-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FuvxABfOmDHoanlCrmIUPeTv58V686ALTZprsFFUT0dRxA0FGGd+62D5VbDE0V2E rIxOpflTWTD/bVKAsSw6UQ== 0000912057-97-023641.txt : 19970709 0000912057-97-023641.hdr.sgml : 19970709 ACCESSION NUMBER: 0000912057-97-023641 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 16 FILED AS OF DATE: 19970708 SROS: NYSE GROUP MEMBERS: FP ADVISORS, L.L.C. GROUP MEMBERS: FREMONT ACQUISITION COMPANY, LLC GROUP MEMBERS: FREMONT GROUP, L.L.C. GROUP MEMBERS: FREMONT INVESTORS, INC. GROUP MEMBERS: FREMONT PARTNERS, L.P. GROUP MEMBERS: KERR ACQUISTION CORP SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: KERR GROUP INC CENTRAL INDEX KEY: 0000055454 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 950898810 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-34081 FILM NUMBER: 97637429 BUSINESS ADDRESS: STREET 1: 500 NEW HOLLAND AVE CITY: LANCASTER STATE: PA ZIP: 17602 BUSINESS PHONE: 3105562200 MAIL ADDRESS: STREET 1: 1840 CENTURY PARK EAST CITY: LOS ANGELES STATE: CA ZIP: 90067 FORMER COMPANY: FORMER CONFORMED NAME: KERR GLASS MANUFACTURING CORP DATE OF NAME CHANGE: 19920518 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: KERR GROUP INC CENTRAL INDEX KEY: 0000055454 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 950898810 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: 1934 Act SEC FILE NUMBER: 005-34081 FILM NUMBER: 97637430 BUSINESS ADDRESS: STREET 1: 500 NEW HOLLAND AVE CITY: LANCASTER STATE: PA ZIP: 17602 BUSINESS PHONE: 3105562200 MAIL ADDRESS: STREET 1: 1840 CENTURY PARK EAST CITY: LOS ANGELES STATE: CA ZIP: 90067 FORMER COMPANY: FORMER CONFORMED NAME: KERR GLASS MANUFACTURING CORP DATE OF NAME CHANGE: 19920518 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: KERR ACQUISTION CORP CENTRAL INDEX KEY: 0001041988 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: 50 FREMONT STREET SUITE 3700 CITY: SAN FRANCISCO STATE: CA ZIP: 94105 MAIL ADDRESS: STREET 1: 50 FREMONT STREET SUITE 3700 CITY: SAN FRANCISCO STATE: CA ZIP: 94105 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: KERR ACQUISTION CORP CENTRAL INDEX KEY: 0001041988 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: 50 FREMONT STREET SUITE 3700 CITY: SAN FRANCISCO STATE: CA ZIP: 94105 MAIL ADDRESS: STREET 1: 50 FREMONT STREET SUITE 3700 CITY: SAN FRANCISCO STATE: CA ZIP: 94105 SC 14D1 1 SCHEDULE 14D1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 AND SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 ------------------------ KERR GROUP, INC. (Name of Subject Company) KERR ACQUISITION CORPORATION FREMONT ACQUISITION COMPANY, LLC (Bidders) ------------------------ COMMON STOCK, PAR VALUE $0.50 PER SHARE (AND ASSOCIATED PURCHASE RIGHTS) $1.70 CLASS B CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES D, PAR VALUE $0.50 PER SHARE (Title of Class of Securities) ------------------------ 492376108 AND 492376207 (CUSIP Number of Class of Securities) ------------------------ GILBERT H. LAMPHERE PRESIDENT FREMONT ACQUISITION COMPANY, LLC C/O THE FREMONT GROUP 50 FREMONT STREET SUITE 3700 SAN FRANCISCO, CALIFORNIA 94105 (415) 284-8500 (Name, Address and Telephone Number of Person authorized to Receive Notices and Communications on Behalf of Bidder) COPY TO: KENTON J. KING, ESQ. Skadden, Arps, Slate, Meagher & Flom LLP Four Embarcadero Center, Suite 3800 San Francisco, California 94111 (415) 984-6400 CALCULATION OF FILING FEE Transaction Valuation* $29,757,082 Amount of Filing Fee $5,951.42 * For purposes of calculating fee only. This amount assumes (i) the purchase of 3,933,095 outstanding shares of common stock of Kerr Group, Inc. and 449,235 shares of common stock of Kerr Group, Inc. which may be issued upon exercise of outstanding options and warrants, in each case, at $5.40 in cash per share and (ii) the purchase of 487,400 outstanding shares of $1.70 Class B Cumulative Convertible Preferred Stock, Series D at $12.50 in cash per share . The amount of the filing fee calculated in accordance with Regulation 240.0-11 of the Securities Exchange Act of 1934, as amended, equals 1/50 of one percentum of the value of shares to be purchased. / / 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. Form or Registration No.: Not applicable. Filing Party: Not applicable. Date Filed: Not applicable. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CUSIP NO. 492376108 AND 492376207 14D-1 1. Names of Reporting Person S.S. or I.R.S. Identification Nos. of Above Persons Kerr Acquisition Corporation 2. Check the Appropriate Box if a Member of a Group (a) / / (b) / / 3. SEC Use Only 4. Source of Funds AF 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) or 2(f) / / 6. Citizenship or Place of Organization Delaware 7. Aggregate Amount Beneficially Owned By Each Reporting Person 782,865 (see the Offer to Purchase) 8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares / / 9. Percent of Class Represented By Amount in Row (7) 19.9% 10. Type of Reporting Person CO
2 CUSIP NO. 492376108 AND 492376207 14D-1 1. Names of Reporting Person S.S. or I.R.S. Identification Nos. of Above Persons Fremont Acquisition Company, LLC 2. Check the Appropriate Box if a Member of a Group (a) / / (b) / / 3. SEC Use Only 4. Source of Funds AF 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) or 2(f) / / 6. Citizenship or Place of Organization Delaware 7. Aggregate Amount Beneficially Owned By Each Reporting Person 782,865 (see the Offer to Purchase) 8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares / / 9. Percent of Class Represented By Amount in Row (7) 19.9% 10. Type of Reporting Person OO (limited liability company)
3 CUSIP NO. 492376108 AND 492376207 14D-1 1. Names of Reporting Person S.S. or I.R.S. Identification Nos. of Above Persons Fremont Partners, L.P. 2. Check the Appropriate Box if a Member of a Group (a) / / (b) / / 3. SEC Use Only 4. Source of Funds OO 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) or 2(f) / / 6. Citizenship or Place of Organization Delaware 7. Aggregate Amount Beneficially Owned By Each Reporting Person 782,865 (see the Offer to Purchase) 8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares / / 9. Percent of Class Represented By Amount in Row (7) 19.9% 10. Type of Reporting Person PN
4 CUSIP NO. 492376108 AND 492376207 14D-1
1. Names of Reporting Person S.S. or I.R.S. Identification No. of Above Persons FP Advisors, L.L.C. 2. Check the Appropriate Box if a Member of a Group(a) / / (b) / / 3. SEC Use Only 4. Source of Funds OO 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) or 2(f) / / 6. Citizenship or Place of Organization Delaware 7. Aggregate Amount Beneficially Owned By Each Reporting Person 782,865 (see the Offer to Purchase) 8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares / / 9. Percent of Class Represented By Amount in Row (7) 19.9% 10. Type of Reporting Person OO (limited liability company)
5 CUSIP NO. 492376108 AND 492376207 14D-1
1. Names of Reporting Person S.S. or I.R.S. Identification No. of Above Persons Fremont Group, L.L.C. 2. Check the Appropriate Box if a Member of a Group(a) / / (b) / / 3. SEC Use Only 4. Source of Funds OO 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) or 2(f) / / 6. Citizenship or Place of Organization Delaware 7. Aggregate Amount Beneficially Owned By Each Reporting Person 782,865 (see the Offer to Purchase) 8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares / / 9. Percent of Class Represented By Amount in Row (7) 19.9% 10. Type of Reporting Person OO (limited liability company)
6 CUSIP NO. 492376108 AND 492376207 14D-1 1. Names of Reporting Person S.S. or I.R.S. Identification No. of Above Persons Fremont Investors, Inc. 2. Check the Appropriate Box if a Member of a Group(a) / / (b) / / 3. SEC Use Only 4. Source of Funds OO 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) or 2(f) / / 6. Citizenship or Place of Organization Nevada 7. Aggregate Amount Beneficially Owned By Each Reporting Person 782,865 (see the Offer to Purchase) 8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares / / 9. Percent of Class Represented By Amount in Row (7) 19.9% 10. Type of Reporting Person CO
7 TENDER OFFER This Tender Offer Statement on Schedule 14D-1 (this "Statement") relates to the offer by Kerr Acquisition Corporation, a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of Fremont Acquisition Company, LLC, a Delaware limited liability company ("Fremont"), to purchase all of the outstanding shares of (i) common stock, par value $.50 per share, including the associated rights to purchase shares of preferred stock (the "Rights" and, together with the common stock, the "Common Stock") and (ii) $1.70 Class B Cumulative Convertible Preferred Stock, Series D, par value $0.50 per share (the "Series D Preferred Shares" and, together with the Common Stock, the "Shares"), of Kerr Group, Inc., a Delaware corporation (the "Company"), at $5.40 per share of Common Stock and $12.50 per share of Series D Preferred Shares, respectively, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated July 8, 1997 (the "Offer to Purchase"), a copy of which is attached hereto as Exhibit (a)(1), and in the related Letters of Transmittal, copies of which are attached hereto as Exhibits (a)(2) and (a)(3) (which together constitute the "Offer"). This Statement also constitutes a Statement on Schedule 13D of each of the Purchaser, Fremont, Fremont Partners, L.P. ("Fremont Partners"), FP Advisors, L.L.C. ("FP Advisors"), Fremont Group, L.L.C. ("The Fremont Group") and Fremont Investors, Inc. ("Fremont Investors") with respect to the option granted by the Company to purchase up to 782,685 (approximately 19.9%) newly issued shares of Common Stock at $5.40 per share. The Option can only be exercised in certain circumstances described in Section 11 of the Offer to Purchase. Each of the Purchaser, Fremont, Fremont Partners, FP Advisors, The Fremont Group and Fremont Investors disclaims beneficial ownership of such shares. ITEM 1. SECURITY AND SUBJECT COMPANY. (a) The name of the subject company is Kerr Group, Inc. and the address of its principal executive offices is 500 New Holland Avenue, Lancaster, Pennsylvania 17062. (b) The class of securities to which this Statement relates is (i) the Common Stock and (ii) the Series D Preferred Shares of the Company. As of June 23, 1997 there were (a) 3,933,095 shares of Common Stock, issued and outstanding and (b) outstanding options and warrants to purchase an aggregate of 449,235 shares of Common Stock and (c) 487,400 shares of Series D Preferred Shares issued and outstanding, convertible into 708,923 shares of Common Stock. Purchaser is seeking to purchase all of the outstanding Shares at a purchase price of $5.40 per Share of Common Stock and $12.50 per share of Series D Preferred Shares, respectively, net to the seller in cash. (c) The information set forth in "Section 6 -- Price Range of the Shares; Dividends on the Shares" of the Offer to Purchase is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND. (a)-(d), (g) This Statement is being filed by the Purchaser, Fremont, Fremont Partners, FP Advisors, The Fremont Group and Fremont Investors. Each of Fremont Partners, FP Advisors, The Fremont Group and Fremont Investors disclaims that it is a "bidder" within the meaning of Schedule 14D-1. The information set forth in the "INTRODUCTION" and "Section 9 -- Certain Information Concerning Fremont Partners, Fremont and the Purchaser" of the Offer to Purchase is incorporated herein by reference. The name, business address, present principal occupation or employment, the material occupations, positions, offices or employments for the past five years and citizenship of each director and executive officer of Fremont Partners, L.P., Fremont and the Purchaser and the name, principal business and address of any corporation or other organization in which such occupations, positions, offices and employments are or were carried on are set forth in Schedule I of the Offer to Purchase and incorporated herein by reference. (e)-(f) During the last five years neither the Purchaser or Fremont nor, to the best knowledge of the Purchaser and Fremont, any of the persons listed in Schedule I of the Offer to Purchase have been 8 ITEM 2. IDENTITY AND BACKGROUND. (CONTINUED) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or 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)(1) Other than the transactions described in Item 3(b) below, neither the Purchaser or Fremont, nor, to the best knowledge of the Purchaser and Fremont, any of the persons listed in Schedule I of the Offer to Purchase, has entered into any transaction with the Company, or any of the Company's affiliates which are corporations, since the commencement of the Company's third full fiscal year preceding the date of this Statement, the aggregate amount of which was equal to or greater than one percent of the consolidated revenues of the Company for (i) the fiscal year in which such transaction occurred or (ii) the portion of the current fiscal year which has occurred if the transaction occurred in such year. (a)(2) Other than the transactions described in Item 3(b) below, neither the Purchaser or Fremont, nor, to the best knowledge of the Purchaser and Fremont, any of the persons listed in Schedule I of the Offer to Purchase, has entered into any transaction since the commencement of the Company's third full fiscal year preceding the date of this Statement, with the executive officers, directors or affiliates of the Company which are not corporations, in which the aggregate amount involved in such transaction or in a series of similar transactions, including all periodic installments in the case of any lease or other agreement providing for periodic payments or installments, exceeded $40,000. (b) The information set forth in the "INTRODUCTION", "Section 9 -- Certain Information Concerning Fremont Partners, Fremont and the Purchaser", "Section 11 - -- Background of the Offer; Purpose of the Offer and the Merger; The Merger Agreement and Certain Other Agreements" and "Section 12 -- Plans for the Company; Other Matters" of the Offer to Purchase is incorporated herein by reference. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a)-(b) The information set forth in "Section 10 -- Source and Amount of Funds" of the Offer to Purchase is incorporated herein by reference. (c) Not applicable. ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER. (a)-(e) The information set forth in the "INTRODUCTION", "Section 11 -- Background of the Offer; Purpose of the Offer and the Merger; The Merger Agreement and Certain Other Agreements" and "Section 12 -- Plans for the Company; Other Matters" of the Offer to Purchase is incorporated herein by reference. (f)-(g) The information set forth in "Section 7 -- Effect of the Offer on the Market for the Shares; Stock Listing; 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)-(b) The information set forth in "Section 9 -- Certain Information Concerning Fremont Partners, Fremont and the Purchaser" and "Section 11 -- Background of the Offer; Purpose of the Offer and the 9 ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (CONTINUED) Merger; The Merger Agreement and Certain Other Agreements" of the Offer to Purchase is incorporated herein by reference. ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. The information set forth in the "INTRODUCTION", "Section 10 -- Source and Amount of Funds", "Section 11 -- Background of the Offer; Purpose of the Offer and the Merger; The Merger Agreement and Certain Other Agreements", "Section 12 - -- Plans for the Company; Other Matters" and "Section 16 -- Fees and Expenses" of the Offer to Purchase is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in "Section 16 -- 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 9 -- Certain Information Concerning Fremont Partners, Fremont and the Purchaser" of the Offer to Purchase is incorporated herein by reference. ITEM 10. ADDITIONAL INFORMATION. (a) Except as disclosed in Items 3 and 7 above, there are no present or proposed material contracts, arrangements, understandings or relationships between the Purchaser or Fremont, or to the best knowledge of the Purchaser and Fremont, any of the persons listed in Schedule I of the Offer to Purchase, and the Company, or any of its executive officers, directors, controlling persons or subsidiaries. (b)-(c) The information set forth in the "INTRODUCTION", "Section 14 -- Conditions of the Offer" and "Section 15 -- Certain Legal Matters" of the Offer to Purchase is incorporated herein by reference. (d) The information set forth in "Section 7 -- Effect of the Offer on the Market for Shares; Stock Listing; Exchange Act Registration; Margin Regulations" and "Section 15 -- Certain Legal Matters" of the Offer to Purchase is incorporated herein by reference. (e) None. (f) The information set forth in the Offer to Purchase and the Letters of Transmittal, to the extent not otherwise incorporated herein by reference, is incorporated herein by reference. ITEM 11. MATERIALS TO BE FILED AS EXHIBITS. (a)(1) Offer to Purchase, dated July 8, 1997. (a)(2) Letter of Transmittal with respect to the Common Stock. (a)(3) Letter of Transmittal with respect to the Series D Preferred Shares. (a)(4) Letter for use by Brokers, Dealers, Banks, Trust Companies and Nominees to their Clients. (a)(5)Letter to Clients. (a)(6) Notice of Guaranteed Delivery with respect to the Common Stock. (a)(7) Notice of Guaranteed Delivery with respect to the Series D Preferred Shares. 10 ITEM 11. MATERIALS TO BE FILED AS EXHIBITS. (CONTINUED) (a)(8) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(9) Press Release jointly issued by Fremont and the Company, dated July 1, 1997. (a)(10) Form of Summary Advertisement, dated July 8, 1997. (a)(11) Fairness Opinion of CIBC Wood Gundy Securities Corp., dated June 30, 1997. (c)(1) Agreement and Plan of Merger, dated as of July 1, 1997, by and among Fremont, the Purchaser and the Company. (c)(2) Option Agreement, dated as of July 1, 1997, by and between Fremont and the Company. (c)(3) Guarantee, dated as of July 1, 1997, by and between Fremont Partners, L.P. and the Company. (c)(4) Confidentiality Agreement, dated November 6, 1995, by and between Fremont Group, Inc. and Lehman Brothers Inc. on behalf of the Company. (d) None. (e) Not applicable. (f) None. 11 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: July 8, 1997 KERR ACQUISITION CORPORATION By: /s/ R. S. Kopf ----------------------------------- Name: R. S. Kopf Title: Vice President 12 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: July 8, 1997 FREMONT ACQUISITION COMPANY, LLC By: /s/ R. S. Kopf ----------------------------------- Name: R. S. Kopf Title: Vice President 13 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: July 8, 1997 FREMONT PARTNERS, L.P. By: FP Advisors, L.L.C., its general partner By: Fremont Group, L.L.C., its managing member By: Fremont Investors, Inc., its manager By: /s/ R. S. Kopf -------------------------- Name: R. S. Kopf Title:Managing Principal, General Counsel and Secretary 14 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: July 8, 1997 FP ADVISORS, L.L.C. By: Fremont Group, L.L.C., its managing member By: Fremont Investors, Inc., its manager By: /s/ R. S. Kopf ---------------------------- Name: R. S. Kopf Title:Managing Principal, General Counsel and Secretary 15 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: July 8, 1997 FREMONT GROUP, L.L.C. By: Fremont Investors, Inc., its manager By: /s/ R. S. Kopf -------------------------------- Name: R. S. Kopf Title:Managing Principal, General Counsel and Secretary 16 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: July 8, 1997 FREMONT INVESTORS, INC. By: /s/ R. S. Kopf ----------------------------------- Name: R. S. Kopf Title:Managing Principal, General Counsel and Secretary 17 INDEX TO EXHIBITS
EXHIBIT NUMBER EXHIBIT - ---------- ---------------------------------------------------------------------------------------------- (a)(1) Offer to Purchase dated July 8, 1997. (a)(2) Letter of Transmittal with respect to the Common Stock. (a)(3) Letter of Transmittal with respect to the Series D Preferred Shares. (a)(4) Letter for use by Brokers, Dealers, Banks, Trust Companies and Nominees to their Clients. (a)(5) Letter to Clients. (a)(6) Notice of Guaranteed Delivery with respect to the Common Stock. (a)(7) Notice of Guaranteed Delivery with respect to the Series D Preferred Shares. (a)(8) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(9) Press Release jointly issued by Fremont and the Company, dated July 1, 1997. (a)(10) Form of Summary Advertisement, dated July 8, 1997. (a)(11) Fairness Opinion of CIBC Wood Gundy Securities Corp., dated June 30, 1997. (c)(1) Agreement and Plan of Merger, dated as of July 1, 1997, by and among Fremont, the Purchaser and the Company. (c)(2) Option Agreement, dated as of July 1, 1997, by and between Fremont and the Company. (c)(3) Guarantee, dated as of July 1, 1997, by and between Fremont Partners, L.P. and the Company. (c)(4) Confidentiality Agreement, dated November 6, 1995, by and between Fremont Group, Inc. and Lehman Brothers Inc. on behalf of the Company.
18 EX-99.(A)(1) 2 EXHIBIT (A)(1) EXHIBIT (a)(1) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS) AND ALL OUTSTANDING SHARES OF $1.70 CLASS B CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES D OF KERR GROUP, INC. BY KERR ACQUISITION CORPORATION A CORPORATION FORMED AT THE DIRECTION OF FREMONT PARTNERS AT $5.40 NET PER SHARE OF COMMON STOCK AND $12.50 NET PER SHARE OF $1.70 CLASS B CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES D ---------------------------------------------------------------------- THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, AUGUST 4, 1997, UNLESS THE OFFER IS EXTENDED. - -------------------------------------------------------------------------------- THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER DATED AS OF JULY 1, 1997 AMONG FREMONT ACQUISITION COMPANY, LLC, KERR ACQUISITION CORPORATION AND KERR GROUP, INC. THE BOARD OF DIRECTORS OF KERR GROUP, INC. HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE OFFER AND THE MERGER AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE HOLDERS OF BOTH THE COMMON STOCK AND THE $1.70 CLASS B CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES D, AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER, THAT NUMBER OF SHARES, ON AN AS-CONVERTED BASIS, WHICH REPRESENTS AT LEAST FIFTY-ONE PERCENT (51%) OF THE SHARES OF COMMON STOCK OUTSTANDING ON A FULLY DILUTED BASIS AND THE OTHER CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE. SEE SECTION 14. IMPORTANT Any stockholder who desires to tender all or any portion of such stockholder's Shares (as defined herein) should either (i) complete and sign the Letter of Transmittal (or facsimile thereof) in accordance with the instructions in the Letter of Transmittal, mail or deliver it and any other required documents to the Depositary and either deliver the certificates for such Shares to the Depositary or tender such Shares pursuant to the procedures for book-entry transfer set forth in Section 3 or (ii) request such stockholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such stockholder. Any stockholder whose Shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee to tender such Shares. Any stockholder who desires to tender Shares and whose certificates representing such Shares are not immediately available, or who cannot comply with the procedures 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 the Information Agent at the location and telephone numbers set forth on the back cover of this Offer to Purchase. Requests for additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Information Agent, or the Depositary, or to brokers, dealers, commercial banks or trust companies. A stockholder also may contact brokers, dealers, commercial banks or trust companies for assistance concerning the Offer. The Information Agent for the Offer is: [MACKENZIE PARTNERS, INC. LOGO] July 8, 1997 2 TABLE OF CONTENTS
PAGE ----- INTRODUCTION THE OFFER 1. Terms of the Offer................................................................................... 3 2. Acceptance for Payment and Payment................................................................... 5 3. Procedure for Tendering Shares....................................................................... 6 4. Withdrawal Rights.................................................................................... 8 5. Certain Federal Income Tax Consequences.............................................................. 9 6. Price Range of the Shares; Dividends on the Shares................................................... 10 7. Effect of the Offer on the Market for the Shares; Stock Listing; Exchange Act Registration; Margin Regulations........................................................................................ 10 8. Certain Information Concerning the Company........................................................... 12 9. Certain Information Concerning Fremont Partners, Fremont and the Purchaser........................... 15 10. Source and Amount of Funds........................................................................... 16 11. Background of the Offer; Purpose of the Offer and the Merger; The Merger Agreement and Certain Other Agreements......................................................................................... 17 12. Plans for the Company; Other Matters................................................................. 29 13. Dividends and Distributions.......................................................................... 32 14. Conditions of the Offer.............................................................................. 32 15. Certain Legal Matters................................................................................ 34 16. Fees and Expenses.................................................................................... 35 17. Miscellaneous........................................................................................ 35
Schedule I--General Partners, Managing Members, Directors and Executive Officers of Kerr Acquisition Corporation, Fremont Acquisition Company, LLC, Fremont Partners, L.P., FP Advisors, L.L.C., Fremont Group, L.L.C. and Fremont Investors, Inc. i TO THE HOLDERS OF COMMON STOCK AND PREFERRED STOCK OF KERR GROUP, INC.: INTRODUCTION Kerr Acquisition Corporation, a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of Fremont Acquisition Company, LLC, a Delaware limited liability company ("Fremont"), hereby offers to purchase (i) all of the issued and outstanding shares of common stock, par value $.50 per share, including the associated rights to purchase shares of preferred stock (the "Rights" and, together with the common stock, the "Common Stock") issued pursuant to the Rights Agreement (as defined below), and (ii) all of the issued and outstanding shares of $1.70 Class B Cumulative Convertible Preferred Stock Series D, par value $0.50 per share, (the "Series D Preferred Shares" and, together with the Common Stock, the "Shares"), of Kerr Group, Inc., a Delaware corporation (the "Company"), for $5.40 per share of Common Stock (the "Common Per Share Amount") and $12.50 per share of Series D Preferred Share (the "Series D Per Share Amount"), in each case net to the seller in cash, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements hereto or thereto, collectively constitute the "Offer"). Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the sale of Shares pursuant to the Offer. The Purchaser will pay all fees and expenses incurred in connection with the Offer of MacKenzie Partners, Inc., which is acting as the Information Agent (the "Information Agent") and Boston EquiServe, L.P. which is acting as the Depositary (the "Depositary"). THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER, THAT NUMBER OF SHARES OF COMMON STOCK AND SERIES D PREFERRED SHARES (ASSUMING THE CONVERSION OF ALL SUCH SERIES D PREFERRED SHARES INTO SHARES OF COMMON STOCK) WHICH REPRESENTS AT LEAST FIFTY-ONE PERCENT (51%) OF THE SHARES OF COMMON STOCK (OTHER THAN THE OPTION (AS DEFINED BELOW)) OUTSTANDING ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION"). SEE SECTION 14. As used in this Offer to Purchase, "fully diluted basis" takes into account the conversion or exercise of all outstanding Series D Preferred Shares, options, warrants and other rights and securities exercisable or convertible into shares of Common Stock. The Company has informed the Purchaser that, as of July 1, 1997, there were (i) 3,933,095 shares of Common Stock issued and outstanding, (ii) outstanding options and warrants to purchase an aggregate of 449,235 shares of Common Stock and (iii) 487,400 shares of Series D Preferred Shares issued and outstanding, convertible into 708,923 shares of Common Stock. The Merger Agreement (as defined below) provides, among other things, that the Company will not, without the prior written consent of Fremont, issue any additional Shares (except on the exercise of outstanding options and warrants or conversion of the Series D Preferred Shares). Based on the foregoing and giving effect to the exercise of all outstanding options and warrants, the Purchaser believes that the Minimum Condition will be satisfied if 2,596,539 shares of Common Stock, on an as-converted basis, are validly tendered and not withdrawn prior to the expiration of the Offer. As a condition and inducement to Fremont's and Purchaser's entering into the Merger Agreement (as defined below), concurrently with the execution and delivery of the Merger Agreement, Fremont and the Company have entered into an Option Agreement, dated July 1, 1997, pursuant to which, among other things, the Company has granted Fremont an irrevocable option to purchase up to 782,685 (approximately 19.9%) newly issued shares of Common Stock at $5.40 per share (the "Option"). The Option can only be exercised in certain circumstances described herein. See Section 11. As a condition and inducement to the Company's entering into the Merger Agreement, concurrently with the execution and delivery of the Merger Agreement, Fremont Partners, L.P., a Delaware limited partnership ("Fremont Partners"), and the Company have entered into a Guarantee, dated July 1, 1997 (the "Guarantee"), pursuant to which, among other things, Fremont Partners has agreed to unconditionally and irrevocably guarantee, for the benefit of the Company the performance of all obligations of Fremont and the Purchaser pursuant to the Merger Agreement. Fremont Partners has represented in the 1 Guarantee that it has funds available to it sufficient to purchase, or cause the purchase, of the Shares in accordance with the terms of the Merger Agreement, and to pay, or cause to be paid, all amounts due (or which will, as a result of the transactions contemplated by the Merger Agreement, become due) in respect of any indebtedness of the Company for borrowed money outstanding as of the date of the consummation of the Offer. The Guarantee terminates upon the consummation of the purchase by the Purchaser, Fremont or any of their respective affiliates of any Shares pursuant to the Offer. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of July 1, 1997 (the "Merger Agreement"), by and among Fremont, the Purchaser and the Company pursuant to which, as soon as practicable after the completion of the Offer and satisfaction or waiver, if permissible, of all conditions to the Merger (as defined below), the Purchaser will be merged with and into the Company and the separate corporate existence of the Purchaser will thereupon cease. The merger, as effected pursuant to the immediately preceding sentence, is referred to herein as the "Merger," and the Company as the surviving corporation of the Merger is sometimes herein referred to as the "Surviving Corporation." At the effective time of the Merger (the "Effective Time"), each share of Common Stock and Series D Preferred Shares then outstanding (other than Shares held by Fremont or the Purchaser and Shares held by stockholders who properly perfect their dissenters' rights under Delaware law) will be cancelled and extinguished and converted into the right to receive, respectively, (i) the Common Per Share Amount or any higher price per share of Common Stock paid in the Offer (the "Common Stock Merger Consideration"), and (ii) the Series D Per Share Amount or any higher price per share of Series D Preferred Shares paid in the Offer (the "Series D Merger Consideration" and, together with the Common Stock Merger Consideration, the "Merger Consideration"), in each case, in cash payable to the holder thereof without interest. The Merger Agreement is more fully described in Section 11. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE OFFER AND THE MERGER AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE HOLDERS OF BOTH THE COMMON STOCK AND THE SERIES D PREFERRED SHARES, AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES. CIBC Wood Gundy Securities Corp., the Company's financial advisor ("CIBC Wood Gundy"), has delivered to the Company's Board of Directors its written opinion (the "Fairness Opinion") to the effect that the consideration to be received by the holders of Common Stock, on the one hand, and the Series D Preferred Shares (as defined in the Fairness Opinion), on the other, pursuant to the Offer and under the terms of the Merger Agreement, is fair to such holders (other than Fremont or any other subsidiary of Fremont), from a financial point of view. Such opinion is set forth in full as an exhibit to the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") that is being mailed to stockholders of the Company. The Merger Agreement provides that the initial scheduled expiration date of the Offer shall be twenty (20) business days after the date the Offer is commenced, but that if all conditions to the Offer shall not have been satisfied or waived by such date, the Purchaser may, from time to time, in its sole discretion, extend the expiration date. In addition, the Merger Agreement provides that the Purchaser shall, on the terms and subject to the prior satisfaction or waiver of the conditions of the Offer, accept for payment and purchase, as soon as permitted under the terms of the Offer, all Shares validly tendered and not withdrawn prior to the expiration of the Offer; PROVIDED, HOWEVER, that if, immediately prior to the initial expiration date of the Offer (as it may be extended), the Shares tendered and not withdrawn pursuant to the Offer equal less than 90% of the outstanding shares of Common Stock or Series D Preferred Shares, the Purchaser may extend the Offer for a period not to exceed five business days, notwithstanding that all conditions to the Offer are satisfied as of such expiration date of the Offer, so long as the Purchaser expressly irrevocably waives any condition (other than the Minimum Condition) that subsequently may not be satisfied during such extension of the Offer. The Offer will not remain open following the time Shares are accepted for payment. 2 Consummation of the Merger is conditioned upon, among other things, the approval and adoption by the requisite vote of stockholders of the Company of the Merger Agreement, if required by applicable law in order to consummate the Merger. See Section 11. Under the Delaware General Corporation Law (the "DGCL"), except as otherwise provided below, the affirmative vote of a majority of the outstanding shares of Common Stock is required to approve the Merger Agreement and the Merger. Under Section 253 of the DGCL, if a corporation owns at least 90% of the outstanding shares of each class of another corporation, the corporation holding such stock may merge such other corporation into itself without any action or vote on the part of the board of directors or the stockholders of such other corporation (a "short-form merger"). In the event that Fremont and the Purchaser acquire in the aggregate at least 90% of the outstanding shares of Common Stock and at least 90% of the outstanding Series D Preferred Shares, pursuant to the Offer or otherwise, then, at the election of Fremont, a short-form merger could be effected without any approval of the Board of Directors or the stockholders of the Company, subject to compliance with the provisions of Section 253 of the DGCL. Even if Fremont and the Purchaser do not own 90% of the outstanding shares of Common Stock and 90% of the outstanding Series D Preferred Shares following consummation of the Offer, Fremont and the Purchaser could seek to purchase additional shares in the open market or otherwise in order to reach the 90% thresholds and employ a short-form merger. The per share consideration paid for any Shares so acquired may be greater or less than that paid in the Offer. Fremont presently intends to effect a short-form merger if permitted to do so under the DGCL. The Company has distributed one Right for each outstanding share of Common Stock pursuant to a Rights Agreement, dated as of July 25, 1995, between the Company and BankBoston, N.A. (formerly The First National Bank of Boston), as Rights Agent, as amended (the "Rights Agreement"). The Company has represented in the Merger Agreement that it has taken all action which may be necessary under the Rights Agreement so that the (x) execution of the Merger Agreement and any amendments thereto and the consummation of the transactions contemplated thereby will not cause (i) Fremont and/or the Purchaser to become an Acquiring Person (as defined in the Rights Agreement) or (ii) a Distribution Date, a Stock Acquisition Date or a Triggering Event (as such terms are defined in the Rights Agreement) to occur, irrespective of the number of Shares acquired pursuant to the Offer, or exercise of the Option and (y) the Rights shall expire upon the acceptance of Shares for payment pursuant to the Offer. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. THE OFFER 1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the Offer, the Purchaser will accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn in accordance with Section 4 of this Offer to Purchase. The term "Expiration Date" shall mean 12:00 Midnight, New York City time, on Monday, August 4, 1997, unless and until the Purchaser, in accordance with the terms of the Merger Agreement, shall have extended the period of time for 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, the Purchaser expressly reserves the right, in its sole discretion, at any time or from time to time, (i) to 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) to amend the Offer in any respect (including, without limitation, by decreasing or increasing the consideration offered in the Offer (the "Offer Price") to holders of Shares and/or by decreasing the number of Shares being sought in the Offer), by giving oral or written notice of such amendment to the Depositary. The rights reserved by the Purchaser in this paragraph are in addition to the Purchaser's rights to terminate the Offer as described in Section 14. Any extension, amendment or 3 termination will be followed as promptly as practicable by public announcement thereof, the announcement in the case of an extension to be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date in accordance with the public announcement requirements of Rule 14d-4(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Without limiting the obligation of the Purchaser under such Rule or 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. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE COMMON STOCK PER SHARE AMOUNT OR THE SERIES D PER SHARE AMOUNT TO BE PAID BY THE PURCHASER FOR THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. The Merger Agreement provides that the Purchaser will not amend or waive the Minimum Condition and will not decrease the Common Stock Per Share Amount or the Series D Per Share Amount or change the form of consideration payable in the Offer or decrease the number of Shares sought, or impose additional conditions to the Offer, or amend any other term of the Offer in any manner adverse to the holders of the Shares without the written consent of the Company; provided, however, that if on the initial scheduled Expiration Date of the Offer, which is twenty business days after the date the Offer is commenced, all conditions to the Offer shall not have been satisfied or waived, the Purchaser may, from time to time, in its sole discretion, extend the Expiration Date. In addition, under the terms of the Merger Agreement, if, immediately prior to the initial Expiration Date, the Shares tendered and not withdrawn equal less than 90% of the outstanding shares of Common Stock or Series D Preferred Shares, the Purchaser may extend the Offer for a period not to exceed five business days, notwithstanding that all conditions to the Offer may have been satisfied, so long as the Purchaser expressly irrevocably waives any condition (other than the Minimum Condition) that subsequently may not be satisfied during such extension of the Offer. If the Purchaser extends the Offer, or if the Purchaser (whether before or after its acceptance for payment of Shares) is delayed in its purchase of or payment for Shares or is unable to pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer, the Depositary may retain tendered Shares on behalf of the Purchaser, and such Shares may not be withdrawn except to the extent tendering stockholders are entitled to withdrawal rights as described in Section 4. However, the ability of the Purchaser to delay the payment for Shares which the Purchaser has accepted for payment is limited by Rule 14e-l(c) under the Exchange Act, which requires that a bidder pay the consideration offered or return the securities deposited by or on behalf of holders of securities promptly after the termination or withdrawal of the Offer. If the Purchaser makes a material change in the terms of the Offer or the information concerning the Offer or 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 the Offer must remain open following material changes in the terms of the Offer or information concerning the Offer, other than a change in price or a change in percentage of securities sought, will depend upon the facts and circumstances then existing, including the relative materiality of the changed terms or information. In a public release, the Commission has stated that in its view an offer must remain open for a minimum period of time following a material change in the terms of the Offer and that waiver of a material condition, such as the Minimum Condition, is a material change in the terms of the Offer. The release states than an offer should remain open for a minimum of five business days from the date a material change is first published, sent or given to security holders and that, if material changes are made with respect to information not materially less significant than the offer price and the number of shares being sought, a minimum of ten business days may be required to allow adequate dissemination and investor response. The requirement to extend the Offer will not apply to the extent that the number of business days remaining between the occurrence of the change and the then-scheduled Expiration Date equals or exceeds the minimum extension period that would be required because of such amendment. As used in this Offer to Purchase, "business day" has the meaning set forth in Rule 14d-1 under the Exchange Act. 4 The Company has provided the Purchaser with the Company's stockholder lists 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 will be mailed by the Purchaser to record holders of Shares and will be furnished by the Purchaser to brokers, dealers, banks and similar persons whose names, or the names of whose nominees, appear on the stockholder lists 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. 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, promptly after the Expiration Date, for all Shares validly tendered prior to the Expiration Date and not properly withdrawn in accordance with Section 4. All determinations concerning the satisfaction of such terms and conditions will be within the Purchaser's discretion, which determinations will be final and binding. See Sections 1 and 14. The Purchaser expressly reserves the right, in its sole discretion, to delay acceptance for payment of or payment for Shares in order to comply in whole or in part with any applicable law, including, without limitation, the HSR Act. Any such delays will be effected in compliance with Rule 14e-l(c) under the Exchange Act (relating to a bidder's obligation to pay the consideration offered or return the securities deposited by or on behalf of holders of securities promptly after the termination or withdrawal of such bidder's offer). In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates for such Shares (or a timely Book-Entry Confirmation (as defined below) with respect thereto), (ii) a Letter of Transmittal (or 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 (as defined below), and (iii) any other documents required by the Letter of Transmittal. The per share consideration paid to any holder of Common Stock and any holder of Series D Preferred Shares pursuant to the Offer will be the highest per Share consideration paid to any other holder of such shares pursuant to the Offer. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares properly tendered to the Purchaser and not 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. 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 payment from the Purchaser and transmitting payment to tendering stockholders. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE TO BE PAID BY THE PURCHASER FOR THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. If the Purchaser is delayed in its acceptance for payment of, or payment for, Shares or is unable to accept for payment or pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer (including such rights as are set forth in Sections 1 and 14) (but subject to compliance with Rule 14e-1(c) under the Exchange Act), the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent tendering stockholders are entitled to exercise, and duly exercise, withdrawal rights as described in Section 4. 5 If any tendered Shares are not purchased pursuant to the Offer for any reason, certificates for any such Shares will be returned, without expense to the tendering stockholder (or, in the case of Shares delivered by book-entry transfer of such Shares into the Depositary's account at the Book-Entry Transfer Facility (as defined below) pursuant to the procedures set forth in Section 3, such Shares will be credited to an account maintained at the Book-Entry Transfer Facility), as promptly as practicable after the expiration or termination of the Offer. The Purchaser reserves the right to transfer or assign, in whole or in part, to Fremont or to any affiliate of Fremont, the right to purchase 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 TENDER. For Shares to be validly tendered pursuant to the Offer, either (i) a properly completed and duly executed Letter of Transmittal (or facsimile thereof), together with any required signature guarantees, or in the case of a book-entry transfer, an Agent's Message (as defined below), and any other required documents, must be received by the Depositary at its address set forth on the back cover of this Offer to Purchase prior to the Expiration Date and either certificates for tendered Shares must be received by the Depositary at one of such addresses or such Shares must be delivered pursuant to the procedures for book-entry transfer set forth below (and a Book-Entry Confirmation received by the Depositary), in each case, prior to the Expiration Date or (ii) the tendering stockholder must comply with the guaranteed delivery procedures set forth below. The Depositary will establish an account with respect to the Shares at The Depository Trust Company or the Philadelphia Depository Trust Company (each a "Book-Entry Transfer Facility") 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 Book-Entry Transfer Facility's systems may make book-entry delivery of Shares by causing the Book-Entry Transfer Facility to transfer such Shares into the Depositary's account in accordance with the Book-Entry Transfer Facility's procedure for such transfer. However, although delivery of Shares may be effected through book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message, and any other required documents must, in any case, be transmitted to, and received by, the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or the tendering stockholder must comply with the guaranteed delivery procedures described below. The confirmation of a book-entry transfer of Shares into the Depositary's account at the Book-Entry Transfer Facility as described above is referred to herein as a "Book-Entry Confirmation." DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. The term "Agent's Message" means a message transmitted by the 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 the participant. THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH 6 RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. SIGNATURE GUARANTEES. No signature guarantee is required on the Letter of Transmittal (i) if the Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this Section, includes any participant in the Book Entry Transfer Facility's systems whose name appears on a security position listing as the owner of the Shares) of Shares tendered therewith and such registered holder has not completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the Letter of Transmittal or (ii) if such Shares are tendered for the account of a financial institution (including most commercial banks, savings and loan associations and brokerage houses) that is a participant in the Security Transfer Agent's Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program (each, an "Eligible Institution" and, collectively, "Eligible Institutions"). In all other cases, all signatures on Letters of Transmittal must be guaranteed by an Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal. If the certificates for Shares 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 certificates for Shares not tendered or not accepted for payment are to be returned, to a person other than the registered holder of the certificates surrendered, then the tendered certificates for such Shares must be endorsed or accompanied by appropriate stock powers, in either case, signed exactly as the name or names of the registered holders or owners appear on the certificates, with the signatures on the certificates or stock powers guaranteed as aforesaid. See Instructions 1 and 5 to the Letter of Transmittal. GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to the Offer and such stockholder's certificates for Shares are not immediately available or the procedures for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Depositary prior to the Expiration Date, such stockholder's tender may be effected if all the following conditions are met: (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 provided by the Purchaser, is received by the Depositary, as provided below, prior to the Expiration Date; and (iii) the certificates for (or a Book-Entry Confirmation with respect to) such Shares, together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and any other required documents are received by the Depositary within three trading days after the date of execution of such Notice of Guaranteed Delivery. A "trading day" is any day on which the New York Stock Exchange, Inc. (the "NYSE") is open for business. The Notice of Guaranteed Delivery may be delivered by hand to the Depositary or transmitted by telegram, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution 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 (i) certificates for (or a timely Book-Entry Confirmation with respect to) such Shares, (ii) a Letter of Transmittal (or 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 (iii) any other documents required by the Letter of Transmittal. Accordingly, tendering stockholders may be paid at different times depending upon when certificates for Shares or Book-Entry Confirmations with respect to Shares are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE TO BE PAID BY THE PURCHASER FOR THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. 7 The valid tender of Shares pursuant to one 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. APPOINTMENT. By executing the Letter of Transmittal as set forth above, the tendering stockholder will irrevocably appoint designees of the Purchaser, and each of them, as such stockholder's attorneys-in-fact and proxies in the manner set forth in the Letter of Transmittal, each with full power of substitution, to the full extent of such stockholder's rights with respect to the Shares tendered by such stockholder and accepted for payment by the Purchaser and with respect to any and all other Shares or other securities or rights issued or issuable in respect of such Shares. All such proxies will be considered coupled with an interest in the tendered Shares. Such appointment will be effective when, and only to the extent that, the Purchaser accepts for payment Shares tendered by such stockholder as provided herein. Upon such appointment, all prior powers of attorney, proxies and consents given by such stockholder with respect to such Shares or other securities or rights will, without further action, be revoked and no subsequent powers of attorney, proxies, consents or revocations may be given by such stockholder (and, if given, will not be deemed effective). The designees of the Purchaser will thereby be empowered to exercise all voting and other rights with respect to such Shares and other securities or rights, including, without limitation, in respect of any annual, special or adjourned meeting of the Company's stockholders, actions by written consent in lieu of any such meeting or otherwise, as they in their sole discretion deem proper. The Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Purchaser's acceptance for payment of such Shares, the Purchaser must be able to exercise full voting, consent and other rights with respect to such Shares and other related securities or rights, including voting at any meeting of stockholders. DETERMINATION OF VALIDITY. All questions as to the validity, form, eligibility (including time of receipt) and acceptance of any tender of Shares will be determined by the Purchaser, in its sole discretion, which determination will be final and binding. The Purchaser reserves the absolute right to reject any or all tenders of any Shares determined by it not to be in proper form or the acceptance for payment of, or payment for which may, in the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute right, in its sole discretion, subject to the provisions of the Merger Agreement, to waive any of the conditions of the Offer or any defect or irregularity in the tender of any 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 or irregularities relating thereto have been cured or waived. None of the Purchaser, Fremont, the Depositary, the Information Agent, the Company 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. Subject to the terms of the Merger Agreement, 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. Under the "backup withholding" provisions of federal income tax law, unless a tendering registered holder, or his assignee (in either case, the "Payee"), satisfies the conditions described in Instruction 9 of the Letter of Transmittal or is otherwise exempt, the cash payable as a result of the Offer to Purchase Shares may be subject to backup withholding tax at a rate of 31% of the gross proceeds. To prevent backup withholding, each Payee should complete and sign the Substitute Form W-9 provided in the Letter of Transmittal. See Instruction 9 of the Letter of Transmittal. 4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4, tenders of Shares are irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to the procedures set forth below at any time prior to the Expiration Date and, unless theretofore accepted for payment and paid for by the Purchaser pursuant to the Offer, may also be withdrawn at any time after August 4, 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 this Offer to 8 Purchase and must specify the name of the person having tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of the Shares to be withdrawn, if different from the name of the person who tendered the Shares. If certificates for Shares 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, unless such Shares have been tendered by an Eligible Institution, the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been delivered pursuant to the procedures for book-entry transfer as set forth in Section 3, any notice of withdrawal must also specify the name and number of the account at the appropriate Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's procedures. Withdrawals of tenders of Shares may not be rescinded, and any Shares properly withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be retendered by again following one of the procedures described in Section 3 any time prior to the Expiration Date. 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, which determination will be final and binding. None of the Purchaser, Fremont, 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. 5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash for Shares pursuant to the Offer or the Merger will be a taxable transaction for U.S. federal income tax purposes and also may be a taxable transaction under state, local or foreign tax laws. In general, a stockholder who tenders Shares in the Offer or receives cash in exchange for Shares in the Merger will recognize gain or loss for Federal income tax purposes equal to the difference, if any, between the amount of cash received and the stockholder's tax basis in the Shares sold. Gain or loss will be determined separately for each block of Shares (i.e., Shares acquired at the same time and price) exchanged pursuant to the Offer or the Merger. Such gain or loss generally will be capital gain or loss if the Shares disposed of were held as capital assets by the stockholder, and will be long-term capital gain or loss if the Shares disposed of were held for more than one year at the date of sale. A holder of Shares who perfects such stockholder's appraisal rights, if any, under the DGCL probably will recognize gain or loss at the Effective Time in an amount equal to the difference between the "amount realized" and such stockholder's adjusted tax basis of such Shares. For this purpose, although there is no authority to this effect directly on point, the amount realized generally should equal the trading value per share of the Shares at the Effective Time. Ordinary interest income and/or capital gain (or capital loss, assuming that the Shares were held as capital assets) should be recognized by such stockholder at the time of actual receipt of payment, to the extent that such payment exceeds (or is less than) the amount realized at the Effective Time. The foregoing summary is a general description of certain U.S. federal income tax consequences of the Offer and the Merger without regard to the particular facts and circumstances of each stockholder of the Company and is based on the provisions of the Internal Revenue Code of 1986, as amended, Treasury Department Regulations issued pursuant thereto and published rulings and court decisions in effect as of the date hereof, all of which are subject to change, possibly with retroactive effect. Special tax consequences not described herein may be applicable to certain stockholders subject to special tax treatment (including, but not limited to, insurance companies, tax-exempt organizations, financial institutions or broker dealers, foreign stockholders and stockholders who have acquired their Shares pursuant to the exercise of employee stock options or otherwise as compensation). ALL STOCKHOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO SPECIFIC TAX EFFECTS APPLICABLE TO THEM OF THE OFFER AND THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF THE ALTERNATIVE MINIMUM TAX AND ANY STATE, LOCAL AND FOREIGN TAX LAWS. 9 6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES. The shares of Common Stock and Series D Preferred Shares are both traded on the NYSE under the symbol "KGM" and "KGMD", respectively. The following table sets forth, for each of the calendar quarters indicated, the high and low reported sales price per share of Common Stock and of Series D Preferred Shares on the NYSE and quarterly cash dividends based on published financial sources.
