing shall not thereafter be revocable by the
Borrower.
(b) Not later than 12:00 Noon (New York City time) on the date of each
Borrowing, each Bank participating therein shall (except as provided in
subsection (c) of this Section) make available its share of such Borrowing, in
Federal or other funds immediately available in New York City, to the Agent at
its address specified in or pursuant to Section 9.01. Unless the Agent
determines that any applicable condition specified in Article III has not been
satisfied, the Agent will make the funds so received from the Banks available to
the Borrower at the Agent's aforesaid address.
(c) If any Bank makes a new Loan hereunder on a day on which the Borrower
is to repay all or any part of an outstanding Loan from such Bank, such Bank
shall apply the proceeds of its new Loan to make such repayment and only an
amount equal to the difference (if any) between the amount being borrowed and
the amount being repaid shall be made available by such Bank to the Agent as
provided
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in subsection (b), or remitted by the Borrower to the Agent as provided
in Section 2.12, as the case may be.
(d) Unless the Agent shall have received notice from a Bank prior to the
date of any Borrowing that such Bank will not make available to the Agent such
Bank's share of such Borrowing, the Agent may assume that such Bank has made
such share available to the Agent on the date of such Borrowing in accordance
with subsections (b) and (c) of this Section 2.04 and the Agent may, in reliance
upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have so made
such share available to the Agent, such Bank and the Borrower severally agrees
to repay to the Agent forthwith on demand such corresponding amount together
with interest thereon, for each day from the date such amount is made available
to the Borrower until the date such amount is repaid to the Agent, at (i) in the
case of the Borrower, a rate per annum equal to the higher of the Federal Funds
Rate and the interest rate applicable thereto pursuant to Section 2.07 and (ii)
in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to
the Agent such corresponding amount, such amount so repaid shall constitute such
Bank's Loan included in such Borrowing for purposes of this Agreement.
SECTION 2.05. Notes. (a) The Loans of each Bank shall be evidenced by a
single Note payable to the order of such Bank for the account of its Applicable
Lending Office in an amount equal to the aggregate unpaid principal amount of
such Bank's Loans.
(b) Each Bank may, by notice to the Borrower and the Agent, request that
its Loans of a particular type be evidenced by a separate Note in an amount
equal to the aggregate unpaid principal amount of such Loans. Each such Note
shall be in substantially the form of Exhibit A hereto with appropriate
modifications to reflect the fact that it evidences solely Loans of the relevant
type. Each reference in this Agreement to the "Note" of such Bank shall be
deemed to refer to and include any or all of such Notes, as the context may
require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.01(a), the
Agent shall forward such Note to such Bank. Each Bank shall record the date,
amount, type and maturity of each Loan made by it and the date and amount of
each payment of principal made by the Borrower with respect thereto, and may, if
such Bank so elects in connection with any transfer or enforcement of its Note,
endorse on the schedule forming a part thereof appropriate notations to
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evidence the foregoing information with respect to each such Loan then
outstanding; provided that the failure of any Bank to make any such recordation
or endorsement shall not affect the obligations of the Borrower hereunder or
under the Notes. Each Bank is hereby irrevocably authorized by the Borrower so
to endorse its Note and to attach to and make a part of its Note a continuation
of any such schedule as and when required.
SECTION 2.06. Maturity of Loans. Each Loan included in any Borrowing shall
mature, and the principal amount thereof shall be due and payable, on the last
day of the Interest Period applicable to such Borrowing.
SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall bear interest
on the outstanding principal amount thereof for each day at a rate per annum
equal to the sum of the Applicable Margin for such day plus the Base Rate for
such day. Such interest shall be payable for each Interest Period on the last
day thereof. Any overdue principal of or interest on any Base Rate Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the sum of 2% plus the rate otherwise applicable to Base Rate Loans for
such day.
(b) Each CD Loan shall bear interest on the outstanding principal amount
thereof, for each day during the Interest Period applicable thereto, at a rate
per annum equal to the sum of the Applicable Margin for such day plus the
applicable Adjusted CD Rate for such Interest Period; provided that if any CD
Loan or any portion thereof shall, as a result of clause (2)(b) of the
definition of Interest Period, have an Interest Period of less than 30 days,
such portion shall bear interest during such Interest Period at the rate
applicable to Base Rate Loans during such period. Such interest shall be payable
for each Interest Period on the last day thereof and, if such Interest Period is
longer than 90 days, at intervals of 90 days after the first day thereof. Any
overdue principal of or interest on any CD Loan shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to the sum of 2% plus
the higher of (i) the sum of the Applicable Margin for such day plus the
Adjusted CD Rate applicable to such Loan and (ii) the rate applicable to Base
Rate Loans for such day.
The "Adjusted CD Rate" applicable to any Interest Period means a rate per
annum determined pursuant to the following formula:
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[CDBR ]*
ACDR = [-----------] + AR
[1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
-------------
* The amount in brackets being rounded upward, if necessary, to the next
higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the rate of
interest determined by the Agent to be the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid
at 10:00 A.M. (New York City time) (or as soon thereafter as practicble) on the
first day of such Interest Period by two or more New York certificate of deposit
dealers of recognized standing for the purchase at face value from each CD
Reference Bank of its certificates of deposit in an amount comparable to the
principal amount of the CD Loan of such CD Reference Bank to which such Interest
Period applies and having a maturity comparable to such Interest Period.
"Domestic Reserve Percentage" means for any day that percentage (expressed
as a decimal) which is in effect on such day, as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for determining the
maximum reserve requirement (including without limitation any basic,
supplemental or emergency reserves) for a member bank of the Federal Reserve
System in New York City with deposits exceeding five billion dollars in respect
of new non-personal time deposits in dollars in New York City having a maturity
comparable to the related Interest Period and in an amount of $100,000 or more.
The Adjusted CD Rate shall be adjusted automatically on and as of the effective
date of any change in the Domestic Reserve Percentage.
"Assessment Rate" means for any day the annual assessment rate in effect
on such day which is payable by a member of the Bank Insurance Fund classified
as adequately capitalized and within supervisory subgroup "A" (or a comparable
successor assessment risk classification) within the meaning of 12 C.F.R.
section 327.3(d) (or any successor provision) to the Federal Deposit Insurance
Corporation (or any successor) for such Corporation's (or such successor's)
insuring time deposits at offices of such institutions in the United States. The
Adjusted CD Rate shall be adjusted
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automatically on and as of the effective date of any change in the Assessment
Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during the Interest Period applicable
thereto, at a rate per annum equal to the sum of the Applicable Margin for such
day plus the applicable Adjusted London Interbank Offered Rate for such Interest
Period. Such interest shall be payable for each Interest Period on the last day
thereof and, if such Interest Period is longer than three months, at intervals
of three months after the first day thereof.
The "Adjusted London Interbank Offered Rate" applicable to any Interest
Period means a rate per annum equal to the quotient obtained (rounded upward, if
necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable London
Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve Percentage.
The "London Interbank Offered Rate" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/16 of 1%)
of the respective rates per annum at which deposits in dollars are offered to
each of the Euro-Dollar Reference Banks in the London interbank market at
approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the
first day of such Interest Period in an amount approximately equal to the
principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to
which such Interest Period is to apply and for a period of time comparable to
such Interest Period.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Bank to United
States residents). The Adjusted London Interbank Offered Rate shall be adjusted
automatically on and as of the effective date of any change in the Euro-Dollar
Reserve Percentage.
(d) Any overdue principal of or interest on any Euro-Dollar Loan shall
bear interest, payable on demand, for
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each day from and including the date payment thereof was due to but excluding
the date of actual payment, at a rate per annum equal to the sum of 2% plus the
higher of (i) the sum of the Applicable Margin for such day plus the Adjusted
London Interbank Offered Rate applicable to such Loan and (ii) the Applicable
Margin for such day plus the quotient obtained (rounded upward, if necessary, to
the next higher 1/100 of 1%) by dividing (x) the average (rounded upward, if
ncessary, to the next higher 1/16 of 1%) of the respective rates per annum at
which one day (or, if such amount due remains unpaid more than three Euro-Dollar
Business Days, than for such other period of time not longer than six months as
the Agent may select) deposits in dollars in an amount approximately equal to
such overdue payment due to each of the Euro-Dollar Reference Banks are offered
to such Euro-Dollar Reference Bank in the London interbank market for the
applicable period determined as provided above by (y) 1.00 minus the Euro-Dollar
Reserve Percentage (or, if the circumstances described in clause (a) or (b) of
Section 8.01 shall exist, at a rate per annum equal to the sum of 2% plus the
rate applicable to Base Rate Loans for such day).
(e) Subject to Section 8.01(a), each Money Market LIBOR Loan shall bear
interest on the outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the sum of the London Interbank
Offered Rate for such Interest Period (determined in accordance with Section
2.07(c) as if the related Money Market LIBOR Borrowing were a Committed
Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the
Bank making such Loan in accordance with Section 2.03. Each Money Market
Absolute Rate Loan shall bear interest on the outstanding principal amount
thereof, for the Interest Period applicable thereto, at a rate per annum equal
to the Money Market Absolute Rate quoted by the Bank making such Loan in
accordance with Section 2.03. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is longer than three
months, at intervals of three months after the first day thereof. Any overdue
principal of or interest on any Money Market Loan shall bear interest, payable
on demand, for each day until paid at a rate per annum equal to the sum of 2%
plus the Base Rate for such day.
(f) The Agent shall determine each interest rate applicable to the Loans
hereunder. The Agent shall give prompt notice to the Borrower and the
participating Banks of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
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(g) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Agent as contemplated by this Section. If any Reference Bank
does not furnish a timely quotation, the Agent shall determine the relevant
interest rate on the basis of the quotation or quotations furnished by the
remaining Reference Bank or Banks or, if none of such quotations is available on
a timely basis, the provisions of Section 8.01 shall apply.
(h) The "Applicable Margin" with respect to any Committed Loan at any date
is the applicable percentage amount set forth in the table below based on the
Status Level for such date:
Level I Level II Level III Level IV Level V
Status Status Status Status Status
------- -------- --------- -------- --------
Base Rate Loans .0000% .0000% .0000% .0000% 1.5000%
Euro-Dollar Loans .2500% .3300% .4500% .5500% 2.5000%
CD Loans .3750% .4550% .5750% .6750% 2.6250%
SECTION 2.08. Fees.
(a) Commitment Fee. During the Revolving Credit Period, the Borrower shall
pay to the Agent for the account of the Banks ratably in proportion to their
respective Commitments a commitment fee at the Commitment Fee Rate on the daily
amount by which the aggregate amount of the Commitments exceeds the aggregate
outstanding principal amount of (i) for any day on which Level V Status exists,
all Committed Loans and (ii) for any other day, all Loans. Such commitment fee
shall accrue from and includuing the Effective Date to but excluding the
Termination Date.
For this purpose, the "Commitment Fee Rate" is a rate per annum equal to
(i) 0.0200% for any day on which Level I Status or Level II Status exists, (ii)
0.0500% for any day on which Level III Status or Level IV Status exists and
(iii) 0.5000% for any day on which Level V Status exists.
(b) Facility Fee. The Borrower shall pay to the Agent for the account of
the Banks ratably in proportion to their respective Commitments a facility fee
at the Facility Fee Rate. Such facility fee shall accrue (i) from and including
the Effective Date to but excluding the Termination Date, on the daily aggregate
amount of the Commitments (whether used or unused) and (ii) from and including
the Termination Date to but excluding the date the
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Loans shall be repaid in their entirety, on the aggregate outstanding principal
amount of the Loans.
For this purpose, the "Facility Fee Rate" is a rate per annum equal to
(i) 0.1000% for any day on which Level I Status exists, (ii) 0.1200% for any day
on which Level II Status exists, (iii) 0.1500% for any day on which Level III
Status exists, (iv) 0.2000% for any day on which Level IV Status exists and (v)
0.0000% for any day on which Level V Status exists.
(c) Payments. Accrued fees under this Section shall be payable quarterly
on each Quarterly Date and upon the date of termination of the Commitments in
their entirety (and, if later, the date the Loans shall be repaid in their
entirety).
SECTION 2.09. Optional Termination or Reduction of Commitments. During the
Revolving Credit Period, the Borrower may, upon at least three Domestic Business
Days' notice to the Agent, (i) terminate the Commitments at any time, if no
Loans are outstanding at such time or (ii) ratably reduce from time to time by
an aggregate amount of $10,000,000 or any larger multiple thereof, the aggregate
amount of the Commitments in excess of the aggregate outstanding principal
amount of the Loans.
SECTION 2.10. Mandatory Termination of Commitments. The Commitments shall
terminate on the Termination Date, and any Loans then outstanding (together with
accrued interest thereon) shall be due and payable on such date.
SECTION 2.11. Optional Prepayments. (a) The Borrower may, upon at least
one Domestic Business Day's notice to the Agent, prepay any Base Rate Rorrowing
(or any Money Market Borrowing bearing interest at the Base Rate pursuant to
Section 8.01(a)) in whole at any time, or from time to time in part in amounts
aggregating $10,000,000 or any larger multiple of $1,000,000, by paying the
principal amount to be prepaid together with accrued interest thereon to the
date of prepayment. Each such optional prepayment shall be applied to prepay
ratably the Loans of the several Banks included in such Borrowing.
(b) Except as provided in Section 8.02, the Borrower may not prepay all
or any portion of the principal amount of any Fixed Rate Loan prior to the
maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant to this Section, the
Agent shall promptly notify
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each Bank of the contents thereof and of such Bank's ratable share (if any) of
such prepayment and such notice shall not thereafter be revocable by the
Borrower.
SECTION 2.12. General Provisions as to Payments. (a) The Borrower shall
make each payment of principal of, and interest on, the Loans and of fees
hereunder, not later than 12:00 Noon (New York City time) on the date when due,
in Federal or other funds immediately available in New York City, to the Agent
at its address referred to in Section 9.01. The Agent will promptly distribute
to each Bank its ratable share of each such payment received by the Agent for
the account of the Banks. Whenever any payment of principal of, or interest on,
the Domestic Loans or of fees shall be due on a day which is not a Domestic
Business Day, the date for payment thereof shall be extended to the next
succeeding Domestic Business Day. Whenever any payment of principal of, or
interest on, the Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day. Whenever any payment of
principal of, or interest on, the Money Market Loans shall be due on a day which
is not a Euro-Dollar Business Day, the date for payment thereof shall be
extended to the next succeeding Euro-Dollar Business Day. If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
(b) Unless the Agent shall have received notice from the Borrower prior to
the date on which any payment is due to the Banks hereunder that the Borrower
will not make such payment in full, the Agent may assume that the Borrower has
made such payment in full to the Agent on such date and the Agent may, in
reliance upon such assumption, cause to be distributed to each Bank on such due
date an amount equal to the amount then due such Bank. If and to the extent that
the Borrower shall not have so made such payment, each Bank shall repay to the
Agent forthwith on demand such amount distributed to such Bank together with
interest thereon, for each day from the date such amount is distributed to such
Bank until the date such Bank repays such amount to the Agent, at the Federal
Funds Rate.
SECTION 2.13. Funding Losses. If the Borrower makes any payment of
principal with respect to any Fixed Rate Loan (pursuant to Article VI or VIII or
otherwise) on any day other than the last day of the Interest Period
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applicable thereto, or the end of an applicable period fixed pursuant to Section
2.07(d), or if the Borrower fails to borrow any Fixed Rate Loans after notice
has been given to any Bank in accordance with Section 2.04(a), the Borrower
shall reimburse each Bank within 15 days after demand for any resulting loss or
expense incurred by it (or by an existing or prospective Participant in the
related Loan), including (without limitation) any loss incurred in obtaining,
liquidating or employing deposits from third parties, but excluding loss of
margin or the period after any such payment or failure to borrow, provided that
such Bank shall have delivered to the Borrower a certificate as to the amount of
such loss or expense, which certificate shall be conclusive in the absence of
manifest error.
SECTION 2.14. Computation of Interest and Fees. Interest based on the
Prime Rate hereunder shall be computed on the basis of a year of 365 days (or
366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest and
fees shall be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but excluding the last
day).
ARTICLE III
CONDITONS
SECTION 3.01. Effectiveness. This Agreement shall become effective on the
date that each of the following conditions shall have been satisfied (or waived
in accordance with Section 9.05):
(a) receipt by the Agent of counterparts hereof signed by each of the
parties hereto (or, in the case of any party as to which an executed
counterpart shall not have been received, receipt by the Agent in form
satisfactory to it of telegraphic, telex, telecopy or other written
confirmation from such party of execution of a counterpart hereof by such
party);
(b) receipt by the Agent for the account of each Bank of a duly executed
Note dated on or before the Effective Date complying with the provisions of
Section 2.05;
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(c) receipt by the Agent of an opinion of John R. Welty,
General Counsel of the Borrower, substantially in the form of Exhibit E
hereto and covering such additional matters relating to the
transactions contemplated hereby as the Required Banks may reasonably
request;
(d) receipt by the Agent of an opinion of Davis Polk &
Wardwell, special counsel for the Agent, substantially in the form of
Exhibit F hereto and covering such additional matters relating to the
transactions contemplated hereby as the Required Banks may reasonably
request;
(e) receipt by the Agent of a certificate signed by an
authorized officer of the Borrower, to the effect set forth in clauses
(c) and (d) of Section 3.02;
(f) receipt by the Agent of all documents it may reasonably
request relating to the existence of the Borrower, the corporate
authority for and the validity of this Agreement and the Notes, and any
other matters relevant hereto, all in form and substance reasonably
satisfactory to the Agent; and
(g) receipt by the Agent of evidence satisfactory to it of the
payment of all amounts payable under the 1991 Credit Agreement;
Provided that this Agreement shall not become effective or be binding on any
party hereto unless all of the foregoing conditions are satisfied not later than
January 24, 1994. The Agent shall promptly notify the Borrower and the Banks of
the Effective Date, and such notice shall be conclusive and binding on all
parties hereto. The parties hereto and thereto agree that the commitments under
the 1991 Credit Agreement shall terminate in their entirety simultaneously with
and subject to the effectiveness of this Agreement and that the Borrower shall
be obliged to pay the accrued commitment and facility fees thereunder to but
excluding the date of such effectiveness.
SECTION 3.02. Borrowings. The obligation of any Bank to make a
Loan on the occasion of any Borrowing is subject to the satisfaction of the
following conditions:
(a) receipt by the Agent of a Notice of Borrowing as required
by Section 2.02 or 2.03, as the case may be;
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(b) the fact that, immediately after such Borrowing, the
aggregate outstanding principal amount of the Loans will not exceed the
aggregate amount of the Commitments;
(c) the fact that, immediately before and after such
Borrowing, no Default shall have occurred and be continuing; and
(d) the fact that the representations and warranties of the
Borrower contained in this Agreement (except, in the case of a
Refunding Borrowing, the representations and warranties set forth in
Sections 4.04(c) and 4.05 as to any matter which has theretofore
been disclosed in writing by the Borrower to the Banks) shall be true
on and as of the date of such Borrowing.
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such Borrowing as to the facts specified in clauses
(b), (c) and (d) of this Section.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The Borrower is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Borrower of this
Agreement and the Notes are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official and do not
contravene, or constitute a default under, any provision of applicable law or
regulation or of the certificate of incorporation or by-laws of the Borrower or
of any agreement, judgment, injunction, order, decree or other instrument
binding upon the Borrower or any of its Subsidiaries or result in the
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creation or imposition of any Lien on any asset of the Borrower or any of its
Subsidiaries.
SECTION 4.03. Binding Effect. This Agreement constitutes a
valid and binding agreement of the Borrower and the Notes, when executed and
delivered in accordance with this Agreement, will constitute valid and binding
obligations of the Borrower.
SECTION 4.04. Financial Information.
(a) The consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of June 30, 1993 and the related consolidated
statements of income, reinvested earnings and cash flows for the fiscal year
then ended, reported on by Coopers & Lybrand and set forth in the Borrower's
1993 Form 10-K, a copy of which has been delivered to each of the Banks, fairly
present, in conformity with generally accepted accounting principles, the
consolidated financial position of the Borrower and its Consolidated
Subsidiaries as of such date and their consolidated results of operations and
cash flows for such fiscal year.
(b) The unaudited consolidated balance sheet of the Borrower
and its Consolidated Subsidiaries as of September 30, 1993 and the related
unaudited consolidated statements of income and cash flows for the three months
then ended, set forth in the Borrower's quarterly report for the fiscal quarter
ended September 30, 1993 as filed with the Securities and Exchange Commission on
Form 10-Q, a copy of which has been delivered to each of the Banks, fairly
present, in conformity with generally accepted accounting principles applied on
a basis consistent with the financial statements referred to in subsection (a)
of this Section, the consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such three month period (subject to normal
year-end adjustments).
(c) Since September 30, 1993 there has been no material
adverse change in the business, financial position, results of operations or
prospects of the Borrower and its Consolidated Subsidiaries, considered as a
whole.
SECTION 4.05. Litigation. There is no action, suit or
proceeding pending against, or to the knowledge of the Borrower threatened
against or affecting, the Borrower or any of its Subsidiaries before any court
or arbitrator or any governmental body, agency or official in which there is a
reasonable possibility of an adverse decision which could
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materially adversely affect the business, consolidated financial position or
consolidated results of operations of the Borrower and its Consolidated
Subsidiaries or which in any manner draws into question the validity of this
Agreement or the Notes.
SECTION 4.06. Compliance with ERISA. Each member of the ERISA
Group has fulfilled its obligations under the minimum funding standards of ERISA
and the Internal Revenue Code with respect to each Plan and is in compliance in
all material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could result in the imposition of a Lien or the posting of
a bond or other security under ERISA or the Internal Revenue Code or (iii)
incurred any liability under Title IV or ERISA other than a liability to the
PBGC for premiums under Section 4007 of ERISA.
SECTION 4.07. Environmental Matters. In the ordinary course of
its business, the Borrower conducts an ongoing review of the effect of
Environmental Laws on the business, operations and properties of the Borrower
and its Subsidiaries, in the course of which it periodically identifies and
evaluates associated liabilities and costs (including, without limitation, any
capital or operating expenditures required for clean-up or closure of properties
presently or previously owned, any capital or operating expenditures required to
achieve or maintain compliance with environmental protection standards imposed
by law or as a condition of any license, permit or contract, any related
constraints on operating activities, including any periodic or permanent
shutdown of any facility or reduction in the level of or change in the nature of
operations conducted thereat and any actual or potential liabilities to third
parties, including employees, and any related costs and expenses). On the basis
of this review, the Borrower has reasonably concluded that Environmental Laws
are unlikely to have a material adverse effect on the business, financial
condition, results of operations or prospects of the Borrower and its
Consolidated Subsidiaries, considered as a whole.
SECTION 4.08. Taxes. United States Federal income tax returns
of the Borrower and its Subsidiaries have
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been examined and closed through the fiscal year ended June 30, 1987. The
Borrower and its Subsidiaries have filed all United States Federal income tax
returns and all other material tax returns which are required to be filed by
them and have paid all taxes due pursuant to such returns or pursuant to any
assessment received by the Borrower or any Subsidiary (other than those the
amount or validity of which is best contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with generally
accepted accounting principles have been provided on the books of the Borrower
or its Subsidiaries, as the case may be). The charges, accruals and reserves on
the books of the Borrower and its Subsidiaries in respect of taxes or other
governmental charges are, in the opinion of the Borrower, adequate.
SECTION 4.09. Subsidiaries. Each of the Borrower's corporate
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has all
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted.
SECTION 4.10. Not an Investment Company. The Borrower is not
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
SECTION 4.11. Full Disclosure. All information heretofore
furnished by or on behalf of the Borrower to the Agent or any Bank for purposes
of or in connection with this Agreement or any transaction contemplated hereby
was, and all such information hereafter furnished by or on behalf of the
Borrower to the Agent or any Bank will be, true and accurate in every material
respect based on reasonable estimates on the date as of which such information
is stated or certified. The Borrower has previously disclosed in writing to the
Banks all facts and circumstances known to the Borrower which have had or might
in the future have (so far as the Borrower can presently reasonably foresee) a
materially adverse effect on the Borrower or its Subsidiaries taken as a whole.
