-----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, B45Guf3aus+OGOgec6u/d0bXw5G9YTdO+WzfkkdXTnszKf7Ria7M0AV63xDx5UAZ M9yj6pHc9D9+uRwgap7fiw== 0000950135-98-006382.txt : 19981228 0000950135-98-006382.hdr.sgml : 19981228 ACCESSION NUMBER: 0000950135-98-006382 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 19981223 GROUP MEMBERS: HOLMES PRODUCTS CORP GROUP MEMBERS: MORIARTY ACQUISITION CORP SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: RIVAL CO CENTRAL INDEX KEY: 0000860194 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC HOUSEWARES & FANS [3634] IRS NUMBER: 133327021 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: SEC FILE NUMBER: 005-44879 FILM NUMBER: 98774345 BUSINESS ADDRESS: STREET 1: 800 E 101ST TERRACE CITY: KANSAS CITY STATE: MO ZIP: 64131 BUSINESS PHONE: 8169434100 MAIL ADDRESS: STREET 1: 800 E 101ST TERRACE CITY: KANSAS CITY STATE: MO ZIP: 64131 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: HOLMES PRODUCTS CORP CENTRAL INDEX KEY: 0001052490 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRICAL APPLIANCES, TV & RADIO SETS [5064] IRS NUMBER: 042768914 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: 233 FORTUNE BLVD CITY: MILFORDJ STATE: MA ZIP: 01757 BUSINESS PHONE: 5086348050 MAIL ADDRESS: STREET 1: 233 FORTUNE BLVD STREET 2: 233 FORTUNE BLVD CITY: MILFORD STATE: MA ZIP: 02114 SC 14D1 1 HOLMES PRODUCTS CORP. 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 ------------------------ THE RIVAL COMPANY (NAME OF SUBJECT COMPANY [ISSUER]) MORIARTY ACQUISITION CORP. A WHOLLY-OWNED SUBSIDIARY OF HOLMES PRODUCTS CORP. (BIDDER) COMMON STOCK, PAR VALUE $0.01 PER SHARE (TITLE OF CLASS OF SECURITIES) 768020109 (CUSIP NUMBER OF CLASS OF SECURITIES) JORDAN A. KAHN PRESIDENT HOLMES PRODUCTS CORP. 233 FORTUNE BOULEVARD MILFORD, MA 01757 (508) 634-8050 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDER) ------------------------ WITH A COPY TO: DONALD H. SIEGEL, P.C. MICHAEL L. ANDRESINO, ESQ. POSTERNAK, BLANKSTEIN & LUND, L.L.P. 100 CHARLES RIVER PLAZA BOSTON, MASSACHUSETTS 02114 (617) 973-6100 CALCULATION OF FILING FEE - -------------------------------------------------------------------------------------------- Transaction Valuation: $139,899,898* Amount of Filing Fee: $27,980** - --------------------------------------------------------------------------------------------
* For purposes of calculation of the filing fee only. This amount assumes the purchase of (i) 9,294,227 outstanding shares of Common Stock, par value $0.01 per share (the "Shares") of Issuer and (ii) 880,311 Shares issuable pursuant to outstanding stock options, in each case at a purchase price of $13.75 per Share, net to the seller in cash, without interest thereon. ** The amount of the filing fee, calculated in accordance with Rule 0-11(d) of the Securities Exchange Act of 1934, as amended, equals 1/50(th) of one percent of the Transaction Valuation. [ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: Not applicable Filing Party: Not applicable Form or Registration No.: Not applicable Date Filed: Not applicable
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 14D-1 CUSIP No. 768020109 - --------------------------------------------------------------------------- 1. Name of Reporting Persons S.S. or I.R.S. Identification No. of Above Persons: MORIARTY ACQUISITION CORP.* - --------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of a Group: (a) [X] (b) [ ] - --------------------------------------------------------------------------- 3. SEC Use Only - --------------------------------------------------------------------------- 4. Sources of Funds BK, AF, 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 NONE - --------------------------------------------------------------------------- 8. Check if the Aggregate Amount in Row 7 Excludes Certain Shares [ ] - --------------------------------------------------------------------------- 9. Percent of Class Represented by Amount in Row 7 0% - --------------------------------------------------------------------------- 10. Type of Reporting Person CO - ---------------------------------------------------------------------------
- --------------- * I.R.S. Identification No. applied for. 2 3 14D-1 CUSIP No. 768020109 - --------------------------------------------------------------------------- 1. Name of Reporting Persons S.S. or I.R.S. Identification No. of Above Persons: HOLMES PRODUCTS CORP. (I.R.S. IDENTIFICATION NO. 04-2768914) - --------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of a Group: (a) [X] (b) [ ] - --------------------------------------------------------------------------- 3. SEC Use Only - --------------------------------------------------------------------------- 4. Sources of Funds BK, AF, 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 MASSACHUSETTS - --------------------------------------------------------------------------- 7. Aggregate Amount Beneficially Owned by Each Reporting Person NONE - --------------------------------------------------------------------------- 8. Check if the Aggregate Amount in Row 7 Excludes Certain Shares [ ] - --------------------------------------------------------------------------- 9. Percent of Class Represented by Amount in Row 7 0% - --------------------------------------------------------------------------- 10. Type of Reporting Person CO - ---------------------------------------------------------------------------
3 4 This Tender Offer Statement on Schedule 14D-1 (the "Statement"), relates to the offer by Moriarty Acquisition Corp. ("Purchaser"), a Delaware corporation and a wholly-owned subsidiary of Holmes Products Corp., a Massachusetts corporation ("Parent"), to purchase all of the outstanding shares of Common Stock, par value $0.01 per share (the "Shares"), of The Rival Company, a Delaware corporation (the "Company"), at a purchase price of $13.75 per Share, net to the seller in cash, without interest thereon. ITEM 1. SECURITY AND SUBJECT COMPANY. (a) The name of the subject company is The Rival Company. The address of the Company's principal executive offices is 800 E. 101st Terrace, Kansas City, Missouri 64131. (b) The information set forth in the "Introduction" of the Offer to Purchase annexed hereto as Exhibit (a)(1) (the "Offer to Purchase") is incorporated herein by reference. (c) The information set forth in Section 6 ("Price Range of 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 Purchaser and Parent. The information set forth in Section 9 ("Certain Information Concerning Purchaser and Parent") of the Offer to Purchase and Schedule I thereto is incorporated herein by reference. (e) and (f) During the last five years, neither Purchaser nor Parent, nor, to the best knowledge of Purchaser and Parent, any persons controlling Purchaser or Parent, or any of the persons listed on Schedule I to the Offer to Purchase, (i) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which any such person was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. (a)-(b) The information set forth in the Introduction, Section 9 ("Certain Information Concerning Purchaser and Parent"), Section 11 ("Background of the Offer") and Section 12 ("Purpose of the Offer and the Merger; The Merger Agreement; Other Agreements; 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") and Section 12 ("Purpose of the Offer and the Merger; The Merger Agreement; Other Agreements; 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; Nasdaq Quotation and Exchange Act Registration") of the Offer to Purchase is incorporated herein by reference. 4 5 ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a) The information set forth in Section 9 ("Certain Information Concerning Purchaser and Parent") of the Offer to Purchase is incorporated herein by reference. (b) The information set forth in Section 9 ("Certain Information Concerning Purchaser and Parent") 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 and Section 9 ("Certain Information Concerning Purchaser and Parent"), Section 11 ("Background of the Offer") and Section 12 ("Purpose of the Offer and the Merger; The Merger Agreement; Other Agreements; Plans for the Company; Other Matters") of the Offer to Purchase is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in the Introduction and 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 Purchaser and Parent") of the Offer to Purchase is incorporated herein by reference. In addition, Parent is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and accordingly, files financial and other information with the Securities and Exchange Commission (the "Commission"). Such information may be inspected and copied at the public reference facilities of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates, and at the following regional offices of the Commission: Seven World Trade Center, Suite 3300, New York, New York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The Commission also maintains an Internet web site at http://www.sec.gov where such information is available. The following financial statements filed by Parent with the Commission are hereby incorporated by reference: (1) Parent's audited Consolidated Financial Statements and notes thereto beginning on page F-1 of Amendment No. 2 to Parent's Registration Statement on Form S-4 (File No. 33-44473), filed with the Commission on March 23, 1998; and (2) Parent's unaudited Consolidated Financial Statements and notes thereto set forth at Part I, Item 1 of Parent's Quarterly Reports on Form 10-Q filed with the Commission for the periods ended March 31, 1998, June 30, 1998 and September 30, 1998. The incorporation by reference herein of the above-referenced financial information does not constitute an admission that such information is material to a decision by a stockholder of the Company whether to sell, tender or hold Shares being sought in the Offer. ITEM 10. ADDITIONAL INFORMATION. (a) Not applicable. (b)-(c) The information set forth in the Introduction and Section 15 ("Certain Legal Matters; Regulatory Approvals") 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 the Shares; Nasdaq Quotation and Exchange Act Registration") and Section 15 ("Certain Legal Matters; Regulatory Approvals") of the Offer to Purchase is incorporated herein by reference. 5 6 (e) The information set forth in Section 15 ("Certain Legal Matters; Regulatory Approvals") of the Offer to Purchase is incorporated herein by reference. (f) The information set forth in the Offer to Purchase and the Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively, is incorporated herein by reference. ITEM 11. MATERIAL TO BE FILED AS EXHIBITS. (a) (1) Offer to Purchase, dated December 23, 1998. (2) Letter of Transmittal. (3) Notice of Guaranteed Delivery. (4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees. (5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees. (6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (7) Summary Advertisement as published on December 23, 1998. (8) Text of Press Release issued by Parent and the Company dated December 17, 1998. (9) Text of Press Release issued by Parent dated December 23, 1998. (b) Not applicable (to be filed by amendment). (c) (1) Agreement and Plan of Merger, dated December 17, 1998, by and among the Company, Parent and Purchaser. (2) Tender and Voting Agreement, dated December 17, 1998, by and among Parent, Purchaser and the directors and certain executive officers of the Company. (3) Confidentiality Agreement, dated October 1, 1998, by and between Parent and BancAmerica Securities, Inc. on behalf of the Company. (d) Not applicable. (e) Not applicable. (f) None. 6 7 SIGNATURES After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. HOLMES PRODUCTS CORP. By: /s/ IRA B. MORGENSTERN ------------------------------------ Ira B. Morgenstern Senior Vice President -- Finance MORIARTY ACQUISITION CORP. By: /s/ IRA B. MORGENSTERN ------------------------------------ Ira B. Morgenstern Treasurer Dated: December 23, 1998 7 8 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION (a)(1) Offer to Purchase, dated December 23, 1998. (a)(2) Letter of Transmittal. (a)(3) Notice of Guaranteed Delivery. (a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees. (a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees. (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (a)(7) Summary Advertisement as published on December 23, 1998. (a)(8) Text of Press Release issued by Parent and the Company dated December 17, 1998. (a)(9) Text of Press Release issued by Parent dated December 23, 1998. (c)(1) Agreement and Plan of Merger, dated as of December 17, 1998, by and among the Company, Parent and Purchaser. (c)(2) Tender and Voting Agreement, dated as of December 17, 1998, by and among Parent, Purchaser and the directors and certain executive officers of the Company. (c)(3) Confidentiality Agreement, dated as of October 1, 1998, by and between Parent and BancAmerica Securities, Inc. on behalf the Company.