COMMON STOCK SERIES D PREFERRED SHARES --------------------------------------- --------------------------------------- HIGH LOW CASH DIVIDENDS HIGH LOW CASH DIVIDENDS --------- --------- ----------------- --------- --------- ----------------- 1995 First Quarter............................. $ 9 3/8 $ 6 7/8 $ -- $ 20 5/8 $ 19 1/8 $ .425 Second Quarter............................ 8 3/8 7 1/8 -- 20 1/8 19 1/4 .425 Third Quarter............................. 8 1/2 7 -- 20 1/4 19 .425 Fourth Quarter............................ 10 3/8 6 1/2 -- 20 16 3/8 .425 1996 First Quarter............................. $ 9 7/8 $ 5 3/4 $ -- $ 28 $ 17 3/4 $ .425 Second Quarter............................ 6 1/4 3 3/4 -- 18 1/8 13 1/2 -- Third Quarter............................. 4 3/8 2 3/8 -- 14 12 1/8 -- Fourth Quarter............................ 4 3/8 2 1/8 -- 12 3/8 7 1/2 -- 1997 First Quarter............................. $ 2 5/8 $ 1 7/8 $ -- $ 7 5/8 $ 4 1/4 $ -- Second Quarter............................ 4 1/4 2 -- 14 4 1/4 -- Third Quarter (through July 7, 1997)...... 5 3/8 3 7/8 -- 12 1/2 12 1/4 --
On June 13, 1997, the last full trading day prior to the first public announcement by the Company that it was engaged in discussions with several third parties regarding a possible sale of the Company, the last reported sales price of the Shares on the NYSE was $3 3/4 per share of Common Stock and $10 per share of Series D Preferred Shares. On June 30, 1997, the last full trading day prior to the first public announcement of the Purchaser's intention to commence the Offer, the last reported sales price of the Shares on the NYSE was $3 7/8 per share of Common Stock and $12 1/2 per share of Series D Preferred Shares. On July 7, 1997, the last full trading day prior to the commencement of the Offer, the last reported sales price of the Shares on the NYSE was $5 1/4 per share of Common Stock and $12 1/2 per share of Series D Preferred Shares. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES. The Company has advised the Purchaser that the cumulative Series D Preferred Shares annual dividend requirement is $828,580, or $1.70 per share. The Company has not declared a dividend on its Series D Preferred Shares since the first quarter of 1996. The cumulative amount of undeclared dividends as of June 30, 1997 is currently $1,038,162, or $2.13 per share. Under the terms of an agreement with its lenders, the Company is not currently permitted to declare or pay any dividends on its Series D Preferred Shares. The payment of Common Stock dividends is restricted under the terms of an agreement with the Company's lenders. Under such restrictions, the payment of Common Stock dividends is not currently permitted. In addition, under the terms of the Merger Agreement, the Company is not permitted to declare or pay dividends on either the Common Stock or the Series D Preferred Shares. No portion of the cumulative undeclared dividends on the Series D Preferred Shares dividend requirement will be paid as part of or in connection with the Offer. 7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK LISTING; EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS. MARKET FOR THE SHARES. The purchase of Shares by the Purchaser pursuant to the Offer will reduce the number of holders of Shares and the number of Shares that might otherwise trade publicly and, depending 10 upon the number of Shares so purchased, could adversely affect the liquidity and market value of the remaining Shares held by the public. STOCK LISTING. The Common Stock and Series D Preferred Shares are listed on the NYSE. Depending upon the aggregate market value and the per Share price of any Shares not purchased pursuant to the Offer, the Common Stock or the Series D Preferred Shares may no longer meet the requirements for continued listing on the NYSE. According to the NYSE's published guidelines, the NYSE would consider delisting the Common Stock or the Series D Preferred Shares if, among other things, the number of record holders of at least 100 or more shares of Common Stock or Series D Preferred Shares should fall below 1,200, the number of publicly held shares of Common Stock or Series D Preferred Shares (exclusive of holdings of officers and directors of the Company and their immediate families and other concentrated holdings of 10% or more) should fall below 600,000, or the aggregate market value of the publicly held Shares should fall below $5,000,000. According to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, there were approximately 1,257 and 189 holders of record of shares of Common Stock and Series D Preferred Shares, respectively, on February 28, 1997 and according to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997, as of April 30, 1997, there were 3,933,095 and 487,400 Shares of Common Stock and Series D Preferred Shares, respectively, outstanding. If the NYSE were to delist the Common Stock or the Series D Preferred Shares, the market therefor could be adversely affected. It is possible that such Shares would continue to trade on other securities exchanges, or in the over-the-counter market and that price quotations would be reported by such exchanges or through the National Association of Securities Dealers Automated Quotation System or other sources. The extent of the public market for each of the Common Stock and Series D Preferred Shares and the availability of such quotations would, however, depend upon the number of stockholders and/or the aggregate market value of such Shares remaining at such time, the interest in maintaining a market in such Shares on the part of securities firms, the possible termination of registration of such Shares under the Exchange Act and other factors. If, as a result of the purchase of the Shares pursuant to the Offer or otherwise, the Shares no longer meet the requirement of the NYSE for continued inclusion in the NYSE and the Shares are no longer included in the NYSE, the market for, and the value of, the Shares should be adversely affected. EXCHANGE ACT REGISTRATION. The Common Stock and Series D Preferred Shares currently are registered under the Exchange Act. Registration of the Shares under the Exchange Act may be terminated upon application of the Company to the Commission if shares of Common Stock or of the Series D Preferred Shares are neither listed on a national securities exchange nor held by 300 or more holders of record. Termination of registration of either the Common Stock or the Series D Preferred Shares under the Exchange Act, assuming there are no other securities of the Company subject to registration, would substantially reduce the information required to be furnished by the Company to its stockholders 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 pursuant to Section 14(a) in connection with stockholders' meetings and the related requirement of furnishing an annual report to stockholders and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions, no longer applicable to the Company. Furthermore, the ability of "affiliates" of the Company and persons holding "restricted securities" of the Company to dispose of such securities pursuant to Rule 144 or Rule 144A promulgated under the Securities Act of 1933, as amended (the "Securities Act"), may be impaired or eliminated. If registration of either the Common Stock or the Series D Preferred Shares under the Exchange Act were terminated, such Shares would no longer be "margin securities" or be eligible for continued listing on any stock exchange. The Purchaser may seek to cause the Company to apply for termination of registration of the Shares under the Exchange Act as soon after the completion of the Offer as the requirements for such termination are met. 11 If registration of the Shares is not terminated prior to the Merger, then the Shares will be delisted from the NYSE and the registration of the Shares under the Exchange Act will be terminated following the consummation of the Merger. MARGIN REGULATIONS. The Common Stock and Series D Preferred Shares presently are "margin securities" under the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which status 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, it is possible that, following the Offer, the Shares would no longer constitute "margin securities" for the purposes of the margin regulations of the Federal Reserve Board and therefore could no longer be used as collateral for loans made by brokers. If registration of the Shares under the Exchange Act were terminated, the Shares would no longer be "margin securities." 8. CERTAIN INFORMATION CONCERNING THE COMPANY. GENERAL. The information concerning the Company contained in this Offer to Purchase, including that set forth below under the caption "Selected Financial Information," has been furnished by the Company or has been taken from or based upon publicly available documents and records on file with the Commission and other public sources. Neither Fremont nor the Purchaser assumes responsibility for the accuracy or completeness of the information concerning the Company contained in such documents and records or for any failure by the Company to disclose events which may have occurred or may affect the significance or accuracy of any such information but which are unknown to Fremont or the Purchaser. The Company is a major producer of plastic packaging products. The Company is a Delaware corporation with its principal executive offices at 500 New Holland Avenue, Lancaster, Pennsylvania 17602. The telephone number of the Company at such offices is (717) 299-6511. SELECTED FINANCIAL INFORMATION. Set forth below is certain selected consolidated financial information with respect to the Company, excerpted or derived from the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 and its Quarterly Report on Form 10-Q for the quarter ended March 31, 1997, both filed with the Commission pursuant to the Exchange Act. More comprehensive financial information is included in such reports and in other documents filed by the Company with the Commission. The following summary is qualified in its entirety by reference to such reports and other documents and all of the financial information (including any related notes) contained therein. Such reports and other documents may be inspected and copies may be obtained from the Commission in the manner set forth below. 12 KERR GROUP, INC. SELECTED CONSOLIDATED FINANCIAL INFORMATION (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED FISCAL YEARS ENDED ------------------------ ------------------------------------------------- MARCH 31, MARCH 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1997 1996 1996 1995 1994 ----------- ----------- --------------- --------------- --------------- Operating Data: Net Sales......................... $ 28,732 $ 25,096 $ 107,369 $ 109,187 $ 106,792 Operating Income (loss)........... (1,130) (7,666) (12,722) (1,416) 7,152 Net Earnings (loss)............... (1,337) (6,442) (23,122) (6,136) 2,575 Net Earnings (loss) per share..... (0.34) (1.64) (5.88) (1.60) 0.70 Balance Sheet Data (at end of period): Total Assets...................... $ 86,011 $ 116,747 $ 85,526 $ 119,497 $ 122,660 Total Liabilities................. 83,839 97,765 82,224 95,590 89,607 Stockholders' Equity.............. 2,172 18,982 3,302 23,907 33,053
CERTAIN COMPANY PROJECTIONS. To the knowledge of Fremont and the Purchaser, the Company does not as a matter of course make public forecasts as to its future financial performance. However, in connection with the preliminary discussions concerning the feasibility of the Offer and the Merger, the Company prepared and furnished Fremont with certain financial projections. The summary projections presented in the tables below (the "Projections") are derived or excerpted from information provided by the Company and are based on numerous assumptions concerning future events. The Projections have not been adjusted to reflect the effects of the Offer or the Merger or the incurrence of indebtedness in connection therewith. The Projections should be read together with the other information contained in this Section 8. In May, 1997, the Company provided Fremont with the Projections for the fiscal years ending December 31, 1997, 1998 and 1999, which are set forth in the table below. 13 KERR GROUP, INC. ESTIMATED FINANCIAL STATEMENT ITEMS (DOLLARS IN MILLIONS)
1997 1998 1999 --------- --------- --------- Net Sales............................................................................. $ 114.1 $ 119.9 $ 130.2 Earnings (Loss) Before Interest and Taxes............................................. $ 6.7 $ 10.3 $ 12.0 Total Current Assets.................................................................. $ 30.8 $ 31.3 $ 33.9 Total Assets.......................................................................... 80.7 78.0 78.0 Total Current Liabilities............................................................. 11.3 12.9 14.0 Long-Term Pension and SERP Liabilities................................................ 12.1 8.4 4.5 Long-Term Retiree Health Liability(a)................................................. 2.6 2.6 2.6 Other Long-Term Liabilities........................................................... 1.1 1.1 1.1 Total Liabilities..................................................................... 73.0 68.4 65.4 Capital Expenditures.................................................................. $ 9.3 $ 9.7 $ 11.2 Reduction in Pension Liability........................................................ 1.8 3.7 3.8 Payments associated with restructuring, net of tax.................................... 1.7 0.0 0.0
- ------------------------ (a) Does not include the unaccrued portion of the Accumulated Benefit Obligation In Excess Of Plan Assets, which at December 31, 1996 was $6.8 million. The Accumulated Benefit Obligation In Excess Of Plan Assets as disclosed in the Notes to the Company's Financial Statements at and for the year ended December 31, 1996 equaled $9.3 million. In June 1997, the Company provided Fremont with revised forecasts for the fiscal year ending December 31, 1997 which incorporated actual financial results through April 1997. These revised forecasts showed increased net sales of approximately $116.6 million but reduced profitability, with Earnings Before Interest and Taxes forecast at approximately $6.2 million. The forecasts for the fiscal years ending December 31, 1998 and 1999 were not revised. THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE WITH PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS OR FORECASTS AND ARE INCLUDED HEREIN ONLY BECAUSE SUCH INFORMATION WAS PROVIDED TO FREMONT. THESE FORWARD-LOOKING STATEMENTS (AS THAT TERM IS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995) ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE PROJECTIONS. THE PROJECTIONS REFLECT NUMEROUS ASSUMPTIONS, ALL MADE BY MANAGEMENT OF THE COMPANY, WITH RESPECT TO INDUSTRY PERFORMANCE, GENERAL BUSINESS, ECONOMIC, MARKET AND FINANCIAL CONDITIONS AND OTHER MATTERS, ALL OF WHICH ARE DIFFICULT TO PREDICT, MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL AND NONE OF WHICH WERE SUBJECT TO APPROVAL BY FREMONT OR THE PURCHASER. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE ASSUMPTIONS MADE IN PREPARING THE PROJECTIONS WILL PROVE ACCURATE, AND ACTUAL RESULTS MAY BE MATERIALLY GREATER OR LESS THAN THOSE CONTAINED IN THE PROJECTIONS. THE INCLUSION OF THE PROJECTIONS HEREIN SHOULD NOT BE REGARDED AS AN INDICATION THAT ANY OF FREMONT, THE PURCHASER, THE COMPANY OR THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES CONSIDERED OR CONSIDER THE PROJECTIONS TO BE A RELIABLE PREDICTION OF FUTURE EVENTS, AND 14 THE PROJECTIONS SHOULD NOT BE RELIED UPON AS SUCH. NONE OF FREMONT, THE PURCHASER, THE COMPANY AND THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES ASSUMES ANY RESPONSIBILITY FOR THE VALIDITY, REASONABLENESS, ACCURACY OR COMPLETENESS OF THE PROJECTIONS. NONE OF FREMONT, THE PURCHASER, THE COMPANY AND ANY OF THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES HAS MADE, OR MAKES ANY REPRESENTATION TO ANY PERSON REGARDING THE INFORMATION CONTAINED IN THE PROJECTIONS AND NONE OF THEM INTENDS TO UPDATE OR OTHERWISE REVISE THE PROJECTIONS TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THE PROJECTIONS ARE SHOWN TO BE IN ERROR. AVAILABLE INFORMATION. The Company is subject to the informational filing requirements of the Exchange Act and, in accordance therewith, is obligated to file 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 Company's directors and officers, their remuneration, options granted to them, the principal holders of the Company's securities and any material interests of such persons in transactions with the Company is required to be disclosed in proxy statements 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 at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Commission located at Seven World Trade Center, Suite 1300, New York, NY 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661. Copies of such information should be obtainable by mail, upon payment of the Commission's customary charges, by writing to the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also maintains a website at http://www.sec.gov that contains reports, proxy statements and other information. Such material should also be available for inspection at the offices of the NYSE, located at 20 Broad Street, New York, New York 10005. 9. CERTAIN INFORMATION CONCERNING FREMONT PARTNERS, FREMONT AND THE PURCHASER. FREMONT PARTNERS. Fremont Partners, and affiliated partnerships, is a private investment fund headquartered in San Francisco with available committed capital of approximately $605 million. The sole general partner of Fremont Partners is FP Advisors, L.L.C., a Delaware limited liability company ("FP Advisors"). The sole managing member of FP Advisors is Fremont Group, L.L.C., a Delaware limited liability company (including predecessor entities, "The Fremont Group"). The sole manager of The Fremont Group is Fremont Investors, Inc., a Nevada corporation ("Fremont Investors"). Fremont Partners, FP Advisors, The Fremont Group and Fremont Investors are collectively referred to herein as the "Fremont Entities." Fremont Partners is a party to the Guarantee; it is not a party to either the Merger Agreement or the Option Agreement. None of the other Fremont Entities is a party to any of the Merger Agreement, the Option Agreement or the Guarantee. The offices of each of the Fremont Entities are located at 50 Fremont Street, Suite 3700, San Francisco, California 94105-1895. FREMONT AND THE PURCHASER. Each of Fremont and the Purchaser is a Delaware entity, newly formed at the direction of Fremont Partners for the purpose of effecting the Offer and the Merger. Fremont owns all of the outstanding capital stock of the Purchaser. It is not anticipated that, prior to the consummation of the Offer, the Purchaser or Fremont will have any significant assets or liabilities or will engage in any activities other than those incident to the Offer and the Merger and the financing thereof. The offices of Fremont and the Purchaser are located at 50 Fremont Street, Suite 3700, San Francisco, California 94105-1895. After the completion of the sale of equity interests in Fremont, Fremont Partners and affiliated partnerships of which FP Advisors or The Fremont Group are the general partners, will own in excess of 90% of the outstanding equity interests of Fremont. It is anticipated that Fremont Partners, as sole 15 managing member of Fremont, will have sole voting and investment power with respect to such equity interests. In its prior acquisitions, entities affiliated with Fremont Partners have offered equity ownership opportunities to the key management of the companies they have acquired, and may offer key management of the Company and related entities an opportunity to acquire a portion of the equity interest in Fremont or the Company. Such entities may include New Canaan Investments, Inc. ("New Canaan"), a private company headquartered in Stamford, Connecticut engaged in making equity investments and acquisitions, which has assisted Fremont Partners in its review and assessment of the business of the Company. Although general discussions have taken place with the management of the Company and New Canaan, no decisions have been made at this time, either as to the identity of the persons or entities who may be offered the opportunity to invest in Fremont or the Company or as to the amount or nature of any equity interest any members of management of the Company or New Canaan may be offered. If and to the extent members of management of the Company and related entities are given the opportunity to, and do, invest in the equity of Fremont or the Company, the equity interest of Fremont Partners and its affiliated partnerships in Fremont or the Company would be reduced. For certain information concerning the general partners, managing members or executive officers and directors, as the case may be, of the Purchaser, Fremont and the Fremont Entities, see Schedule I. Each of the Fremont Entities disclaims that it is a "bidder" for purposes of this Offer. Pursuant to the Option Agreement, Fremont may be deemed to beneficially own 782,685 shares of Common Stock constituting approximately 19.9% of the total currently outstanding shares of Common Stock. Each of the Purchaser, Fremont and the Fremont Entities disclaims beneficial ownership of such shares. Except as set forth in this Offer to Purchase, none of the Purchaser, Fremont or any of the Fremont Entities, nor, to the best knowledge of the Purchaser, Fremont or Fremont Partners, any of the persons listed on Schedule I, nor any associate or majority-owned subsidiary of any of the foregoing, beneficially owns or has a right to acquire any Shares, and none of the Purchaser, Fremont or any of the Fremont Entities nor, to the best of knowledge of the Purchaser, Fremont or Fremont Partners, any of the persons or entities referred to above, nor any of the respective executive officers, directors or subsidiaries of any of the foregoing, has effected any transaction in Shares during the past 60 days. Except as set forth in this Offer to Purchase, none of the Purchaser, Fremont or any of the Fremont Entities, nor, to the best knowledge of the Purchaser, Fremont or Fremont Partners, any of the persons listed on Schedule I, has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any securities of the Company, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss, or the giving or withholding of proxies. Except as set forth in this Offer to Purchase, none of the Purchaser, Fremont or any of the Fremont Entities, or any of their respective affiliates, nor, to the best knowledge of the Purchaser, Fremont or Fremont Partners, any of the persons listed on Schedule I, has had, since January 1, 1994, any business relationships or transactions with the Company or any of its executive officers, directors or affiliates that would require reporting under the rules of the Commission. Except as set forth in this Offer to Purchase, since January 1, 1994, there have been no contacts, negotiations or transactions between the Purchaser, Fremont or any of the Fremont Entities, any of their respective affiliates or, to the best knowledge of the Purchaser, Fremont or Fremont Partners, any of the persons listed on Schedule I, and the Company or its affiliates concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, election of directors or a sale or other transfer of a material amount of assets. 10. SOURCE AND AMOUNT OF FUNDS. Fremont and the Purchaser estimate that the total amount of funds required by the Purchaser to (i) purchase all of the Shares pursuant to the Offer and finance the Merger Consideration, (ii) refinance certain existing indebtedness and accrued liabilities of the Company, and (iii) pay fees and expenses 16 incurred in connection with the Offer and the Merger will be approximately $91.9 million. Of these funds, it is anticipated that (i) approximately $1.8 million will be obtained from cash on hand of the Company, (ii) approximately $44.3 million will be obtained by Fremont through the sale of equity interests to Fremont Partners and affiliated partnerships, (and possibly to key management of the Company and related entities) and Fremont will in turn contribute such amount to the Purchaser, and (iii) approximately $47.6 million will be financed either through a permanent bank financing (the "Bank Financing"), or, if the Bank Financing cannot be obtained prior to the date on which the Shares are acquired by the Purchaser pursuant to the Offer, through a bridge facility (the "Bridge Facility") provided by Fremont Partners, the principal terms of which are described below. The following table has been prepared by the Purchaser after discussions with management of the Company and sets forth the approximate amounts, proposed sources and uses of funds necessary to consummate the proposed Offer, Merger and related refinancings:
$IN MILLIONS Sources: Cash of the Company............................................................................ $ 1.8 Equity Contributions from Fremont.............................................................. 44.3 Borrowings under Bridge Facility or Bank Financing............................................. 47.6 ----- Total........................................................................................ $ 91.9 ----- ----- Uses: Purchase Equity................................................................................ $ 27.8 Refinance Existing Debt and Accrued Liabilities of Company..................................... 56.5 Fees and Expenses.............................................................................. 7.6 ----- Total........................................................................................ $ 91.9 ----- -----
The proposed Bridge Facility will be structured as a term loan, and will be fully secured by a first priority, perfected security interest on substantially all of the tangible and intangible assets of the Company. The Bridge Facility will mature and be payable in full on the date which is 364 days after the date on which the Shares are acquired by the Purchaser pursuant to the Offer (the "Bridge Maturity Date"). If the Bridge Facility is not refinanced on or prior to the Bridge Maturity Date, it would, at such time, convert (the "Conversion") to a permanent loan facility with a five-year term. Prior to the Bridge Maturity Date, the Bridge Facility will accrue interest at a rate per annum equal to LIBOR plus a margin of 250 basis points. Following the Conversion, the Bridge Facility will accrue interest at a rate per annum equal to the rate for five-year U.S. Treasuries as of the date of the Conversion plus a margin of 600 basis points. 11. BACKGROUND OF THE OFFER; PURPOSE OF THE OFFER AND THE MERGER; THE MERGER AGREEMENT AND CERTAIN OTHER AGREEMENTS. The following description was prepared by Fremont and the Company. Information about the Company was provided by the Company and neither the Purchaser nor Fremont takes any responsibility for the accuracy or completeness of any information regarding meetings or discussions in which Fremont or its representatives did not participate. BACKGROUND OF THE OFFER. In October 1995, a representative of Lehman Brothers Inc. ("Lehman Brothers") contacted representatives of The Fremont Group to inquire as to The Fremont Group's potential interest in pursuing a transaction with the Company. Following this contact, The Fremont Group initiated a review of certain publicly available information concerning the Company. 17 On November 6, 1995, The Fremont Group entered into a confidentiality agreement with Lehman Brothers on behalf of the Company, pursuant to which The Fremont Group agreed to treat as confidential certain information provided to it by or on behalf of the Company and agreed for a period of two years not to acquire any voting securities of the Company without the consent of the Board of Directors of the Company. On November 7, 1995, Lehman Brothers furnished to The Fremont Group a descriptive memorandum containing limited non-public information concerning the Company. On November 30, 1995, in compliance with bid instructions provided by Lehman Brothers, The Fremont Group submitted an initial indication of interest together with a due diligence request list. Based on an indication of interest to acquire all the outstanding Common Stock for $10 to $12 a share, The Fremont Group was invited to attend a due diligence session at the Company's headquarters. On January 11, 1996, The Fremont Group met with the senior management of the Company and reviewed documents provided in a data room set up by the Company and Lehman Brothers. Over the next several weeks, The Fremont Group and its advisors engaged in a series of telephone conversations, plant tours and meetings with senior and operating management of the Company to further investigate the business, strategies and prospects of the Company. During this time period, The Fremont Group, with the assistance of its outside advisors, also conducted a detailed independent due diligence review of the Company's assets and liabilities, including its underfunded pension plan liabilities, unfunded retiree medical and health liabilities and potential environmental liabilities. At the end of January 1996, The Fremont Group communicated to Lehman Brothers that following its review of the data room documents, discussions with senior management and its independent due diligence review of the assets and liabilities of the Company, it was no longer willing to proceed at the valuation levels indicated in its initial indication of interest of November 30, 1995. The Fremont Group indicated that its current view was based on the understanding it had now acquired with respect to the Company's significant off-balance sheet liabilities and deteriorating operating performance and financial condition. The Fremont Group communicated that it would, however, continue to have an interest in pursuing a transaction with the Company at substantially lower valuations. At the time, representatives of Lehman Brothers discouraged The Fremont Group from further proceeding with its review of the Company or further discussions, indicating that the Company's Board of Directors was unwilling to accept an offer below the approximate range of $10 to $12 per share of Common Stock provided by The Fremont Group in its initial indication of interest. At the time of these discussions, the Common Stock was trading within a range of approximately $8 to $10 per share. In early March 1996, a representative of Lehman Brothers contacted a representative of Fremont Partners, which had been formed in the meantime in February 1996 to carry on the direct investment activities of The Fremont Group, and suggested the Board of Directors of the Company might now be prepared to consider Fremont Partners' proposal if Fremont Partners remained interested in an acquisition of the Company. On March 7, 1996, Fremont Partners submitted a transaction proposal that provided for the acquisition of all equity interests in the Company and contemplated an arrangement where repayment of a portion of the existing senior notes would be contingent upon the receipt of a specified level of net proceeds from the sale of the Company's consumer products division, which was then actively being undertaken. Under this structure, Fremont Partners indicated that it was prepared to pay $2.62 to $4.00 per share of Common Stock, assuming the disposition of the Company's consumer products division. On April 3, 1996, a representative of Lehman Brothers informed a representative of Fremont Partners that following the sale of the consumer products division, Lehman Brothers would no longer be actively working with the Company. Lehman Brothers indicated that the Company continued to have a need for new capital and that if Fremont Partners remained interested in a transaction with the Company, Fremont Partners should communicate with the new Chief Executive Officer, Mr. D. Gordon Strickland, directly. Fremont Partners telephoned Mr. Strickland on April 3, 1996 and inquired whether the Company would have an interest in pursuing a recapitalization transaction led by Fremont Partners. 18 On April 4, 1996, Mr. Strickland provided Fremont Partners with a package of updated financial information that detailed the Company's planned restructuring. Fremont Partners held a number of discussions during the month of April with Mr. Strickland and other members of senior management of the Company regarding a potential recapitalization of the Company. On April 19, 1996, Mr. Strickland met with Fremont Partners in Fremont Partners' offices in San Francisco. In this meeting, representatives of Fremont Partners outlined a number of recapitalization alternatives that generally involved a capital infusion by Fremont Partners of up to $25 million in return for a substantial but minority stake in the Company. Mr. Strickland expressed an interest in pursuing such a transaction, but expressed concern with the proposed financial terms of the proposed investment as it implied a valuation of the common equity below the then-current market price of the Common Stock of approximately $6 per share. Mr. Strickland agreed to discuss the proposal with members of the Board of Directors of the Company and the Company's advisors. Several days later, Mr. Strickland responded that the Company was unwilling to pursue a recapitalization with an implied common equity valuation below current market prices. On August 12, 1996, a representative of Fremont Partners spoke to Mr. Strickland, inquiring as to the current status of its negotiations with its noteholders concerning a financial restructuring of the Company. Mr. Strickland indicated an interest in reopening discussions with Fremont Partners concerning a possible investment in the Company. Fremont Partners requested updated financial information with respect to the Company, which was provided. A series of conversations were held over the next several weeks between senior management of the Company and representatives of Fremont Partners, but did not result in significant progress concerning the terms of a possible recapitalization transaction. On November 19, 1996, a representative of Fremont Partners spoke with Mr. Strickland regarding the Company's recent public announcement that the holders of the Company's long-term unsecured debt had sold such debt to third parties. On December 18, 1996, a representative of Fremont Partners spoke to Mr. Herb Elish, Chairman of the Board of the Company, inquiring whether the Company would have an interest in pursuing a recapitalization transaction lead by Fremont Partners that would provide sufficient capital to the Company to facilitate a repurchase of the Company's unsecured long-term debt from the new debtholders. On January 7, 1997, Mr. Elish requested that Fremont Partners contact the Company's new financial advisor, CIBC Wood Gundy, in order to obtain updated financial information needed to prepare and resubmit a transaction proposal. In a series of conversations throughout January 1997, representatives of Fremont Partners discussed a potential recapitalization of the Company with CIBC Wood Gundy and the Company's senior management. Fremont Partners also reviewed with the Company's senior management the progress of its various business and financial restructuring efforts and the Company's operating prospects in the aftermath of its disappointing performance in fiscal year 1996. Fremont Partners also updated its independent due diligence review of the Company's assets and liabilities, including its underfunded pension plan liabilities, unfunded retiree medical and health liabilities and potential environmental liabilities. On January 16, 1997, Fremont Partners submitted to CIBC Wood Gundy a letter detailing the terms of its recapitalization proposal. These terms included a new equity investment of $25 million in the form of new preferred and new common equity with an implied common equity valuation of approximately $2.00 per share. On January 28, 1997, a representative of CIBC Wood Gundy contacted Fremont Partners and indicated that CIBC Wood Gundy had presented Fremont Partners' proposal to the Company's Board of Directors along with a number of other transaction alternatives. According to the representative of CIBC Wood Gundy, the Company's Board of Directors chose to pursue a refinancing transaction that would not involve a new equity capital contribution, but instead would effect a refinancing of the Company's existing unsecured debt obligations with a new senior secured credit facility together with senior subordinated secured notes with equity warrants. CIBC Wood Gundy indicated that it expected this transaction would be completed within two to three weeks. 19 On March 12, 1997, a representative of Fremont Partners contacted CIBC Wood Gundy and inquired regarding the apparent delay in completing the refinancing previously discussed. CIBC Wood Gundy responded that it still expected the refinancing transaction to be completed shortly. Fremont Partners submitted another proposal letter to CIBC Wood Gundy that reiterated Fremont Partners' interest in pursuing a recapitalization transaction and indicated a willingness to improve its terms by providing an effective common equity valuation of approximately $3.00 per share. CIBC Wood Gundy responded that the Board of Directors remained unwilling to consider Fremont Partners' proposal and would continue to pursue the refinancing alternative. On May 23, 1997, a representative of CIBC Wood Gundy contacted Fremont Partners and stated that the Company had received and was reviewing an acquisition proposal from a third party and was willing to reconsider an acquisition proposal from Fremont Partners. CIBC Wood Gundy indicated that the refinancing transaction remained an alternative that was also under active consideration. Fremont Partners commenced a series of discussions and meetings with the Company's senior and operating management and Kerr's advisors that culminated in a letter to Mr. Strickland, dated June 10, 1997 that proposed a Fremont Partners acquisition of all Common Stock at a price of $4.50 per share. The Company and its advisors responded to this proposal by asking Fremont Partners to clear all due diligence issues and to resubmit its letter as a formal offer with a marked-up purchase contract provided by counsel to the Company by no later than June 16, 1997. Fremont Partners accelerated its already commenced full due diligence review and prepared a final proposal, including a contract mark-up, which Fremont Partners submitted to CIBC Wood Gundy, in accordance with CIBC Wood Gundy's instructions, on June 16, 1997. The proposal provided for, among other things, a tender offer for all outstanding shares of Common Stock and Series D Preferred Shares at $4.50 per share and $8.50 per share, respectively, to be followed by a back-end merger at the same price. The proposal provided for an option for a number of newly issued shares of Common Stock equal to approximately 19.9% of the then-outstanding shares of Common Stock at an exercise price equal to the price to be paid for the Common Stock in the tender offer, to be exercisable in certain circumstances, and for a termination fee, payable in certain circumstances, of $5 million, plus expenses not to exceed $1.5 million. Fremont Partners and its legal counsel held a number of discussions over the telephone with the Company and its advisors and counsel in the days following June 16 to negotiate the terms of the proposed acquisition, including various contractual provisions. On June 25, a member of the Company's Executive Committee telephoned a representative of Fremont Partners and stated that the Company was prepared to work with Fremont Partners toward the signing of a definitive agreement and to recommend Fremont Partners' proposal to the Company's Board of Directors, subject to resolution of a number of contractual issues and subject to Fremont Partners' agreeing to pay $5.90 per share for the Common Stock and $14.50 per share for the Series D Preferred Shares. Fremont Partners and the Company and the Company's advisors negotiated over the next several days to resolve the open issues including the price differential, the amount of the termination fee and the circumstances under which the termination fee would become payable and the Option would become exercisable. At a meeting of the Board of Directors of the Company held on June 30, 1997, the Board of Directors unanimously approved the Merger Agreement, the Offer and the Merger and determined that the terms of the Offer and the Merger are fair to, and in the best interests of, the holders of both the Common Stock and the Series D Preferred Shares, and unanimously recommend that stockholders of the Company accept the Offer and tender their Shares. On June 30, 1997, CIBC Wood Gundy delivered to the Company's Board of Directors its opinion to the effect that, based on the assumptions, limited procedures and matters referred to therein, the consideration to be received by the holders of Common Stock, on the one hand, and the Series D Preferred Shares, on the other, pursuant to the Offer and under the terms of the Merger Agreement, is fair to such holders (other than Fremont or any other subsidiary of Fremont), from a financial point of view. The written opinion of CIBC Wood Gundy is set forth in full as an exhibit to the 20 Company's Schedule 14D-9 which is being mailed to stockholders of the Company. Stockholders of the Company are urged to read that opinion in its entirety. Following the approval of the Board of Directors, on July 1, 1997, Fremont, the Purchaser and the Company executed and delivered the Merger Agreement, and the parties thereto executed the Option Agreement and Guarantee. On July 8, 1997, the Purchaser and Fremont commenced the Offer. PURPOSE OF THE OFFER AND THE MERGER. The purpose of the Offer, the Merger and the Merger Agreement is to enable Fremont to acquire control of, and the entire equity interest in, the Company. The Offer is being made pursuant to the Merger Agreement and is intended to increase the likelihood that the Merger will be effected. The purpose of the Merger is to acquire all outstanding Shares not purchased pursuant to the Offer. The transaction is structured as a merger in order to ensure the acquisition by Fremont of all the outstanding Shares. If the Merger is consummated, Fremont's common equity interest in the Company would increase to 100% and Fremont would be entitled to all benefits resulting from that interest. These benefits include complete management with regard to the future conduct of the Company's business and any increase in its value. Similarly, Fremont will also bear the risk of any decrease in the value of the Company. Stockholders of the Company who sell their Shares in the Offer will cease to have any equity interest in the Company and to participate in its earnings and any future growth. If the Merger is consummated, the stockholders will no longer have an equity interest in the Company and instead will have only the right to receive cash consideration pursuant to the Merger Agreement or to exercise statutory appraisal rights under Delaware law. See Section 12. Similarly, the stockholders of the Company will not bear the risk of any decrease in the value of the Company after selling their Shares in the Offer or the subsequent Merger. The primary benefits of the Offer and the Merger to the stockholders of the Company are that such stockholders are being afforded an opportunity to sell all of their Shares for cash at a price which represents a premium of approximately 44% over the closing market price of the Common Stock and 25% over the closing market price of the Series D Preferred Shares on the last full trading day prior to the initial public announcement that the Company was engaged in discussions with several third parties regarding a possible sale of the Company, and a more substantial premium over recent historical trading prices. In addition, the Company has informed the Purchaser that, since March 7, 1997 (following the expiration of waivers previously granted beginning in September 1995), the Company has been in default of several covenants under loan agreements related to its $50,900,000 of unsecured debt, including, currently, covenants related to current ratio, leverage ratio, interest coverage, net worth and negative pledge covenants. Moreover, the Company's failure to pay a note in the principal amount of $5,856,000, which matured on March 7, 1997, constituted a default under such loan agreements. Pursuant to a letter dated June 10, 1997, the holders of the Company's $50,900,000 unsecured debt agreed not to accelerate before July 3, 1997 in exchange for the current payment of interest on a monthly basis at the default rate of interest and a fee in the amount of $500,000, $150,000 of which was credited to the "make-whole" payment due to such holders upon a prepayment. MERGER AGREEMENT. The following is a summary of certain provisions of the Merger Agreement. The summary is qualified in its entirety by reference to the Merger Agreement which is incorporated herein by reference and a copy of which has been filed with the Commission as an exhibit to the Schedule 14D-1. The Merger Agreement may be examined and copies may be obtained at the places and in the manner set forth in Section 9 of this Offer to Purchase. 21 THE OFFER. The Merger Agreement provides that the Purchaser will commence the Offer and that, upon the terms and subject to the prior satisfaction or waiver of the conditions of the Offer, the Purchaser will purchase all Shares validly tendered pursuant to the Offer. The Merger Agreement provides that, without the written consent of the Company, the Purchaser will not (i) decrease the Common Per Share Amount or the Series D Per Share Amount, (ii) decrease the number of Shares sought in the Offer, (iii) amend or waive satisfaction of the Minimum Condition, or (iv) impose additional conditions of the Offer in any manner adverse to the holders of Shares, except that if on the initial scheduled Expiration Date all conditions to the Offer shall not have been satisfied or waived, the Purchaser may, from time to time, in its sole discretion, extend the Expiration Date. The Merger Agreement provides that if, immediately prior to the Expiration Date, as it may be extended, the Shares tendered and not withdrawn pursuant to the Offer equal less than 90% of the outstanding Common Stock or Series D Preferred Shares, the Purchaser may extend the Offer for a period not to exceed 5 business days, so long as the Purchaser expressly irrevocably waives any condition (other than the Minimum Condition) that subsequently may not be satisfied during such extension of the Offer. THE MERGER. Following the consummation of the Offer, the Merger Agreement provides that, subject to the terms and conditions thereof, at the Effective Time the Purchaser shall be merged with and into the Company and, as a result of the Merger, the separate corporate existence of the Purchaser shall cease and the Company shall continue as the surviving corporation (sometimes referred to as the "Surviving Corporation"). The respective obligations of Fremont and the Purchaser, on the one hand, and the Company, on the other hand, to effect the Merger are subject to the satisfaction on or prior to the Closing Date (as defined in the Merger Agreement) of each of the following conditions: (i) Fremont or the Purchaser or their affiliates shall have made or cause to be made, the Offer and shall have purchased Shares pursuant to the Offer, unless such failure to purchase is a result of a breach of Fremont's and the Purchaser's obligations under the Merger Agreement (ii) the Merger Agreement shall have been approved and adopted by the requisite vote of the holders of Shares, if required by applicable law, in order to consummate the Merger; and (iii) no statute, rule or regulation judgment, writ, decree, order or injunction shall have been enacted or promulgated by any governmental authority which prohibits the consummation of the Merger, and there shall be no order or injunction of a court of competent jurisdiction in effect precluding the consummation of the Merger. At the Effective Time of the Merger (i) each issued and outstanding Share (other than Shares that are owned by the Company as treasury stock, any Shares owned by Fremont, the Purchaser or any Shares which are held by stockholders properly exercising dissenters' rights under Delaware law) will be converted into the right to receive the Common Per Share Amount or the Series D Per Share Amount, as the case may be, paid pursuant to the Offer and (ii) each issued and outstanding share of the common stock, par value $.01 per share, of the Purchaser will be converted into one share of common stock of the Surviving Corporation and shall constitute the only outstanding shares of capital stock of the Surviving Corporation. THE COMPANY'S BOARD OF DIRECTORS. The Merger Agreement provides that promptly upon the purchase by the Purchaser of any Shares pursuant to the Offer, Fremont shall be entitled to designate such number of directors, rounded up to the next whole number, on the Company's Board of Directors as will give Fremont representation on the Board of Directors equal to at least that number of directors which equals the product of the total number of directors on the Company's Board of Directors (giving effect to the directors designated by Fremont and including directors serving as officers of the Company) multiplied by the percentage that the number of Shares beneficially owned by the Purchaser or any of its affiliates (including Shares as are accepted for payment pursuant to the Offer, but excluding Shares held by the Company) bears to the number of Shares outstanding. The Company will, upon request of the Purchaser, promptly increase the size of the Board of Directors or use its best efforts to secure the resignations of such number of its incumbent directors as is necessary to enable Fremont's designees to be elected to the Company's Board of Directors, provided that (i) in the event that Fremont's designees are appointed or 22 elected to the Company's Board of Directors, until the Effective Time the Company's Board of Directors will have at least one director who is a director as of the date of the execution of the Merger Agreement and who is neither an officer of the Company nor a designee, stockholder, affiliate or associate (within the meaning of Federal securities laws) of Fremont (one or more of such directors, the "Independent Directors") and (ii) if no Independent Directors remain, the other directors will designate one person to fill one of the vacancies who is neither an officer of the Company nor a designee, stockholder, affiliate or associate of the Purchaser, such person so designated being deemed an Independent Director. The Company's obligation to appoint Fremont's designees to the Company's Board of Directors is subject to compliance with Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. STOCKHOLDERS' MEETING. Pursuant to the Merger Agreement, the Company will, if required by applicable law in order to consummate the Merger, duly call, give notice of, convene and hold a special meeting of its stockholders as promptly as practicable following the acceptance for payment and purchase of Shares by the Purchaser pursuant to the Offer for the purpose of considering and taking action upon the approval of the Merger and the adoption of the Merger Agreement. The Merger Agreement provides that the Company will, if required by applicable law in order to consummate the Merger, prepare and file with the Commission a preliminary proxy or information statement relating to the Merger and the Merger Agreement and use its best efforts (i) to obtain and furnish the information required to be included by the Commission in the Proxy Statement (as hereinafter defined) and, after consultation with Fremont, to respond promptly to any comments made by the Commission with respect to the preliminary proxy or information statement and cause a definitive proxy or information statement, including any amendment or supplement thereto (the "Proxy Statement") to be mailed to its stockholders, provided that no amendment or supplement to the Proxy Statement will be made by the Company without consultation with Fremont and its counsel and (ii) to obtain the necessary approvals of the Merger and the Merger Agreement by its Stockholders. If the Purchaser acquires at least a majority of the outstanding shares of Common Stock, the Purchaser will have sufficient voting power to approve the Merger, even if no other stockholder votes in favor of the Merger. The Company has agreed to include in the Proxy Statement the recommendation of the Company's Board of Directors that stockholders of the Company vote in favor of the approval of the Merger and the adoption of the Merger Agreement. The Merger Agreement provides that in the event that Fremont or the Purchaser acquires at least 90% of outstanding shares of Common Stock and Series D Preferred Shares, respectively, pursuant to the Offer or otherwise, Fremont, the Purchaser and the Company will, at the request of Fremont and subject to the terms of the Merger Agreement, take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after such acquisition, without a meeting of stockholders of the Company, in accordance with Delaware law. OPTIONS. Pursuant to the Merger Agreement, at the Effective Time, the Company will use reasonable efforts (without incurring any liability in connection therewith) to provide that (i) each then-outstanding option to purchase shares of Common Stock (the "Options") granted under any of the Company's 1984 Stock Option Plan, 1987 Stock Option Plan, 1993 Stock Option Plan, 1988 Non-Employee Directors Plan or 1993 Non-Employee Director Plan, each as amended (collectively, the "Option Plans"), whether or not then exercisable or vested, shall be cancelled and in consideration therefor will receive an amount in cash equal to the product of (A) the difference between the Common Per Share Amount and the per share exercise price of such Option and (B) the number of Shares subject to such Option (such amount, the "Option Price"). The Company will obtain all necessary consents or releases from holders of the Options to effect the foregoing. Upon receipt of the Option Price, the Option will be cancelled. The surrender of an Option to the Company will be deemed a release of any and all rights a holder had or may have had in respect of such Option. Except as may be otherwise agreed to by Fremont or the Purchaser and the Company, the Company (i) shall cause the Option Plans to terminate as of the Effective Time, and (ii) following the Effective Time, shall take all actions necessary to ensure that no holder of Options or any 23 participant in the Option Plans shall have any right thereunder to acquire any equity securities of the Company, the Surviving Corporation or any subsidiary thereof. INTERIM OPERATIONS; COVENANTS. Pursuant to the Merger Agreement, the Company has agreed that, except as expressly contemplated or provided by the Merger Agreement or the Option Agreement or agreed to in writing by Fremont, after the date of execution of the Merger Agreement, and prior to the time the designees of the Purchaser constitute a majority of the Company's Board of Directors (the "Appointment Date"), the business of the Company will be conducted only in the ordinary and usual course and to the extent consistent therewith, the Company will use its reasonable best efforts to preserve its business organization intact and maintain its existing relations with customers, suppliers, employees, creditors and business partners, and (a) the Company will not, directly or indirectly, (i) issue, sell, transfer or pledge or agree to sell, transfer or pledge any treasury stock of the Company beneficially owned by it, except upon the exercise of Options or other rights to purchase shares of Common Stock pursuant to the Option Plans outstanding on the date of the Merger Agreement or upon exercise of outstanding warrants or conversion of outstanding Series D Preferred Shares; (ii) amend its Certificate of Incorporation or By- Laws or similar organizational documents; or (iii) split, combine or reclassify the outstanding Shares of the Company; and (b) the Company shall not (i) declare, set aside or pay any dividend or other distribution payable in cash, stock or property with respect to its capital stock; (ii) issue, sell, pledge, dispose of or encumber any additional shares of, or securities convertible into or exchangeable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of capital stock of any class of the Company, other than Shares reserved for issuance on the date of the Merger Agreement pursuant to the exercise of warrants or Options outstanding on the date of the Merger Agreement or upon the conversion of Series D Preferred Shares; (iii) transfer, lease, license, sell, mortgage, pledge, dispose of, or encumber any assets, or incur any indebtedness or other liability other than in the ordinary course of business, or mortgage, pledge or encumber any assets or modify any indebtedness; (iv) redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock; (v) grant any increase in the compensation payable or to become payable by the Company to any of its executive officers or adopt any new or amend or otherwise increase or accelerate the payment or vesting of the amounts payable or to become payable under any existing bonus, incentive compensation, deferred compensation, severance, profit sharing, stock option, stock purchase, insurance, pension, retirement or other employee benefit plan, agreement or arrangement; (vi) enter into any employment or severance agreement with or, except in accordance with the existing written policies of the Company, grant any severance or termination pay to any officer, director or employee of the Company; (vii) permit any insurance policy naming it as a beneficiary or a loss payable payee to be cancelled or terminated without notice to Fremont except in the ordinary course of business and consistent with past practice unless the Company shall have obtained a comparable replacement policy; (viii) enter into any material contract or material transaction relating to the purchase of assets other than in the ordinary course of business; assume, guarantee or become liable for the obligations of any person, except in the ordinary course of business and consistent with past practice; (ix) modify, amend or terminate any of its material contracts or waive, release or assign any material rights or claims, except in the ordinary course of business and consistent with past practice; (x) make any loans, advances or capital contributions to or investments in any other person; incur or assume any long-term debt, or except in the ordinary course of business, incur or assume any short-term indebtedness in amounts not consistent with past practice except for borrowings under the Company's existing credit facility in the ordinary course of business and consistent with past practice; (xi) pay, discharge or satisfy any claims or liabilities (whether absolute, accrued, asserted or unasserted, contingent or otherwise) other than in the ordinary course of business and consistent with past practices or reflected or reserved against in the consolidated financial statements of the Company; (xii) adopt a plan of liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company (other than the Merger); (xiii) take or agree to take, any action that would or is reasonably likely to result in any of the conditions to the Merger not being satisfied, or would make any representation or warranty of the Company contained in the Merger Agreement inaccurate in any respect, at or prior to the Effective Time, or that would materially impair the Company's 24 ability to consummate the Merger or materially delays such consummation; (xiv) redeem the Rights or terminate, amend or modify the Rights Plan prior to the consummation of the Offer; (xv) change any of the accounting methods used by it unless required by generally accepted accounting principles ("GAAP"), make any material tax election, change any material tax election already made, adopt any material tax accounting method, change any material tax accounting method unless required by GAAP, enter into any closing agreement, settle any tax claim or assessment or consent to any tax claim or assessment or any waiver of the statute of limitations for any such claim or assessment; or (xvi) enter into any agreement with respect to the foregoing or take any action with the intent of causing any of the conditions to the Offer set forth in Section 14 not to be satisfied. Pursuant to the Merger Agreement, the Purchaser has agreed that, promptly following the consummation of the Offer, the Purchaser will join with the defendants in the action entitled KUPFERBERG V. NORIAN, ET AL. (Del. Ch. Civ. Act. No. 12709) in a motion to dismiss or withdraw such action with prejudice, and will not assert or permit the Company to assert any claim against the defendants thereunder relating to the subject matter thereof. NO SOLICITATION. Pursuant to the Merger Agreement, the Company has agreed to notify the Purchaser immediately if any proposals are received by, any information is requested from, or any negotiations or discussions are sought to be initiated or continued with the Company or its representatives, in each case in connection with any Takeover Proposal (as defined below) or the possibility or consideration of making a Takeover Proposal ("Takeover Proposal Interest") indicating, in connection with such notice, the name of the Person (as defined in the Merger Agreement) indicating such Takeover Proposal Interest and the terms and conditions of any proposals or offers. In addition, the Company has agreed that it will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted prior to the date of the Merger Agreement with respect to any Takeover Proposal Interest and that it will keep Fremont informed, on a current basis, on the status and terms of any Takeover Proposal Interest. In addition, pursuant to the Merger Agreement, the Company has agreed that the Company will not (and the Company will use its reasonable best efforts to ensure that its officers, directors, employees, investment bankers, attorneys, accountants and other agents do not), directly or indirectly (i) initiate, solicit or encourage, or take any action to facilitate the making of, any offer or proposal which constitutes or is reasonably likely to lead to any Takeover Proposal, (ii) enter into any agreement with respect to any Takeover Proposal, or in the event of an unsolicited written Takeover Proposal for the Company engage in negotiations or discussion with, or provide information or data to, any Person (other than Fremont, any of its affiliates or representatives and except for information which has been previously publicly disseminated by the Company) relating to any Takeover Proposal, except that the Merger Agreement does not prohibit the Company and the Company's Board of Directors from (i) taking and disclosing to the Company's stockholders a position with respect to a tender or exchange offer by a third party pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act, or (ii) making such disclosure to the Company's stockholders as, in the good faith judgment of the Board, after receiving advice from outside counsel, is required under applicable law. A "Takeover Proposal" means any tender or exchange offer involving the Company, any proposal for a merger, consolidation or other business combination involving the Company, any proposal or offer to acquire in any manner a substantial equity interest in, or a substantial portion of the business or assets of, the Company (other than immaterial or insubstantial assets or inventory in the ordinary course of business or assets held for sale), any proposal or offer with respect to the Company or any proposal or offer with respect to any other transaction similar to any of the foregoing with respect to the Company other than pursuant to the transactions effected pursuant to the Merger Agreement. Notwithstanding the foregoing, prior to the acceptance of Shares pursuant to the Offer, the Company may furnish information concerning its business to any Person pursuant to confidentiality agreements and negotiate a Takeover Proposal if (a) such Person submitted on an unsolicited basis a bona fide written proposal to the Company relating to any such transaction which the Company's Board of Directors 25 determines in good faith, after receiving advice from a nationally recognized investment banking firm, represents a superior transaction to the Offer and the Merger and which is not conditioned upon obtaining financing and (b) in the opinion of the Company's Board of Directors, only after receipt of advice from outside legal counsel to the Company, the failure to provide such information or access or to engage in such discussions or negotiations would create a reasonable possibility of a breach of the fiduciary duties of the Company's Board of Directors to the Company's stockholders under applicable law (a Takeover Proposal which satisfied clauses (a) and (b), a "Superior Proposal"). Within two business days following receipt by the Company of a Superior Proposal, the Company must notify Fremont of the receipt thereof. The Company must then provide Fremont any material nonpublic information regarding the Company provided to the other party which was not provided to Fremont. At any time after two business days following notification to Fremont of the Company's intent to do so, the Company's Board of Directors may terminate the Merger Agreement pursuant to its terms and enter into an agreement with respect to a Superior Proposal, provided that the Company, concurrently with entering into such agreement, pay or cause to be paid, the Termination Fee (as defined below), plus any amount payable at the time for reimbursement of expenses. Except as permitted under the terms of the Merger Agreement, neither the Company's Board of Directors nor any committee thereof shall (i) approve or recommend, or propose to approve or recommend, any Takeover Proposal, (ii) enter into any agreement with respect to any Takeover Proposal or (iii) withdraw or modify, or propose to withdraw or modify, in a manner adverse to Fremont or the Purchaser, the approval or recommendation of the Company's Board of Directors, or any such committee thereof, of the Offer, the Merger Agreement or the Merger. INDEMNIFICATION AND INSURANCE. Pursuant to the Merger Agreement, for a period of five years after the Effective Time, the Certificate of Incorporation and By-Laws of the Surviving Corporation shall not be amended, repealed or otherwise modified in any manner that would adversely affect the rights thereunder of individuals who as of the date of the Merger Agreement were directors, officers, employees, fiduciary, agents or otherwise entitled to indemnification under the Certificate of Incorporation, By-Laws or indemnification agreements (the "Indemnified Parties"). The Merger Agreement provides that the Company shall, to the fullest extent permitted under Delaware law and regardless of whether the Merger becomes effective, indemnify, defend and hold harmless, and after the Effective Time, Fremont, the Purchaser and the Surviving Corporation shall jointly and severally, to the fullest extent permitted under Delaware law, indemnify and hold harmless, each Indemnified Party against any costs or expenses (including reasonable attorneys' fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any claim, action, suit proceeding or investigation, including without limitation, liabilities arising out of the Merger. The Merger Agreement also provides that Fremont or the Surviving Corporation will maintain the Company's existing officers' and directors' liability insurance ("D&O Insurance") for a period of not less than six years after the Effective Time, provided, that if the aggregate annual premiums for such D&O Insurance at any time shall exceed 200% of the per annum rate of premium currently paid by the Company for such insurance as in effect on the date of the Merger Agreement, then Fremont will cause the Company or the Surviving Corporation to provide the maximum coverage then available at an annual premium equal to 200% of such rate. REPRESENTATIONS AND WARRANTIES. Pursuant to the Merger Agreement, the Company has made customary representations and warranties to Fremont and the Purchaser with respect to, among other things, its organization, capitalization, authority relative to the Merger, financial statements, public filings, conduct of business, employee benefit plans, intellectual property, employment matters, compliance with laws, tax matters, litigation, environmental matters, material contracts, potential conflicts of interest, brokers' fees, real property, insurance, accounts receivable and inventory, vote required to approve the Merger Agreement, undisclosed liabilities, its rights plan, information in the Proxy Statement and the absence of any material adverse effect on the Company since December 31, 1996. In addition, the Company has represented that, subject to certain exceptions, no material licensor, vendor, supplier, licensee or customer of the Company has cancelled or otherwise modified its relationship with the Company. 