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ARTICLE V
COVENANTS
The Borrower agrees that, so long as any Bank has any
Commitment hereunder or any amount payable under any Note remains unpaid:
SECTION 5.01. Information. The Borrower will deliver to each
of the Banks:
(a) as soon as available and in any event within 90 days after
the end of each fiscal year of the Borrower, a consolidated balance
sheet of the Borrower and its Consolidated Subsidiaries as of the end
of such fiscal year and the related consolidated statements of income,
reinvested earnings and cash flows for such fiscal year, setting forth
in each case in comparative form the figures for the previous fiscal
year, all reported on in a manner acceptable to the Securities and
Exchange Commission and audited by Coopers & Lybrand or other
independent public accountants of nationally recognized standing;
provided that so long as the Borrower is required to file periodic
reports with the Securities and Exchange Commission or any successor
agency, delivery of copies of each annual report described in paragraph
(g) below shall satisfy the requirements of this paragraph;
(b) as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of the
Borrower, an unaudited consolidated balance sheet of the Borrower and
its Consolidated Subsidiaries as of the end of such quarter and the
related consolidated statements of income and cash flows for such
quarter and for the portion of the Borrower's fiscal year ended at the
end of such quarter, setting forth in each case in comparative form the
figures for the corresponding quarter and the corresponding portion of
the Borrower's previous fiscal year, all certified (subject to normal
year-end adjustments) as to fairness of presentation, generally
accepted accounting principles and consistency by the chief financial
officer or the chief accounting officer of the Borrower; provided that
so long as the Borrower is required to file periodic reports with the
Securities and Exchange Commission or any successor agency, delivery of
copies of each
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quarterly report described in paragraph (g) below shall satisfy the requirements
of this paragraph;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of
the chief financial officer of the chief accounting officer of the
Borrower (i) setting forth in reasonable detail the calculations
required to establish whether the Borrower was in compliance with the
requirements of Section 5.05 to 5.08, inclusive, on the date of such
financial statements and (ii) stating whether, to the best of his
knowledge, any Default exists on the date of such certificate and, if
any Default then exists, setting forth the details thereof and the
action which the Borrower is taking or proposes to take with respect
thereto;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements (i)
whether anything has come to their attention to cause them to believe
that any Default existed on the date of such statements and (ii)
confirming the calculations set forth in the officer's certificate
delivered simultaneously therewith pursuant to clause (c) above;
(e) within five days after an Executive Officer obtains
knowledge of any Default, if such Default is then continuing, a
certificate of the chief financial officer of the chief accounting
officer of the Borrower setting forth the details thereof and the
action which the Borrower is taking or proposes to take with respect
thereto;
(f) promptly upon the mailing thereof to the shareholders of
the Borrower generally, copies of all financial statements, reports and
proxy statements so mailed;
(g) promptly upon the filing thereof, copies of all
registration statement (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent) and reports on
Forms 10-K, 10-Q and 8-K (or their equivalents) which the Borrower
shall have filed with the Securities and Exchange Commission;
(h) promptly upon any change in Status Level, notice thereof;
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(i) if and when any member of the ERISA Group (i) gives or
is required to give notice to the PBGC of any "reportable event" (as
defined in Section 4043 of ERISA) with respect to any Plan which might
constitute grounds for termination of such Plan under Title IV of
ERISA, or knows that the plan administrator of any Plan has given or is
required to give notice of any such reportable event, a copy of the
notice of such reportable event given or required to be given to the
PBGC; (ii) receives notice of complete or partial withdrawal liability
under Title IV of ERISA or notice that any Multiemployer Plan is in
reorganization, is insolvent or has been terminated, a copy of such
notice; (iii) receives notice from the PBGC under Title IV of ERISA of
an intent to terminate, impose liability (other than for premiums under
Section 4007 of ERISA) in respect of, or appoint a trustee to
administer any Plan, a copy of such notice; (iv) applies for a waiver
of the minimum funding standard under Section 412 of the Internal
Revenue Code, a copy of such application; (v) gives notice of intent to
terminate any Plan under Section 4041(c) of ERISA, a copy of such
notice and other information filed with the PBGC; (vi) gives notice of
withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of
such notice; or (vii) fails to make any payment or contribution to any
Plan or Multiemployer Plan or in respect of any Benefit Arrangement or
makes any amendment to any Plan or Benefit Arrangement which has
resulted or could result in the imposition of a Lien or the posting of
a bond or other security, a certificate of the chief financial officer
or the chief accounting officer of the Borrower setting forth details
as to such occurrence and action, if any, which the Borrower or
applicable member of the ERISA Group is required or proposes to take;
and
(j) from time to time such additional information regarding
the financial position or business of the Borrower and its Subsidiaries
as the Agent, at the request of any Bank, may reasonably request.
SECTION 5.02. Maintenance of Property; Insurance. (a) The
Borrower will keep, and will cause each Subsidiary to keep, all property useful
and necessary in its business in good working order and condition, ordinary wear
and tear excepted.
(b) The Borrower will maintain, and will cause each subsidiary
to maintain, insurance coverage by financially sound and reputable insurers in
such forms and
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amounts and against such risks as are customary for corporations of established
reputation engaged in the same or a similar business and owning and operating
similar properties; and will furnish to the Banks, upon request from the Agent,
information presented in reasonable detail as to the insurance so carried.
SECTION 5.03. Conduct of Business and Maintenance of
Existence. The Borrower will continue, and will cause each Subsidiary to
continue, to engage in business of the same general type as now conducted by the
Borrower and its Subsidiaries, and will preserve, renew and keep in full force
and effect, and will cause each Subsidiary to preserve, renew and keep in full
force and effect their respective corporate existence and their respective
rights, privileges and franchises necessary or desirable in the normal conduct
of business; provided that nothing in this Section 5.03 shall prohibit the
merger of a Subsidiary or the termination of the corporate existence of any
Subsidiary if the Borrower in good faith determines that such termination is in
the best interest of the Borrower and is not materially disadvantageous to the
Banks.
SECTION 5.04. Compliance with Laws. The Borrower will comply,
and cause each Subsidiary to comply, in all material respects with all
applicable laws, ordinances, rules, regulations, and requirements of
governmental authorities (including, without limitation, Environmental Laws and
ERISA and the rules and regulations thereunder) except where the necessity of
compliance therewith is contested in good faith by appropriate proceedings.
SECTION 5.05. Debt. Consolidated Debt will at no time exceed
55% of Total Capitalization. For purposes of this Section any preferred stock of
a Subsidiary held by a Person other than the Borrower or a Wholly-Owned
Subsidiary shall be included, at the higher of its voluntary or involuntary
liquidation value, in "Consolidated Debt."
SECTION 5.06. Minimum Consolidated Tangible Net Worth.
Consolidated Tangible Net Worth will at no time be less than the "Minimum
Compliance Level". The Minimum Compliance Level shall be $170,000,000 effective
as of the date hereof, and shall be increased as of the end of each fiscal year,
beginning with the fiscal year ending June 30, 1994, by 45% of any amount (the
"Annual Amount") equal to the sum of (x) the net income of the Borrower and its
Consolidated Subsidiaries for such fiscal year, minus (y) any dividend payments
made on the Borrower's capital stock during such fiscal year,
minus (z) the aggregate price of
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any purchase by the Borrower of its own capital stock. The increases in the
Minimum Compliance level shall be fully cumulative, and no reduction shall be
made on account of a negative Annual Amount for any fiscal year of the Borrower.
Section 5.07. Negative Pledge. Neither the Borrower nor any
Subsidiary will create, assume or suffer to exist any Lien on any asset now
owned or hereafter acquired by it, except:
(a) Liens existing on the date of this Agreement securing Debt
outstanding on the date of this Agreement in an aggregate principal
amount not exceeding $5,000,000;
(b) Liens for property taxes and assessments or governmental
charges or levies and liens securing claims or demands of mechanics and
material, provided that payment thereof is not at the time required;
(c) Liens of or resulting from any judgment or award, the
time for the appeal or petition for rehearing of which shall not have
expired, or in respect of which the Borrower or a Subsidiary shall at
any time in good faith be prosecuting an appeal or proceeding for a
review and in respect of which a stay of execution pending such appeal
or proceeding for review shall have been secured; provided that such
Lien does not secure any obligation in an amount exceeding $50,000,000;
(d) minor survey exceptions or minor encumbrances, easements
or reservations, or rights of others for the rights-of-way, utilities
and other similar purposes, or zoning or other restrictions as to the
use of real properties, which are necessary for the conduct of the
activities of the Borrower and its Subsidiaries or which customarily
exist on properties of corporations engaged in similar activities and
similarly situated and which do not in any event materially impair
their use in the operation of the business of the Borrower and its
Subsidiaries;
(e) any Lien existing on any asset of any corporation at the
time such corporation becomes a Subsidiary;
(f) any Lien on any asset securing Debt incurred or assumed
for the purpose of financing all or any part of the cost of acquiring
such asset, provided that such
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Lien attaches to such asset concurrently with or within 90 days after
the acquisition thereof;
(g) any Lien on any asset of any corporation existing at the
time such corporation is merged or consolidated with or into the
Borrower or a Subsidiary;
(h) any Lien existing on any asset prior to the acquisition
thereof by the Borrower or a Subsidiary;
(i) any Lien arising out of the refinancing, extension,
renewal or refunding of any Debt secured by any Lien permitted by any
of the foregoing clauses of this Section, provided that such Debt is
not increased and is not secured by any additional assets;
(j) Liens arising in the ordinary course of its business which
(i) do not secure Debt (ii) do not secure any obligation in an amount
exceeding $40,000,000 and (iii) do not in the aggregate materially
detract from the value of its assets or materially impair the use
thereof in the operation of its business; and
(k) Liens not otherwise permitted by the foregoing clauses of
this Section securing Debt in an aggregate principal amount at any time
outstanding not to exceed 15% of Consolidated Tangible Net Worth.
SECTION 5.08. Consolidations, Mergers and Sales of Assets. The
Borrower will not (i) consolidate or merge with or into any other Person or (ii)
sell, lease or otherwise transfer, directly or indirectly, all or any
substantial part of the assets of the Borrower and its Subsidiaries, taken as a
whole, to any other Person; provided that the Borrower may merge with another
Person if the Borrower is the corporation surviving such merger and, after
giving effect thereto, no Default shall have occurred and be continuing.
SECTION 5.09. Use of Proceeds. The proceeds of the Loans made
under this Agreement will be used by the Borrower for the general corporate
purposes of the Borrower, including acquisitions. None of such proceeds will be
used, directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of buying or carrying any "margin stock" within the meaning of
Regulation U.
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ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the
following events ("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of
any Loan, or shall fail to pay within two days of the due date any
interest on any Loan, any fees or any other amount payable hereunder;
(b) the Borrower shall fail to observe or perform any covenant
contained in Sections 5.05 to 5.10, inclusive;
(c) the Borrower shall fail to observe or perform any covenant
or agreement contained in this Agreement (other than those covered by
clause (a) or (b) above) for 10 days after written notice thereof has
been given to the Borrower by the Agent at the request of any Bank;
(d) any representation, warranty, certification or statement
made by the Borrower in this Agreement or in any certificate, financial
statement or other document delivered pursuant to this Agreement shall
prove to have been incorrect in any material respect when made (or
deemed made);
(e) the Borrower or any Subsidiary shall fail to make any
payment in respect of any Material Debt when due or within any
applicable grace period;
(f) any event or condition shall occur which (i) results in
the acceleration of the maturity of any Material Debt or (ii) enables
(or, with the giving of notice or lapse of time or both, would enable)
the holder of such Debt or any Person acting on such holder's behalf to
accelerate the maturity thereof, and such event or condition shall
continue for more than any expressly applicable grace period with
respect thereto (without giving effect to any waiver, consent or
amendment for which the Borrower or any Subsidiary gave any
consideration or benefit of any kind (including, without limitation,
any increased compensation, prepayment, shortening of maturities,
security or other credit support) during the continuation of such event
or
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condition or within 30 days before such event or condition would
otherwise have occurred);
(g) the Borrower or any Subsidiary shall commence a voluntary
case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as
they become due, or shall take any corporate action to authorize any of
the foregoing;
(h) an involuntary case or other proceeding shall be commenced
against the Borrower or any Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period of 60 days; or an order
for relief shall be entered against the Borrower or any Subsidiary
under the federal bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due
an amount or amounts aggregating in excess of $5,000,000 which it shall
have become liable to pay under Title IV of ERISA; or notice of intent
to terminate a Material Plan shall be filed under Title IV of ERISA by
any member of the ERISA Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings
under Title IV of ERISA to terminate, to impose liability (other than
for premiums under Section 4007 of ERISA) in respect of, or to cause a
trustee to be appointed to administer any Material Plan; or a condition
shall exist by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any Material Plan must be terminated; or there
shall occur a complete or partial withdrawal from, or a default,
withing the meaning of Section 4219(c)(5) of ERISA, with respect to,
one or more Multiemployer Plans which could cause one or more members
of the ERISA Group
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to incur a current payment obligation in excess of $5,000,000;
(j) a judgment or order for the payment of money in excess of
$1,000,000 shall be rendered against the Borrower or any Subsidiary and
such judgment or order shall continue unsatisfied and unstayed for a
period of 30 days; or
(k) any person or group of persons (within the meaning of
Section 13 or 14 of the Securities Exchange Act of 1934, as amended)
shall have acquired beneficial ownership (within the meaning of Rule
13d-3 promulgated by the Securities and Exchange Commission under said
Act) of 33% or more of the outstanding shares of common stock of the
Borrower; or, during any period of 24 consecutive calendar months,
individuals who were directors of the Borrower on the first day of such
period shall cease to constitute a majority of the board of directors
of the Borrower;
then, and in every such event, if such event is continuing, the Agent shall (i)
if requested by the Required Banks, by notice to the Borrower terminate the
Commitments and they shall thereupon terminate, and (ii) if requested by Banks
holding Notes evidencing more than 66 2/3% in aggregate principal amount of the
Loans, by notice to the Borrower declare the Notes (together with accrued
interest thereon) to be, and the Notes shall thereupon become, immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower; provided that in the case of any
of the Events of Default specified in clause (g) or (h) above with respect to
the Borrower, without any notice to the Borrower or any other act by the Agent
or the Banks, the Commitments shall thereupon terminate and the Notes (together
with accrued interest thereon) shall become immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower.
SECTION 6.02. Notice of Default. The Agent shall give notice
to the Borrower under Section 6.01(c) promptly upon being requested to do so by
any Bank and shall thereupon notify all the Banks thereof.
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ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization. Each Bank
irrevocably appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement and the Notes as are
delegated to the Agent by the terms hereof or thereof, together with all such
powers as are reasonably incidental thereto.
SECTION 7.02. Agent and Affiliates. Morgan Guaranty Trust
Company of New York shall have the same rights and powers under this Agreement
as any other Bank and may exercise or refrain from exercising the same as though
it were not the Agent, and Morgan Guaranty Trust Company of New York and its
affiliates may accept deposits from, lend money to, and generally engage in any
kind of business with the Borrower or any Subsidiary or affiliate of the
Borrower as if it were not the Agent hereunder.
SECTION 7.03. Action by Agent. The obligations of the Agent
hereunder are only those expressly set forth herein. Without limiting the
generality of the foregoing, the Agent shall not be required to take any action
with respect to any Default, except as expressly provided in Article VI.
SECTION 7.04. Consultation with Experts. The Agent may consult
with legal counsel (who may be counsel for the Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
SECTION 7.05. Liability of Agent. Neither the Agent nor any of
its affiliates nor any of their respective directors, officers, agents or
employees shall be liable for any action taken or not taken by it in connection
herewith (i) with the consent or at the request of the Required Banks or (ii) in
the absence of its own gross negligence or willful misconduct. Neither the Agent
nor any of its affiliates nor any of their respective directors, officers,
agents or employees shall be responsible for or have any duty to ascertain,
inquire into or verify (i) any statement, warranty or representation made in
connection with this Agreement or any borrowing hereunder; (ii) the performance
or observance of any of the covenants or agreements of the Borrower; (iii) the
satisfaction of any condition specified in Article III, except receipt of items
required to be delivered to the Agent; or
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(iv) the validity, effectiveness or genuineness of this Agreement, the Notes or
any other instrument or writing furnished in connection herewith. The Agent
shall not incur any liability by acting in reliance upon any notice, consent,
certificate, statement, or other writing (which may be a bank wire, telex,
telecopy or similar writing) believed by it to be genuine or to be signed by the
proper party or parties.
SECTION 7.06 Indemnification. Each Bank shall, ratably in
accordance with its Commitment, indemnify the Agent, its affiliates and their
respective directors, officers, agents and employees (to the extent not
reimbursed by the Borrower) against any cost, expense (including counsel fees
and disbursements), claim, demand, action, loss or liability (except such as
result from such indemnitees' gross negligence or willful misconduct) that such
indemnitees may suffer or incur in connection with this Agreement or any action
taken or omitted by such indemnitees hereunder.
SECTION 7.07. Credit Decision. Each Bank acknowledges that it
has, independently and without reliance upon the Agent or any other Bank, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under this Agreement.
SECTION 7.08. Successor Agent. The Agent may resign at any
time by giving notice thereof to the Banks and the Borrower. Upon any such
resignation, the Required Banks shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Required Banks,
and shall have accepted such appointment, within 30 days after the retiring
Agent gives notice of resignation, then the retiring Agent may, on behalf of the
Banks, appoint a successor Agent, which shall be a commercial bank organized or
licensed under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $50,000,000. Upon the
acceptance of its appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the rights
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations hereunder. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Article shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent.
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SECTION 7.09. Agent's Fee. The Borrower shall pay to the Agent for its
own account fees in the amounts and at the times previously agreed upon between
the Borrower and the Agent.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair.
If on or prior to the first day of an Interest Period for any Fixed Rate
Borrowing:
(a) the Agent is advised by the Reference Banks that deposits in
dollars (in the applicable amounts) are not being offered to the Reference
Banks in the relevant market for such Interest Period, or
(b) in the case of a Committed Borrowing, Banks having 50% or more of
the aggregate amount of the Commitments advise the Agent that the Adjusted
CD Rate or the Adjusted London Interbank Offered Rate, as the case may be,
as determined by the Agent will not adequately and fairly reflect the cost
to such Banks of funding their CD Loans or Euro-Dollar Loans, as the case
may be, for such Interest Period,
the Agent shall forthwith give notice thereof to the Borrower and the Banks,
whereupon until the Agent notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, the obligations of the Banks to make CD
Loans or Euro-Dollar Loans, as the case may be, shall be suspended. Unless the
Borrower notifies the Agent at least two Domestic Business Days before the date
of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been
given that it elects not to borrow on such date, (i) if such Fixed Rate
Borrowing is a Committed Borrowing, such Borrowing shall instead be made as a
Base Rate Borrowing and (ii) if such Fixed Rate Borrowing is a Money Market
LIBOR Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall
bear interest for each day from and including the first day to but excluding the
last day of the Interest Period applicable thereto at the Base Rate for such
day.
SECTION 8.02. Illegality. If, on or after the date of this Agreement,
the adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central
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bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall make it unlawful or
impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or
fund its Euro-Dollar Loans and such Bank shall so notify the Agent, the Agent
shall forthwith give notice thereof to the other Banks and the Borrower,
whereupon until such Bank notifies the Borrower and the Agent that the
circumstances giving rise to such suspension no longer exist, the obligation of
such Bank to make Euro-Dollar Loans shall be suspended. Before giving any notice
to the Agent pursuant to this Section, such Bank shall designate a different
Euro-Dollar Lending Office if such designation will avoid the need for giving
such notice and will not, in the judgement of such Bank, be otherwise
disadvantageous to such Bank. If such Bank shall determine that it may not
lawfully continue to maintain and fund any of its outstanding Euro-Dollar Loans
to maturity and shall so specify in such notice, the Borrower shall immediately
prepay in full the then outstanding principal amount of each such Euro-Dollar
Loan, together with accrued interest thereon. Concurrently with prepaying each
such Euro-Dollar Loan, the Borrower shall borrow a Base Rate Loan in an equal
principal amount from such Bank (on which interest and principal shall be
payable contemporaneously with the related Euro-Dollar Loans of the other
Banks), and such Bank shall make such a Base Rate Loan.
SECTION 8.03 Increased Cost and Reduced Return. (a) If on or after (x)
the date hereof, in the case of any Committed Loan or any obligation to make
Committed Loans or (y) the date of the related Money Market Quote, in the case
of any Market Loan, the adoption of any applicable law, rule or regulation, or
any change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its Applicable Lending Office) with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall impose, modify or deem
applicable any reserve (including, without limitation, any such requirement
imposed by the Board of Governors of the Federal Reserve System, but excluding
(i) with respect to any CD Loan any such requirement included in an applicable
Domestic Reserve Percentage and (ii) with respect to any Euro-Dollar Loan any
such requirement included in an applicable Euro-Dollar Reserve Percentage),
special deposit, insurance assessment (excluding, with respect to any
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CD Loan, any such requirement reflected in an applicable Assessment Rate) or
similar requirement against assets of, deposits with or for the account of, or
credit extended by, any Bank (or its Applicable Lending Office) or shall impose
on any Bank (or its Applicable Lending Office) or on the United States market
for certificates of deposit or the London interbank market any other condition
affecting its Fixed Rate Loans, its Note or its obligation to make Fixed Rate
Loans and the result of any of the foregoing is to increase the cost to such
Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate
Loan, or to reduce the amount of any sum received or receivable by such Bank (or
its Applicable Lending Office) under this Agreement or under its Note with
respect thereto, by an amount deemed by such Bank to be material, then, within
15 days after demand by such Bank (with a copy to the Agent), the Borrower shall
pay to such Bank such additional amount or amounts as will compensate such Bank
for such increased cost or reduction.
(b) If any Bank shall have determined that, after the date hereof, the
adoption of any applicable law, rule or regulation regarding capital adequay, or
any change in any such law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparabe agency charged with the interpretation or adminitration
therof, or any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on capital
of such Bank (or its Parent) as a consequence of such Bank's obligations
hereunder to a level below that which such Bank (or its Parent) could have
achieved but for such adoption, change, request or directive (taking into
consideration its policies with respect to capital adequacy) by an amount deemed
by such Bank to be material, then from time to time, within 15 days after demand
by such Bank (with a copy to the Agent), the Borrower shall pay to such Bank
such additional amount or amounts as will compensate such Bank (or its Parent)
for such reduction.
(c) Each Bank will promptly notify the Borrower and the Agent of any
event of which it has knowledge, occurring after the date hereof, which will
entitle such Bank to compensation pursuant to this Section and will designate a
different Applicable Lending Office if such designation will avoid the need for,
or reduce the amount of, such compensation and will not, in the judgment of such
Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank
claiming compensation under this Section and setting forth the additional amount
or amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In
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determining such amount, such Bank may use any reasonable averaging and
attribution methods.
SECTION 8.04. Taxes. (a) Any and all payments by the Borrower to or for
the account of any Bank or the Agent hereunder or under any Note shall be made
free and clear of and without deduction for any and all present or future taxes,
duties, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each Bank and the
Agent, taxes imposed on its income, and franchise or similar taxes imposed on
it, by the jurisdiction under the laws of which such Bank or the Agent (as the
case may be) is organized or any political subdivision thereof and, in the case
of each Bank, taxes imposed on its income, and franchise or similar taxes
imposed on it, by the jurisdiction of such Bank's Applicable Lending Office or
any political subdivision thereof (all such non-excluded taxes, duties, levies,
imposts, deductions, charges, withholdings and liabilites being hereinafter
referred to as "Taxes"). If the Borrower shall be required by law to deduct any
Taxes from or in respect of any sum payable hereunder or under any Note to any
Bank or the Agent, (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 8.04) such Bank or the Agent (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such deductions, (iii)
the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law and (iv) the
Borrower shall furnish to the Agent, at its address referred to in Section 9.01,
the original or a certified copy of a receipt evidencing payment thereof.
(b) In addition, the Borrower agrees to pay any present or future stamp
or documentary taxes and any other excise or property taxes, or charges or
similar levies which arise from any payment made hereunder or under any Note or
from the execution or delivery of, or otherwise with respect to, this Agreement
or any Note (hereinafter referred to as "Other Taxes").
(c) The Borrower agrees to indemnify each Bank and the Agent for the
full amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed or asserted by any jurisdiction on amounts payable under
this Section 8.04) paid by such Bank or the Agent (as the case may be) and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto and attributable to Borrower's failure to pay any such Taxes or
Other Taxes when due. This indemnification shall be
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made within 15 days from the date such Bank or the Agent (as the case may be)
makes demand therefor.
(d) Each Bank organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Bank listed on the signature pages hereof and on
or prior to the date on which it becomes a Bank in the case of each other Bank,
and from time to time thereafter if requested in writing by the Borrower (but
only so long as such Bank remains lawfully able to do so), shall provide the
Borrower with Internal Revenue Service form 1001 or 4224, as appropriate, or any
successor form prescribed by the Internal Revenue Service, certifying that such
Bank is entitled to benefits under an income tax treaty to which the United
States is a party which reduces the rate of withholding tax on payments of
interest or certifying that the income receivable pursuant to this Agreement is
effectively connected with the conduct of a trade or business in the United
States. If the form provided by a Bank at the time such Bank first becomes a
party to this Agreement indicates a United States interest withholding tax rate
in excess of zero, withholding tax at such rate shall be considered excluded
from "Taxes" as defined in Section 8.04(a).
(e) For any period with respect to which a Bank has failed to provide
the Borrower with the appropriate form pursuant to Section 8.04(d) (unless such
failure is due to a change in treaty, law or regulation occurring subsequent to
the date on which a form originally was required to be provided), such Bank
shall not be entitled to indemnification under Section 8.04(a) with respect to
Taxes imposed by the United States; provided, however, that should a Bank, which
is otherwise exempt from or subject to a reduced rate of withholding tax, become
subject to Taxes because of its failure to deliver a form required hereunder,
the Borrower shall take such steps as such Bank shall reasonably request to
assist such Bank to recover such Taxes.
(f) If the Borrower is required to pay additional amounts to or for the
account of any Bank pursuant to this Section 8.04, then such Bank will change
the jurisdiction of its Applicable Lending Office so as to eliminate or reduce
any such additional payment which may thereafter accrue if such change, in the
judgement of such Bank, is not otherwise disadvantageous to such Bank.
SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate
Loans. If (i) the obligation of any Bank to make Euro-Dollar Loans has been
suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation
under
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Section 8.03(a) and the Borrower shall, by at least five Euro-Dollar Business
Days' prior notice to such Bank through the Agent, have elected that the
provisions of this Section shall apply to such Bank, then, unless and until such
Bank notifies the Borrower that the circumstances giving rise to such suspension
or demand for compensation no longer exist:
(a) all Loans which would otherwise be made by such Bank as CD
Loans or Euro-Dollar Loans, as the case may be, shall be made instead
as Base Rate Loans (on which interest and principal shall be payable
contemporaneously with the related Fixed Rate Loans of the other
Banks), and
(b) after each of its CD Loans or Euro-Dollar Loans, as the
case may be, has been repaid, all payments of principal which would
otherwise be applied to repay such Fixed Rate Loans shall be applied to
repay its Base Rate Loans intead.
SECTION 8.06. Substitution of Bank. If (i) the obligation of any Bank
to make Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii)
any Bank has demanded compensation under Section 8.03 or 8.04, the Borrower
shall have the right, with the assistance of the Agent, to seek a mutually
satisfactory substitute bank or banks (which may be one or more of the Banks) to
purchase the Note and assume the Commitment of such Bank.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex,
facsimile transmission or similar writing) and shall be given to such party: (x)
in the case of the Borrower or the Agent, at its address or telex number set
forth on the signature pages hereof, (y) in the case of any Bank, at its address
or telex number set forth in its Administrative Questionnaire or (z) in the case
of any party, such other address or telex number as such party may hereafter
specify for the purpose by notice to the Agent and the Borrower. Each such
notice, request or other communication shall be effective (i) if given by telex,
when such telex is transmitted to the telex number specified in this Section and
the appropriate answerback is received, (ii) if given by mail, 72 hours after
such communication is
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deposited in the mails with first class postage prepaid, addressed as aforesaid
or (iii) if given by any other means, when delivered at the address specified in
this Section; provided that notices to the Agent under Article II or Article
VIII shall not be effective until received.
SECTION 9.02. No Waivers. No failure or delay by the Agent or any Bank
in exercising any right, power or privilege hereunder or under any Note shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
SECTION 9.03. Expenses; Indemnification. (a) The Borrower shall pay (i)
all out-of-pocket expenses of the Agent, including fees and disbursements of
special counsel for the Agent, in connection with the preparation of this
Agreement, any waiver or consent hereunder or any amendment hereof or any
Default hereunder and (ii) if an Event of Default occurs, all out-of-pocket
expenses incurred by the Agent and each Bank, including fees and disbursements
of counsel, in connection with such Event of Default and collection, bankruptcy,
insolvency and other enforcement proceedings resulting therefrom.
(b) The Borrower agrees to indemnify the Agent and each Bank, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each and "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such Indemnitee in connection
with any investigative, administrative or judicial proceeding (whether or not
such Indemnitee shall be designated a party thereto) brought or threatened
relating to or arising out of this Agreement or any actual or proposed use of
proceeds of Loans hereunder; provided that no Indemnitee shall have the right to
be indmnified hereunder for such Indemnitee's own gross negligence or willfull
misconduct as determined by a court of competent jurisdiction.
SECTION 9.04. Sharing of Set-Offs. Each Bank agrees that if it shall,
by exercising any right of set-off or counterclaim or otherwise, receive payment
of a proportion of the aggregate amount of principal and interest due with
respect to any Note held by it which is greater than the proportion received by
any other Bank in respect of the aggregate amount of principal and interest due
with respect to
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any Note held by such other Bank, the Bank receiving such proportionately
greater payment shall purchase such participations in the Notes held by the
other Banks, and such other adjustments shall be made, as may be required so
that all such payments of principal and interest with respect to the Notes held
by the Banks shall be shared by the Banks pro rata; provided that nothing in
this Section shall impair the right of any Bank to exercise any right of set-off
or counterclaim it may have and to apply the amount subject to such exercise to
the payment of indebtedness of the Borrower other than its indebtedness under
the Notes. The Borrower agrees, to the fullest extent it may effectively do so
under applicable law, that any Bank acquiring a participation in a Note pursuant
to the foregoing arrangements may exercise rights of set-off or counterclaim and
other rights with respect to such participation as fully as if such holder of a
participation were a direct creditor of the Borrower in the amount of Such
participation.
SECTION 9.05. Amendments and Waivers. Any provision of this Agreement
or the Notes may be amended or waived if, but only if, such amendment or waiver
is in writing and is signed by the Borrower and the Required Banks (and, if the
rights or duties of the Agent are affected thereby, by the Agent); provided that
no such amendment or waiver shall, unless signed by all the Banks, (i) increase
or decrease the Commitment of any Bank (except for a ratable decrease in the
Commitments of all Banks) or subject any Bank to any additional obligation, (ii)
reduce the principal of or rate of interest on any Loan or any fees hereunder,
(iii) postpone the date fixed for any payment of principal of or interest on any
Loan or any fees hereunder or for termination of any Commitment or (iv) change
the percentage, of the Commitments or of the aggregate unpaid principal amount
of the Notes, or the number of Banks, which shall be required for the Banks or
any of them to take any action under this Section or any other provision of this
Agreement.
SECTION 9.06. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Borrower may not
assign or otherwise transfer any of its rights under this Agreement without the
prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment
or any or all of its Loans. In the event of any such grant by a Bank of a
participating interest to a Participant, whether or not upon notice to the
Borrower and the Agent, such Bank shall remain
52
<PAGE>
responsible for the performance of its obligations hereunder, and the Borrower
and the Agent shall continue to deal solely and directly with such Bank in
connection with such Banks rights and obligations under this Agreement. Any
agreement pursuant to which any Bank may grant such a participating interest
shall provide that such Bank shall retain the sole right and responsibility to
enforce the obligations of the Borrower hereunder including, without limitation,
the right to approve any amendment, modification or waiver of any provision of
this Agreement; provided that such participation agreement may provide that such
Bank will not agree to any modification, amendment or waiver of this Agreement
described in clause (i), (ii) or (iii) of Section 9.05 without the consent of
the Participant. The Borrower agrees that each Participant shall, to the extent
provided in its participation agreement, be entitled to the benefits of Article
VIII with respect to its participating interest. An assignment or other transfer
which is not permitted by subsection (c) or (d) below shall be given effect for
purposes of this Agreement only to the extent of a participating interest
granted in accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part (equivalent to a
Commitment of not less than $5,000,000) of all, of its rights and obligations
under this Agreement and the Notes, and such Assignee shall assume such rights
and obligations, pursuant to an Assignment and Assumption Agreement in
substantially the form of Exhibit G hereto executed by such Assignee and such
transferor Bank, with (and subject to) the subscribed consent of the Borrower
and the Agent; provided that if an Assignee is an affiliate of such transferor
Bank, no such consent shall be required; and provided further that such
assignment may, but need not, include rights of the transferor Bank in respect
of outstanding Money Market Loans. Upon execution and delivery of such
instrument and payment by such Assignee to such transferor Bank of an amount
equal to the purchase price agreed between such transferor Bank and such
Assignee, such Assignee shall be a Bank party to this Agreement and shall have
all the rights and obligations of a Bank with a Commitment as set forth in such
instrument of assumption, and the transferor Bank shall be released from its
obligations hereunder to a corresponding extent, and no further consent or
action by any party shall be required. Upon the consummation of any assignment
pursuant to this subsection (c), the transferor Bank, the Agent and the Borrower
shall make appropriate arrangements so that, if required, a new Note is issued
to the Assignee In connection with any such assignment, the transferor Bank
shall pay to the Agent an administrative fee for processing such assignment in
the
53
<PAGE>
amount of $2,000. If the Assignee is not incorporated under the laws of the
United States of America or a state thereof, it shall, prior to the first date
on which interest or fees are payable hereunder for its account, deliver to the
Borrower and the Agent certification as to exemption from deduction or
withholding or any United States federal income taxes in accordance with Section
8.04.
(d) Any Bank may at any time assign all or any portion of it rights
under this Agreement and its Notes to a Federal Reserve Bank. No such assignment
shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights
shall be entitled to receive any greater payment under Section 8.03 than such
Bank would have been entitled to receive with respect to the rights transferred,
unless such transfer is made with the Borrower's prior written consent or by
reason of the provisions of Section 8.02 or 8.03 requiring such Bank to
designate a different Applicable Lending Office under certain circumstances or
at a time when the circumstances giving rise to such greater payment did not
exist.
SECTION 9.07. Collateral. Each of the Banks represents to the Agent and
each of the other Banks that it in good faith is not relying upon any "margin
stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
SECTION 9.08. Governing Law; Submission to Jurisdiction. This Agreement
and each Note shall be governed by and construed in accordance with the laws of
the State of New York. The Borrower hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any New York State court sitting in New York City for purposes
of all legal proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby. The Borrower irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum.
SECTION 9.09. Counterparts; Integration. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement constitutes the entire agreement and understanding among the
parties hereto and supersedes any and
54
<PAGE>
all prior agreements and understandings, oral or written, relating to the
subject matter hereof.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT AND
THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
55
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
CARPENTER TECHNOLOGY CORPORATION
By /s/ John A. Schuler
------------------------------
Title: Treasurer
101 West Bern Street
Reading, Pennsylvania 19603
Telex number: 836432
Telecopy/FAX number: 215-371-2286
56
<PAGE>
Commitments
- - - -----------
$ 20,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Laura E. Reim
--------------------------------------
Title: Vice President
$ 20,000,000 J.P. MORGAN DELAWARE
By /s/ David J. Morris
--------------------------------------
Title: Vice President
$ 23,000,000 CONTINENTAL BANK N.A.
By /s/ Thomas H. Pearson
--------------------------------------
Title: Vice President
$ 20,000,000 MELLON BANK, N.A.
By /s/ Roger N. Stanier
--------------------------------------
Title: Vice President
$ 14,000,000 CORESTATES BANK, N.A.
By /s/ David S. Aulenbach
--------------------------------------
Title: Vice President
$ 14,000,000 MERIDIAN BANK, N.A.
By /s/ Barbara H. Pattison
--------------------------------------
Title: Vice President
57
<PAGE>
$ 14,000,000 PNC BANK, NATIONAL ASSOCIATION
By /s/ Carl R. Kopfinger
--------------------------------------
Title: Assistant Vice President
- - - -----------------
Total Commitments
$ 125,000,000
=================
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By /s/ Laura E. Reim
--------------------------------------
Title: Vice President
60 Wall Street
New York, New York 10260-0060
Attention: Loan Department
Telex number: 177615
58
<PAGE>
EXHIBIT A
NOTE
New York, New York
, 1994
For value received, CARPENTER TECHNOLOGY CORPORATION, a Delaware
corporation (the "Borrower"), promises to pay to the order of
__________________________ (the "Bank"), for the account of its Applicable
Lending Office, the unpaid principal amount of each Loan made by the Bank to the
Borrower pursuant to the Credit Agreement referred to below on the last day of
the Interest Period relating to such Loan. The Borrower promises to pay interest
on the unpaid principal amount of each such Loan on the dates and at the rate or
rates provided for in the Credit Agreement. All such payments of principal and
interest shall be made in lawful money of the United States in Federal or other
immediately available funds at the office of Morgan Guaranty Trust Company of
New York, 60 Wall Street, New York, New York.
All Loans made by the Bank, the respective types and maturities thereof
and all repayments of the principal thereof shall be recorded by the Bank and,
if the Bank so elects in connection with any transfer or enforcement hereof,
appropriate notations to evidence the foregoing information with respect to each
such Loan then outstanding may be endorsed by the Bank on the schedule attached
hereto, or on a continuation of such schedule attached to and made a part
hereof; provided that the failure of the Bank to make any such recordation or
endorsement shall not affect the obligations of the Borrower hereunder or under
the Credit Agreement.
This note is one of the Notes referred to in the Credit Agreement dated as
of January 18, 1994 among the Borrower, the banks listed on the signature pages
thereof and Morgan Guaranty Trust Company of New York, as Agent (as the same may
be amended from time to time, the "Credit Agreement"). Terms defined in the
Credit Agreement are used herein with the same meanings. Reference is made to
the Credit Agreement for provisions for the prepayment hereof and the
acceleration of the maturity hereof.
CARPENTER TECHNOLOGY CORPORATION
By
---------------------------------------
Title:
<PAGE>
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
- - - --------------------------------------------------------------------------------
Amount of
Amount of Type of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
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- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
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2
<PAGE>
EXHIBIT B
Form of Money Market Quote Request
__________________________________
[Date]
To: Morgan Guaranty Trust Company of New York
(the "Agent")
From: Carpenter Technology Corporation (the "Borrower")
Re: Credit Agreement (the "Credit Agreement") dated as of January 18, 1994
among the Borrower, the Banks listed on the signature pages thereof
and the Agent
We hereby give notice pursuant to Section 2.03 of the Credit Agreement
that we request Money Market Quotes for the following proposed Money Market
Borrowing(s):
Date of Borrowing: __________________________
Principal Amount** Interest Period***
__________________ __________________
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
Terms used herein have the meanings assigned to them in the Credit
Agreement.
CARPENTER TECHNOLOGY CORPORATION
By______________________________
Title:
___________________________
**Amount must be $10,000,000 or larger multiple of $1,000,000.
***Not less than one month (LIBOR Auction) or not less than 30 days
(Absolute Rate Auction), subject to the provisions of the definition of Interest
Period.
<PAGE>
EXHIBIT C
Form of Invitation for Money Market Quotes
__________________________________________
To: [Name of Bank]
Re: Invitation for Money Market Quotes to Carpenter Technology Corporation
(the "Borrower")
Pursuant to Section 2.03 of the Credit Agreement dated as of January 18,
1994 among the Borrower, the Banks parties thereto and the undersigned, as
Agent, we are pleased on behalf of the Borrower to invite you to submit
Money Market Quotes to the Borrower for the following proposed Money Market
Borrowing(s):
Date of Borrowing: _______________________
Principal Amount Interest Period
________________ _______________
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
Please respond to this invitation by no later than [2:00 P.M.]
[9:15 A.M.] (New York City time) on [date].
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By___________________________
Authorized Officer
<PAGE>
EXHIBIT D
Form of Money Market Quote
__________________________
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
Attention:
Re: Money Market Quote to
Carpenter Technology Corporation (the "Borrower")
In response to your invitation on behalf of the Borrower dated
___________________, 19___, we hereby make the following Money Market Quote
on the following terms:
1. Quoting Bank:_____________________________
2. Person to contact at Quoting Bank:
__________________________________________
3. Date of Borrowing:________________________*
4. We hereby offer to make Money Market Loan(s) in the following principal
amounts, for the following Interest Periods and at the following rates:
Principal Interest Money Market
Amount** Period*** [Margin****] [Absolute Rate*****]
_________ _________ ____________ ____________________
$
$
[Provided, that the aggregate principal amount of Money Market Loans for which
the above offers may be accepted shall not exceed $________________.]**
_____________________
* As specified in the related Invitation.
** Principal amount bid for each Interest Period may not exceed principal
amount requested. Specify aggregate limitation if the sum of the individual
offers exceeds the amount the Bank is willing to lend. Bids must be made for
$5,000,000 or a larger multiple of $1,000,000.
(notes continued on the following page)
<PAGE>
We understand and agree that the offer(s) set forth above, subject to
the satisfaction of the applicable conditions set forth in the Credit Agreement
dated as of January 18, 1994 among the Borrower, the Banks listed on the
signature pages thereof and yourselves, as Agent, irrevocably obligates us to
make the Money Market Loan(s) for which any offer(s) are accepted, in whole or
in part,
Very truly yours,
[NAME OF BANK]
Dated:________________________ By:_________________________
Authorized Officer
____________________
***Not less than one month or not less than 30 days, as specified in the related
Invitation. No more than five bids are permitted for each Interest Period.
****Margin over or under the London Interbank Offered Rate determined for the
applicable Interest Period. Specify percentage (to the nearest 1/10,000 of 1%)
and specify whether "PLUS" or "MINUS".
*****Specify rate of interest per annum (to the nearest 1/10,000th of 1%).
2
<PAGE>
EXHIBIT E
OPINION OF
COUNSEL FOR THE BORROWER
________________________
[Effective Date]
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
I am General Counsel of Carpenter Technology Corporation (the
"Borrower") and I and members of my staff have acted as counsel for the Borrower
in connection with the Credit Agreement (the "Credit Agreement") dated as of
January 18, 1994 among the Borrower, the banks listed on the signature pages
thereof and Morgan Guaranty Trust Company of New York as Agent. Terms defined
in the Credit Agreement are used herein as therein defined.
As to various questions of fact material to this opinion, I have, to
the extent deemed appropriate, relied upon certificates of officers of the
Borrower and, with respect to matters of public record, relied upon certificates
of public officials. I or members of my staff have also examined originals or
copies, certified or otherwise identified to my satisfaction, of such
certificates of public officials, corporate documents and records and other
certificates, opinions and instruments, and have made such other investigations
as I have deemed appropriate or necessary in connection with this opinion,
including an examination of the Credit Agreement and the Notes.
In my examination documents, I have assumed the genuineness of all
signatures (other than signatures of officers of the Borrower), the authenticity
of all documents submitted to me or my staff as originals and the conformity to
authentic original documents of all documents submitted to me or my staff as
photostatic or certified copies.
Upon the basis of the foregoing, I am of the opinion that:
<PAGE>
1. The Borrower is a corporation duly incorporated, validly existing
and in good standing under the laws of Delaware, and has all corporate powers
and all material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted.
2. The execution, delivery and performance by the Borower of the
Credit Agreement and the Notes are within the Borrower's corporate powers, have
been duly authorized by all necessary corporate action, require no action by or
in respect of, or filing with, any governmental body, agency or official and do
not contravene, or constitute a default under, any provision of applicable law
or regulation or of the certificate of incorporation or by-laws of the Borrower
or of any agreement, judgment, injunction, order, decree or other instrument
binding upon the Borrower or any of its Subsidiaries or result in the creation
or imposition of any Lien on any asset of the Borrower or any of its
Subsidiaries.
3. The Credit Agreement constitutes a valid and binding agreement of
the Borrower and the Notes constitute valid and binding obligations of the
Borrower.
4. There is no action, suit or proceeding pending against, or to the
best of my knowledge threatened against or affecting, the Borrower or any of its
Subsidiaries before any court or arbitrator or any governmental body, agency or
official, in which there is a reasonable possibility of an adverse decision
which could materially adversely affect the business, consolidated financial
position or consolidated results of operations of the Borrower and its
consolidated Subsidiaries, considered as a whole or which in any manner draws
into question the validity of the Credit Agreement or the Notes.
5. Each of the Borrower's corporate Subsidiaries is a corporation
validly existing and in good standing under the laws of its jurisdiction of
incorporation, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
Very truly yours,
2
<PAGE>
EXHIBIT F
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENT
______________________________________
[Effective Date]
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have participated in the preparation of the Credit Agreement (the
"Credit Agreement") dated as of January 18, 1994 among Carpenter Technology
Corporation, a Delaware corporation (the "Borrower"), the banks listed on the
signature pages thereof (the "Banks") and Morgan Guaranty Trust Company of New
York, as Agent (the "Agent"), and have acted as special counsel for the Agent
for the purpose of rendering this opinion pursuant to Section 3.01(d) of the
Credit Agreement. Terms defined in the Credit Agreement are used herein as
therein defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes are within the Borrower's corporate powers and
have been duly authorized by all necessary corporate action.
2. The Credit Agreement constitutes a valid and binding agreement of
the Borrower and the Notes constitute valid and binding obligations of the
Borrower.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the
<PAGE>
Assignor under the Credit Agreement to the extent of the Assigned Amount, and
the Assignee hereby accepts such assignment from the Assignor and assumes all of
the obligations of the Assignor under the Credit Agreement to the extent of the
Assigned Amount, including the purchase from the Assignor of the corresponding
portion of the principal amount of the Committed Loans made by the Assignor
outstanding at the date hereof. Upon the execution and delivery hereof by the
Assignor, the Assignee, the Borrower and the Agent and the payment of the
amounts specified in Section 3 required to be paid on the date hereof (i) the
Assignee shall, as of the date hereof, succeed to the rights and be obligated to
perform obligations of a Bank under the Credit Agreement with a Commitment in an
amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor
shall, as of the date hereof, be reduced by a like amount and the Assignor
released from its obligations under the Credit Agreement to the extent such
obligations have been assumed by the Assignee. The assignment provided for
herein shall be without recourse to the Assignor.
SECTION 3. Payments. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the
date hereof in Federal funds the amount heretofore agreed between them.**** It
is understood that commitment and/or facility fees accrued to the date hereof
are for the account of the Assignor and such fees accruing from and including
the date hereof are for the account of the Assignee. Each of the Assignor and
the Assignee hereby agrees that if it receives any amount under the Credit
Agreement which is for the account of the other party hereto, it shall receive
the same for the account of such other party to the extent of such other party's
interest therein and shall promptly pay the same to such other party.
[SECTION 4. Consent of the Borrower and the Agent. This Agreement is
conditioned upon the consent of the Borrower and the Agent pursuant to Section
9.06(c) of the Credit Agreement. The execution of this Agreement by
___________________________
****Amount should combine principal together with accrued interest and
breakage compensation, if any, to be paid by the Assignee, net of any portion of
any upfront fee to be paid by the Assignee, net of the portion of any upfront
fee to be paid by the Assignor to the Assignee. It may be preferable in an
appropriate case to specify these amounts generically or by formula rather than
as a fixed sum.
2
<PAGE>
the Borrower and the Agent is evidence of this consent. Pursuant to the Section
9.06(c) the Borrower agrees to execute and deliver a Note payable to the order
of the Assignee to evidence the assignment and assumption provided for herein.]
SECTION 5. Non-Reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no responsibility
with respect to, the solvency, financial condition, or statements of the
Borrower, or the validity and enforceability of the obligations of the Borrower
in respect of the Credit Agreement or any Note. The Assignee acknowledges that
it has, independently and without reliance on the Assignor, and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and will continue to be
responsible for making its own independent appraisal of the business, affairs
and financial condition of the Borrower.
SECTION 6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 7. Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreemwent to be
executed and delivered by their duly authorized officers as of the date first
above written.
[ASSIGNOR]
By_______________________________
Title:
3
<PAGE>
[ASSIGNEE]
By________________________________
Title:
CARPENTER TECHNOLOGY CORPORATION
By________________________________
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By________________________________
Title:
4
<PAGE>
[EXECUTION COUNTERPART]
================================================================================
AGREEMENT AND PLAN OF MERGER
among
CARPENTER TECHNOLOGY CORPORATION,
SCORE ACQUISITION CORP.
and
TALLEY INDUSTRIES, INC.
Dated September 25, 1997
================================================================================
<PAGE>
Table of Contents
Page
ARTICLE 1 - THE OFFER....................................................... 1
SECTION 1.1 The Offer............................................... 1
SECTION 1.2 Company Actions......................................... 3
ARTICLE 2 - THE MERGER...................................................... 6
SECTION 2.1 The Merger.............................................. 6
SECTION 2.2 Effective Time.......................................... 7
SECTION 2.3 Effects of the Merger................................... 7
SECTION 2.4 Certificate of Incorporation and Bylaws................. 7
SECTION 2.5 Directors and Officers.................................. 7
SECTION 2.6 Conversion of Shares.................................... 8
SECTION 2.7 Dissenting Shares....................................... 8
SECTION 2.8 Payments for Shares..................................... 9
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION SUB...............................10
SECTION 3.1 Organization and Qualification..........................10
SECTION 3.2 Authority Relating to this Agreement....................11
SECTION 3.3 Information Supplied....................................11
SECTION 3.4 Consents and Approvals; No Violation....................12
SECTION 3.5 Financing...............................................12
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES
OF THE COMPANY..............................................13
SECTION 4.1 Organization and Qualification..........................13
SECTION 4.2 Capitalization..........................................14
SECTION 4.3 Authority Relative to this Agreement....................15
SECTION 4.4 Absence of Certain Changes..............................16
SECTION 4.5 Reports.................................................17
SECTION 4.6 Proxy Statement.........................................17
SECTION 4.7 Consents and Approvals; No Violation....................18
SECTION 4.8 Fees and Commissions....................................18
SECTION 4.9 Information Supplied....................................19
SECTION 4.10 Litigation.............................................19
SECTION 4.11 Patents and Other Proprietary Rights...................19
SECTION 4.12 Benefit Plans; ERISA Compliance........................20
SECTION 4.13 Taxes..................................................23
SECTION 4.14 Compliance with Applicable Laws........................25
SECTION 4.15 State Takeover Statutes................................28
SECTION 4.16 Labor Matters..........................................28
SECTION 4.17 Undisclosed Liabilities................................28
SECTION 4.18 Certain Agreements.....................................28
SECTION 4.19 Amendment of Rights Agreement..........................28
-i-
<PAGE>
ARTICLE 5 - COVENANTS.......................................................29
SECTION 5.1 Conduct of Business of the Company......................29
SECTION 5.2 No Solicitation.........................................31
SECTION 5.3 Access to Information...................................33
SECTION 5.4 Reasonable Best Efforts.................................33
SECTION 5.5 Indemnification, Exculpation and Insurance..............34
SECTION 5.6 Stock Options; Employee Plans and Benefits
and Employment Contracts................................35
SECTION 5.7 Meeting of the Company's Stockholders...................37
SECTION 5.8 Public Announcements....................................38
SECTION 5.9 Stockholder Litigation..................................38
SECTION 5.10 Rights Agreement.......................................38
ARTICLE 6 - CONDITIONS TO CONSUMMATION OF MERGER............................38
SECTION 6.1 Conditions to Each Party's Obligation to
Effect the Merger.......................................38
ARTICLE 7 - TERMINATION; AMENDMENT; WAIVER
SECTION 7.1 Termination.............................................39
SECTION 7.2 Effect of Termination...................................40
SECTION 7.3 Termination Fee.........................................40
SECTION 7.4 Amendment...............................................40
SECTION 7.5 Extension; Waiver.......................................41
SECTION 7.6 Procedure for Termination, Amendment,
Extension or Waiver.....................................41
SECTION 7.7 Concurrence of Independent Directors....................41
ARTICLE 8 - MISCELLANEOUS...................................................41
SECTION 8.1 Non-Survival of Representations and
Warranties..............................................41
SECTION 8.2 Entire Agreement; Assignment............................42
SECTION 8.3 Validity................................................42
SECTION 8.4 Notices.................................................42
SECTION 8.5 Governing Law...........................................44
SECTION 8.6 Jurisdiction............................................44
SECTION 8.7 Descriptive Headings....................................44
SECTION 8.8 Parties in Interest.....................................44
SECTION 8.9 Counterparts............................................44
SECTION 8.10 Fees and Expenses.......................................44
SECTION 8.11 Certain Definitions.....................................45
SECTION 8.12 Performance by Acquisition Sub..........................46
-ii-
<PAGE>
DISCLOSURE SCHEDULES
4.1(b) Subsidiaries
4.2 Capitalization
4.4 Absence of Certain Changes
4.7 Consents and Approvals; No Violation
4.10 Litigation
4.11 Intellectual Property Rights
4.12 Benefits
4.13 Taxes
4.16 Labor Matters
4.18 Covenants Not to Compete
5.6(d) Agreements with Current and Former Officers and Directors
-iii-
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated
September 25, 1997, among CARPENTER TECHNOLOGY CORPORATION, a Delaware
corporation ("Parent"), SCORE ACQUISITION CORP., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Acquisition Sub"), and TALLEY INDUSTRIES,
INC., a Delaware corporation (the "Company").