8 EX-99.(A)(1) 2 OFFER TO PURCHASE 1 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF THE RIVAL COMPANY AT $13.75 NET PER SHARE BY MORIARTY ACQUISITION CORP. A WHOLLY-OWNED SUBSIDIARY OF HOLMES PRODUCTS CORP. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 25, 1999, UNLESS THE OFFER IS EXTENDED. THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER BY AND AMONG THE RIVAL COMPANY (THE "COMPANY"), HOLMES PRODUCTS CORP. ("PARENT") AND MORIARTY ACQUISITION CORP. ("PURCHASER"). THE BOARD OF DIRECTORS OF THE COMPANY (WITH ONE DIRECTOR ABSENT) HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER REFERRED TO HEREIN AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES (AS DEFINED HEREIN). THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS (1) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE OF THE OFFER THAT NUMBER OF SHARES, WHICH, TOGETHER WITH ANY SHARES THEN OWNED BY PARENT OR PURCHASER, REPRESENTS AT LEAST 70% OF THE SHARES THEN OUTSTANDING, (2) PARENT AND PURCHASER HAVING RECEIVED THE CASH PROCEEDS OF FINANCING TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT AND (3) ANY WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE OFFER HAVING EXPIRED OR BEEN TERMINATED. THE OFFER ALSO IS SUBJECT TO CERTAIN OTHER CONDITIONS WHICH ARE SET FORTH IN SECTION 14. ------------------------ IMPORTANT Any stockholder desiring to tender all or any portion of such stockholder's Shares should either (1) complete and sign the Letter of Transmittal (or a facsimile thereof) in accordance with the instructions set forth in the Letter of Transmittal and (A) mail or deliver it, together with the certificate(s) representing tendered Shares and any other required documents to the Depositary (as defined herein) or (B) tender such Shares pursuant to the procedures for book-entry transfer set forth in Section 3, or (2) request such stockholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such stockholder. A stockholder whose Shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee if such stockholder desires to tender such Shares. A stockholder who desires to tender Shares, and whose certificates representing such Shares are not immediately available, or who cannot comply with the procedures for book-entry transfer described in this Offer to Purchase 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 Dealer Manager or the Information Agent at the address and telephone numbers set forth on the back cover of this Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of Transmittal or other tender offer materials may be obtained from the Information Agent. Stockholders may also contact their brokers, dealers, commercial banks and trust companies for assistance concerning the Offer. ------------------------ The Dealer Manager for the Offer is: DONALDSON, LUFKIN & JENRETTE The Information Agent for the Offer is: MORROW & CO., INC. December 23, 1998 2 TABLE OF CONTENTS
PAGE ---- INTRODUCTION................................................ 1 THE TENDER OFFER............................................ 3 1. Terms of the Offer................................... 3 2. Acceptance for Payment and Payment for Shares........ 4 3. Procedures for Tendering Shares...................... 6 4. Withdrawal Rights.................................... 8 5. Certain United States Federal Income Tax Consequences........................................... 9 6. Price Range of Shares; Dividends..................... 10 7. Effect of the Offer on the Market for the Shares; Nasdaq Quotation and Exchange Act Registration....... 10 8. Certain Information Concerning the Company........... 11 9. Certain Information Concerning Purchaser and Parent................................................. 14 10. Source and Amount of Funds........................... 16 11. Background of the Offer.............................. 19 12. Purpose of the Offer and the Merger; The Merger Agreement; Other Agreements; Plans for the Company; Other Matters........................................ 20 13. Dividends and Distributions.......................... 32 14. Certain Conditions of the Offer...................... 32 15. Certain Legal Matters; Regulatory Approvals.......... 34 16. Fees and Expenses.................................... 36 17. Miscellaneous........................................ 36 SCHEDULE I--Information Relating to Directors and Executive Officers of Parent and Purchaser.......................... I-1
3 TO THE HOLDERS OF SHARES OF COMMON STOCK OF THE RIVAL COMPANY: INTRODUCTION Moriarty Acquisition Corp. ("Purchaser"), a Delaware corporation and a wholly-owned subsidiary of Holmes Products Corp., a Massachusetts corporation ("Parent"), hereby offers to purchase all outstanding shares (the "Shares") of common stock, par value $0.01 per share (the "Common Stock"), of The Rival Company, a Delaware corporation (the "Company"), at a purchase price of $13.75 per Share, net to the seller in cash, without interest thereon (the "Offer Price"), upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") (WITH ONE DIRECTOR ABSENT) HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER (AS DEFINED BELOW) AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. THE FACTORS CONSIDERED BY THE BOARD OF DIRECTORS OF THE COMPANY IN ARRIVING AT ITS DECISION TO APPROVE THE OFFER AND THE MERGER AND TO RECOMMEND THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES ARE DESCRIBED IN THE COMPANY'S SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 (THE "SCHEDULE 14D-9") WHICH IS BEING MAILED TO STOCKHOLDERS OF THE COMPANY HEREWITH. The Company's financial advisor, NationsBanc Montgomery Securities LLC (the "Financial Advisor"), has delivered to the Company its opinion dated December 14, 1998 that the consideration to be received by holders of Shares (other than Parent and Purchaser, and other than holders of dissenting shares, if any) pursuant to the Offer and the Merger is fair to such holders from a financial point of view. The full text of the opinion is set forth as an Annex to the Schedule 14D-9 and should, together with the related sections of the Schedule 14D-9, be read carefully and in its entirety in connection with the Offer. The Financial Advisor's opinion is directed to the Board of Directors of the Company and does not constitute a recommendation to any stockholder of the Company as to how such stockholder should respond to the Offer. The Financial Advisor's opinion addresses only the financial fairness of the consideration to be received by the holders of Shares pursuant to the Offer and the Merger and does not address any other aspect of the Offer or the Merger. The Offer is being made pursuant to the Agreement and Plan of Merger dated as of December 17, 1998 (the "Merger Agreement"), among Parent, Purchaser and the Company. The Merger Agreement provides, among other things, for the commencement of the Offer by Purchaser and further provides that, following the satisfaction or waiver of certain conditions, a merger (the "Merger") will be effected under the terms of which Purchaser will be merged with and into the Company, with the Company surviving the Merger (the "Surviving Corporation"). The Surviving Corporation will be a wholly-owned subsidiary of Parent. In the Merger, each outstanding Share (other than Shares held by stockholders who properly demand their appraisal rights under Delaware law, Shares held in the Company's treasury and Shares owned by Parent or Purchaser) will be converted into the right to receive the Offer Price in cash, without interest (the "Merger Consideration"). See Section 12. The Merger Agreement provides that the Offer is conditioned upon, among other things, (1) satisfaction of the Minimum Condition, as defined below, (2) Parent and Purchaser having received the cash proceeds of the Financing, as defined below, in an amount sufficient to consummate the transactions contemplated by the Merger Agreement and (3) the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and receipt of any required regulatory consents and approvals. See Sections 1 and 14, which set forth the conditions of the Offer, and Section 15, which discusses certain legal matters and regulatory consents and approvals. The consummation of the Merger is subject to the satisfaction or waiver of a number of conditions, including, if required, the approval of the Merger by the requisite vote or consent of the Stockholders. Under the Delaware General Corporation Law (the "DGCL"), the stockholder vote necessary to approve the Merger will be the affirmative vote of at least a majority of the outstanding Shares, including Shares held by 1 4 Purchaser and its affiliates. If Purchaser purchases at least a majority of the outstanding Shares in the Offer, Purchaser will be able to effect the Merger without the affirmative vote of any other stockholders. If Purchaser acquires at least 90% of the outstanding Shares pursuant to the Offer or otherwise, Purchaser will be able to effect the Merger pursuant to the "short-form" merger provisions of Section 253 of the DGCL, without prior notice to, or any action by, any other Stockholder. In that event, Purchaser intends to effect the Merger as promptly as practicable following the purchase of Shares in the Offer. See Section 12. In connection with the execution of the Merger Agreement, Parent and Purchaser entered into a Tender and Voting Agreement, dated as of December 17, 1998 (the "Tender and Voting Agreement"), with all of the directors and certain executive officers of the Company (the "Tendering Stockholders"). The Tendering Stockholders beneficially own an aggregate of 1,049,769 Shares (which Shares represent approximately 11.3% of the Shares currently outstanding). Pursuant to the Tender and Voting Agreement, the Tendering Stockholders have agreed to validly tender pursuant to the Offer and not withdraw all Shares which are beneficially owned by them prior to the Expiration Date. The Merger Agreement and the Tender and Voting Agreement are more fully described in Section 12. The Minimum Condition. Consummation of 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, which represents at least 70% of the number of Shares then outstanding (the "Minimum Condition"). The Company has represented that on December 17, 1998 it had issued and outstanding 9,294,227 Shares and outstanding stock options to purchase an aggregate of 378,611 Shares at exercise prices at or below the Offer Price and that are vested or that will vest as a result of the transactions contemplated by the Merger Agreement. Based on the foregoing, assuming no change in the number of outstanding shares other than the potential exercise of the options referred to above, the Minimum Condition will be satisfied if at least 6,770,987 Shares (including the 1,049,769 Shares subject to the Tender and Voting Agreement) are validly tendered and not withdrawn prior to the Expiration Date. The actual number of Shares required to be tendered to satisfy the Minimum Condition will depend upon the actual number of Shares outstanding on the date Purchaser accepts Shares for payment pursuant to the Offer. The Financing Condition. Purchaser's obligation to purchase Shares pursuant to the Offer is conditioned upon, among other things, Parent and Purchaser having received the cash proceeds of the Financing in an amount sufficient to consummate the transactions contemplated by the Merger Agreement (the "Financing Condition"). As described in Section 10, Parent and Purchaser intend to obtain all funds needed for the Offer and the Merger through (1) the issuance of $50 million of equity securities of Parent, (2) the incurrence of approximately $250 million of indebtedness under a new credit facility, and (3) the issuance of $30 million in principal amount of Parent's 9 7/8% Senior Subordinated Notes due 2007 (as further described in Section 10, the "Financing"). Certain other conditions to consummation of the Offer are described in Section 14. Purchaser expressly reserves the right, in its sole discretion, to waive any one or more of the conditions to the Offer. See Section 14. 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, stock transfer taxes on the purchase of Shares pursuant to the Offer. However, any tendering stockholder or other payee who fails to complete and sign the Substitute Form W-9 included in the Letter of Transmittal may be subject to a required backup federal income tax withholding of 31% of the gross proceeds payable to such stockholder or other payee pursuant to the Offer. See Section 3. Purchaser will pay all fees and expenses of Donaldson, Lufkin & Jenrette Securities Corporation, which is acting as the Dealer Manager for the Offer ("DLJ" or the "Dealer Manager"), Morrow & Co., Inc., which is acting as Information Agent (the "Information Agent"), and Harris Trust Company of New York, which is acting as Depositary (the "Depositary"), incurred in connection with the Offer. See Section 16. THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 2 5 THE TENDER OFFER 1. TERMS OF 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 extension or amendment), Purchaser will accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not withdrawn in accordance with Section 4. The term "Expiration Date" means 12:00 midnight, New York City time, on Monday, January 25, 1999, unless and until Purchaser shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by Purchaser, shall expire. The Offer is conditioned upon, among other things, the satisfaction of the Minimum Condition, the Financing Condition and certain other customary conditions described herein (the "Offer Conditions"). See Section 14. If any or all of such conditions are not satisfied prior to the Expiration Date, Purchaser expressly reserves the right, in its sole discretion, at any time and from time to time, to (1) decline to purchase any of the Shares tendered and terminate the Offer, subject to the terms of the Merger Agreement, (2) waive any of the conditions to the Offer (including the Minimum Condition, provided that no such waiver of the Minimum Condition shall decrease the Minimum Condition to less than a majority of the outstanding shares), to the extent permitted by applicable law and the provisions of the Merger Agreement and, subject to complying with the applicable rules and regulations of the Securities and Exchange Commission (the "Commission"), purchase all Shares validly tendered, (3) subject to the terms of the Merger Agreement, extend the Offer and, subject to the right of stockholders to withdraw Shares until the Expiration Date, retain the Shares which will have been tendered during the period or periods for which the Offer is extended or (4) subject to the terms of the Merger Agreement, amend the Offer. Purchaser has agreed in the Merger Agreement that it will not, without the prior written consent of the Company (1) decrease the price per Share payable in the Offer, (2) decrease the maximum number of Shares to be purchased in the Offer, (3) impose terms and conditions to the Offer in addition to those set forth in Section 14, (4) change the terms and conditions to the Offer in any respect adverse to the Company, (5) except as provided in the next sentence, extend the Offer, (6) change the form of consideration payable in the Offer or (7) amend any other term or condition of the Offer in a manner adverse to the holders of the Shares. Notwithstanding the foregoing, pursuant to the Merger Agreement, Purchaser may, without the consent of the Company, (1) extend the Offer, at any time up to March 15, 1999, for one or more periods of not more than ten business days each, if any of the Offer Conditions shall not be satisfied or waived, until such time as such conditions are satisfied or waived, (2) extend the Offer for any period required by any rule, regulation, interpretation or position of the Commission or the staff thereof applicable to the Offer, or (3) if all of the Offer Conditions are satisfied or waived and the number of Shares tendered is at least equal to 70%, but less than 90%, of the then-outstanding number of Shares, further extend the Offer for an aggregate period of not more than ten business days beyond the then-scheduled Expiration Date. So long as this Agreement is in effect, the Offer has been commenced and the Offer Conditions have not been satisfied or waived, Purchaser shall cause the Offer not to expire. Subject to the terms of the Merger Agreement, Purchaser expressly reserves the right, in its sole discretion, at any time or from time to time, and regardless of whether or not any of the events set forth in Section 14 hereof shall have occurred or shall have been determined by Purchaser to have occurred (1) 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 (2) except as indicated above, to amend the Offer in any respect by giving oral or written notice of such amendment to the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE TO BE PAID BY PURCHASER FOR THE TENDERED SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. The rights reserved by Purchaser as set forth above are in addition to Purchaser's rights to terminate the Offer described in Section 14. Any extension, amendment or termination will be followed as promptly as 3 6 practicable by public announcement thereof, the announcement in the case of an extension to be made no later than 9:00 a.m., New York City time, on the next business day (as defined below) after the previously scheduled Expiration Date in accordance with the public announcement requirements of Rule l4e-1(d) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Subject to applicable law (including, without limitation, Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require that material changes in the information published, sent or given in connection with the Offer be promptly disseminated to stockholders in a manner reasonably designed to inform stockholders of such changes) and without limiting the manner in which Purchaser may choose to make any public announcement, Purchaser shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a press release to the Dow Jones News Service. If Purchaser extends the Offer (whether before or after its acceptance for payment of Shares), is delayed in its payment for Shares or is unable to pay for Shares pursuant to the Offer for any reason, then, without prejudice to Purchaser's rights under the Offer, the Depositary may retain tendered Shares on behalf of 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 Purchaser to delay the payment for Shares which Purchaser has accepted for payment is limited by Rule 14e-1(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 such bidder's offer. If 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, Purchaser will disseminate additional tender offer materials (including any public announcement as set forth above) and extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and l4e-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, including the relative materiality of the changes in the terms or information. With respect to a change in price or a change in the percentage of securities sought, a minimum period of ten business days is generally required to allow for adequate dissemination to stockholders and investor response. If, prior to the Expiration Date, Purchaser should decide to increase the price per Share being offered in the Offer, such increase will be applicable to all stockholders whose Shares are accepted for payment pursuant to the Offer and, if at the time notice of any such increase is first published sent or given to holders of such Shares, the Offer is scheduled to expire at any time earlier than the period ending on the tenth business day from and including the date that such notice is first so published, sent or given, the Offer will be extended at least until the expiration of such ten business day period. The Merger Agreement provides that, without the Company's prior written consent, Purchaser will not decrease the price or number of Shares sought in the Offer. As used in this Offer to Purchase, the term "business day" has the meaning set forth in Rule l4d-1 under the Exchange Act. The Company has provided Purchaser with its list of stockholders and security position listings for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase and the related Letter of Transmittal and, if required, other relevant materials will be mailed to record holders of Shares and will be furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the Company's stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares. 