26 TERMINATION; FEES. The Merger Agreement may be terminated and the transactions contemplated therein abandoned at any time prior to the Effective Time, whether before or after approval of the stockholders of the Company, (a) by mutual written consent of Fremont and the Company; (b) by either the Company or Fremont if there is a material breach by the other, which breach cannot or has not been cured within 10 days of receipt of notice thereof; (c) by Fremont if (i) the Company's Board of Directors withdraws, modifies or changes its recommendation in respect of the Merger Agreement in a manner adverse to Fremont; (ii) subject to the "No Solicitation" provision, if (X) the Company's Board of Directors recommends any proposal other than Fremont's proposal in respect of a Takeover Proposal, (Y) the Company continues discussions with a third party concerning a Takeover Proposal for more than 20 business days after the receipt thereof, or (Z) a Takeover Proposal containing a proposed price is commenced or made public and the Company does not reject such Takeover Proposal within 20 business days of its receipt, or if sooner, the date its existence first becomes publicly disclosed; and (iii) if any person other than Gabelli Funds, Inc. and its affiliates acquires beneficial ownership of at least 15% of the outstanding Common Stock; (d) by the Company in order to allow it to enter into a transaction with a third party, which transaction the Company's Board of Directors has determined is more favorable to the Company's stockholders than the proposed transaction with Fremont, PROVIDED, that the Company gives notice thereof and it makes simultaneous payment to Fremont of the Termination Fee and reimbursement of expenses (as discussed below); (e) by Fremont if (i) the Offer shall have expired or been terminated without any Shares being purchased thereunder by the Purchaser as the result of the occurrence of any of the conditions set forth in Annex I to the Merger Agreement or (ii) prior to the purchase of Shares pursuant to the Offer, the Company shall have breached any representation, warranty or covenant or other agreement contained in the Merger Agreement, which breach would give rise to the failure of a condition set forth in paragraphs (d) or (e) of Annex I to the Merger Agreement and such breach cannot or has not been cured within 10 days of receipt of notice thereof; (f) by either the Company or Fremont if a court of competent jurisdiction or governmental entity shall have issued an order, decree or ruling or taken any other actions, in each case permanently enjoining, restraining or otherwise prohibiting the Offer, the Merger and the transaction contemplated by the Merger Agreement; or (g) by either the Company or Fremont if, without any material breach on its respective part, the purchase of Shares pursuant to the Offer shall not have occurred on or before 120 days from the date of the Merger Agreement. In accordance with the Merger Agreement, if (A) Fremont shall have terminated the Merger Agreement pursuant to the foregoing clauses, (c)(i) or (c)(ii)(X); or (B)(i) if Fremont shall have terminated the Merger Agreement pursuant to the foregoing clauses (c)(ii)(Y), (c)(ii)(Z), (c)(iii) or (e)(ii) and (2) within 18 months of any such termination the Company shall have entered into a definitive agreement with respect to a Takeover Proposal or a Takeover Proposal with respect to the Company shall have been consummated; or (C) the Company shall have terminated the Merger Agreement pursuant to the foregoing clause (d), then in either case the Company shall pay simultaneously with such termination pursuant to clause (d) and promptly, but in no event later than two business days after the date of such termination or event if pursuant to clauses (c) or (e)(ii), to Fremont a termination fee (the "Termination Fee") of $2,000,000 plus an amount, not in excess of $1,500,000, equal to Fremont's actual and reasonably documented reasonable out-of-pocket expenses incurred by Fremont and the Purchaser in connection with the Offer, the Merger, the Merger Agreement and the consummation of the transactions contemplated thereby, which amount shall be payable by wire transfer. OPTION AGREEMENT. The following is a summary of certain provisions of the Option Agreement. The summary is qualified in its entirety by reference to the Option Agreement which is incorporated herein by reference and a copy of which has been filed with the Commission as an exhibit to the Schedule 14D-1. The Option Agreement may be examined and copies may be obtained at the places and in the manner set forth in Section 9 of this Offer to Purchase. 27 As a condition and inducement to Fremont's and Purchaser's entering into the Merger Agreement, concurrently with the execution and delivery of the Merger Agreement, Fremont and the Company have entered into an Option Agreement, dated July 1, 1997, pursuant to which, among another things, the Company has granted Fremont an irrevocable option to purchase up to 782,685 (approximately 19.9%) newly issued shares of Common Stock at $5.40 per share (the "Option Shares"). The Option can be exercised by the Parent (or its designee) under the following circumstances: (a) any corporation, partnership, individual, trust, unincorporated association, or other entity or "person" (as defined in Section 13(d)(3) of the Exchange Act) other than Fremont or any of its affiliates (i) commences a bona fide tender offer or exchange offer for any shares of Common Stock, the consummation of which would result in beneficial ownership by such third party (together with its affiliates and associates) of 15% or more of the then outstanding Common Stock (either on a primary or fully diluted basis); (ii) acquires beneficial ownership of 15% of the Common Stock, other than the Gabelli Funds, Inc. and its affiliates; (iii) solicits proxies in a "solicitation" subject to proxy rules under the Exchange Act, executes any written consent or become a "participant" in any "solicitation" as defined in Regulation 14A under the Exchange Act), in each case with respect to the Common Stock, or (b) any of the termination events described in Section 8.1(g) or (h) of the Merger Agreement that would allow Fremont to terminate the Merger Agreement has occurred (but without the necessity of Fremont having terminated the Merger Agreement). In addition, the Option Agreement provides that in the event of any change in Common Stock or in the number of outstanding shares of Common Stock by reason of a stock dividend, split up, recapitalization, combination, exchange of shares or similar transaction or any other change in the corporate or capital structure of the Company (including the declaration or payment of an extraordinary dividend of cash, securities or other property), the type and number of Option Shares to be issued by the Company upon exercise of the Option shall be adjusted appropriately, and proper provision made in the agreements governing such transaction so that Fremont will receive upon exercise of the Option the number and class of shares or other securities or property that Fremont would have received in respect to the Common Stock if the Option had been exercised immediately prior to such event, or the record date therefor, as applicable. If the Company enters into an agreement (i) to consolidate with or merge into any person, other than Fremont or one of its subsidiaries, and is not the continuing or surviving corporation, (ii) to permit any person, other than Fremont or one of its subsidiaries, to merge into the Company, and the Company is not the continuing or surviving corporation, but in connection with such merger, the then outstanding shares of Common Stock are changed into or exchanged for stock or other securities of the Company or any other person or cash or any other property, or then outstanding shares of Common Stock after such merger represent less than 50% of the corporation or (iii) to sell or otherwise transfer all or substantially all of its assets to any person, other than Fremont or one of its subsidiaries, then, in each case, proper provision must be made in such governing agreements so that Fremont will receive upon exercise of the Option the number and class of shares or other securities or property that Fremont would have received in respect of any Common Stock if the Option had been exercised immediately prior to such transaction. In addition, the Total Profit (as defined below) that Fremont may make upon the exercise of the Option is capped at $1,000,000. Total Profit means the aggregate amount (before taxes) of the following: (i)(x) the net cash amounts received by Fremont pursuant to the sale of Option Shares (or any securities into which such Option Shares are converted or exchanged) to any unaffiliated party, less (y) Fremont's purchase price of such Option Shares and (ii) any Notional Total Profit, which is, with respect to any number of shares as to which Fremont may propose to exercise the Option, the Total Profit determined as of the date of such proposal assuming that the Option were exercised on such date for such number of shares and assuming that such shares, together with all other shares of Common Stock held by Fremont and its affiliates as of such date, were sold for cash at the closing market price for the Common Stock as of the close of business on the preceding trading day (less customary brokerage commissions). 28 The Option Agreement terminates, and the Option expires, on the earlier of (i) the Effective Time and (ii) to the extent that a notice to exercise the Option has not theretofore been given by Fremont, six months after termination of the Merger Agreement. GUARANTEE. The following is a summary of certain provisions of the Guarantee. The summary is qualified in its entirety by reference to the Guarantee which is incorporated herein by reference and a copy of which has been filed with the Commission as an exhibit to the Schedule 14D-1. The Guarantee may be examined and copies may be obtained at the places and in the manner set forth in Section 9 of this Offer to Purchase. As a condition and inducement to the Company's entering into the Merger Agreement, concurrently with execution and delivery of the Merger Agreement, Fremont Partners and the Company executed the Guarantee pursuant to which, among other things, Fremont Partners has agreed to unconditionally and irrevocably guarantee, for the benefit of the Company the performance of all obligations of Fremont and the Purchaser pursuant to the Merger Agreement. Fremont Partners has represented in the Guarantee that it has funds available to it sufficient to purchase, or cause the purchase of the Shares in accordance with the terms of the Merger Agreement, and to pay, or cause to be paid, all amounts due (or which will, as a result of the transactions contemplated by the Merger Agreement become due) in respect of any indebtedness of the Company for borrowed money outstanding as of the date of the consummation of the Offer. The Guarantee terminates upon the consummation of the purchase by the Purchaser, Fremont or any of its affiliates of any Shares pursuant to the Offer. 12. PLANS FOR THE COMPANY; OTHER MATTERS. PLANS FOR THE COMPANY. Fremont is conducting a detailed review of the Company and its assets, corporate structure, dividend policy, capitalization, operations, properties, policies, management and personnel and will consider, subject to the terms of the Merger Agreement, what, if any, changes would be desirable in light of the circumstances which exist upon completion of the Offer. Such changes could include changes in the Company's business, corporate structure, certificate of incorporation, by-laws, capitalization, Board of Directors, management or dividend policy, although, except as disclosed in this Offer to Purchase, Fremont has no current plans with respect to any of such matters. The Merger Agreement provides that, promptly after the purchase by the Purchaser of any Shares pursuant to the Offer, Fremont has the right to designate such number of directors, rounded up to the next whole number, on the Company's Board of Directors as is equal to the product of the total number of directors on the Company's Board of Directors (giving effect to the directors designated by Fremont) multiplied by the percentage that the number of Shares beneficially owned by the Purchaser or any affiliate of the Purchaser (including such Shares as are accepted for payment pursuant to the Offer) bears to the total number of Shares then outstanding. See Section 11. The Merger Agreement provides that the directors of the Purchaser and the officers of the Company at the Effective Time of the Merger will, from and after the Effective Time, be the initial directors and officers, respectively, of the Surviving Corporation. Except as disclosed in this Offer to Purchase, neither Fremont nor the Purchaser has any present plans or proposals that would result in an extraordinary corporate transaction, such as a merger, reorganization, liquidation, relocation of operations, or sale or transfer of assets, involving the Company or any of its subsidiaries, or any material changes in the Company's corporate structure, business or composition of its management or personnel. OTHER MATTERS. STOCKHOLDER APPROVAL. Under the DGCL, the approval of the Board of Directors of the Company and the affirmative vote of the holders of a majority of the outstanding Shares are required to adopt and 29 approve the Merger Agreement and the transactions contemplated thereby. The Company has represented in the Merger Agreement that the execution and delivery of the Merger Agreement by the Company and the consummation by the Company of the transactions contemplated by the Merger Agreement and the Option Agreement have been duly authorized by all necessary corporate action on the part of the Company, subject to the approval of the Merger by the Company's stockholders in accordance with the DGCL. In addition, the Company has represented that the affirmative vote of the holders of a majority of the outstanding shares of Common Stock is the only vote of the holders of any class or series of the Company's capital stock which is necessary to approve the Merger Agreement and the transactions contemplated thereby, including the Merger. Therefore, unless the Merger is consummated pursuant to the short-form merger provisions under the DGCL described below (in which case no further corporate action by the stockholders of the Company will be required to complete the Merger), the only remaining required corporate action of the Company will be the approval of the Merger Agreement and the transactions contemplated thereby by the affirmative vote of the holders of a majority of the shares of Common Stock. The Merger Agreement provides that Fremont will vote, or cause to be voted, all of the Shares then owned by Fremont, the Purchaser or any of Fremont's other subsidiaries and affiliates in favor of the approval of the Merger and the adoption of the Merger Agreement. In the event that Fremont, the Purchaser and Fremont's other subsidiaries acquire in the aggregate at least a majority of the shares of Common Stock, the vote of no other stockholder of the Company will be required to approve the Merger and the Merger Agreement. SHORT-FORM MERGER. Section 253 of the DGCL provides that, if a corporation owns at least 90% of the outstanding shares of each class of another corporation, the corporation holding such stock may merge such other corporation into itself without any action or vote on the part of the board of directors or the stockholders of such other corporation (a "short-form merger"). In the event that Fremont, the Purchaser and any other subsidiaries of Fremont acquire in the aggregate at least 90% of the outstanding shares of Common Stock and at least 90% of the outstanding Series D Preferred Shares, pursuant to the Offer or otherwise, then, at the election of Fremont, a short-form merger could be effected without any approval of the Board of Directors or the stockholders of the Company, subject to compliance with the provisions of Section 253 of the DGCL. Even if Fremont and the Purchaser do not own 90% of the outstanding shares of Common Stock and 90% of the outstanding Series D Preferred Shares following consummation of the Offer, Fremont and the Purchaser could seek to purchase additional shares in the open market or otherwise in order to reach the 90% thresholds and employ a short-form merger. The per share consideration paid for any Shares so acquired may be greater or less than that paid in the Offer. Fremont presently intends to effect a short-form merger if permitted to do so under the DGCL. DELAWARE BUSINESS COMBINATION STATUTE. SECTION 203. Section 203 of the DGCL, in general, prohibits a Delaware corporation such as the Company, from engaging in a "Business Combination" (defined as a variety of transactions, including mergers, as set forth below) with an "Interested Stockholder" (defined generally as a person that is the beneficial owner of 15% or more of a corporation's outstanding voting stock) for a period of three years following the date that such person became an Interested Stockholder unless (a) prior to the date such person became an Interested Stockholder, the board of directors of the corporation approved either the Business Combination or the transaction that resulted in the stockholder becoming an interested Stockholder, (b) upon consummation of the transaction that resulted in the stockholder becoming an Interested Stockholder, the Interested Stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding stock held by directors who are also officers of the corporation and employee stock ownership plans that do not provide employees with the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer or (c) on or subsequent to the date such person became an Interested Stockholder, the Business Combination is approved by the board of directors of the corporation and authorized at a meeting of 30 stockholders, and not by written consent, by the affirmative vote of the holders of a least 66 2/3% of the outstanding voting stock of the corporation not owned by the Interested Stockholder. Under Section 203, the restrictions described above do not apply if, among other things (a) the corporation's original certificate of incorporation contains a provision expressly electing not to be governed by Section 203; (b) the corporation, by action of its stockholders, adopts an amendment to its certificate of incorporation or by-laws expressly electing not to be governed by Section 203, provided that, in addition to any other vote required by law, such amendment of the certificate of incorporation or by-laws must be approved by the affirmative vote of a majority of the shares entitled to vote, which amendment would not be effective until 12 months after the adoption of such amendment and would not apply to any Business Combination between the corporation and any person who became an Interested Stockholder of the corporation on or prior to the date of such adoption; (c) the corporation does not have a class of voting stock that is (1) listed on a national securities exchange, (2) authorized for quotation on an inter-dealer quotation system of a registered national securities association or (3) held of record by more than 2,000 stockholders, unless any of the foregoing results from action taken , directly or indirectly, by an Interested Stockholder or from a transaction in which a person became an Interested Stockholder; or (d) a stockholder become an Interested Stockholder "inadvertently" and thereafter divests itself of a sufficient number of shares so that such stockholder ceases to be an Interested Stockholder. Under Section 203, the restrictions described above also do not apply to certain Business Combinations proposed by an Interested Stockholder following the announcement or notification or one of certain extraordinary transactions involving the corporation and a person who had not been an Interested Stockholder during the previous three years or who became an Interested Stockholder with the approval of a majority of the corporation's directors. Section 203 provides that, during such three-year period, the corporation may not merge or consolidate with an Interested Stockholder or any affiliate or associate thereof, and also may not engage in certain other transactions with an Interested Stockholder or any affiliate or associate thereof, including, without limitation, (a) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of assets (except proportionately as a stockholder of the corporation) having an aggregate market value equal to 10% or more of the aggregate market value of all assets of the corporation determined on a consolidated basis or the aggregate market value of all the outstanding stock of a corporation; (b) any transaction which results in the issuance or transfer by the corporation or by certain subsidiaries thereof of any stock of the corporation or such subsidiaries to the Interested Stockholder, except pursuant to a transaction which effects a pro rata distribution to all stockholders of the corporation; (c) any transaction involving the corporation or certain subsidiaries thereof which has the effect of increasing the proportionate share of the stock of any class or series, or securities convertible into the stock of any class or series, of the corporation or any such subsidiary which is owned directly or indirectly by the Interested Stockholder (except as a result of immaterial changes due to fractional share adjustments); or (d) any receipt of the Interested Stockholder of the benefit (except proportionately as a stockholder of such corporation) of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation. The Company has represented in the Merger Agreement that the provisions of Section 203 of the DGCL are not applicable to any of the transactions contemplated by the Merger Agreement or the Option Agreement, including the Merger and the purchase of Shares in the Offer or pursuant to the exercise of the option granted under the Option Agreement. APPRAISAL RIGHTS. Holders of the Shares do not have appraisal rights as a result of the Offer. However, if the Merger is consummated, holders of the Shares at the effective time of the Merger will have certain rights pursuant to the provisions of Section 262 of the DGCL. Dissenting stockholders of the Company who comply with the applicable statutory procedures will be entitled to receive a judicial determination of the fair value of their Shares (exclusive of any element of value arising from the accomplishment or expectation of the Merger) and to receive payment of such fair value in cash, together with a fair rate of interest thereon, if any. Any such judicial determination of the fair value of the Shares 31 could be based upon factors other than, or in addition to, the price per share of Common Stock or of Series D Preferred Shares, as the case may be, to be paid in the Merger or the market value of the Shares. The value so determined could be more or less than the price per share of Common Stock or Series D Preferred Shares to be paid in the Merger. THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING STOCKHOLDERS DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY STOCKHOLDERS DESIRING TO EXERCISE ANY AVAILABLE DISSENTERS' RIGHTS. THE PRESERVATION AND EXERCISE OF DISSENTERS' RIGHTS REQUIRE STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF THE DGCL. The foregoing description of the DGCL, including the descriptions of Sections 203 and 262, is not necessarily complete and is qualified in its entirety by reference to the DGCL. RULE 13E-3. The Merger would have to comply with any applicable Federal law operative at the time. Rule 13e-3 under the Exchange Act is applicable to certain "going private" transactions; however, the Purchaser believes that Rule 13e-3 will not be applicable to the Merger. If Rule 13e-3 were applicable to the Merger, it would require, among other things, that certain financial information concerning the Company, and certain information relating to the fairness of the proposed transaction and the consideration offered to minority stockholders in such a transaction, be filed with the Commission and disclosed to minority stockholders prior to consummation of the transaction. 13. DIVIDENDS AND DISTRIBUTIONS. As described above, the Merger Agreement provides that, prior to the time the designees of Fremont have been elected to, and constitute a majority of, the Board of Directors of the Company, without the prior written consent of Fremont, (i) the Company will not, directly or indirectly, (A) except upon exercise of stock options or other rights to purchase shares of Common Stock pursuant to the Option Plans outstanding on the date of the Merger Agreement or upon exercise of outstanding warrants or conversion of outstanding Series D Preferred Shares, issue, sell, transfer or pledge or agree to sell, transfer or pledge any treasury stock of the Company; (B) amend its Certificate of Incorporation or by-laws or similar organizational documents; or (C) split, combine or reclassify the outstanding Shares; and (ii) the Company shall not (A) declare, set aside or pay any dividend or other distribution payable in cash, stock or property with respect to its capital stock; (B) issue, sell, pledge, dispose of or encumber any additional shares of, or securities convertible into or exchangeable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of capital stock of any class of the Company, other than Shares reserved for issuance on the date of the Merger Agreement pursuant to the exercise of warrants or options outstanding on such date or upon conversion of the Series D Preferred Shares; (C) transfer, lease, license, sell or dispose of any assets, or incur any indebtedness or other liability other than in the ordinary and usual course of business and consistent with past practice, or incur or modify any indebtedness or other liability, other than in the ordinary and usual course of business and consistent with past practice; or (D) redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock. 14. CONDITIONS OF THE OFFER. Notwithstanding any other provisions of the Offer, and in addition to (and not in limitation of) the Purchaser's rights to extend and amend the Offer at any time in its sole discretion (subject to the provisions of the Merger Agreement), the Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the Commission, including Rule 14e-l(c) under the Exchange Act (relating to the Purchaser's obligation to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), pay for, and (subject to any such rules or regulations) may delay the acceptance for payment of any tendered Shares, and (except as provided in the Merger Agreement) may terminate or amend the Offer as to any Shares not then paid for, if (i) any applicable waiting period 32 under the HSR Act has not expired or terminated, (ii) the Minimum Condition has not been satisfied, or (iii) at any time after the date of the Merger Agreement and before the time of acceptance for payment for any such Shares (whether or not any Shares have theretofore been accepted for payment or paid for pursuant to the Offer), any of the following conditions exist: (a) there shall be pending in effect an injunction or other order, decree, judgment or ruling by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission of competent jurisdiction or a statute, rule, regulation, executive order or other action shall have been promulgated, enacted, taken or threatened by a governmental authority or a governmental, regulatory or administrative agency or commission of competent jurisdiction which in any such case (i) restrains or prohibits the making or consummation of the Offer or the consummation of the Merger, (ii) prohibits or restricts the ownership or operation by the Purchaser (or any of its affiliates or subsidiaries) or any portion of its or the Company's business or assets which is material to the business of all such entities taken as a whole or compels the Purchaser (or any of its affiliates or subsidiaries) to dispose of or hold separate any portion of its or the Company's business or assets which is material to the business of all such entities taken as a whole, (iii) imposes material limitations on the ability of the Purchaser effectively to acquire or to hold or to exercise full rights of ownership of the Shares, including, without limitation, the right to vote the Shares purchased by the Purchaser on all matters properly presented to the stockholders of the Company, (iv) imposes any material limitations on the ability of the Purchaser or any of their respective affiliates or subsidiaries effectively to control in any material respect the business and operations of the Company; or (b) the Merger Agreement shall have been terminated by the Company or the Purchaser in accordance with its terms; or (c) there shall have occurred (i) any general suspension of, or limitation on prices for, trading in securities on any national securities exchange or the over-the-counter market for a period in excess of 24 hours (excluding suspensions or limitations resulting solely from physical damage or interference with such exchanges not related to market conditions), (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States (whether or not mandatory), (iii) a commencement of a war, armed hostilities or other international or national calamity directly or indirectly involving the United States, (iv) any limitation (whether or not mandatory) by any United States governmental authority on the extension of credit generally by banks or other financial institutions, (v) a change in general financial, bank or capital market conditions which materially and adversely affects the ability of financial institutions in the United States to extend credit or syndicate loans or (vi) in the case of any of the foregoing existing at the time of the execution of this Agreement, a material acceleration or worsening thereof; or (d) the representations and warranties of the Company set forth in the Merger Agreement shall not be true and correct in all material respects, in each case (i) as of the date referred to in any representation or warranty which addresses matters as of a particular date, or (ii) as to all other representations and warranties as of the date of the Merger Agreement and as of the Expiration Date (without giving effect to any materiality qualification or standard contained in any such representations and warranties); or (e) the Company shall have failed to perform in all material respects any obligation or to comply with any agreement or covenant to be performed or complied with by it under the Merger Agreement (without giving effect to any materiality qualification or standard contained in any such agreements or covenants); or (f) the Purchaser shall have failed to receive a certificate executed by the President or a Vice President of the Company, dated as of the Expiration Date, to the effect that the conditions set forth in paragraphs (d) and (e) of Annex I have not occurred; or 33 (g) there shall have occurred any change (or any development that, insofar as reasonably can be foreseen, reasonably likely to result in any change) that constitutes a Material Adverse Effect; or (h) any person (other than the Gabelli Funds, Inc. and its affiliates and associates) acquires beneficial ownership (as defined in Rule 13d-3 promulgated under the Exchange Act), of at least 15% of the outstanding Common Stock. The foregoing conditions are for the sole benefit of the Purchaser and may be asserted by the Purchaser regardless of the circumstances (including any action or inaction by the Purchaser) giving rise to any such conditions and may be waived by the Purchaser in whole or in part at any time and from time to time, in each case, in the exercise of the good faith judgment of the Purchaser and subject to the terms of this Agreement. The failure by the Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such time, in each case, in the exercise of the good faith judgment of the Purchaser and subject to the terms of this Agreement. The failure by the Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. 15. CERTAIN LEGAL MATTERS. Except as described in this Section 15, based on information provided by the Company, none of the Company, Purchaser or Fremont is aware of any license or regulatory permit that appears to be material to the business of the Company that might be adversely affected by the Purchaser's acquisition of Shares as contemplated herein or of any approval or other action by a domestic or foreign governmental, administrative or regulatory agency or authority that would be required for the acquisition and ownership of the Shares by the Purchaser as contemplated herein. Should any such approval or other action be required, the Purchaser and Fremont presently contemplate that such approval or other action will be sought, except as described below under "State Takeover Laws." While, except as otherwise described in this Offer to Purchase, the Purchaser does not presently intend to delay the acceptance for payment of or payment for Shares tendered pursuant to the Offer pending the outcome of any such matter, there can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that failure to obtain any such approval or other action might not result in consequences adverse to the Company's business or that certain parts of the Company's business might not have to be disposed of or other substantial conditions complied with in the event that such approvals were not obtained or such other actions were not taken or in order to obtain any such approval or other action. If certain types of adverse action are taken with respect to the matters discussed below, the Purchaser could decline to accept for payment or pay for any Shares tendered. See Section 14 for certain conditions to the Offer, including conditions with respect to governmental actions. STATE TAKEOVER LAWS. The Company conducts business in a number of other states throughout the United States, some of which have enacted takeover laws and regulations. Neither Fremont nor the Purchaser knows whether any or all of these takeover laws and regulations will by their terms apply to the Offer, and, except as set forth above with respect to Section 203 of the DGCL, neither Fremont nor the Purchaser has currently complied with any other state takeover statute or regulation. The Purchaser reserves the right to challenge the applicability or validity of any state law purportedly applicable to the Offer and nothing in this Offer to Purchase or any action taken in connection with the Offer is intended as a waiver of such right. If it is asserted that any state takeover statute is applicable to the Offer and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer, the Purchaser might be required to file certain information with, or to receive approvals from, the relevant state authorities, and the Purchaser might be unable to accept for payment or pay for Shares tendered pursuant to the Offer, or may be delayed in consummating the Offer. In such case, the Purchaser may not be obligated to accept for payment or pay for any Shares tendered pursuant to the Offer. See Section 14. 34 ANTITRUST. The Purchaser has determined that a Pre-Merger Notification under the HSR Act is not required with respect to the Offer and the Merger. Nevertheless, the Federal Trade Commission (the "FTC") and the Antitrust Division of the Department of Justice (the "Antitrust Division") frequently scrutinize the legality under the antitrust laws of transactions such as the Purchaser's acquisition of Shares pursuant to the Offer and the Merger. At any time before or after the Purchaser's acquisition of Shares, the Antitrust Division or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the acquisition of Shares pursuant to the Offer or otherwise or seeking divestiture of Shares acquired by the Purchaser or divestiture of substantial assets of Fremont or its subsidiaries. Private parties, as well as state governments, may also bring legal action under the antitrust laws under certain circumstances. Based upon an examination of publicly available information relating to the businesses in which Fremont and the Company are engaged, Fremont and the Purchaser believe that the acquisition of Shares by the Purchaser will not violate the antitrust laws. Nevertheless, there can be no assurance that a challenge to the Offer or other acquisition of Shares by the Purchaser on antitrust grounds will not be made or, if such a challenge is made, of the result. See Section 14 for certain conditions to the Offer, including conditions with respect to litigation and certain governmental actions. FEDERAL RESERVE BOARD REGULATIONS. Regulations G, U and X (the "Margin Regulations") of the Federal Reserve Board restrict the extension or maintenance of credit for the purpose of buying or carrying margin stock, including the Shares, if the credit is secured directly or indirectly by margin stock. Such secured credit may not be extended or maintained in an amount that exceeds the maximum loan value of all the direct and indirect collateral securing the credit, including margin stock and other collateral. All financing for the Offer will be structured so as to be in full compliance with the Margin Regulations. 16. FEES AND EXPENSES. The Purchaser has retained MacKenzie Partners, Inc. to act as the Information Agent and Boston EquiServe, L.P. to act as the Depositary in connection with the Offer. Such firms each will receive reasonable and customary compensation for their services. The Purchaser has also agreed to reimburse each such firm for certain reasonable out-of-pocket expenses and to indemnify each such firm against certain liabilities in connection with their services, including certain liabilities under federal securities laws. The Purchaser will not pay any fees or commissions to any broker or dealer or other person (other than the Information Agent) for making solicitations or recommendations in connection with the Offer. Brokers, dealers, banks and trust companies will be reimbursed by the Purchaser for customary mailing and handling expenses incurred by them in forwarding material to their customers. 17. MISCELLANEOUS. The Offer is being made to all holders of Shares other than the Company. The Purchaser is not aware of any jurisdiction in which the making of the Offer or the tender of Shares in connection therewith would not be in compliance with the laws of such jurisdiction. If the Purchaser becomes aware of any jurisdiction in which the making of the Offer would not be in compliance with applicable law, the Purchaser will make a good faith effort to comply with any such law. If, after such good faith effort, the Purchaser cannot comply with any such law, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares residing 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 shall be deemed to be made on behalf of the Purchaser by or one or more registered brokers or dealers licensed under the laws of such jurisdiction. 35 No person has been authorized to give any information or to make any representation on behalf of Fremont or the Purchaser 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. The Purchaser and Fremont have filed with the Commission the Schedule 14D-1 pursuant to Rule 14d-3 under the Exchange Act furnishing certain additional information with respect to the Offer. The Schedule 14D-1 and any amendments thereto, including exhibits, may be examined and copies may be obtained from the offices of the Commission and the NYSE in the manner set forth in Section 8 of this Offer to Purchase (except that they will not be available at the regional offices of the Commission). KERR ACQUISITION CORPORATION July 8, 1997 36 SCHEDULE I GENERAL PARTNERS, MANAGING MEMBERS, DIRECTORS AND EXECUTIVE OFFICERS OF KERR ACQUISITION CORPORATION, FREMONT ACQUISITION COMPANY, LLC, FREMONT PARTNERS, L.P., FP ADVISORS, L.L.C., FREMONT GROUP, L.L.C. AND FREMONT INVESTORS, INC. 1. KERR ACQUISITION CORPORATION. Set forth below is the name, business address and present principal occupation or employment, and material occupations, positions, offices or employments for the past five years, of each director and executive officer of the Purchaser. Unless otherwise indicated, each person has held the position listed below with The Fremont Group and Fremont Investors during the last five years. Each such person is a citizen of the United States of America and, unless otherwise indicated, the business address of each such person is c/o The Fremont Group, 50 Fremont Street, Suite 3700, San Francisco, California 94105.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD NAME AND ADDRESS DURING THE PAST FIVE YEARS G. H. Lamphere Director of the Purchaser and President of the Purchaser and Fremont from formation; Managing Director and Director of The Fremont Group, Fremont Investors and Sequoia Ventures Inc. ("Sequoia") since 1994; Director and Chairman of Illinois Central Corporation; Co-Chairman and Chief Executive Officer of the Noel Group prior to 1994; Chairman and Chief Executive Officer of the Prospect Group (1990-1994); Director of Recognition International, Inc. (1990-1995); Cleveland-Cliffs, Inc. (1991-1994); R.P. Scherer Corporation (1991-1995); Global Natural Resources Corporation (resigned 1994); Belding Heminway Company, Inc. (1993-1997); Sylvan, Inc. (resigned 1994); Lincoln Snacks Company (resigned 1994); Simmons Outdoor Corporation (resigned 1994); and Children's Discovery Centers of America, Inc. (resigned 1994). Gregory P. Spivy Director of the Purchaser and Vice President and Treasurer of the Purchaser and Fremont from formation; Principal of The Fremont Group since 1995; Director and Associate of The Bridgeford Group from 1992 through 1995. R. S. Kopf Director of the Purchaser and Vice President and Secretary of the Purchaser and Fremont from formation; Managing Principal, General Counsel and Secretary of The Fremont Group, Fremont Investors and Sequoia since 1988; General Counsel, Secretary and Director of Bechtel International Constructors, Inc. since 1988; Vice President, General Counsel and Secretary of HLQ Corp. since 1987; Vice President, General Counsel, Secretary and Director of Offshore Bechtel Exploration Corporation since 1988.
1 2. FREMONT ACQUISITION COMPANY, LLC. Set forth below is the name, business address and present principal occupation or employment, and material occupations, positions, offices or employments for the past five years, of each of the sole managing member and executive officers of Fremont. Each such person is a citizen of the United States of America and, unless otherwise indicated, the business address of each such person is c/o The Fremont Group, 50 Fremont Street, Suite 3700, San Francisco, California 94105.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD NAME AND ADDRESS DURING THE PAST FIVE YEARS Fremont Partners, L.P. Not Applicable. G. H. Lamphere See Part 1 of this Schedule I. Gregory P. Spivy See Part 1 of this Schedule I. R. S. Kopf See Part 1 of this Schedule I.
3. FREMONT PARTNERS, L.P. Set forth below is the name, business address and present principal occupation or employment, and material occupations, positions, offices or employments for the past five years, of the sole general partner of Fremont Partners. Each such person is a citizen of the United States of America and, unless otherwise indicated, the business address of each such person is c/o The Fremont Group, 50 Fremont Street, Suite 3700, San Francisco, California 94105.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD NAME AND ADDRESS DURING THE PAST FIVE YEARS FP Advisors, L.L.C. Not Applicable.
4. FP ADVISORS, L.L.C. Set forth below is the name, business address and present principal occupation or employment, and material occupations, positions, offices or employments for the past five years, of the sole managing member of FP Advisors. Each such person is a citizen of the United States of America and, unless otherwise indicated, the business address of each such person is c/o The Fremont Group, 50 Fremont Street, Suite 3700, San Francisco, California 94105.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD NAME AND ADDRESS DURING THE PAST FIVE YEARS Fremont Group, L.L.C. Not Applicable.
5. FREMONT GROUP, L.L.C. Set forth below is the name, business address and present principal occupation or employment, and material occupations, positions, offices or employments for the past five years, of each of the sole manager, the executive officers and directors of The Fremont Group. Unless otherwise indicated, each person has held the position listed below with The Fremont Group and Fremont Investors during the last five years. Each such person is a citizen of the United States of America and, unless otherwise indicated, the business address of each such person is c/o The Fremont Group, 50 Fremont Street, Suite 3700, San Francisco, California 94105. 2
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD DURING NAME AND ADDRESS THE PAST FIVE YEARS Fremont Investors, Inc. Not Applicable. A. M. Dachs President, Chief Executive Officer and Director of The Fremont Group, Fremont Investors and Sequoia; President and Director of Bechtel Constructors, Inc.; Director of Offshore Bechtel Exploration Corporation and BPT Properties, L.P. and related entities; Director of Bechtel Enterprises, Inc., Esco Corporation and The Brookings Institution; Chairman of the Board of Trustees of Wesleyan University. S. D. Bechtel, Jr. Chairman Emeritus and Director of The Fremont Group, Fremont Investors and Sequoia; Chairman Emeritus of Bechtel Group, Inc.; Director of Remington Arms since 1993; Director of IBM from 1976-1993. Richard E. Cavanagh Director of The Fremont Group, Fremont Investors and Sequoia; President and Chief Executive Officer of The Conference Board, Inc., 845 Third Avenue, New York, New York 10022, since 1995; Executive Dean of Harvard University (Kennedy School of Government) from 1988 to 1995; Director of Black Rock Mutual Fund and related funds; Director of Olin Corporation and LCI International. H. J. Haynes Director of The Fremont Group, Fremont Investors and Sequoia; Director and Senior Counselor of Bechtel Group, Inc.; Director of Hewlett-Packard Co., Paccar, Inc., Boeing Co., Citicorp, Saudi Arabian Oil Co. and Bechtel Enterprises, Inc. C. W. Hull Director of The Fremont Group, Fremont Investors and Sequoia; Chairman of Energy Asset Management, L.L.C., 250 Montgomery Street, Suite 1600, San Francisco, California 94104; Director of Bechtel Group, Inc. and Bechtel Enterprises, Inc. R. Jaunich II Managing Director and Director of The Fremont Group, Fremont Investors and Sequoia; Director of CNF Transportation, Inc.; Chairman of the Board of Coldwell Banker Corporation from 1992 to 1996; Chairman of the Board of Crown Pacific, Ltd. since 1992; member of the Board of Control of Petro Stopping Centers, L.P. from 1992 to 1997. G. H. Lamphere See Part 1 of this Schedule I. D. L. Redo Managing Director and Director of The Fremont Group, Fremont Investors and Sequoia; President and Chief Executive Officer of Fremont Investment Advisors, Inc.
3
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD DURING NAME AND ADDRESS THE PAST FIVE YEARS G. P. Shultz Director of The Fremont Group, Fremont Investors and Sequoia; Director and Senior Counselor of Bechtel Group, Inc.; Professor of International Economics at Stanford University and Distinguished Fellow at the Hoover Institution; Director of Gulfstream Aerospace Corp., Charles Schwab, Gilead Sciences, Airtouch Communications, Ziff-Davis Publishing Company (resigned 1996) and Bechtel Enterprises, Inc. J. W. Weiser Director of The Fremont Group, Fremont Investors and Sequoia; Director and Senior Counselor of Bechtel Group, Inc. J. D. Mahaffey Managing Director of The Fremont Group, Fremont Investors and Sequoia; President of Fremont Energy, L.P., 5956 Sherry Lane, Suite 1310, Dallas, Texas, since 1995; prior to such time, Chief Executive Officer and Director of United Meredian Corp.; President and Director of Offshore Bechtel Exploration Corporation; Director of Xpronet, Inc. since 1997. J. S. Higgins Managing Principal and Chief Financial Officer of The Fremont Group, Fremont Investors and Sequoia; Director of Fremont Investment Advisors, Inc.; Vice President and Director of HLQ Corp.; Chief Financial Officer of Bechtel International Constructors and Offshore Bechtel Exploration Corp. R. S. Kopf See Part 1 of this Schedule I. D. W. Aronson Treasurer of The Fremont Group, Fremont Investors and Sequoia; Chief Financial Officer and Vice President of Operations of Redwood Microsystems, Inc. from 1990 through 1994; Treasurer of Bechtel International Constructors, Inc., CRMF Corp., and Offshore Bechtel Exploration Corporation.
6. FREMONT INVESTORS, INC. Set forth below is the name, business address and present principal occupation or employment, and material occupations, positions, offices or employments for the past five years, of each director and executive officer of Fremont Investors. Each such person is a citizen of the United States of America and, unless otherwise indicated, the business address of each such person is c/o The Fremont Group, 50 Fremont Street, Suite 3700, San Francisco, California 94105. 4
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD NAME AND ADDRESS DURING THE PAST FIVE YEARS - ------------------------------------------------------------------------- --------------------------------------- A. M. Dachs.............................................................. See Part 5 of this Schedule I. S. D. Bechtel, Jr........................................................ See Part 5 of this Schedule I. Richard E. Cavanagh...................................................... See Part 5 of this Schedule I. H. J. Haynes............................................................. See Part 5 of this Schedule I. C. W. Hull............................................................... See Part 5 of this Schedule I. R. Jaunich II............................................................ See Part 5 of this Schedule I. G. H. Lamphere........................................................... See Part 1 of this Schedule I. D. L. Redo............................................................... See Part 5 of this Schedule I. G. P. Shultz............................................................. See Part 5 of this Schedule I. J. W. Weiser............................................................. See Part 5 of this Schedule I. J. D. Mahaffey........................................................... See Part 5 of this Schedule I. J. S. Higgins............................................................ See Part 5 of this Schedule I. R. S. Kopf............................................................... See Part 1 of this Schedule I. D. W. Aronson............................................................ See Part 5 of this Schedule I.
5 Facsimile copies of the Letter of Transmittal, properly completed and duly signed, will be accepted. The Letter of Transmittal, certificates for Shares and any other required documents should be sent or delivered by each stockholder of the Company or his broker, dealer, commercial bank, trust company or other nominee to the Depositary, at one of the addresses set forth below: The Depositary for the Offer is: BOSTON EQUISERVE, L.P.