The respective Boards of Directors of Parent, Acquisition Sub
and the Company have each determined that it is advisable, on the terms and
subject to the conditions of this Agreement, (i) for a wholly-owned subsidiary
of Parent to commence a cash tender offer to purchase all outstanding shares of
Series A Convertible Preferred Stock ("Series A Preferred Shares"), Series B $1
Cumulative Convertible Preferred Stock ("Series B Preferred Shares and together
with the Series A Preferred Shares, "Preferred Shares") and Common Stock, par
value $1 per share, of the Company ("Common Shares" and together with the
Preferred Shares, "Shares") and (ii) following the cash tender offer, to merge
Acquisition Sub with and into the Company.
In consideration of the premises and the mutual covenants
herein contained and intending to be legally bound hereby, Parent, Acquisition
Sub and the Company hereby agree as follows:
ARTICLE 1
THE OFFER
SECTION 1.1 The Offer.
(a) As promptly as practicable but in no event later than the fifth
business day after the public announcement of the execution of this Agreement,
Parent shall cause Acquisition Sub to commence (within the meaning of Rule 14d-2
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), and
Acquisition Sub shall commence, an offer (as amended or supplemented in
accordance with this Agreement, the "Offer") to purchase for cash all issued and
outstanding Shares at a price of $11.70 per Series A Preferred Share, $16.00 per
Series B Preferred Share and $12.00 per Common Share net to the seller in cash
(such prices, or such higher prices per Share as may be paid in the Offer, being
referred to as the "Offer Prices"). The obligation of Acquisition Sub, and of
Parent to cause Acquisition Sub, to consummate the Offer, to accept for payment
and to pay for any Shares tendered shall be subject to only those conditions set
forth in Annex A hereto (any of which
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may be waived by Acquisition Sub in its sole discretion; provided that, without
the consent of the Company, Acquisition Sub shall not waive the Minimum Tender
Condition (as defined in Annex A)).
(b) As soon as practicable on the date of commencement of the Offer,
Parent and Acquisition Sub shall file with the Securities and Exchange
Commission (the "SEC") with respect to the Offer a Tender Offer Statement on
Schedule 14D-1 (the "Schedule 14D-1"), which will comply in all material
respects with the provisions of applicable federal securities laws and will
contain the offer to purchase relating to the Offer (the "Offer to Purchase")
and forms of related letters of transmittal and summary advertisement (which
documents, together with any supplements or amendments thereto, are referred to
herein collectively as the "Offer Documents"). Parent will deliver copies of the
proposed forms of the Schedule 14D-1 and the Offer Documents (as well as any
change thereto) to the Company within a reasonable time prior to the
commencement of the Offer for prompt review and comment by the Company and its
counsel. Parent will provide the Company and its counsel in writing any comments
that Acquisition Sub, Parent or their counsel may receive from the SEC or its
staff with respect to the Offer Documents promptly after the receipt thereof.
Parent and Acquisition Sub represent that the Schedule 14D-1 and the Offer
Documents (including any amendments or supplements thereto) (i) shall comply as
to form in all material respects with the requirements of the Exchange Act and
the rules and regulations thereunder and (ii) shall not, in the case of the
Schedule 14D-1 at the time filed with the SEC and at the time the Offer is
consummated and in the case of the Offer Documents when first published, sent or
given to the stockholders of the Company and at the time the Offer is
consummated, 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 are made,
not misleading; provided, however, that Parent and Acquisition Sub make no
covenant, representation or warranty as to any of the information relating to
and supplied by the Company in writing specifically for inclusion in the
Schedule 14D-1 or the Offer Documents (including any amendments or supplements
thereto). Parent and Acquisition Sub shall promptly correct any information in
the Schedule 14D-1 or the Offer Documents that shall have become false or
misleading in any material respect and take all steps necessary to cause such
Schedule 14D-1 or Offer Documents as so corrected to be filed with the SEC and
disseminated to the stockholders of the Company, as and to the extent required
by applicable law. Parent and Acquisition Sub
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will provide copies of any amendments or supplements to the Offer Documents or
the Schedule 14D-1 prior to any filing of such amendments or supplements with
the SEC in order to provide the Company and its counsel with a reasonable
opportunity to review and comment.
(c) Each of Parent and Acquisition Sub expressly reserves the right to
modify the terms of the Offer, except that neither Parent nor Acquisition Sub
shall, without the prior written consent of the Company, decrease the
consideration payable in the Offer, change the form of consideration payable in
the Offer, decrease the number of Shares sought pursuant to the Offer, change or
modify the conditions to the Offer in a manner adverse to the Company or holders
of Shares, impose additional conditions to the Offer, waive the Minimum Tender
Condition, or amend any term of the Offer in any manner adverse to the Company
or holders of Shares. Notwithstanding the foregoing, Acquisition Sub, without
the consent of the Company, (i) shall extend the Offer, if at the then scheduled
expiration date of the Offer any of the conditions to Acquisition Sub's
obligation to accept for payment and pay for Shares shall not have been
satisfied, until such time as such condition is satisfied or waived, if such
condition may in the reasonable judgment of Acquisition Sub be satisfied in a
time period reasonable for such satisfaction, (ii) may, if any such condition is
not waived, extend the Offer until such condition is waived, (iii) may extend
the Offer for any period required by any rule, regulation, interpretation or
position of the SEC or the staff thereof applicable to the Offer and (iv) may
extend the Offer on one or more occasions for an aggregate period of not more
than five business days if the Minimum Tender Condition has been satisfied and
there has theretofore been validly tendered and not withdrawn Shares
representing at least 70% but less than 90% of each class of the outstanding
Shares (on a fully diluted basis).
(d) Parent will provide or cause to be provided to Acquisition Sub on a
timely basis the funds necessary to accept for payment, and pay for, Shares that
Acquisition Sub becomes obligated to accept for payment, and pay for, pursuant
to the Offer.
SECTION 1.2 Company Actions.
(a) The Company hereby consents to the Offer and represents that (i)
its Board of Directors, at a meeting duly called and held, has duly and by the
affirmative vote of at least
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4/5ths of the duly elected, qualified and acting members of the Board at the
time of such meeting, adopted resolutions approving the Offer, the Merger (as
defined in Section 2.1) and this Agreement, determining that the terms of the
Offer and the Merger are fair to, and in the best interests of, the Company's
stockholders and recommending acceptance of the Offer and approval of the Merger
and this Agreement by the stockholders of the Company and (ii) J. P. Morgan
Securities Inc. ("JPMorgan") has delivered to the Company's Board of Directors
its opinion that as of the date of this Agreement the cash consideration to be
received by holders of the Common Shares for such Shares is fair to such holders
from a financial point of view. The Company hereby consents to the inclusion in
the Offer Documents of the recommendations of the Company's Board of Directors
described in this Section.
(b) The Company will file with the SEC on the date of the commencement
of the Offer a Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") containing such recommendations of the Board in favor of the
Offer and the Merger, and shall disseminate the Schedule 14D-9 as required by
Rule 14d-9 promulgated under the Exchange Act. The Company will deliver the
proposed forms of the Schedule 14D-9 and the exhibits thereto to Parent within a
reasonable time prior to the commencement of the Offer for prompt review and
comment by Parent and its counsel. Parent and its counsel shall be given a
reasonable opportunity to review any amendments and supplements to the Schedule
14D-9 prior to their filing with the SEC or dissemination to stockholders of the
Company. The Company will provide Parent and its counsel in writing any comments
that the Company or its counsel may receive from the SEC or its staff with
respect to the Schedule 14D-9 promptly after receipt thereof. The Company
represents that the Schedule 14D-9, on the date filed with the SEC and on the
date first published, sent or given to the stockholders of the Company, 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. The Company shall promptly correct any information in the
Schedule 14D-9 that shall have become false or misleading in any material
respect and take all steps necessary to cause such Schedule 14D-9 as so
corrected to be filed with the SEC and disseminated to the stockholders of the
Company, as and to the extent required by applicable federal securities laws.
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(c) In connection with the Offer, the Company shall furnish to, or
cause to be furnished to, Parent mailing labels, security position listings and
any available listing or computer file containing the names and addresses of the
record holders of the Shares as of a recent date and shall furnish Parent with
such information and assistance as Parent or its agents may reasonably request
in communicating the Offer to the stockholders of the Company. Subject to the
requirements of law, and except for such steps as are necessary to disseminate
the Offer Documents and any other documents necessary to consummate the Merger,
Parent and Acquisition Sub shall, and shall cause each of their affiliates to,
hold the information contained in any of such labels and lists in confidence,
use such information only in connection with the Offer and the Merger, and, if
this Agreement is terminated, deliver to the Company all copies of such
information or extracts therefrom then in their possession or under their
control.
(d) Promptly upon the acceptance for payment of and payment for any
Shares by Acquisition Sub, Acquisition Sub 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 will give Acquisition Sub, subject to compliance
with Section 14(f) of the Exchange Act, representation on the Board of Directors
of the Company equal to the product of (i) the number of directors on the Board
of Directors of the Company and (ii) the percentage that such number of votes
represented by Shares so purchased bears to the number of votes represented by
Shares outstanding, and the Company shall at such time, subject to applicable
law, including applicable fiduciary duties, cause Acquisition Sub's designees to
be so elected by its existing Board of Directors; provided, however, that in the
event that Acquisition Sub's designees are elected to the Board of Directors of
the Company, until the Effective Time such Board of Directors shall have at
least three directors who are directors on the date of this Agreement and who
are not officers or affiliates of the Company (the "Independent Directors"); and
provided further, that, in such event, if the number of Independent Directors
shall be reduced below three for any reason whatsoever any remaining Independent
Directors (or Independent Director, if there shall be only one remaining) shall
designate persons to fill such vacancies who shall be deemed to be
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Independent Directors for purposes of this Agreement or, if no Independent
Directors then remain, the other directors shall designate three persons to fill
such vacancies who shall not be officers or affiliates of the Company, or
officers or affiliates of Parent or any of their respective subsidiaries, and
such persons shall be deemed to be Independent Directors for purposes of this
Agreement. Subject to applicable law, including applicable fiduciary duties, the
Company shall take all action requested by Parent necessary to effect any such
election, including mailing to its stockholders the information statement (the
"Information Statement") containing the information required by Section 14(f) of
the Exchange Act and Rule 14(f)-1 promulgated thereunder, and the Company shall
make such mailing with the mailing of the Schedule 14D-9 (provided that Parent
and Acquisition Sub shall have provided to the Company on a timely basis all
information required to be included in the Information Statement with respect to
Acquisition Sub's designees). In connection with the foregoing, the Company
will, subject to applicable law, including applicable fiduciary duties,
promptly, at the option of Parent, either increase the size of the Company's
Board of Directors and/or obtain the resignation of such number of its current
directors as is necessary to enable Acquisition Sub's designees to be elected or
appointed to the Company's Board of Directors as provided above.
ARTICLE 2
THE MERGER
SECTION 2.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the relevant provisions of the Delaware General
Corporation Law (the "DGCL"), Acquisition Sub shall be merged with and into the
Company (the "Merger") as soon as practicable following the satisfaction or
waiver of the conditions set forth in Article 7. Following the Merger, the
Company shall continue as the surviving corporation (the "Surviving
Corporation") under the name "Score" and shall continue its existence under the
laws of the State of Delaware, and the separate corporate existence of
Acquisition Sub shall cease. At the election of Parent, and subject to the
execution of an appropriate amendment to this Agreement, any direct or indirect
wholly owned subsidiary of Parent may be substituted for Acquisition Sub as a
constituent corporation in the Merger. Notwithstanding this Section 2.1, Parent
may elect at any time prior to the fifth business day immediately preceding the
date on which the notice of the meeting of stockholders of the Company to
consider approval of the Merger and this Agreement (the "Meeting") is first
given to the Company's stockholders that instead of merging Acquisition Sub into
the Company as hereinabove provided, to merge the Company into Acquisition Sub
or another direct or indirect wholly-owned subsidiary of Parent;
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provided, however, that the Company shall not be deemed to have breached any of
its representations, warranties or covenants herein solely by reason of such
election. In such event the parties shall execute an appropriate amendment to
this Agreement in order to reflect the foregoing and to provide that Acquisition
Sub or such other subsidiary of Parent shall be the Surviving Corporation and
shall continue under the name "Score".
SECTION 2.2 Effective Time. Upon the terms and subject to the
conditions hereof, as soon as possible after consummation of the Offer and to
the extent required by the DGCL after the vote of the stockholders of the
Company in favor of the approval of the Merger and this Agreement has been
obtained, the Merger shall be consummated by filing with the Secretary of State
of the State of Delaware, as provided in the DGCL, a certificate of merger or
other appropriate documents (in any such case, the "Certificate of Merger") and
the parties hereto shall make all other filings or recordings required under the
DGCL (the later of the time of such filing or the time specified in the
Certificate of Merger being the "Effective Time").
SECTION 2.3 Effects of the Merger. The Merger shall have the effects
set forth in Section 259 of the DGCL. As of the Effective Time, the Company, as
the Surviving Corporation, shall be a wholly owned subsidiary of Parent.
SECTION 2.4 Certificate of Incorporation and Bylaws.
(a) The Certificate of Incorporation of the Company in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation from and after the Effective Time
until amended in accordance with applicable law.
(b) The Bylaws of Acquisition Sub in effect at the Effective Time shall
be the Bylaws of the Surviving Corporation from and after the Effective Time
until amended in accordance with applicable law.
SECTION 2.5 Directors and Officers. The directors of Acquisition Sub
and the officers of the Company immediately prior to the Effective Time shall be
the directors and officers of the Surviving Corporation until their respective
successors are duly elected and qualified, except that the President and Chief
Executive Officer of Acquisition Sub will become the Chairman and Chief
Executive Officer of the Surviving Corporation.
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<PAGE>
SECTION 2.6 Conversion of Shares. At the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Acquisition Sub, the
Company or the holders of any of the following securities:
(a) each Share held by the Company as treasury stock and each issued
and outstanding Share owned by Parent, Acquisition Sub or any other subsidiary
of Parent shall be cancelled and retired and no payment made with respect
thereto;
(b) each issued and outstanding Share, other than those Shares referred
to in Section 2.6(a) or Dissenting Shares (as defined in Section 2.7), shall be
converted into the right to receive from the Surviving Corporation an amount of
cash, without interest, equal to the respective Offer Price applicable to such
Share (the "Merger Consideration"); and
(c) each common share, par value $1 per share, of Acquisition Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into one fully-paid and nonassessable share of common stock, par value
$1 per share, of the Surviving Corporation.
SECTION 2.7 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, any issued and outstanding Shares held by a person (a
"Dissenting Stockholder") who objects to the Merger and complies with all the
provisions of Delaware law concerning the right of holders of Shares to require
appraisal of their Shares ("Dissenting Shares") shall not be converted as
described in Section 2.6(b) but shall become the right to receive such
consideration as may be determined to be due to such Dissenting Stockholder
pursuant to the laws of the State of Delaware. If, after the Effective Time,
such Dissenting Stockholder withdraws his demand for appraisal or fails to
perfect or otherwise loses his right of appraisal, in any case pursuant to the
DGCL, his Shares shall be deemed to be converted as of the Effective Time into
the right to receive the Merger Consideration. The Company shall give Parent (i)
prompt notice of any demands for appraisal of Shares received by the Company and
(ii) the opportunity to participate in and direct all negotiations and
proceedings with respect to any such demands. The Company shall not, without the
prior written consent of Parent, make any payment with respect to, or settle,
offer to settle or otherwise negotiate, any such demands.
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<PAGE>
SECTION 2.8 Payments for Shares.
(a) Prior to the Effective Time, Parent shall appoint a commercial bank
or trust company reasonably acceptable to the Company to act as disbursing agent
for the Merger (the "Disbursing Agent"). Parent will enter into a disbursing
agent agreement with the Disbursing Agent, in form and substance reasonably
acceptable to the Company, and shall deposit or cause to be deposited with the
Disbursing Agent in trust for the benefit of the Company's stockholders cash at
such times as shall be necessary to make the payments pursuant to Section 2.6 to
holders of Shares (such amounts being hereinafter referred to as the "Exchange
Fund"). The Disbursing Agent shall, pursuant to irrevocable instructions, make
the payments provided for in the preceding sentence out of the Exchange Fund.
The Disbursing Agent shall invest portions of the Exchange Fund as Parent
directs.
(b) Promptly after the Effective Time, the Surviving Corporation shall
cause the Disbursing Agent to mail to each record holder, as of the Effective
Time, of an outstanding certificate or certificates which immediately prior to
the Effective Time represented Shares (the "Certificates") a form of letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Disbursing Agent) and instructions for use in effecting the
surrender of the Certificate or payment therefor. Upon surrender to the
Disbursing Agent of a Certificate, together with such letter of transmittal duly
executed, the holder of such Certificate shall be paid in exchange therefor cash
in an amount equal to the product of the number of Shares represented by such
Certificate multiplied by the Merger Consideration, and such Certificate shall
forthwith be cancelled. No interest will be paid or accrued on the cash payable
upon the surrender of the Certificates. If payment is to be made to a person
other than the person in whose name the Certificate surrendered is registered,
it shall be a condition of payment that the Certificate so surrendered be
properly endorsed or otherwise in proper form for transfer and that the person
requesting such payment pay any transfer or other taxes required by reason of
the payment to a person other than the registered holder of the Certificate
surrendered or established to the satisfaction of the Surviving Corporation that
such tax has been paid or is not applicable. Until surrendered in accordance
with the provisions of this Section 2.8, each Certificate (other than
Certificates representing Shares owned by Parent, Acquisition Sub or any other
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subsidiary of Parent or Dissenting Shares) shall represent for all purposes only
the right to receive the Merger Consideration in cash multiplied by the number
of Shares evidenced by such Certificate, without any interest thereon.
(c) At and after the Effective Time, there shall be no transfers of
Shares which were outstanding immediately prior to the Effective Time on the
stock transfer books of the Surviving Corporation. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be cancelled
and exchanged for cash as provided in this Section 2.8.
(d) Any portion of the Exchange Fund (including the proceeds of any
investments thereof) that remains unclaimed by the stockholders of the Company
for six months after the Effective Time shall be repaid to the Surviving
Corporation. Any stockholders of the Company who have not theretofore complied
with Section 2.8 shall thereafter look only to Parent and the Surviving
Corporation for payment of their claim for the Merger Consideration per Share,
without any interest thereon.
(e) To the fullest extent permitted by applicable law, none of Parent,
Acquisition Sub, the Company or the Disbursing Agent shall be liable to any
person in respect of any cash delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION SUB
Parent and Acquisition Sub represent and warrant to the Company as
follows:
SECTION 3.1 Organization and Qualification. Each of Parent and
Acquisition Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
requisite corporate power to carry on its business as it is now being conducted.
Each of Parent and Acquisition Sub is duly qualified as a foreign corporation 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
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result in a material adverse effect on Parent or its ability to consummate the
transactions contemplated by this Agreement.
SECTION 3.2 Authority Relating to this Agreement. Each of Parent and
Acquisition Sub has all requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery by Parent and Acquisition Sub of this Agreement and
the consummation by Parent and Acquisition Sub of the transactions contemplated
hereby have been duly and validly authorized by the respective Boards of
Directors of Parent and Acquisition Sub, and the stockholder of Acquisition Sub,
and no other corporate proceedings on the part of Parent or Acquisition Sub are
necessary to authorize this Agreement, or commence the Offer or to consummate
the transactions so contemplated by this Agreement (including the Offer). This
Agreement has been duly and validly executed and delivered by each of Parent and
Acquisition Sub and, assuming this Agreement constitutes a valid and binding
obligation of the Company, this Agreement constitutes a valid and binding
agreement of each of Parent and Acquisition Sub, enforceable against each of
Parent and Acquisition Sub in accordance with its terms except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws affecting creditors' rights generally.
SECTION 3.3 Information Supplied. None of the information supplied by
Parent, Acquisition Sub and their respective affiliates specifically for
inclusion in the Schedule 14D-9 or the Proxy Statement (as hereinafter defined),
if required, shall, with respect to the Schedule 14D-9, at the time such
Schedule is filed with the SEC or first published, sent or given to holders of
Shares or the Offer is consummated or, with respect to the Proxy Statement, at
the time the Proxy Statement is mailed or at the time of the Meeting, 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. The letter to stockholders, notice of meeting, proxy statement and
form of proxy, or the information statement, as the case may be, to be
distributed to stockholders in connection with the Merger, or any schedule
required to be filed with the SEC in connection therewith, are collectively
referred to herein as the "Proxy Statement." If, at any time prior to the
Effective Time, any event relating to Parent or any of its affiliates, officers
or directors is discovered by Parent that should be set forth in a supplement to
the Proxy Statement, Parent will promptly inform the Company.
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SECTION 3.4 Consents and Approvals; No Violation. Neither the execution
and delivery of this Agreement by Parent and Acquisition Sub nor the
consummation of the transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of the respective Certificates of
Incorporation or Bylaws of Parent or Acquisition Sub, (ii) require any consent,
approval, order, authorization or permit of, or registration, declaration or
filing with or notification to, any Federal, state or local government or any
court, administrative or regulatory agency or commission or other governmental
authority or agency, domestic or foreign (a "Governmental Entity") by Parent or
Acquisition Sub, except (A) the filing of a premerger notification and report
form by Parent under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "H-S-R Act"), (B) pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), and the Exchange Act, (C) the filing of the
Certificate of Merger pursuant to the DGCL, (D) such consents, approvals,
orders, authorizations, registrations and declarations as may be required under
the law of any foreign country in which the Parent or any of its subsidiaries
conducts any business or owns any assets, (F) such filings and approvals as may
be required under the "blue sky", takeover or securities laws of various states,
or (G) where the failure to obtain any such consent, approval, authorization or
permit, or to make any such filing or notification, would not prevent or delay
consummation of the Offer or the Merger or would not otherwise prevent Parent
from performing its obligations under this Agreement; (iii) result in a default
(or give rise to any right of termination, cancellation or acceleration) under
any of the terms, conditions or provisions of any note, license, agreement or
other instrument or obligation to which Parent or any of its subsidiaries is a
party or by which Parent or any of its subsidiaries or any of their respective
assets may be bound, except for such defaults (or rights of termination,
cancellation or acceleration) as to which requisite waivers or consents have
been obtained or which, in the aggregate, would not result in a material adverse
effect on Parent; or (iv) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Parent, any of its subsidiaries or any of their
respective assets, except for violations which in the aggregate would not result
in a material adverse effect on Parent.
SECTION 3.5 Financing. At each of (i) the time of acceptance for
purchase by Acquisition Sub of Shares pursuant to the Offer and (ii) the
Effective Time, Parent will have, and will make available to Acquisition Sub,
the funds necessary to
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consummate the Offer and the Merger and the transactions contemplated thereby,
and to pay related fees and expenses.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company hereby represents and warrants to Parent and Acquisition
Sub as follows:
SECTION 4.1 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 and has the requisite
corporate power to carry on its business as it is now being conducted. The
Company is duly qualified as a foreign corporation 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 result in a Material
Adverse Effect.