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will purchase, by accepting for payment, and will pay for, all Shares validly tendered prior to the Expiration Date (and not properly withdrawn in accordance with Section 4) promptly after the Expiration Date. Subject to the terms of the Merger Agreement, any determination concerning the satisfaction of such terms and conditions shall be within 4 7 the sole discretion of Purchaser and such determination shall be final and binding on all tendering stockholders. See Sections 1 and 14. 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-1(c) under the Exchange Act (relating to a bidder's obligation to pay for or return tendered securities promptly after the termination or withdrawal of such bidder's offer). In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates for (or a timely Book-Entry Confirmation (as defined in Section 3) with respect to) such Shares, (ii) a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message (as defined in Section 3), and (c) any other documents required by the Letter of Transmittal. THE PER SHARE CONSIDERATION PAID TO ANY STOCKHOLDER PURSUANT TO THE OFFER WILL BE THE HIGHEST PER SHARE CONSIDERATION PAID TO ANY OTHER STOCKHOLDER PURSUANT TO THE OFFER. A Notification and Report Form with respect to the Offer has been filed on behalf of Parent under the HSR Act. The waiting period under the HSR Act with respect to the Offer will expire at 11:59 p.m., New York City time, on the fifteenth calendar day after the date Parent's form is filed, unless early termination of the waiting period is granted. Before such time, however, the Antitrust Division of the United States Department of Justice (the "Antitrust Division") or the United States Federal Trade Commission (the "FTC") may extend the waiting period by requesting additional information or documentary material from Parent. If such request is made, such waiting period will expire at 11:59 p.m., New York City time, on the tenth calendar day after substantial compliance by Parent with such request. See Section 15 hereof for additional information concerning the HSR Act and applicability of the antitrust laws to the Offer. For purposes of the Offer, Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered to Purchaser and not withdrawn if, as and when Purchaser gives oral or written notice to the Depositary of Purchaser's acceptance of such Shares for payment. Payment for Shares accepted pursuant to the Offer will be made by deposit of the aggregate purchase price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payment from Purchaser and transmitting payment to such tendering stockholders. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE TO BE PAID BY PURCHASER FOR THE TENDERED SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. If, for any reason whatsoever, Purchaser is delayed in its acceptance for payment of or payment for any Shares tendered pursuant to the Offer, or Purchaser is unable to accept for payment or pay for Shares tendered pursuant to the Offer, then, without prejudice to Purchaser's rights under the Offer (but subject to compliance with Rule 14e-1(c) under the Exchange Act, which requires that a tender offeror pay the consideration offered or return the tendered securities promptly after termination or withdrawal of the tender offer), the Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares and such Shares may not be withdrawn except to the extent that under the Offer tendering stockholders are entitled to exercise and duly exercise withdrawal rights as described in Section 4. If any tendered Shares are not purchased pursuant to the Offer, certificates for any such Shares will be returned, without expense to the tendering stockholder (or, in the case of Shares tendered by book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility (as defined in Section 3) pursuant to the procedure set forth in Section 3, such Shares will be credited to an account maintained at such Book-Entry Transfer Facility), as promptly as is practicable after the expiration or termination of the Offer. Purchaser reserves the right to transfer or assign, in whole at any time or in part from time to time, to one or more of its affiliates or the affiliates of Parent the right to purchase all or any portion of the Shares tendered pursuant to the Offer, subject to the conditions to such assignment set forth in the Merger Agreement. Any such transfer or assignment will not relieve Parent or Purchaser of their obligations under the Offer and will in 5 8 no way prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 3. PROCEDURES FOR TENDERING SHARES. Valid Tender. For a stockholder validly to tender Shares pursuant to the Offer, either (i) a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and any other required documents, must be 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 and either the certificates for tendered Shares must be received by the Depositary at one of its addresses or such Shares must be delivered pursuant to the procedure for book-entry transfer described below (and a Book-Entry Confirmation must be received by the Depositary), in each case, prior to the Expiration Date, or (ii) the tendering stockholder must comply with the guaranteed delivery procedures described below. Book-Entry Transfer. The Depositary will establish an account with respect to the Shares at The Depository Trust Company and the Philadelphia Depository Trust Company (the "Book-Entry Transfer Facilities") for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in any of the Book-Entry Transfer Facilities' systems may make book-entry transfer of Shares by causing a Book-Entry Transfer Facility to transfer such Shares into the Depositary's account at a Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for transfer. However, although delivery of Shares may be effected through book-entry transfer at a Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and any other 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 a Book-Entry Transfer Facility as described above is referred to herein as a "Book-Entry Confirmation." DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. The term "Agent's Message" means a message, transmitted by a Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering the Shares that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that 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 ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION 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 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 any of the Book Entry Transfer Facilities' 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 Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program (each, an "Eligible Institution"). In all other 6 9 cases, all signatures on the Letter 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 accepted for payment or not tendered are to be returned to a person other than the registered holder of the certificates surrendered, then the tendered certificates must be endorsed or accompanied by appropriate stock powers, in either case, signed exactly as the names of the registered holders appear on the certificates, with the signatures on the certificates or stock powers guaranteed as described above. See Instructions 1 and 5 of the Letter of Transmittal. If the certificates for Shares are forwarded separately to the Depositary, a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, must accompany each such delivery. 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 procedure 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 satisfied: (i) the 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 Purchaser herewith, 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) all tendered Shares, in proper form for transfer together with a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, together with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message) and any other 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 Nasdaq National Market (the "Nasdaq National Market") operated by the National Association of Securities Dealers, Inc. (the "NASD") is open for business. The Notice of Guaranteed Delivery may be delivered by hand, or transmitted by telegram, facsimile transmission or mail, to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in the Notice of Guaranteed Delivery. Notwithstanding any other provisions 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 (a) certificates for (or a timely Book-Entry Confirmation with respect to) such Shares, (b) a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and (c) 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 such Shares are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE BY PURCHASER FOR THE TENDERED SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. The valid tender of Shares pursuant to one of the procedures described above will constitute a binding agreement between the tendering stockholder and Purchaser upon the terms and subject to the conditions of the Offer. Appointment as Proxy. By executing a Letter of Transmittal as set forth above, a tendering stockholder irrevocably appoints designees of Purchaser 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 Purchaser (and any and all non-cash dividends, distributions, rights or other securities issued or issuable in respect of such Shares on or after the date of this Offer to Purchase). All such proxies shall be considered 7 10 coupled with an interest in the tendered Shares. Such appointment will be effective if, when and only to the extent that Purchaser accepts such Shares for payment pursuant to the Offer as provided herein. Upon such acceptance for payment, all prior powers of attorney, proxies and consents given by such stockholder with respect to such Shares and 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 Purchaser will thereby, with respect to the Shares and other securities or rights for which the appointment is effective, be empowered to exercise all voting and other rights with respect to such Shares or other securities or rights, including, without limitation, in respect of any annual, special, adjourned or postponed 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. Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon Purchaser's acceptance for payment of such Shares, Purchaser must be able to exercise full voting, consent and other rights with respect to such Shares and other securities or rights, including voting at any meeting of stockholders then scheduled. 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 Purchaser, in its sole discretion, and its determination will be final and binding on all parties. Purchaser reserves the absolute right to reject any or all tenders of Shares determined by it not to be in proper form or if the acceptance for payment of, or payment for, such Shares may, in the opinion of Purchaser's counsel, be unlawful. 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 any tender with respect to Shares of any particular stockholder, whether or not similar defects or irregularities are waived in the case of other stockholders. No tender of Shares will be deemed to have been validly made until all defects and irregularities have been cured or waived. None of Parent, Purchaser, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or will incur any liability for failure to give any such notification. 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 Withholding. In order to avoid "backup withholding" of Federal income tax on payments of cash pursuant to the Offer, a stockholder surrendering Shares in the Offer must, unless an exemption applies, provide the Depositary with such stockholder's correct taxpayer identification number ("TIN") on a Substitute Form W-9 and certify under penalty of perjury that such number is correct and that such stockholder is not subject to backup withholding. If a stockholder does not provide such stockholder's correct TIN or fails to provide the certifications described above, the Internal Revenue Service (the "IRS") may impose a penalty on such stockholder and payment of cash to such stockholder pursuant to the Offer may be subject to backup withholding of 31%. All stockholders surrendering Shares pursuant to the Offer should complete and sign the Substitute Form W-9 included as part of the Letter of Transmittal to provide the information and certification necessary to avoid backup withholding (unless an applicable exemption exists and is proved in a manner satisfactory to Purchaser and the Depositary). Certain stockholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to backup withholding. Noncorporate foreign stockholders should complete and sign the main signature line on the Letter of Transmittal and a Form W-8, Certificate of Foreign Status, a copy of which may be obtained from the Depositary, in order to avoid backup withholding. See the Letter of Transmittal. 4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4, tenders of Shares made pursuant to the Offer 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, in any event, unless theretofore accepted for payment and paid for by Purchaser pursuant to the Offer, may also be withdrawn at any time after February 19, 1999 pursuant to the provisions of the Exchange Act. For a withdrawal to be effective, a written, telegraphic, telex or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase and must specify the name of the person having tendered the Shares to be withdrawn, the 8 11 number of Shares to be withdrawn and the name of the registered holder, if different from that of the person who tendered such Shares. If certificates for Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then prior to the physical release of such certificates, the serial numbers shown on such certificates must also 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 tendered pursuant to the procedure 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 such withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility procedures. Withdrawals of tenders of Shares may not be rescinded, and any Shares properly withdrawn will thereafter be deemed not to be validly tendered for purposes of the Offer. However, withdrawn Shares may be retendered by following one of the procedures described in Section 3 at 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 Purchaser, in its sole discretion, and its determination will be final and binding. None of Parent, Purchaser, the Depositary, the Information Agent, the Dealer Manager 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 UNITED STATES FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash for Shares pursuant to the Offer or the Merger will be a taxable transaction for federal income tax purposes and may also be a taxable transaction under applicable state, local or foreign tax laws. The tax consequences of such receipt may vary depending upon, among other things, the particular circumstances of the stockholder. In general, a stockholder who receives cash for Shares pursuant to the Offer or the Merger will recognize gain or loss for federal income tax purposes equal to the difference between the amount of cash received in exchange for the Shares sold and such stockholder's adjusted tax basis in such Shares. Provided that the Shares constitute capital assets in the hands of the stockholder, such gain or loss will be capital gain or loss, and any capital gain will currently be subject to a maximum tax rate of 20% if the stockholder is an individual and has held the Shares for more than one year at the time of sale. Gain or loss will be calculated separately for each block of Shares (i.e., Shares acquired at the same time and price) exchanged pursuant to the Offer or the Merger. A STOCKHOLDER (OTHER THAN CERTAIN EXEMPT STOCKHOLDERS) WHO TENDERS SHARES MAY BE SUBJECT TO 31% BACKUP WITHHOLDING UNLESS THE STOCKHOLDER PROVIDES HIS OR HER TIN AND CERTIFIES UNDER PENALTY OF PERJURY THAT SUCH NUMBER IS CORRECT AND THAT SUCH STOCKHOLDER IS NOT SUBJECT TO BACKUP WITHHOLDING. A STOCKHOLDER WHO DOES NOT FURNISH HIS OR HER CORRECT TIN MAY BE SUBJECT TO A PENALTY IMPOSED BY THE INTERNAL REVENUE SERVICE. EACH STOCKHOLDER SHOULD COMPLETE AND SIGN THE SUBSTITUTE FORM W-9 INCLUDED AS PART OF THE LETTER OF TRANSMITTAL SO AS TO PROVIDE THE INFORMATION AND CERTIFICATION NECESSARY TO AVOID BACKUP WITHHOLDING. If backup withholding applies, the payor is required to withhold 31% from payments. This is not an additional tax; the amount of the backup withholding can be credited against the tax liability of the person subject to the backup withholding. If backup withholding results in an overpayment of tax, a refund can be obtained upon filing an income tax return. THE DISCUSSION OF UNITED STATES FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE IS FOR GENERAL INFORMATION ONLY AND IS BASED ON EXISTING LAW AS OF THE DATE OF THIS OFFER TO PURCHASE. THIS DISCUSSION MAY NOT BE APPLICABLE TO CERTAIN TYPES OF STOCKHOLDERS, INCLUDING STOCKHOLDERS WHO ACQUIRED SHARES PURSUANT TO THE EXERCISE OF STOCK OPTIONS OR OTHERWISE AS COMPENSATION, INDIVIDUALS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED STATES AND FOREIGN ENTITIES, OR ENTITIES THAT ARE OTHERWISE SUBJECT TO SPECIAL TAX TREATMENT UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (SUCH AS INSURANCE COMPANIES, TAX-EXEMPT ENTITIES, DEALERS IN SECU- 9 12 RITIES AND REGULATED INVESTMENT COMPANIES). STOCKHOLDERS OF THE COMPANY ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE OFFER AND THE MERGER (INCLUDING THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS, AND POSSIBLE CHANGES IN SUCH TAX LAWS, WHICH MAY HAVE RETROACTIVE EFFECT). 6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are traded in the over-the-counter market and prices are quoted on the Nasdaq National Market under the symbol "RIVL." The following table sets forth, for the periods indicated, the high and low sales price per Share as reported by the Nasdaq National Market and as reported in published financial sources.