BY MAIL: BY HAND: BY POSTAL EXPRESS Boston EquiServe, L.P. BankBoston, N.A. OR OVERNIGHT COURIER: Corporate Reorganization Securities Transfer & BankBoston, N.A. Post Office Box 2089 Reporting Services Inc. Boston EquiServe L.P. Boston, MA 02266-2089 55 Broadway, 3rd Floor Corporate Reorganization New York, NY 10006 150 Royall Street Attn: Delivery Window Mail Stop 45-02-53 Canton, MA 02021
Questions and requests for assistance or additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer Identification on Substitute Form W-9 may be directed to the Information Agent at the location and telephone numbers set forth below. Stockholders may also contact their broker, dealer, commercial bank or trust company for assistance concerning the Offer. The Information Agent for the Offer is: MACKENZIE PARTNERS, INC. 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (call collect) Call Toll-Free (800) 322-2885 6 EX-99.(A)(2) 3 EXHIBIT (A)(2) EXHIBIT (a)(2) LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS) OF KERR GROUP, INC. PURSUANT TO THE OFFER TO PURCHASE DATED JULY 8, 1997 BY KERR ACQUISITION CORPORATION A CORPORATION FORMED AT THE DIRECTION OF FREMONT PARTNERS - -------------------------------------------------------------------------------- THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, AUGUST 4, 1997, UNLESS THE OFFER IS EXTENDED. - -------------------------------------------------------------------------------- THE DEPOSITARY FOR THE OFFER IS: BOSTON EQUISERVE, L.P. BY MAIL: BY HAND: BY POSTAL EXPRESS OR Boston EquiServe, L.P. BankBoston, N.A. OVERNIGHT COURIER: Corporate Securities Transfer & BankBoston, N.A. Reorganization Reporting Services, Inc. Boston EquiServe, L.P. Post Office Box 2089 55 Broadway, 3rd Floor Corporate Boston, MA 02266-2089 New York, NY 10006 Reorganization Attn: Delivery Window 150 Royall Street Mail Stop 45-02-53 Canton, MA 02021
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE PROVIDED THEREFORE AND COMPLETE THE SUBSTITUTE FORM W-9 PROVIDED 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 used either if certificates are to be forwarded herewith or if delivery of Shares (as defined below) is to be made by book-entry transfer to an account maintained by the Depositary at The Depository Trust Company ("DTC") or the Philadelphia Depository Trust Company ("PDTC," and together with DTC each a "Book-Entry Transfer Facility and collectively, 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 Depository. Stockholders who deliver Shares by book-entry transfer are referred to herein as "Book-Entry Stockholders" and other stockholders are referred to herein as "Certificate Stockholders." Stockholders whose certificates evidencing Shares ("Share Certificates") are not immediately available or who cannot deliver their Share Certificates and all other documents required hereby to the Depositary or complete the procedures for book-entry transfer prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase) must tender their Shares according to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. See Instruction 2. / / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES, AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER): Name of Tendering Institution: _____________________________________________ Check Box of Applicable Book-Entry Transfer Facility (check one) / / DTC / / PDTC Account Number: ____________________________________________________________ Transaction Code Number: ___________________________________________________ / / 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): ___________________________________________ Window Ticket No. (if any): ________________________________________________ Date of Execution of Notice of Guaranteed Delivery: ________________________ Name of Institution which Guaranteed Delivery: _____________________________ If Delivered by Book-Entry Transfer, Check Box of Applicable Book-Entry Transfer Facility: / / DTC / / PDTC Account Number (if delivered by Book-Entry Transfer): ______________________ Transaction Code Number ____________________________________________________ BOXES ABOVE FOR USE BY ELIGIBLE INSTITUTIONS ONLY
- ------------------------------------------------------------------------------------------ DESCRIPTION OF COMMON STOCK SHARES TENDERED - ------------------------------------------------------------------------------------------ NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ON SHARE SHARE CERTIFICATE(S) AND SHARES TENDERED CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY) - ------------------------------------------------------------------------------------------- TOTAL NUMBER OF SHARE SHARES CERTIFICATE EVIDENCED BY SHARE NUMBER OF SHARES NUMBER(S)* CERTIFICATE(S)* TENDERED** - ------------------------------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- TOTAL SHARES: - ------------------------------------------------------------------------------------------- * NEED NOT BE COMPLETED BY STOCKHOLDERS DELIVERING SHARES BY BOOK-ENTRY TRANSFER. ** UNLESS OTHERWISE INDICATED, IT WILL BE ASSUMED THAT ALL SHARES EVIDENCED BY EACH SHARE CERTIFICATE DELIVERED TO THE DEPOSITARY ARE BEING TENDERED HEREBY. SEE INSTRUCTION 4. - -------------------------------------------------------------------------------------------
/ / CHECK HERE IF YOU CANNOT LOCATE YOUR CERTIFICATE(S) AND REQUIRE ASSISTANCE IN REPLACING THEM. UPON RECEIPT OF NOTIFICATION BY THIS LETTER OF TRANSMITTAL, THE COMPANY'S STOCK TRANSFER AGENT WILL CONTACT YOU DIRECTLY WITH REPLACEMENT INSTRUCTIONS. NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. Ladies and Gentlemen: The undersigned hereby tenders to Kerr Acquisition Corporation, a Delaware corporation (the "Offeror") and a wholly owned subsidiary of Fremont Acquisition Company, LLC, a Delaware limited liability company ("Parent"), the above-described shares of Common Stock, par value $.50 per share (the "Common Stock"), including the associated rights to purchase shares of preferred stock, issued pursuant to the Rights Agreement (as defined below) (the "Rights" together with the Common Stock, the "Shares") pursuant to the Offeror's offer to purchase all outstanding Shares at a price of $5.40 per share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated July 8, 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, constitute the "Offer"). The undersigned understands that the Offeror reserves the right to transfer or assign, in whole or in part from time to time, to any affiliate of Parent the right to purchase Shares tendered pursuant to the Offer. Kerr Group, Inc., a Delaware corporation (the "Company"), has distributed one Right for each outstanding share of Common Stock pursuant to the Rights Agreement, dated as of July 25, 1995, between the Company and BankBoston, N.A. (formerly The First National Bank of Boston), as Rights Agent, as amended (the "Rights Agreement"). The Company has represented in the Merger Agreement (as defined in the Offer to Purchase) that it has taken all action which may be necessary under the Rights Agreement so that the execution of the Merger Agreement and any amendments thereto and the consummation of the transactions contemplated thereby will not cause (i) Parent and/or the Offeror to become an Acquiring Person (as defined in the Rights Agreement), (ii) a Distribution Date, a Stock Acquisition Date or a Trigger Event (as such terms are defined in the Rights Agreement) to occur, irrespective of the number of Shares acquired pursuant to the Offer, and (iii) the Rights shall expire upon the acceptance of Shares for payment pursuant to the Offer. 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), effective upon acceptance for payment 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 (collectively, "Distributions")) and irrevocably constitutes and appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares and all Distributions, 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 a Book-Entry Transfer Facility, together, in any such case, with all accompanying evidences of transfer and authenticity, to or upon the order of the Offeror, upon receipt by the Depositary, as the undersigned's agent, of the purchase price (adjusted, if appropriate, as provided in the Offer to Purchase), (b) present such Shares and all Distributions for cancellation and transfer on the Company's books and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares and all Distributions, all in accordance with the terms of the Offer. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the tendered Shares and all Distributions and that, when the same are accepted for payment by the Offeror, the Offeror will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, claims, charges and encumbrances, and the same will not be subject to any adverse claims. The undersigned will, upon request, execute any signature guarantees or additional documents deemed by the Depositary or the Offeror to be necessary or desirable to complete the sale, assignment and transfer of the tendered Shares and all Distributions. In addition, the undersigned shall promptly remit and transfer to the Depositary for the account of the Offeror any such Distributions issued to the undersigned, in respect of the tendered Shares, accompanied by documentation of transfer, and pending such remittance or appropriate assurance thereof, the Offeror shall be entitled to all rights and privileges as owner of any such Distributions and, subject to the terms of the Merger Agreement, may withhold the entire purchase price or deduct from the purchase price the amount or value thereof, as determined by the Offeror, in its sole discretion. All authority conferred or agreed to be conferred in this Letter of Transmittal shall be binding upon the successors, assigns, heirs, executors, administrators and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. The undersigned hereby irrevocably appoints Gilbert H. Lamphere or Gregory P. Spivy and each of them, and any other designees of the Offeror, the attorneys and proxies of the undersigned, each with full power of substitution, to vote at any annual, special or adjourned meeting of the Company's stockholders or otherwise act (including pursuant to written consent) in such manner as each such attorney and proxy or his or her substitute shall in his or her sole discretion deem proper, to execute any written consent concerning any matter as each such attorney and proxy or his or her substitute shall in his or her sole discretion deem proper with respect to, and to otherwise act with respect to, all the Shares tendered hereby which have been accepted for payment by the Offeror prior to the time any such vote or action is taken (and any and all Distributions issued or issuable in respect thereof) and with respect to which the undersigned is entitled to vote. This appointment is effective when, and only to the extent that, the Offeror accepts for payment such Shares as provided in the Offer to Purchase. This power of attorney and proxy is coupled with an interest in the tendered Shares, is irrevocable and is granted in consideration of the acceptance for payment of such Shares in accordance with the terms of the Offer. Such acceptance for payment shall revoke all prior powers of attorney and proxies given by the undersigned at any time with respect to such Shares and no subsequent powers of attorney or proxies may be given by the undersigned (and, if given, will not be deemed effective). The Offeror reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Offeror's acceptance for payment of such Shares, the Offeror must be able to exercise full voting and other rights with respect to such Shares, including voting at any stockholders meeting then scheduled. The undersigned understands that the valid tender of Shares to Offeror pursuant to any one of the procedures described in Section 3 of the Offer and in the instructions hereto will constitute a binding agreement between the undersigned and the Offeror upon the terms and subject to the conditions of the Offer. The undersigned recognizes that under certain circumstances set forth in the Offer to Purchase, the Offeror may not be required to accept for payment any of the tendered Shares. The Offeror's acceptance for payment of Shares pursuant to the Offer will constitute a binding agreement between the undersigned and the Offeror upon the terms and subject to the conditions of the Offer. Unless otherwise indicated herein under "Special Payment Instructions," please issue the check for the purchase price of any Shares purchased, and/or return any certificates for Shares not tendered or accepted for payment, in the name(s) of the registered holder(s) appearing under "Description of Shares Tendered." Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price of any Shares purchased, and/or any certificates for Shares not tendered or accepted for payment (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing under "Description of Shares Tendered." In the event that both the Special Delivery Instructions and the Special Payment Instructions are completed, please issue the check for the purchase price of any Shares purchased, and/or return any certificates for Shares not tendered or accepted for payment in the name(s) of, and mail said check and/or any certificates to, the person or persons so indicated. In the case of a book-entry delivery of Shares, please credit the account maintained at a Book-Entry Transfer Facility indicated above with any Shares not accepted for payment. 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. - ------------------------------------------- SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for the purchase price of Shares or Share Certificates evidencing Shares not tendered or not purchased are to be issued in the name of someone other than the undersigned. Issue check and/or certificate(s) to: Name: ______________________________________________________________________ PLEASE PRINT Address: ___________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ INCLUDE ZIP CODE __________________________________________________________________________ TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER (SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE) - ------------------------------------------------------ - ------------------------------------------------------ SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for the purchase of Shares purchased or Share Certificates evidencing Shares not tendered or not purchased are to be mailed to someone other than the undersigned, or to the undersigned at an address other than that shown under "Description of Shares Tendered." Mail check and/or certificate(s) to: Name: ______________________________________________________________________ PLEASE PRINT Address: ___________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ INCLUDE ZIP CODE - ----------------------------------------------------- - -------------------------------------------------------------------------------- IMPORTANT STOCKHOLDER(S): SIGN HERE (PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE) ____________________________________________________________________________ ____________________________________________________________________________ SIGNATURE(S) OF HOLDER(S) Dated: ___________________________________________, 199 (Must be signed by registered holder(s) exactly as name(s) appear(s) on Share Certificates or on a security position listing or by a 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, officer of a corporation or other person acting in a fiduciary or representative capacity, please provide the following information. See Instruction 5.) Name(s): ___________________________________________________________________ ____________________________________________________________________________ PLEASE PRINT Capacity: __________________________________________________________________ PLEASE PROVIDE FULL TITLE Address: ___________________________________________________________________ ____________________________________________________________________________ INCLUDE ZIP CODE Telephone No.: _____________________________________________________________ INCLUDE AREA CODE Tax Identification or Social Security Number: ____________________________________________________ SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE GUARANTEE OF SIGNATURE(S) (IF REQUIRED--SEE INSTRUCTIONS 1 AND 5) SPACE BELOW IS FOR USE BY FINANCIAL INSTITUTIONS ONLY. FINANCIAL INSTITUTIONS: PLACE MEDALLION GUARANTEE IN SPACE PROVIDED BELOW. - -------------------------------------------------------------------------------- INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all signatures on this Letter of Transmittal must be guaranteed by a financial institution (including most commercial banks, savings and loan associations and brokerage houses) that is a participant in the Security Transfer Agent's Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program (each an "Eligible Institution," and collectively, "Eligible Institutions"). No signature guarantee is required on this Letter of Transmittal (i) if this Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this document, shall include any participant in a Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) of Shares tendered herewith, unless such holder(s) has completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" in this Letter of Transmittal or (ii) if such Shares are tendered for the account of an Eligible Institution. See Instruction 5. 2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY PROCEDURES. This Letter of Transmittal is to be completed by stockholders either if Share Certificates are to be forwarded herewith or if a tender of Shares is to be made pursuant to the procedures for delivery by book-entry transfer set forth in Section 3 of the Offer to Purchase. For Shares to be validly tendered pursuant to the Offer, either (i) a properly completed and duly executed Letter of Transmittal (or facsimile thereof), together with any required signature guarantees, or in the case of a book-entry transfer, an Agent's Message (as defined in the Offer to Purchase), and any other required documents, must be received by the Depositary at one of the Depositary's addresses set forth herein prior to the Expiration Date (as defined in the Offer to Purchase) and either certificates for tendered Shares must be received by the Depositary at one of such addresses or such Shares must be delivered pursuant to the procedures for book-entry transfer (and a Book Entry Confirmation received by the Depositary), in each case, prior to the Expiration Date, or (ii) the tendering stockholder must comply with the guaranteed delivery procedure set forth below. Stockholders whose Share Certificates are not immediately available or who cannot complete the procedures for book-entry transfer on a timely basis or time will not permit all required documents to reach the Depositary prior to the Expiration Date, may tender their Shares pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. Pursuant to such procedures, (i) such tender must be made by or through an Eligible Institution, (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Offeror (or facsimile thereof), must be received by the Depositary prior to the Expiration Date and (iii) the certificates for (or a Book-Entry Confirmation with respect to) such Shares, together with this properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and any other required documents are 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. A "trading day" is any day on which the New York Stock Exchange is open for business. The Notice of Guaranteed Delivery may be delivered by hand to the Depositary or transmitted by telegram, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A BOOK-ENTRY TRANSFER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARE CERTIFICATES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF A 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. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. All tendering stockholders, by execution of this Letter of Transmittal (or facsimile thereof), waive any right to receive any notice of the acceptance of their Shares for payment. 3. INADEQUATE SPACE. If the space provided herein under "Description of Shares Tendered" is inadequate, the Share Certificate numbers and/or the number of Shares evidenced by such Share Certificates and the number of Shares tendered should be listed on a separate schedule attached hereto. 4. PARTIAL TENDERS. If fewer than all the Shares evidenced by any Share Certificate delivered to the Depositary herewith 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, new Share Certificate(s) for the remainder of the Shares that were evidenced by the Share Certificate(s) delivered to the Depositary herewith will be sent to the person(s) signing this Letter of Transmittal, unless otherwise provided in the box entitled "Special Delivery Instructions" on the reverse hereof, as soon as practicable after the expiration or termination of the Offer. All Shares represented by Share 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 Share Certificate(s) evidencing such shares without any change whatsoever. If any of the Shares tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any of the Shares tendered hereby are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of such Shares. If this Letter of Transmittal or any certificates or stock powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and proper evidence satisfactory to the Offeror of their authority so to act must be submitted. When this Letter of Transmittal is signed by the registered owner(s) of the Shares listed and tendered hereby, no endorsements of Share Certificates or separate stock powers are required unless payment or Share Certificates evidencing Shares not tendered or not accepted for payment are to be issued in the name of a person other than the registered holder(s), in which case the Share Certificate(s) evidencing the 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) or such Share Certificate(s). Signatures on such Share Certificate(s) or stock powers must be guaranteed by an Eligible Institution. See Instruction 1. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the shares tendered hereby, the certificates evidencing the 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 such Share Certificates. Signatures on such Share Certificate(s) or stock powers must be guaranteed by an Eligible Institution. See Instruction 1. 6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, the Offeror will pay, or cause to be paid, any stock transfer taxes with respect to the transfer and sale of Shares to it or its assignee pursuant to the Offer. If, however, payment of the purchase price of any Shares is to be made to, or if Share Certificates evidencing Shares not tendered or accepted for payment are to be issued in the name of, a person other than the registered holder(s), or if tendered Share Certificates are registered in the name of a person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder(s) or such person or otherwise payable on the account of the transfer to such other person) will be deducted from the purchase price of such Shares purchased, unless evidence satisfactory to the Offeror 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 Share Certificates evidencing the Shares tendered hereby. 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in the name of and/or Shares Certificates not accepted for payment are to be returned to a person other than the signer of this Letter of Transmittal or if a check is to be sent and/or such Share Certificates are to be returned to a person other than the signer of this Letter of Transmittal or to an address other than that shown in the box entitled "Description of Shares Tendered" on the reverse hereof, the appropriate boxes on the reverse side of this Letter of Transmittal should be completed. Any stockholder tendering Shares by book-entry transfer will have any Shares not accepted for payment returned by crediting the account maintained by such stockholder at a Book-Entry Transfer Facility from which such transfer was made. 8. WAIVER OF CONDITIONS. Except as otherwise provided in the Offer to Purchase, the Offeror reserves the absolute right, in its sole discretion, to waive any of the conditions of the Offer or any defect or irregularity in the tender of any Shares of any particular stockholder, whether or not similar defects or irregularities are waived in the case of other stockholders. 9. TAXPAYER IDENTIFICATION NUMBER AND BACKUP WITHHOLDING. Federal income tax law generally requires that a registered holder whose tendered stock is accepted for purchase, or such registered holder's assignee (in either case, the "Payee") provide the Depositary ("the Payor") with a correct Taxpayer Identification Number ("TIN"), which, in the case of a Payee who is an individual, is such Payee's social security number. If the Depositary is not provided with the correct TIN or an adequate basis for an exemption, such Payee may be subject to a $50 penalty imposed by the Internal Revenue Service and backup withholding in an amount equal to 31% of the gross proceeds of the purchase price. If withholding results in an overpayment of taxes, a refund may be obtained. To prevent backup withholding, each payee must provide such payee's correct TIN by completing the "Substitute Form W-9" set forth herein, certifying that the TIN provided is correct (or that such Payee is awaiting a TIN) and that (i) the Payee is exempt from backup withholding (ii) the Payee has not been notified by the Internal Revenue Service that such Payee is subject to backup withholding as a result of a failure to report all interest or dividends, or (iii) the Internal Revenue Service has notified the payee that such Payee is no longer subject to backup withholding. If the Payee does not have a TIN, such Payee should consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for instructions on applying for a TIN, write "Applied For" in the space for the TIN in Part 1 of the Substitute Form W-9, and sign and date the Substitute Form W-9 and the Certificate of Awaiting Taxpayer Identification Number set forth herein. If the payee does not provide such payee's TIN to the Payor within 60 days, backup withholding will begin and continue until such payee furnishes such payee's TIN to the Payor. Note: Writing "Applied for" on the form means that the payee has already applied for a TIN or that such Payee intends to apply for one in the near future. If the Shares are held in more than one name, or is not in the name of the actual owner, consult the W-9 Guidelines for information on which TIN to report. Exempt Payees (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. To prevent possible erroneous backup withholding, an exempt Payee should write "Exempt" in Part 2 of the Substitute Form W-9. See the W-9 Guidelines for additional instructions. In order for a non-resident alien or foreign entity to qualify as exempt, such person must substitute a completed form W-8, "Certificate of Foreign Status", signed under penalty of perjury attesting to such exempt status. Such forms may be obtained from the Payor. 10. LOST OR DESTROYED CERTIFICATES. If any Share Certificate(s) has (have) been lost or destroyed, the stockholder should check the appropriate box on the reverse side of the Letter of Transmittal. The Company's stock transfer agent will then instruct such stockholder as to the procedure to be followed in order to replace the Share Certificate(s). The stockholder will have to post a surety bond of approximately 2% of the current market value of the stock. This Letter of Transmittal and related documents cannot be processed until procedures for replacing lost or destroyed Share Certificates have been followed. 11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance or additional copies of the Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 may be directed to the Information Agent at the locations and telephone numbers set forth below. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE COPY THEREOF), TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES, OR IN THE CASE OF A BOOK-ENTRY TRANSFER, AN AGENT'S MESSAGE, AND SHARE CERTIFICATES, OR A BOOK-ENTRY CONFIRMATION, FOR SHARES AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE DEPOSITARY, OR THE NOTICE OF GUARANTEED DELIVERY (OR A FACSIMILE COPY THEREOF) MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE EXPIRATION DATE. WHAT NUMBER TO GIVE THE DEPOSITARY The stockholder is required to give the Depositary the TIN, generally the social security number or employer identification number, of the record holder of the Shares tendered hereby. 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 guidance on which number to report. If the tendering stockholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, he or she should write "Applied For" in the space provided for the TIN in Part I, sign and date the Substitute Form W-9 and sign and date the Certificate of Awaiting Taxpayer Identification Number, which appears in a separate box below the Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is not provided with a TIN by the time of payment, the Depositary will withhold 31% of all payments of the purchase price until a TIN is provided to the Depositary.
- ---------------------------------------------------------------------------------------- PAYER'S NAME: BANKBOSTON, N.A. - ---------------------------------------------------------------------------------------- PART I--Taxpayer SUBSTITUTE Identification Number--For FORM W-9 all accounts, enter your TIN Department of the Treasury in the box at right. (For ---------------------------- Internal Revenue Service most individuals, this is SOCIAL SECURITY NUMBER your social security number. OR PAYER'S REQUEST FOR TAXPAYER If you do not have a TIN, IDENTIFICATION NUMBER (TIN) see Obtaining a Number in the enclosed GUIDELINES.) ---------------------------- Certify by signing and EMPLOYER IDENTIFICATION dating below. Note: If the NUMBER account is in more than one name, see the chart in the (IF AWAITING TIN WRITE enclosed GUIDELINES to "APPLIED FOR") determine which number to give the payer. ---------------------------------------------------------- PART II--For Payees Exempt from backup Withholding, see the enclosed GUIDELINES and complete as instructed therein. - ---------------------------------------------------------------------------------------- CERTIFICATION--Under penalties of perjury, I certify that: (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me), and (2) I am not subject to backup withholding either because (a) I am exempt from backup withholding, (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. CERTIFICATE INSTRUCTIONS--You must cross out item (2) above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are not longer subject to backup withholding, do not cross out item (2). (Also see instructions in the enclosed GUIDELINES.) - ---------------------------------------------------------------------------------------- SIGNATURE DATE , 199 - ----------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY IMPOSED BY THE INTERNAL REVENUE SERVICE AND 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 WROTE "APPLIED FOR" IN PART I OF SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I CERTIFY UNDER THE PENALTIES OF PERJURY THAT A TAXPAYER IDENTIFICATION NUMBER HAS NOT BEEN ISSUED TO ME, AND EITHER (A) I HAVE MAILED OR DELIVERED AN APPLICATION TO RECEIVE A TAXPAYER IDENTIFICATION NUMBER TO THE APPROPRIATE INTERNAL REVENUE SERVICE CENTER OR SOCIAL SECURITY ADMINISTRATION OFFICE, OR (B) I INTEND TO MAIL OR DELIVER AN APPLICATION IN THE NEAR FUTURE. I UNDERSTAND THAT IF I DO NOT PROVIDE A TAXPAYER IDENTIFICATION NUMBER BY THE TIME OF PAYMENT, 31% OF ALL REPORTABLE PAYMENTS MADE TO ME THEREAFTER WILL BE WITHHELD UNTIL I PROVIDE A NUMBER. __________ DATE _____________________________________ Questions and requests for assistance or additional copies of the Offer to Purchase, Letter of Transmittal and other tender offer materials may be directed to the Information Agent at the locations and telephone numbers set forth below: The Information Agent for the Offer is: MACKENZIE PARTNERS, INC. 156 FIFTH AVENUE NEW YORK, NY 10010 BANKS AND BROKERS CALL COLLECT (212) 929-5500 ALL OTHERS CALL TOLL FREE: (800) 322-2885 EX-99.(A)(3) 4 EXHIBIT (A)(3) EXHIBIT (a)(3) LETTER OF TRANSMITTAL TO TENDER SHARES OF $1.70 CLASS B CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES D OF KERR GROUP, INC. PURSUANT TO THE OFFER TO PURCHASE DATED JULY 8, 1997 BY KERR ACQUISITION CORPORATION A CORPORATION FORMED AT THE DIRECTION OF FREMONT PARTNERS - -------------------------------------------------------------------------------- THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, AUGUST 4, 1997, UNLESS THE OFFER IS EXTENDED. - -------------------------------------------------------------------------------- THE DEPOSITARY FOR THE OFFER IS: BOSTON EQUISERVE, L.P. BY MAIL: BY HAND: BY POSTAL EXPRESS OR Boston EquiServe, L.P. BankBoston, N.A. OVERNIGHT COURIER: Corporate Securities Transfer & BankBoston, N.A. Reorganization Reporting Services, Inc. Boston EquiServe, L.P. Post Office Box 2089 55 Broadway, 3rd Floor Corporate Boston, MA 02266-2089 New York, NY 10006 Reorganization Attn: Delivery Window 150 Royall Street Mail Stop 45-02-53 Canton, MA 02021
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE PROVIDED THEREFORE AND COMPLETE THE SUBSTITUTE FORM W-9 PROVIDED 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 used either if certificates are to be forwarded herewith or if delivery of Shares (as defined below) is to be made by book-entry transfer to an account maintained by the Depositary at The Depository Trust Company ("DTC") or the Philadelphia Depository Trust Company ("PDTC," and together with DTC each a "Book-Entry Transfer Facility and collectively, 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. Stockholders who deliver Shares by book-entry transfer are referred to herein as "Book-Entry Stockholders" and other stockholders are referred to herein as "Certificate Stockholders." Stockholders whose certificates evidencing Shares ("Share Certificates") are not immediately available or who cannot deliver their Share Certificates and all other documents required hereby to the Depositary or complete the procedures for book-entry transfer prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase) must tender their Shares according to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. See Instruction 2. / / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES, AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER): Name of Tendering Institution: _____________________________________________ Check Box of Applicable Book-Entry Transfer Facility (check one) / / DTC / / PDTC Account Number: ____________________________________________________________ Transaction Code Number: ___________________________________________________ / / 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): ___________________________________________ Window Ticket No. (if any): ________________________________________________ Date of Execution of Notice of Guaranteed Delivery: ________________________ Name of Institution which Guaranteed Delivery: _____________________________ If Delivered by Book-Entry Transfer, Check Box of Applicable Book-Entry Transfer Facility: / / DTC / / PDTC Account Number (if delivered by Book-Entry Transfer): ______________________ Transaction Code Number ____________________________________________________ BOXES ABOVE FOR USE BY ELIGIBLE INSTITUTIONS ONLY
- ------------------------------------------------------------------------------------------ DESCRIPTION OF $1.70 CLASS B CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES D SHARES TENDERED - ------------------------------------------------------------------------------------------ NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ON SHARE SHARE CERTIFICATE(S) AND SHARES TENDERED CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY) - ------------------------------------------------------------------------------------------- TOTAL NUMBER OF SHARE SHARES CERTIFICATE EVIDENCED BY SHARE NUMBER OF SHARES NUMBER(S)* CERTIFICATE(S)* TENDERED** - ------------------------------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- TOTAL SHARES: - ------------------------------------------------------------------------------------------- * NEED NOT BE COMPLETED BY STOCKHOLDERS DELIVERING SHARES BY BOOK-ENTRY TRANSFER. ** UNLESS OTHERWISE INDICATED, IT WILL BE ASSUMED THAT ALL SHARES EVIDENCED BY EACH SHARE CERTIFICATE DELIVERED TO THE DEPOSITARY ARE BEING TENDERED HEREBY. SEE INSTRUCTION 4. - -------------------------------------------------------------------------------------------
/ / CHECK HERE IF YOU CANNOT LOCATE YOUR CERTIFICATE(S) AND REQUIRE ASSISTANCE IN REPLACING THEM. UPON RECEIPT OF NOTIFICATION BY THIS LETTER OF TRANSMITTAL, THE COMPANY'S STOCK TRANSFER AGENT WILL CONTACT YOU DIRECTLY WITH REPLACEMENT INSTRUCTIONS. NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. Ladies and Gentlemen: The undersigned hereby tenders to Kerr Acquisition Corporation, a Delaware corporation (the "Offeror") and a wholly owned subsidiary of Fremont Acquisition Company, LLC, a Delaware limited liability company ("Parent"), the above-described shares of $1.70 Class B Cumulative Convertible Preferred Stock Series D, par value $.50 per share (the "Shares") pursuant to the Offeror's offer to purchase all outstanding Shares at $12.50 per share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated July 8, 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, constitute the "Offer"). The undersigned understands that the Offeror reserves the right to transfer or assign, in whole or in part from time to time, to any affiliate of Parent the right to purchase Shares tendered pursuant to the Offer. Kerr Group, Inc., a Delaware corporation (the "Company"), has distributed one Right for each outstanding share of common stock of the Company pursuant to the Rights Agreement, dated as of July 25, 1995, between the Company and BankBoston, N.A. (formerly The First National Bank of Boston), as Rights Agent, as amended (the "Rights Agreement"). The Company has represented in the Merger Agreement (as defined in the Offer to Purchase) that it has taken all action which may be necessary under the Rights Agreement so that the execution of the Merger Agreement and any amendments thereto and the consummation of the transactions contemplated thereby will not cause (i) Parent and/or the Offeror to become an Acquiring Person (as defined in the Rights Agreement), (ii) a Distribution Date, a Stock Acquisition Date or a Trigger Event (as such terms are defined in the Rights Agreement) to occur, irrespective of the number of Shares acquired pursuant to the Offer, and (iii) the Rights shall expire upon the acceptance of Shares for payment pursuant to the Offer. 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), effective upon acceptance for payment 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 (collectively, "Distributions")) and irrevocably constitutes and appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares and all Distributions, 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 a Book-Entry Transfer Facility, together, in any such case, with all accompanying evidences of transfer and authenticity, to or upon the order of the Offeror, upon receipt by the Depositary, as the undersigned's agent, of the purchase price (adjusted, if appropriate, as provided in the Offer to Purchase), (b) present such Shares and all Distributions for cancellation and transfer on the Company's books and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares and all Distributions, all in accordance with the terms of the Offer. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the tendered Shares and all Distributions and that, when the same are accepted for payment by the Offeror, the Offeror will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, claims, charges and encumbrances, and the same will not be subject to any adverse claims. The undersigned will, upon request, execute any signature guarantees or additional documents deemed by the Depositary or the Offeror to be necessary or desirable to complete the sale, assignment and transfer of the tendered Shares and all Distributions. In addition, the undersigned shall promptly remit and transfer to the Depositary for the account of the Offeror any such Distributions issued to the undersigned, in respect of the tendered Shares, accompanied by documentation of transfer, and pending such remittance or appropriate assurance thereof, the Offeror shall be entitled to all rights and privileges as owner of any such Distributions and, subject to the terms of the Merger Agreement, may withhold the entire purchase price or deduct from the purchase price the amount or value thereof, as determined by the Offeror, in its sole discretion. All authority conferred or agreed to be conferred in this Letter of Transmittal shall be binding upon the successors, assigns, heirs, executors, administrators and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. The undersigned hereby irrevocably appoints Gilbert H. Lamphere or Gregory P. Spivy and each of them, and any other designees of the Offeror, the attorneys and proxies of the undersigned, each with full power of substitution, to vote at any annual, special or adjourned meeting of the Company's stockholders or otherwise act (including pursuant to written consent) in such manner as each such attorney and proxy or his or her substitute shall in his or her sole discretion deem proper, to execute any written consent concerning any matter as each such attorney and proxy or his or her substitute shall in his or her sole discretion deem proper with respect to, and to otherwise act with respect to, all the Shares tendered hereby which have been accepted for payment by the Offeror prior to the time any such vote or action is taken (and any and all Distributions issued or issuable in respect thereof) and with respect to which the undersigned is entitled to vote. This appointment is effective when, and only to the extent that, the Offeror accepts for payment such Shares as provided in the Offer to Purchase. This power of attorney and proxy is coupled with an interest in the tendered Shares, is irrevocable and is granted in consideration of the acceptance for payment of such Shares in accordance with the terms of the Offer. Such acceptance for payment shall revoke all prior powers of attorney and proxies given by the undersigned at any time with respect to such Shares and no subsequent powers of attorney or proxies may be given by the undersigned (and, if given, will not be deemed effective). The Offeror reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Offeror's acceptance for payment of such Shares, the Offeror must be able to exercise full voting and other rights with respect to such Shares, including voting at any stockholders meeting then scheduled. The undersigned understands that the valid tender of Shares to Offeror pursuant to any one of the procedures described in Section 3 of the Offer and in the instructions hereto will constitute a binding agreement between the undersigned and the Offeror upon the terms and subject to the conditions of the Offer. The undersigned recognizes that under certain circumstances set forth in the Offer to Purchase, the Offeror may not be required to accept for payment any of the tendered Shares. The Offeror's acceptance for payment of Shares pursuant to the Offer will constitute a binding agreement between the undersigned and the Offeror upon the terms and subject to the conditions of the Offer. Unless otherwise indicated herein under "Special Payment Instructions," please issue the check for the purchase price of any Shares purchased, and/or return any certificates for Shares not tendered or accepted for payment, in the name(s) of the registered holder(s) appearing under "Description of Shares Tendered." Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price of any Shares purchased, and/or any certificates for Shares not tendered or accepted for payment (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing under "Description of Shares Tendered." In the event that both the Special Delivery Instructions and the Special Payment Instructions are completed, please issue the check for the purchase price of any Shares purchased, and/or return any certificates for Shares not tendered or accepted for payment in the name(s) of, and mail said check and/or any certificates to, the person or persons so indicated. In the case of a book-entry delivery of Shares, please credit the account maintained at a Book-Entry Transfer Facility indicated above with any Shares not accepted for payment. 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. - ------------------------------------------- SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for the purchase price of Shares or Share Certificates evidencing Shares not tendered or not purchased are to be issued in the name of someone other than the undersigned. Issue check and/or certificate(s) to: Name: ______________________________________________________________________ PLEASE PRINT Address: ___________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ INCLUDE ZIP CODE __________________________________________________________________________ TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER (SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE) - ------------------------------------------------------ - ------------------------------------------------------ SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for the purchase of Shares purchased or Share Certificates evidencing Shares not tendered or not purchased are to be mailed to someone other than the undersigned, or to the undersigned at an address other than that shown under "Description of Shares Tendered." Mail check and/or certificate(s) to: Name: ______________________________________________________________________ PLEASE PRINT Address: ___________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ INCLUDE ZIP CODE - ----------------------------------------------------- - -------------------------------------------------------------------------------- IMPORTANT STOCKHOLDER(S): SIGN HERE (PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE) ____________________________________________________________________________ ____________________________________________________________________________ SIGNATURE(S) OF HOLDER(S) Dated: ___________________________________________, 199 (Must be signed by registered holder(s) exactly as name(s) appear(s) on Share Certificates or on a security position listing or by a 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, officer of a corporation or other person acting in a fiduciary or representative capacity, please provide the following information. See Instruction 5.) Name(s): ___________________________________________________________________ ____________________________________________________________________________ PLEASE PRINT Capacity: __________________________________________________________________ PLEASE PROVIDE FULL TITLE Address: ___________________________________________________________________ ____________________________________________________________________________ INCLUDE ZIP CODE Telephone No.: _____________________________________________________________ INCLUDE AREA CODE Tax Identification or Social Security Number: ____________________________________________________ SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE GUARANTEE OF SIGNATURE(S) (IF REQUIRED--SEE INSTRUCTIONS 1 AND 5) SPACE BELOW IS FOR USE BY FINANCIAL INSTITUTIONS ONLY. FINANCIAL INSTITUTIONS: PLACE MEDALLION GUARANTEE IN SPACE PROVIDED BELOW. - -------------------------------------------------------------------------------- INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all signatures on this Letter of Transmittal must be guaranteed by a financial institution (including most commercial banks, savings and loan associations and brokerage houses) that is a participant in the Security Transfer Agent's Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program (each an "Eligible Institution," and collectively, "Eligible Institutions"). No signature guarantee is required on this Letter of Transmittal (i) if this Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this document, shall include any participant in a Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) of Shares tendered herewith, unless such holder(s) has completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" in this Letter of Transmittal or (ii) if such Shares are tendered for the account of an Eligible Institution. See Instruction 5. 2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY PROCEDURES. This Letter of Transmittal is to be completed by stockholders either if Share Certificates are to be forwarded herewith or if a tender of Shares is to be made pursuant to the procedures for delivery by book-entry transfer set forth in Section 3 of the Offer to Purchase. For Shares to be validly tendered pursuant to the Offer, either (i) a properly completed and duly executed Letter of Transmittal (or facsimile thereof), together with any required signature guarantees, or in the case of a book-entry transfer, an Agent's Message (as defined in the Offer to Purchase), and any other required documents, must be received by the Depositary at one of the Depositary's addresses set forth herein prior to the Expiration Date (as defined in the Offer to Purchase) and either certificates for tendered Shares must be received by the Depositary at one of such addresses or such Shares must be delivered pursuant to the procedures for book-entry transfer (and a Book Entry Confirmation received by the Depositary), in each case, prior to the Expiration Date, or (ii) the tendering stockholder must comply with the guaranteed delivery procedure set forth below. Stockholders whose Share Certificates are not immediately available or who cannot complete the procedures for book-entry transfer on a timely basis or time will not permit all required documents to reach the Depositary prior to the Expiration Date, may tender their Shares pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. Pursuant to such procedures, (i) such tender must be made by or through an Eligible Institution, (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Offeror (or facsimile thereof), must be received by the Depositary prior to the Expiration Date and (iii) the certificates for (or a Book-Entry Confirmation with respect to) such Shares, together with this properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and any other required documents are 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. A "trading day" is any day on which the New York Stock Exchange is open for business. The Notice of Guaranteed Delivery may be delivered by hand to the Depositary or transmitted by telegram, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A BOOK-ENTRY TRANSFER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARE CERTIFICATES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF A 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. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. All tendering stockholders, by execution of this Letter of Transmittal (or facsimile thereof), waive any right to receive any notice of the acceptance of their Shares for payment. 3. INADEQUATE SPACE. If the space provided herein under "Description of Shares Tendered" is inadequate, the Share Certificate numbers and/or the number of Shares evidenced by such Share Certificates and the number of Shares tendered should be listed on a separate schedule attached hereto. 4. PARTIAL TENDERS. If fewer than all the Shares evidenced by any Share Certificate delivered to the Depositary herewith 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, new Share Certificate(s) for the remainder of the Shares that were evidenced by the Share Certificate(s) delivered to the Depositary herewith will be sent to the person(s) signing this Letter of Transmittal, unless otherwise provided in the box entitled "Special Delivery Instructions" on the reverse hereof, as soon as practicable after the expiration or termination of the Offer. All Shares represented by Share 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 Share Certificate(s) evidencing such shares without any change whatsoever. If any of the Shares tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any of the Shares tendered hereby are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of such Shares. If this Letter of Transmittal or any certificates or stock powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and proper evidence satisfactory to the Offeror of their authority so to act must be submitted. When this Letter of Transmittal is signed by the registered owner(s) of the Shares listed and tendered hereby, no endorsements of Share Certificates or separate stock powers are required unless payment or Share Certificates evidencing Shares not tendered or not accepted for payment are to be issued in the name of a person other than the registered holder(s), in which case the Share Certificate(s) evidencing the 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) or such Share Certificate(s). Signatures on such Share Certificate(s) or stock powers must be guaranteed by an Eligible Institution. See Instruction 1. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the shares tendered hereby, the certificates evidencing the 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 such Share Certificates. Signatures on such Share Certificate(s) or stock powers must be guaranteed by an Eligible Institution. See Instruction 1. 6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, the Offeror will pay, or cause to be paid, any stock transfer taxes with respect to the transfer and sale of Shares to it or its assignee pursuant to the Offer. If, however, payment of the purchase price of any Shares is to be made to, or if Share Certificates evidencing Shares not tendered or accepted for payment are to be issued in the name of, a person other than the registered holder(s), or if tendered Share Certificates are registered in the name of a person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder(s) or such person or otherwise payable on the account of the transfer to such other person) will be deducted from the purchase price of such Shares purchased, unless evidence satisfactory to the Offeror 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 Share Certificates evidencing the Shares tendered hereby. 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in the name of and/or Shares Certificates not accepted for payment are to be returned to a person other than the signer of this Letter of Transmittal or if a check is to be sent and/or such Share Certificates are to be returned to a person other than the signer of this Letter of Transmittal or to an address other than that shown in the box entitled "Description of Shares Tendered" on the reverse hereof, the appropriate boxes on the reverse side of this Letter of Transmittal should be completed. Any stockholder tendering Shares by book-entry transfer will have any Shares not accepted for payment returned by crediting the account maintained by such stockholder at a Book-Entry Transfer Facility from which such transfer was made. 8. WAIVER OF CONDITIONS. Except as otherwise provided in the Offer to Purchase, the Offeror reserves the absolute right, in its sole discretion, to waive any of the conditions of the Offer or any defect or irregularity in the tender of any Shares of any particular stockholder, whether or not similar defects or irregularities are waived in the case of other stockholders. 9. TAXPAYER IDENTIFICATION NUMBER AND BACKUP WITHHOLDING. Federal income tax law generally requires that a registered holder whose tendered stock is accepted for purchase, or such registered holder's assignee (in either case, the "Payee") provide the Depositary ("the Payor") with a correct Taxpayer Identification Number ("TIN"), which, in the case of a Payee who is an individual, is such Payee's social security number. If the Depositary is not provided with the correct TIN or an adequate basis for an exemption, such Payee may be subject to a $50 penalty imposed by the Internal Revenue Service and backup withholding in an amount equal to 31% of the gross proceeds of the purchase price. If withholding results in an overpayment of taxes, a refund may be obtained. To prevent backup withholding, each payee must provide such payee's correct TIN by completing the "Substitute Form W-9" set forth herein, certifying that the TIN provided is correct (or that such Payee is awaiting a TIN) and that (i) the Payee is exempt from backup withholding (ii) the Payee has not been notified by the Internal Revenue Service that such Payee is subject to backup withholding as a result of a failure to report all interest or dividends, or (iii) the Internal Revenue Service has notified the payee that such Payee is no longer subject to backup withholding. If the Payee does not have a TIN, such Payee should consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for instructions on applying for a TIN, write "Applied For" in the space for the TIN in Part 1 of the Substitute Form W-9, and sign and date the Substitute Form W-9 and the Certificate of Awaiting Taxpayer Identification Number set forth herein. If the payee does not provide such payee's TIN to the Payor within 60 days, backup withholding will begin and continue until such payee furnishes such payee's TIN to the Payor. Note: Writing "Applied for" on the form means that the payee has already applied for a TIN or that such Payee intends to apply for one in the near future. If the Shares are held in more than one name, or is not in the name of the actual owner, consult the W-9 Guidelines for information on which TIN to report. Exempt Payees (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. To prevent possible erroneous backup withholding, an exempt Payee should write "Exempt" in Part 2 of the Substitute Form W-9. See the W-9 Guidelines for additional instructions. In order for a non-resident alien or foreign entity to quality as exempt, such person must substitute a completed form W-8, "Certificate of Foreign Status", signed under penalty of perjury attesting to such exempt status. Such forms may be obtained from the Payor. 10. LOST OR DESTROYED CERTIFICATES. If any Share Certificate(s) has (have) been lost or destroyed, the stockholder should check the appropriate box on the reverse side of the Letter of Transmittal. The Company's stock transfer agent will then instruct such stockholder as to the procedure to be followed in order to replace the Share Certificate(s). The stockholder will have to post a surety bond of approximately 2% of the current market value of the stock. This Letter of Transmittal and related documents cannot be processed until procedures for replacing lost or destroyed Share Certificates have been followed. 11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance or additional copies of the Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 may be directed to the Information Agent at the locations and telephone numbers set forth below. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE COPY THEREOF), TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES, OR IN THE CASE OF A BOOK-ENTRY TRANSFER, AN AGENT'S MESSAGE, AND SHARE CERTIFICATES, OR A BOOK-ENTRY CONFIRMATION, FOR SHARES AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE DEPOSITARY, OR THE NOTICE OF GUARANTEED DELIVERY (OR A FACSIMILE COPY THEREOF) MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE EXPIRATION DATE. WHAT NUMBER TO GIVE THE DEPOSITARY The stockholder is required to give the Depositary the TIN, generally the social security number or employer identification number, of the record holder of the Shares tendered hereby. 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 guidance on which number to report. If the tendering stockholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, he or she should write "Applied For" in the space provided for the TIN in Part I, sign and date the Substitute Form W-9 and sign and date the Certificate of Awaiting Taxpayer Identification Number, which appears in a separate box below the Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is not provided with a TIN by the time of payment, the Depositary will withhold 31% of all payments of the purchase price until a TIN is provided to the Depositary.