(b) The only subsidiaries of the Company (collectively, "Subsidiaries")
are those identified in Schedule 4.1(b). Each Subsidiary is a corporation or
other organization duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation or organization and has the
requisite corporate or other power to carry on its business as it is now being
conducted, and 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 result in a Material
Adverse Effect. Except as disclosed on Schedule 4.1(b), all of the outstanding
shares of capital stock of each Subsidiary have been validly issued and are
fully paid and non-assessable and are owned by the Company, by another
wholly-owned Subsidiary of the Company or by the Company and another such
wholly-owned Subsidiary, free and clear of all pledges, claims, equities,
options, liens, charges, rights of first refusal, "tag" or "drag" along rights,
encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens"). Except for the capital stock or other equity interests
of the Subsidiaries or as otherwise specifically indicated in the SEC Documents
(as defined in Section 4.5) or in
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Schedule 4.1(b), the Company does not own, directly or indirectly, any capital
stock or other equity interest in any corporation, partnership, joint venture or
other entity. The Company has made available to Parent complete and correct
copies of its Restated Certificate of Incorporation, as amended (the
"Certificate of Incorporation") and Bylaws and the comparable charters and
bylaws or other organizational documents of the Subsidiaries, in each case as
amended to the date of this Agreement.
SECTION 4.2. Capitalization.
(a) The authorized capital stock of the Company consists of 20,000,000
Common Shares and 5,000,000 shares of Preferred Stock, par value $1 per share.
All of the issued and outstanding Shares have been duly authorized and validly
issued and are fully paid and nonassessable and are not subject to preemptive
rights. As of September 19, 1997, 13,793 Series A Preferred Shares, 749,486
Series B Preferred Shares and 14,113,623 Common Shares were issued and
outstanding and an aggregate of 1,622,050 Common Shares were reserved for
issuance pursuant to the 1996 Comprehensive Stock Plan of Score Industries,
Inc., the Company's 1978 and 1990 Stock Option Plans and the 1996 Non-Employee
Director Stock Plan (collectively, the "Stock Plans"). Except as disclosed in
Schedule 4.2, such Common Shares reserved for issuance under the Stock Plans
have not been issued and will not prior to the Effective Time be issued, and,
except as disclosed in Schedule 4.2, no commitment has been or will be made for
their issuance other than under stock options outstanding under the Stock Plans
("Stock Options") as of the date of this Agreement. Schedule 4.2 sets forth the
exercise prices and number of Shares in respect of outstanding Stock Options
under the Stock Plans. In addition, each outstanding Common Share has a
Preferred Stock purchase right attached, allowing the holder upon the occurrence
of certain events described in the Rights Agreement between the Company and
ChaseMellon Shareholder Services L.L.C., as Rights Agent, relating to such
rights (the "Rights"), as amended and restated on February 2, 1996 (the "Rights
Agreement"), to purchase one one-hundredth of a share of Series C Junior
Participating Preferred Stock at an exercise price of $32. No shares of such
Series C Preferred Stock have been issued as of the date of this Agreement.
(b) There are no bonds, debentures, notes or other indebtedness of the
Company having the right to vote (or convertible into, or exchangeable for,
securities having the
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right to vote) on any matters on which stockholders of the Company may vote.
Except as set forth above or otherwise on Schedule 4.2, there are no outstanding
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company or any of the
Subsidiaries is a party or by which any of them is bound, obligating the Company
or any of the Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other voting securities
of the Company or any of the Subsidiaries or obligating the Company or any of
the Subsidiaries to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or undertaking.
Except as disclosed in Schedule 4.2, there are no outstanding contractual
obligations of the Company or any of the Subsidiaries to repurchase, redeem or
otherwise acquire, or providing preemptive or registration rights with respect
to, any shares of capital stock of the Company or any of the Subsidiaries. The
Company and the Subsidiaries do not have outstanding any loans to any person in
respect of the purchase of securities issued by the Company or any Subsidiary.
SECTION 4.3 Authority Relative to this Agreement. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby (subject with respect to
the Merger to approval of the Merger and this Agreement by the holders of a
majority of the votes represented by the Shares). The execution and delivery of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized and
approved by the affirmative vote of no fewer than 4/5ths of the duly elected,
qualified and acting members of the Board of Directors of the Company, and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions so contemplated,
other than (with respect to the Merger) the approval of this Agreement by the
holders of a majority of the votes represented by the Shares, voting together as
one class, and no separate vote of the Preferred Shares will be required for
such approval. This Agreement has been duly and validly executed and delivered
by the Company, and, assuming this Agreement constitutes a valid and binding
obligation of each of Parent and Acquisition Sub, constitutes a valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, and other similar laws
affecting creditors' rights generally.
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SECTION 4.4 Absence of Certain Changes. Except as disclosed in the SEC
Documents or in Schedule 4.4 or as contemplated by this Agreement, since June
30, 1997 until the commencement of the Offer, no event has occurred or will
occur and no circumstances exist or will exist, and as of the date hereof the
Company is not aware of any event or circumstances which may reasonably be
likely to occur or exist, that would be reasonably likely to result in a
Material Adverse Effect, except for general economic changes, changes that
affect the industry of the Company or any Subsidiary generally, and changes in
the Company's business after the date hereof attributable solely to actions
taken by Parent or Acquisition Sub. Except as disclosed in the SEC Documents or
in Schedule 4.4, since June 30, 1997, there has not been (a) any declaration,
setting aside or payment of any dividend or other distribution in respect of the
capital stock of the Company or any redemption or other acquisition by the
Company of any Shares; (b) any entry into any agreement, commitment or
transaction by the Company or any Subsidiary which is material to the Company
and the Subsidiaries taken as a whole, except agreements, commitments or
transactions in the ordinary course of business, (c) any split, combination or
reclassification of the Company's capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock, (d)(i) any granting by the
Company or any of the Subsidiaries to any officer or key employee of the Company
or any of the Subsidiaries of any increase in compensation, except in the
ordinary course of business or as was required under employment agreements in
effect as of the date of the most recent financial statements included in the
SEC Documents or (ii) any entry by the Company or any Subsidiary into any
employment, severance or termination agreement with any such officer or key
employee or granting by the Company or any Subsidiary to any such officer or key
employee of any increase in severance or termination pay, except (A) as was
required under employment, severance or termination agreements in effect as of
the date of the most recent financial statements included in the SEC Documents
or (B) as disclosed on Schedule 5.6(d) of the Disclosure Schedule, or (e) any
damage, destruction or loss, whether or not covered by insurance, that has or
would be reasonably likely to have a Material Adverse Effect or (f) any change
in accounting methods, principles or practices by the Company or any Subsidiary
materially affecting its assets, liabilities or business, except insofar as may
have been required by a change in generally accepted accounting principles.
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SECTION 4.5 Reports. Since January 1, 1995, the Company has filed all
required forms, reports and documents with the SEC required to be filed by it
pursuant to the federal securities laws and the SEC rules and regulations
thereunder (collectively, the "SEC Documents"), all of which have complied as of
their respective filing dates in all material respects with all applicable
requirements of the Securities Act and the Exchange Act, and the rules
promulgated thereunder. None of such forms, reports or documents required by the
Exchange Act at the time filed, nor any of such forms, reports or documents
required by the Securities Act as of the date of their effectiveness contained
any untrue statement of a material fact or omitted 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, except to the extent that information contained in any SEC Document
has been revised or superseded by a later-filed SEC Document filed and publicly
available prior to the date hereof. The financial statements of the Company
included in the SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present the consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
SECTION 4.6 Proxy Statement. If a Proxy Statement is required for the
consummation of the Merger under applicable law, the Proxy Statement will comply
in all material respects with the Exchange Act, except that no representation is
made by the Company with respect to information supplied by Parent or any
affiliate of Parent specifically for inclusion in the Proxy Statement. None of
the information supplied by the Company specifically for inclusion in the Proxy
Statement shall, at the time the Proxy Statement is mailed or at the time of the
Meeting, 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.
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SECTION 4.7 Consents and Approvals; No Violation. Except as set forth
on Schedule 4.7, neither the execution and delivery of this Agreement by the
Company nor the consummation of the transactions contemplated hereby will
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both) under, or require any consent or approval by a party
under or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or result in the creation
of any Lien upon any of the properties or assets or the Company or any
Subsidiary under (i) the Certificate of Incorporation or Bylaws of the Company
or the comparable charter or organizational documents of any Subsidiary, (ii)
any loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license applicable to
the Company or any Subsidiary or its respective properties or assets or (iii)
subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to the Company or any Subsidiary or their respective
properties or assets, other than, in the case of clauses (ii) or (iii), any such
conflicts, violations, defaults, rights or Liens that individually or in the
aggregate would not have a Material Adverse Effect. Except as set forth on
Schedule 4.7, no consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by the Company
or any Subsidiary in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the transactions
contemplated by this Agreement, except for (i) the filing of a premerger
notification and report form by the Company under the H-S-R Act, (ii)
requirements under the Securities Act and the Exchange Act, (iii) the filing of
the Certificate of Merger pursuant to the DGCL and appropriate documents with
the relevant authorities of other states in which the Company is qualified to do
business; (iv) requirements under state environmental statutes or regulations
and (v) such other consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to be obtained or made would not
have a Material Adverse Effect.
SECTION 4.8 Fees and Commissions. Except for those fees and expenses
payable to JPMorgan pursuant to the letter agreement, dated July 23, 1997, no
person is entitled to receive from the Company or any Subsidiary any investment
banking, brokerage or finder's fee in connection with this Agreement or the
transactions contemplated hereby. A copy of the aforementioned agreement has
previously been delivered to Parent.
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SECTION 4.9 Information Supplied. None of the information supplied or
to be supplied by the Company for inclusion or incorporation by reference in (i)
the Offer Documents, (ii) the Schedule 14D-9 or (iii) the information to be
filed by the Company in connection with the Offer pursuant to Rule 14f-1
promulgated under the Exchange Act (the "Information Statement"), will, at the
respective times the Offer Documents, the Schedule 14D-9 and the Information
Statement are filed with the SEC or first published, sent or given to the
Company's stockholders, 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
are made, not misleading. The Schedule 14D-9 and the Information Statement will
comply as to form in all material respects with the requirements of the Exchange
Act and the rules and regulations thereunder, except that no representation or
warranty is made by the Company with respect to statements made or incorporated
by reference therein based on information supplied by Parent or Acquisition Sub
specifically for inclusion or incorporation by reference therein.
SECTION 4.10 Litigation. Except as disclosed in the SEC Documents or in
Schedule 4.10 of the Disclosure Statement, as of the date hereof there is no
suit, action or proceeding pending or, to the knowledge of the Company,
threatened against the Company or any Subsidiary before any court or arbitrator
or before or by any governmental body, agency or official that would be
reasonably likely to have a Material Adverse Effect, nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against the Company or any Subsidiary having, or which is reasonably
likely to have, a Material Adverse Effect.
SECTION 4.11 Patents and Other Proprietary Rights. To the Company's
knowledge, except as disclosed in Schedule 4.11, the Company and Subsidiaries
have rights to use, whether through ownership, licensing or otherwise, all
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information, proprietary rights and processes of which the Company is
aware that are necessary for its business as now conducted (collectively,
"Intellectual Property Rights"). Except as disclosed in Schedule 4.11, the
Company and Subsidiaries have not assigned, hypothecated or otherwise encumbered
any of the Intellectual Property Rights and none of the licenses included in the
Intellectual Property Rights purport to grant sole or exclusive licenses to
another entity or person, including, without limitation, sole or exclusive
licenses limited to
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specific fields of use. To the Company's knowledge, except as disclosed in
Schedule 4.11, the patents owned by the Company and Subsidiaries are valid and
enforceable and any patent issuing from patent applications of the Company and
Subsidiaries will be valid and enforceable, except as such invalidity or
unenforceability would not, individually or in the aggregate, be reasonably
likely to have a Material Adverse Affect. Except as disclosed in writing to
Parent prior to the date hereof: (i) the Company has no knowledge of any
infringement by any other party of any of the Intellectual Property Rights, and
(ii) the Company and Subsidiaries have not entered into any agreement to
indemnify any other party against any charge of infringement of any of its
Intellectual Property Rights except for such matters as would not, individually
or in the aggregate, be reasonably likely to have a Material Adverse Affect. To
the Company's knowledge, the Company and Subsidiaries have not and do not
violate or infringe any intellectual property right of any other person or
entity, and the Company and Subsidiaries have not received any communication
alleging that any of them violates or infringes the intellectual property right
of any other person or entity, except as disclosed in writing to Parent prior to
the date hereof and except for any such violations or infringements as would
not, individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect. The Company and Subsidiaries are not subject to any pending suit
for infringing any intellectual property right of another entity or person.
SECTION 4.12 Benefit Plans; ERISA Compliance.
(a) Schedule 4.12(a) sets forth a complete list of all "employee
benefit plans" (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), bonus, pension, profit sharing,
deferred compensation, incentive compensation, excess benefit, stock, stock
option, severance, termination pay, change in control or other material employee
benefit plans, programs or arrangements, including, but not limited to, those
providing medical, dental, vision, disability, life insurance and vacation
benefits (other than those required to be maintained by law), qualified or
unqualified, funded or unfunded, foreign or domestic currently maintained, or
contributed to, or required to be maintained or contributed to, by the Company
or any other person or entity that, together with the Company, is treated as a
single employer under Section 414 of the Internal Revenue Code of 1986, as
amended (the "Code") (each a "Commonly Controlled Entity") for the benefit of
any current or former employees, officers,
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directors or independent contractors of the Company or any Subsidiary and with
respect to which the Company or any Subsidiary has any liability (collectively,
the "Benefit Plans"). Except with respect to any "multiemployer plan" (as
defined in Section 3(37) of ERISA), the Company has delivered or made available
to Parent true, complete and correct copies of each Benefit Plan and related
trust agreement and annuity contract and (to the extent applicable) a copy of
each Benefit Plan's current summary plan description. In addition, to the extent
applicable, the Company has provided or made available to Parent a copy of the
most recent IRS determination letter issued, and copies of the two most recently
filed IRS Forms 5500 together with all schedules, actuarial reports and
accountants' statements for each Benefit Plan, including Form 5500, Schedule B
for each Benefit Plan that is a "defined benefit plan" (as defined in Section
3(35) of ERISA), other than a multiemployer plan.
(b) To the Company's knowledge, each Benefit Plan has been administered
in accordance with its terms and in compliance with the applicable provisions of
ERISA and the Code where the failure to so administer or comply would have a
Material Adverse Effect.
(c) All Benefit Plans (other than a multiemployer plan) 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 as amended at least through the
statutory changes implemented under the Tax Reform Act of 1986, and no such
determination letter has been revoked nor, to the knowledge of the Company, has
revocation been threatened, nor has any such Benefit Plan been amended since the
date of its most recent determination letter or application therefor in any
respect that would adversely affect its qualification.
(d) No Benefit Plan which is a "single-employer plan" (as defined in
Section 4001(a)(15) of ERISA) and which is subject to Title IV of ERISA is, as
of its most recent valuation date, unfunded by an amount which would have
Material Adverse Effect based on actuarial assumptions indicated in the most
recent actuarial valuation report. To the knowledge of the Company, neither the
Company nor any of the Subsidiaries is aware of any facts or circumstances that
would materially and adversely change the funded status of any such Benefit
Plans. None of the Benefit Plans has an "accumulated funding deficiency" (as
such term is
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defined in Section 302 of ERISA or Section 412 of the Code), and there has been
no application for a waiver of the minimum funding standards imposed by Section
412 of the Code with respect to any Benefit Plan.
(e) To the Company's knowledge, no person or entity has incurred any
liability under Title IV of ERISA or Section 412 of the Code during the time
such person or entity was required to be treated as a single employer with the
Company under Section 414 of the Code that would have a Material Adverse Effect.
(f) During the last five years, to the Company's knowledge, there has
been no "reportable event" (as that term is defined in Section 4043 of ERISA)
which is reasonably likely to have a Material Adverse Effect with respect to any
Benefit Plan that is a single employer plan subject to Title IV of ERISA.
(g) With respect to any Benefit Plan that is an employee welfare
benefit plan (as defined in Section 3(1) of ERISA), (i) to the best of the
Company's knowledge, no such Benefit Plan provides benefits, including without
limitation, death or medical benefits, except as set forth on Schedule 4.12(g),
beyond termination of employment or retirement other than (A) coverage mandated
by law or (B) death or retirement benefits under a Benefit Plan qualified under
Section 401(a) of the Code, and (ii) each such Benefit Plan (including any such
Plan covering retirees or other former employees) may be amended or terminated
without liability that would have a Material Adverse Effect to the Company or
any of its subsidiaries on or at any time after the consummation of the Offer.
(h) Except as set forth on Schedule 4.12(h), no employee of the Company
or any Commonly Controlled Entity will become entitled to any retirement,
severance or similar benefit or enhanced or accelerated benefit solely as a
result of the transactions contemplated hereby. Without limiting the generality
of the foregoing, no amount required to be paid or payable to or with respect to
any employee of the Company or any Commonly Controlled Entity in connection with
the transactions contemplated hereby (either solely as a result thereof or as a
result of such transactions in conjunction with any other event) will be an
"excess parachute payment" within the meaning of Section 280G of the Code.
(i) Except as indicated on Schedule 4.12(i), at no time since December
31, 1990, have the Company or any Commonly Controlled Entity, been required to
contribute to, or incurred
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any withdrawal liability, within the meaning of Section 4201 of ERISA to any
multiemployer pension plan, within the meaning of Section 3(37) of ERISA. All
required contributions, withdrawal liability payments or other payments of any
type that the Company or any Commonly Controlled Entity have been obligated to
make to any multiemployer plan have been duly and timely made. Any withdrawal
liability incurred with respect to any multiemployer plan has been fully paid as
of the date hereof. Neither the Company nor any Commonly Controlled Entity has
undertaken any course of action that could reasonably be expected to lead to a
complete or partial withdrawal from any multiemployer plan that would reasonably
be expected to result in a withdrawal liability that would have a Material
Adverse Effect. Set forth next to each multiemployer plan listed on Schedule
4.12(i) is the amount of the withdrawal liability that would be incurred by the
Company or any Commonly Controlled Entity with respect to such plan, under
Section 4201 of ERISA, if the Company or any Commonly Controlled Entity were to
completely withdraw from such multiemployer plan on the date hereof.
(j) Except as listed on Schedule 4.12(j), neither the Company nor any
Commonly Controlled Entity has any secondary liability resulting from a
transaction described in ERISA Section 4204 that would, if the Company or
Commonly Controlled Entity were to become primarily liable, reasonably be likely
to have a Material Adverse Effect.
(k) Except as disclosed in the SEC Documents or in Schedule 5.6(d),
there exist no employment, consulting, severance, termination or indemnification
agreements, arrangements or understandings between either of the Company or any
Subsidiary and any current or former officer or director of either of the
Company or any Subsidiary or for which either of the Company or any Subsidiary
is liable.
SECTION 4.13 Taxes.
(a) Each of the Company and each Subsidiary has filed all Federal
income tax returns and all other material tax returns and reports (including
information returns and reports) required to be filed by it on or before the
date hereof and on or before the date Shares are accepted for payment pursuant
to the Offer (or requests for extensions to file such tax returns have been
timely filed, granted and have not expired). All such returns are complete and
correct in all material respects, have been prepared in accordance with all
applicable laws and requirements and accurately reflect in all material respects
the taxable
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income (or other measure of tax) of the party filing the same. Except as
disclosed on Schedule 4.13, each of the Company and each Subsidiary has paid (or
the Company has paid on their behalf) all taxes shown to be due on such return,
all material taxes for which no return was required to be filed and all other
taxes for which a notice of assessment or demand for payment has been received.
The most recent financial statements contained in the SEC Documents reflect an
adequate reserve for all taxes payable by the Company and the Subsidiaries for
all taxable periods and portions thereof through the date of such financial
statements.
(b) True and complete copies of federal and state income returns of the
Company and each Subsidiary for each of the taxable years ended December 31,
1992 through December 31, 1996 have been made available to Parent.
(c) Except as disclosed on Schedule 4.13, no deficiencies for any taxes
have been proposed, asserted or assessed against the Company or any Subsidiary
that have not yet been paid or settled, and no requests for waivers of the time
to assess any such taxes are pending and neither the Company nor any Subsidiary
is currently the subject of an audit or examination with respect to tax matters
and neither the Company nor any Subsidiary has received notice from a taxing
authority of its intention to conduct such an audit or examination. No taxing
authority for a jurisdiction in which the Company or any Subsidiary does not
file tax returns has asserted that the Company or any such Subsidiary is or may
be subject to tax by such jurisdiction. The Federal income tax returns of the
Company and each of the Subsidiaries consolidated in such returns have been
examined by and settled with the Internal Revenue Service for all years through
December 31, 1992.
(d) Except as disclosed on Schedule 4.13, neither the Company nor any
Subsidiary (i) currently has in effect any consent under Section 341(f) of the
Code; (ii) currently has in effect a waiver or consent extending any statute of
limitation for the assessment or collection of tax, which waiver or consent
remains outstanding; (iii) has ever joined in or been required to join in the
filing of a consolidated Federal income tax return or a combined or consolidated
state income tax return other than one for which the Company is the common
parent; (iv) has ever applied for a ruling with respect to a tax matter or
entered into a closing agreement with respect to a tax matter that has a
continuing effect; (v) has ever filed or been the subject of an election under
Section 338(g) or Section 338(h)(10) of the Code
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or caused or been the subject of a deemed election under Section 338(e) of the
Code; or (vi) has ever agreed to make or been required to make an adjustment
under Section 481 of the Code by reason of a change in accounting method or
otherwise that has continuing effect. Except as disclosed on Schedule 4.13,
neither the Company nor any Subsidiary (i) owns an interest in any entity or is
a party to an arrangement that is treated as a partnership for federal income
tax purposes or (ii) is a party to a tax sharing or tax allocation agreement
pursuant to which it could be liable for taxes of another person.
(e) As used in this Agreement, "taxes" shall include all Federal,
state, local and foreign income, property, sales, excise and other taxes,
tariffs or governmental charges of any nature whatsoever.
(f) The Company is not a "real property holding corporation" as defined
in the Code.
SECTION 4.14 Compliance with Applicable Laws.
(a) Except for matters disclosed in the SEC Documents and during the
Phase I site assessments performed by Dames & Moore, to the knowledge of the
Company, each of the Company and each Subsidiary has obtained and maintained all
Federal, state, local and foreign governmental approvals, authorizations,
certificates, filings, franchises, licenses, notices, permits and rights
("Permits") necessary as of the Effective Time for it to own, lease or operate
its properties and assets as now owned, leased or operated and to carry on its
business as now conducted, except for any failure to obtain or maintain such
Permits which is not reasonably likely to have a Material Adverse Effect. Except
for matters disclosed in the SEC Documents and during the Phase I site visits
performed by Dames & Moore, to the knowledge of the Company, each of the Company
and each Subsidiary has complied with and is in compliance with all statutes,
laws, Environmental Laws, ordinances, rules, orders and regulations of any
Governmental Entity, Permits and Environmental Permits applicable prior to or as
of the Effective Time, except for noncompliance which is not reasonably likely
to have a Material Adverse Effect. "Environmental Permit" means Permit under any
federal, state, local or foreign Environmental Law (as hereinafter defined)
applicable prior to or as of the Effective Time. The term "Environmental Laws"
means any federal, state, local or foreign statute, code, ordinance, rule,
regulation, judgment, order, writ, decree, injunction, common law, Permit, or
settlement or consent agreement applicable prior to or as of the
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Effective Time relating to the protection of the environment or human health or
to Hazardous Materials (as defined below).
(b) Except for matters disclosed in the SEC Documents and during the
Phase I site assessments performed by Dames & Moore, to the knowledge of the
Company, there have been no releases of Hazardous Materials by the Company or
any Subsidiary or by any predecessor in interest in, on or under any properties
now owned, operated or leased by the Company or any Subsidiary which could be
the basis for liability under Environmental Laws and, to the knowledge of the
Company, there have been no releases of Hazardous Material by the Company or any
Subsidiary or any predecessor in interest in, on or under any properties
formerly owned, operated or leased by the Company or any Subsidiary which could
be the basis for liability under Environmental Laws, except for those which are
not reasonably likely to have a Material Adverse Effect. The term "Hazardous
Materials" means hazardous or toxic materials, substances or wastes that are
regulated by or that could be the basis for liability under Environmental Laws.
(c) Except for matters disclosed in the SEC Documents and during the
Phase I site assessments performed by Dames & Moore, to the knowledge of the
Company, neither the Company nor any Subsidiary has received any written notice
of violation, citation, summons or order, been served with a complaint or
assessed a penalty and no investigation is pending or has been threatened by any
governmental entity within the five year period immediately preceding the date
hereof or, if prior to that time period, which remains unresolved, and which
reasonably could be expected to require the Company or any Subsidiary to expend
money or abide by conditions contained in settlement agreements or consent
decrees, which is reasonably likely to have a Material Adverse Effect: (i) with
respect to any alleged violation by the Company or any Subsidiary or any of its
or their predecessors in interest of any Environmental Law; or (ii) with respect
to any alleged failure by the Company or any Subsidiary to have complied with
any Environmental Permit; or (iii) with respect to any use, possession,
generation, treatment, storage, recycling, transportation or disposal
(collectively, "Management" or when used as a verb, "Managed"), or release of
any Hazardous Materials by or on behalf of the Company or any Subsidiary or any
of their predecessors in interest.
(d) Except for matters disclosed in the SEC Documents and during the
Phase I site assessments performed by Dames & Moore, to the knowledge of the
Company, neither the Company nor any Subsidiary has received any written request
for information,
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notice of claim, demand or notification that it or any predecessor in interest
is or may be potentially responsible or/and liable under Environmental Laws,
with respect to any investigation or clean-up of any threatened or actual
release of any Hazardous Material within the five-year period immediately
preceding the date hereof or, if prior to that time period, which remains
unresolved, and which reasonably could be expected to require the Company or any
Subsidiary to expend money to an extent which is reasonably likely to have a
Material Adverse Effect.