SALES PRICE ---------------- HIGH LOW Fiscal 1997: First Quarter ended September 30, 1996.................... $23.25 $17.75 Second Quarter ended December 31, 1996.................... 24.88 21.25 Third Quarter ended March 31, 1997........................ 24.31 21.00 Fourth Quarter ended June 30, 1997........................ 21.88 13.50 Fiscal 1998: First Quarter ended September 30, 1997.................... $20.38 $14.13 Second Quarter ended December 31, 1997.................... 16.50 12.75 Third Quarter ended March 31, 1998........................ 17.25 13.00 Fourth Quarter ended June 30, 1998........................ 18.00 13.00 Fiscal 1999: First Quarter ended September 30, 1998.................... $14.13 $ 8.00 Second Quarter through December 16, 1998.................. 13.63 6.63
On November 24, 1998, the next-to-last full trading day before the Company's announcement that it had retained the Financial Advisor to assist it in evaluating an acquisition proposal, the last reported sales price of the Shares on the Nasdaq National Market was $7.38 per Share. On December 16, 1998, the last full trading day before the public announcement of the execution of the Merger Agreement, the last reported sales price of the Shares on the Nasdaq National Market was $11.19 per Share. On December 22, 1998, the last full trading day before commencement of the Offer, the last reported sales price of the Shares on the Nasdaq National Market was $13.19 per Share. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES. The Company paid aggregate cash dividends of $0.24 per Share in fiscal 1997 and $0.26 per Share in fiscal 1998. On each of September 15, 1998, and December 15, 1998, the Company paid quarterly cash dividends of $0.07 per Share. The Merger Agreement prohibits the payment of additional cash dividends by the Company without Parent's prior written consent. Parent does not currently intend to permit the payment of dividends on the Shares prior to the Merger. 7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; NASDAQ QUOTATION AND EXCHANGE ACT REGISTRATION. The purchase of Shares pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and could reduce the number of holders of Shares, which could adversely affect the liquidity and market value of the remaining Shares held by the public. Nasdaq Quotation. The Shares are currently included in the Nasdaq National Market. Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the requirements of the NASD for continued inclusion in the Nasdaq National Market (the top tier of The Nasdaq Stock Market), which requires that an issuer have at least 200,000 publicly held shares, held by at least 400 stockholders or 10 13 300 stockholders of round lots, with a market value of at least $1,000,000. If these standards are not met, the Shares might nevertheless continue to be included in The Nasdaq Stock Market with quotations published in the Nasdaq's "additional list" or in one of the "local lists," but if the number of holders of the Shares were to fall below 300, or if the number of publicly held Shares were to fall below 100,000 or there were not at least two registered and active market-makers for the Shares, the NASD's rules provide that the Shares would no longer be "qualified" for reporting in The Nasdaq Stock Market and The Nasdaq Stock Market would cease to provide any quotations. Shares held directly or indirectly by directors, officers or beneficial owners of more than 10% of the Shares are not considered as being publicly held for this purpose. According to the Company's transfer agent, as of December 17, 1998, there were approximately 170 holders of record of Shares and 9,294,227 Shares were outstanding. If, as a result of the purchase of Shares pursuant to the Offer, the Shares no longer meet the requirements of the NASD for inclusion in the Nasdaq National Market or in any other tier of The Nasdaq Stock Market and the Shares are no longer included in the Nasdaq National Market or in any other tier of The Nasdaq Stock Market, as the case may be, the market for the Shares could be adversely affected. In the event that the Shares no longer meet the requirements of the NASD for quotation through any tier of The Nasdaq Stock Market, it is possible that the Shares would continue to trade in the over-the-counter market and that price quotations would be reported by other sources. The extent of the public market for the Shares and the availability of such quotations would however, depend upon such factors as the number of holders of Shares remaining at such time, the interests in maintaining a market in Shares on the part of securities firms, the possible termination of registration of the Shares under the Exchange Act, as described below, and other factors. Exchange Act Registration. The Shares are currently 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 the Shares are not listed on a national securities exchange, quoted on an automated inter-dealer quotation system or held by 300 or more holders of record. Termination of registration of the Shares under the Exchange Act 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 no longer applicable to the Company, such as the short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the requirement of furnishing a proxy statement in connection with stockholders' meetings pursuant to Section 14(a) of the Exchange Act 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. 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. Purchaser intends to seek to cause the Company to apply for termination of registration of the Shares under the Exchange Act as soon after consummation of the Offer as the requirements for such termination are met. If registration of the Shares is not terminated prior to the Merger, then the Shares will cease to be reported on The Nasdaq Stock Market and the registration of the Shares under the Exchange Act will be terminated following consummation of the Merger. Margin Regulations. The Shares are currently "margin securities" under the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of the Shares. 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 purposes of the margin regulations of the Federal Reserve Board, and therefore could no longer be used as collateral for loans made by brokers. In any event, the Shares will cease to be "margin securities" if registration of the Shares under the Exchange Act is terminated. 8. CERTAIN INFORMATION CONCERNING THE COMPANY. General. The information concerning the Company contained in this Offer to Purchase, including financial information, has been taken from or is based upon publicly available documents and records on file 11 14 with the Commission and other public sources. Neither Parent nor Purchaser assumes any 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 Parent or Purchaser. The Company is a Delaware corporation with its principal executive offices located at 800 E. 101st Terrace, Kansas City, Missouri, 64131. The following description of the Company's business is summarized from the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1998 (the "Company's 1998 10-K"). The Company is a leading designer, manufacturer and marketer of a variety of products including small kitchen and personal care appliances such as Crock-Pot(R) slow cookers, can openers and massagers; products for the home environment including space heaters, air purifiers, showerheads, utility pumps, humidifiers and fans; and building supply and industrial products such as household ventilation, door chimes, ceiling fans and industrial fans. The Company distributes the Rival(R), Rival Select(R), Simer(R), Pollenex(R), Patton(R), Bionaire(R), and White Mountain(R) product lines to substantially all major retail outlets in the U.S. and Canada, including such mass merchants as Kmart, Target and Wal-Mart; hardware/home centers such as Ace Hardware, Home Depot and Home Quarters; department stores, catalog showrooms and warehouse clubs. The Company also sells Patton commercial fans and building supply and home products to industrial and electrical dealers and distributors. The Company has focused its resources to provide its customers with superior service, product innovation and marketing support. To accomplish this, the Company has developed automated ordering, shipping, invoicing and data storage and retrieval systems that are linked to the retailers "point-of-sale" systems. These automated systems are supported by close coordination between the traffic, warehousing, sales support and finance departments of the retailer and the Company. The Company manufactures at least 60% of the products it sells. Its manufacturing facilities (all of which are located in the U.S.) produce electric motors, molded plastic components, screw machine parts, stampings and stoneware. The Company believes that the ability to manufacture the majority of its products in North America is one of the Company's fundamental strengths. Manufacturing capability gives the Company flexibility, bargaining power with third party vendors, quality control, and quick response time. Selected Financial Information. Set forth below is certain selected consolidated financial information with respect to the Company excerpted or derived from the (i) audited financial information of the Company contained in the Company's 1998 10-K and (ii) the Company's Quarterly Report on Form 10-Q for the period ended September 30, 1998. More comprehensive financial information is included in the Company's 1998 10-K and other documents filed with the Commission, and the following information is qualified in its entirety by reference to the Company's 1998 10-K and other documents, including the financial information and related notes contained therein. The Company's 1998 10-K and such other documents may be inspected and copies may be obtained from the offices of the Commission or the Nasdaq National Market in the manner set forth on the following page under "Available Information." 12 15 THE RIVAL COMPANY SELECTED CONSOLIDATED FINANCIAL DATA
THREE MONTHS ENDED FISCAL YEAR ENDED JUNE 30, SEPTEMBER 30, ------------------------------ ------------------- 1996 1997 1998 1997 1998 (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) INCOME STATEMENT DATA: Net sales................................. $313,864 $376,465 $376,919 $96,697 $80,052 Cost of sales............................. 230,207 278,455 281,043 71,119 62,410(2) -------- -------- -------- ------- ------- Gross profit.............................. 83,657 98,010 95,876 25,578 17,642 Selling, general and administrative expenses................................ 50,561 63,809 63,251 16,254 15,108 Restructuring expenses.................... -- 3,000 -- -- 4,887(2) Amortization of goodwill and other intangible assets....................... 2,432 3,069 2,894 779 685 -------- -------- -------- ------- ------- Operating income (loss)................... 30,664 28,132 29,731 8,545 (3,038) Interest expense.......................... 7,117 10,081 10,099 2,587 2,484 Other expenses............................ 295 21 3,875 3 345 -------- -------- -------- ------- ------- Earnings (loss) before income taxes....... 23,252 18,030 15,757 5,955 (5,867) Income tax expense........................ 9,013 7,345 6,550 2,229 (2,033) -------- -------- -------- ------- ------- Net earnings (loss)....................... $ 14,239 $ 10,685 $ 9,207 $ 3,726 $(3,834) ======== ======== ======== ======= ======= Net earnings (loss) per share (Basic)..... $ 1.46 $ 1.10 $ 0.98 $ 0.39 $ (0.41) -------- -------- -------- ------- ------- Net earnings (loss) per share (Diluted)... $ 1.43 $ 1.08 $ 0.96 $ 0.39 $ (0.41) -------- -------- -------- ------- ------- Weighted average common shares outstanding............................. 9,725 9,684 9,422 9,449 9,348 -------- -------- -------- ------- ------- Weighted average common and common equivalent shares outstanding(1)........ 9,950 9,895 9,582 9,663 9,348 -------- -------- -------- ------- ------- Earnings excluding litigation and restructuring charges(2)................ $ 14,239 $ 12,755 $ 12,186 $ 3,726 $ 914 -------- -------- -------- ------- ------- Dividends per share....................... $ 0.20 $ 0.24 $ 0.26 $ 0.06 $ 0.07 -------- -------- -------- ------- -------
AT JUNE 30, AT SEPTEMBER 30, -------------------------------- -------------------- 1996 1997 1998 1997 1998 (UNAUDITED) BALANCE SHEET DATA: Working capital..................... $ 91,396 $ 84,819 $ 89,607 $ 88,537 $ 86,407 Total assets........................ 288,251 298,605 292,114 322,956 299,928 Long-term debt (less current portion).......................... 88,000 84,000 78,000 84,000 78,000 Stockholders' equity................ 106,148 110,390 116,615 113,525 110,791
- ------------------------------ (1) Stock options are included as common stock equivalents. (2) Excludes certain litigation in fiscal 1998, a restructuring loss in fiscal 1997 relative to the Company's Montreal, Quebec manufacturing, distribution and administrative functions and a restructuring loss in the first quarter of fiscal 1999 relative to the closing of three locations in North Carolina and Indiana. The pre-tax restructuring loss of $7,720,000 for the first quarter of fiscal 1999 consisted of a charge of $2,833,000 to cost of sales and $4,887,000 in selling, general and administrative expenses. Available Information. The Company is subject to the informational and reporting requirements of the Exchange Act and is required to file reports 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, stock options granted to them, the principal holders of the 13 16 Company's securities, any material interests of such persons in transactions with the Company and other matters is required to be disclosed in proxy statements distributed to the Company's stockholders and filed with the Commission. These reports, proxy statements and other information should be available for inspection at the public reference facilities of the Commission located in Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and also should be available for inspection and copying at prescribed rates at the following regional offices of the Commission: Seven World Trade Center, Suite 3300, New York, New York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained from the Public Reference Section of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission also maintains a site on the world wide web at http://www.sec.gov that contains reports, proxy statements and other information regarding companies that file electronically with the Commission. Reports, proxy statements and other information concerning the Company should also be available for inspection at the offices of the Nasdaq National Market, 1735 K Street, N.W., Washington, D.C. 20006. 9. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT. Purchaser. Purchaser is a newly incorporated Delaware corporation organized in connection with the Offer and the Merger and has not carried on any activities other than in connection with the Offer and the Merger. Purchaser is a wholly-owned subsidiary of Parent. Until immediately prior to the time that Purchaser will purchase Shares pursuant to the Offer, it is not expected that Purchaser will have any significant assets or engage in activities other than those incidental to its formation and capitalization and the transactions contemplated by the Offer and the Merger. Due to the fact that Purchaser is newly formed and has minimal assets and capitalization, no meaningful financial information regarding Purchaser is available. Parent. Holmes Products Corp. (referred to herein as "Parent") is a leading developer, manufacturer and marketer of quality branded home comfort products, including fans, heaters, humidifiers and air purifiers. In addition, Parent markets and distributes dehumidifiers and a variety of decorative and home office lighting products, as well as various replacement filters and accessories for its products. Parent's products are sold to consumers through major retail channels, including mass merchants, do-it-yourself home centers, warehouse clubs, hardware stores and national drugstore chains. Representative customers include Wal-Mart, Kmart, Target, Home Depot, Costco, BJ's Wholesale Club, TruServ (formerly True Value and ServiStar) and Walgreens. Parent believes that the strength and breadth of its retail account base provide a competitive advantage with respect to shelf space, penetration of the consumer market and brand recognition. Parent's focus on product innovation to meet consumer needs, as well as its focus on customer service, has contributed to its success in the home comfort market. Parent was founded in 1982 by its current Chief Executive Officer, Jordan A. Kahn, an innovator in the home comfort market with over 30 years of industry experience. Parent opened its first manufacturing facility in China in 1989, and currently operates two facilities in China where it manufactures its products and electric motors for use in its products. Parent also produces electric motors for manufacturers of other electric products. Parent's vertically integrated manufacturing facilities provide Parent with control over the production process and product quality. These facilities also enhance operational flexibility and allow Parent to respond quickly to changes in consumer demand and to specialized production needs. Parent maintains offices in Hong Kong and Taiwan that are responsible for sourcing raw materials, processing orders and shipping Parent's products. Parent coordinates product development, marketing, sales and distribution from its Milford, Massachusetts headquarters. Parent markets and distributes products primarily under the Holmes(R) brand name. Parent is a Massachusetts corporation. The common stock of Parent is privately held by affiliates of Berkshire Partners LLC ("Berkshire"), management and other employees of Parent, and certain other investors. The executive offices of Purchaser and Parent are located at 233 Fortune Boulevard, Milford, Massachusetts, 01757. Set forth below is (i) certain selected consolidated financial information with respect to Parent as of and for the years ended December 31, 1995, 1996 and 1997 which has been derived from audited consolidated financial statements of Parent and (ii) certain unaudited consolidated financial information as of and for the nine months ended September 30, 1997 and 1998 which has been derived from unaudited consolidated 14 17 financial statements of Parent. Results for the nine months ended September 30, 1998 are not necessarily indicative of the results that may be expected for the year ending December 31, 1998. More comprehensive financial information is included in the historical consolidated financial statements of Parent included in Parent's Registration Statement on Form S-4 (Commission File No. 33-44473) and in Parent's quarterly reports on Form 10-Q filed with the Commission by Parent. Such filings may be examined and copies may be obtained at the places and in the manner set forth under "Available Information" in Section 8. The following summary is qualified in its entirety by reference to such other documents, including the financial information and related notes contained therein. HOLMES PRODUCTS CORP. SELECTED CONSOLIDATED FINANCIAL DATA
NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, -------------------------------- -------------------- 1995 1996 1997(1) 1997 1998 (UNAUDITED) INCOME STATEMENT DATA: Net sales........................... $178,132 $194,331 $192,153 $136,767 $157,602 Cost of goods sold.................. 141,226 145,915 136,740 102,442 110,523 -------- -------- -------- -------- -------- Gross Profit...................... 36,906 48,416 55,413 34,325 47,079 Selling, general and administrative expenses.......................... 22,500 27,308 36,530(2) 21,432 26,514 Product development expenses........ 3,154 5,520 5,463 3,637 4,738 -------- -------- -------- -------- -------- Operating profit.................. 11,252 15,588 13,420 9,256 15,827 Interest expense, net............... 5,219 6,491 7,096 4,724 10,369 Other (income) expense, net......... (337) (319) 56 42 (268) -------- -------- -------- -------- -------- Income before income taxes and minority interest.............. 6,370 9,416 6,268 4,490 5,726 Income tax expense.................. 2,614 2,787 2,196 292 873 Minority interest in net income of majority-owned subsidiaries(3).... 518 408 225 220 -- -------- -------- -------- -------- -------- Net income........................ $ 3,238 $ 6,221 $ 3,847 $ 3,978 $ 4,853 ======== ======== ======== ======== ========
AT DECEMBER 31, AT SEPTEMBER 30, -------------------------------- -------------------- 1995 1996 1997 1997 1998 (UNAUDITED) BALANCE SHEET DATA: Cash and cash equivalents........... $ 3,368 $ 4,462 $ 5,141 $ 8,149 $ 5,738 Working capital (deficit)(4)........ (6,770) (2,883) 78,318 850 74,941 Total assets........................ 118,524 128,286 135,165 135,310 139,194 Long-term debt...................... 217 737 134,294 890 124,820 Stockholders' equity (deficit)...... 11,487 17,708 (24,991) 21,686 (19,457)
- ------------------------------ (1) In November, 1997, Parent and Berkshire consummated a leveraged recapitalization of Parent in which affiliates of Berkshire, certain members of Parent's senior management and certain other investors made an equity investment in Parent. Parent used the equity proceeds, proceeds of a $105 million offering of Senior Subordinated Notes due 2007, borrowings under a $100 million senior credit facility and available cash to redeem a portion of the common stock held by Parent's prior majority owner, to repay certain outstanding indebtedness and to pay fees and expenses of the recapitalization transaction. (2) Includes approximately $6 million of incremental incentive compensation expense which was paid to certain executives in conjunction with the November, 1997 recapitalization of Parent. (3) In May and June, 1997, Parent repurchased the 30% minority interest held by certain stockholders in one of Parent's subsidiaries for a total of $900,000. (4) Parent's working capital deficit prior to the November, 1997 recapitalization reflected the inclusion of trade financing to fund the working capital needs of the business under Parent's prior ownership. 15 18 The name, citizenship, business address, present principal occupation or employment and five-year employment history for each of the directors and executive officers of Purchaser and Parent are set forth in Schedule I hereto. None of Parent, Purchaser or, to the best knowledge of Parent or Purchaser, any of the persons listed in Schedule I hereto or any associate or majority owned subsidiary of Parent, Purchaser or any of the persons so listed, beneficially owns or has the right to acquire, directly or indirectly, any Shares, and none of Parent or Purchaser or, to the best knowledge of Parent or Purchaser, any of the other persons or entities referred to above, or any of the respective directors, executive officers or subsidiaries of any of the foregoing, has effected any transaction in the Shares during the past 60 days. Except as set forth in this Offer to Purchase, none of Parent or Purchaser or, to the best knowledge of Parent or Purchaser, any of the persons listed in Schedule I hereto has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, without limitation, 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 Parent or Purchaser or, to the best knowledge of Parent or Purchaser, any of the persons listed in Schedule I hereto, has had any 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 the commencement of the Company's third full fiscal year prior to the date hereof, there have been no contacts, negotiations or transactions between Parent or Purchaser, or their respective subsidiaries, or, to the best knowledge of Parent or Purchaser, any of the persons listed in Schedule I hereto, on the one hand, and the Company or its executive officers, directors or affiliates, on the other hand, 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. Parent and Purchaser will require approximately $129 million to purchase all the outstanding Shares pursuant to the Offer, and to make cash payments to the holders of each outstanding unexercised stock option which is exercisable at a price less than or equal to $13.75 per Share. In addition, Purchaser will require approximately $200 million in additional funds to (i) repay the outstanding indebtedness of the Company of approximately $156 million, (ii) to refinance certain existing indebtedness of Parent, and (iii) to pay fees and expenses related to the Offer and the Merger. The total amount of financing required is approximately $330 million. Funding will be provided through (1) the issuance of $50 million of common stock of Parent to two investment funds affiliated with Berkshire Partners LLC ("Berkshire"), members of management and certain other co-investors, (2) the incurrence of approximately $250 million of indebtedness under a new credit facility to be provided by BankBoston, N.A. ("BankBoston"), as lender and as agent for a syndicate of other lenders, and (3) the issuance of an additional $30 million in principal amount of Parent's 9 7/8% Senior Subordinated Notes due 2007, to be issued in a private placement pursuant to Rule 144A ("Rule 144A") promulgated under the Securities Act. The exact amount of bank indebtedness to be incurred will depend on the outstanding cash and loan balances of Parent, Purchaser and the Company at the time of the consummation of the Offer. PARENT COMMON STOCK ISSUANCE Pursuant to a financing commitment letter dated December 10, 1998, Berkshire Fund IV, Limited Partnership, the principal stockholder of Parent, and Berkshire Fund V, Limited Partnership (together, the "Berkshire Funds"), which are private equity investment funds sponsored by Berkshire, have agreed to purchase up to $50 million of shares of common stock of Parent in a private placement (the "Private Placement"). It is anticipated that certain of the other existing shareholders of Parent, as well as certain members of Parent's management, will participate with the Berkshire Funds in such investment. The principal conditions to the Private Placement are funding of the bank and note financings described below and 16 19 consummation of the Offer and/or the Merger in accordance with the terms and provisions of the Merger Agreement. BANK FINANCING Pursuant to a commitment letter (the "Bank Commitment"), dated December 8, 1998, from BankBoston and BancBoston Robertson Stephens Inc., as arranger ("BRS"), BankBoston has agreed to provide Parent, Purchaser, the Company and their subsidiaries (collectively, the "Borrowers") up to $325 million of senior bank credit facilities, subject to the terms and conditions set forth in the Bank Commitment. The senior bank credit facilities will be comprised of a tranche A term loan of $50 million and a tranche B term loan of $75 million (collectively, the "Term Loan Facility") and a revolving credit facility of up to $200 million (the "Revolving Credit Facility" and, together with the Term Loan Facility, the "Credit Facilities"). The Credit Facilities will be secured by substantially all of the assets of the Borrowers, and a pledge of stock of the subsidiaries of Parent, including all Shares of the Company acquired in the Offer and the Merger. Conditions. The Bank Commitment is subject to usual and customary conditions to initial funding, including funding of the Private Placement and the Note Financing described below, tender (without withdrawal) pursuant to the Offer of at least 70% of the outstanding Shares and consummation of the Offer, no material adverse change in the assets, business or financial condition of Parent or its subsidiaries, or the assets and business of the Company or the ability of Parent or its subsidiaries to perform their respective obligations described in the Bank Commitment, and satisfactory evidence of solvency. The Bank Commitment is also conditioned on the ratio of the Borrowers' total funded debt to combined trailing four quarters EBITDA (earnings before interest, taxes, depreciation and amortization) at closing, after giving effect to borrowings at closing, not exceeding 5.75:1. This condition would be satisfied based upon the combined EBITDA of the Borrowers for the four quarters ended September 30, 1998. In addition, the funding of the Bank Commitment is subject to there being no material adverse litigation (other than existing litigation), no material adverse changes in governmental regulation or policy affecting BankBoston, BRS, Parent or its subsidiaries (including the Company) and no material adverse change or material disruption in the syndication, financial or capital markets. Maturity; Amortization. The tranche A term loans will have a final maturity date of six years after the date of the initial funding under the Credit Facilities (the "Closing Date"), and will be amortized in quarterly installments in specified increments over the term. The tranche B term loans will have a final maturity date of eight years after the Closing Date with quarterly amortization in specified increments over the term. The Revolving Credit Facility will have a final maturity date of six years after the Closing Date. Repayment of the Term Loans will be provided out of the cash flow of the Borrowers or proceeds of further debt or equity financings, and the Revolving Credit Facility will either be extended at maturity, or refinanced through further debt or equity financings, although Parent has no commitments for any such extension or refinancings at the present time. Interest. The Revolving Credit Facility and the tranche A term loan will bear interest, at Parent's option, at the Alternate Base Rate (as defined below) or a LIBOR rate, plus specified margins based on the ratio of Borrowers' Total Debt to EBITDA (each as defined therein). The Alternate Base Rate will be the greater of BankBoston's base rate as announced from time to time and the federal funds effective rate plus 0.50%. The applicable margins will initially be set at the Alternate Base Rate plus 1.25% or the LIBOR rate plus 3.00%. Interest on the tranche B term loan will bear interest, at Parent's option, at the Alternate Base Rate plus 1.75% or LIBOR plus 3.50%. Modification of Terms. The Bank Commitment is not contingent on syndication to other lenders; however, BankBoston or BRS may, after consultation with Parent, propose additional or different terms to the Credit Facilities, so long as the aggregate amount of the Credit Facilities is not reduced, and the interest rate and fees applicable to the Credit Facilities are not increased by more than 100 basis points. 17 20 Additional Terms and Conditions. The Credit Facilities will provide for customary additional terms and conditions, including: (1) restrictions on the Borrowers' activity with respect to capital expenditures, liens, negative pledges, additional indebtedness, contingent liabilities, investments, dividends, distributions and management fees, affiliate transactions, mergers, acquisitions, joint ventures, asset sales and sale leasebacks; (2) restrictions on the Borrowers' ability to voluntarily prepay indebtedness other than under the Credit Facilities; (3) ERISA and environmental covenants; (4) satisfactory insurance requirements; and (5) customary events of default, including without limitation, a cross default to other indebtedness and a change of control default. The Credit Facilities will also require Parent to maintain certain customary financial ratios, measured on a consolidated basis, including without limitation minimum interest coverage ratios and maximum ratios of total debt to EBITDA. NOTE FINANCING Parent issued $105 million principal amount of Senior Subordinated Notes due 2007 pursuant to a private placement in November, 1997, which notes were subsequently exchanged for notes (the "Existing Notes") registered pursuant to an effective registration statement filed under the Securities Act. Pursuant to a Commitment Letter dated December 17, 1998 (the "Note Purchase Commitment"), BRS and Lehman Brothers Inc. ("Lehman") (and together, the "Note Purchasers") committed to place or purchase, pursuant to a private placement under Rule 144A, an additional $30 million of principal amount of a series of notes substantially similar to the Existing Notes (the "New Notes"). Conditions. The obligation of the Note Purchasers to place or purchase the Senior Notes is subject to usual and customary terms and conditions, including no material adverse change since the date of Parent's or the Company's most recent financial statements filed with the Commission in the business or financial condition of Parent or the Company and its subsidiaries, taken as a whole; the satisfaction of the Note Purchasers with any material changes to the terms and conditions of the Offer and Merger and the Private Placement subsequent to December 17, 1998, including without limitation, satisfaction with the pro forma capitalization and results of operations of Parent; the absence of any material adverse litigation; there being no material adverse change in governmental regulation or policy affecting the purchase or placement of the New Notes; and there being no material adverse change or material disruption in the syndication, financial or capital markets that could materially adversely impair the remarketing or sale of the New Notes. Terms of New Notes. The principal of the New Notes shall be due and payable in full on November 15, 2007. The stated interest rate of the New Notes will be 9 7/8% per annum. However, the effective interest rate on the New Notes is expected to be higher, and will depend on the pricing option selected by Parent and market conditions existing at the time. Interest on the New Notes will be payable semi-annually on May 15 and November 15 while the New Notes are outstanding. The New Notes will not be redeemable prior to November 15, 2002, except that up to 35% of the New Notes may be redeemed, at a premium equal to the interest rate on the New Notes, with the proceeds of the issuance of equity securities of Parent. Thereafter, the New Notes may be redeemed at Parent's option, in whole or in part, at any time and from time to time, at a premium to the principal amount which shall decline to zero on the ninth anniversary of the date of issuance. The New Notes will be senior subordinated obligations of Parent ranking pari passu in right of payment with all other senior subordinated indebtedness of Parent, including without limitation, the Existing Notes. Upon the occurrence of a "Change of Control," Parent would be required to offer to purchase the New Notes at 101% of face amount plus accrued interest to the purchase date. Parent has no current arrangements for the repayment of the New Notes on their maturity in 2007. The indenture governing the New Notes will be materially consistent with the terms and conditions of the indenture governing the Existing Notes, and will contain certain covenants typical for securities of this type, including covenants limiting the ability of Parent and its subsidiaries to incur additional indebtedness, make certain restricted payments, effect certain sales of assets, effect mergers and consolidations, engage in transactions with affiliates, restrict the ability of subsidiaries to make certain distributions on their capital stock and engage in certain other transactions, or grant liens or security interests on their assets. 18 21 Although the New Notes will initially be issued in an offering under Rule 144A, Parent will be obligated to either register the New Notes or exchange the New Notes for registered notes with equivalent terms. The New Notes will be guaranteed by all of Parent's domestic subsidiaries, including the Company. The New Notes will be unsecured. THIS OFFER TO PURCHASE DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO PURCHASE ANY OF THE PARENT'S COMMON STOCK TO BE ISSUED IN THE PRIVATE PLACEMENT OR ANY OF THE NEW NOTES. 