- ---------------------------------------------------------------------------------------- PAYER'S NAME: BANKBOSTON, N.A. - ---------------------------------------------------------------------------------------- PART I--Taxpayer SUBSTITUTE Identification Number--For FORM W-9 all accounts, enter your TIN Department of the Treasury in the box at right. (For ---------------------------- Internal Revenue Service most individuals, this is SOCIAL SECURITY NUMBER your social security number. OR PAYER'S REQUEST FOR TAXPAYER If you do not have a TIN, IDENTIFICATION NUMBER (TIN) see Obtaining a Number in the enclosed GUIDELINES.) ---------------------------- Certify by signing and EMPLOYER IDENTIFICATION dating below. Note: If the NUMBER account is in more than one name, see the chart in the (IF AWAITING TIN WRITE enclosed GUIDELINES to "APPLIED FOR") determine which number to give the payer. ---------------------------------------------------------- PART II--For Payees Exempt from backup Withholding, see the enclosed GUIDELINES and complete as instructed therein. - ---------------------------------------------------------------------------------------- CERTIFICATION--Under penalties of perjury, I certify that: (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me), and (2) I am not subject to backup withholding either because (a) I am exempt from backup withholding, (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. CERTIFICATE INSTRUCTIONS--You must cross out item (2) above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are not longer subject to backup withholding, do not cross out item (2). (Also see instructions in the enclosed GUIDELINES.) - ---------------------------------------------------------------------------------------- SIGNATURE DATE , 199 - ----------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY IMPOSED BY THE INTERNAL REVENUE SERVICE AND 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 WROTE "APPLIED FOR" IN PART I OF SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I CERTIFY UNDER THE PENALTIES OF PERJURY THAT A TAXPAYER IDENTIFICATION NUMBER HAS NOT BEEN ISSUED TO ME, AND EITHER (A) I HAVE MAILED OR DELIVERED AN APPLICATION TO RECEIVE A TAXPAYER IDENTIFICATION NUMBER TO THE APPROPRIATE INTERNAL REVENUE SERVICE CENTER OR SOCIAL SECURITY ADMINISTRATION OFFICE, OR (B) I INTEND TO MAIL OR DELIVER AN APPLICATION IN THE NEAR FUTURE. I UNDERSTAND THAT IF I DO NOT PROVIDE A TAXPAYER IDENTIFICATION NUMBER BY THE TIME OF PAYMENT, 31% OF ALL REPORTABLE PAYMENTS MADE TO ME THEREAFTER WILL BE WITHHELD UNTIL I PROVIDE A NUMBER. __________ DATE _____________________________________ Questions and requests for assistance or additional copies of the Offer to Purchase, Letter of Transmittal and other tender offer materials may be directed to the Information Agent at the locations and telephone numbers set forth below: The Information Agent for the Offer is: MACKENZIE PARTNERS, INC. 156 FIFTH AVENUE NEW YORK, NY 10010 BANKS AND BROKERS CALL COLLECT (212) 929-5500 ALL OTHERS CALL TOLL FREE: (800) 322-2885 EX-99.(A)(4) 5 EXHIBIT (A)(4) EXHIBIT (a)(4) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS) AND ALL OUTSTANDING SHARES OF $1.70 CLASS B CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES D OF KERR GROUP, INC. AT $5.40 NET PER SHARE OF COMMON STOCK AND $12.50 NET PER SHARE OF $1.70 CLASS B CUMULATIVE CONVERTIBLE PREFERRED STOCK BY KERR ACQUISITION CORPORATION A CORPORATION FORMED AT THE DIRECTION OF FREMONT PARTNERS THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, AUGUST 4, 1997, UNLESS THE OFFER IS EXTENDED. July 8, 1997 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been appointed by Kerr Acquisition Corporation, a Delaware corporation (the "Offeror") and a wholly owned subsidiary of Fremont Acquisition Company, LLC, a Delaware limited liability company (the "Parent"), to act as Information Agent in connection with the Offeror's offer to purchase all outstanding shares of common stock, par value $.50 per share, including the associated rights to purchase shares of preferred stock (the "Rights"), issued pursuant to the Rights Agreement, dated as of July 25, 1995, between Kerr Group, Inc., a Delaware corporation (the "Company") and BankBoston, N.A. (formerly The First National Bank of Boston), as amended (the "Rights Agreement") (the Rights together with the common stock, the "Common Stock") and the shares of $1.70 Class B Cumulative Convertible Preferred Stock, Series D, par value $.50 per share (the "Series D Preferred Shares" and together with the Common Stock, the "Shares"), of the Company, at a price of $5.40 per share of Common Stock and $12.50 per share of Series D Preferred Shares, each, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offeror's Offer to Purchase, dated July 8, 1997 (the "Offer to Purchase"), and 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 as of July 1, 1997, as amended, by and among the Parent, the Offeror and the Company. 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. For your information and for forwarding to your clients for whom you hold Shares registered in your name or in the name of your nominee we are enclosing copies of the following documents: 1. Offer to Purchase; 2. Letter of Transmittal to tender Shares for your use and for the information of your clients; 3. Notice of Guaranteed Delivery to be used to accept the Offer if certificates for Shares are not immediately available or time will not permit all required documents to reach the Depositary by the Expiration Date (as defined in the Offer to Purchase) or if the procedure for book-entry transfer cannot be completed on a timely basis. 4. A letter to stockholders of the Company from D. Gordon Strickland, President and Chief Executive Officer of the Company, together with a Solicitation/Recommendation Statement on Schedule 14D-9 filed with the Securities and Exchange Commission by the Company; 5. A letter which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer; 6. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9; and 7. Return envelope addressed to the Depositary. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, AUGUST 4, 1997, UNLESS THE OFFER IS EXTENDED. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) the certificates evidencing such Shares or timely confirmation of a book-entry transfer of such Shares into the Depositary's account at one of the Book-Entry Transfer Facilities (as defined in the Offer to Purchase), (ii) a Letter of Transmittal (or 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 delivery, and (iii) and any other documents required by the Letter of Transmittal. If holders of Shares wish to tender Shares, but cannot deliver such holders' certificates or other required documents, or cannot comply with the procedure for book-entry transfer, prior to the expiration of the Offer, a tender may be effected by following the guaranteed delivery procedure described in Section 3 of the Offer to Purchase. Neither the Offeror nor the Parent will pay any fees or commissions to any broker, dealer or other person (other than the Information Agent) for soliciting tenders of Shares pursuant to the Offer. However, upon request, the Offeror will reimburse you for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to your clients. The Offeror will pay or cause to be paid any stock transfer taxes payable with respect to the transfer of Shares to it, except as otherwise provided in the Letter of Transmittal. Any inquiries you may have with respect to the Offer should be addressed to MacKenzie Partners, Inc., the Information Agent, at the addresses and telephone numbers set forth on the back cover page of the Offer to Purchase. 2 Additional copies of the enclosed material may be obtained from the Information Agent at the address and telephone number set forth on the back cover page of the Offer to Purchase. Very truly yours, MacKenzie Partners, Inc. NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL AUTHORIZE YOU OR ANY OTHER PERSON TO ACT ON BEHALF OF OR AS THE AGENT OF THE PARENT, THE OFFEROR, THE COMPANY, THE INFORMATION AGENT OR THE DEPOSITARY, OR OF ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR TO MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN. 3 EX-99.(A)(5) 6 EXHIBIT (A)(5) EXHIBIT (a)(5) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS) AND ALL OUTSTANDING SHARES OF $1.70 CLASS B CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES D OF KERR GROUP, INC. AT $5.40 NET PER SHARE OF COMMON STOCK AND $12.50 NET PER SHARE OF $1.70 CLASS B CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES D BY KERR ACQUISITION CORPORATION A CORPORATION FORMED AT THE DIRECTION OF FREMONT PARTNERS THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, AUGUST 4, 1997, UNLESS THE OFFER IS EXTENDED. To Our Clients: Enclosed for your consideration are an Offer to Purchase, dated July 8, 1997 (the "Offer to Purchase"), and a related Letter of Transmittal (which, as amended or supplemented from time to time, together constitute the "Offer") relating to the offer by Kerr Acquisition Corporation, a Delaware corporation (the "Offeror") and a wholly owned subsidiary of Fremont Acquisition Company, LLC, a Delaware limited liability company (the "Parent"), to purchase all outstanding shares of common stock, par value $0.50 per share, including the associated rights to purchase shares of preferred stock (the "Rights"), issued pursuant to the Rights Agreement, dated as of July 25, 1995, between Kerr Group, Inc., a Delaware corporation (the "Company") and BankBoston, N.A. (formerly The First National Bank of Boston), as amended (the "Rights Agreement") (the Rights together with the common stock, the "Common Stock") and the shares of $1.70 Class B Cumulative Convertible Preferred Stock, Series D, par value $.50 per share (the "Series D Preferred Shares" and together with the Common Stock, the "Shares") of the Company at a price of $5.40 per share of Common Stock and $12.50 per share of Series D Preferred Shares, each, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer. The Offer is being made in connection with the Agreement and Plan of Merger, dated as of July 1, 1997, by and among the Parent, the Offeror and the Company (the "Merger Agreement"). Also enclosed is the Letter to Stockholders of the Company from M. Gordon Strickland, President and Chief Executive Officer of the Company, together with a Solicitation/Recommendation Statement on Schedule 14D-9. WE ARE (OR OUR NOMINEE IS) 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. Accordingly, we request instructions as to whether you wish to have us tender on your behalf any or all of the Shares held by us (or our nominee) for your account, upon the terms and subject to the condition set forth in the Offer. Your attention is invited to the following: 1. The tender price is $5.40 per share of Common Stock and $12.50 per share of Series D Preferred Shares, each net to the seller in cash, without interest. 2. The Offer is being made for all outstanding Shares. 3. The Board of Directors of the Company has unanimously approved the Merger Agreement and the transactions contemplated thereby, has determined that each of the Merger Agreement and the transactions contemplated thereby are fair to, and in the best interests of, the Company and the holders of both the Common Stock and the Series D Preferred Shares and recommends that the Company's holders tender their Shares in the Offer. 4. The Offer and withdrawal rights will expire at 12:00 midnight, New York City time, on Monday, August 4, 1997, unless the Offer is extended. 5. Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in the Letter of Transmittal, stock transfer taxes with respect to the purchase of Shares by the Offeror pursuant to the Offer. If you wish to have us tender any or all of your Shares, please so instruct us by completing, executing, detaching and returning to us the instruction 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 in your instructions. 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 and any supplements or amendments 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 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 Offeror by one or more registered brokers or dealers licensed under the laws of such jurisdiction. 2 INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS) AND $1.70 CLASS B CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES D OF KERR GROUP, INC. BY KERR ACQUISITION CORPORATION A CORPORATION FORMED AT THE DIRECTION OF FREMONT PARTNERS L.P. AN INVESTMENT FUND MANAGED BY AN AFFILIATE OF THE FREMONT GROUP The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase, dated July 8, 1997, 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 Kerr Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of Fremont Acquisition Company, LLC, a Delaware limited liability company, to purchase all outstanding shares of common stock, par value $0.50 per share (the "Common Stock"), including the associated rights to purchase shares of preferred stock (the "Rights"), issued pursuant to the Rights Agreement, dated as of July 25, 1995, between Kerr Group, Inc., a Delaware corporation (the "Company") and BankBoston, N.A. (formerly The First National Bank of Boston), as amended (the "Rights Agreement") (the "Rights" together with the Common Stock, the "Common Stock Shares") and the shares of $1.70 Class B Cumulative Convertible Preferred Stock, par value $.50 per share, Series D (the "Series D Preferred Shares" and together with the Common Stock Shares, the "Shares") of the Company. 3 This will instruct you to tender the number of Shares indicated below (or, if no number is indicated below, all Shares) that are held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer. Dated: --------------, 1997 SIGN HERE ------------------------------------------ ------------------------------------------ Signature(s) of Holder(s) Name(s) of Holder(s) ------------------------------------------ ------------------------------------------ Number of Shares to be Tendered: Please Type or Print - ------- shares of Common Stock* ------------------------------------------ Address - ------- shares of Series D Preferred Shares* ------------------------------------------ Zip Code ------------------------------------------ Area Code and Telephone Number ------------------------------------------ Taxpayer Identification or Social Security Number
- ------------------------ * Unless otherwise indicated, it will be assumed that all Shares held by us for your account are to be tendered. 4 EX-99.(A)(6) 7 EXHIBIT (A)(6) EXHIBIT (a)(6) NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS) OF KERR GROUP, INC. TO KERR ACQUISITION CORPORATION A CORPORATION FORMED AT THE DIRECTION OF FREMONT PARTNERS (NOT TO BE USED FOR SIGNATURE GUARANTEES) This Notice of Guaranteed Delivery, or one substantially in the form hereof, must be used to accept the Offer (as defined below) if certificates evidencing shares of common stock, par value $0.50 per share (the "Common Stock"), including the associated rights to purchase shares of preferred stock (the "Rights"), issued pursuant to the Rights Agreement, dated as of July 25, 1995, between Kerr Group, Inc., a Delaware corporation (the "Company") and BankBoston, N.A. (formerly The First National Bank of Boston) as Rights Agent, as amended (the "Rights Agreement")(the Rights together with the Common Stock, the "Shares"), of the Company, are not immediately available or time will not permit all required documents to reach Boston EquiServe, L.P., as Depositary (the "Depositary"), prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase (as defined below)) or the procedure for delivery by book- entry transfer cannot be completed on a timely basis. This Notice of Guaranteed Delivery may be delivered by hand or transmitted by telegram, facsimile transmission or mail to the Depositary. See Section 3 of the Offer to Purchase. THE DEPOSITARY FOR THE OFFER IS: BOSTON EQUISERVE, L.P. BY POSTAL EXPRESS OR OVERNIGHT BY MAIL: BY HAND: COURIER: Boston EquiServe, L.P. BankBoston, N.A. BankBoston, N.A. Corporate Reorganization Securities Transfer & Boston EquiServe, L.P. Post Office Box 2089 Reporting Services, Inc. Corporate Reorganization Boston, MA 02266-2089 55 Broadway, 3rd Floor 150 Royall Street New York, NY 10006 Mail Stop 45-02-53 Attn: Delivery Window Canton, MA 02021
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, AND TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. Ladies and Gentlemen: The undersigned hereby tenders to Kerr Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of Fremont Acquisition Company, LLC, a Delaware limited liability company, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated July 8, 1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which, as amended or supplemented from time to time, together constitute the "Offer"), receipt of each of which is hereby acknowledged, the number of Shares specified below pursuant to the guaranteed delivery procedure described in Section 3 of the Offer to Purchase. PLEASE CHECK RELEVANT BOX BELOW Series and Certificate Nos. of Shares (if available): Common Stock, par value $.50 Name(s) of Record Holder(s) Certificate Nos. - ----------------------------- -------------------------------------------- Number of Shares Tendered - ---------------- / / -------------------------------------------- Please Type or Print -------------------------------------------- Address(es): -------------------------------- -------------------------------------------- Zip Code Area Code and Tel. No.: --------------------- Signature(s): -------------------------------- Dated: -------------------------------------
Check one box if Shares will be delivered by book-entry transfer: / / The Depositary Trust Company / / Philadelphia Depositary Trust Company Account No.: - --------------------------------- GUARANTEE (NOT TO BE USED FOR THE SIGNATURE GUARANTEE) The undersigned, an Eligible Institution (as defined in the Offer to Purchase), hereby guarantees delivery to the Depositary, at one of its addresses set forth above, certificates ("Share Certificates") evidencing the Shares tendered hereby, in proper form for transfer, or confirmation of book-entry transfer of such Shares into the Depositary's account at The Depositary Trust Company or the Philadelphia Depositary Trust Company, in each case with delivery of a Letter of Transmittal (or facsimile thereof) properly completed and duly executed, or an Agent's Message (as defined in the Offer to Purchase) in the case of a book-entry delivery, and any other required documents, all within three days on which the New York Stock Exchange is open for business after the date hereof. 2 The Eligible Institution that completes this form must communicate the guarantee to the Depositary and must deliver the Letter of Transmittal and Share Certificates to the Depositary within the time period shown herein. Failure to do so could result in a financial loss to such Eligible Institution. - -------------------------------------------- -------------------------------------------- Name of Firm Authorized Signature - -------------------------------------------- Title: -------------------------------------- Address -------------------------------------------- Name: ------------------------------------- Zip Code Please Type or Print - -------------------------------------------- Dated: --------------------------------, 199 Area Code and Telephone No. -
DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. 3 EX-99.(A)(7) 8 EXHIBIT (A)(7) EXHIBIT (a)(7) NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF $1.70 CLASS B CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES D OF KERR GROUP, INC. TO KERR ACQUISITION CORPORATION A CORPORATION FORMED AT THE DIRECTION OF FREMONT PARTNERS (NOT TO BE USED FOR SIGNATURE GUARANTEES) This Notice of Guaranteed Delivery, or one substantially in the form hereof, must be used to accept the Offer (as defined below) if certificates evidencing shares of $1.70 Class B Cumulative Convertible Preferred Stock, Series D, par value $.50 per share (the "Shares") of Kerr Group, Inc., a Delaware corporation (the "Company"), are not immediately available or time will not permit all required documents to reach Boston EquiServe, L.P., as Depositary (the "Depositary"), prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase (as defined below)) or the procedure for delivery by book- entry transfer cannot be completed on a timely basis. This Notice of Guaranteed Delivery may be delivered by hand or transmitted by telegram, facsimile transmission or mail to the Depositary. See Section 3 of the Offer to Purchase. THE DEPOSITARY FOR THE OFFER IS: BOSTON EQUISERVE, L.P. BY POSTAL EXPRESS OR BY MAIL: BY HAND: OVERNIGHT COURIER: Boston EquiServe, L.P. BankBoston, N.A. BankBoston, N.A. Corporate Reorganization Securities Transfer & Boston EquiServe, L.P. Post Office Box 2089 Reporting Services, Inc. Corporate Reorganization Boston, MA 02266-2089 55 Broadway, 3rd Floor 150 Royall Street New York, NY 10006 Mail Stop 45-02-53 Attn: Delivery Window Canton, MA 02021
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, AND TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. Ladies and Gentlemen: The undersigned hereby tenders to Kerr Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of Fremont Acquisition Company, LLC, a Delaware limited liability company, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated July 8, 1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which, as amended or supplemented from time to time, together constitute the "Offer"), receipt of each of which is hereby acknowledged, the number of Shares specified below pursuant to the guaranteed delivery procedure described in Section 3 of the Offer to Purchase. PLEASE CHECK RELEVANT BOX BELOW Series and Certificate Nos. of Shares (if available): $1.70 Class B Cumulative Convertible Name(s) of Record Holder(s) Preferred Shares, Series D, par value $.50 Certificate Nos. - ----------------------------- -------------------------------------------- Number of Shares Tendered - ---------------- / / -------------------------------------------- Please Type or Print -------------------------------------------- Address(es): -------------------------------- -------------------------------------------- Zip Code Area Code and Tel. No.: --------------------- Signature(s): -------------------------------- Dated: -------------------------------------
Check one box if Shares will be delivered by book-entry transfer: / / The Depositary Trust Company / / Philadelphia Depositary Trust Company Account No.: - ---------------------------- GUARANTEE (NOT TO BE USED FOR THE SIGNATURE GUARANTEE) The undersigned, an Eligible Institution (as defined in the Offer to Purchase), hereby guarantees delivery to the Depositary, at one of its addresses set forth above, certificates ("Share Certificates") evidencing the Shares tendered hereby, in proper form for transfer, or confirmation of book-entry transfer of such Shares into the Depositary's account at The Depositary Trust Company or the Philadelphia Depositary Trust Company, in each case with delivery of a Letter of Transmittal (or facsimile thereof) properly completed and duly executed, or an Agent's Message (as defined in the Offer to Purchase) in the case of a book-entry delivery, and any other required documents, all within three days on which the New York Stock Exchange is open for business after the date hereof. 2 The Eligible Institution that completes this form must communicate the guarantee to the Depositary and must deliver the Letter of Transmittal and Share Certificates to the Depositary within the time period shown herein. Failure to do so could result in a financial loss to such Eligible Institution. - -------------------------------------------- -------------------------------------------- Name of Firm Authorized Signature - -------------------------------------------- Title: -------------------------------------- Address -------------------------------------------- Name: ------------------------------------- Zip Code Please Type or Print - -------------------------------------------- Dated: --------------------------------, 199 Area Code and Telephone No. -
DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. 3 EX-99.(A)(8) 9 EXHIBIT (A)(8) EXHIBIT (a)(8) 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, E.G., 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen, E.G., 00-0000000. The table below will help determine the number to give the payer.
- ------------------------------------------------------------- ------------------------------------------------------------- GIVE THE GIVE THE EMPLOYER SOCIAL SECURITY IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF-- FOR THIS TYPE OF ACCOUNT: NUMBER OF-- - ------------------------------------------------------------- ------------------------------------------------------------- 1. An individual's account The individual 8. Sole proprietorship The owner(4) account 2. Two or more individuals The actual owner of the 9. A valid trust, estate, The legal entity (do not (joint account) account or, if combined or pension trust furnish the identifying funds, the first number of the personal individual on the representative or account(1) trustee unless the legal entity itself is not designated in the account title)(5) 3. Husband wife (joint The actual owner of the 10. Corporate account The corporation account) account or, if joint funds, either person (1) 4. Custodian account of a The minor (2) 11. Religious, charitable, The organization minor (Uniform Gift to or educational Minors Act) organization account 5. Adult and minor (joint The adult or, if the 12. Partnership account held The partnership account) minor is the only in the name of the contributor, the business minor(1) 6. Account in the name of The ward, minor, or 13. Association, club, or The organization guardian or committee incompetent person(3) other tax-exempt for a designated ward, organization minor, or incompetent person 7. a. A revocable savings The grantor-trustee(1) 14. A broker or registered The broker or nominee trust account (in nominee which grantor is also trustee) b. Any "trust" account The actual owner(1) 15. Account with the The public entity that is not a legal Department of or valid trust under Agriculture in the name State law of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments - ------------------------------------------------------------- -------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) Show the name of the owner. If the owner does not have an employer identification number, furnish the owner's social security number. (5) 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. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you do not have a taxpayer identification number or you do not know your number, obtain form SS-5, Application for a Social Security Number Card (for resident individuals), Form SS-4, Application for Employer Identification Number (for businesses and all other entitites), for Form W-7 for International 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. To complete Substitute Form W-9, if you do not have a taxpayer identification number, write "Applied For" in the space for the taxpayer identification number in Part I, sign and date the Form, and give it to the requester. Generally, you will then have 60 days to obtain a taxpayer identification number and furnish it to the requester. If the requester does not receive your taxpayer identification number within 60 days, backup withholding, if applicable, will begin and will continue until you furnish your taxpayer identification number to the requester. PAYEES EXEMPT FROM BACKUP WITHHOLDING PENALTIES Payees specifically exempted from backup withholding on ALL payments include the following:* - - A corporation. - - A financial institution. - - An organization exempt from tax under section 501(a), or an individual - - retirement plan, or a custodial account under section 403(b)(7). - - The United States or any agency or instrumentality thereof. - - A State, the District of Columbia, a possession of the United States, or any politial subdivision or instrumentality thereof. - - A foreign government or a political subdivision, agency or instrumentality thereof. - - An international organization or any agency or instrumentality thereof. - - A registered dealer in securities or commodities registered in the United - - States or a possession of the United States. - - A real estate investment trust. - - A common trust fund operated by a bank under section 584(a). - - 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: - - Payments to nonresident aliens subject to withholding under section 1441. - - Payments to partnerships not engaged in a trade or business in the United - - States and which have at least one nonresident partner. - - Payments of patronage dividends where the amount received is not paid in money. - - Payments made by certain foreign organizations. - - Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: - - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if (i) this interest is $600 or more, (ii) the interest is paid in the course of the payer's trade or business and (iii) you have not provided your correct taxpayer identification number to the payer. - - Payments of tax-exempt interest (including exempt-interest dividends under section 852). - - Payments described in section 6049(b)(5) to non-resident aliens. - - Payments on tax-free covenant bonds under section 1451. - - Payments made by certain foreign organizations. - - Payments made to a nominee. 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, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER. 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 the regulations under sections 6041, 6041A(a), 6045, and 6050A. PRIVACY ACT NOTICES. Section 6109 requires most recipients of dividends, 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, dividends, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.-- If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reason-able cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE STATEMENTS 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.-- If you falsify certifications or affirmations, you are subject to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. - -------------------------- * Unless otherwise noted herein, all references below to section numbers or to regulations are references to the Internal Revenue Code and the regulation promulgated thereunder. EX-99.(A)(9) 10 EXHIBIT (A)(9) EXHIBIT (a)(9) [KERR GROUP, INC. LOGO OMITTED] 500 New Holland Avenue Lancaster, PA 17602-2104 (717) 299-6511 FOR IMMEDIATE RELEASE -------------------------- FREMONT PARTNERS TO ACQUIRE KERR GROUP, INC. ----------------------------------------------------- LANCASTER, PENNSYLVANIA (July 1, 1997) -- Fremont Partners ("Fremont") and Kerr Group, Inc. (NYSE:KGM) jointly announced that they have signed a definitive merger agreement for Fremont to acquire all of the outstanding common and preferred shares of Kerr. Pursuant to the agreement, Fremont will pay $5.40 per share for each outstanding share of Kerr common stock and $12.50 per share for each outstanding share of Kerr Class B Cumulative Convertible Preferred Stock, Series D. Kerr currently has 3,933,095 shares of common stock and 487,400 shares of preferred stock outstanding. The transaction will be a cash tender offer followed by a cash merger to acquire any shares not previously tendered. The transaction has been recommended by Kerr's Board of Directors and approved by Fremont. Fremont expects to commence its cash tender offer on July 8, 1997. The cash tender offer is subject to Fremont receiving at least 51% of the fully diluted shares of common stock of Kerr. The closing of the transaction is subject to the satisfaction of various conditions, including expiration of the waiting period under the Hart-Scott-Rodino Act. Fremont Partners is a $600 million private equity fund, headquartered in San Francisco. Kerr, headquartered in Lancaster, Pennsylvania, is a major producer of plastic packaging products. ### Company Contact: D. Gordon Strickland President and Chief Executive Officer (717) 390-8438 Fremont Contact: Gregory P. Spivy Principal (415) 284-8793 EX-99.(A)(10) 11 EXHIBIT (A)(10) EXHIBIT (a)(10) 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 July 8, 1997 ("Offer to Purchase") and the related Letter of Transmittal 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 or any administrative or judicial action pursuant thereto. In any jurisdiction where 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 Kerr Acquisition Corporation by one or more registered brokers or dealers licensed under the laws of such jurisdiction. Offer to Purchase for Cash All Outstanding Shares of Common Stock (Including the Associated Rights) and All Outstanding Shares of $1.70 Class B Cumulative Convertible Preferred Stock, Series D of Kerr Group, Inc. at $5.40 Net Per Share of Common Stock and $12.50 Net Per Share of $1.70 Class B Cumulative Convertible Preferred Stock, Series D by Kerr Acquisition Corporation a corporation formed at the direction of Fremont Partners Kerr Acquisition Corporation, a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of Fremont Acquisition Company, LLC, a Delaware limited liability company ("Fremont"), is offering to purchase (i) all of the issued and outstanding shares of common stock, par value $.50 per share, including the associated rights to purchase shares of preferred stock (the "Rights"), together with the common stock (the "Common Stock") issued pursuant to the Rights Agreement (as defined below), and (ii) all of the issued and outstanding shares of $1.70 Class B Cumulative Convertible Preferred Stock, par value $0.50 per share, Series D (the "Series D Preferred Shares" and, together with the Common Stock, the "Shares"), of Kerr Group, Inc., a Delaware corporation (the "Company"), for $5.40 per share of Common Stock (the "Common Per Share Amount") and $12.50 per share of Series D Preferred Shares (the "Series D Per Share Amount"), in each case net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, AUGUST 4, 1997, UNLESS THE OFFER IS EXTENDED. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of July 1, 1997 (the "Merger Agreement"), by and among Fremont, the Purchaser and the Company pursuant to which, as soon as practicable after the completion of the Offer and satisfaction or waiver, if permissible, of all conditions to the Merger (as defined below), the Purchaser will be merged with and into the Company and the separate corporate existence of the Purchaser will thereupon cease. The merger, as effected pursuant to the immediately preceding sentence, is referred to herein as the "Merger," and the Company as the surviving corporation of the Merger is sometimes herein referred to as the "Surviving Corporation." At the effective time of the Merger (the "Effective Time"), each share of Common Stock and Series D Preferred Shares then outstanding (other than Shares held by Fremont or the Purchaser and Shares held by stockholders who perfect their dissenters' rights under Delaware law) will be cancelled and extinguished and converted into the right 2 to receive, respectively, (i) the Common Per Share Amount or any higher price per share of Common Stock paid in the Offer and (ii) the Series D Per Share Amount or any higher price per share of Series D Preferred Shares paid in the Offer, in each case, in cash payable to the holder thereof without interest. The Company has represented in the Merger Agreement that it has taken all action which may be necessary under the Rights Agreement, dated as of July 25, 1995, as amended (the "Rights Agreement"), by and between the Company and BankBoston, N.A. (formerly The First National Bank of Boston) so that the (x) execution of the Merger Agreement and any amendments thereto and the consummation of the transactions contemplated thereby will not cause (i) Fremont and/or the Purchaser to become an Acquiring Person (as defined in the Rights Agreement) or (ii) a Distribution Date, a Stock Acquisition Date or a Triggering Event (as such terms are defined in the Rights Agreement) to occur, irrespective of the number of Shares acquired pursuant to the Offer, or exercise of the option granted under the Option Agreement and (y) the Rights shall expire upon the acceptance of Shares for payment pursuant to the Offer. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE OFFER AND THE MERGER AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE HOLDERS OF BOTH THE COMMON STOCK AND THE SERIES D PREFERRED SHARES, AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER, THAT NUMBER OF SHARES OF COMMON STOCK AND SERIES D PREFERRED SHARES (ASSUMING THE CONVERSION OF ALL SUCH SERIES D PREFERRED SHARES INTO SHARES OF COMMON STOCK) WHICH REPRESENTS AT LEAST FIFTY-ONE PERCENT (51%) OF THE SHARES OUTSTANDING ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION"). As used herein "fully diluted basis" takes into account the conversion or exercise of all outstanding Series D Preferred Shares, options, warrants and other rights and securities exercisable or convertible into shares of Common Stock. As a condition and inducement to Fremont's and Purchaser's entering into the Merger Agreement concur- 3 rently with the execution and delivery of the Merger Agreement, Fremont and the Company have entered into an Option Agreement, dated July 1, 1997, pursuant to which, among other things, the Company has granted Fremont an irrevocable option to purchase up to 782,685 (approximately 19.9%) newly issued shares of Common Stock at $5.40 per share (the "Option"). The Option can only be exercised in certain circumstances as described in Section 11 of the Offer to Purchase. In addition, the maximum profit Fremont may make upon the exercise of the Option is capped at $1,000,000. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares properly tendered to the Purchaser and not withdrawn as, if and when the Purchaser gives oral or written notice to Boston EquiServe (the "Depositary") of the Purchaser's acceptance for payment of such Shares. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the 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 tendering stockholders. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates for such Shares (or a timely Book-Entry Confirmation (as defined in the Offer to Purchase) with respect thereto), (ii) a Letter of Transmittal (or 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 (as defined in the Offer to Purchase) and (iii) any other documents required by the Letter of Transmittal. The per share consideration paid to any holder of Common Stock and any holder of Series D Preferred Shares pursuant to the Offer will be the highest per share consideration paid to any other holder of such shares pursuant to the Offer. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE TO BE PAID BY THE PURCHASER FOR THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. Except as otherwise provided below, tenders of Shares are irrevocable. Shares tendered pursuant to the 4 Offer may be withdrawn pursuant to the procedures set forth below at any time prior to the Expiration Date (as defined in the Offer to Purchase) and, unless theretofore accepted for payment and paid for by the Purchaser pursuant to the Offer, may also be withdrawn at any time after August 4, 1997. For a withdrawal to be effective, a written, telegraphic 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 the Offer to Purchase and must specify the name of the person having tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of the Shares to be withdrawn, if different from the name of the person who tendered the Shares. If certificates for Shares 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, unless such Shares have been tendered by an Eligible Institution (as defined in Section 3 of the Offer to Purchase), the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been delivered pursuant to the procedures for book-entry transfer as set forth in Section 3 of the Offer to Purchase, any notice of withdrawal must also specify the name and number of the account at the appropriate Book-Entry Transfer Facility (as defined in the Offer to Purchase) to be credited with the withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's procedures. Withdrawals of tenders of Shares may not be rescinded, and any Shares properly withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be retendered by again following one of the procedures described in Section 3 of the Offer to Purchase any time prior to the Expiration Date. 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, which determination will be final and binding. None of the Purchaser, Fremont, 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 5 to give any such notification. Subject to the terms of the Merger Agreement, the Purchaser expressly reserves the right, in its sole discretion, at any time or from time to time, to 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. The information required to be disclosed by paragraph (e)(1)(vii) of Rule 14d-6 under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. The Company has provided the Purchaser with the Company's shareholder lists and security position listings for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase, the related Letter of Transmittal and other relevant documents will be mailed by the Purchaser to record holders of Shares, and will be furnished by the Purchaser to brokers, dealers, banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the shareholder lists, 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 LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 6 Questions and requests for assistance or additional copies of the Offer to Purchase, Letter of Transmittal and other tender offer documents may be directed to the Information Agent, at the address and telephone numbers set forth below, and copies will be furnished at the Purchaser's expense. The Purchaser will not pay any fees or commissions to any broker or dealer or other person (other than the Information Agent) for soliciting tenders of Shares pursuant to the Offer. The Information Agent for the Offer is: MacKenzie Partners, Inc. 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (Call Collect) or Call Toll-Free (800) 322-2885 July 8, 1997 7 EX-99.(A)(11) 12 EXHIBIT (A)(11) EXHIBIT (a)(11) [Letterhead] June 30, 1997 The Board of Directors Kerr Group, Inc. 500 New Holland Avenue Lancaster, PA 17602-2104 Dear Members of the Board: You have requested our opinion as to the fairness, from a financial point of view, to the holders of shares of Common Stock, par value $0.50 per share ("Common Stock"), and to the holders of Class B Cumulative Convertible Preferred Stock, Series D (the "Preferred Stock"), of Kerr Group, Inc. (the "Company") of the consideration to be received by each class of such securities in a series of transactions (collectively, the "Transactions") pursuant to the Agreement and Plan of Merger among the Company, Fremont Acquisition Company, LLC ("Fremont") and Kerr Acquisition Corporation ("Purchaser"), dated as of July 1, 1997 (collectively, the "Merger Agreement"). Pursuant to the Merger Agreement, Purchaser is required to commence a tender offer to purchase, subject to certain conditions (the "Offer"), any and all of the outstanding shares of Common Stock of the Company at a price of $5.40 per share, net to the seller in cash, and any and all of the outstanding shares of Preferred Stock of the Company at a price of $12.50 per share, net to the seller in cash (collectively, the "Offer Consideration"). Following consummation of the Offer, subject to, among other things, the favorable required vote of holders of shares of Common Stock (if necessary), pursuant to the Merger (as defined in the Merger Agreement), each remaining outstanding share (other than shares of Common Stock owned by the Company as treasury stock or owned by Purchaser or any other subsidiary of Fremont and other than shares of Common Stock held by holders who properly exercise and perfect dissenter's rights, if any) will converted into the right to receive $5.40 per share, net to the seller in cash, and each remaining outstanding share of Preferred Stock (other than shares of Preferred Stock owned by the Company as treasury stock or owned by Purchaser or any other subsidiary of Fremont and other than shares of Preferred Stock held by holders who properly exercise and perfect dissenter's rights, if any) will be converted into the right to receive $12.50 per share, net to the seller in cash (collectively, the "Merger Considerations" and together with the Offer Consideration, the "Consideration"). In connection with the rendering of this opinion, we have: (i) Reviewed the terms and conditions of the Merger Agreement and the financial terms of the Transactions, all as set forth in the Merger Agreement, and the option agreement dated July 1, 1997 between the Company and Fremont pursuant to which Fremont was granted the right to purchase shares of Common Stock; (ii) Analyzed certain historical business and financial information relating to the Company; (iii) Reviewed certain financial forecasts and other data provided to us by the Company relating to the business of the Company, including the most recent business plan for the Company prepared by the Company's senior management, in the form furnished to us; (iv) Conducted discussions with members of the senior management of the Company with respect to the businesses and prospects of the Company, the strategic objectives of the Company and possible benefits which might be realized following the Merger; 1 (v) Reviewed public information with respect to certain other companies in the lines of businesses we believe to be generally comparable in whole or in part to the businesses of the Company and reviewed the financial terms of certain other business combinations involving companies in lines of businesses we believe to be generally comparable in whole or in part to businesses of the Company that have recently been effected; (vi) Reviewed the historical stock prices and trading volumes of the Common Stock and Preferred Stock; (vii) Reviewed the trading prices and yields of selected publicly traded distressed securities which we deemed comparable to the Company's; (viii) Conducted discussions with numerous third parties regarding their potential interest in making an investment in the Company or acquiring it as a whole; and (ix) Conducted such other financial studies, analyses and investigations as we deemed appropriate. We have relied upon the accuracy and completeness of the foregoing financial and other information and have not assumed any responsibility for independent verification of such information or conducted any independent valuation or appraisal of any of the assets of the Company, nor have we been furnished with any such appraisals. With respect to financial forecasts, we have assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments of management of the Company as to the future financial performance of the Company. We assume no responsibility for, and express no view as to, such forecasts or the assumptions on which they are based. Our opinion necessarily is based upon market, economic and other conditions as they exist on, and can be evaluated as of, the date of this letter. In rendering our opinion, we have assumed that the Transactions will be consummated substantially on the terms described in the Merger Agreement, without any waiver of any material terms or conditions by any party thereto. It should be understood that, although subsequent developments may affect this opinion, we do not have any obligation to update, revise or reaffirm this opinion to reflect such developments. This opinion does not address the business decision of the Board of Directors of the Company to engage in the Transactions. No opinion is expressed herein nor should one be implied as to the fair market value of Common Stock or Preferred Stock. We have advised the Board of Directors of the Company that, based on the terms of our engagement by the Company, we do not believe that any person (including any common or preferred stockholder of the Company), other than the Company and the Board of Directors of the Company, had the legal right to rely upon this letter to support any claim against us arising under applicable state law and that, should any such claim be brought against us by any such person, this assertion would be raised as a defense. In the absence of applicable state law, the availability of such a defense would be resolved by a court of competent jurisdiction. Resolution of the question of the availability of such a defense, however, would have no effect on the rights and responsibilities of the Board of Directors of the Company under applicable state law. Furthermore, the availability of such a defense to us would have no effect on the rights and responsibilities of either us or the Board of Directors of the Company under the federal securities laws. Our engagement and the opinion expressed herein are for the benefit of the Company's Board of Directors, and our opinion is rendered in connection with its consideration of the Transactions. This opinion is not intended to and does not constitute a recommendation to any holder of Common Stock or Preferred Stock as to whether such holder should tender shares pursuant to the Offer or vote to approve the Merger Agreement and the transactions contemplated thereby. It is understood that, except for inclusion of this letter in its entirety in a proxy statement or tender offer recommendation statement of Schedule 14D-9 from the Company to holders of Common Stock or Preferred Stock relating to the Transactions, this letter may not be disclosed or otherwise referred to or used for any other purpose 2 without our prior written consent, except as may otherwise be required by law or by a court of competent jurisdiction. In connection with the rendering of this opinion, we have assumed that under applicable provisions of the General Corporation Law of the State of Delaware, controlling legal precedent and the Certificate of Designations of the Preferred Stock, the holders of such Preferred Stock are not entitled to receive amounts at least equal to the liquidation preference of the Preferred Stock plus accrued and unpaid dividends or any other amount in connection with the Transactions. Based on and subject to the foregoing, we are of the opinion that, as of the date hereof, the Consideration to be received by the holders of Common Stock, on the one hand, and Preferred Stock, on the other, pursuant to the Offer and under the terms of the Merger Agreement, is fair to such holders (other than Purchaser or any other subsidiary of Fremont), from a financial point of view. Very truly yours, By: /s/ CIBC Wood Gundy --------------------------------- CIBC Wood Gundy Securities Corp. 3 EX-99.(C)(1) 13 EXHIBIT (C)(1) EXHIBIT (c)(1) KERR GROUP, INC., FREMONT ACQUISITION COMPANY, LLC AND KERR ACQUISITION CORPORATION AGREEMENT AND PLAN OF MERGER DATED AS OF JULY 1, 1997 TABLE OF CONTENTS
PAGE ----------- ARTICLE I. THE TENDER OFFER SECTION 1.1. THE OFFER............................................................................. 2 SECTION 1.2. COMPANY ACTION........................................................................ 3 SECTION 1.3. DIRECTORS............................................................................. 4 ARTICLE II. THE MERGER SECTION 2.1. THE MERGER............................................................................ 5 SECTION 2.2. EFFECTIVE TIME........................................................................ 5 SECTION 2.3. CLOSING............................................................................... 5 SECTION 2.4. EFFECT OF THE MERGER.................................................................. 5 SECTION 2.5. SUBSEQUENT ACTIONS.................................................................... 5 SECTION 2.6. CERTIFICATE OF INCORPORATION; BY-LAWS; DIRECTORS AND OFFICERS......................... 6 SECTION 2.7. STOCKHOLDERS' MEETING................................................................. 6 SECTION 2.8. MERGER WITHOUT MEETING OF STOCKHOLDERS................................................ 6 SECTION 2.9. CONVERSION OF SECURITIES.............................................................. 7 SECTION 2.10. DISSENTING SHARES..................................................................... 7 SECTION 2.11. SURRENDER OF SHARES; STOCK TRANSFER BOOKS............................................. 8 SECTION 2.12. STOCK PLANS........................................................................... 9 ARTICLE III. REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER SECTION 3.1. CORPORATE ORGANIZATION................................................................ 9 SECTION 3.2. AUTHORITY RELATIVE TO THIS AGREEMENT.................................................. 10 SECTION 3.3. NO CONFLICT; REQUIRED FILINGS AND CONSENTS............................................ 10 SECTION 3.4. FINANCING ARRANGEMENTS................................................................ 10 SECTION 3.5. NO PRIOR ACTIVITIES................................................................... 10 SECTION 3.6. BROKERS............................................................................... 10 SECTION 3.7. PROXY STATEMENT....................................................................... 11 SECTION 3.8. EMPLOYEE BENEFIT PLANS................................................................ 11 ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY SECTION 4.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.......................................... 11 SECTION 4.2. CAPITALIZATION........................................................................ 12 SECTION 4.3. AUTHORITY RELATIVE TO THIS AGREEMENT.................................................. 12 SECTION 4.4. NO CONFLICT; REQUIRED FILINGS AND CONSENTS............................................ 12 SECTION 4.5. SEC FILINGS; FINANCIAL STATEMENTS..................................................... 13 SECTION 4.6. UNDISCLOSED LIABILITIES............................................................... 13 SECTION 4.7. ABSENCE OF CERTAIN CHANGES OR EVENTS.................................................. 13 SECTION 4.8. LITIGATION............................................................................ 14 SECTION 4.9. EMPLOYEE BENEFIT PLANS................................................................ 14 SECTION 4.10. PROXY STATEMENT....................................................................... 15 SECTION 4.11. BROKERS............................................................................... 15 SECTION 4.12. CONTROL SHARE ACQUISITION............................................................. 15 SECTION 4.13. CONDUCT OF BUSINESS................................................................... 15 SECTION 4.14. TAXES................................................................................. 16 SECTION 4.15. INTELLECTUAL PROPERTY................................................................. 16 SECTION 4.16. EMPLOYMENT MATTERS.................................................................... 18 SECTION 4.17. VOTE REQUIRED......................................................................... 18
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PAGE ----------- SECTION 4.18. ENVIRONMENTAL MATTERS................................................................. 18 SECTION 4.19. REAL PROPERTY......................................................................... 19 SECTION 4.20. TITLE AND CONDITION OF PROPERTIES..................................................... 19 SECTION 4.21. CONTRACTS............................................................................. 19 SECTION 4.22. POTENTIAL CONFLICTS OF INTEREST....................................................... 20 SECTION 4.23. SUPPLIERS AND CUSTOMERS............................................................... 20 SECTION 4.24. INSURANCE............................................................................. 20 SECTION 4.25. ACCOUNTS RECEIVABLE; INVENTORY........................................................ 20 SECTION 4.26. OPINION OF FINANCIAL ADVISOR.......................................................... 20 ARTICLE V. CONDUCT OF BUSINESS PENDING THE MERGER SECTION 5.1. ACQUISITION PROPOSALS................................................................. 21 SECTION 5.2. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER................................. 21 SECTION 5.3. NO SHOPPING........................................................................... 23 ARTICLE VI. ADDITIONAL AGREEMENTS SECTION 6.1. PROXY STATEMENT....................................................................... 23 SECTION 6.2. MEETING OF STOCKHOLDERS OF THE COMPANY................................................ 24 SECTION 6.3. ADDITIONAL AGREEMENTS................................................................. 24 SECTION 6.4. NOTIFICATION OF CERTAIN MATTERS....................................................... 24 SECTION 6.5. ACCESS TO INFORMATION................................................................. 24 SECTION 6.6. PUBLIC ANNOUNCEMENTS.................................................................. 25 SECTION 6.7. BEST EFFORTS; COOPERATION............................................................. 25 SECTION 6.8. AGREEMENT TO DEFEND AND INDEMNIFY..................................................... 25 SECTION 6.9. EMPLOYEE BENEFITS..................................................................... 26 SECTION 6.10. PENDING LITIGATION.................................................................... 26 ARTICLE VII. CONDITIONS OF MERGER SECTION 7.1. OFFER................................................................................. 27 SECTION 7.2. STOCKHOLDER APPROVAL.................................................................. 27 SECTION 7.3. NO CHALLENGE.......................................................................... 27 ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER SECTION 8.1. TERMINATION........................................................................... 27 SECTION 8.2. EFFECT OF TERMINATION................................................................. 28 ARTICLE IX. GENERAL PROVISIONS SECTION 9.1. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS............................ 29 SECTION 9.2. NOTICES............................................................................... 29 SECTION 9.3. EXPENSES.............................................................................. 30 SECTION 9.4. CERTAIN DEFINITIONS................................................................... 30 SECTION 9.5. HEADINGS.............................................................................. 30 SECTION 9.6. SEVERABILITY.......................................................................... 30 SECTION 9.7. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES........................................ 30 SECTION 9.8. ASSIGNMENT............................................................................ 30 SECTION 9.9. GOVERNING LAW......................................................................... 30 SECTION 9.10. AMENDMENT............................................................................. 30 SECTION 9.11. WAIVER................................................................................ 31 SECTION 9.12. COUNTERPARTS.......................................................................... 31 ANNEX I Conditions to the Offer