(e) Except for matters disclosed in the SEC Documents and during the
Phase I site assessments performed by Dames & Moore, to the knowledge of the
Company, no Hazardous Materials Managed by or on behalf of the Company or any of
the Subsidiaries or any predecessor in interest has come to be located at any
site which is listed pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), the Comprehensive
Environmental Response, Compensation and Liability Information System
("CERCLIS") or on any similar published state list, or which is the subject of
federal, state or local enforcement actions or investigations which may
reasonably lead to claims against the Company or any Subsidiary under
Environmental Laws for cleanup costs, remedial work, damages to natural
resources or for personal injury claims, which are reasonably likely to have a
Material Adverse Effect.
(f) Except for matters disclosed in the SEC Documents, in the materials
made available for review by Parent and during the Phase I site assessments
performed by Dames & Moore, to the knowledge of the Company, there have been no
environmental inspections, investigations, studies, audits, tests, reviews or
other analyses, other than those required to be done routinely pursuant to
Environmental Permits or Environmental Laws, conducted in relation to any
property or business now or previously owned, operated or leased by the Company
or any Subsidiary which have been performed by or on behalf of the Company or
any Subsidiary or, to the knowledge of the Company, by any other person
regarding any environmental condition, matter or activity which could be the
basis of liability under Environmental Laws which is reasonably likely to have a
Material Adverse Effect.
(g) For the purposes of this Section 4.14 only, the "knowledge of the
Company" shall mean the actual knowledge of the executive officers of the
Company.
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SECTION 4.15 State Takeover Statutes. The Board of Directors of the
Company has approved the Offer, the Merger and the other transactions
contemplated by this Agreement in accordance with the provisions of Section 203
of the DGCL.
SECTION 4.16 Labor Matters. Except as disclosed in Schedule 4.16, to
the knowledge of the Company, as of the date hereof (a) no employee of the
Company or any Subsidiary is represented by any union or other labor
organization; (b) the Company and all of the Subsidiaries are in material
compliance with applicable laws respecting employment and employment practices,
terms and conditions of employment and wages and hours, and are not engaged in
any unfair labor practice; (c) there is no unfair labor practice complaint
against the Company or any of the Subsidiaries pending before the National Labor
Relations Board; (d) there is no labor strike, dispute, slowdown, representation
campaign or work stoppage pending or threatened against or affecting the Company
or any of the Subsidiaries; (e) no material grievance or arbitration proceeding
arising out of or under collective bargaining agreements is pending and no claim
therefor has been asserted against the Company or the Subsidiaries; and (f)
neither the Company nor any of the Subsidiaries has experienced any material
work stoppage since January 1, 1996.
SECTION 4.17 Undisclosed Liabilities. Except as and to the extent
disclosed in the SEC Documents, except for liabilities incurred in the ordinary
course of business and otherwise not in contravention of this Agreement and
except for liabilities or obligations under this Agreement or incurred in
connection with the transactions contemplated hereby, the Company does not have
any liabilities or obligations of any nature (whether absolute, contingent or
otherwise) that would be reasonably likely to have a Material Adverse Effect.
SECTION 4.18 Certain Agreements. Except as disclosed in Schedule 4.18,
neither the Company nor any of the Subsidiaries is a party to, or bound by, any
contract or agreement that materially limits the ability of the Company directly
or through any of its subsidiaries to compete in any line of business or with
any person in any geographic area during any period of time.
SECTION 4.19 Amendment of Rights Agreement. The Board of Directors of
the Company has taken all action necessary to (i) render the Rights Agreement
inapplicable to the Offer, the Merger and the other transactions contemplated by
this Agreement and (ii) ensure that (A) neither Parent nor any of its wholly-
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owned subsidiaries will become an "Acquiring Person" (as defined in the Rights
Agreement) by reason of consummation of the transactions contemplated by this
Agreement and (B) a "Shares Acquisition Date", "Distribution Date" or
"Triggering Event" (each as defined in the Rights Agreement) does not occur by
reason of the approval, execution or delivery of this Agreement, the
consummation of the Offer, the Merger or the other transactions contemplated by
this Agreement.
ARTICLE 5
COVENANTS
SECTION 5.1 Conduct of Business of the Company. Except as contemplated
by this Agreement or as approved in writing by Parent, during the period from
the date of this Agreement to the acceptance of Shares for payment, the Company
and the Subsidiaries will each conduct its operations according to its ordinary
and usual course of business. Without limiting the generality of the foregoing,
and except as otherwise expressly provided in this Agreement, neither the
Company nor any Subsidiary, without the prior written consent of Parent, will
(i) issue, sell or pledge, or authorize or propose the
issuance, sale or pledge of (A) additional shares of capital stock of any class
(including the Shares), or securities convertible into any such shares, or any
rights, warrants or options to acquire any such shares or other convertible
securities, or grant or accelerate any right to convert or exchange any
securities of the Company for shares, other than (1) Shares issuable pursuant to
the terms of outstanding Stock Options and commitments disclosed in Section 4.2,
or (2) issuance of shares of capital stock to the Company by a wholly-owned
Subsidiary, or (B) any other securities in respect of, in lieu of or in
substitution for Shares outstanding on the date thereof or split, combine or
reclassify any of the Company's capital stock;
(ii) purchase, redeem or otherwise acquire, or propose to
purchase or otherwise acquire, any of its outstanding securities (including the
Shares);
(iii) declare, set aside or pay any dividend or other
distribution on any shares of capital stock of the Company other than the
regular quarterly dividends of $.275 per share with respect to the Series A
Preferred Shares and $.25 per share with respect to the Series B Preferred
Shares, except that
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a direct or indirect wholly-owned Subsidiary may pay a dividend or distribution
to its parent;
(iv) except as disclosed to Parent prior to the date
hereof, make any acquisition of a material amount of assets or securities, any
disposition (including by way of mortgage, license, encumbrance or any Lien) of
a material amount of assets or securities, or enter into a material contract or
release or relinquish any material contract rights, or make any amendments, or
modifications thereto, except in all instances for actions in the ordinary
course of business;
(v) (A) except in the ordinary course of business, incur
any indebtedness for borrowed money or guarantee any such indebtedness of
another person, issue or sell any debt securities or warrants or other rights to
acquire any debt securities of the Company or any Subsidiary, guarantee any debt
securities of another person, enter into any "keep well" or other agreement to
maintain any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing or (B) make any
loans, advances of capital contributions to, or investments in, any other
person, other than to the Company or any direct or indirect wholly owned
Subsidiary;
(vi) pay, discharge, settle or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement or
satisfaction, in the ordinary course of business or in accordance with their
terms;
(vii) propose or adopt any amendments (initiated by the
Board of Directors) to the Certificate of Incorporation or Bylaws of the Company
(or any such similar organizational documents of the Subsidiaries);
(viii) except as disclosed in Schedule 5.6(d) of the
Disclosure Statement, enter into any new employment, severance or termination
agreements with, or grant any increase in severance or termination pay to, any
officers, directors or key employees or grant any material increases in the
compensation or benefits to officers, directors and key employees;
(ix) change any accounting methods, principles or practices
materially affecting their assets,
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liabilities or business, except insofar as may be required by a change in
generally accepted accounting principles;
(x) make any material tax election or settle or compromise
any material income tax liability;
(xi) except as disclosed to Parent prior to the date
hereof, make or agree to make any new capital expenditure or expenditures not
previously committed to which individually is in excess of $500,000 or which in
the aggregate are in excess of $1 million; or
(xii) agree in writing or otherwise to take any of the
foregoing actions or any action which would make any representation or warranty
in this Agreement untrue or incorrect at any time prior to acceptance of Shares
for payment in the Offer.
SECTION 5.2 No Solicitation.
(a) The Company shall not, nor shall it permit any Subsidiary to, nor
shall it authorize or permit any officer, director or employee of or any
investment banker, attorney or other advisor or representative of the Company or
any of its subsidiaries to, directly or indirectly, (i) solicit, initiate or
knowingly encourage the submission of any Takeover Proposal or (ii) participate
in any discussions or negotiations regarding, or furnish to any person any
information with respect to any inquiries or the making of any proposal that
constitutes or may reasonably be expected to lead to a Takeover Proposal;
provided, however, that prior to the acceptance for payment of Shares pursuant
to the Offer, to the extent consistent with the fiduciary obligations of the
Board of Directors of the Company, as determined in good faith by the Board of
Directors after consultation with outside counsel, the Company may upon receipt
by the Company of an unsolicited written, bona fide Takeover Proposal, furnish
information with respect to the Company pursuant to a customary confidentiality
agreement containing "standstill" provisions no less onerous than in the
Confidentiality Agreement (as defined in Section 5.3) and participate in
negotiations regarding such Takeover Proposal. Without limiting the foregoing,
it is understood that any violation of the restrictions set forth in the
preceding sentence by any officer, director or employee of the Company or any
Subsidiary or any investment banker, attorney or other advisor or representative
of the Company or any Subsidiary, shall be deemed to be a breach of this Section
5.2(a) by the Company. For
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purposes of this Agreement, "Takeover Proposal" means any proposal or offer for,
or any expression of interest (by public announcement or otherwise) by any
person other than Parent or its affiliates in, a merger or other business
combination involving the Company or any proposal or offer to acquire in any
manner (including through a joint venture with the Company), directly or
indirectly, an equity interest in not less than 20% of the outstanding voting
securities of, or assets representing not less than 20% of the annual revenues
or net earnings of the Company and the Subsidiaries taken as a whole.
(b) Neither the Board of Directors of the Company nor any committee
thereof shall (i) approve or recommend, or propose to approve or recommend, any
Takeover Proposal or (ii) cause the Company or any of its Subsidiaries to enter
into any agreement with respect to any Takeover Proposal. Notwithstanding the
foregoing, in the event the Board of Directors of the Company receives an
unsolicited Takeover Proposal that, in the exercise of its fiduciary obligations
(as determined in good faith by the Board of Directors and after consultation
with outside counsel), it determines to be a Superior Proposal, the Board of
Directors may (subject to the following sentences) withdraw or modify its
approval or recommendation of the Offer, this Agreement and the Merger taken
together, or approve or recommend any such Superior Proposal, in order to enter
into an agreement with respect to such a Superior Proposal, in each case at any
time after the third business day following Parent's receipt of written notice
(a "Notice of Superior Proposal") advising Parent that the Board of Directors
has received a Superior Proposal and specifying the material terms and
conditions of such Superior Proposal. For purposes of this Agreement, a
"Superior Proposal" means any bona fide Takeover Proposal on terms which the
Board of Directors of the Company determines in its good faith judgment, after
consultation with JPMorgan or another financial advisor of nationally recognized
reputation, to be more favorable to the Company's stockholders than the Offer
and the Merger and for which financing is available. Nothing contained herein
shall prohibit the Company from taking and disclosing to its stockholders a
position contemplated by Rule 14e-2(a) promulgated under the Exchange Act.
(c) In addition to the obligations of the Company set forth in
paragraph (b) above, the Company shall promptly advise Parent of any request for
non-public information or any Takeover Proposal, or any inquiry with respect to
or which could reasonably be expected to lead to any Takeover Proposal and the
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material terms and conditions of such request, Takeover Proposal or inquiry.
(d) Neither the Board of Directors of the Company nor any committee
thereof shall withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Parent or Acquisition Sub, the approval or recommendation by such
Board of Directors or any such committee of the Offer, this Agreement or the
Merger, unless failure to do so could be a breach of its fiduciary obligations
as they would exist without the foregoing prohibition (as determined in good
faith by the Board of Directors and after consultation with outside counsel).
SECTION 5.3 Access to Information.
(a) Between the date of this Agreement and the Effective Time, the
Company will upon reasonable notice (i) give Parent and its authorized
representatives reasonable access during regular business hours to the Company's
and each Subsidiary's plants, offices, warehouses and other facilities and to
its books and records, (ii) permit Parent to make such inspections as it may
require, and (iii) cause its officers and those of the Subsidiaries to furnish
Parent with such financial and operating data and other information with respect
to the business and properties of the Company and the Subsidiaries as Parent may
from time to time reasonably request.
(b) Information obtained by Parent pursuant to this Section 5.3 shall
be subject to the provisions of the confidentiality agreement between the
Company and Parent, dated August 7, 1997 (the "Confidentiality Agreement"),
which remains in full force and effect, but shall terminate upon the acceptance
for payment of the Shares pursuant to the Offer.
SECTION 5.4 Reasonable Best Efforts.
(a) Subject to Section 5.2, each of the parties hereto will use its
reasonable best efforts to take, or cause to be taken, all appropriate action,
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement. Such reasonable best efforts shall
include, without limitation, (i) obtaining all necessary consents, approvals or
waivers from third parties and governmental authorities necessary to the
consummation of the transactions contemplated by this Agreement and (ii)
opposing vigorously any litigation or administrative proceeding relating
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to this Agreement or the transactions contemplated hereby, including, without
limitation, promptly appealing any adverse court or agency order.
Notwithstanding the foregoing or any other provisions contained in this
Agreement to the contrary, neither Parent nor any of its affiliates shall be
under any obligation of any kind to agree with any Governmental Entity,
including but not limited to any governmental or regulatory authority with
jurisdiction over the enforcement of any applicable federal, state, local and
foreign antitrust, competition or other similar laws, or any other party to sell
or otherwise dispose of, hold separate (through the establishment of a trust or
otherwise) particular assets or categories of assets or businesses of any of the
Company, Parent or any of Parent's affiliates.
(b) The Company shall give and make all required notices, filings and
reports to the appropriate persons with respect to the Permits and Environmental
Permits and comply with all applicable requirements under Environmental Laws
that may be necessary for the sale and purchase of the business and the
ownership, operation and use of the assets of Surviving Corporation by Parent
after the Effective Time.
(c) The Company and its Board of Directors shall (i) take all action
necessary to ensure that no state takeover statute or similar statute or
regulation is or becomes applicable to the Offer, the Merger, this Agreement or
any of the other transactions contemplated by the foregoing and (ii) if any
state takeover statute or similar statute or regulation becomes applicable to
the Offer, the Merger, this Agreement or any other transactions contemplated by
the foregoing, take all action necessary to ensure that the Offer, the Merger
and the other transactions contemplated by this Agreement may be consummated as
promptly as practicable on the terms contemplated by this Agreement and
otherwise to minimize the effect of such statute or regulation on the Offer, the
Merger and the other transactions contemplated by this Agreement.
SECTION 5.5 Indemnification, Exculpation and Insurance.
(a) All rights to indemnification and exculpation from liabilities for
acts or omissions occurring at or prior to the Effective Time now existing in
favor of the current or former directors or officers of the Company and the
Subsidiaries as provided in their respective certificates of incorporation or
by-laws (or comparable organizational documents) and any
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indemnification agreements of the Company, the existence of which does not
constitute a breach of this Agreement, shall be assumed by the Surviving
Corporation in the Merger, without further action, as of the Effective Time and
shall survive the Merger and shall continue in full force and effect (to the
extent consistent with applicable law) in accordance with their terms.
(b) For six years after the Effective Time, Parent shall cause the
Surviving Corporation to honor its commitments and obligations pursuant to this
Section 5.5. In the event that Parent or the Surviving Corporation or any of
their respective successors or assigns (i) consolidates with or merges into any
other person and is not the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers or conveys all or substantially
all of its properties and assets to any person, then, and in each such case,
proper provision will be made so that the successors and assigns of Parent or
the Surviving Corporation, as the case may be, assume the obligations set forth
in this Section 5.5(b).
(c) For six years after the Effective Time, the Surviving Corporation
shall provide officers' and directors' liability insurance in respect of acts or
omissions occurring prior to the Effective Time, including but not limited to
the transactions contemplated by this Agreement, covering each person currently
covered by the Company's officers' and directors' liability insurance policy, or
who becomes covered by such policy prior to the Effective Time, on terms with
respect to coverage and amount no less favorable than those of such policy in
effect on the date hereof; provided that in satisfying its obligation under this
Section 5.5 the Surviving Corporation shall not be obligated to pay annual
premiums in excess of 175% of the amount per annum the Company paid in its last
full fiscal year.
(d) The provisions of this Section 5.5 are (i) intended to be for the
benefit of, and will be enforceable by, each indemnified party, his or her heirs
and his or her representatives and (ii) in addition to, and not in substitution
or, any other rights to indemnification or contribution that any such person may
have by contract or otherwise.
SECTION 5.6 Stock Options; Employee Plans and Benefits and Employment
Contracts.
(a) As soon as practicable following the date of this Agreement, the
Board of Directors of the Company (or, if appropriate, any committee
administering the Stock Plans) shall
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adopt such resolutions or take such other actions as are required in accordance
with the Stock Plans to adjust the terms of all outstanding Stock Options to
provide that, at the Effective Time, each Stock Option, whether vested or not,
outstanding immediately prior to the Effective Time be cancelled in exchange for
a cash payment by the Company of an amount equal to (i) the excess, if any, of
(x) the price per Share to be paid pursuant to the Offer over (y) the exercise
price per Share subject to such Stock Option, multiplied by (ii) the number of
Shares for which such Stock Option shall not theretofore have been exercised.
(b) All amounts payable pursuant to Section 5.6(a) shall be subject to
any required withholding of taxes and shall be paid without interest. The
Company shall use its best efforts to obtain all consents of the holders of the
Stock Options as shall be necessary to effectuate the foregoing. Notwithstanding
anything to the contrary contained in this Agreement, payment shall, at Parent's
request, be withheld in respect of any Stock Option until all necessary consents
of the holder are obtained with respect to such Stock Option.
(c) The Stock Plans shall terminate as of the Effective Time, and the
provisions in any other Benefit Plan providing for the potential issuance,
transfer or grant of any capital stock of the Company or any Subsidiary or any
interest in respect of any capital stock of the Company or any Subsidiary shall
be deleted as of the Effective Time, and the Company shall ensure that following
the Effective Time no holder of a Stock Option or any participant in the Stock
Plans or other Benefit Plan shall have any right thereunder to acquire any
capital stock of the Company or any Subsidiary or the Surviving Corporation.
(d) From and after the Effective Time, Parent shall cause the Surviving
Corporation to honor in accordance with their terms all existing employment,
severance, consulting or other compensation agreements, plans or contracts
between the Company or any Subsidiary and any officer, director or employee of
the Company or any Subsidiary which are specifically disclosed on Schedule
5.6(d).
(e) For the one-year period immediately following the Effective Time,
Parent shall cause the Company to provide such benefit plans, programs and
arrangements that are no less favorable in the aggregate than the Benefit Plans.
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SECTION 5.7 Meeting of the Company's Stockholders.
(a) After consummation of the Offer, to the extent required by
applicable law, the Company shall promptly take all action necessary in
accordance with the DGCL and its Certificate of Incorporation and Bylaws to
convene the Meeting to consider and vote on the Merger and this Agreement. At
the Meeting, all of the Shares then owned by Parent, Acquisition Sub or any
other subsidiary of Parent shall be voted to approve the Merger and this
Agreement. Subject to its fiduciary duties and Section 5.2, the Board of
Directors of the Company shall recommend that the Company's stockholders vote to
approve the Merger and this Agreement if such vote is sought, shall use its best
efforts to solicit from stockholders of the Company proxies in favor of the
Merger and shall take all other reasonable action in its judgment necessary and
appropriate to secure the vote of stockholders required by the DGCL to effect
the Merger.
(b) If required under applicable law, the Company and Parent shall
prepare the Proxy Statement, file it with the SEC under the Exchange Act as
promptly as practicable after Acquisition Sub purchases Shares pursuant to the
Offer, and use all reasonable efforts to have it cleared by the SEC. As promptly
as practicable after the Proxy Statement has been cleared by the SEC, the
Company shall mail the Proxy Statement to the stockholders of the Company as of
the record date for the Meeting.
(c) Parent and Acquisition Sub shall not, and they shall cause their
subsidiaries not to, sell, transfer, assign, encumber or otherwise dispose of
the Shares acquired pursuant to the Offer or otherwise prior to the Meeting;
provided, however, that this Section 5.7(c) shall not apply to the sale,
transfer, assignment, encumbrance or other disposition of any or all such Shares
in transactions involving solely Parent, Acquisition Sub and/or one or more of
their wholly owned subsidiaries.
(d) Notwithstanding the foregoing, in the event that Acquisition Sub
shall acquire Preferred Shares representing at least 90% of the votes
represented by all outstanding Preferred Shares and Common Shares representing
at least 90% of the votes represented by all outstanding Common Shares, the
parties hereto agree, at the request of Acquisition Sub, to take all necessary
and appropriate action to cause the Merger to become effective, in accordance
with Section 253 of the DGCL, as soon as reasonably practicable after such
acquisition, without a meeting of the stockholders of the Company.
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SECTION 5.8 Public Announcements. Parent and the Company shall consult
with each other before issuing, and provide each other the opportunity to
review, comment upon and concur with, any press release or other public
statement with respect to the transactions contemplated by this Agreement,
including the Offer and the Merger, and shall not issue any such press release
or make any such public statement prior to such consultation, except as either
party may determine is required by applicable law or by obligations pursuant to
any listing agreement with any national securities exchange.
SECTION 5.9 Stockholder Litigation. The Company shall keep Parent
reasonably informed, and shall consult with Parent on a regular basis,
concerning the defense or settlement of any stockholder litigation against the
Company and its directors relating to any of the transactions contemplated by
this Agreement.
SECTION 5.10 Rights Agreement. The Board of Directors of the Company
shall take all further action (in addition to that previously taken referred to
in Section 4.19) reasonably requested in writing by Parent (including redeeming
the Rights immediately prior to the Effective Time or amending the Rights
Agreement) in order to render the Rights inapplicable to the Offer, the Merger
and the other transactions contemplated by this Agreement.
ARTICLE 6
CONDITIONS TO CONSUMMATION OF MERGER
SECTION 6.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver, where permissible, prior to the Effective Time, of the
following conditions:
(a) Stockholder Approval. If required by applicable law, this Agreement
shall have been approved by the affirmative vote of the stockholders of the
Company by the requisite vote in accordance with applicable law;
(b) Purchase of Shares. Acquisition Sub shall have accepted for payment
and purchased Shares tendered pursuant to the Offer.
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(c) No Injunctions or Restraints. No judgment, order, decree, statute,
law, ordinance, rule, regulation, temporary restraining order, preliminary or
permanent injunction or other order enacted, entered, promulgated, enforced or
issued by any court of competent jurisdiction or other Government Entity or
other legal restraint or prohibition (collectively, "Restraints") preventing the
consummation of the Merger shall be in effect; provided, however, that the party
seeking to assert this condition shall have used reasonable efforts to prevent
the entry of any such Restraints and to appeal as promptly as possible any such
Restraints that may be entered.
ARTICLE 7
TERMINATION; AMENDMENT; WAIVER
SECTION 7.1 Termination. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time prior to the Effective
Time, notwithstanding approval thereof by the stockholders of the Company:
(a) by mutual written consent of the Company and Parent;
(b) by either the Company or Parent, if
(i) the Offer terminates or expires in accordance with its
terms without Acquisition Sub's having purchased any Shares pursuant to the
Offer because of a failure of any of the conditions set forth in Annex A hereto
to have been satisfied at the time of such termination or expiration; provided,
however, that the right to terminate this Agreement pursuant to this Section
7.1(b)(i) shall not be available to any party whose failure to fulfill any of
its obligations under this Agreement results in the failure to have satisfied
any such condition;
(ii) Shares have not been accepted for payment pursuant to
the Offer on or prior to December 31, 1997; provided, however, that the right to
terminate this Agreement pursuant to this Section 7.1(b)(ii) shall not be
available to any party whose failure to fulfill any of its obligations under
this Agreement results in the failure of the Offer to be consummated by such
time;
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(iii) any Governmental Entity shall have issued a Restraint
or taken any other action permanently enjoining, restraining or otherwise
prohibiting consummation of the Merger or any of the other transactions
contemplated by this Agreement and such Restraint or other action shall have
become final and nonappealable; provided, however, that the party seeking to
terminate this Agreement pursuant to this Section 7.1(b)(iii) shall have used
all reasonable efforts to prevent the entry of and to remove such Restraint or
other action; or
(iv) the Board of Directors of the Company (or, if
applicable, any committee thereof) shall have (A) withdrawn or modified in a
manner adverse to Parent and Acquisition Sub its approval or recommendation of
the Offer or the Merger or (B) approved or recommended any Takeover Proposal in
respect of the Company or (C) resolved to take any of the foregoing actions, in
each case in compliance with the provisions contained in Section 5.2(b) or (d).
SECTION 7.2 Effect of Termination. In the event of termination of this
Agreement by either Parent or the Company as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any liability
on the part of any party or its directors, officers or stockholders, other than
the provisions of Section 5.3(b), this Section 7.2, Section 7.3 and Section 8.9,
which provisions will survive such termination, and except to the extent that
such termination results from the willful and material breach by a party of any
of its representations, warranties, covenants or other agreements set forth in
this Agreement.
SECTION 7.3 Termination Fee. In the event that this Agreement is
terminated by the Company or Parent pursuant to Section 7.1(b)(iv), the Company
shall promptly, but in no event later than two business days after such event,
pay Parent a fee of $6 million (the "Termination Fee") in cash in immediately
available funds by wire transfer to an account designated by Parent.