11. BACKGROUND OF THE OFFER. In late 1997, Jordan A. Kahn, President and Chief Executive Officer of Parent, telephoned Thomas K. Manning, Chairman and Chief Executive Officer of the Company, to arrange a meeting regarding a possible business combination transaction between their two companies. Messrs. Kahn and Manning met on December 15, 1997 and discussed the potential benefits of a combination of the two companies. In January, 1998, Mr. Manning and William L. Yager, President and Chief Operating Officer of the Company, met with Mr. Kahn and with Richard K. Lubin and Randy Peeler, Managing Director and Vice President, respectively, of Berkshire, which holds a majority equity interest in Parent. During the course of this meeting, they discussed the outlines of a possible combination in which the surviving company would be a public company. In March, 1998, these individuals met with Todd Goodwin, a Director of the Company, to further discuss this matter. No share price was proposed at these meetings. Mr. Manning subsequently informed Mr. Kahn that the Company's Board of Directors was not inclined to pursue such a transaction at that time. No further discussions were held between Parent and the Company for a period of approximately five months. During this time, Parent considered a number of other acquisition opportunities, none of which were pursued. In August, 1998, representatives of Parent and the Company resumed discussions, this time concerning Parent's interest in a possible leveraged acquisition of the Company for cash. At this time, DLJ began serving as Parent's financial advisor to assist it in evaluating and structuring a potential transaction with the Company. On August 31, 1998, Messrs. Manning and Yager met in Kansas City with representatives of Parent, Berkshire and DLJ to discuss a cash acquisition of the Company by Parent. On September 1, 1998, Parent sent a letter to the Company proposing a tender offer and second-step merger pursuant to which stockholders of the Company would receive $17.00 for each Share tendered by them. Parent's proposal was based upon publicly available information, before due diligence, as well as Parent's expectations regarding the Company's level of indebtedness and the sources of financing then available. At this time, the Share price had declined from above $13.00 in early August, 1998 to a closing price of $10.00 as of August 31, 1998. In mid-September, 1998, Mr. Manning informed Mr. Kahn that he had discussed with the Company's Board of Directors the proposed transaction with Parent and that the Board of Directors had authorized the engagement of the Financial Advisor to analyze the transaction on behalf of the Company. On October 1, 1998, a meeting was held in Boston among representatives of Parent, Berkshire, the Company and their respective financial advisors. At this meeting, Parent executed a letter agreement with the Financial Advisor, on behalf of the Company, with respect to the nondisclosure of confidential information provided to Parent and its representatives (the "Confidentiality Agreement"). Parent also agreed, among other things, not to engage in a takeover attempt not supported by the Company's Board of Directors. During this period, the closing market price of the Shares continued to decline, from $10.875 on September 15, 1998, to $8.00 on October 1, 1998, and to $7.625 on October 15, 1998, the date the Company released its financial results for the first quarter of fiscal 1999, reporting lower sales and earnings than in the comparable quarter of fiscal 1998. 19 22 During the week of October 12, 1998, representatives of Parent and members of Parent's legal and accounting firms visited the offices of the Company's legal and accounting firms in order to begin a due diligence review of the Company. On October 30, 1998, an initial draft of an Agreement and Plan of Merger was distributed to the Company and its representatives. Parent and Berkshire continued their due diligence review and discussions with prospective financing sources throughout November, 1998. At a meeting with the Financial Advisor on November 19, 1998, DLJ indicated that Parent would not be inclined to proceed with a transaction at a price greater than $13.00 per Share. On Tuesday, November 24, 1998, the Company's Board of Directors responded with a counter-proposal of $15.00 per Share. On Friday, November 27, 1998, in response to rumors in the financial marketplace regarding a possible acquisition of the Company, the Company publicly announced that it had engaged the Financial Advisor to assist it in evaluating an acquisition proposal it had received. On this date, Parent proposed to the Company a price of $14.00 per Share, subject to completion of due diligence matters. Over the Thanksgiving weekend, the Company informed Parent that based upon discussions with certain members of the Company's Board of Directors, the Board might be agreeable to a transaction at $14.00 per Share, subject to the negotiation of a satisfactory merger agreement and Parent's obtaining satisfactory written financing commitments. On December 1 and 2, 1998, Ira Morgenstern, Parent's Senior Vice President--Finance, met in Boston with Messrs. Yager and W. Mark Meierhoffer, the Company's Chief Financial Officer, along with their respective financial and legal advisors and representatives of Berkshire, to begin negotiating the terms of a definitive merger agreement. At the same time, Parent and Berkshire were negotiating with prospective financing sources regarding the terms and conditions of the commitments for the Financing. Mr. Kahn also met again with Mr. Manning. During the week of December 7, 1998, the parties continued to negotiate the terms of the proposed merger agreement while Parent completed its due diligence review. On Sunday, December 13, 1998, Parent proposed a revised price of $13.25 per Share, based in part on the results of its due diligence and the Company's performance. The Company's Board of Directors met on Monday and Tuesday, December 14 and 15, 1998, to consider Parent's revised proposal. On Tuesday afternoon, the Financial Advisor informed DLJ that the Board of Directors had voted to approve the proposed transaction at a price of $13.75 per Share, subject to the completion of a satisfactory merger agreement, and that the Board would not consider any lower price. Later that day, the Company's counsel proposed revisions to the merger agreement that would be acceptable to the Company's Board of Directors. Over the next 36 hours, the parties negotiated the final terms of the Merger Agreement and the Tender and Voting Agreement. On Thursday, December 17, 1998, the Merger Agreement and the Tender and Voting Agreement were finalized and executed by the respective parties thereto, Parent accepted and executed the commitments for the Financing, and Parent and the Company issued a joint press release announcing the transaction. On December 23, 1998, Purchaser commenced the Offer. 12. PURPOSE OF THE OFFER AND THE MERGER; THE MERGER AGREEMENT; OTHER AGREEMENTS; PLANS FOR THE COMPANY; OTHER MATTERS. PURPOSE OF THE OFFER AND THE MERGER The purpose of the Offer and the Merger is for Parent to acquire control of, and the entire equity interest in, the Company. The Offer, as the first step in the acquisition of the Company, is intended to facilitate Purchaser's acquisition of all the outstanding Shares and to increase the likelihood that the Merger will be completed promptly. 20 23 THE MERGER AGREEMENT The Merger. The Merger Agreement provides that, following consummation of the Offer and following the satisfaction or waiver of the conditions described below under "Conditions to the Merger," and in accordance with Delaware law, that Purchaser will be merged with and into the Company with the Company surviving the Merger. Upon consummation of the Merger, each outstanding Share (other than Shares held by stockholders who properly demand their appraisal rights under Delaware law, Shares held in the Company's treasury and Shares owned by Parent or Purchaser) will be converted into the right to receive the cash price per Share paid pursuant to the Offer, without interest thereon. Vote Required to Approve Merger. 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 approve the Merger Agreement and the transactions contemplated thereby. The Company has represented in the Merger Agreement that the Board of Directors of the Company (with one director absent) has unanimously approved the Merger Agreement, the Offer and the Merger and the other transactions contemplated thereby as required under the DGCL. Therefore, unless the Merger is consummated pursuant to the "short-form" merger provisions under the DGCL described below under "Short-Form Merger" (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 outstanding Shares. In the event that Parent and Purchaser acquire in the aggregate at least a majority of the outstanding Shares, 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 stock of another corporation, the corporation holding such stock may merge such other corporation into itself, or merge itself into such other corporation, without any action or vote on the part of the stockholders by vote of its directors (a "short-form merger"). In the event that Purchaser acquires, pursuant to the Offer or otherwise, at least 90% of the outstanding Shares, then, at the election of Parent, a short-form merger may be effected without any approval of the stockholders of the Company by a vote of the Board of Directors of Purchaser, subject to compliance with the provisions of Section 253 of the DGCL. Even if Purchaser does not own 90% of the outstanding Shares following consummation of the Offer, Purchaser may seek to purchase additional shares in the open market or otherwise in order to reach the 90% threshold 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. Accordingly, if as a result of the Offer or otherwise, Purchaser acquires at least 90% of the outstanding Shares, Purchaser may, and intends to, effect the Merger without approval of any other stockholder of the Company. Stockholders' Meeting. Pursuant to the Merger Agreement, following the expiration of the Offer (or at such earlier time as the parties shall mutually agree), the Company will promptly take all action necessary in accordance with applicable law and its Restated Certificate of Incorporation and By-Laws to duly call, give notice of, and convene a meeting of its stockholders (the "Stockholders' Meeting") to consider and vote upon the adoption and approval of the Merger Agreement and the Merger and all actions contemplated thereby which require approval and adoption by the Company's stockholders, unless the Merger may be effected as a "short-form merger" as described above under "Short-Form Merger," or pursuant to written consents in lieu of a meeting. The Merger Agreement provides that under certain circumstances, if more than 50% of the then-outstanding Shares shall have been validly tendered in the Offer and not withdrawn, upon the written request of either Parent or the Company following the expiration of the Offer without the purchase of any Shares thereunder, the parties shall nevertheless proceed to call and convene the Stockholders' Meeting and undertake in an expeditious manner the efforts required to consummate the Merger. The Merger Agreement provides that the Company will, if required by applicable law to consummate the Merger, prepare and file with the Commission a preliminary proxy or information statement (the "Proxy Statement") and will use its commercially reasonable best efforts to respond to the comments of the Commission concerning the Proxy Statement and to cause the Proxy Statement to be mailed to the 21 24 Company's stockholders, in each case as soon as reasonably practicable. The Company will use its best efforts to cause to be included as an exhibit to the Proxy Statement, the fairness opinion of the Financial Advisor. Parent has agreed to cause all of the shares of capital stock of the Company held by Parent and/or Purchaser to be voted, either in person or by proxy, in favor of the adoption and approval of the Merger Agreement and the Merger at the Stockholders' Meeting. Conditions to the Merger. The Merger Agreement provides that the respective obligations of Parent, Purchaser and the Company to effect the Merger are subject to the satisfaction or waiver on or prior to the closing date of the Merger (the "Closing Date") of the following conditions, any and all of which may be waived, in whole or in part, jointly by Parent and the Company: (i) the Merger shall have been adopted and approved by the requisite vote of the holders of the outstanding Shares, if required under the DGCL, (ii) all filings required to be made prior to the time at which the Merger becomes effective (the "Effective Time") with, and all consents, approvals, permits and authorizations required to be obtained prior to the Effective Time from, any governmental agency, board, commission, department or regulatory authority (each, a "Governmental Entity"), under the HSR Act which, either individually or in the aggregate, if not made or obtained would have a Company Material Adverse Effect (as defined below) or would prevent consummation of the Merger, shall have been made or obtained (as the case may be) and (iii) no temporary restraining order, judgment, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Merger shall be in effect; provided, however, that the parties invoking this condition shall use their best efforts to have any such order or injunction vacated. For purposes of this description of the Merger Agreement, "Company Material Adverse Effect" means (1) having a material adverse effect upon the business, assets, properties, condition (financial or otherwise), or results of operations of the Company and its subsidiaries taken as a whole, or (2) preventing the Company from consummating the transactions contemplated by the Merger Agreement. The obligations of Parent and Purchaser to effect the Merger are further subject to the satisfaction, or waiver by Parent on or prior to the Closing Date, of the following conditions: (1) the representations and warranties of the Company contained in the Merger Agreement that are qualified by materiality shall be true and correct, and the representations and warranties of the Company that are not so qualified shall be true and correct in all material respects, individually and in the aggregate, as of the Closing Date as though made on and as of the Closing Date, except (A) for changes permitted or contemplated by the Merger Agreement, and (B) in the case of any breach of such representations and warranties, where such breach or breaches would not, individually or in the aggregate, have a Company Material Adverse Effect, (2) the Company shall have performed in all material respects all obligations and complied in all material respects with all agreements and covenants of the Company required to be performed or complied with by it under the Merger Agreement, except, in the case of any breach of any such obligation, agreement or covenant, where such breach or breaches would not, individually or in the aggregate, have a Company Material Adverse Effect, (3) the Company shall have furnished Parent with such certificates and other documents to evidence the fulfillment of the conditions set forth in this paragraph as Parent may reasonably request, (4) the Financing Condition shall have been satisfied, (5) all filings required to be made by the Company or its subsidiaries prior to the Effective Time with, and all consents, approvals, permits and authorizations required to be obtained by the Company or its subsidiaries prior to the Effective Time from, any Governmental Entities, which either individually or in the aggregate, if not made or obtained would have a Company Material Adverse Effect on or after the Effective Time or would prevent consummation of the Merger, shall have been made or obtained (as the case may be), (6) between the date of the Merger Agreement and the Effective Time, there shall not have been a material adverse change in the business, assets, properties, condition (financial or otherwise), or results of operations of the Company and its subsidiaries taken as a whole and (7) the percentage of shares dissenting from the Merger in accordance with the DGCL shall not be greater than 10% of the aggregate number of Shares outstanding immediately prior to the Effective Time. The obligations of the Company to effect the Merger are further subject to the satisfaction, or waiver by the Company, on or prior to the Closing Date, of the following conditions: (1) the representations and warranties of Parent and Purchaser contained in the Merger Agreement that are qualified by materiality shall 22 25 be true and correct, and the representations and warranties of Parent and Purchaser that are not so qualified shall be true and correct in all material respects, individually and in the aggregate, as of the Closing Date as though made on and as of the Closing Date, except (A) for changes permitted or contemplated by the Merger Agreement, and (B) in the case of any breach of such representations and warranties, where such breach or breaches would not, individually or in the aggregate, materially and adversely affect the consummation of the Merger, (2) Parent and Purchaser shall have performed in all material respects all obligations and complied in all material respects with all agreements and covenants required to be performed or complied with by them under the Merger Agreement, except, in the case of any breach of any such obligation, agreement or covenant, where such breach or breaches would not, individually or in the aggregate, materially adversely affect the consummation of the Merger, (3) Parent shall have furnished the Company with such certificates and other documents to evidence the fulfillment of the conditions set forth in this paragraph as the Company may reasonably request and (4) all filings required to be made by Parent or its subsidiaries prior to the Effective Time with, and all consents, approvals, permits and authorizations required to be obtained by Parent or its subsidiaries prior to the Effective Time from, any Governmental Entities, which, either individually or in the aggregate, if not made or obtained would prevent consummation of the Merger, shall have been made or obtained (as the case may be). The conditions set forth in the preceding two paragraphs shall cease to be conditions to the obligations of any of the parties to the Merger Agreement if Purchaser shall have accepted for payment and paid for Shares validly tendered pursuant to the Offer. Additionally, no party to the Merger Agreement may rely on the failure of any condition set forth therein to be satisfied if such failure was caused by such party's failure to use commercially reasonable efforts to consummate the transactions contemplated by the Merger Agreement. Other Offers. Pursuant to the Merger Agreement, the Company has agreed not to, nor to authorize or permit any of its representatives to, directly or indirectly, (1) solicit, initiate or knowingly encourage any Third Party (as defined below) with respect to the