ii AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER, dated as of July 1, 1997 (the "Agreement"), among Kerr Group, Inc., a Delaware corporation (the "Company"), Fremont Acquisition Company, LLC, a Delaware limited liability company (the "Parent"), and Kerr Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of the Parent ("Purchaser"). W I T N E S S E T H WHEREAS, the Boards of Directors of each of the Company, Parent and the Purchaser have determined that it is in the best interests of their respective stockholders for the Parent to acquire the Company upon the terms and subject to the conditions set forth herein; and WHEREAS, in furtherance thereof, it is proposed that the Purchaser will make a cash tender offer (the "Offer") to acquire all shares of the issued and outstanding common stock, $.50 par value, of the Company (the "Company Common Stock"), including the associated Preferred Stock Purchase Rights (the "Rights") issued pursuant to the Rights Agreement dated as of July 25, 1995, between the Company and The First National Bank of Boston (the "Rights Agreement"), and all shares of the issued and outstanding $1.70 Class B Cumulative Convertible Preferred Stock, Series D, par value $.50 per share (the "Series D Shares"; the Company Common Stock and the Series D Shares being collectively referred to herein as the "Shares"), for $5.40 per share of Company Common Stock (the "Common Per Share Amount") and $12.50 per Series D Shares (the "Series D Per Share Amount"), or such higher price as may be paid in the Offer, in each case net to the seller in cash; and WHEREAS, also in furtherance of such acquisition, the Boards of Directors of the Company, Parent and the Purchaser have each approved the merger (the "Merger") of the Purchaser with and into the Company following the Offer in accordance with the General Corporation Law of the State of Delaware ("Delaware Law") and upon the terms and subject to the conditions set forth herein; WHEREAS, the Board of Directors of the Company (the "Board of Directors") has resolved to recommend acceptance of the Offer and the Merger to the holders of Shares and has determined that the consideration to be paid for each share of Company Common Stock and each of the Series D Preferred Shares in the Offer and the Merger is fair to the holders of such Shares and to recommend that the holders of such Shares accept the Offer and approve this Agreement and each of the transactions contemplated hereby upon the terms and subject to the conditions set forth herein; and WHEREAS, as a condition and inducement to Parent's and the Purchaser's entering into this Agreement and incurring the obligations set forth herein, concurrently with the execution and delivery of this Agreement, Purchaser and the Company are entering into an Option Agreement in the form of Exhibit A hereto (the "Option Agreement"), pursuant to which, among other things, the Company has granted the Purchaser an option to purchase certain newly-issued shares of Company Common Stock, subject to certain conditions; 1 NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements herein contained, and intending to be legally bound hereby, the Company, Parent and the Purchaser hereby agree as follows: ARTICLE I. THE TENDER OFFER SECTION 1.1. THE OFFER. (a) Provided that this Agreement shall not have been terminated in accordance with Section 8.1 hereof and none of the events set forth in Annex I hereto shall have occurred and be existing, the Purchaser or a direct or indirect subsidiary thereof shall commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") the Offer as promptly as practicable, but in no event later than five business days following the execution of this Agreement, and shall use all reasonable efforts to consummate the Offer. The obligation of the Purchaser to accept for payment any Shares tendered shall be subject to the satisfaction of only those conditions set forth in Annex I. The Purchaser expressly reserves the right to waive any such condition or to increase the Common Per Share Amount and the Series D Per Share Amount. The Common Per Share Amount and the Series D Per Share Amount shall be net to the seller in cash. The Company agrees that no Shares held by the Company will be tendered pursuant to the Offer. (b) Without the prior written consent of the Company, the Purchaser shall not (i) decrease the Common Per Share Amount or the Series D Per Share Amount or change the form of consideration payable in the Offer, (ii) decrease the number of Shares sought, (iii) amend or waive satisfaction of the Minimum Condition (as defined in Annex I) or (iv) impose additional conditions to the Offer or amend any other term of the Offer in any manner adverse to the holders of Shares; PROVIDED HOWEVER, that if on the initial scheduled expiration date of the Offer which shall be twenty (20) business days after the date the Offer is commenced, all conditions to the Offer shall not have been satisfied or waived, the Purchaser may, from time to time, in its sole discretion, extend the expiration date. The Purchaser shall, on the terms and subject to the prior satisfaction or waiver of the conditions of the Offer, accept for payment and purchase, as soon as permitted under the terms of the Offer, all Shares validly tendered and not withdrawn prior to the expiration of the Offer; PROVIDED, HOWEVER, that if, immediately prior to the initial expiration date of the Offer (as it may be extended), the Shares tendered and not withdrawn pursuant to the Offer equal less than 90% of the outstanding Company Common Stock or the outstanding Series D Shares, the Purchaser may extend the Offer for a period not to exceed five (5) business days, notwithstanding that all conditions to the Offer are satisfied as of such expiration date of the Offer, so long as the Purchaser expressly irrevocably waives any condition (other than the Minimum Condition (as defined in Annex I hereto)) that subsequently may not be satisfied during such extension of the Offer. (c) The Offer shall be made by means of an offer to purchase (the "Offer to Purchase") having only the conditions set forth in Annex I hereto. As soon as practicable on the date the Offer is commenced, the Purchaser shall file with the Securities and Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 (together with all amendments and supplements thereto, and including the exhibits thereto, the "Schedule 14D-1"). The Schedule 14D-1 will contain (including as an exhibit) or incorporate by reference the Offer to Purchase and forms of the related letter of transmittal and summary advertisement (which documents, together with any supplements or amendments thereto, and any other SEC schedule or form which is filed in connection with the Offer and related transactions, are referred to collectively herein as the "Offer Documents"). The Offer Documents will comply in all material respects with the provisions of applicable Federal securities laws and, on the date filed with the SEC and on the date first published, mailed or given to the Company's stockholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to 2 make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by the Purchaser with respect to information furnished by the Company to the Purchaser, in writing, expressly for inclusion in the Offer Documents. The information supplied by the Company to the Purchaser, in writing, expressly for inclusion in the Schedule 14D-1 will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. (d) The Purchaser agrees to take all steps necessary to cause the Schedule 14D-1 to be filed with the SEC and the Offer Documents to be disseminated to holders of Shares, in each case as and to the extent required by applicable Federal securities laws. The Company and its counsel shall be given a reasonable opportunity to review and comment on any Offer Documents before they are filed with the SEC. Each of Parent, the Purchaser and the Company agrees promptly (i) to correct any information provided by it for use in the Schedule 14D-1 or the Offer Documents if and to the extent that such information shall have become false or misleading in any material respect and (ii) to supplement the information provided by it specifically for use in the Schedule 14D-1 or the Offer Documents to include any information that shall become necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Purchaser further agrees to take all steps necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC and to be disseminated to the Company's stockholders in each case and as to the extent required by applicable Federal securities laws. SECTION 1.2. COMPANY ACTION. (a) The Company hereby approves of and consents to the Offer and represents and warrants that the Board of Directors, at a meeting duly called and held on June 30, 1997, at which a majority of the Directors were present: (i) duly approved and adopted this Agreement, the Option Agreement and the transactions contemplated hereby and thereby, including the Offer and the Merger, recommended that the stockholders of the Company accept the Offer, tender their Shares pursuant to the Offer and approve this Agreement and the transactions contemplated hereby, including the Merger, and determined that this Agreement and the transactions contemplated hereby, including the Offer and the Merger, are fair to and in the best interests of the holders of both the Company Common Stock and the Series D Shares; and (ii) with respect to the Rights Agreement, duly amended the Rights Agreement to provide that (1) neither this Agreement nor any of the transactions contemplated hereby, including the Offer and the Merger, will result in the occurrence of a "Distribution Date" (as such term is defined in the Rights Agreement) or otherwise cause the Rights to become exercisable by the holders thereof and (2) the Rights shall automatically on and as of the Effective Time (as hereinafter defined) be void and of no further force or effect. (b) The Company shall file with the SEC, as promptly as practicable after the filing by the Purchaser of the Schedule 14D-1 with respect to the Offer, a Tender Offer Solicitation/Recommendation Statement on Schedule 14D-9 (together with any and all amendments or supplements thereto, and including the exhibits thereto, the "Schedule 14D-9"). The Schedule 14D-9 will comply in all material respects with the provisions of all applicable Federal securities law and, on the date filed with the SEC and on the date first published, sent or given to the Company's stockholders, shall not contain any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by the Company with respect to information furnished by Parent or the Purchaser for inclusion in the Schedule 14D-9. The Company further agrees to take all steps necessary to cause the Schedule 14D-9 to be filed with the SEC and to be disseminated to holders of the Shares, in each case and as and to the extent required by applicable Federal securities laws. The Company shall mail, or cause to be mailed, such Schedule 14D-9 to the stockholders of the Company at the same time the Offer Documents are first mailed to the Stockholders of the Company together with such Offer Documents. The Schedule 14D-9 and the Offer Documents shall contain the recommendations of the Board of Directors 3 described in Section 1.2(a) hereof. The Company agrees promptly to correct the Schedule 14D-9 if and to the extent that it shall have become false or misleading in any material respect (and each of the Parent and the Purchaser, with respect to written information supplied by it specifically for use in the Schedule 14D-9, shall promptly notify the Company of any required corrections of such information and cooperate with the Company with respect to correcting such information) and to supplement the information contained in the Schedule 14D-9 to include any information that shall become necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company further agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to the Company's stockholders in each case as and to the extent required by applicable Federal securities laws. The Purchaser and its counsel shall be given a reasonable opportunity to review and comment on the Schedule 14D-9 before it is filed with the SEC. In addition, the Company agrees to provide the Purchaser and its counsel with any comments, whether written or oral, that the Company or its counsel may receive from time to time from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments or communications. (c) In connection with the Offer, the Company, promptly upon execution of this Agreement, shall furnish or cause to be furnished to the Purchaser mailing labels containing the names and addresses of all record holders of Shares and security position listings of Shares held in stock depositories, each as of a recent date, and shall promptly furnish the Purchaser with such additional information (including, but not limited to, updated lists of stockholders and their addresses, mailing labels and security position listings) and such other information and assistance as the Purchaser or its agents may reasonably request for the purpose of communicating the Offer to the record and beneficial holders of Shares. SECTION 1.3. DIRECTORS. (a) Promptly upon the purchase by the Purchaser of any Shares pursuant to the Offer, and from time to time thereafter as Shares are acquired by the Purchaser, Parent shall be entitled to designate such number of directors, rounded up to the next whole number, on the Board of Directors as will give Parent, subject to compliance with Section 14(f) of the Exchange Act, representation on the Board of Directors equal to at least that number of directors which equals the product of the total number of directors on the Board of Directors (giving effect to the directors appointed or elected pursuant to this sentence and including current directors serving as officers of the Company) multiplied by the percentage that the aggregate number of Shares beneficially owned by the Purchaser or any affiliate of the Purchaser (including for purposes of this Section 1.3 such Shares as are accepted for payment pursuant to the Offer, but excluding Shares held by the Company) bears to the number of Shares outstanding. At such times, the Company will also cause (i) each committee of the Board of Directors and (ii) if requested by the Purchaser, each committee of such board to include persons designated by the Purchaser constituting the same percentage of each such committee or board as Parent's designees are of the Board of Directors. The Company shall, upon request by the Purchaser, promptly increase the size of the Board of Directors or exercise its best efforts to secure the resignations of such number of incumbent directors as is necessary to enable Parent's designees to be elected to the Board of Directors in accordance with the terms of this Section 1.3 and shall cause Parent's designees to be so elected; PROVIDED, HOWEVER, that, in the event that Parent's designees are appointed or elected to the Board of Directors, until the Effective Time (as defined in Section 2.2 hereof) the Board of Directors shall have at least one director who is a director on the date hereof and who is neither an officer of the Company nor a designee, stockholder, affiliate or associate (within the meaning of the Federal securities laws) of Parent (one or more of such directors, the "Independent Directors"); PROVIDED FURTHER, that if no Independent Directors remain, the other directors shall designate one person to fill one of the vacancies who shall not be either an officer of the Company or a designee, shareholder, affiliate or associate of the Purchaser, and such person shall be deemed to be an Independent Director for purposes of this Agreement. 4 (b) Subject to applicable law, the Company shall promptly take all action necessary pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order to fulfill its obligations under this Section 1.3 hereof and shall include in the Schedule 14D-9 mailed to stockholders promptly after the commencement of the Offer (or an amendment thereof or an information statement pursuant to Rule 14f-1 if the Purchaser has not theretofore designated directors) such information with respect to the Company and its officers and directors as is required under Section 14(f) and Rule 14f-1 in order to fulfill its obligations under this Section 1.3. Parent will supply the Company and be solely responsible for any information with respect to itself and its nominees, officers, directors and affiliates required by Section 14(f) and Rule 14f-1. Notwithstanding anything in this Agreement to the contrary, in the event that Parent's designees are elected to the Company's Board of Directors, after the acceptance of payment of Shares pursuant to the Offer and prior to the Effective Time, the affirmative vote of a majority of the Independent Directors shall be required to (i) amend or terminate this Agreement on behalf of the Company, (ii) exercise or waive any of the Company's rights or remedies hereunder, (iii) extend the time for performance of the Purchaser's obligations hereunder or (iv) take any other action by the Company in connection with this Agreement required to be taken by the Board of Directors. ARTICLE II. THE MERGER SECTION 2.1. THE MERGER. At the Effective Time (as defined in Section 2.2, hereof) and subject to and upon the terms and conditions of this Agreement and Delaware Law, the Purchaser shall be merged with and into the Company the separate corporate existence of the Purchaser shall cease, (b) and the Company shall continue as the surviving corporation. The Company as the surviving corporation after the Merger hereinafter sometimes is referred to as the "Surviving Corporation". SECTION 2.2. EFFECTIVE TIME. The parties hereto shall cause a Certificate of Merger to be executed and filed on the Closing Date (as defined in Section 2.3) (or on such other date as the Purchaser and the Company may agree) with the Secretary of State of the State of Delaware, in such form as required by, and executed in accordance with the relevant provisions of, the Delaware Law. The Merger shall become effective on the date on which the Certificate of Merger is duly filed with the Secretary of State of the State of Delaware or such time as is agreed upon by the parties and specified in the Certificate of Merger, and such time is hereinafter referred to as the "Effective Time." SECTION 2.3. CLOSING. The closing of the Merger (the "Closing") shall take place at 10:00 a.m. on a date to be specified by the parties, which shall be no later than the third business day after satisfaction or waiver of all of the conditions set forth in Article VII hereof (the "Closing Date"), at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, Four Embarcadero Center, Suite 3800, San Francisco, California, unless another date or place is agreed to in writing by the parties hereto. SECTION 2.4. EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of Delaware Law. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time all the property, rights, privileges, powers and franchises of the Company and the Purchaser shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and the Purchaser shall become the debts, liabilities and duties of the Surviving Corporation. SECTION 2.5. SUBSEQUENT ACTIONS. If, at any time after the Effective Time, the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Corporation its right, title or interest in, to or under any of the rights, properties or assets of either of the Company or the Purchaser acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger or otherwise to carry out this Agreement, the officers and directors of the Surviving Corporation shall be authorized to execute and deliver, in the name and on behalf of either the Company or the Purchaser, all such deeds, bills of sale, assignments and assurances and to take and do, in 5 the name and on behalf of each of such corporations or otherwise, all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under such rights, properties or assets in the Surviving Corporation or otherwise to carry out this Agreement. SECTION 2.6. CERTIFICATE OF INCORPORATION; BY-LAWS; DIRECTORS AND OFFICERS. (a) Unless otherwise determined by the Purchaser before the Effective Time, at the Effective Time the Certificate of Incorporation of the Company, as in effect immediately before the Effective Time, shall be the Certificate of Incorporation of the Surviving Corporation until thereafter amended as provided by law and such Certificate of Incorporation. (b) The By-Laws of the Purchaser, as in effect immediately before the Effective Time, shall be the By-Laws of the Surviving Corporation until thereafter amended as provided by law, the Certificate of Incorporation of the Surviving Corporation and such By-Laws. (c) The directors of the Purchaser immediately before the Effective Time will be the initial directors of the Surviving Corporation, and the officers of the Company immediately before the Effective Time will be the initial officers of the Surviving Corporation, in each case until their successors are elected or appointed and qualified. If, at the Effective Time, a vacancy shall exist on the Board of Directors or in any office of the Surviving Corporation, such vacancy may thereafter be filled in the manner provided by law. SECTION 2.7. STOCKHOLDERS' MEETING. (a) If required by applicable law in order to consummate the Merger, the Company, acting through its Board of Directors, shall, in accordance with applicable law: (i) duly call, give notice of, convene and hold a special meeting of its stockholders (the "Special Meeting") as promptly as practicable following the acceptance for payment and purchase of Shares by the Purchaser pursuant to the Offer for the purpose of considering and taking action upon the approval of the Merger and the adoption of this Agreement; (ii) prepare and file with the SEC a preliminary proxy or information statement relating to the Merger and this Agreement and use its best efforts (x) to obtain and furnish the information required to be included by the SEC in the Proxy Statement (as hereinafter defined) and, after consultation with Parent, to respond promptly to any comments made by the SEC with respect to the preliminary proxy or information statement and cause a definitive proxy or information statement, including any amendment or supplement thereto (the "Proxy Statement") to be mailed to its stockholders, provided that no amendment or supplement to the Proxy Statement will be made by the Company without consultation with Parent and its counsel and (y) to obtain the necessary approvals of the Merger and this Agreement by its stockholders; and (iii) include in the Proxy Statement the recommendation of the Board that stockholders of the Company vote in favor of the approval of the Merger and the adoption of this Agreement. (b) Parent shall vote, or cause to be voted, all of the Shares then owned by it, the Purchaser or any of its other subsidiaries and affiliates in favor of the approval of the Merger and the adoption of this Agreement. SECTION 2.8. MERGER WITHOUT MEETING OF STOCKHOLDERS. Notwithstanding Section 2.7 hereof, in the event that Parent, the Purchaser or any other subsidiary of Parent shall acquire at least 90% of the outstanding shares of each class of capital stock of the Company, pursuant to the Offer or otherwise, the parties hereto shall, at the request of Parent and subject to Article VII hereof, take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after such acquisition, without a meeting of stockholders of the Company, in accordance with Section 253 of Delaware Law. 6 SECTION 2.9. CONVERSION OF SECURITIES. At the Effective Time, by virtue of the Merger and without any action on the part of Parent, the Purchaser, the Company or the holder of any of the following securities: (a) Each share of Company Common Stock issued and outstanding immediately before the Effective Time (other than any Shares to be cancelled pursuant to Section 2.9(b) and any Dissenting Shares (as defined in Section 2.10(a)) shall be cancelled and extinguished and be converted into the right to receive the Common Per Share Amount in cash payable to the holder thereof, without interest (the "Common Stock Merger Consideration"), upon surrender of the certificate formerly representing such Share in the manner provided in Section 2.11 hereof. All such Shares, when so converted, shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of a certificate representing any such Shares shall cease to have any rights with respect thereto, except the right to receive the Common Stock Merger Consideration therefor upon the surrender of such certificate in accordance with Section 2.11 hereof, without interest. (b) Each share of Company Common Stock held in the treasury of the Company and each Share owned by the Purchaser or any direct or indirect wholly owned subsidiary of the Purchaser immediately before the Effective Time shall be cancelled and extinguished and no payment or other consideration shall be made with respect thereto. (c) Each Series D Share issued and outstanding immediately before the Effective Time (other than any Dissenting Shares) shall be cancelled and extinguished and be converted into the right to receive the Series D Per Share Amount in cash payable to the holder thereof, without interest (the "Series D Merger Consideration and together with the Common Stock Merger Consideration, the "Merger Consideration"), upon surrender of the certificate formerly representing such Share in the manner provided in Section 2.11 hereof. All such Shares, when so converted, shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of a certificate representing any such Shares shall cease to have any rights with respect thereto, except the right to receive the Series D Merger Consideration therefor upon the surrender of such certificate in accordance with Section 2.11 hereof, without interest. (d) Each share of common stock, par value $.01 per share, of the Purchaser issued and outstanding immediately before the Effective Time shall thereafter represent one validly issued, fully paid and nonassessable share of common stock, par value $.01 per share, of the Surviving Corporation. SECTION 2.10. DISSENTING SHARES. (a) Notwithstanding any provision of this Agreement to the contrary, any Shares held by a holder who has demanded and perfected his demand for appraisal of his Shares in accordance with Delaware Law (including but not limited to Section 262 thereof) and as of the Effective Time has neither effectively withdrawn nor lost his right to such appraisal ("Dissenting Shares"), shall not be converted into or represent a right to receive cash pursuant to Section 2.9, but the holder thereof shall be entitled to only such rights as are granted by Delaware Law. (b) Notwithstanding the provisions of Section 2.7(a), if any holder of Shares who demands appraisal of his Shares under Delaware Law shall effectively withdraw or lose (through failure to perfect or otherwise) his right to appraisal, then as of the Effective Time or the occurrence of such event, whichever later occurs, such holder's Shares shall automatically be converted into and represent only the right to receive the Common Stock Merger Consideration or the Series D Merger Consideration as provided in Section 2.9(a) or (c), as the case may be, without interest thereon, upon surrender of the certificate or certificates representing such Shares pursuant to Section 2.11 hereof. (c) The Company shall give the Purchaser (i) prompt notice of any written demands for appraisal or payment of the fair value of any Shares, withdrawals of such demands, and any other instruments served 7 pursuant to Delaware Law received by the Company and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under Delaware Law. The Company shall not voluntarily make any payment with respect to any demands for appraisal and shall not, except with the prior written consent of the Purchaser, settle or offer to settle any such demands. SECTION 2.11. SURRENDER OF SHARES; STOCK TRANSFER BOOKS. (a) Before the Effective Time, the Purchaser shall designate a bank or trust company reasonably acceptable to the Company to act as agent for the holders of Shares in connection with the Merger(the "Exchange Agent") to receive the funds necessary to make the payments contemplated by Section 2.9. At the Effective Time, the Purchaser shall deposit, or cause to be deposited, in trust with the Exchange Agent for the benefit of holders of Shares the aggregate consideration to which such holders shall be entitled at the Effective Time pursuant to Section 2.9. (b) Each holder representing any Shares cancelled upon the Merger, which immediately prior to the Effective Time represented outstanding Shares (the "Certificates") whose Shares were converted pursuant to Section 2.9(a) or (c) may thereafter surrender such Certificate or Certificates to the Exchange Agent, as agent for such holder, to effect the surrender of such Certificate or Certificates on such holder's behalf for a period ending six months after the Effective Time. The Purchaser agrees that promptly after the Effective Time it shall cause the distribution to holders of record of Shares as of the Effective Time of appropriate materials to facilitate such surrender. Upon the surrender of Certificates, the Purchaser shall cause the Exchange Agent to pay the holder of such certificates in exchange therefor cash in an amount equal to the Common Stock Merger Consideration or Series D Merger Consideration, as the case may be, multiplied by the number of Shares represented by such Certificate. Until so surrendered, each Certificate (other than Certificates representing Dissenting Shares and Certificates representing Shares held by the Purchaser or in the treasury of the Company) shall represent solely the right to receive the aggregate Common Stock Merger Consideration or Series D Merger Consideration, as the case may be, relating thereto. (c) If payment of the Merger Consideration in respect of cancelled Shares is to be made to a Person other than the Person in whose name a surrendered Certificate or instrument is registered, it shall be a condition to such payment that the Certificate or instrument so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer and that the Person requesting such payment shall have paid any transfer and other taxes required by reason of such payment in a name other than that of the registered holder of the Certificate or instrument surrendered or shall have established to the satisfaction of the Purchaser or the Exchange Agent that such tax either has been paid or is not applicable. (d) At the Effective Time, the stock transfer books of the Company shall be closed and there shall not be any further registration of transfers of shares of any shares of capital stock thereafter on the records of the Company. From and after the Effective Time, the holders of certificates evidencing ownership of the Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Shares, except as otherwise provided for herein or by applicable law. If, after the Effective Time, Certificates are presented to the Surviving Corporation, they shall be cancelled and exchanged for cash as provided in this Article II. No interest shall accrue or be paid on any cash payable upon the surrender of a Certificate or Certificates which immediately before the Effective Time represented outstanding Shares. (e) Promptly following the date which is six months after the Effective Time, the Surviving Corporation shall be entitled to require the Exchange Agent to deliver to it any cash (including any interest received with respect thereto), Certificates and other documents in its possession relating to the transactions contemplated hereby, which had been made available to the Exchange Agent and which have not been disbursed to holders of Certificates, and thereafter such holders shall be entitled to look to the Surviving Corporation (subject to abandoned property, escheat or similar laws) only as general creditors thereof with respect to the Merger Consideration payable upon due surrender of their Certificates, without any interest 8 thereon. Notwithstanding the foregoing neither the Surviving Corporation nor the Exchange Agent shall be liable to any holder of a Certificate for Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. (f) The Merger Consideration paid in the Merger shall be net to the holder of Shares in cash, subject to reduction only for any applicable Federal backup withholding or, as set forth in Section 2.8(c), stock transfer taxes payable by such holder. SECTION 2.12. STOCK PLANS. (a) The Company shall use reasonable efforts (without incurring any liability in connection therewith) to provide that, at the Effective Time, (i) each then outstanding option to purchase shares of Company Common Stock (the "Options") granted under any of the Company's stock option plans referred to in Section 4.2 hereof, each as amended (collectively, the "Option Plans"), whether or not then exercisable or vested, shall be cancelled and (ii) in consideration of such cancellation, such holders of Options shall receive for each Share subject to such Option an amount (subject to any applicable withholding tax) in cash equal to the product of (A) the excess, if any, of the Common Per Share Amount over the per share exercise price of such Option and (B) the number of Shares subject to such Option (such amount being herein referred to as, the "Option Price"); PROVIDED that the Company shall obtain all necessary consents or releases from holders of Options to effect the foregoing. Upon receipt of the Option Price, the Option shall be cancelled. The surrender of an Option to the Company shall be deemed a release of any and all rights the holder had or may have had in respect of such Option. As promptly as practicable following the consummation of the Merger, the Purchaser shall provide the Company with the funds necessary to satisfy its obligations under this Section 2.12(a). (b) Except as provided herein or as otherwise agreed to by the parties and to the extent permitted by the Option Plans, (i) the Company shall cause the Option Plans to terminate as of the Effective Time and provide for the payment of the Option Price pursuant to Section 2.12(a) hereof, and (ii) the Company shall take all action necessary to ensure that following the Effective Time no holder of Options or any participant in the Option Plans shall have any right thereunder to acquire any equity securities of the Company, the Surviving Corporation or any subsidiary thereof. (c) None of the parties to this Agreement shall take any action to deprive any employee or director of the Company of the benefits of (i) the consideration payable with respect to Options in accordance with Section 2.12(a) or (ii) the consideration that would have been payable with respect to any other equity-based compensation in accordance with the terms and conditions of the applicable Other Stock Plan, but for the amendment set forth in Section 2.12(b) above, such consideration to be determined by valuing any right to equity-based compensation by reference to the Common Per Share Amount. Without limiting the generality of the foregoing, if any of the transactions contemplated hereby would cause any individual subject to Section 16 of the Exchange Act to become subject to the profit recovery provisions thereof, to the extent permitted by applicable law neither the Surviving Corporation nor the Purchaser (nor any affiliate of the Purchaser) shall assert any claims against any such individual arising out of the foregoing or relating thereto, based directly or indirectly, on Section 16. ARTICLE III. REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER Parent and the Purchaser represent and warrant to the Company as follows: SECTION 3.1. CORPORATE ORGANIZATION. Each of Parent and the Purchaser is, respectively, a limited liability company and a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority and any necessary governmental approvals to own, operate or lease the properties that it purports to own, operate or lease and to carry 9 on its business as it is now being conducted, except where the failure to be so organized, existing and in good standing or to have such power, authority, and governmental approvals would not have, individually or in the aggregate, a material adverse effect on the Parent or on the ability of Parent or the Purchaser to consummate any transactions contemplated by this Agreement or to perform either of their respective obligations under this Agreement. SECTION 3.2. AUTHORITY RELATIVE TO THIS AGREEMENT. The execution and delivery of this Agreement by Parent and the Purchaser and the consummation by Parent and the Purchaser of the Merger and the transactions hereby and thereby have been duly authorized by all necessary corporate action on the part of each of Parent and the Purchaser and no other corporate proceeding is necessary for the execution and delivery of this Agreement by Parent and the Purchaser, the performance by Parent or the Purchaser or of their respective obligations hereunder and the consummation by each of Parent or the Purchaser or of the transactions contemplated hereby. This Agreement has been duly executed and delivered by each of Parent and the Purchaser and, assuming due and valid authorization, execution and delivery hereof by the Company, constitutes a legal, valid and binding obligation of each such corporation, enforceable against each of them in accordance with its terms. SECTION 3.3. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The execution and delivery of this Agreement by Parent and the Purchaser do not, and the performance of this Agreement by Parent and the Purchaser will not, (i) conflict with or violate any law, regulation, court order, judgment or decree applicable to Parent or the Purchaser or by which any of their respective property is bound or affected, (ii) violate or conflict with either the Certificate of Formation of Parent or the Certificate of Incorporation or By-Laws of the Purchaser, or (iii) result in a violation or breach of or constitute a default under (with or without due notice or lapse of time, or both), or give to others any rights of termination or cancellation of, or result in the creation of a lien or encumbrance on any of the property or assets of Parent or the Purchaser pursuant to, any contract, instrument, permit, license or franchise to which Parent or the Purchaser is a party or by which Parent or the Purchaser or any of their respective property is bound or affected. (b) Except for applicable requirements, if any, of the Exchange Act, the pre-merger notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), filing and recordation of appropriate merger documents as required by Delaware Law, neither Parent nor the Purchaser is required to submit any notice, report or other filing with any court, arbitrable tribunal, administrative agency or commission or other governmental or other regulatory authority or agency, domestic or foreign (a "Governmental Authority"), in connection with the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby. No waiver, consent, approval or authorization of any Governmental Authority is required to be obtained or made by either Parent or the Purchaser in connection with its execution, delivery or performance of this Agreement. SECTION 3.4. FINANCING ARRANGEMENTS. The Purchaser has funds available to it sufficient to purchase the Shares in accordance with the terms of this Agreement and to pay all amounts due (or which will, as a result of the transactions contemplated hereby, become due) in respect of any indebtedness of the Company for money borrowed outstanding as of the date of the consummation of the Offer, a schedule of which is attached hereto as Schedule 3.4 of the Disclosure Schedule. SECTION 3.5. NO PRIOR ACTIVITIES. Except for obligations or liabilities incurred in connection with its incorporation or organization or the negotiation and consummation of this Agreement and the transactions contemplated hereby (including any financing), the Purchaser has not incurred any obligations or liabilities, and has not engaged in any business or activities of any type or kind whatsoever or entered into any agreements or arrangements with any Person or entity. SECTION 3.6. BROKERS. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by and on behalf of Parent or the Purchaser. 10 SECTION 3.7. PROXY STATEMENT. None of the information supplied by the Purchaser, its officers, directors, representatives, agents or employees (the "Purchaser Information"), for inclusion in the Proxy Statement, or in any amendments thereof or supplements thereto, will, on the date the Proxy Statement is mailed to stockholders and at the time of the meeting of stockholders to be held in connection with the Merger, contain any untrue statement of material fact or contain 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. Notwithstanding the foregoing, Parent and the Purchaser do not make any representation or warranty with respect to any information that has been supplied by the Company or its accountants, counsel or other authorized representatives for use in any of the foregoing documents. SECTION 3.8. EMPLOYEE BENEFIT PLANS. Except as set forth in Schedule 3.8 of the Disclosure Schedule, (i) neither the Purchaser nor any person or entity which is treated as part of Purchaser's "controlled group" for purposes of Section 4001(a)(14) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") (each an "ERISA Affiliate), maintains or contributes to any employee benefit plan which is subject to the requirements of Title IV of ERISA (other than a multiemployer plan within the meaning of Section 3(37) of ERISA), and (ii) if any plans are listed on such Schedule, the unfunded accrued liability for each such plan, determined on the basis of the latest actuarial valuation for such plan and on the actuarial methods and assumptions employed for that valuation, is also set forth on such schedule for each such plan and copies of such valuations have been provided to the Company. No such employee benefit plan has incurred any "accumulated funding deficiency" (as defined in ERISA), whether or not waived. Neither the Purchaser nor any of its ERISA Affiliates contributes, or has within the six-year period ending on the date hereof contributed or been obligated to contribute, to any pension or retirement plan which is a "multiemployer plan" (as defined in Section 3(37) of ERISA). ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY Except as set forth on the Disclosure Schedule delivered to Parent prior to the execution of this Agreement (the "Disclosure Schedule"), the Company hereby represents and warrants to Parent and the Purchaser as follows: SECTION 4.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. 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 and authority and any necessary governmental approvals to own, operate or lease the properties that it purports to own, operate or lease and to carry on its business as it is now being conducted, and 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, operated or leased or the nature of its activities makes such qualification necessary, except for such failure which, when taken together with all other such failures, would not have a Material Adverse Effect (as defined below in this Section 4.1). The Company does not own any Subsidiaries. The Company does not have an equity interest in any other Person. The term "Subsidiary" means any corporation or other legal entity of which the Company (either alone or through or together with any other Subsidiary) owns, directly or indirectly, more than 50% of the capital stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity. The term "Material Adverse Effect" means any change in or effect on the business of the Company that is or could reasonably be expected to be materially adverse to the business, operations, properties (including intangible properties), condition (financial or otherwise), results of operations, assets, liabilities, regulatory status or prospects of the Company or (y) the ability of the Company to consummate any transactions contemplated by this Agreement or the Option Agreement or to perform its obligations under this Agreement. 11 SECTION 4.2. CAPITALIZATION. The authorized capital stock of the Company consists of 20,000,000 shares of Company Common Stock and 1,302,300 shares of Class B Preferred Stock, par value $.50 per share ("Company Preferred Stock"). As of June 23, 1997, (i) 3,933,095 shares of Company Common Stock were issued and outstanding, (ii) 293,450 shares of Company Common Stock were held in the treasury of the Company, (iii) 487,400 Series D Shares were issued and outstanding, (iv) 708,923 shares of Company Common Stock were reserved for issuance upon conversion of the Series D Shares, (v) 70,000 shares of Company Common Stock were reserved for issuance upon exercise of outstanding options under the Company's 1988 and 1993 Stock Option Plans for Non-Employee Directors, (vi) 284,500 shares of Company Common Stock were reserved for issuance under the Company's employee stock option plans listed on Schedule 4.2(a) of the Disclosure Schedule in the amounts stated in such schedule and (vii) 94,735 shares of Company Common Stock were reserved for issuance upon the exercise of currently outstanding warrants. All of the issued and outstanding shares of the Company's capital stock are, and all Shares which may be issued pursuant to the exercise of outstanding Options will be, when issued in accordance with the respective terms thereof, duly authorized, validly issued, fully paid and nonassessable. There are no bonds, debentures, notes or other indebtedness having general voting rights (or convertible into securities having such rights) ("Voting Debt") of the Company issued and outstanding. There are no voting trusts in other agreements or understandings to which the Company is a party with respect to the voting of the capital stock of the Company. Except as disclosed on Schedule 4.2 of the Disclosure Schedule, there are no other options, warrants, calls, preemptive rights, subscriptions or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of the Company obligating the Company to issue or sell any shares of capital stock or Voting Debt of, or other equity interests, in the Company. SECTION 4.3. AUTHORITY RELATIVE TO THIS AGREEMENT. (a) The Company has the necessary corporate power and authority to enter into this Agreement and the Option Agreement and, subject to obtaining any necessary stockholder approval of the Merger, to carry out its obligations hereunder. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby by the Agreement and the Option Agreement have been duly authorized by all necessary corporate action on the part of the Company, subject to the approval of the Merger by the Company's stockholders in accordance with Delaware Law. Each of this Agreement and the Option Agreement has been duly executed and delivered by the Company and, assuming due and valid authorization, execution and delivery hereof by the other parties hereto and thereto, constitutes a legal, valid and binding obligation of the Company, enforceable against it in accordance with its terms. (b) The Company has taken all action which may be necessary under the Rights Agreement, so that (x) the execution of this Agreement and the Option Agreement and any amendments thereto by the parties hereto and thereto and the consummation of the transactions contemplated hereby and thereby shall not cause (i) the Parent and/or the Purchaser to become an Acquiring Person (as defined in the Rights Agreement) or (ii) a Distribution Date, a Stock Acquisition Date or a Trigger Event (as such terms are defined in the Rights Agreement) to occur, irrespective of the number of Shares acquired pursuant to the Offer or exercise of the option granted under the Option Agreement, and (y) the Rights (as defined in the Rights Agreement) shall expire upon the acceptance of Shares for payment pursuant to the Offer. SECTION 4.4. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not, (i) conflict with or violate any law, order, writ, injunction, decree, statute, rule or regulation, court order or judgment applicable to the Company or by which its property is bound or affected, (ii) violate or conflict with the Certificate of Incorporation or By-Laws of the Company, or (iii) result in a violation or breach of or constitute a default under (with or without due notice or lapse of time or both) or give to others any rights of termination or cancellation of, or result in the creation of a lien or encumbrance on any of the properties or assets of the Company pursuant to, any contract, instrument, permit, license or franchise to which the Company is a party or by which the Company or its property is bound or affected, excluding 12 from the foregoing clauses (i) and (iii) such violations, breaches or defaults which, in the aggregate, would not have a Material Adverse Effect. (b) Except for applicable requirements of the Exchange Act, the pre-merger notification requirements of the HSR Act, and the filing and recordation of appropriate merger or other documents as required by Delaware Law, or "blue sky" laws of various states, the Company is not required to submit any notice, report, permit, authorization or other filing with any Governmental Authority, in connection with the execution, delivery or performance of this Agreement. No waiver, consent, approval or authorization of any Governmental Authority, is required to be obtained or made by the Company in connection with its execution, delivery or performance of this Agreement. SECTION 4.5. SEC FILINGS; FINANCIAL STATEMENTS. (a) The Company has filed all forms, reports and documents required to be filed with the SEC since January 1, 1994, and has heretofore delivered to the Purchaser, in the form filed with the SEC, its (i) Annual Reports on Form 10-K for the fiscal years ended December 31, 1995 and 1996 (including all amendments prior to the date hereof), (ii) Quarterly Report on Form 10-Q for the quarter ended March 31, 1997, (iii) all proxy statements relating to the Company's meetings of stockholders (whether annual or special) held since January 1, 1994 and (iv) all other forms, reports, registrations, schedules, statements and other documents required to be (other than Reports on Form 10-Q not referred to in clause (ii) above) filed by the Company since January 1, 1994 with the SEC pursuant to the Exchange Act or the Securities Act of 1933, as amended (the "Securities Act") (as such documents referred to herein have been amended since the time of their filing, collectively, the "SEC Reports"). As of their respective dates, or, if amended, as of the date of the last such amendment, the SEC Reports, including without limitation, any financial statements or schedules included therein (i) complied in all material respects with the applicable requirements of the Exchange Act and the Securities Act, as the case may be, and the applicable rules and regulations of the SEC promulgated thereunder, and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (b) The consolidated financial statements of the Company contained in the SEC Reports (the "Financial Statements") have been prepared from, and are in accordance with the books and records of the Company, comply in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with United States generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto) and fairly presented the consolidated financial position of the Company and the consolidated results of operation, cash flows and changes in financial position of the Company as of and for the periods indicated, except that the unaudited interim financial statements were or are subject to normal and recurring yearend adjustments. SECTION 4.6. UNDISCLOSED LIABILITIES. (a) Except (a) as disclosed in the Financial Statements and (b) for liabilities and obligations (i) incurred in the ordinary course of business and consistent with past practice since March 31, 1997, (ii) pursuant to the terms of this Agreement, or (iii) as set forth in Schedule 4.6 of the Disclosure Schedule, the Company has no liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, that would be required by GAAP to be reflected in, reserved against or otherwise described in the balance sheet of the Company (including the notes thereto) or which would have a Material Adverse Effect. SECTION 4.7. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1996, except as disclosed in Schedule 4.7 of the Disclosure Schedule or in the SEC Reports filed prior to the date hereof, the Company has conducted its business only in the ordinary and usual course, and: (a) there have not occurred any events or changes (including the incurrence of any liabilities of any nature, whether or not accrued, contingent or otherwise) having, individually or in the aggregate, a Material Adverse Effect; and 13 (b) the Company has not taken any action which would have been prohibited under Section 5.2 hereof. SECTION 4.8. LITIGATION. Except as disclosed in the SEC Reports filed prior to the date hereof, there are no claims, actions, suits, proceedings, (including, without limitation, arbitration proceedings) or other alternative dispute resolution proceedings, or investigations pending or, to the knowledge of the Company, threatened against the Company, or any properties or rights of the Company, before any Governmental Authority that, either individually or in the aggregate would be reasonably likely to have a Material Adverse Effect. As of the date hereof, the Company is not subject to any outstanding order, judgment, injunction or decree. SECTION 4.9. EMPLOYEE BENEFIT PLANS. (a) Schedule 4.9(a) of the Disclosure Schedule sets forth a list of all material employee welfare benefit plans (as defined in Section 3(l) of ERISA, employee pension benefit plans (as defined in Section 3(2) of ERISA), employment agreements and all other bonus, stock option, stock purchase, benefit, profit sharing, savings, retirement, disability, insurance, incentive, deferred compensation and other similar fringe or employee benefit plans, programs or arrangements for the benefit of, or relating to, any employee of, or independent contractor or consultant to, the Company (together, the "Employee Plans"). The Company has delivered to the Purchaser true and complete copies of all Employee Plans, as in effect, and will make available all other employee plans, together with all amendments thereto which will become effective at a later date, as well as the latest Internal Revenue Service determination letters obtained with respect to any Employee Plan intended to be qualified under Section 401(a) or 501(a) of the Internal Revenue Code of 1986, as amended (the "Code"). True and complete copies of the (i) three (3) most recent annual actuarial valuation report, if any, (ii) last filed Form 5500 together with Schedule A and/or B thereto, if any, (iii) summary plan description (as defined in ERISA), if any, and all modifications thereto communicated to employees, and (iv) most recent annual and periodic accounting of related plan assets, if any, in each case, relating to the Employee Plans, have been, or will be, delivered to the Purchaser and are, or will be, correct in all material respects. Neither the Company nor any of its directors, officers, employees or agents has, with respect to any Employee Plan, engaged in or been a party to any "prohibited transaction", as such term is defined in Section 4975 of the Code or Section 406 of ERISA, which could result in the imposition of either a material penalty assessed pursuant to Section 502(i) of ERISA or a material tax imposed by Section 4975 of the Code, in each case applicable to the Company or any Employee Plan. All Employee Plans are in compliance in all material respects with the currently applicable requirements prescribed by all statutes, orders, or governmental rules or regulations currently in effect with respect to such Employee Plans, including, but not limited to, ERISA and the Code (except for such requirements that are not required to be adopted as of the effective date of the applicable requirement) and, to the knowledge of the Company, there are no pending or threatened claims, lawsuits or arbitrations (other than routine claims for benefits), relating to any of the Employee Plans, which have been asserted or instituted against the Company, any Employee Plan or the assets of any trust for any Employee Plan. Each Employee Plan intended to qualify under Section 401(a) of the Code, and the trusts created thereunder intended to be exempt from tax under the provisions of Section 501(a) of the Code, either (i) has received a favorable determination letter from the Internal Revenue Service to such effect or (ii) is still within the "remedial amendment period," as described in Section 401(b) of the Code and the regulations thereunder. Each Employee Plan that has been terminated by the Company which was intended to qualify under Section 401(a) of the Code has received a determination from the Internal Revenue Service that such termination did not adversely affect its qualified status. No Employee Plan subject to Section 412 of the Code has incurred any "accumulated funding deficiency" (as defined in ERISA), whether or not waived. The Company does not contribute and has not within the six-year period ending on the date hereof contributed or been obligated to contribute, to any pension or retirement plan which is a "multiemployer plan" (as defined in Section 3(37) of ERISA). (b) Except as set forth on Schedule 4.9 of the Disclosure Schedule, and as provided in Sections 2.12 and 6.9(i) no amounts payable under the Employee Plans will fail to be deductible for Federal income tax purposes by virtue of section 280G of the Code (ii) (b) (i) the consummation of the transactions 14 contemplated by this Agreement will not either alone or in combination with another event (A) entitle any current or former employee or officer of the Company or any ERISA affiliate to severance pay, unemployment compensation or any other payment, (B) accelerate the time of payment or vesting, or increase the amount of compensation due any such employee or officer or (C) result in any liability under Title IV of ERISA and (ii) no unfunded liability exists with respect to the Employee Plans, as of the date of and determined in the manner set forth in the consolidated financial statements contained in the SEC Reports, which is not set forth on such statements. SECTION 4.10. PROXY STATEMENT. The Proxy Statement, if any (or any amendment thereof or supplement thereto, to be sent to the stockholders of the Company in connection with the Special Meeting or the information statement, if any, to be sent to such stockholders, as appropriate, will comply in all material respects with the applicable requirements of the Exchange Act and the rules and regulations thereunder. The Proxy Statement will not, at the time the Proxy Statement at the date mailed to stockholders and at the time of the Special 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, except that no representation or warranty is being made by the Company with respect to any information supplied to the Company by Parent or the Purchaser specifically for inclusion in the Proxy Statement. SECTION 4.11. BROKERS. Except as disclosed on Schedule 4.11 of the Disclosure Schedule, no broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by and on behalf of the Company. The Company has heretofore furnished to the Purchaser true and complete information concerning the financial arrangements between the Company and the financial advisors set forth on such schedule pursuant to which such firms may be entitled to any payment as a result of the transactions contemplated hereunder. SECTION 4.12. CONTROL SHARE ACQUISITION. The provisions of Section 203 of Delaware Law are not applicable to any of the transactions contemplated by this Agreement or the Option Agreement, including the Merger and the purchase of Shares in the Offer or pursuant to the exercise of the option granted under the Option Agreement. SECTION 4.13. CONDUCT OF BUSINESS. Except as disclosed in the SEC Reports filed prior to the date hereof, the business of the Company is not being conducted in default or violation of (with or without due notice and lapse of time or both) any term, condition or provision of (i) its Certificate of Incorporation or By-Laws, or (ii) any note, bond, mortgage, indenture, contract, agreement, lease or other instrument or agreement of any kind to which the Company is a party or by which the Company or any of its properties or assets may be bound (each, a "Company Agreement"), or (iii) any Federal, state, local or foreign statute, law, ordinance, rule, regulation, judgment, decree, order, concession, grant, franchise, permit or license or other governmental authorization or approval applicable to the Company, and no notice, charge, claim, action or assertion has been received by the Company or has been filed commenced or, to the Company's knowledge, threatened against the Company alleging any such violation except, with respect to the foregoing clauses (ii) and (iii), defaults or violations that would not, individually or in the aggregate, have a Material Adverse Effect. All licenses, permits and approvals required under such laws, rules and regulations are in full force and effect except where the failure to be in full force and effect would not, individually or in the aggregate, have a Material Adverse Effect. 