SECTION 7.4 Amendment. To the extent permitted by applicable law, this
Agreement may be amended by the parties at any time before or after approval of
this Agreement by the stockholders of the Company; provided, however, that after
any such stockholder approval, no amendment shall be made which by law requires
further approval of the Company's stockholders without the approval of such
stockholders. This Agreement may
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not be amended except by an instrument in writing signed on behalf of each of
the parties.
SECTION 7.5 Extension; Waiver. At any time prior to the Effective Time,
a party hereto 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 contained herein or in any
document delivered pursuant hereto by any other party or (c) subject to Section
7.4, waive compliance by any other party with any of the agreements or
conditions contained herein. Any agreement on the part of any party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights.
SECTION 7.6 Procedure for Termination, Amendment, Extension or Waiver.
A termination of this Agreement pursuant to Section 7.1, an amendment of this
Agreement pursuant to Section 7.4 or an extension or waiver pursuant to Section
7.5 in order to be effective shall require, in the case of Parent or the
Company, action by its Board of Directors or, with respect to any amendment of
this Agreement, a duly authorized committee of its Board of Directors.
SECTION 7.7 Concurrence of Independent Directors. Notwithstanding any
other provision of this Agreement, from and after the consummation of the Offer,
the concurrence of a majority of the Independent Directors shall be required for
any amendment or determination of this Agreement by the Company, any waiver of
any of the Company's rights hereunder or otherwise pursuant to Sections 7.1, 7.4
or 7.5, any extension of the time for performance of Parent's or Acquisition
Sub's obligations or other acts hereunder, or any other action taken by the
Company's Board of Directors in connection with this Agreement (including
actions to enforce this Agreement).
ARTICLE 8
MISCELLANEOUS
SECTION 8.1 Non-Survival of Representations and Warranties. None of the
representations and warranties made in this Agreement or in any instrument
delivered pursuant to this
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Agreement shall survive after the Effective Time. This Section 8.1 shall not
limit any covenant or agreement of the parties hereto which by its terms
contemplates performance after the Effective Time.
SECTION 8.2 Entire Agreement; Assignment. This Agreement (including the
Schedules hereto) and, to the extent contemplated in Section 5.3(b), the
Confidentiality Agreement, (a) constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all other prior
agreements and understandings, both written and oral, among the parties or any
of them with respect to the subject matter hereof and (b) shall not be assigned
by operation of law or otherwise, provided that Parent or Acquisition Sub may
assign any of their rights and obligations to any direct or indirect wholly
owned subsidiary of Parent, but no such assignment shall relieve Parent or
Acquisition Sub of its obligations hereunder. Either Parent, Acquisition Sub or
any direct or indirect wholly owned subsidiary of Parent may purchase Shares
under the Offer.
SECTION 8.3 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
SECTION 8.4 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by facsimile transmission with confirmation
of receipt, by overnight courier (with delivery confirmed), or by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties as follows:
(a) if to Parent or Acquisition Sub:
Carpenter Technology Corporation
101 West Bern Street
Reading, PA 19601
Attention: John R. Welty, Esq.,
Vice President, General
Counsel & Secretary
Fax No. 610-208-3068
-42-
<PAGE>
with a copy to:
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Attention: Herbert F. Goodrich, Jr., Esq.
Fax No. 215-994-2222
(b) if to the Company:
Talley Industries, Inc.
2702 North 44th Street - Suite 100-A
Phoenix, AZ 85008
Attention: Mark S. Dickerson, Esq.
Vice President, General Counsel
& Secretary
Fax No. 602-852-6972
with copies to:
Osborn Maledon
2929 North Central Avenue
Phoenix, AZ 85012
Attention: David Victor, Esq.
Fax No. 602-640-9355
and to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Attention: William L. Rosoff, Esq.
Fax No. 212-450-4800
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the
-43-
<PAGE>
manner set forth above (provided that notice of any change of address shall be
effective only upon receipt thereof).
SECTION 8.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
SECTION 8.6 Jurisdiction. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby may be brought
against any of the parties in any federal court located in the State of Delaware
or any Delaware state court, and each of the parties hereto hereby consents to
the exclusive jurisdiction of such courts (and of the appropriate appellate
courts therefrom) in any such suit, action or proceeding and waives any
objection to venue laid therein. Process in any such suit, action or proceeding
may be served on any party anywhere in the world, whether within or without the
State of Delaware. Without limiting the generality of the foregoing, each party
hereto agrees that service of process upon such party at the address referred to
in Section 8.4, together with written notice of such service to such party,
shall be deemed effective service of process upon such party.
SECTION 8.7 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and shall not constitute a part of or
affect the meaning or interpretation of this Agreement.
SECTION 8.8 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this Agreement
except for Section 5.5 (which is intended to be for the benefit of the persons
entitled to therein, and may be enforced by such persons).
SECTION 8.9 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.
SECTION 8.10 Fees and Expenses. Except as set forth in Section 7.3, all
fees, costs and expenses incurred in connection with the transactions
contemplated by this Agreement
-44-
<PAGE>
shall be paid by the party incurring such fees and expenses, whether or not the
Offer or the Merger is consummated.
SECTION 8.11 Certain Definitions. For purposes of this Agreement
(including Annex A hereto), the following terms shall have the meanings ascribed
to them below:
(a) "affiliate" of a person shall mean (i) a person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the first-mentioned person and (ii) an
"associate", as that term is defined in Rule 12b-2 promulgated under the
Exchange Act as in effect on the date of this Agreement.
(b) "beneficial owner" (including the term "beneficially own" or
correlative terms) with respect to any securities means a person who shall be
deemed to be the beneficial owner of such securities which (i) such person or
any of its affiliates beneficially owns, directly or indirectly, (ii) such
person or any of its affiliates has, directly or indirectly, (A) the right to
acquire (whether such right is exercisable immediately or only after the passage
of time), pursuant to any agreement, arrangement or understanding or upon the
exercise of consideration rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement, arrangement or
understanding or (iii) are beneficially owned, directly or indirectly, by any
other person with which such person or any of its affiliates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of any of such securities.
(c) "control" (including the terms "controlling", "controlled by" and
"under common control with" or correlative terms) shall mean the possession,
direct or indirect, of the power to direct or cause the direction of the
management and policies of a person, whether through ownership of voting
securities, by contract, or otherwise.
(d) "fully diluted" in reference to the Shares means all outstanding
securities entitled generally to vote in the election of directors of the
Company on a fully diluted basis, after giving effect to the exercise or
conversion of all options, rights and securities exercisable or convertible into
such voting securities.
-45-
<PAGE>
(e) "knowledge" shall mean the actual knowledge of the executive
officers of the Company after reasonable investigation, including consultation
with the principal executive officers of each of the operating Subsidiaries.
(f) "Material Adverse Effect" shall mean a material adverse effect (i)
on the financial condition, assets, liabilities, business, or results of
operations of the Company and the Subsidiaries, taken as a whole, except for
changes in the general economic conditions and changes that affect the industry
of the Company or any of the Subsidiaries generally, or (ii) on the ability of
the Company to perform its obligations under this Agreement or to consummate the
transactions contemplated by this Agreement.
(g) "person" shall mean a natural person, company, corporation,
partnership, association, trust or any unincorporated organization.
(h) "subsidiary" shall mean, when used with reference to a person means
a corporation (or other entity) the majority of the outstanding voting
securities (or equity interests) of which are owned directly or indirectly by
such person.
SECTION 8.12 Performance by Acquisition Sub. Parent hereby agrees to
cause Acquisition Sub to comply with its obligations hereunder and under the
Offer and to cause Acquisition Sub to consummate the Merger as contemplated
herein.
-46-
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officer thereunto duly authorized, on the day and
year first above written.
CARPENTER TECHNOLOGY CORPORATION
By:_______________________________
Robert W. Cardy,
Chairman, President &
Chief Executive Officer
SCORE ACQUISITION CORP.
By:_______________________________
Robert W. Cardy,
President &
Chief Executive Officer
TALLEY INDUSTRIES, INC.
By:_______________________________
Paul L. Foster
Chairman of the Board &
Chief Executive Officer
-47-
<PAGE>
ANNEX A
to
Agreement and Plan of Merger
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer or this Agreement,
Acquisition Sub shall not be required to accept for payment or pay for, subject
to Rule 14e-1(c) of the Exchange Act, any Shares not theretofore accepted for
payment, and may terminate or amend the Offer if (i) that number of Shares which
would represent at least a majority of the voting power represented by the
Shares and other securities entitled generally to vote in the election of
directors of the Company outstanding on a fully diluted basis after giving
effect to the exercise or conversion of all options, rights and securities
exercisable or convertible into or exchangeable for Shares or such voting
securities shall not have been validly tendered and not withdrawn immediately
prior to the expiration of the Offer (the "Minimum Tender Condition"), (ii) any
applicable waiting period under the H-S-R Act shall not have expired or been
terminated prior to the expiration of the Offer or (iii) at any time on or after
the date of commencement of the Offer and before the acceptance of such Shares
for payment or the payment therefor, any of the following conditions exist or
shall occur:
(a) there shall have occurred (i) any general suspension
of trading in, or limitation on prices for, securities on the New York
Stock Exchange or in the over-the-counter market, (ii) any declaration
of a banking moratorium or any suspension of payments in respect of
banks in the United States, (iii) any limitation, whether or not
mandatory, by any Governmental Entity on, or other event that
materially affects, the extension of credit by banks or other lending
institutions, (iv) any commencement of a war, armed hostilities or
other national or international calamity involving the armed forces of
the United States, (v) any decline, measured from the date of this
Agreement, in either the Dow Jones Industrial Average or the Standard &
Poor's Index of 400 Industrial Companies by an amount in excess of 20%,
(vi) in the case of any of the foregoing occurrences existing on or at
the time of the commencement of the Offer, a material acceleration or
worsening thereof; or
(b) there shall be pending by any Governmental Entity, or
threatened by the staff of any Governmental Entity, any suit, action or
proceeding, (i) challenging the acquisition by Parent or Acquisition
Sub of any Shares, seeking to restrain or prohibit the making or
consummation of the Offer or the Merger or the performance of any of
the other transactions contemplated by this Agreement (ii) seeking to
prohibit or limit the ownership or operation by the Company, Parent or
any of their respective subsidiaries
<PAGE>
of a material portion of the business or assets of the Company or the
Subsidiaries, or Parent or its subsidiaries, or to compel the Company
or Parent to dispose of or hold separate any material portion of the
business or assets of the Company or the Subsidiaries, or Parent or its
subsidiaries, as a result of the Offer or any of the other transactions
contemplated by this Agreement, (iii) seeking to impose limitations on
the ability of Parent or Acquisition Sub to acquire or hold, or
exercise full rights of ownership of, any Shares accepted for payment
pursuant to the Offer including, without limitation, the right to vote
the Shares accepted for payment by it on all matters properly presented
to the stockholders of the Company, or (iv) seeking to prohibit Parent
or any of its subsidiaries from effectively controlling in any material
respect the business or operations of the Company or the Subsidiaries;
(c) there shall be any statute, rule, regulation,
judgment, order or injunction enacted, entered, enforced, promulgated
or deemed applicable to the Offer or the Merger, or any other action
shall be taken by any Governmental Entity or court, other than the
application to the Offer or the Merger of applicable waiting periods
under the H-S-R Act, that is reasonably likely to result, directly or
indirectly, in any of the consequences referred to in clauses (i)
though (iv) of paragraph (b) above;
(d) the Company shall have entered into an agreement
concerning any Superior Proposal, or the Board of Directors of the
Company or any committee thereof shall have resolved to enter into such
an agreement;
(e) any person or group (as defined in Section 13(d)(3)
of the Exchange Act) (other than Parent, Acquisition Sub or any
affiliate thereof) shall have become the beneficial owner (as defined
in Rule 13d-3 promulgated under the Exchange Act) of Shares
representing a majority of the total votes represented by all
outstanding Shares;
(f) the Merger Agreement shall have been terminated in
accordance with its terms; or
(g) any of the representations and warranties of the
Company set forth in the Merger Agreement were inaccurate in any
material respect when made or become inaccurate in any material respect
at any time thereafter, or the Company shall have failed in any
material respect to perform any obligation or covenant required by the
Merger Agreement to be performed or complied with by it;
A-2
<PAGE>
which, in the reasonable judgment of Acquisition Sub and regardless of the
circumstances giving rise to any such condition, makes it inadvisable to proceed
with the Offer or with such acceptance for payment, purchase of, or payment for
Shares.
The foregoing conditions are for the sole benefit of Acquisition Sub
and Parent and may be asserted by Acquisition Sub or Parent regardless of the
circumstances giving rise to any such condition and may be waived by Acquisition
Sub or Parent, in whole or in part, at any time and from time to time, in the
sole discretion of Acquisition Sub or Parent. The failure by Acquisition Sub or
Parent at any time to exercise any of the foregoing rights will not be deemed a
waiver of any right and each right will be deemed an ongoing right which may be
asserted at any time and from time to time.
A-3
<PAGE>
SCHEDULE 4.1(b)
SUBSIDIARIES
Aegis Technologies, L.L.C.
(Talley Industries owns 51%. The remaining interest is owned by an
unaffiliated entity).
Amcan Speciality Steels, Inc. (1)
Dimetrics, Inc. (1)
Electrodynamics, Inc. (1)
John J. McMullen Associates, Inc. (1)
LME Capital Corporation
(Talley Realty Holding Company, Incorporated owns approximately 88.6%.
The remaining shares are owned by unaffiliated entities. All shares
have not been fully issued).
Maritime Tanksystems, Inc.
Merrick Corporation
New California Corporation
Porcelain Products Co. (1)
Rowe Industries, Inc. (1)
Talley Automotive Products, Inc. (1)
Talley Canada, Inc.
Talley Defense Systems, Inc. (1)
Talley Industries, Inc. Foundation
Talley International Investment Corporation (1)
Talley International Sales Corporation
Talley Manufacturing and Technology, Inc. (2)
Talley Metals Technology, Inc. (1)
Talley Realty Development, Inc.
Talley Real Estate Company, Inc.
Talley Realty Finance and Investment Company, Inc.
Talley Realty Holding Company, Incorporated
Talley Realty Investment Group, Inc.
Talley Technology, Inc.
Universal Propulsion Company, Inc. (1)
The Waterbury Button Company
Waterbury Companies, Inc. (1)
WDC, Inc. (1)
The shares of the corporations marked with a (1) are pledged to Transamerica
Business Credit Corporation as Agent by Talley Manufacturing and Technology,
Inc. The shares of the corporations marked with a (2) are pledged to BankOne,
Columbus, N.A. by Talley Industries, Inc.
<PAGE>
SCHEDULE 4.2
CAPITALIZATION
1. Set forth below are the exercise prices and number of Shares in respect of
outstanding Stock Options under the Stock Plans:
- - - -------------------------------------------------------------------------------
Stock Plan Exercise Price per Share Number of Shares
- - - -------------------------------------------------------------------------------
1978 Stock Option Plan $9.750 83,750
- - - -------------------------------------------------------------------------------
1978 Stock Option Plan $8.000 108,800
- - - -------------------------------------------------------------------------------
1990 Stock Option Plan $5.375 52,000
- - - -------------------------------------------------------------------------------
1996 Non-Employee $7.875 9,000
Director Stock Plan
- - - -------------------------------------------------------------------------------
1996 Non-Employee $8.375 7,000
Director Stock Plan
- - - -------------------------------------------------------------------------------
2. Commitment for the issuance of Common Shares other than under Stock
Options outstanding under the Stock Plans.
(a) Stock Options Bonus Plan as outlined in a letter from Jack
Crim, dated October 14, 1996, to the President of each
operating Subsidiary of Talley Manufacturing and Technology,
Inc.
3. Outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which the
Company or any of the Subsidiaries is a party or by which any of them
is bound, obligating the Company or any of the Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other voting securities of the Company or
any of the Subsidiaries or obligating the Company or any of the
Subsidiaries to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or
undertaking.
(a) Stock Options Bonus Plan as outlined in a letter from Jack
Crim, dated October 14, 1996, to the President of each
operating Subsidiary of Talley Manufacturing and Technology,
Inc.
<PAGE>
(b) Limited Liability Company Agreement for Aegis
Technologies, L.L.C., dated as of June 17, 1997.
4. Outstanding contractual obligations of the Company or any of the
Subsidiaries to repurchase, redeem or otherwise acquire, or providing
preemptive or registration rights with respect to, any shares of
capital stock of the Company or any of the Subsidiaries.
(a) Limited Liability Company Agreement for Aegis
Technologies, L.L.C., dated as of June 17, 1997.
<PAGE>
SCHEDULE 4.4
ABSENCE OF CERTAIN CHANGES
Declaration, setting aside or payment of any dividend or other
distribution in respect of the capital stock of the Company.
(a) Regular quarterly dividends on the Series A Preferred Shares and
the Series B Preferred Shares.
<PAGE>
SCHEDULE 4.7
CONSENTS AND APPROVALS; NO VIOLATION
1. The execution and delivery of the Agreement by the Company or the
consummation of the transactions contemplated thereby will conflict with, or
result in a violation of, or default (with or without notice or lapse of time,
or both) under, or require a consent or approval by a party under or give rise
to a right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or result in the creation of any Lien upon any
of the properties or assets or the Company or any Subsidiary under the:
(a) Loan and Security Agreement, dated October 22, 1993, as thereafter
amended from time to time, between Talley Manufacturing and Technology,
Inc., Borrower and Transamerica Business Credit Corporation, as Agent
and Lender and American National Bank and Trust Company of Chicago and
National Bank of Canada as Lenders.
(b) Subsidiary Loan and Security Agreements, dated October 22, 1993, as
thereafter amended from time to time, between each of the subsidiaries
listed below and Talley Manufacturing and Technology, Inc., as
thereafter assigned to Transamerica Business Credit Corporation, as
Agent for the benefit of Transamerica Business Credit Corporation,
American National Bank and Trust Company of Chicago and National Bank
of Canada as Lenders:
Amcan Speciality Steels, Inc.
Dimetrics, Inc.
Electrodynamics, Inc.
John J. McMullen Associates, Inc.
Porcelain Products Co.
Rowe Industries, Inc.
Talley Automotive Products, Inc.
Talley Defense Systems, Inc.
Talley International Investment Corporation
Talley Metals Technology, Inc.
Universal Propulsion Company, Inc.
Waterbury Companies, Inc.
WDC, Inc.
(c) Indenture, dated as of October 15, 1993, with respect to the
12-1/4% Senior Discount Debentures Due 2005 issued by Talley
Industries, Inc.
(d) Indenture, dated as of October 15, 1993, with respect to the
10-3/4% Senior Notes Due 2003 issued by Talley Manufacturing and
Technology, Inc.
<PAGE>
2. Consents, approvals, orders or authorizations of, or registrations,
declarations or filings with any Governmental Entity.
(a) Those Subsidiaries which are authorized to handle classified
material will be required to notify the Department of Defense regarding
any change in major stockholders, officers or directors of such
Subsidiary or Talley Industries, Inc.
<PAGE>
SCHEDULE 4.10
LITIGATION
None. There is no matter that fits within the definition of the Schedule.
<PAGE>
SCHEDULE 4.11
INTELLECTUAL PROPERTY RIGHTS
The Intellectual Property Rights are encumbered by the following:
1. Loan and Security Agreement, dated October 22, 1993, as thereafter
amended from time to time, between Talley Manufacturing and Technology,
Inc., Borrower and Transamerica Business Credit Corporation, as Agent
and Lender and American National Bank and Trust Company of Chicago and
National Bank of Canada as Lenders.
2. Subsidiary Loan and Security Agreements, dated October 22, 1993, as
thereafter amended from time to time, between each of the subsidiaries
listed below and Talley Manufacturing and Technology, Inc., as
thereafter assigned to Transamerica Business Credit Corporation, as
Agent for the benefit of Transamerica Business Credit Corporation,
American National Bank and Trust Company of Chicago and National Bank
of Canada as Lenders:
Amcan Speciality Steels, Inc.
Dimetrics, Inc.
Electrodynamics, Inc.
John J. McMullen Associates, Inc.
Porcelain Products Co.
Rowe Industries, Inc.
Talley Automotive Products, Inc.
Talley Defense Systems, Inc.
Talley International Investment Corporation
Talley Metals Technology, Inc.
Universal Propulsion Company, Inc.
Waterbury Companies, Inc.
WDC, Inc.
<PAGE>
Revised 9/23/97
Schedule 4.12 (a)
CORPORATE
Corporate Executive Incentive Plan
Second Amended and Restated 1978 Stock Option Plan of Talley Industries, Inc.
1990 Stock Option Plan of Talley Industries, Inc.
Talley Manufacturing and Technology, Inc. Executive Health Care Reimbursement
Plan
Talley Manufacturing and Technology, Inc. Executive Life Insurance Plan
Talley Manufacturing and Technology, Inc. Key Employee Life Insurance Plan
Talley Manufacturing and Technology, Inc. Executive Disability Plan
Restoration Benefit Plan of Talley Manufacturing and Technology, Inc.
Talley Manufacturing and Technology, Inc. Executive Restoration Benefit Plan
Talley Manufacturing and Technology, Inc. Executive Joint and Survivor Plan
Talley Manufacturing and Technology, Inc. Employee Supplemental Retirement Plan
Talley Manufacturing and Technology, Inc. Executive Bonus Deferral Plan
Talley Manufacturing and Technology, Inc. Trust Under the Executive Benefit
Plans
Retirement Plan of Talley Manufacturing and Technology, Inc.
Talley Savings Plus
Group Medical and Dental - PPO and HMO
Group Long-Term Disability
Vacation Schedule
Holiday Schedule
Group Life Insurance
Group Business and Travel Insurance
Group Accidental Death and Dismemberment
Group Supplemental life Insurance
Group Dependent Life Insurance
Company Provided Vehicles
Severance Practice
Educational Assistance
Talley Industries, Inc. Retirement Plan (Directors only)
Directors Death Benefit Program
1996 Non-Employee Director Stock Plan
Stock Option Bonus Plan
Director Charitable Awards Program
<PAGE>
Schedule 4.12 (a)
AMCAN, INC.
Executive Incentive Plan
Amcan Sales Incentive Plan
Retirement Plan of Talley Metals Technology, Inc.
Medical/Dental- HMO
Medical/Dental - PPO
Group Life Insurance
Group Accidental Death and Dismemberment
Group Supplemental Life Insurance
Group Dependent Life Insurance
Group Long-Term Disability
Group Short-Term Disability
Vacation Schedule
Holiday Schedule
Company Provided Vehicles
Severance Practice
<PAGE>
Schedule 4.12 (a)
DIMETRICS, INC.
Executive Incentive Plan
Dimetrics Sales Incentive Plan
Retirement Plan for Salaried Employees of Dimetrics, Inc.
Retirement Plan for Hourly Employees of Dimetrics, Inc.
Medical/Dental - Salaried - HMO & PPO
Medical/Dental - Hourly - HMO & PPO
Group Life Insurance (Salaried)
Group Life Insurance (Hourly)
Group Accidental Death and Dismemberment
Group Supplemental Life Insurance (Salaried)
Group Dependent Life Insurance (Salaried)
Group Long-Term Disability
Group Short-Term Disability
Vacation Schedule
Holiday Schedule
Company Provided Vehicles
Severance Practice
Severance Agreements
Educational Assistance
<PAGE>
Schedule 4.12 (a)
ELECTRODYNAMICS, INC.
Executive Incentive Plan
Electrodynamics Sales Incentive Plan
Retirement Plan for Salaried Employees of Electrodynamics, Inc.
Electrodynamics, Inc. Pension Plan for Members of Local 134, I.B.E.W.
Medical/Dental - Salaried - HMO & PPO
Medical/Dental - Hourly - HMO & PPO
Group Life Insurance (Salaried)
Group Life Insurance (Hourly)
Group Accidental Death and Dismemberment (Salaried)
Group Supplemental Life Insurance (Salaried)
Group Supplemental Life Insurance (Hourly)
Group Dependent Life Insurance (Salaried)
Group Long-Term Disability (Salaried)
Group Short-Term Disability (Salaried)
Group Short-Term Disability (Hourly)
Vacation Schedule (Salaried)
Vacation Schedule (Hourly)
Holiday Schedule
Company Provided Vehicles
Severance Practice
Severance Agreements
Educational Assistance (Salaried)
<PAGE>
Schedule 4.12 (a)
JOHN J. McMULLEN ASSOCIATES, INC. (JJMA)
Executive Incentive Plan
JJMA Sales Incentive Bonus Plan for Non-Executive Employees
JJMA 401(k) Plan
JJMA Executive Health Care Plan
JJMA Executive Insurance Benefits Plan
Medical/Dental - HMO
Medical/Dental - PPO
Group Life Insurance
Group Accidental Death and Dismemberment
Group Supplemental Life Insurance
Group Dependent Life Insurance
Group Long-Term Disability
Group Short-Term Disability
Vacation Schedule
Holiday Schedule
Company Provided Vehicles
Severance Program
Educational Assistance
<PAGE>
Schedule 4.12 (a)
PORCELAIN PRODUCTS COMPANY
Company-wide
- - - ------------
Executive Incentive Plan
Porcelain Products Company Sales Incentive Plan
Retirement Plan for Salaried Employees of Porcelain Products Company
Retirement Plan for Hourly Employees of Porcelain Products Company
Medical/Dental - PPO (Salaried)
Group Life Insurance (Salaried)
Group Accidental Death and Dismemberment (Salaried)
Group Supplemental Life Insurance (Salaried)
Group Dependent Life Insurance (Salaried)
Group Long-Term Disability (Salaried)
Group Short-Term Disability (Salaried)
Vacation Schedule (Salaried)
Holiday Schedule (Salaried)
Company Provided Vehicles
Severance Practice
Educational Assistance (Salaried)
Knoxville Only (Hourly)
- - - -----------------------
Medical - PPO
Group Life Insurance
Group Short-Term Disability
Vacation Schedule
Holiday Schedule
Carey Only (Hourly)
- - - -------------------
Medical - PPO
Group Life Insurance
Group Short-Term Disability
Vacation Schedule
Holiday Schedule
<PAGE>
Schedule 4.12 (a)
ROWE INDUSTRIES, INC.