submission of any Acquisition Proposal (as defined below) or (2) participate in any discussions or negotiations regarding, or furnish to any Third Party any non-public information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Acquisition Proposal; provided, however, that the foregoing shall not prohibit the Board of Directors of the Company (or, if applicable, a duly appointed committee thereof (the "Special Committee")) from: (i) furnishing information to, or entering into discussions or negotiations with, any Third Party in connection with an unsolicited bona fide Acquisition Proposal by such Third Party if, and to the extent that, the Board of Directors of the Company (or the Special Committee), after consultation with independent legal counsel (who may be the Company's regularly engaged independent counsel), determines in good faith that such action is necessary for the Board of Directors of the Company to comply with its fiduciary obligations under applicable law; (ii) withdrawing or modifying its recommendation of the Merger Agreement, the Offer, the Merger and the other transactions contemplated by the Merger Agreement following receipt of a bona fide unsolicited Acquisition Proposal if the Board of Directors of the Company (or the Special Committee), after consultation with independent legal counsel (who may be the Company's regularly engaged independent counsel), determines in good faith that such action is necessary for the Board of Directors of the Company to comply with its fiduciary obligations under applicable law; or (iii) making to the Company's stockholders any recommendation and related filing with the Commission as required by Rule 14e-2 and 14d-9 under the Exchange Act, with respect to any tender offer, or taking any other equally required action (including, without limitation, the making of public disclosures as may be necessary or advisable under applicable securities laws); and provided further, that, in the event of an exercise of the Company's or its Board of Directors' (or the Special Committee's) rights under clause (i), (ii) or (iii) above, notwithstanding anything contained in the Merger Agreement to the contrary, such action shall not constitute a breach of the Merger Agreement by the Company. The Company has agreed to provide immediate written notice to Parent of the receipt of any oral or written inquiry or proposal from a Third Party with respect to a merger, consolidation, share exchange, tender offer or similar transaction involving the Company, or any purchase or other acquisition of all or substantially all of the assets or equity interests of the Company, other than the transactions contemplated by the Merger Agreement (an "Acquisition Transaction") and of the Company's intention to furnish information to, or enter 23 26 into discussions or negotiations with, such person or entity, along with a copy of any such written inquiry or proposal and copies of any information furnished to such Third Party, to the extent not previously provided to Parent. For purposes of this description of the Merger Agreement, (i) "Acquisition Proposal" means any written proposal with respect to an Acquisition Transaction that the Board of Directors of the Company (or the Special Committee), after consultation with and receipt of advice from the Financial Advisor or another nationally recognized investment banking firm, determines in good faith in the exercise of its fiduciary obligations under applicable law to be more favorable than the transactions contemplated by the Merger Agreement; and (ii) "Third Party" means any corporation, partnership, person or other entity or "group" (as defined in Section 13(d)(3) of the Exchange Act) other than Parent, Purchaser or any affiliates of Parent or Purchaser and their respective directors, officers, employees, representatives and agents. Termination of the Merger Agreement. The Merger Agreement may be terminated and abandoned at any time prior to the Effective Time, whether before or after approval of the Merger by the stockholders of the Company: (a) by mutual written consent of Parent and the Company prior to the purchase of Shares pursuant to the Offer; or (b)(A) by either Parent or the Company if: (i) the Offer shall not have been commenced within the time period specified in the Merger Agreement, unless the failure to have commenced the Offer is as a result of any judgment, injunction, order, decree or other legal restraint or prohibition enjoining or otherwise restraining the commencement of the Offer, and provided notice of termination under this provision has been given prior to the actual commencement of the Offer (even if such commencement occurs later than the time period specified in the Merger Agreement), or (ii) the Offer shall have terminated or expired or been withdrawn in accordance with its terms without the Purchaser having purchased any Shares pursuant to the Offer, or (iii) any time after March 15, 1999 (or such later date to which the Offer shall have been extended pursuant to the Merger Agreement) the Offer has not been consummated; but only to the extent that the parties shall not then be required to proceed under the conditions described in the second paragraph under "Stockholders' Meeting" above and provided that the failure to commence or consummate the Offer, as the case may be, is not attributable to the failure of the terminating party to fulfill its obligations pursuant to the Merger Agreement; or (B) by the Company prior to the purchase of Shares pursuant to the Offer, if any change to the Offer is made by Purchaser in contravention of certain provisions of the Merger Agreement; or (c) by either Parent or the Company if: (i) upon a vote at the Stockholders' Meeting, or any adjournment thereof, the adoption and approval of the Merger Agreement and the Merger by the stockholders of the Company required by Delaware law, the Company's Restated Certificate of Incorporation or By-Laws or the terms of the Merger Agreement shall not have been obtained; or (ii) the Merger shall not have been consummated on or before June 15, 1999, provided that the failure to consummate the Merger is not attributable to the failure of the terminating party to fulfill its obligations pursuant to the Merger Agreement; or (iii) there shall be any law or regulation that makes consummation of the Offer or the Merger illegal or otherwise prohibited, or if any judgment, injunction, order or decree enjoining or otherwise restraining Purchaser from purchasing Shares pursuant to the Offer or Parent, Purchaser or the Company from consummating the Merger is entered and such judgment, injunction, order or decree shall become final and non-appealable; provided that neither Parent nor the Company may terminate the Merger Agreement pursuant to clauses (i) or (ii) above if the Shares are purchased pursuant to the Offer; or (d) by the Company prior to the purchase of Shares pursuant to the Offer, immediately after payment to Purchaser of the termination fee described in the following subsection, if the Board of Directors shall have withdrawn or modified in a manner adverse to Parent or Purchaser its approval or recommendation of the Offer, the Merger Agreement or the Merger in order to permit the Company to execute an Acquisition Proposal providing for the acquisition of the Company by a Third Party as determined by the Board of Directors in good faith after consultation with independent legal counsel (who may be the Company's regularly engaged independent counsel) that such action is required for the Board of Directors of the Company to comply with its fiduciary obligations to stockholders under applicable law; or (e) by Parent prior to the purchase of Shares pursuant to the Offer, if the Board of Directors of the Company shall have approved an Acquisition Proposal or withdrawn or modified (including by amendment of the Company's Schedule 14D-9), in a manner adverse to Parent or Purchaser, the Board of Director's recommendation of the Offer, the Merger Agreement or the Merger and the other transactions contemplated by the Merger Agreement; or (f) by Parent prior to the purchase of 24 27 Shares pursuant to the Offer, if any of the conditions set forth in the first and third full paragraphs under "Conditions to the Merger" shall have become incapable of fulfillment, and shall not have been waived by Parent, or if the Company shall breach in any respect any of its representations, warranties or obligations under the Merger Agreement and such breach shall have a Company Material Adverse Effect, and the Company shall not have provided reasonable assurance that such breach will be cured in all material respects on or before the Closing Date; or (g) by the Company prior to the purchase of Shares pursuant to the Offer, if any of the conditions set forth in the first and fourth full paragraphs under "Conditions to the Merger" shall have become incapable of fulfillment, and shall not have been waived by the Company, or if Parent or Purchaser shall breach in any respect any of their respective representations, warranties or obligations under the Merger Agreement and such breach shall have a material adverse effect on the consummation of the transactions contemplated by the Merger Agreement, and Parent or Purchaser, as the case may be, shall not have provided reasonable assurance that such breach will be cured in all material respects on or before the Closing Date; provided, however, that the party seeking termination pursuant to clause (f) or (g) above is not in material breach of any of its material representations, warranties, covenants or agreements contained in the Merger Agreement. Termination Fee. Pursuant to the Merger Agreement, if the Merger Agreement is terminated pursuant to either of clauses (d) or (e) of the preceding paragraph, then the Company shall (provided that neither Parent nor Purchaser is then in material breach of its obligations under the Merger Agreement) promptly pay to Parent the sum of $4,500,000 in cash (the "Termination Amount"). The Merger Agreement further provides that if (1) less than 50% of the outstanding Shares are validly tendered in the Offer and not withdrawn and the Merger Agreement is terminated at a time when Parent and Purchaser (and the parties issuing the commitments for the Financing) would otherwise be prepared to proceed to consummate the Offer, and (2) the Company consummates an Acquisition Transaction with a Third Party within one year after termination of the Merger Agreement at a value or price per Share which is greater than the price per Share provided by the Merger Agreement, then the Company shall pay to Parent the Termination Amount. Conduct of the Company's Business Until the Effective Time. Pursuant to and except as contemplated by the Merger Agreement, during the period from the date of the Merger Agreement to the Effective Time, the Company shall operate, and shall cause each subsidiary to operate, its business in the ordinary course of business in a manner consistent with past practices. Without limiting the generality of the foregoing, during the period from the date of the Merger Agreement to the Effective Time, except as expressly contemplated by the Merger Agreement, and except for actions requested by a majority of those directors of the Company designated by Parent following consummation of the Offer pursuant to the Merger Agreement, the Company and its subsidiaries shall not, without the prior written consent of Parent: (i)(x) declare, set aside or pay any dividends on, or make any other distributions (whether in cash, stock or property) in respect of, any of the Company's outstanding capital stock, except for a cash dividend of $.07 per Share paid on December 15, 1998, (y) split, combine or reclassify any of its outstanding capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of, or in substitution for shares of its outstanding capital stock, or (z) purchase, redeem or otherwise acquire any shares of outstanding capital stock or any rights, warrants or options to acquire any such shares; (ii) issue, sell, grant, pledge or otherwise encumber any shares of its capital stock, any other voting securities or any securities convertible into, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities, except for the issuance of Shares upon exercise of Company Stock Options (as defined below) outstanding prior to the date of the Merger Agreement and disclosed therein, or take any action that would make the Company's representations and warranties set forth in the Merger Agreement not true and correct in all material respects; (iii) amend its Restated Certificate of Incorporation or By-Laws or the comparable charter or organizational documents of any of its subsidiaries; (iv) acquire any business or any corporation, partnership, joint venture, association or other business organization or division thereof (or any interest therein), or form any subsidiaries; 25 28 (v) sell or otherwise dispose of any of its assets, except in the ordinary course of business, other than (x) obsolete or immaterial equipment or tooling, and (y) in connection with certain restructuring transactions previously disclosed to Parent (the "Restructuring"); (vi) make any capital expenditures, enter into leases or agreements for new locations, close any locations (other than in connection with the Restructuring), or make other commitments with respect thereto, except capital expenditures, leases, agreements or commitments (x) previously disclosed to Parent, or (y) not exceeding $100,000 in the aggregate as the Company may, in its discretion, deem appropriate; (vii) (x) incur any indebtedness for borrowed money or guaranty any such indebtedness of another person, other than (A) borrowings in the ordinary course under existing lines of credit, (B) indebtedness owing to, or guaranties of indebtedness owing to, the Company or (C) in connection with the Financing, or (y) make any loans or advances to any other person, other than routine advances to employees; (viii) except as previously disclosed to Parent, grant or agree to grant to any employee any increase in wages or bonus, severance, profit sharing, retirement, deferred compensation, insurance or other compensation or benefits, or establish any new compensation or benefit plans or arrangements, or amend or agree to amend any existing benefit plans of the Company, except (x) as may be required under existing agreements, and (y) customary increases in the ordinary course of business consistent with prior practice (not including, however, any new or additional benefit plan of the Company unless previously disclosed to Parent); (ix) merge, amalgamate or consolidate with any other person or entity in any transaction, sell all or substantially all of its business or assets, or acquire all or substantially all of the business or assets of any other person or entity; (x) except as previously disclosed to Parent, enter into or amend any employment, consulting (except for consulting agreements for development services for new products involving payments by the Company or any subsidiary of less than $500,000 in the aggregate, prior to March 31, 1999, and less than $500,000 in the aggregate for the period from April 1, 1999 to June 30, 1999), severance or similar agreement with any person or amend the Company's engagement letter with the Financial Advisor; (xi) change its accounting policies in any material respect, except as required by generally accepted accounting principles; (xii) except as previously disclosed to Parent, enter into any material contract, agreement or commitment not otherwise permitted in the Merger Agreement, including, without limitation, any contract, agreement or commitment involving expenditures by the Company or any of its subsidiaries in excess of $50,000 or which is not terminable by the Company upon giving 30 days or less prior written notice, except in the ordinary course of business consistent with prior practice; (xiii) settle or compromise any pending or threatened suit, action or claim, except for products liability cases being defended in the ordinary course of business, if such settlement or compromise involves the payment of more than $100,000 by the Company or any of its subsidiaries or would impose any material obligations on, or (other than releasing the Company's or any subsidiary's claim for relief in such proceeding and the Company's or any subsidiary's right to a trial of such claim) waive or affect any material right or interest of, the Company, any subsidiary, Parent or Purchaser; or (xiv) commit or agree to take any of the foregoing actions. The Company shall not, and shall cause its subsidiaries not to, take any action that would, or that could reasonably be expected to, result in (i) any of the representations and warranties of the Company set forth in the Merger Agreement that are qualified as to materiality becoming untrue, (ii) any of such representations and warranties that are not so qualified becoming untrue in any material respect or (iii) any of the conditions of the Offer set forth in Section 14 or of the Merger set forth above under "Conditions to the Merger" not being satisfied. 