15 SECTION 4.14. TAXES. (a) Except as would not, either individually or in the aggregate, have a Material Adverse Effect, (i) the Company has timely filed with the appropriate Tax Authority (as hereinafter defined) all Tax Returns (as hereinafter defined) required to be filed by or with respect to the Company, and such Tax Returns are true, correct and complete in all material respects, (ii) all Taxes (as hereinafter defined) due and payable by the Company, with respect to the taxable years or other taxable periods ending on or prior to the Effective Time have been or on or prior to the Effective Time will be, paid or adequately disclosed and fully provided for, (iii) no Audits (as hereinafter defined) are pending or threatened with regard to any Taxes or Tax Returns of the Company and there are no outstanding deficiencies or assessments asserted or proposed, (iv) no issue has been raised by any Taxing Authority in any Audit of the Company that if raised with respect to any other period not so audited could be expected to result in a proposed deficiency of any period not so audited, (v) there are no outstanding agreements, consents or waivers extending the statutory period of limitations applicable to the assessment of any Taxes or deficiencies against the Company, and the Company is not a party to any agreement providing for the allocation or sharing of Taxes and (vi) no powers of attorney with respect to Taxes of the Company have been executed that will be outstanding as of the Effective Time. (b) The Company has not filed a consent to the application of Section 341(f) of the Code. (c) The Company is not and has not been a United States real property holding company (as defined in Section 897(c)(2) of the Code) during the applicable period specified in Section 897(c)(1)(ii) of the Code. (d) No indebtedness of the Company is "corporate acquisition indebtedness" within the meaning of Section 279(b) of the Code. (e) Except as would not, either individually or in the aggregate, have a Material Adverse Effect, the Company has not entered into any agreements that would result in the disallowance of any tax deductions pursuant to section 280G of the Code. (f) Except as would not, either individually or in the aggregate, have a Material Adverse Effect, there are no Liens (as hereinafter defined) for Taxes upon any of the assets of the Company, except for Liens for Taxes not yet due and payable for which adequate reserves have been established on the Company's balance sheet at March 31, 1997 included in the Company's Quarterly Report on Form 10-Q filed with the SEC prior to the date hereof (the "Balance Sheet") in accordance with GAAP. (g) The Company has disclosed all material Tax elections to the Purchaser. (h) For purposes of this Agreement, "Taxes" means any Federal, state, local and foreign taxes, and other assessments of a similar nature (whether imposed directly or through withholding), including any interest, additions to tax, or penalties applicable thereto, imposed by any Tax Authority (as hereinafter defined); "Tax Authority" means the Internal Revenue Service and any other domestic or foreign governmental authority responsible for the administration of any Taxes; and "Audit" means any audit, assessment or other examination relating to Taxes by any Tax Authority or any judicial or administrative proceedings relating to Taxes. (i) For purposes of this Agreement, "Tax Return" means any return, report, information return or other document (including any related or supporting information and, where applicable, profit and loss accounts and balance sheets) with respect to Taxes. SECTION 4.15. INTELLECTUAL PROPERTY. (a) Schedule 4.15 of the Disclosure Schedule contains a true and complete list of all material (i) patents and patent applications, (ii) trademark registrations and applications, (iii) service mark registrations and applications, (iv) Computer Software (as hereinafter defined)(excluding Computer 16 Software generally available for purchase by the public), (v) copyright registrations and applications, (vi) unregistered trademarks, service marks, and copyrights, and (vii) Internet domain names used or held for use in connection with the business of the Company, together with all licenses related to the foregoing. (b) The term "Computer Software" shall mean (i) any and all computer programs and applications consisting of sets of statements and instructions to be used directly or indirectly in computer software or firmware whether in source code or object code form, (ii) databases and compilations, including without limitation any and all data and collections of data, whether machine readable or otherwise, (iii) all versions of the foregoing including, without limitation, all screen displays and designs thereof, and all component modules of source code or object code or natural language code therefor, and whether recorded on papers, magnetic media or other electronic or non-electronic device, (iv) all descriptions, flowcharts and other work product used to design, plan, organize and develop any of the foregoing, (v) all documentation, including without limitation all technical and user manuals and training materials, relating to the foregoing, and all Internet domain names and content contained on all World Wide Web sites of the Company or any Subsidiary. (c) The Company owns or has the valid right to use all of the material Intellectual Property used by it or held for use by it in connection with its business. The Company is the sole and exclusive owners of all patents, patent applications, patent rights, copyrights, trademarks, trademark rights, trade names, trade name rights, and service marks, and all goodwill of the business associated therewith, trade secrets, registrations for and applications for registration of trademarks, service marks and copyrights, technology and know-how, Computer Software other than off-the-shelf applications and other confidential or proprietary rights and information and all technical and user manuals and documentation made or used in connection with any of the foregoing, used or held for use anywhere in the world in connection with the businesses of the Company as currently conducted (collectively, the "Intellectual Property"), free and clear of all material Liens, except where the failure to own such Intellectual Property would not have a Material Adverse Effect. (d) All grants, registrations and applications for Intellectual Property that are used in and are material to the conduct of the businesses of the Company as currently conducted (i) are valid, subsisting, in proper form and enforceable, and have been duly maintained, including the submission of all necessary filings and fees in accordance with the legal and administrative requirements of the appropriate jurisdictions and (ii) have not lapsed, expired or been abandoned, and no application or registration therefor is the subject of any legal or governmental proceeding before any governmental, registration or other authority in any jurisdiction, except to the extent where the absence of such Intellectual Property would not have a Material Adverse Effect. (e) To the knowledge of the Company, there are no conflicts with or infringements of any Intellectual Property by any third party, except for conflicts or infringements which would not have a Material Adverse Effect. The conduct of the businesses of the Company as currently conducted does not conflict with or infringe in any way on any proprietary right of any third party, which conflict or infringement would have a Material Adverse Effect. There is no claim, suit, action or proceeding pending or, to the knowledge of the Company, threatened against the Company (i) alleging any such conflict or infringement with any third party's proprietary rights, or (ii) challenging the ownership, use, validity or enforceability of the Intellectual Property, except for claims, suits, actions or proceedings which would not have a Material Adverse Effect. (f) All consents, filings and authorizations by or with governmental authorities or third parties necessary with respect to the consummation of the transactions contemplated hereby as they may affect the Intellectual Property have been obtained, except where the failure to have obtained such consents, filings or authorizations would not have a Material Adverse Effect. (g) The Company is not, nor will it be as a result of the execution and delivery of this Agreement or the performance of its obligations under this Agreement, in breach of any license, sublicense or other 17 agreement relating to the Intellectual Property, except for breaches which would not have a Material Adverse Effect. (h) No former or present employees, officers or directors of the Company hold any right, title or interest directly or indirectly, in whole or in part, in or to any Intellectual Property. SECTION 4.16. EMPLOYMENT MATTERS. The Company has not experienced any strikes, collective labor grievances, other collective bargaining disputes or claims of unfair labor practices in the last five years, except for such strikes, grievances, disputes or claims which have not and would not have a Material Adverse Effect. To the Company's knowledge, there is no organizational effort presently being made or threatened by or on behalf of any labor union with respect to employees of the Company. SECTION 4.17. VOTE REQUIRED. The affirmative vote of the holders of a majority of the outstanding shares of Company Common Stock is the only vote of the holders of any class or series of the Company's capital stock which is necessary to approve this Agreement and the transactions contemplated hereby, including the Merger. SECTION 4.18. ENVIRONMENTAL MATTERS. (a) Except for matters disclosed in the SEC Reports or matters that would not, individually or in the aggregate, be reasonably expected to result in a Material Adverse Effect, to the Company's knowledge: (i) the Company is in compliance with all applicable laws, rules, regulations, ordinances, decrees, orders or other legal or regulatory requirements relating to pollution of the environment or the impact of the environment on human health or preservation of the environment (including without limitation the treatment, storage and disposal of wastes and the remediation of releases and threatened releases of hazardous or toxic substances, wastes, pollutants, contaminants or similar materials) (collectively "Environmental Laws"), and the Company has not received written notice of any outstanding allegations by any person or entity that the Company is not or has not been in compliance (unless such non-compliance has been cured) with any Environmental Laws, and (ii) the Company currently holds all permits, licenses, registrations and other governmental authorizations and financial assurance required under any Environmental Laws for the Company to operate its business. (b) Except for matters disclosed in the SEC Reports or matters that would not individually or in the aggregate, be reasonably expected to result in a Material Adverse Effect, (i) there is no asbestos or asbestos-containing materials in or on any real property, buildings, structures or components thereof currently owned, leased or operated by the Company, and (ii) there are and have been no underground or aboveground storage tanks (whether or not required to be registered under any applicable law), dumps, landfills, lagoons, surface impoundments, sumps, injection wells or other disposal or storage sites or locations in or on any property currently owned, leased or operated by the Company. (c) Except for matters disclosed in the SEC Reports or matters that would not, individually or in the aggregate, be reasonably expected to result in a Material Adverse Effect, (i) the Company has not received (x) any communication from any person stating or alleging that it is or may be a potentially responsible party under any Environmental Law (including without limitation the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and any state analog thereto) with respect to any actual or alleged environmental contamination or (y) any request for information under any Environmental Law from any governmental agency or authority or any other person or entity with respect to any active or alleged environmental contamination or violation, (ii) the Company is not party to any pending judicial or administrative proceedings alleging that it is a potentially responsible party under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, and any state analog thereto) or otherwise liable or responsible with respect to any actual or alleged environmental contamination, or (iii) the Company, any governmental agency or authority, or any other person or entity 18 is not conducting and has not conducted (nor is proposing or threatening to conduct) any environmental remediation or investigation. (d) This Section 4.18 contains the sole and exclusive representations of the Company with respect to Environmental Laws. SECTION 4.19. REAL PROPERTY. (a) Schedule 4.19 of the Disclosure Schedule sets forth a complete list of all real property owned by the Company (the "Real Property"). Copies of (i) all deeds, title insurance policies and surveys of the Real Property and (ii) all documents evidencing all Liens upon the Real Property have been furnished to Parent. Except for matters disclosed in the SEC Reports or matters that would not, individually or in the aggregate, be reasonably expected to result in a Material Adverse Effect, there are no proceedings, claims, disputes or conditions affecting any Real Property that might curtail or interfere with the use of such property, nor is an action of eminent domain pending or to the knowledge of the Company, threatened for all or any portion of the Real Property. Except as disclosed in Schedule 4.20 hereto, the Company is not a party to any lease, assignment or similar arrangement under which the Company is a lessor, assignor or otherwise makes available for use by any third party any portion of the Real Property. (b) As of the date hereof, to the knowledge of the Company, the Company has not, within the past two years, received any written notice of or other writing referring to any requirements or recommendations by any insurance company that has issued a policy covering any part of the Real Property or by any board of fire underwriters or other body exercising similar functions, requiring or recommending any repairs or work to be done on any part of the Real Property except for any requirements or recommendations that would not individually or in the aggregate have a Material Adverse Effect. The plumbing, electrical, heating, air conditioning, ventilating and all other structural or material mechanical systems in the buildings upon the Real Property are in good working order and working condition, so as to be adequate for the operation of the business of the Company as heretofore conducted, and the roof, basement and foundation walls of all buildings on the Real Property are free of leaks and other material defects, except for any matter otherwise covered by this sentence which does not have, individually or in the aggregate, a Material Adverse Effect. (c) The Company has obtained all appropriate licenses, permits, easements and rights of way, including proofs of dedication, required to use and operate the Real Property in the manner in which the Real Property is currently being used and operated, except for such licenses, permits or rights of way the failure of which to have obtained does not have, individually or in the aggregate, a Material Adverse Effect. SECTION 4.20. TITLE AND CONDITION OF PROPERTIES. The Company owns good and marketable title, free and clear of all Liens, to all of the personal property and assets shown on Balance Sheet or acquired after March 31, 1997, except for (A) assets which have been disposed of to nonaffiliated third parties since March 31, 1997 in the ordinary course of business, (B) Liens reflected in the Balance Sheet, (C) Liens or imperfections of title which are not, individually or in the aggregate, material in character, amount or extent and which do not materially detract from the value or materially interfere with the present or presently contemplated use of the assets subject thereto or affected thereby, and (D) Liens for current Taxes not yet due and payable. All of the machinery, equipment and other tangible personal property and assets owned or used by the Company are in good condition and repair, except for ordinary wear and tear not caused by neglect, and are usable in the ordinary course of business, except for any matter otherwise covered by this sentence which does not have, individually or in the aggregate, a Material Adverse Effect. SECTION 4.21. CONTRACTS. Each Company Agreement is legally valid and binding and in full force and effect, except where failure to be legally valid and binding and in full force and effect would not have a Material Adverse Effect. Schedule 4.21 of the Disclosure Schedule sets forth a true and complete list of (i) all material Company Agreements entered into by the Company since December 31, 1996 and all 19 amendments to any Company Agreements included as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1996 and (ii) all non-competition agreements imposing restrictions on the ability of the Company to conduct business in any jurisdiction or territory. SECTION 4.22. POTENTIAL CONFLICTS OF INTEREST. Except as set forth in Schedule 4.22 of the Disclosure Schedule or in the SEC Reports filed prior to the date hereof, since December 31, 1996, there have been no transactions, agreements, arrangements or understandings between the Company and its affiliates that would be required to be disclosed under Item 404 of Regulation S-K under the Securities Act. SECTION 4.23. SUPPLIERS AND CUSTOMERS. Since December 31, 1996, no material licensor, vendor, supplier, licensee or customer of the Company has cancelled or otherwise modified its relationship with the Company and, to the knowledge of the Company (i) no such person has given the Company notice of any intention to do so and (ii) the consummation of the transactions contemplated hereby will not adversely affect the Company's relationship with any such person. SECTION 4.24. INSURANCE. There is no material claim pending under any of the Company's policies or bonds as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds. All premiums due and payable under all such policies and bonds have been paid and the Company is otherwise in compliance in all material respects with the terms of such policies and bonds. The Company has no knowledge of any threatened termination of, or material premium increase with respect to, any of such policies. SECTION 4.25. ACCOUNTS RECEIVABLE; INVENTORY. Subject to any reserves set forth in the Balance Sheet, the accounts receivable shown in the Balance Sheet arose in the ordinary course of business; were not, as of the date of the Balance Sheet, subject to any material discount, contingency, claim of offset or recoupment or counterclaim; and represented, as of the date of the Balance Sheet, bona fide claims against debtors for sales, leases, licenses and other charges. All accounts receivable of the Company arising after the date of the Balance Sheet through the date of this Agreement arose in the ordinary course of business and, as of the date of this Agreement, are not subject to any material discount, contingency, claim of offset or recoupment or counterclaim, except for normal reserves consistent with past practice, The amount carried for doubtful accounts and allowances disclosed in the Balance Sheet is believed by the Company as of the date of this Agreement to be sufficient to provide for any losses which may be sustained or realization of the accounts receivable shown in the Balance Sheet. As of the date of the Balance Sheet, the inventories shown on the Balance Sheet consisted in all material respects of items of a quantity and quality usable or saleable in the ordinary course of business. All of such inventories were acquired in the ordinary course of business and, as of the date of this Agreement, have been replenished in all material respects in the ordinary course of business consistent with past practices. All such inventories are valued on the Balance Sheet in accordance with GAAP applied on a basis consistent with the Company's past practices, and provision has been made or reserves have been established on the Balance Sheet, in each case in an amount believed by the Company as of the date of this Agreement to be adequate, for all slow-moving, obsolete or unusable inventories. SECTION 4.26. OPINION OF FINANCIAL ADVISOR. The Company has received an opinion from CIBC Wood Gundy Securities Corp. ("CIBC"), financial advisor to the Company, to the effect that the consideration to be received in the Offer and the Merger by the holders of the Company Common Stock and the Series D Shares is fair to both the holders of the Company Common Stock and the holders of the Series D Shares from a financial point of view, a draft copy of which opinion has been delivered to Parent (the "Draft Opinion"). 20 ARTICLE V. CONDUCT OF BUSINESS PENDING THE MERGER SECTION 5.1. ACQUISITION PROPOSALS. The Company will notify the Purchaser immediately if any proposals are received by, any information is requested from, or any negotiations or discussions are sought to be initiated or continued with the Company or its representatives, in each case in connection with any Takeover Proposal (as defined below) or the possibility or consideration of making a Takeover Proposal ("Takeover Proposal Interest") indicating, in connection with such notice, the name of the Person indicating such Takeover Proposal Interest and the terms and conditions of any proposals or offers. The Company agrees that it will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Takeover Proposal Interest. The Company agrees that it shall keep Parent informed, on a current basis, of the status and terms of any Takeover Proposal Interest. As used in this Agreement, "Takeover Proposal" shall mean any tender or exchange offer involving the Company, any proposal for a merger, consolidation or other business combination involving the Company, any proposal or offer to acquire in any manner a substantial equity interest in, or a substantial portion of the business or assets of, the Company (other than immaterial or insubstantial assets or inventory in the ordinary course of business or assets held for sale), any proposal or offer with respect to any recapitalization or restructuring with respect to the Company or any proposal or offer with respect to any other transaction similar to any of the foregoing with respect to the Company other than pursuant to the transactions to be effected pursuant to this Agreement. SECTION 5.2. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. The Company covenants and agrees that, (i) except as expressly contemplated by this Agreement or the Option Agreement, or (ii) as set forth in Schedule 5.2 of the Disclosure Schedule, or (iii) agreed in writing by Parent, after the date hereof, and prior to the time the directors of the Purchaser have been elected to, and shall constitute a majority of the Board of Directors of the Company pursuant to Section 1.3 (the "Appointment Date"): (a) the business of the Company shall be conducted only in the ordinary and usual course and, to the extent consistent therewith, the Company shall use its best reasonable efforts to preserve its business organization intact and maintain its existing relations with customers, suppliers, employees, creditors and business partners; (b) the Company will not, directly or indirectly, (i) except upon exercise of stock options or other rights to purchase shares of Company Common Stock pursuant to the Option Plans outstanding on the date hereof or upon exercise of outstanding warrants or conversion of outstanding Series D Shares, issue, sell, transfer or pledge or agree to sell, transfer or pledge any treasury stock of the Company beneficially owned by it, (ii) amend its Certificate of Incorporation or By-Laws or similar organizational documents; or (iii) split, combine or reclassify the outstanding Shares; (c) the Company shall not: (i) declare, set aside or pay any dividend or other distribution payable in cash, stock or property with respect to its capital stock; (ii) issue, sell, pledge, dispose of or encumber any additional shares of, or securities convertible into or exchangeable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of capital stock of any class of the Company, other than Shares reserved for issuance on the date hereof pursuant to the exercise of Options or warrants outstanding on the date hereof or upon the conversion of the Series D Shares; (iii) transfer, lease, license, sell, mortgage, pledge, dispose of, or encumber any assets other than in the ordinary and usual course of business and consistent with past practice, or incur or modify any indebtedness or other liability, other than in the ordinary and usual course of business and consistent with past practice; or (iv) redeem, purchase or otherwise acquire directly or indirectly any of its capital stock; (d) the Company shall not: (i) grant any increase in the compensation payable or to become payable by the Company to any of its executive officers or (ii)(A) adopt any new, or (B) amend or otherwise increase, or accelerate the payment or vesting of the amounts payable or to become payable under any 21 existing bonus, incentive compensation, deferred compensation, severance, profit sharing, stock option, stock purchase, insurance, pension, retirement or other employee benefit plan, agreement or arrangement; or (iii) enter into any employment or severance agreement with or, except in accordance with the existing written policies of the Company, grant any severance or termination pay to any officer, director or employee of the Company; (e) the Company shall not modify, amend or terminate any of its material contracts or waive, release or assign any material rights or claims, except in the ordinary course of business and consistent with past practice; (f) the Company shall (i) not permit any insurance policy naming it as a beneficiary or a loss payable payee to be cancelled or terminated without notice to Parent, except in the ordinary course of business and consistent with past practice unless the Company shall have obtained a comparable replacement policy; the Company shall not incur or assume any long-term debt, or except in the ordinary course of business, incur or assume any short-term indebtedness in amounts not consistent with past practice except for borrowings under the Company's existing credit facility with Madeleine LLC in the ordinary course of business and consistent with past practice; (ii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person, except in the ordinary course of business and consistent with past practice; (iii) make any loans, advances (other than travel and expense advances to employees in the ordinary course of business and consistent with past practice) or capital contributions to, or investments in, any other person; or (iv) enter into any material commitment or transaction (including, but not limited to, any borrowing, or purchase, sale or lease of assets or real estate); (g) the Company shall not (i) change any of the accounting methods used by it unless required by GAAP or (ii) make any material Tax election change any material Tax election already made, adopt any material Tax accounting method, change any material Tax accounting method unless required by GAAP, enter into any closing agreement, settle any Tax claim or assessment or consent to any Tax claim or assessment or any waiver of the statute of limitations for any such claim or assessment; and (h) the Company shall not pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction of any such claims, liabilities or obligations, in the ordinary course of business and consistent with past practice, of claims, liabilities or obligations reflected or reserved against in, or contemplated by, the consolidated financial statements (or the notes thereto) of the Company; (i) the Company shall not adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company (other than the Merger); (j) the Company shall not take, or agree to commit to take, any action that would or is reasonably likely to result in any of the conditions to the Merger set forth in Article VII not being satisfied, or would make many representation or warranty of the Company contained herein inaccurate in any respect at, or as of any time prior to, the Effective Time, or that would materially impair the ability of the Company to consummate the Merger in accordance with the terms hereof or materially delay such consummation; (k) the Company shall not redeem the Rights or terminate, amend or otherwise modify the Rights Plan prior to the consummation of the Offer unless required to do so by order of a court of competent jurisdiction; and (l) except as expressly provided herein, the Company shall not enter into an agreement, contract, commitment or arrangement to do any of the foregoing, or to authorize, recommend, propose or announce an intention to do any of the foregoing. 22 SECTION 5.3. NO SHOPPING. (a) The Company will not, and will use its reasonable best efforts to ensure that its officers, directors, employees, investment bankers, attorneys, accountants and other agents do not, directly or indirectly: (i) initiate, solicit or encourage, or take any action to facilitate the making of, any offer or proposal which constitutes or is reasonably likely to lead to any Takeover Proposal, (ii) enter into any agreement with respect to any Takeover Proposal, or (iii) in the event of an unsolicited written Takeover Proposal for the Company engage in negotiations or discussions with, or provide any information or data to, any Person (other than Parent, any of its affiliates or representatives and except for information which has been previously publicly disseminated by the Company) relating to any Takeover Proposal; PROVIDED HOWEVER, that nothing contained in this Section 5.3 or any other provision hereof shall prohibit the Company or the Company's Board from (i) taking and disclosing to the Company's stockholders or position with respect to tender or exchange offer by a third party pursuant to Rules 14D-9 and 14e2 promulgated under the Exchange Act or (ii) making such disclosure to the Company's stockholders as, in the good faith judgment of the Board after receiving advice from outside counsel, is required under applicable law. (b) Notwithstanding the foregoing, prior to the acceptance of Shares pursuant to the Offer, the Company may furnish information concerning its business, properties or assets to any Person pursuant to appropriate confidentiality agreements, and may negotiate and participate in discussions and negotiations with such Person concerning a Takeover Proposal if (x) such entity or group has on an unsolicited basis submitted a bona fide written proposal to the Company relating to any such transaction which the Board determines in good faith, after receiving advice from a nationally recognized investment banking firm, represents a superior transaction to the Offer and the Merger and which is not conditioned upon obtaining additional financing and (y) in the opinion of the Board of Directors of the Company, only after receipt of advice from outside legal counsel to the Company, the failure to provide such information or access or to engage in such discussions or negotiations would create a reasonable possibility of a breach of the fiduciary duties of the Board of Directors to the Company's shareholders under applicable law (a Takeover Proposal which satisfies clauses (x) and (y) being referred to herein as a "Superior Proposal"). The Company shall within two business days following receipt of a Superior Proposal notify Parent of the receipt of the same. The Company shall promptly provide to Parent any material nonpublic information regarding the Company provided to any other party which was not previously provided to Parent. At any time after two business days following notification to Parent of the Company's intent to do so (which notification shall include the identity of the bidder and the material terms and conditions of the proposal) and if the Company has otherwise complied with the terms of this Section 5.3(b), the Board of Directors may terminate this Agreement pursuant to clause (ii) of Section 8.1(f) and enter into an agreement with respect to a Superior Proposal, PROVIDED that the Company shall, concurrently with entering into such agreement, pay or cause to be paid to Parent the Termination Fee (as defined in Section 8.2(b) hereof), plus any amount payable at the time for reimbursement of expenses pursuant to Section 8.2(b) hereof. (c) Except as set forth in Section 5.3(b), neither the Board of Directors of the Company nor any committee thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to Parent or the Purchaser, the approval or recommendation by such Board of Directors or any such committee of the Offer, this Agreement or the Merger, (ii) approve or recommend or propose to approve or recommend, any Acquisition Proposal or (iii) enter into any agreement with respect to any Takeover Proposal. ARTICLE VI. ADDITIONAL AGREEMENTS SECTION 6.1. PROXY STATEMENT. As promptly as practicable after the consummation of the Offer and if required by the Exchange Act, the Company shall prepare and file with the SEC, and shall use all reasonable efforts to have cleared by the SEC, and promptly thereafter shall mail to stockholders, the 23 Proxy Statement. The Proxy Statement shall contain the recommendation of the Board of Directors in favor of the Merger. SECTION 6.2. MEETING OF STOCKHOLDERS OF THE COMPANY. At the Special Meeting, if any, the Company shall use its best efforts to solicit from stockholders of the Company proxies in favor of the Merger and shall take all other action necessary or, in the reasonable opinion of the Purchaser, advisable to secure any vote or consent of stockholders required by Delaware Law to effect the Merger. The Purchaser agrees that it shall vote, or cause to be voted, in favor of the Merger all Shares directly or indirectly beneficially owned by it. SECTION 6.3. ADDITIONAL AGREEMENTS. Subject to the terms and condition is herein provided, the Company, Parent and Purchaser will each comply in all material respects with all applicable laws and with all applicable rules and regulations of any governmental authority to achieve the satisfaction of the Minimum Condition and all conditions set forth in Annex I attached hereto and Article VII hereof, and to consummate and make effective the Merger and the other transactions contemplated hereby. Each of the parties hereto agrees to use all reasonable efforts to obtain in a timely manner all necessary waivers, consents and approvals and to effect all necessary registrations and filings, and to use all reasonable efforts to take, or cause to be taken, all other actions and to do, or cause to be done, all other things necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and directors of the Company, Parent and the Purchaser shall use all reasonable efforts to take, or cause to be taken, all such necessary actions. SECTION 6.4. NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt notice to the Purchaser and the Purchaser shall give prompt notice to the Company, of (i) the occurrence, or nonoccurrence of any event whose occurrence, or nonoccurrence would be likely to cause either (A) any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect at any time from the date hereof to the Effective Time or (B) any condition set forth in Annex I to be unsatisfied in any material respect at any time from the date hereof to the date the Purchaser purchases Shares pursuant to the Offer and (ii) any material failure of the Company, the Purchaser, or Parent, as the case may be, or any officer, director, employee or agent thereof, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to this Section 6.4 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. SECTION 6.5. ACCESS TO INFORMATION. (a) From the date hereof to the Effective Time, the Company shall, and shall cause its officers, directors, employees, auditors and agents to, afford the officers, employees and agents of Parent and the Purchaser reasonable access at all reasonable times to its officers, employees, agents, properties, offices and other facilities and to all books and records, and shall furnish Parent and the Purchaser with all financial, operating and other data and information as Parent and the Purchaser, through its officers, employees or agents, may reasonably request. (b) Unless otherwise required by law and until the Appointment Date, the Purchaser agrees that it shall, and shall cause its affiliates and each of their respective officers, directors, employees, financial advisors and agents (the "Purchaser Representatives"), to hold in strict confidence all data and information obtained by them from the Company (unless such information is or becomes publicly available without the fault of any of the Purchaser Representatives or public disclosure of such information is required by law in the opinion of counsel to the Purchaser) and shall insure that the Purchaser Representatives do not disclose such information to others without the prior written consent of the Company. Notwithstanding 24 anything herein to the contrary, the terms of the Confidentiality Agreement, dated November 6, 1995 (the "Confidentiality Agreement"), executed by the Purchaser shall remain in full force and effect. (c) In the event of the termination of this Agreement, the Purchaser shall, and shall cause its affiliates to, return promptly every document furnished to them by the Company or any of its representatives in connection with the transactions contemplated hereby and any copies thereof which may have been made, and shall cause the Purchaser Representatives to whom such documents were furnished promptly to return such documents and any copies thereof any of them may have made, other than documents filed with the SEC or otherwise publicly available. SECTION 6.6. PUBLIC ANNOUNCEMENTS. The Purchaser and the Company shall consult with each other before issuing any press release or otherwise making any public statements with respect to the Offer or the Merger and shall not issue any such press release or make any such public statement before such consultation, except as may be required by law. SECTION 6.7. BEST EFFORTS; COOPERATION. Upon the terms and subject to the conditions hereof, each of the parties hereto agrees to use its reasonable best efforts to take or cause to be taken all actions and to do or cause to be done all things necessary, proper or advisable to consummate the transactions contemplated by this Agreement and shall use its reasonable best efforts to obtain all necessary waivers, consents and approvals, and to effect all necessary filings under the Exchange Act and the HSR Act. The parties shall cooperate in responding to inquiries from, and making presentations to, regulatory authorities. SECTION 6.8. AGREEMENT TO DEFEND AND INDEMNIFY. (a) The Certificate of Incorporation and By-Laws of the Surviving Corporation shall not be amended, repealed or otherwise modified for a period of five years after the Effective Time in any manner that would adversely affect the rights thereunder of individuals who as of the date hereof were directors, officers, employees, fiduciary, agents or otherwise entitled to indemnification under the Certificate of Incorporation, By-Laws or indemnification agreements (the "Indemnified Parties"). It is understood and agreed that the Company shall, to the fullest extent permitted under Delaware Law and regardless of whether the Merger becomes effective, indemnify, defend and hold harmless, and after the Effective Time, the Parent, Purchaser and the Surviving Corporation shall jointly and severally, to the fullest extent permitted under Delaware Law, indemnify, defend and hold harmless, each Indemnified Party against any costs or expenses (including reasonable attorneys' fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any claim, action, suit, proceeding or investigation, including without limitation liabilities arising out of this transaction, under the Exchange Act in connection with the Offer or the Merger, and in the event of any such claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time), (i) the Company or the Surviving Corporation shall pay the reasonable fees and expenses of counsel selected by the Indemnified Parties, which counsel shall be reasonably satisfactory to the Company or the Surviving Corporation, promptly as statements therefor are received, and (ii) the Company and the Surviving Corporation will cooperate in the defense of any such matter; PROVIDED, HOWEVER, that neither the Company nor the Surviving Corporation shall be liable for any settlement effected without its written consent (which consent shall not be unreasonably withheld); and FURTHER, PROVIDED, that neither the Company nor the Surviving Corporation shall be obliged pursuant to this Section 6.8 to pay the fees and disbursements of more than one counsel for all Indemnified Parties in any single action except to the extent that, in the opinion of counsel for the Indemnified Parties, two or more of such Indemnified Parties have conflicting interests in the outcome of such action. For six years after the Effective Time, the Surviving Corporation shall be required to maintain or obtain officers' and directors' liability insurance covering the Indemnified Parties who are currently covered by the Company's officers and directors liability insurance policy with respect to matters existing or occurring at or prior to the Effective Time on terms not less favorable than those in effect on the date hereof in terms of coverage and amounts; PROVIDED, HOWEVER, that if the aggregate annual premiums for such insurance at any time during 25 such period shall exceed 200% of the per annum rate of premium currently paid by the Company for such insurance on the date of this Agreement, which amount is set forth in Section 6.8 of the Disclosure Schedule, then Parent shall cause the Company (or the Surviving Corporation if after the Effective Time) to, and the Company (or the Surviving Corporation if after the Effective Time) shall, provide the maximum coverage that shall then be available at an annual premium equal to 200% of such rate. This Section 6.8 shall survive the consummation of the Merger. Purchaser shall cause Surviving Corporation to reimburse all expenses, including reasonable attorney's fees and expenses, incurred by any person to enforce the obligations of the Purchaser and the Surviving Corporation under this Section 6.8. Notwithstanding Section 9.7 hereof, this Section 6.8 is intended to be for the benefit of and to grant third party rights to Indemnified Parties whether or not parties to this Agreement, and each of the Indemnified Parties shall be entitled to enforce the covenants contained herein. (b) If the Surviving Corporation or any of its successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any Person, then and in each such case, proper provision shall be made so that the successors and assigns of the Surviving Corporation assume the obligations set forth in this Section 6.8. SECTION 6.9. EMPLOYEE BENEFITS. (a) At the Effective Time, the Surviving Corporation shall continue as the Plan Sponsor of each Employee Plan. Subject to Section 6.9(b) hereof, each of the parties hereto agrees that participants' rights to the employer-provided benefits for nonunion employees under the Employee Plans as in effect as of the Effective Time shall be continued under the same or an equivalent plan and shall not be reduced for at least one year following the Effective Time, except (i) to the extent provided in Section 2.12 hereof, or (ii) as required by applicable law (including as required to preserve any favorable tax treatment afforded such benefits as of the Effective Time). Thereafter, such participants shall in any event be credited with their service with the Company in determining their right to participate and vesting under any successor Employee Plans. (b) The Company's 1985 and 1987 Employee Stock Ownership Plans (the "ESOPs") shall be terminated effective as of the Effective Time. As soon as practicable following the receipt of favorable determination letters from the Internal Revenue Service confirming that the termination of the ESOPs and elimination of the right to receive distributions in the form of employer securities does not adversely affect their prior qualified and tax-exempt status, the assets held in the trusts related thereto (consisting of the proceeds of the sale of Company Common Stock held therein in the Offer or the Merger) shall be either (i) to the extent allowable under applicable law, distributed to participants in single lump sums, or (ii) to the extent not allowable under applicable law (particularly Treasury regulation 1.411(a)11(e)(1)), transferred to another qualified defined contribution plan maintained by the Company, the Purchaser or an affiliate of either of them. SECTION 6.10. PENDING LITIGATION. Promptly following the consummation of the Offer, the Purchaser shall join with the defendants in the action entitled KUPFERBERG V. NORIAN, ET AL. (Del. Ch. Civ. Act. No. 12709) in a motion to dismiss or withdraw such action with prejudice, and will not assert or permit the Company to assert any claim against the defendants thereunder relating to the subject matter thereof. 26 ARTICLE VII. CONDITIONS OF MERGER The respective obligations of each party to effect the Merger shall be subject to the following conditions: SECTION 7.1. OFFER. The Purchaser shall have made, or caused to be made, the Offer and shall have purchased, or caused to be purchased, the Shares pursuant to the Offer; PROVIDED, that this condition shall be deemed to have been satisfied with respect to the obligation of Parent and the Purchaser to effect the Merger if the Purchaser fails to accept for payment or pay for Shares pursuant to the Offer in violation of the terms of the Offer or of this Agreement. SECTION 7.2. STOCKHOLDER APPROVAL. The Merger and this Agreement shall have been approved and adopted by the requisite vote of the stockholders of the Company, if required by Delaware Law. SECTION 7.3. NO CHALLENGE. No statute, rule, regulation, judgment, writ, decree, order or injunction shall have been promulgated, enacted, entered or enforced, and no other action shall have been taken, by any government or governmental, administrative or regulatory authority or by any court of competent jurisdiction, that in any of the foregoing cases has the effect of making illegal or directly or indirectly restraining, prohibiting or restricting the consummation of the Merger. ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER SECTION 8.1. TERMINATION. This Agreement may be terminated and the transactions contemplated herein may be abandoned at any time before the Effective Time, whether before or after stockholder approval: (a) By mutual written consent of the Boards of Directors of Parent and the Company; or (b) By Parent (i) if the Offer shall have expired or been terminated without any Shares being purchased thereunder by the Purchaser as a result of the occurrence of any of the events set forth in Annex I or (ii) if the Company shall have failed to deliver to Parent by July 3, 1997 an executed copy of the fairness opinion of CIBC referred to in Section 4.26, substantially in the form of the Draft Opinion; or (c) By either Parent or the Company if a court of competent jurisdiction or governmental, regulatory or administrative agency or commission shall have issued an order, decree or ruling or taken any other action (which order, decree or ruling the parties hereto shall use their best efforts to lift), in each case permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement; or (d) By Parent if, without any material breach by the Purchaser of its obligations under this Agreement, the purchase of Shares pursuant to the Offer shall not have occurred on or before 120 days from the date hereof; or (e) By the Company if, without any material breach by the Company of its obligations under this Agreement, the purchase of Shares pursuant to the Offer shall not have occurred on or before 120 days from the date hereof; or (f) By the Company (i) if there shall be a material breach of any of Parent or the Purchaser's representations, warranties or covenants hereunder, which breach cannot be or has not been cured within ten (10) days of the receipt of written notice thereof or (ii) to allow the Company to enter into an agreement in accordance with Section 5.3(b) with respect to a Superior Proposal which the Board of Directors has determined is more favorable to the stockholders of the Company than the transactions contemplated hereby; PROVIDED that it has complied with all provisions thereof, including the notice 27 provision therein, and that it makes simultaneous payment of the Termination Fee, plus any amounts then due as a reimbursement of expenses; or (g) By Parent, if prior to the purchase of Shares pursuant to the Offer, the Company shall have breached any representation, warranty or covenant or other agreement contained in this Agreement, which breach (i) would give rise to the failure of a condition set forth in paragraph (d) or (e) of Annex I hereto and (ii) cannot be or has not been cured within ten (10) days of the receipt of written notice thereof; or (h) By Parent, at any time prior to the purchase of the Shares pursuant to the Offer, if (i) the Board of Directors of the Company shall withdraw, modify, or change its recommendation or approval in respect of this Agreement or the Offer in a manner adverse to the Purchaser, (ii) the Board of Directors of the Company shall have recommended any proposal other than by Parent or the Purchaser in respect of a Takeover Proposal, (iii) the Company shall have exercised a right with respect to Takeover Proposal referenced in Section 5.3(b) and shall, directly or through its representatives, continue discussions with any third party concerning a Takeover Proposal for more than twenty (20) business days after the date of receipt of such Takeover Proposal, (iv) a Takeover Proposal that is publicly disclosed shall have been commenced, publicly proposed or communicated to the Company which contains a proposal as to price (without regard to whether such proposal specifies a specific price or a range of potential prices) and the Company shall not have rejected such proposal within twenty (20) business days of its receipt or, if sooner, the date its existence first becomes publicly disclosed, or (v) any Person or group (as defined in Section 13(d)(3) of the Exchange Act) other than Parent or the Purchaser or any of their respective subsidiaries or affiliates shall have become the beneficial owner of more than 15% (or in the case of the Gabelli Funds, Inc. and its affiliates and associates, 32%) of the outstanding Shares (either on a primary or a fully diluted basis); provided, however, that this provision shall not apply to any Person that owns more than 15% of the outstanding Shares on the date hereof. SECTION 8.2. EFFECT OF TERMINATION. (a) In the event of termination of this Agreement as provided in Section 8.1 hereof, written notice thereof shall forthwith be given to the other party or parties specifying the provision hereof pursuant to which such terminations is made, and this Agreement shall forthwith become null and void and there shall be no liability on the part of Parent, the Purchaser or the Company, except (i) as set forth in Sections 6.5 and 9.3 hereof and (ii) nothing herein shall relieve any party from liability for any breach of this Agreement. (b) If (i) Parent shall have terminated this Agreement pursuant to Section 8.1(h)(i) or 8.1(h)(ii), (ii) (A) the Parent shall have terminated this Agreement pursuant to Section 8.1(g) or pursuant to Section 8.1(h)(iii), 8.1(h)(iv) or 8.1(h)(v) and (B) within eighteen (18) months of any such termination the Company shall have entered into a definitive agreement with respect to a Takeover Proposal or a Takeover Proposal with respect to the Company shall have been consummated with such Person, or (iii) the Company shall have terminated this Agreement pursuant to Section 8.1(f)(ii), then in either such case the Company shall pay simultaneously with such termination if pursuant to Section 8.1(f)(ii) and promptly, but in no event later than two business days after the date of such termination or event if pursuant to Section 8.1(h) or 8.1(g), to Parent a termination fee (the "Termination Fee") of $2,000,000 plus an amount, not in excess of $1,500,000, equal to the Purchaser's actual and reasonably documented reasonable out-of-pocket expenses incurred by Parent and the Purchaser in connection with the Offer, the Merger, this Agreement and the consummation of the transactions contemplated hereby, which amount shall be payable by wire transfer to such account as the Purchaser may designate in writing to the Company. No fee or expense reimbursement shall be paid pursuant to this Section 8.2(b) if the Purchaser shall be in material breach of its obligations hereunder. 28 ARTICLE IX. GENERAL PROVISIONS SECTION 9.1. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The representations, warranties and agreements in this Agreement or in any schedule, instrument or other document delivered pursuant to this Agreement shall terminate at the Effective Time or the termination of this Agreement pursuant to Section 8.1, as the case may be, except that the agreements set forth in Article II and Section 6.8 shall survive the Effective Time indefinitely and those set forth in Sections 6.4(b), 6.4(c), 8.2 and 9.3 shall survive termination indefinitely. SECTION 9.2. NOTICES. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed to have been duly given or made (i) as of the date delivered or sent by facsimile if delivered personally or by facsimile, and (ii) on the third business day after deposit in the U.S. mail, if mailed by registered or certified mail (postage prepaid, return receipt requested), in each case to the parties at the following addresses (or at such other address for a party as shall be specified by like notice, except that notices of changes of address shall be effective upon receipt): (a) if to Parent or the Purchaser Fremont Acquisition Company, LLC c/o Fremont Partners, L.L.C. 50 Fremont Street, Suite 3700 San Francisco, California 94105 Attention: Robert Jaunich II Facsimile: (415) 284-8191 With a copy to: Fremont Partners, L.L.C. 50 Fremont Street, Suite 3700 San Francisco, California 94105 Attention: General Counsel Facsimile: (415) 512-7121 And a copy to: Skadden, Arps, Slate, Meagher & Flom LLP Four Embarcadero Center, Suite 3800 San Francisco, California 94111 Attention: Kenton J. King, Esq. Facsimile: (415) 984-2698 (b) if to the Company: Kerr Group, Inc. 500 New Holland Avenue Lancaster, PA 176022104 Attention: D. Gordon Strickland Facsimile: (717) 394-6398 With a copy to: Willkie Farr & Gallagher One Citicorp Center 153 East 53rd Street New York, New York 10022 Attention: Harvey L. Sperry, Esq. Facsimile: (212) 821-8111 29 SECTION 9.3. EXPENSES. Except as expressly set forth in Section 8.2(b), all fees, costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such fees, costs and expenses. SECTION 9.4. CERTAIN DEFINITIONS. For purposes of this Agreement, the term: (a) "affiliate" of a Person means 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; (b) "control" (including the terms "controlled by" and "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of stock, as trustee or executor, by contract or credit arrangement or otherwise; and (c) "Lien" means any mortgage, pledge, hypothecation, assignment for security purposes, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including without limitation any conditional sale or other title retention agreement and any Financing Lease having substantially the same economic effect as any of the foregoing); PROVIDED, HOWEVER, that liens for Taxes not yet due and payable but for which adequate reserves have been established and other statutory liens shall not be Liens for the purposes of this Agreement. (d) "Person" means an individual, corporation, partnership, limited liability company, association, trust or any unincorporated organization. SECTION 9.5. HEADINGS. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 9.6. SEVERABILITY. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the maximum extent possible. SECTION 9.7. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement and the Confidentiality Agreement constitute the entire agreement and supersede any and all other prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof and, except as otherwise expressly provided herein, this Agreement is not intended to confer upon any other Person any rights or remedies hereunder. SECTION 9.8. ASSIGNMENT. This Agreement shall not be assigned by operation of law or otherwise, except that Parent and the Purchaser may assign all or any of their rights hereunder to any affiliate of Parent provided that no such assignment shall relieve the assigning party of its obligations hereunder. SECTION 9.9. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware applicable to contracts executed in and to be performed entirely within that State. SECTION 9.10. AMENDMENT. This Agreement may be amended by the parties hereto by action taken by Parent and the Purchaser, and by action taken by or on behalf of the Company's Board of Directors at any time before the Effective Time; PROVIDED, HOWEVER, that, after approval of the Merger by the stockholders of the Company, no amendment may be made which would reduce the amount or change the type of consideration into which each Share or Series D Share will be converted upon consummation of the 30 Merger. This Agreement may not be amended except by an instrument in writing signed by the parties hereto. SECTION 9.11. WAIVER. At any time before the Effective Time, any 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 and (c) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only as against such party and only if set forth in an instrument in writing signed by such party. SECTION 9.12. COUNTERPARTS. This Agreement may be executed in two or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which shall constitute one and the same agreement. IN WITNESS WHEREOF, Parent, the Purchaser and the Company have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. Very truly yours, KERR GROUP, INC. By: /s/ D. Gordon Strickland ----------------------------------------- Name: D. Gordon Strickland Title: President and CEO FREMONT ACQUISITION COMPANY, LLC By: /s/ Gil Lamphere ----------------------------------------- Name: Gil Lamphere Title: President KERR ACQUISITION CORPORATION By: /s/ Gregory P. Spivy ----------------------------------------- Name: Gregory P. Spivy Title: Vice President 31 ANNEX I CONDITIONS TO THE OFFER. Notwithstanding any other provision of the Offer, the Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) promulgated under the Exchange Act (relating to the Purchaser's obligation to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), pay for, and (subject to any such rules or regulations) may delay the acceptance for payment of any tendered Shares and (except as provided in this Agreement) amend or terminate the Offer as to any Shares not then paid for if (i) the condition that there shall be validly tendered and not withdrawn prior to the expiration of the Offer a number of shares of Company Common Stock and Series D Shares (assuming the conversion of all such Series D Shares into shares of the Company Common Stock) which represents at least 51% of the number of shares of Company Common Stock then outstanding on a fully diluted basis (after giving effect to the conversion or exercise of all outstanding Series D Shares, options, warrants and other rights and securities exercisable or convertible into shares of Company Common Stock) shall not have been satisfied (the "Minimum Condition") or (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 after the date of this Merger Agreement and before the time of acceptance of payment for any such Shares (whether or not any Shares have theretofore been accepted for payment or paid for pursuant to the Offer,) any of the following conditions exists: (a) there shall be pending in effect an injunction or other order, decree, judgment or ruling by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission of competent jurisdiction or a statute, rule, regulation, executive order or other action shall have been promulgated, enacted, taken or threatened by a governmental authority or a governmental, regulatory or administrative agency or commission of competent jurisdiction which in any such case (i) restrains or prohibits the making or consummation of the Offer or the consummation of the Merger, (ii) prohibits or restricts the ownership or operation by the Purchaser (or any of its affiliates or subsidiaries) of any portion of its or the Company's business or assets which is material to the business of all such entities taken as a whole, or compels the Purchaser (or any of its affiliates or subsidiaries) to dispose of or hold separate any portion of its or the Company's business or assets which is material to the business of all such entities taken as a whole, (iii) imposes material limitations on the ability of the Purchaser effectively to acquire or to hold or to exercise full rights of ownership of the Shares, including, without limitation, the right to vote the Shares purchased by the Purchaser on all matters properly presented to the stockholders of the Company, (iv) imposes any material limitations on the ability of the Purchaser or any of their respective affiliates or subsidiaries effectively to control in any material respect the business and operations of the Company; or (b) this Agreement shall have been terminated by the Company or the Purchaser in accordance with its terms; or (c) there shall have occurred (i) any general suspension of, or limitation on prices for, trading in securities on any national securities exchange or the over-the-counter market for a period in excess of 24 hours (excluding suspensions or limitations resulting solely from physical damage or interference with such exchanges not related to market conditions), (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States (whether or not mandatory), (iii) a commencement of a war, armed hostilities or other international or national calamity directly or indirectly involving the United States, (iv) any limitation (whether or not mandatory) by any United States governmental authority on the extension of credit generally by banks or other financial institutions, (v) a change in general financial, bank or capital market conditions which materially and adversely affects the ability of financial institutions in the United States to extend credit or syndicate loans or (vi) in the case of any of the foregoing existing at the time of the execution of this Agreement, a material acceleration or worsening thereof; or (d) the representations and warranties of the Company set forth in this Agreement shall not be true and correct in all material respects, in each case (i) as of the date referred to in any representation or warranty which addresses matters as of a particular date, or (ii) as to all other representations and warranties as of the date of this Agreement and as of the scheduled expiration of the Offer, (without giving effect to any materiality qualification or standard contained in any such representations and warranties); or (e) the Company shall have failed to perform in all material respects any obligation or to comply with any agreement or covenant to be performed or complied with by it under this Agreement (without giving effect to any materiality qualification or standard contained in any such agreements or covenants); or (f) the Purchaser shall have failed to receive a certificate executed by the President or a Vice President of the Company, dated as of the scheduled expiration of the Offer, to the effect that the conditions set forth in paragraphs (d) and (e) of this Annex I have not occurred; or (g) there shall have occurred any change (or any development that, insofar as reasonably can be foreseen, reasonably likely to result in any change) that constitutes a Material Adverse Effect; or (h) person (other than the Gabelli Funds, Inc. and its affiliates and associates) acquires beneficial ownership (as defined in Rule 13d-3 promulgated under the Exchange Act), of at least 15% of the outstanding Company Common Stock. The foregoing conditions are for the sole benefit of the Purchaser and may be asserted by the Purchaser regardless of the circumstances (including any action or inaction by the Purchaser) giving rise to any such conditions and may be waived by the Purchaser in whole or in part at any time and from time to time, in each case, in the exercise of the good faith judgment of the Purchaser and subject to the terms of this Agreement. The failure by the Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. 2 TABLE OF DEFINITIONS
PAGE ---- Affiliate................................................................. 9.4(a) Agreement................................................................. Recitals Appointment Date.......................................................... 5.2 Audit..................................................................... 4.14(h) Balance Sheet............................................................. 4.14(b) Blue Sky.................................................................. 4.4(b) Board of Directors........................................................ Recitals Certificates.............................................................. 2.11(b) CIBC...................................................................... 4.26 Closing................................................................... 2.3 Closing Date.............................................................. 2.3 Code...................................................................... 4.9(a) Common Per Share Amount................................................... Recitals Common Stock Merger Consideration......................................... 2.9(a) Company................................................................... Recitals Company Agreement......................................................... 4.13 Company Common Stock...................................................... Recitals Company Preferred Stock................................................... 4.2 Computer Software......................................................... 4.15(a) Confidentiality Agreement................................................. 6.5(b) Control................................................................... 9.4(b) Delaware Law.............................................................. Recitals Disclosure Schedule....................................................... 3.7 Dissenting Shares......................................................... 2.10(a) Distribution Date......................................................... 1.2(a) Draft Opinion............................................................. 4.26 Effective Time............................................................ 2.2 Employee Plans............................................................ 4.9(a) Environmental Laws........................................................ 4.19(a) ERISA..................................................................... 4.9(a) ESOPs..................................................................... 6.9(b) Exchange Act.............................................................. 1.1(a) Exchange Agent............................................................ 2.11(a) Financial Statements...................................................... 4.5(b) GAAP...................................................................... 4.5(b) Governmental Authority.................................................... 3.3(b) HSR Act................................................................... 3.3(b) Indemnified Parties....................................................... 6.8(a) Independent Directors..................................................... 1.3(a) Intellectual Property..................................................... 4.15(b) Lien...................................................................... 9.4(c) Material Adverse Effect................................................... 4.1 Merger.................................................................... Recitals Merger Consideration...................................................... 2.9(c) Offer..................................................................... Recitals Offer Documents........................................................... 1.1(c) Offer to Purchase......................................................... 1.1(c) Option Agreement.......................................................... Recitals Option Plans.............................................................. 2.12(a) Option Price.............................................................. 2.12(a)
PAGE ---- Options................................................................... 2.11(b) Other Stock Plan.......................................................... 2.12(a) Person.................................................................... 9.4(d) Proxy Statement........................................................... 2.7(a)(ii) Proxy Statement........................................................... 4.10 Purchaser Information..................................................... 3.3(b) Purchaser Representatives................................................. 6.5(b) Real Property............................................................. 4.20(a) Rights.................................................................... Recitals Rights Agreement.......................................................... Recitals Schedule 14D-1............................................................ 1.1(c) Schedule 14D-9............................................................ 1.2(b) SEC....................................................................... 1.1(c) SEC Reports............................................................... 4.5(a) Securities Act............................................................ 4.5(a) Series D Per Share Amount................................................. Recitals Series D Shares........................................................... Recitals Shares.................................................................... Recitals Special Meeting........................................................... 2.7(a)(i) Stockholders' Meeting..................................................... 4.10 Subsidiary................................................................ 4 Superior Proposal......................................................... 5.3(b) Surviving Corporation..................................................... 2.1 Takeover Proposal......................................................... 5.1 Takeover Proposal Interest................................................ 5.1 Tax Authority............................................................. 4.14(h) Tax Return................................................................ 4.14(i) Taxes..................................................................... 4.14(h) Termination Fee........................................................... 8.2(b) Voting Debt............................................................... 4.4(b)