Executive Incentive Plan
Rowe Industries, Inc. Sales Incentive Plan
Retirement Plan for Salaried Employees of Porcelain Products Company
Money Accumulation Pension Plan for Bargaining Employees of Rowe Industries,
Inc.
Medical/Dental - PPO (Salaried)
Medical/Dental - HMO (Salaried)
Medical/Dental - HMO (Hourly)
Group Life Insurance (Salaried)
Group Life Insurance (Hourly)
Group Accidental Death and Dismemberment (Salaried)
Group Supplemental Life Insurance (Salaried)
Group Dependent Life Insurance (Salaried)
Group Dependent Life Insurance (Hourly)
Group Long-Term Disability (Salaried)
Vacation Schedule (Salaried)
Vacation Schedule (Hourly)
Holiday Schedule
Company Provided Vehicles
Severance Practice
Educational Assistance (Salaried)
<PAGE>
Schedule 4.12 (a)
TALLEY DEFENSE SYSTEMS, INC.
Executive Incentive Plan
Talley Defense Systems, Inc. Sales Incentive Plan
Retirement Plan of Talley Manufacturing and Technology, Inc.
Medical/Dental - HMO
Medical/Dental - PPO
Group Life Insurance
Group Accidental Death and Dismemberment
Group Supplemental Life Insurance
Group Dependent Life Insurance
Group Long-Term Disability
Group Short-Term Disability
Vacation Schedule
Holiday Schedule
Company Provided Vehicles
Severance Practice
Educational Assistance
<PAGE>
Schedule 4.12 (a)
TALLEY METALS TECHNOLOGY, INC.
Executive Incentive Plan
Talley Metals Technology, Inc. Sales Incentive Plan
Retirement Plan of Talley Metals Technology, Inc.
Medical/Dental - HMO
Medical/Dental - PPO
Group Life Insurance
Group Accidental Death and Dismemberment
Group Supplemental Life Insurance
Group Dependent Life Insurance
Group Long-Term Disability
Group Short-Term Disability
Vacation Schedule
Holiday Schedule
Company Provided Vehicles
Severance Practice
<PAGE>
Schedule 4.12 (a)
UNIVERSAL PROPULSION COMPANY, INC.
Executive Incentive Plan
Universal Propulsion Company, Inc. Sales Incentive Plan
Retirement Plan of Universal Propulsion Company, Inc.
Medical/Dental - HMO
Medical/Dental - PPO
Group Life Insurance
Group Accidental Death and Dismemberment
Group Supplemental Life Insurance
Group Dependent Life Insurance
Group Long-Term Disability
Group Short-Term Disability
Vacation Schedule
Holiday Schedule
Company Provided Vehicles
Severance Practice
Educational Assistance
<PAGE>
Schedule 4.12 (a)
WATERBURY COMPANIES, INC.
Company-wide
- - - ------------
Executive Incentive Plan
Waterbury Companies, Inc. Sales Incentive Plan
Waterbury Companies, Inc. Pension Plan
Retirement Plan for Hourly Employees of Waterbury Companies, Inc.
Medical HMO and PPO (Salaried)
Group Life Insurance (Salaried)
Group Accidental Death and Dismemberment (Salaried)
Group Supplemental Life Insurance (Salaried)
Group Dependent Life Insurance (Salaried)
Group Long-Term Disability (Salaried)
Group Short-Term Disability (Salaried)
Vacation Schedule (Salaried)
Holiday Schedule (Salaried)
Company Provided Vehicles
Severance Practice
Educational Assistance (Salaried)
Waterbury Only (Hourly)
- - - -----------------------
Waterbury Companies, Inc., Local 1251, U.A.W. Pension Plan
Medical PPO
Group Life Insurance
Group Accidental Death and Dismemberment
Group Short-Term Disability
Vacation Schedule
Holiday Schedule
Randolph Only (Hourly)
- - - ----------------------
Waterbury-Randolph Division Hourly Employees Pension Plan
Medical HMO and PPO
Group Life Insurance
Group Accidental Death and Dismemberment
Group Short-Term Disability
Vacation Schedule
Holiday Schedule
Independence Only (Hourly)
- - - --------------------------
Retirement Plan of Talley Metals Technology, Inc.
Medical - HMO
Group Life Insurance
Group Accidental Death and Dismemberment
Group Short-Term Disability
Vacation Schedule
Holiday Schedule
<PAGE>
SCHEDULE 4.12 (g)
a) Talley Manufacturing and Technology Inc. Group Life Insurance
Group term life insurance coverage continues for some Executives.
b) Talley Manufacturing and Technology, Inc. Executive Life
Insurance Plan Coverage may be continued at retirement.
c) Maccabees Life Insurance Company
Individual long-term disability benefit policy for Mr. Mallender.
Policy now owned by Rabbi Trust and premiums to be paid until he
attains age 65.
d) Talley Manufacturing and Technology, Inc. Executive Health
Care Reimbursement Plan Covers retired Officers and spouses.
e) Retiree Life Insurance Policies
a) Covers two (2) retired Talley Corporate Officers.
b) Covers retirees at General Time, Westclox Military, Minelco and
Electrodynamics.
f) Waterbury Retirees (No formal plan)
a) Provides up to $2,000 life benefit for bargaining unit members
who retired prior to 1995.
b) Provides $1,500 death benefit to any salaried employee who
retired prior to 1990 and not covered by another group policy.
<PAGE>
SCHEDULE 4.12 (h)
Restoration Benefit Plan of Talley Manufacturing and Technology, Inc.
Talley Manufacturing and Technology, Inc. Trust Under the Executive Benefit
Plans
The referenced Restoration Benefit Plan and Trust provide for
accelerated funding as a result of a change in control.
<PAGE>
SCHEDULE 4.12 (i)
None
<PAGE>
SCHEDULE 4.12 (j)
None
<PAGE>
SCHEDULE 4.13
TAXES
4.13(c)
The Company has one pending tax issue:
Talley Industries, Inc.; Consolidated Subsidiaries v.
Commission IRS, Tax Court No. 27826-92.
4.13(d)(iii)
Consolidations:
In regards to the Company or any Subsidiary joining in the filing of a
consolidated Federal income tax return or a combined or consolidated state
income tax return:
Federal/Foreign
Talley Industries, Inc., and each Subsidiary joins in the filing of a
consolidated Federal tax return, as required by the Internal Revenue Code. This
consolidated Federal filing is not required to be reported as a part of any
larger consolidated group.
The entities that are not directly a part of the consolidated Federal filing
are:
Talley International Sales Corporation a Foreign Sales
Corporation which files its own Federal return (beginning in
1997).
Talley Industries, Inc. Foundation a Charitable Foundation
which files a separate Federal return.
Talley Canada, Inc. a Controlled Foreign Corporation which
files returns under the laws of Canada.
Aegis Technologies, L.L.C., a Limited Liability Company which
files its own Federal return (beginning in 1997) as a
partnership.
State
Talley Industries, Inc. and each Subsidiary joins in the filing of a combined
or consolidated state income tax return in select states.
<PAGE>
The entities that are not directly a part of any combined or consolidated state
filing are:
Talley International Sales Corporation a Foreign Sales
Corporation which files its own Federal return (beginning in
1997).
Talley Industries, Inc. Foundation a Charitable Foundation
which files a separate Federal return.
Talley Canada, Inc. a Controlled Foreign Corporation which
files returns under the laws of Canada.
Aegis Technologies, L.L.C., a Limited Liability Company which
files its own Federal return (beginning in 1997) as a
partnership.
Partnerships:
In regards to owning an interest in any entity that is treated as a partnership
for federal income tax purposes:
Talley Industries, Inc. owns a 51% interest in Aegis
Technologies, L.L.C.
The other 49% is owned by Delphi, a wholly owned division of
General Motors Corporation.
4.13 (d)(v)
Elections under Section 338(g) were:
Purchasing Corporation Target Corporation
---------------------- ------------------
1. Talley Industries, Inc. Granet Industries, Inc. dba
The Barlow Company
Acquisition Date: May 1, 1984
<PAGE>
Purchasing Corporation Target Corporation
---------------------- ------------------
2. Waterbury Companies, Inc. Cline-Buckner, Inc.
Acquisition Date: March 1, 1985
3. Talley Industries, Inc. Groman Corporation and
Subsidiaries
Acquisition Date: July 16, 1985
4. Minelco, Inc. Waters Manufacturing, Inc.
Acquisition Date: October 30, 1985
<PAGE>
SCHEDULE 4.16
LABOR MATTERS
CONTRACT
DIVISION UNION EXPIRATION
- - - -------- ----- ----------
Electrodynamics I.B.E.W., Local 134 November 18, 1997
.
Porcelain Products
Knoxville, TN Teamsters, Local 59 December 15, 2001
Carey, OH Glass, Molders, and Pottery September 30, 1998
Workers, Local 304
Rowe Industries, Inc. U.A.W., Local 12 January 15, 2000
Waterbury Companies, Inc. U.A.W., Local 12 March 12, 2000
<PAGE>
SCHEDULE 4.18
COVENANTS NOT TO COMPETE
The Company and various of its Subsidiaries are bound by the following Covenants
Not to Compete or restrictions contained in the following Agreements:
Agreement Not to Compete dated as of June 1, 1993, by and among Maritime
Tanksystems, Inc., John J. McMullen Associates, Inc., John P. Martin and
Maritime Tanksystems International, Inc.
Covenant Not to Compete dated as of May 23, 1997, between Reynolds Industries
Incorporated, Rowe Industries and Talley Manufacturing and Technology, Inc.
Limited Liability Agreement dated as of June 17, 1997 of Aegis Technologies,
L.L.C. made and entered into by and between General Motors Corporation,
including Delphi interior and Lighting Systems and Talley Industries
Joint Development Agreement dated as of June 17, 1997 dated as of June 17, 1997,
by and between General Motors Corporation including Delphi interior and Lighting
Systems and Talley Defense Systems, Inc.
Non-Competition Agreement made on March 24, 1997, by and between Ulbrich of
Canada, Inc. and Talley Canada d/b/a Diversified Stainless Steel of Canada and
d/b/a Acier Inoxydable Diversified du Canada
Non-Competition Agreement made on March 24, 1997, by and between Ulbrich of
Canada, Inc. and Talley Manufacturing and Technology, Inc.
Non-Competition Agreement made on March 24, 1997, by and between Ulbrich of
Canada, Inc. and Talley Industries, Inc.
Silicone Teflon Products Agreement dated as of January 5, 1996, by and between
Markel Corporation and Rowe Industries, Inc.
License Agreement dated November 11, 1991, by and between Quaker State
Corporation (formerly known as Blue Coral, Inc.) and Waterbury Companies, Inc.
Every teaming agreement or joint venture agreement provides that the relevant
Subsidiary will work solely with the team partner(s) or joint venture partner(s)
in seeking business in the areas defined by the governing agreements.
<PAGE>
SCHEDULE 5.6 (d)
AGREEMENTS WITH CURRENT AND FORMER OFFICERS AND DIRECTORS
Letter agreement between John J. McMullen Associates, Inc. and David Hanafourde
dated December 22, 1993.
Letter agreement between John J. McMullen Associates, Inc. and Ronald J. d'Arcy
dated October 5, 1992.
Letter agreement between John J. McMullen Associates, Inc. and P. Thomas Diamant
dated October 5, 1992.
Letter agreement between John J. McMullen Associates, Inc. and Anthony N. Serro
dated October 5, 1992.
Letter agreement between John J. McMullen Associates, Inc. and Bernard L. Skeens
dated October 5, 1992.
Indemnification Procedures Agreements dated August 25, 1993 between Talley
Industries, Inc. and each of the following: Messrs. Benson, Crim, Foster,
Hoopes, MacNaughton, Mallender, Nielsen, Orlando, Stodder, Ulrich and Victor.
Indemnification Procedures Agreements dated February 21, 1995 between Talley
Industries, Inc. and each of the following: Messrs. Israel and Stamatakis.
Indemnification Procedures Agreements dated June 3, 1997 between Talley
Industries, Inc. and each of the following: Messrs. Rockow and Craig.
Indemnification Procedures Agreements dated February 21, 1995 between Talley
Manufacturing and Technology, Inc. and each of the following: Messrs. Benson,
Foster, Hoopes, Israel, MacNaughton, Orlando, Stodder, Ulrich and Victor.
Indemnification Procedures Agreements dated August 25, 1993 between Talley
Manufacturing and Technology, Inc. and each of the following: Messrs. Crim,
Dickerson, Mallenders, May and Mullen.
Severance and Settlement Agreement between William H. Mallender and Talley
Industries, Inc. dated June 21, 1997.
Consulting Agreement between Talley Industries, Inc., Talley Manufacturing and
Technology, Inc. and Donald L. Corey dated March 31, 1994, as thereafter amended
by certain letters dated December 16, 1994, December 22, 1995 and January 20,
1997.
1
<PAGE>
Consulting Agreement between Talley Manufacturing and Technology, Inc. and
McMullen Consultants, Inc. dated February 7, 1996.
Employment Agreement between Talley Industries, Inc. and Dr. Paul Foster dated
August 11, 1997.
Consulting Agreement between Talley Industries, Inc. and Charles J. Freericks
dated April 15, 1997.
Letter agreement between Talley Industries, Inc. and Charles J. Freericks dated
April 10, 1997.
Negotiated Separation Agreement and Release between Talley Industries, Inc. and
John Andersen dated August 22, 1995.
Consulting Agreement between Universal Propulsion Company, Inc. and John Huber
effective January 1, 1993, as thereafter amended pursuant to those certain
Consulting Agreement (Renewals) dated 12/22/93 and 5/17/96.
Consulting Agreement between Universal Propulsion Company, Inc. and Larry C.
Kempton effective February 1, 1997.
Retention bonus letters dated September 19, 1997 executed by the chief executive
officers of Talley Industries, Inc. ("Talley") and Carpenter Technology
Corporation addressed to key employees of Talley's subsidiaries.
2
<PAGE>
August 7, 1997
PERSONAL and CONFIDENTIAL
Ms. Donna M. Hitscherich
Vice President
J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Dear Ms. Hitscherich:
Carpenter Technology Corporation ("we", "our" or "us") has requested information
regarding Talley Industries, Inc. (the "Company", "your" or "you") in connection
with our consideration of the possible acquisition of the Company (a "Possible
Transaction"). In consideration of your furnishing us with the Evaluation
Materials (as defined below) we agree as follows:
Confidentiality of Evaluation Materials
We will treat confidentially any information (whether written or oral) that
either the Company or its financial advisor, J.P. Morgan & Co. Incorporated
("JPM"), or the Company's other representatives furnish to us in connection with
a Possible Transaction involving the Company, together with analyses,
compilations, studies or other documents prepared by us, or by our
representatives (as defined below) which contain or otherwise reflect such
information or our review of, or interest in, the Company (collectively, the
"Evaluation Materials"). We recognize and acknowledge the competitive value of
the Evaluation Materials and the damage that could result to the Company if the
Evaluation Materials were used or disclosed except as authorized by this
Agreement.
The term "Evaluation Materials" includes information furnished to us orally or
in writing (whatever the form or storage medium) or gathered by inspection, and
regardless of whether such information is specifically identified as
"confidential". The term "Evaluation Materials" does not include information
which (i) is or becomes generally available to the public other than as a result
of a disclosure by us or our representatives, (ii) was or becomes available to
us on a non-confidential basis from a source other than the Company or its
representatives, provided that such source is not prohibited from disclosing
such information to us by a contractual, legal or fiduciary obligation to the
Company or its representatives, or (iii) is independently developed by us.
<PAGE>
Ms. Donna M. Hitscherich
August 7, 1997
Page 2
Use of Evaluation Materials
We will not use any to the Evaluation Materials for any purpose other than the
exclusive purpose of evaluating a Possible Transaction. We and our
representatives will keep the Evaluation Materials completely confidential;
provided, however, that (i) any of such information may be disclosed to those of
our directors, officers, employees, agents, representatives (including
attorneys, accountants and financial advisors), lenders and other sources of
financing (collectively, "our representatives") who we reasonably determine need
to know such information for the purpose of evaluating a Possible Transaction
between us and the Company (it being understood that our representatives shall
be informed by us of the confidential nature of such information and shall be
directed by us, and shall each agree to treat such information confidentially)
and (ii) any other disclosure of such information may only be made if the
Company consents in writing prior to any such disclosure. Without limiting the
generality of the foregoing, in the event that a Possible Transaction is not
consummated neither we nor our representatives shall use any of the Evaluation
Materials for any purpose. We will be responsible for any breach of this
Agreement by our representatives.
In the event that we or any of our representatives receive a request or are
required (by deposition, interrogatory, request for documents, subpoena, civil
investigative demand or similar process) to disclose all or any part of the
Evaluation Materials, we or our representatives, as the case may be, agree to
(i) immediately notify the Company of the existence, terms and circumstances
surrounding such a request, (ii) consult with the Company on the advisability of
taking legally available steps to resist or narrow such request and (iii) assist
the Company in seeking a protective order or other appropriate remedy. In the
event that such protective order or other remedy is not obtained or that the
Company waives compliance with the provisions hereof, (i) we or our
representatives, as the case may be, may disclose to any tribunal only that
portion of the Evaluation Materials which we are advised by counsel is legally
required to be disclosed, and shall exercise our best efforts to obtain
assurance that confidential treatment will be accorded such Evaluation Materials
and (ii) we shall not be liable for such disclosure unless disclosure to any
such tribunal was caused by or resulted from a previous disclosure by us or our
representatives not permitted by this Agreement.
Non-Disclosure
The disclosure of our possible interest in purchasing the Company could have a
material adverse effect on the Company's business if for any reason an agreement
of purchase and sale is not consummated. Accordingly, unless required by
applicable law, we agree that prior to the execution of a Sale Agreement with
respect to the closing of a Possible Transaction, without the prior written
consent of the Company, we will not, and we will direct our representatives not
to, disclose to any person either the fact that discussions or negotiations are
taking place concerning a possible transaction between us and the Company or any
to the terms, conditions or other facts with respect to any such Possible
Transaction, including the status thereof unless we are advised by counsel that
we are required to make such disclosure. The term "person" as used in this
letter shall be broadly interpreted to include, without limitation, any
corporation, the Company, governmental agency or body, stock exchange,
partnership, association or individual.
<PAGE>
Ms. Donna M. Hitscherich
August 7, 1997
Page 3
Return of Documents
Upon the Company's request, we shall promptly deliver to the Company or destroy
all written Evaluation Materials and any other written materials without
retaining, in whole or in part, any copies, extracts or other reproductions
(whatever the form or storage medium) of such materials.
No Unauthorized Contact
During the course of our evaluation, all inquiries and other communications are
to be made directly to JPM or employees or representatives of the Company
specified by JPM. Accordingly, we agree not to directly or indirectly contact or
communicate with any executive or other employee of the Company concerning a
Possible Transaction, or to seek any information in connection therewith from
such person, without the express consent of JPM, with the exception of direct
communication between our chairman and the Company's chairman. We also agree not
to discuss with or offer to any third party an equity participation in a
Possible Transaction or any other form of joint acquisition by us and such third
party without JPM's prior written consent provided that the foregoing
undertaking shall not prevent us from soliciting, on a confidential basis,
indications of intent form selected third parties for the purchase of portions
of the Company.
For a period of two years following the date hereof, you will not, directly or
indirectly, solicit for employment or hire any officer, director, or employee of
the Company or any of its subsidiaries or divisions with whom you have had
contact or who became known to you in connection with your consideration of the
Possible Transaction, except that you shall not be precluded from hiring any
such employee who (i) initiates discussions regarding such employment without
any direct or indirect solicitation by you, (ii) responds to any public
advertisement placed by you, or (iii) has been terminated by the Company or its
subsidiaries prior to commencement of employment discussions between you and
such officer, director, or employee.
Standstill
We agree that until two years from the date of this Agreement, we will not
without the prior approval of the Board of Directors of the Company (i) acquire
or make any proposal to acquire any securities or property of the Company, (ii)
propose to enter into any merger or business combination involving the Company
or purchase a material portion of the assets of the Company, (iii) make or
participate in any solicitation of proxies to vote, or seek to advise or
influence any person with respect to the voting of any securities of the
Company, (iv) form, join or participate in a "group" (within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934) with respect to any
voting securities of the Company, (v) otherwise act or seek to control or
influence the management, Board of Directors or policies of the Company, (vi)
disclose any intention, plan or arrangement inconsistent with the foregoing or
(vii) take any action which might require the Company to make a public
announcement regarding the possibility of a business combination or merger.
<PAGE>
Ms. Donna M. Hitscherich
August 7, 1997
Page 4
No Representation or Warranty
Although the Company and JPM have endeavored to include in the Evaluation
Materials information known to them which they believe to be relevant for the
purpose of our investigation, we acknowledge and agree that none of the Company,
JPM or any of the Company's other representatives or agents is making any
representation or warranty, expressed or implied hereunder, as to the accuracy
or completeness of the Evaluation Materials, and none of the Company, JPM or any
of the Company's other representatives or agents, nor any of their respective
officers, directors, employees, representatives, stockholders, owners,
affiliates, advisors or agents, will have any liability to us or any other
person hereunder resulting from the use of Evaluation Materials by us or any of
our representatives. Only those representations or warranties that are made to a
purchaser in a definitive sale agreement for the Company ("Sale Agreement")
when, as and if it is executed, and subject to such limitations and restrictions
as may be specified in such Sale Agreement, will have any legal effect.
We also acknowledge and agree that no contract or agreement providing for the
sale of the Company shall be deemed to exist between us and the Company unless
and until a Sale Agreement has been executed and delivered by us and each of the
other parties thereto, and we hereby waive, in advance, any claims (including,
without limitation, breach of contract) in connection with the sale of the
Company unless and until a Sale Agreement has been executed and delivered by us
and each of the other parties thereto. We also agree that unless and until a
Sale Agreement between the Company and us with respect to the acquisition of the
Company has been executed and delivered by us and each of the other parties
thereto, there shall not be any legal obligation of any kind whatsoever with
respect to any such transaction by virtue of this agreement or any other written
or oral expression with respect to such transaction except, in the case of this
Agreement for the matters specifically agreed to herein. For purposes of this
Agreement, the term "Sale Agreement" does not include an executed letter of
intent or any other preliminary written agreement, nor does it include any oral
acceptance of an offer or bid by us.
No Solicitation
During the period from acceptance of this agreement until the earlier of (a) the
execution of a definitive agreement or (b) the date that is 45 days after the
date of such acceptance, the Company and the officers, directors, employees and
other representatives of the Company including JPM shall not directly or
indirectly, solicit, initiate, or encourage any offers or proposals for the
acquisition of the Company, or of any of the capital stock or all, or
substantially all, of the assets of the Company, from third parties (an
"Acquisition Proposal"). The Company, may, however, participate in discussions
or negotiations with, and provide confidential information to, a third party, if
the Chairman of the Board of the Company determines in good faith, after
receiving advice from the Company's financial advisor, that such third party has
submitted a bona fide proposal or indication of interest that is, or could
reasonably be expected to lead to, an Acquisition Proposal that is financially
superior to the non-binding indication of interest contained in the letter of
August 7, 1997 from Robert W. Cardy to Paul L. Foster, provided, however, that
the Company agrees to inform us of the receipt of any such proposal.
<PAGE>
Ms. Donna M. Hitscherich
August 7, 1997
Page 5
Legal Remedy
We understand and agree that money damages would not be a sufficient remedy for
any breach of this Agreement by us or our representatives and that the Company
will be entitled to specific performance and injunctive relief as remedies for
any such breach. Such remedies shall not be deemed to be the exclusive remedies
for a breach of this Agreement by us or our representatives but shall be in
addition to all other remedies available at law or equity.
Other
This Agreement constitutes the entire agreement between the parties hereto
regarding the subject matter hereof. This Agreement may be changed only by a
written agreement signed by the parties hereto or their authorized
representatives.
This Agreement shall be governed and construed in accordance with the laws of
the State of New York, without regard to the conflicts of law principles
thereof.
<PAGE>
Ms. Donna M. Hitscherich
August 7, 1997
Page 6
If you are in agreement with the foregoing, please sign and return one copy of
this letter, it being understood that all counterpart copies will constitute but
one agreement with respect to the subject matter of this letter.
Very truly yours,
CARPENTER TECHNOLOGY CORPORATION
By: /s/ G. Walton Cottrell
Name: G. Walton Cottrell
Title: Senior Vice President - Finance
and Chief Financial Officer
/s/ John r. Welty
Vice President, General Counsel and Secretary
Agreed and accepted this 11th day of August, 1997
J.P. MORGAN SECURITIES INC., solely as Company's representative
By: /s/ Donna M. Hitscherich
Name: Donna M. Hitscherich
Title: Vice President