2 EXHIBIT A COMPANY OPTION AGREEMENT STOCK OPTION AGREEMENT, dated as of July 1, 1997 (this "Agreement"), between Fremont Acquisition Company, LLC, a Delaware limited liability company ("Parent"), and Kerr Group, Inc., a Delaware corporation (the "Company"). WHEREAS, Parent, Kerr Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of Parent ("Sub"), and the Company, concurrently with the execution and delivery of this Agreement, will enter into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), providing for, among other things, the merger of Sub with and into the Company (the "Merger"); and WHEREAS, as a condition to the willingness of Parent and Sub to enter into the Merger Agreement, Parent and Sub have required that the Company agree, and in order to induce Parent and Sub to enter into the Merger Agreement the Company has agreed, to grant Parent the option (as hereinafter defined) upon the terms and subject to the conditions of this Agreement. NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, the parties hereto hereby agree as follows: ARTICLE I THE OPTION SECTION 1.1 GRANT OF OPTION. The Company hereby grants to Parent an irrevocable option (the "Option") to purchase up to 782,685 newly-issued shares (the "Shares") of the Common Stock, par value $.50 per share ("Company Common Stock"), of the Company at a purchase price per share of $5.40 (the "Exercise Price"), in the manner set forth in Sections 1.2 and 1.3 of this Agreement; PROVIDED, HOWEVER, that in no event shall the number of Shares for which the Option is exercisable exceed 19.9% of the Company's issued and outstanding shares of Company Common Stock. The number of Shares that may be received upon the exercise of the Option and the Exercise Price are subject to adjustment as herein set forth. This Agreement shall terminate, and the Option hereby granted expire, on the earliest of (i) the Effective Time (as defined in the Merger Agreement) and (ii) to the extent that no Option Notice (as defined below) has theretofore been given by Parent, six (6) months after any termination of the Merger Agreement pursuant to Article VIII thereof. SECTION 1.2 EXERCISE OF OPTION. At any time or from time to time prior to the termination of the option granted hereunder in accordance with the terms of this Agreement, Parent (or its designee) may exercise the option, in whole or in part, if on or after the date hereof: (a) any corporation, partnership, individual, trust, unincorporated association, or other entity or "person" (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) other than Parent or any of its "affiliates" (as defined in the Exchange Act) (a "Third Party"), shall have: (i) commenced a BONA FIDE tender offer or exchange offer for any shares of Company Common Stock, the consummation of which would result in "beneficial ownership" (as defined under the Exchange Act) by such Third Party (together with all such Third Party's affiliates and "associates" (as such term is defined in the Exchange Act)) of 15% or more of the then outstanding voting equity of the Company (either on a primary or a fully diluted basis); (ii) acquired beneficial ownership of shares of Company Stock which, when aggregated with any shares of Company Stock already owned by such Third Party, its affiliates and associates, would result in the aggregate beneficial ownership by such Third Party its affiliates and associates of 15% (or, in the case of The Gabelli Funds, Inc. and its affiliates and associates, 32%), or more of the then outstanding voting equity of the Company (either on a primary or a fully diluted basis), PROVIDED, HOWEVER, that "Third Party" for purposes of this clause (ii) shall not include any corporation, partnership, person, other entity or group which beneficially owns more than 15% of the outstanding voting equity of the Company (either on a primary or a fully diluted basis) as of the date hereof and that does not, after the date hereof, increase such ownership percentage by more than an additional 1% of the outstanding voting equity of the Company (either on a primary or a fully diluted basis); (iii) solicited "proxies" in a "solicitation" subject to the proxy rules under the Exchange Act, executed any written consent or become a "participant" in any "solicitation" (as such terms are defined in Regulation 14A under the Exchange Act), in each case with respect to the Company Stock; or (b) any of the events described in Section 8.1(g) or (h) of the Merger Agreement that would allow Parent to terminate the Merger Agreement has occurred (but without the necessity of Parent having terminated the Merger Agreement). In the event that Parent wishes to exercise all or any part of the Option, Parent shall give written notice (the "Option Notice," with the date of the Option Notice being hereinafter called the "Notice Date") to the Company specifying the number of Shares it will purchase and a place and date (not earlier than three (3) nor later than twenty (20) business days from the Notice Date) for closing such purchase (a "Closing"). Parent's obligation to purchase Shares upon any exercise of the option is subject (at its election) to the conditions that (i) no preliminary or permanent injunction or other order against the purchase, issuance or delivery of the Shares issued by any federal, state or foreign court of competent jurisdiction shall be in effect (and no action or proceeding shall have been commenced or threatened for purposes of obtaining such an injunction or order) and (ii) any applicable waiting period under the HSR Act shall have expired and (iii) there shall have been no material breach of the representations, warranties, covenants or agreements of the Company contained in this Agreement or the Merger Agreement; PROVIDED, HOWEVER, that any failure by Parent to purchase Shares upon exercise of the Option at any Closing as a result of the nonsatisfaction of any of such conditions shall not affect or prejudice Parent's right to purchase such Shares upon the subsequent satisfaction of such conditions. Upon request by Parent, the Company will promptly take all action required to effect all necessary filings by the Company under the HSR Act. SECTION 1.3 PURCHASE OF SHARES. At any Closing, (i) the Company will deliver to Parent the certificate or certificates representing the number of Shares being purchased in proper form for transfer upon exercise of the Option in the denominations designated by Parent in the Option Notice, and, if the Option has been exercised in part, a new Option evidencing the rights of Parent to purchase the balance of the Shares subject thereto, and (ii) Parent shall pay the aggregate purchase price for the Shares to be purchased by delivery to the Company of a certified or bank cashier's check payable in New York Clearing House funds to the order of the Company in the amount of the Exercise Price times the number of shares to be purchased. SECTION 1.4 ADJUSTMENTS UPON SHARE ISSUANCES, CHANGES IN CAPITALIZATION, ETC. (a) In the event of any change in Company Common Stock or in the number of outstanding shares of Company Common Stock by reason of a stock dividend, split-up, recapitalization, combination, exchange of shares or similar transaction or any other change in the corporate or capital structure of the Company (including, without limitation, the declaration or payment of an extraordinary dividend of cash, securities or other property), the type and number of the Shares to be issued by the Company upon exercise of the Option shall be adjusted appropriately, and proper provision shall be made in the agreements governing such transaction, so that Parent shall receive upon exercise of the Option the number and class of shares or other securities or property that Parent would have received in respect to the Company Common Stock if the Option had been exercised immediately prior to such event, or the record date therefor, as applicable, and such 2 Company Common Stock had elected to the fullest extent it would have been permitted to elect, to receive such securities, cash or other property. (b) In the event that the Company shall enter into an agreement (i) to consolidate with or merge into any person, other than Parent or one of its subsidiaries, and shall not be the continuing or surviving corporation of such consolidation or merger, (ii) to permit any person, other than Parent or one of its subsidiaries, to merge into the Company and the Company shall be the continuing or surviving corporation, but, in connection with such merger, the then outstanding shares of Company Common Stock shall be changed into or exchanged for stock or other securities of the Company or any other person or cash or any other property, or then outstanding shares of Company Common Stock shall after such merger represent less than 50% of the outstanding shares and share equivalents of the surviving corporation or (iii) to sell or otherwise transfer all or substantially all of its assets to any person, other than Parent or one of its subsidiaries, then, and in each such case, proper provision shall be made in the agreements governing such transaction so that Parent shall receive upon exercise of the Option the number and class of shares or other securities or property that Parent would have received in respect of Company Common Stock if the Option had been exercised immediately prior to such transaction, or the record date therefor, as applicable, and such Company Common Stock had elected to the fullest extent it would have been permitted to elect, to receive such securities, cash or other property. (c) The rights of Parent under this Section 1.4 shall be in addition to, and shall in no way limit, its rights against the Company for any breach of the Merger Agreement. (d) The provisions of this Agreement shall apply with appropriate adjustments to any securities for which the Option becomes exercisable pursuant to this Section 1.4. ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to Parent as follows: SECTION 2.1 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company is a corporation duly organized and validly existing under the laws of the State of Delaware. The Company has all necessary power and authority (corporate and otherwise) to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of the Company, and no other corporate proceeding on the part of the Company is necessary to authorize this Agreement or for the Company to consummate such transactions. This Agreement has been duly and validly executed and delivered by the Company and, assuming this Agreement constitutes a valid and binding obligation of Parent, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. SECTION 2.2 NO CONFLICT; REQUIRED FILINGS AND CONSENTS. The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not, (i) conflict with or violate the certificate of incorporation or by-laws of the Company, (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to the Company or by which the Company is bound or affected, (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or encumbrance of any kind on any of the Shares pursuant to, any agreement, contract, indenture, notice or instrument to which the Company is a party or by which the Company is bound or affected, or (iv) except for applicable requirements, if any, of the HSR Act, the Exchange Act and the Securities Act of 1933, as amended (the "Securities Act"), require any filing by the Company with, or any permit, authorization, consent or approval of, any governmental or regulatory authority, domestic or foreign. 3 SECTION 2.3 OPTION SHARES. The Company has taken all necessary corporate action to authorize and reserve for issuance upon exercise of the Option a total of 782,685 Shares, and the Shares, when issued and delivered by the Company to Parent upon exercise of the Option, will be duly authorized, validly issued, fully paid and nonassessable shares of Company Common Stock, and will be free and clear of any security interests, liens, claims, pledges, charges or encumbrances of any kind. ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT Parent hereby represents and warrants to the Company as follows: SECTION 3.1 AUTHORITY RELATIVE TO THIS AGREEMENT. Parent is a limited liability company duly organized and validly existing under the laws of the State of Delaware. Parent has all necessary power and authority (corporate and otherwise) to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation by Parent of the transactions contemplated hereby have been duly authorized by the Board of Directors of Parent, and no other corporate proceeding on the part of Parent is necessary to authorize this Agreement or for Parent to consummate such transactions. This Agreement has been duly executed and delivered by Parent and, assuming its due authorization, execution and delivery by the Company, constitutes a legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms. SECTION 3.2 NO CONFLICT, REQUIRED FILING AND CONSENTS. The execution and delivery of this Agreement by Parent do not, and the performance of this Agreement by Parent will not, (i) conflict with or violate the certificate of formation of Parent, (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to Parent or by which Parent is bound or affected, (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, contract, indenture, note or instrument to which Parent is a party or by which it is bound or affected or (iv) except for applicable requirements, if any, of the HSR Act, the Exchange Act, and the Securities Act, require any filing by Parent with, or any permit, authorization, consent or approval of, any governmental or regulatory authority, domestic or foreign, except in the case of each of the foregoing clauses (i) through (iv) for any such conflicts, violations, breaches, defaults, failures to file or obtain the consent or approval of, or other occurrences that would not cause or create a material risk of non-performance or delayed performance by Parent of its obligations under this Agreement. SECTION 3.3 INVESTMENT INTENT. The purchase of Shares pursuant to this Agreement is for the account of Parent for the purpose of investment and not with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act and the rules and regulations promulgated thereunder. ARTICLE IV ADDITIONAL AGREEMENTS SECTION 4.1 REGISTRATION RIGHTS; LISTING OF SHARES. (a) Upon the written request of Parent, the Company agrees to effect up to two registrations under the Securities Act and any applicable state securities laws covering any part or all of the Option (provided that only Shares will be distributed to the public) and any part or all of the Shares purchased under this Agreement, which registration shall be continued in effect for 90 days, unless, in the written opinion of counsel to the Company, addressed to Parent and reasonably satisfactory in form and substance to counsel for Parent, such registration is not required for the sale and distribution of such Shares in the manner contemplated by Parent. The registration effected under this paragraph shall be effected at the Company's expense except for any 4 underwriting commissions. If Shares are offered in a firm commitment underwriting, the Company will provide reasonable and customary indemnification to the underwriters. In the event of any demand for registration pursuant to this paragraph, the Company may delay the filing of the registration statement for a period of up to 90 days if, in the good faith judgment of the Board of Directors of the Company, such delay is necessary in order to avoid interference with a planned material transaction involving the Company. In the event the Company effects a registration of Company Common Stock for its own account or for any other stockholder of the Company (other than on Form S-4 or Form S-8, or any successor or similar form), it shall allow Parent to participate in such registration; PROVIDED, HOWEVER,that if the managing underwriters in such offering advise the Company in writing that in their opinion the number of shares of Company Common Stock requested to be included in such registration exceeds the number which can be sold in such offering, the Company will include the securities requested to be included therein pro rata among the holders requesting to be included. (b) The Company shall, at its expense, use its best efforts to cause the Shares to be approved for quotation on the New York Stock Exchange, Inc. (the "NYSE") subject to notice of issuance, as promptly as practicable following the date of this Agreement, and will provide prompt notice to the NYSE of the issuance of each Share pursuant to any exercise of the Option. SECTION 4.2 LIMITATION ON PROFIT. (a) Notwithstanding any other provision of this Agreement, in no event shall Parent's Total Profit (as hereinafter defined) exceed $1,000,000 and, if it otherwise would exceed such amount, Parent, at its sole election, shall either (a) reduce the number of shares of Company Common Stock subject to the Company Option, (b) deliver to Company for cancellation Company Shares previously purchased by Parent, (c) pay cash to Company, or (d) any combination thereof, so that Parent's actually realized Total Profit shall not exceed $1,000,000 after taking into account the foregoing actions. (b) As used herein, the term "TOTAL PROFIT" shall mean the aggregate amount (before taxes) of the following: (i) (x) the net cash amounts received by Parent pursuant to the sale of Company Shares (or any other securities into which such Company Shares are converted or exchanged) to any unaffiliated party, less (y) Parent's purchase price of such Company Shares, and (ii) any Notional Total Profit (as defined below). (c) As used herein, the term "Notional Total Profit" with respect to any number of shares as to which Parent may propose to exercise the Company Option shall be the Total Profit determined as of the date of such proposal assuming that the Company Option were exercised on such date for such number of shares and assuming that such shares, together with all other Company Shares held by Parent and its affiliates as of such date, were sold for cash at the closing market price for the Company Common Stock as of the close of business on the preceding trading day (less customary brokerage commissions). SECTION 4.3 TRANSFER OF SHARES; RESTRICTIVE LEGEND. Parent agrees not to transfer or otherwise dispose of the Shares, or any interest therein, without first providing to the Company an opinion of counsel for Parent, reasonably satisfactory in form and substance to counsel for the Company, to the effect that such transfer or disposition will not violate the Securities Act or any applicable state law governing the offer and sale of securities, and the rules and regulations thereunder. Parent further agrees to the placement on the certificate(s) representing the Shares of the following legend: 5 "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE." provided that upon provision to the Company of any opinion of counsel for Parent, reasonably satisfactory in form and substance to counsel for the Company, to the effect that such legend is no longer required under the provisions of the Securities Act or applicable state securities laws, the Company shall promptly cause new unlegended certificates representing such Shares to be issued to Parent against surrender of such legended certificates. SECTION 4.4 BEST EFFORTS. Subject to the terms and conditions of this Agreement, Parent and the Company shall each use its best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement. Each party shall promptly consult with the other and provide any necessary information and material with respect to all filings made by such party with any governmental or regulatory authority in connection with this Agreement or the transactions contemplated hereby. SECTION 4.5 FURTHER ASSURANCES. The Company shall perform such further acts and execute such further documents and instruments as may reasonably be required to vest in Parent the power to carry out the provisions of this Agreement. If Parent shall exercise the Option, or any portion thereof, in accordance with the terms of this Agreement, the Company shall, without additional consideration, execute and deliver all such further documents and instruments and take all such further action as Parent may reasonably request for the purpose of effectively carrying out the transactions contemplated by this Agreement. SECTION 4.6 SURVIVAL. All of the representations, warranties and covenants contained herein shall survive a Closing and shall be deemed to have been made as of the date hereof and as of the date of each Closing. ARTICLE V MISCELLANEOUS SECTION 5.1 SPECIFIC PERFORMANCE. The parties hereto agree that if any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached, irreparable damage would occur, no adequate remedy at law would exist and damages would be difficult to determine, and that the parties shall be entitled to specific performance of the terms hereof, without any requirement for securing or posting any bond, in addition to any other remedy at law or equity. SECTION 5.2 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, between the parties, or any of them, with respect to the subject matter hereof. SECTION 5.3 AMENDMENT; ASSIGNMENT. This Agreement may not be amended except by an instrument in writing signed by the parties hereto and specifically referencing this Agreement. No party to this Agreement may assign any of its rights or obligations under this Agreement without the prior written consent of the other party hereto, except that the rights and obligations of Parent hereunder may, upon written notice to the Company prior to or promptly following such action, be assigned by Parent to any of its corporate affiliates, but no such transfer shall relieve Parent of its obligations hereunder if such transferee does not perform such obligations. 6 SECTION 5.4 SEVERABILITY. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provisions hereof or thereof shall not affect the validity and enforceability of the other provisions hereof. If any provision of this Agreement, or the application thereof to any person or entity or any circumstances, is invalid or unenforceable, (i) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid and unenforceable provision and (ii) the remainder of this Agreement and the application of such provision to other persons, entities or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction. SECTION 5.5 GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware without giving effect to the provisions thereof relating to conflicts of law. SECTION 5.6 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but each of which together shall constitute one and the same document. SECTION 5.7 NOTICES. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given if delivered personally or sent by overnight courier (providing proof of delivery) to the parties at the addresses specified below (or at such other address for a party as shall be specified by like notice): (i) if to Parent, to its address set forth in Section 9.2(a) of the Merger Agreement; and (ii) if to the Company, to the Company's address set forth in Section 9.2(b) of the Merger Agreement. SECTION 5.8 BINDING EFFECT. This Agreement shall be binding upon, inure to the benefit of, and be enforceable by the successors and assigns of the parties hereto. Nothing expressed or referred to in this Agreement is intended or shall be construed to give any person other than the parties to this Agreement, or their respective successors or assigns, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. IN WITNESS WHEREOF, each of the Company and Parent have caused this Agreement to be executed on its behalf by its officers thereunto duly authorized, all as of the date first above written. KERR GROUP, INC. By: ----------------------------------------- Name: D. Gordon Strickland Title: President and CEO FREMONT ACQUISITION COMPANY, LLC By: ----------------------------------------- Name: Gil Lamphere Title: President 7 EX-99.(C)(2) 14 EXHIBIT (C)(2) EXHIBIT (c)(2) COMPANY OPTION AGREEMENT STOCK OPTION AGREEMENT, dated as of July 1, 1997 (this "Agreement"), between Fremont Acquisition Company, LLC, a Delaware limited liability company ("Parent"), and Kerr Group, Inc., a Delaware corporation (the "Company"). WHEREAS, Parent, Kerr Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of Parent ("Sub"), and the Company, concurrently with the execution and delivery of this Agreement, will enter into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), providing for, among other things, the merger of Sub with and into the Company (the "Merger"); and WHEREAS, as a condition to the willingness of Parent and Sub to enter into the Merger Agreement, Parent and Sub have required that the Company agree, and in order to induce Parent and Sub to enter into the Merger Agreement the Company has agreed, to grant Parent the option (as hereinafter defined) upon the terms and subject to the conditions of this Agreement. NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, the parties hereto hereby agree as follows: ARTICLE I THE OPTION SECTION 1.1 GRANT OF OPTION. The Company hereby grants to Parent an irrevocable option (the "Option") to purchase up to 782,685 newly-issued shares (the "Shares") of the Common Stock, par value $.50 per share ("Company Common Stock"), of the Company at a purchase price per share of $5.40 (the "Exercise Price"), in the manner set forth in Sections 1.2 and 1.3 of this Agreement; PROVIDED, HOWEVER, that in no event shall the number of Shares for which the Option is exercisable exceed 19.9% of the Company's issued and outstanding shares of Company Common Stock. The number of Shares that may be received upon the exercise of the Option and the Exercise Price are subject to adjustment as herein set forth. This Agreement shall terminate, and the Option hereby granted expire, on the earliest of (i) the Effective Time (as defined in the Merger Agreement) and (ii) to the extent that no Option Notice (as defined below) has theretofore been given by Parent, six (6) months after any termination of the Merger Agreement pursuant to Article VIII thereof. SECTION 1.2 EXERCISE OF OPTION. At any time or from time to time prior to the termination of the option granted hereunder in accordance with the terms of this Agreement, Parent (or its designee) may exercise the option, in whole or in part, if on or after the date hereof: (a) any corporation, partnership, individual, trust, unincorporated association, or other entity or "person" (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) other than Parent or any of its "affiliates" (as defined in the Exchange Act) (a "Third Party"), shall have: (i) commenced a BONA FIDE tender offer or exchange offer for any shares of Company Common Stock, the consummation of which would result in "beneficial ownership" (as defined under the Exchange Act) by such Third Party (together with all such Third Party's affiliates and "associates" (as such term is defined in the Exchange Act)) of 15% or more of the then outstanding voting equity of the Company (either on a primary or a fully diluted basis); (ii) acquired beneficial ownership of shares of Company Stock which, when aggregated with any shares of Company Stock already owned by such Third Party, its affiliates and associates, would result in the aggregate beneficial ownership by such Third Party its affiliates and associates of 15% (or, in the case of The Gabelli Funds, Inc. and its affiliates and associates, 32%), or more of the then outstanding voting equity of the Company (either on a primary or a fully diluted basis), PROVIDED, HOWEVER, that "Third Party" for purposes of this clause (ii) shall not include any corporation, partnership, person, other entity or group which beneficially owns more than 15% of the outstanding voting equity of the Company (either on a primary or a fully diluted basis) as of the date hereof and that does not, after the date hereof, increase such ownership percentage by more than an additional 1% of the outstanding voting equity of the Company (either on a primary or a fully diluted basis); (iii) solicited "proxies" in a "solicitation" subject to the proxy rules under the Exchange Act, executed any written consent or become a "participant" in any "solicitation" (as such terms are defined in Regulation 14A under the Exchange Act), in each case with respect to the Company Stock; or (b) any of the events described in Section 8.1(g) or (h) of the Merger Agreement that would allow Parent to terminate the Merger Agreement has occurred (but without the necessity of Parent having terminated the Merger Agreement). In the event that Parent wishes to exercise all or any part of the Option, Parent shall give written notice (the "Option Notice," with the date of the Option Notice being hereinafter called the "Notice Date") to the Company specifying the number of Shares it will purchase and a place and date (not earlier than three (3) nor later than twenty (20) business days from the Notice Date) for closing such purchase (a "Closing"). Parent's obligation to purchase Shares upon any exercise of the option is subject (at its election) to the conditions that (i) no preliminary or permanent injunction or other order against the purchase, issuance or delivery of the Shares issued by any federal, state or foreign court of competent jurisdiction shall be in effect (and no action or proceeding shall have been commenced or threatened for purposes of obtaining such an injunction or order) and (ii) any applicable waiting period under the HSR Act shall have expired and (iii) there shall have been no material breach of the representations, warranties, covenants or agreements of the Company contained in this Agreement or the Merger Agreement; PROVIDED, HOWEVER, that any failure by Parent to purchase Shares upon exercise of the Option at any Closing as a result of the nonsatisfaction of any of such conditions shall not affect or prejudice Parent's right to purchase such Shares upon the subsequent satisfaction of such conditions. Upon request by Parent, the Company will promptly take all action required to effect all necessary filings by the Company under the HSR Act. SECTION 1.3 PURCHASE OF SHARES. At any Closing, (i) the Company will deliver to Parent the certificate or certificates representing the number of Shares being purchased in proper form for transfer upon exercise of the Option in the denominations designated by Parent in the Option Notice, and, if the Option has been exercised in part, a new Option evidencing the rights of Parent to purchase the balance of the Shares subject thereto, and (ii) Parent shall pay the aggregate purchase price for the Shares to be purchased by delivery to the Company of a certified or bank cashier's check payable in New York Clearing House funds to the order of the Company in the amount of the Exercise Price times the number of shares to be purchased. SECTION 1.4 ADJUSTMENTS UPON SHARE ISSUANCES, CHANGES IN CAPITALIZATION, ETC. (a) In the event of any change in Company Common Stock or in the number of outstanding shares of Company Common Stock by reason of a stock dividend, split-up, recapitalization, combination, exchange of shares or similar transaction or any other change in the corporate or capital structure of the Company (including, without limitation, the declaration or payment of an extraordinary dividend of cash, securities or other property), the type and number of the Shares to be issued by the Company upon exercise of the Option shall be adjusted appropriately, and proper provision shall be made in the agreements governing such transaction, so that Parent shall receive upon exercise of the Option the number and class of shares or other securities or property that Parent would have received in respect to the Company Common Stock if the Option had been exercised immediately prior to such event, or the record date therefor, as applicable, and such 2 Company Common Stock had elected to the fullest extent it would have been permitted to elect, to receive such securities, cash or other property. (b) In the event that the Company shall enter into an agreement (i) to consolidate with or merge into any person, other than Parent or one of its subsidiaries, and shall not be the continuing or surviving corporation of such consolidation or merger, (ii) to permit any person, other than Parent or one of its subsidiaries, to merge into the Company and the Company shall be the continuing or surviving corporation, but, in connection with such merger, the then outstanding shares of Company Common Stock shall be changed into or exchanged for stock or other securities of the Company or any other person or cash or any other property, or then outstanding shares of Company Common Stock shall after such merger represent less than 50% of the outstanding shares and share equivalents of the surviving corporation or (iii) to sell or otherwise transfer all or substantially all of its assets to any person, other than Parent or one of its subsidiaries, then, and in each such case, proper provision shall be made in the agreements governing such transaction so that Parent shall receive upon exercise of the Option the number and class of shares or other securities or property that Parent would have received in respect of Company Common Stock if the Option had been exercised immediately prior to such transaction, or the record date therefor, as applicable, and such Company Common Stock had elected to the fullest extent it would have been permitted to elect, to receive such securities, cash or other property. (c) The rights of Parent under this Section 1.4 shall be in addition to, and shall in no way limit, its rights against the Company for any breach of the Merger Agreement. (d) The provisions of this Agreement shall apply with appropriate adjustments to any securities for which the Option becomes exercisable pursuant to this Section 1.4. ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to Parent as follows: SECTION 2.1 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company is a corporation duly organized and validly existing under the laws of the State of Delaware. The Company has all necessary power and authority (corporate and otherwise) to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of the Company, and no other corporate proceeding on the part of the Company is necessary to authorize this Agreement or for the Company to consummate such transactions. This Agreement has been duly and validly executed and delivered by the Company and, assuming this Agreement constitutes a valid and binding obligation of Parent, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. SECTION 2.2 NO CONFLICT; REQUIRED FILINGS AND CONSENTS. The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not, (i) conflict with or violate the certificate of incorporation or by-laws of the Company, (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to the Company or by which the Company is bound or affected, (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or encumbrance of any kind on any of the Shares pursuant to, any agreement, contract, indenture, notice or instrument to which the Company is a party or by which the Company is bound or affected, or (iv) except for applicable requirements, if any, of the HSR Act, the Exchange Act and the Securities Act of 1933, as amended (the "Securities Act"), require any filing by the Company with, or any permit, authorization, consent or approval of, any governmental or regulatory authority, domestic or foreign. 3 SECTION 2.3 OPTION SHARES. The Company has taken all necessary corporate action to authorize and reserve for issuance upon exercise of the Option a total of 782,685 Shares, and the Shares, when issued and delivered by the Company to Parent upon exercise of the Option, will be duly authorized, validly issued, fully paid and nonassessable shares of Company Common Stock, and will be free and clear of any security interests, liens, claims, pledges, charges or encumbrances of any kind. ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT Parent hereby represents and warrants to the Company as follows: SECTION 3.1 AUTHORITY RELATIVE TO THIS AGREEMENT. Parent is a limited liability company duly organized and validly existing under the laws of the State of Delaware. Parent has all necessary power and authority (corporate and otherwise) to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation by Parent of the transactions contemplated hereby have been duly authorized by the Board of Directors of Parent, and no other corporate proceeding on the part of Parent is necessary to authorize this Agreement or for Parent to consummate such transactions. This Agreement has been duly executed and delivered by Parent and, assuming its due authorization, execution and delivery by the Company, constitutes a legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms. SECTION 3.2 NO CONFLICT, REQUIRED FILING AND CONSENTS. The execution and delivery of this Agreement by Parent do not, and the performance of this Agreement by Parent will not, (i) conflict with or violate the certificate of formation of Parent, (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to Parent or by which Parent is bound or affected, (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, contract, indenture, note or instrument to which Parent is a party or by which it is bound or affected or (iv) except for applicable requirements, if any, of the HSR Act, the Exchange Act, and the Securities Act, require any filing by Parent with, or any permit, authorization, consent or approval of, any governmental or regulatory authority, domestic or foreign, except in the case of each of the foregoing clauses (i) through (iv) for any such conflicts, violations, breaches, defaults, failures to file or obtain the consent or approval of, or other occurrences that would not cause or create a material risk of non-performance or delayed performance by Parent of its obligations under this Agreement. SECTION 3.3 INVESTMENT INTENT. The purchase of Shares pursuant to this Agreement is for the account of Parent for the purpose of investment and not with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act and the rules and regulations promulgated thereunder. ARTICLE IV ADDITIONAL AGREEMENTS SECTION 4.1 REGISTRATION RIGHTS; LISTING OF SHARES. (a) Upon the written request of Parent, the Company agrees to effect up to two registrations under the Securities Act and any applicable state securities laws covering any part or all of the Option (provided that only Shares will be distributed to the public) and any part or all of the Shares purchased under this Agreement, which registration shall be continued in effect for 90 days, unless, in the written opinion of counsel to the Company, addressed to Parent and reasonably satisfactory in form and substance to counsel for Parent, such registration is not required for the sale and distribution of such Shares in the manner contemplated by Parent. The registration effected under this paragraph shall be effected at the Company's expense except for any 4 underwriting commissions. If Shares are offered in a firm commitment underwriting, the Company will provide reasonable and customary indemnification to the underwriters. In the event of any demand for registration pursuant to this paragraph, the Company may delay the filing of the registration statement for a period of up to 90 days if, in the good faith judgment of the Board of Directors of the Company, such delay is necessary in order to avoid interference with a planned material transaction involving the Company. In the event the Company effects a registration of Company Common Stock for its own account or for any other stockholder of the Company (other than on Form S-4 or Form S-8, or any successor or similar form), it shall allow Parent to participate in such registration; PROVIDED, HOWEVER,that if the managing underwriters in such offering advise the Company in writing that in their opinion the number of shares of Company Common Stock requested to be included in such registration exceeds the number which can be sold in such offering, the Company will include the securities requested to be included therein pro rata among the holders requesting to be included. (b) The Company shall, at its expense, use its best efforts to cause the Shares to be approved for quotation on the New York Stock Exchange, Inc. (the "NYSE") subject to notice of issuance, as promptly as practicable following the date of this Agreement, and will provide prompt notice to the NYSE of the issuance of each Share pursuant to any exercise of the Option. SECTION 4.2 LIMITATION ON PROFIT. (a) Notwithstanding any other provision of this Agreement, in no event shall Parent's Total Profit (as hereinafter defined) exceed $1,000,000 and, if it otherwise would exceed such amount, Parent, at its sole election, shall either (a) reduce the number of shares of Company Common Stock subject to the Company Option, (b) deliver to Company for cancellation Company Shares previously purchased by Parent, (c) pay cash to Company, or (d) any combination thereof, so that Parent's actually realized Total Profit shall not exceed $1,000,000 after taking into account the foregoing actions. (b) As used herein, the term "TOTAL PROFIT" shall mean the aggregate amount (before taxes) of the following: (i) (x) the net cash amounts received by Parent pursuant to the sale of Company Shares (or any other securities into which such Company Shares are converted or exchanged) to any unaffiliated party, less (y) Parent's purchase price of such Company Shares, and (ii) any Notional Total Profit (as defined below). (c) As used herein, the term "Notional Total Profit" with respect to any number of shares as to which Parent may propose to exercise the Company Option shall be the Total Profit determined as of the date of such proposal assuming that the Company Option were exercised on such date for such number of shares and assuming that such shares, together with all other Company Shares held by Parent and its affiliates as of such date, were sold for cash at the closing market price for the Company Common Stock as of the close of business on the preceding trading day (less customary brokerage commissions). SECTION 4.3 TRANSFER OF SHARES; RESTRICTIVE LEGEND. Parent agrees not to transfer or otherwise dispose of the Shares, or any interest therein, without first providing to the Company an opinion of counsel for Parent, reasonably satisfactory in form and substance to counsel for the Company, to the effect that such transfer or disposition will not violate the Securities Act or any applicable state law governing the offer and sale of securities, and the rules and regulations thereunder. Parent further agrees to the placement on the certificate(s) representing the Shares of the following legend: 5 "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE." provided that upon provision to the Company of any opinion of counsel for Parent, reasonably satisfactory in form and substance to counsel for the Company, to the effect that such legend is no longer required under the provisions of the Securities Act or applicable state securities laws, the Company shall promptly cause new unlegended certificates representing such Shares to be issued to Parent against surrender of such legended certificates. SECTION 4.4 BEST EFFORTS. Subject to the terms and conditions of this Agreement, Parent and the Company shall each use its best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement. Each party shall promptly consult with the other and provide any necessary information and material with respect to all filings made by such party with any governmental or regulatory authority in connection with this Agreement or the transactions contemplated hereby. SECTION 4.5 FURTHER ASSURANCES. The Company shall perform such further acts and execute such further documents and instruments as may reasonably be required to vest in Parent the power to carry out the provisions of this Agreement. If Parent shall exercise the Option, or any portion thereof, in accordance with the terms of this Agreement, the Company shall, without additional consideration, execute and deliver all such further documents and instruments and take all such further action as Parent may reasonably request for the purpose of effectively carrying out the transactions contemplated by this Agreement. SECTION 4.6 SURVIVAL. All of the representations, warranties and covenants contained herein shall survive a Closing and shall be deemed to have been made as of the date hereof and as of the date of each Closing. ARTICLE V MISCELLANEOUS SECTION 5.1 SPECIFIC PERFORMANCE. The parties hereto agree that if any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached, irreparable damage would occur, no adequate remedy at law would exist and damages would be difficult to determine, and that the parties shall be entitled to specific performance of the terms hereof, without any requirement for securing or posting any bond, in addition to any other remedy at law or equity. SECTION 5.2 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, between the parties, or any of them, with respect to the subject matter hereof. SECTION 5.3 AMENDMENT; ASSIGNMENT. This Agreement may not be amended except by an instrument in writing signed by the parties hereto and specifically referencing this Agreement. No party to this Agreement may assign any of its rights or obligations under this Agreement without the prior written consent of the other party hereto, except that the rights and obligations of Parent hereunder may, upon written notice to the Company prior to or promptly following such action, be assigned by Parent to any of its corporate affiliates, but no such transfer shall relieve Parent of its obligations hereunder if such transferee does not perform such obligations. 6 SECTION 5.4 SEVERABILITY. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provisions hereof or thereof shall not affect the validity and enforceability of the other provisions hereof. If any provision of this Agreement, or the application thereof to any person or entity or any circumstances, is invalid or unenforceable, (i) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid and unenforceable provision and (ii) the remainder of this Agreement and the application of such provision to other persons, entities or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction. SECTION 5.5 GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware without giving effect to the provisions thereof relating to conflicts of law. SECTION 5.6 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but each of which together shall constitute one and the same document. SECTION 5.7 NOTICES. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given if delivered personally or sent by overnight courier (providing proof of delivery) to the parties at the addresses specified below (or at such other address for a party as shall be specified by like notice): (i) if to Parent, to its address set forth in Section 9.2(a) of the Merger Agreement; and (ii) if to the Company, to the Company's address set forth in Section 9.2(b) of the Merger Agreement. SECTION 5.8 BINDING EFFECT. This Agreement shall be binding upon, inure to the benefit of, and be enforceable by the successors and assigns of the parties hereto. Nothing expressed or referred to in this Agreement is intended or shall be construed to give any person other than the parties to this Agreement, or their respective successors or assigns, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. IN WITNESS WHEREOF, each of the Company and Parent have caused this Agreement to be executed on its behalf by its officers thereunto duly authorized, all as of the date first above written. KERR GROUP, INC. By: /s/ D. Gordon Strickland ----------------------------------------- Name: D. Gordon Strickland Title: President and CEO FREMONT ACQUISITION COMPANY, LLC By: /s/ Gil Lamphere ----------------------------------------- Name: Gil Lamphere Title: President 7 EX-99.(C)(3) 15 EXHIBIT (C)(3) EXHIBIT (c)(3) GUARANTEE Guarantee, dated as of July 1, 1997, by and between Kerr Group, Inc., a Delaware corporation (the "Company") and Fremont Partners, L.P., a Delaware limited partnership ("Guarantor"). WHEREAS, each of Fremont Acquisition Company, LLC, a Delaware limited liability company ("Parent"), and Kerr Acquisition Corporation, a Delaware corporation (the "Purchaser"), is a direct or indirect, wholly-owned subsidiary of Guarantor; and WHEREAS, the Company, Parent, and the Purchaser have entered into an Agreement and Plan of Merger (the "Merger Agreement") of even date herewith; and WHEREAS, upon the terms and subject to the conditions set forth in the Merger Agreement, the Purchaser will make a cash tender offer (the "Offer") to acquire all shares of the issued and outstanding common stock, $.50 par value, of the Company (the "Company Common Stock"), including the associated Common Stock Purchase Rights issued pursuant to the Rights Agreement dated as of July 25, 1995, between the Company and The First National Bank of Boston, and all shares of the issued and outstanding Class B Preferred Stock, par value $.50 per share, Series D (the "Series D Shares"; the Company Common Stock and the Series D Shares being collectively referred to herein as the "Shares"), for $5.40 per share of Company Common Stock and $12.50 per Series D Shares or such higher price as may be paid in the Offer, in each case net to the seller in cash; and WHEREAS, as an inducement to the Company to enter into the Merger Agreement, the Guarantor has agreed to enter into this agreement; NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the Company and Guarantor hereby agree as follows: 1. Guarantor hereby unconditionally and irrevocably guarantees, as primary obligor and not merely as surety, for the benefit of the Company the performance of all obligations of Parent or the Purchaser pursuant to the Merger Agreement. 2. Guarantor covenants that this Guarantee will not be discharged except by complete performance of the obligations contained in this Guarantee. This Guarantee shall not be affected by, and shall remain in full force and effect notwithstanding, any bankruptcy, insolvency, liquidation, or reorganization of Parent or the Purchaser or Guarantor. 3. Guarantor agrees to pay, on demand, and to save the Company harmless against liability for, any and all costs and expenses (including reasonable fees and disbursements of counsel) incurred or expended by the Company in connection with the enforcement of or preservation of any rights under this Guarantee. 4. Guarantor hereby represents, warrants and covenants to the Company as follows: a. Guarantor is a limited partnership duly organized and validly existing under the laws of the State of Delaware. Guarantor has the necessary power and authority to own and operate its properties and assets and to carry on its business as currently conducted. b. Guarantor has all requisite legal power and authority to enter into this Guarantee. The Guarantor has all requisite legal power and authority to carry out and perform its obligations under the terms of this Guarantee. The Guarantee constitutes the valid and binding obligation of Guarantor, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium, reorganization or other laws or equitable principles relating to or affecting creditors' rights generally. c. All partnership action on the part of Guarantor and its general partner and limited partners necessary to authorize the execution, delivery and performance of this Guarantee has been taken. d. The Guarantor has funds available to it sufficient to purchase, or cause the purchase of, the Shares in accordance with the terms of the Merger Agreement and to pay, or cause to be paid, all amounts due (or which will, as a result of the transactions contemplated by the Merger Agreement, become due) in respect of any indebtedness of the Company for money borrowed outstanding as of the date of the consummation of the Offer (as defined in the Merger Agreement), a schedule of which is attached as Schedule 3.4 to the Disclosure Schedule to the Merger Agreement. 5. This Guarantee shall be deemed to be a contract under the laws of the State of Delaware and shall for all purposes be governed by and construed in accordance with the laws of such State. 6. This Guarantee shall terminate and be of no further force or effect upon the consummation of the purchase by the Purchaser, Parent or any of their respective affiliates of any Shares pursuant to the Offer. IN WITNESS WHEREOF, each of the Company and Guarantor have caused this Guarantee to be executed on its behalf by its officers thereunto duly authorized, all as on the date first above written. KERR GROUP, INC. By: /s/ D. Gordon Strickland ------------------------ Name: D. Gordon Strickland Title: President and CEO FREMONT PARTNERS, L.P. By: FREMONT ADVISORS, L.L.C., its general partner By: FREMONT GROUP, L.L.C., its managing member By: FREMONT INVESTORS, INC., its manager By: /s/ R.S. Kopf ------------------- Name: R.S. Kopf Title: Managing Principal, General Counsel and Secretary 2 EX-99.(C)(4) 16 EXHIBIT (C)(4) EXHIBIT (c)(4) [letterhead] November 6, 1995 Fremont Group, Inc. 50 Fremont Street, Suite 3700 San Francisco, CA 94105 Attention: Mr. Gregory P. Spivy Principal In connection with your consideration of a possible transaction with Kerr Group, Inc. and/or its subsidiaries or affiliates (collectively, with such subsidiaries or affiliates, the "Company"), the Company is prepared to make available to you certain information concerning the business, financial condition, operations, assets and liabilities of the Company. As a condition to such information being finished to you and your directors, officers, employees, agents or advisors (including, without limitation, attorneys, accountants, consultants, bankers and financial advisors) (collectively, "Representatives"), you agree to treat any information concerning the Company (whether prepared by the Company, its advisors or otherwise and irrespective of the form of communication) which has been or will be furnished to you or to your Representatives by or on behalf of the Company (herein collectively referred to as the "Evaluation Material") in accordance with the provisions of this letter agreement, and to take or abstain from taking certain other actions hereinafter set forth. The term "Evaluation Material" shall be deemed to include all notes, analyses, compilations, studies, interpretations or other documents prepared by you or your Representatives which contain, reflect or are based upon, in whole or in part, the information furnished to you or your Representatives pursuant hereto. The term "Evaluation Material" does not include information which (i) is or becomes generally available to the public other than as a result of a disclosure by you or your Representatives in violation hereof, (ii) was within your possession prior to its being furnished to you by or on behalf of the Company pursuant hereto, provided that the source of such information was not known by you to be bound by a confidentiality agreement with or other contractual, legal or fiduciary obligation of confidentiality to the Company or any other party with respect to such information or (iii) becomes available to you on a non-confidential basis from a source other than the Company or any of its Representatives, provided that such source is not known by you to be bound by a confidentiality agreement with or other contractual, legal or fiduciary obligation of confidentiality to the Company or any other party with respect to such information. You hereby agree that you and your Representatives shall use the Evaluation Material solely for the purpose of evaluating a possible transaction between the Company and you, that the Evaluation Material will be kept confidential and that you and your Representatives will not disclose any of the Evaluation Material in any manner whatsoever, provided, however, that (i) you may make any disclosure of such information to which the Company gives its prior written consent and (ii) any of such information may be disclosed to your Representatives who execute a copy of this Agreement and deliver it to Lehman Brothers and who need to know such information for the sole purpose of evaluating a possible transaction with the Company. In any event, you shall be responsible for any breach of this letter agreement by any of your officers, directors and employees and you agree, at your sole expense, to take all reasonable measures to restrain your officers, directors and employees from prohibited or unauthorized disclosure or use of the Evaluation Material. In addition, you agree that, without the prior written consent of the Company except as required by law, you and your Representatives will not disclose to any other person the fact that the Evaluation Material has been made available to you, that discussions or negotiations are taking place concerning a possible transaction involving the Company or any of the terms, conditions or other facts with respect thereto (including the stratus thereof), unless in the opinion or your counsel such disclosure is required by law and then only with as much prior written notice to the Company as is practical under the circumstances. Without limiting the generality of the foregoing, you further agree that, without the prior written consent of the Company, you will not, directly or indirectly, enter into any agreement, arrangement or understanding, with any other person regarding a possible transaction involving a purchase of the Company's stock or a significant portion of its assets. The term "person" as used in this letter agreement shall be broadly interpreted to include the media and any corporation, partnership, group, individual or other entity. You further agree that, without the prior consent of Lehman Brothers, all communications regarding the proposed transaction, requests for additional information, and discussions or questions regarding procedures, will be submitted or directed only to Lehman Brothers and not to the Company or any of its affiliates or any of their respective directors, officers or employees. In the event that you or any of your Representatives are requested or required (by deposition, interrogatories, requests for information or documents in legal proceedings, subpoena, civil investigative demand or other process) to disclose any of the Evaluation Material, you shall provide the Company with prompt written notice of any such request or requirement so that the Company may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this letter agreement. If, in the absence of a protective order or other remedy or the receipt of a waiver by the Company, you or any of your Representatives are nonetheless, in the opinion of your counsel, legally compelled to disclose Evaluation Material or else stand liable for contempt or suffer other censure or penalty, you or your Representative may, without liability hereunder, disclose only that portion of the Evaluation Material which such counsel advises you is legally required to be disclosed, provided that you cooperate with the Company to preserve the confidentiality of the Evaluation Material, including, without limitation, by cooperating with the Company to obtain an appropriate protective order or other reliable assurance that confidential treatment will be accorded the Evaluation Material by such tribunal, but you shall not be required to incur significant cost or expense to do so. If you decide that you do not with to proceed with a transaction with the Company, you will promptly inform the Company of that decision at the Company's request. At any time upon the written request of the Company for any reason, you will promptly deliver to the Company all documents (and all copies thereof) furnished to you or your Representatives by or on behalf of the Company pursuant hereto (except for one (1) achival copy). In the event of such a decision or request, all other Evaluation Material prepared by you or your Representatives shall be destroyed or retained at your election. Notwithstanding the return, retention or destruction of the Evaluation Material, you and your Representatives will continue to be bound by your obligations of confidentiality and other obligations hereunder. You understand and acknowledge that neither the Company nor any of its Representatives (including without limitation Lehman Brothers Inc.) make any representation or warranty, express or implied, as to the accuracy or completeness of the Evaluation Material. You agree that neither the Company nor any of its Representatives (including without limitation Lehman Brothers Inc.) shall have any liability to you or to any of your Representatives relating to or resulting from the use of the Evaluation Material. Only those representations or warranties which are made in a final definitive agreement regarding the transactions contemplated hereby, when, as and if executed, and subject to such limitations and restrictions as may be specified therein, will have any legal effect. In consideration of the Evaluation Material being furnished to you, you hereby agree that, without the prior written consent of the Board of Directors of the Company, for a period of two years from the date hereof, neither you nor any of your affiliates to whom you have disclosed the Evaluation Material as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934 (the "Exchange Act")) will: (a) acting alone or as part of a group, acquire or offer or agree to acquire, directly or indirectly, by purchase or otherwise, any voting securities (or direct or indirect rights or options to acquire any voting securities) of the Company; (b) make, or in any way participate, directly or indirectly, in any "solicitation" of "proxies" to vote (as such terms are used in the rules under the Exchange Act) or seek to advise or influence any person or entity with respect to the voting of any voting securities of the Company; (c) make any public announcement with respect to any transaction or proposed or contemplated transaction between the Company or any of its security holders and you or any of your affiliates, including, without limitation, any tender or exchange offer, merger or other business combinations or acquisition of a material portion of the assets of the Company; (d) disclose any intention, plan or arrangement regarding any of the matters referred to in clauses (a), (b) or (c); or (e) solicit for employment any current officer or management level employee of the Company with whom you first had contact during your investigation of the Company, but his prohibition shall not apply to general solicitation in the ordinary course of your business. The above (a) through (d) shall not apply to ordinary brokerage or trading transactions by a securities dealer or a transaction entered into on your behalf by a third party without your specific consent (e.g. by investment advisors with investment discretion). You hereby acknowledge that you are aware, and that you will advise your Representatives, that the United States securities laws prohibit any person who has received material, non-public information concerning certain matters which are the subject of this letter agreement from purchasing or selling securities of the Company or from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities. You agree that unless and until a final definitive agreement regarding a transaction between the Company and you has been executed and delivered, neither the Company nor you will be under any legal obligation of any kind whatsoever with respect to such a transaction by virtue of this letter agreement except for the matters specifically agreed to herein. You further acknowledge and agree that the Company reserves the right, in its sole discretion, to reject any and all proposals made by you or any of your Representatives with regard to a transaction between the Company and you, and to terminate discussions and negotiations with you at any time. Without limiting the generality of the foregoing, you further agree that (i) the Company shall be free to conduct the process for a possible transaction as the Company in its sole discretion shall determine (including, without limitation, negotiating with any other person and entering into a definitive agreement without prior notice to you or any other person); (ii) any of the procedures, if any, relating to a possible transaction may be changed at any time without notice to you or any other person; (iii) the Company shall have the right to reject or accept any potential proposal, offer or participant therein, for any reason whatsoever, in its sole discretion; and (iv) neither you nor any of your Representatives shall have any claim whatsoever against the Company or its Representatives arising out of or relating to a possible transaction (other than those as against the parties to a definitive agreement with you in accordance with the terms thereof). The Company reserves the right to assign all of its rights, powers and privileges under this letter agreement (including, without limitation, the right to enforce all of the terms of this letter agreement) to any person who enters into the transactions contemplated by this letter agreement. It is understood and agreed that no failure or delay by the Company in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. It is further understood and agreed that money damages would not be a sufficient remedy for any breach of this letter agreement by you or any of your Representatives and that the Company shall be entitled to equitable relief, including injunction and specific performance, as a remedy for any such breach. You further agree to waive, any requirement for the securing or posting of any bond in connection with such remedy. Such remedies shall not be deemed to be the exclusive remedies for a breach by you of this letter agreement but shall be in addition to all other remedies available at law or equity to the Company. In the event of litigation relating to this letter agreement, the non-prevailing party shall be liable and pay to the prevailing party the reasonable legal fees incurred by the prevailing party in connection with such litigation, including any appeal therefrom. This letter agreement shall be governed by and construed in accordance with the laws of the State of New York and shall automatically expire two (2) years after the date hereof. All modifications of, waivers of and amendments to this letter agreement must be in writing and signed on behalf of you and the Company. Please confirm your agreement with the foregoing by signing and returning one copy of this letter to the undersigned, whereupon this letter agreement shall become a binding agreement between you and the Company. Very truly yours, /S/ (illegible) ------------------------------------------ Lehman Brothers Inc. as financial advisor to, and on behalf of, Kerr Group, Inc. Accepted and agreed as modified herein as of the date first written above: FREMONT GROUP, INC. By: /S/Gregory P. Spivy ------------------- Name: Gregory P. Spivy Title: Principal -----END PRIVACY-ENHANCED MESSAGE-----