26 29 The Company's Board of Directors. Effective upon the purchase of and payment for Shares by Purchaser pursuant to the Offer such that Purchaser shall own at least a majority of the Shares and from time to time thereafter, Parent shall be entitled to designate up to such number of directors, rounded up to the next whole number, on the Company's Board of Directors that equals the product of (i) the total number of directors on the Board of Directors (giving effect to any increase in the number of directors in accordance with the Merger Agreement) multiplied by (ii) the percentage that the number of Shares owned by Parent and Purchaser bears to the total number of Shares outstanding on an undiluted basis, and the Company shall take all action necessary to cause Parent's designees to be elected or appointed to the Board of Directors, including, without limitation, increasing the number of directors and/or securing the resignations of such number of incumbent directors as is necessary to enable Parent's designees to be elected to the Board of Directors and to cause Parent's designees to be so elected. At such times, the Company will use its best efforts to cause individuals designated by Parent to constitute the same percentage as such individuals represent on the Board of Directors of (x) each committee of the Board of Directors, (y) each board of directors of each subsidiary of the Company and (z) each committee of each such board. Notwithstanding the foregoing, until the Effective Time, the Company, shall use its best efforts to ensure that not less than two persons who are directors on the date of the Merger Agreement shall remain as members of the Board of Directors (the "Continuing Directors") until the Effective Time, and Parent and Purchaser shall take no action (other than removal for cause) to prevent such Continuing Directors from so serving. In the event there is only one Continuing Director, such Continuing Director shall have the right to designate a person, who is reasonably acceptable to Parent, to become a Continuing Director. The Company's obligations to appoint designees to the Board of Directors shall be subject to Section 14(f) of the Exchange Act and Rule 14-1 promulgated thereunder. The Company, with Parent's cooperation, shall promptly take all actions required pursuant to Section 14(f) and Rule 14f in order to fulfill its obligations in accordance with the Merger Agreement, including mailing to the stockholders as part of the Schedule 14D-9 the information required by such Section 14(f), as is necessary to enable Parent's designees to be elected to the Board of Directors. Parent will supply to the Company in writing 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. For purposes of the Merger Agreement, "affiliate" means, as to any person, any other person that would be deemed to be an "affiliate" of such person as that term is defined in Rule 12b-2 under the Exchange Act. Following the election or appointment of Parent's designees in accordance with the Merger Agreement and prior to the Effective Time, so long as there shall be at least one Continuing Director, any amendment of the Merger Agreement, any termination of the Merger Agreement by the Company, any extension by the Company of the time for the performance of any of the obligations or other acts of Parent or Purchaser, any consent of the Company contemplated by the Merger Agreement, any extension of the Effective Time provided in the Certificate of Merger filed under the DGCL, any waiver of any of the Company's rights thereunder, any amendment to the Company's Restated Certificate of Incorporation or By-laws or any action taken by the Company that materially adversely affects the interests of the stockholders of the Company (other than Purchaser) with respect to the transactions contemplated by the Merger Agreement, will require the concurrence of at least one of the Continuing Directors. Stock Options. Pursuant to the Merger Agreement, as of the Effective Time, each outstanding, unexercised stock option to purchase Shares (a "Company Stock Option") issued under the Company's 1986 Stock Option Plan (the "1986 Plan") and the 1994 Stock Option Plan (the "1994 Plan"), (collectively, the "Company Stock Option Plans") shall terminate and be canceled and each holder of a Company Stock Option shall be entitled to receive, in consideration therefor, a cash payment from the Company (which payment shall be tendered to such holder on the Closing Date, or such earlier date after the consummation of the Offer and not later than five business days after the option holder shall have tendered the option to the Company and consented to its cancellation in exchange for payment) equal to the product of (a) the excess, if any, of (x) the per Share price paid in the Offer or the Merger over (y) the per Share exercise price of such Company Stock Option, times (b) the number of Shares then subject to such Company Stock Option. Such cash payment shall be net of any required withholding taxes. Not later than the second business day following 27 30 the execution and delivery of the Merger Agreement, the Company shall cause the committee administering each Company Stock Option Plan (the "Option Committee") to provide to each holder of a Company Stock Option written notice regarding the termination of such Company Stock Option as contemplated by the Company Stock Option Plans. As of the Effective Time, each outstanding Company Stock Option and each of the Company Stock Option Plans shall terminate and be of no further force or effect, and the Company shall take such action as shall be necessary to ensure, to Parent's reasonable satisfaction, that no holder of a Company Stock Option or participant in any other employee benefit plan or program of the Company will have any right to acquire any interest in the Surviving Corporation under the Company Stock Option Plans or any other such plan or program. Indemnification. Pursuant to the Merger Agreement, the Certificate of Incorporation and By-Laws of the Company or the Surviving Corporation, as the case may be, shall not be amended, repealed or otherwise modified for a period of from the date hereof until six years after the Effective Time in any manner that would adversely affect the rights thereunder of individuals who as of the date hereof are or were directors, officers, employees, fiduciaries or agents of the Company and its subsidiaries or otherwise entitled to indemnification, advancement of expenses or exculpation from liability under the Company's Restated Certificate of Incorporation, By-laws or indemnification agreements (the "Indemnified Parties"). 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, Parent shall, and shall cause the Surviving Corporation to, 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 threatened, pending or completed claim, action, suit, proceeding or investigation, including without limitation liabilities arising out of this transaction, to the extent that it was based on the fact that such Indemnified Party is or was a director, officer, employee, fiduciary or agent of the Company or its subsidiaries and arising out of actions or omissions or alleged actions or omissions occurring at or prior to the Effective Time, and in the event of any such claim, action, suit proceeding, or investigation (whether arising before or after the Effective Time), (i) Parent, the Company or the Surviving Corporation, as applicable, shall advance expenses to such Indemnified Parties in advance of the final disposition thereof upon receipt of the undertaking specified in Section 145 of the DGCL, including payment of the reasonable fees and expenses of counsel selected by the Indemnified Parties, which counsel shall be reasonably satisfactory to Parent, promptly as statements therefor are received and (ii) Parent, the Company and the Surviving Corporation will cooperate in the defense of any such matter; provided, however, that neither Parent, 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 Parent, the Company nor the Surviving Corporation shall be obliged pursuant to the Merger Agreement 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 written opinion of counsel for the Indemnified Parties, two or more of such Indemnified Parties have conflicting interests in the outcome of such action. Any determination required to be made with respect to whether an Indemnified Party's conduct complies with the standards set forth under Delaware law, the Certificate of Incorporation or By-Laws shall be made by independent counsel mutually acceptable to Parent and the Indemnified Party. In addition, at or prior to the Effective Time, Parent, the Company or the Surviving Corporation shall obtain a fully-paid officers' and directors' liability insurance policy covering the Indemnified Parties who are currently covered by the Company's officers' and directors' liability insurance policy for a term of six years on terms not materially less favorable than those in effect on the date of the Merger Agreement in terms of coverage and amounts. Representations and Warranties. The Merger Agreement contains various customary representations and warranties of the Company (which will not survive the Effective Time or, if earlier, the date of the purchase of Shares pursuant to the Offer) relating to, among other things, (i) the Company's and its subsidiaries' due organization, power, standing and similar corporate matters; (ii) the Company's and its subsidiaries' capital structure; (iii) authorization, execution, delivery and enforceability of the Merger Agreement and related matters; (iv) governmental and other authorizations required in connection with the 28 31 transactions contemplated by the Merger Agreement; (v) documents filed by the Company with the Commission and the accuracy of information contained therein; (vi) preparation of financial statements in accordance with generally accepted accounting principles applied on a consistent basis; (vii) absence of certain changes or events or of undisclosed liabilities; (viii) compliance with applicable laws; (ix) litigation pending or threatened against the Company or any of its subsidiaries; (x) tax and employee benefit plan matters; (xi) insurance; (xii) intellectual property matters; (xiii) material contracts; (xiv) environmental matters; (xv) labor relations; (xvi) accuracy of information supplied by the Company for use in documents relating to the Offer and the Merger; and (xvii) brokers' and financial advisors' fees. Additional Agreements. The Merger Agreement provides that, subject to the conditions and other agreements set forth in the Merger Agreement, each of Parent, Purchaser and the Company will use commercially reasonable efforts to take, or cause to be taken (including, without limitation, by such parties' respective representatives), all actions and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Offer, the Merger, the Financing and the other transactions contemplated by the Merger Agreement. Following the purchase by Purchaser of Shares pursuant to the Offer, neither Parent nor Purchaser will take any action as a stockholder of the Company that would cause the Company to breach any of the Company's obligations contained in the Merger Agreement. Each of the Company, Parent and Purchaser has agreed in the Merger Agreement to make as promptly as practicable following the date of the Merger Agreement all filings and notifications required to be made with, and seek all consents, approvals, permits and authorizations required to be obtained from, any third parties or Governmental Entities in connection with the Merger Agreement, including any filing necessary under the HSR Act. Amendments. The Merger Agreement provides that, subject to the applicable provisions of the DGCL, at any time prior to the Effective Time, Parent, Purchaser and the Company may modify or amend the Merger Agreement, by written agreement executed and delivered by duly authorized officers of the respective parties; provided, however, that after approval of the Merger by the stockholders of the Company, no amendment shall be made which reduces the consideration payable in the Merger or adversely affects the rights of the Company's stockholders thereunder without the approval of such stockholders. The Merger Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties. Extension; Waiver. At any time prior to the Effective Time, Parent, Purchaser and the Company may (a) extend the time for the performance of any of the obligations or other acts of the other parties, (b) waive any inaccuracies in the representations and warranties of the other parties contained in the Merger Agreement or in any document delivered pursuant to the Merger Agreement or (c) subject to certain provisions of the Merger Agreement, waive compliance with any of the agreements or conditions of the other parties contained in the Merger Agreement. Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party to the Merger Agreement to assert any of its rights under the Merger Agreement or otherwise shall not constitute a waiver of such rights. The foregoing summary of certain provisions of the Merger Agreement 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 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 under "Available Information" in Section 8. OTHER AGREEMENTS Tender and Voting Agreement. Pursuant to the Tender and Voting Agreement, all of the directors and certain executive officers of the Company (the "Tendering Stockholders") agreed: (i) to tender pursuant to the Offer all of the Owned Shares (as defined below) (which definition includes all Shares acquired by the Tendering Stockholders after December 17, 1998), no later than three business days prior to the initial expiration of the Offer; (ii) to vote the Owned Shares in favor of the adoption of the Merger Agreement and the approval of the Merger, and against any action or agreement that would result in a breach in any material respect of any covenant, representation or warranty or any other obligation or agreement of the Company 29 32 under the Merger Agreement, or that would impede, interfere with, delay, postpone or attempt to discourage the Merger; (iii) to appoint Parent as the Tendering Stockholders' proxy to vote the Owned Shares in connection with the Merger Agreement and the Merger; (iv) not to enter into any contract or understanding to convey any interest in or to the Owned Shares, or grant any proxy with respect to the Owned Shares, or deposit the Owned Shares into any voting trust, or subject the Owned Shares to any voting agreement, except that a Tendering Stockholder may transfer any or all of the Owned Shares owned by him to a "Permitted Transferee" (as defined in the Tender and Voting Agreement), if such Permitted Transferee agrees to be bound by the terms of the Tender and Voting Agreement; and (v) not to solicit or initiate any Acquisition Proposal or other offer from any person or, except in such solicitor's capacity as a director or officer of the Company to the extent permitted by the Merger Agreement (as described above under "The Merger Agreement--Other Offers"), engage in discussions or negotiations relating thereto (all of which shall collectively be referred to herein as "Tendering Stockholders' Restrictions"). On December 17, 1998, the Tendering Stockholders beneficially owned an aggregate of 1,049,769 Shares (the "Owned Shares"), constituting approximately 11.3% of the Shares then outstanding. The Tender and Voting Agreement, and the Tendering Stockholders' obligations thereunder, terminate upon the earlier of (i) the consummation of the Merger, (ii) the termination of the Offer without any Shares having been purchased pursuant thereto, or (iii) the termination of the Merger Agreement in accordance with its terms, including as such terms may be amended or extended. The obligations of any Tendering Stockholder under the Tender and Voting Agreement may be terminated by such Stockholder if (i) Parent or Purchaser shall have failed to comply with any of its obligations under Article I of the Merger Agreement or (ii) Parent or Purchaser shall have violated any provisions of the Tender and Voting Agreement. The Tender and Voting Agreement contains representations and warranties of Parent and Purchaser relating to, among other things, (i) Parent's and Purchaser's due organization, power, standing and similar corporation matters and (ii) authorization, execution, delivery and enforceability of the Merger Agreement and related matters. The Tender and Voting Agreement also contains representations and warranties of each Tendering Stockholder regarding his unencumbered title to the Owned Shares and his authority and capacity to enter into and be bound by, and perform in accordance with, the terms of the Tender and Voting Agreement. The foregoing summary of certain provisions of the Tender and Voting Agreement is qualified in its entirety by reference to the Tender and Voting Agreement, which is incorporated herein by reference, and a copy of which has been filed as an exhibit to the Schedule 14D-1. The Tender and Voting Agreement may be examined and copies may be obtained at the places and in the manner set forth under "Available Information" in Section 8. Confidentiality Agreement. In connection with negotiations relating to the Merger (see Section 11 hereof), and as a condition to the Company providing any non-public information to Parent, the Financial Advisor, on behalf of the Company, and Parent entered into the Confidentiality Agreement, which provides generally that Parent and its representatives, will keep confidential any non-public information furnished to them by the Company. The Confidentiality Agreement provides that for the period ending one year from the date of the Confidentiality Agreement, neither Parent nor the Company will, without the written consent of the other, solicit the employment of any person who is a senior executive officer of the other and with whom the soliciting party had contacts in conjunction with the Merger and related transactions, nor will either party engage in any negotiations or discussions with any such officers that would result in their employment by the other party, other than pursuant to a general solicitation not specifically directed at such officers. The Confidentiality Agreement further provides that for a period of twelve months from the date of the Confidentiality Agreement, neither Parent nor its affiliates will, directly or indirectly, acting alone or in concert with others, unless specifically requested in writing or otherwise consented to in advance by the Board of Directors of the Company: (i) acquire or agree, offer, seek or propose to acquire (or request permission to do so), ownership of any of the assets or businesses of the Company or any securities issued by the Company, or any rights or options to acquire such ownership (including from a third party), or make any public announcement (or request permission to make any such announcement) with respect to any of the foregoing, 30 33 or (ii) seek or propose to influence or control the management or the policies of the Company or to obtain representation on the Company's Board of Directors, or solicit, or participate in the solicitation of, any proxies or consents with respect to any securities of the Company, or make any public announcement with respect to any of the foregoing or request permission to do any of the foregoing, or (iii) enter into any discussions, negotiations, arrangements or understandings with any third party with respect to any of the foregoing. The foregoing summary of certain provisions of the Confidentiality Agreement is qualified in its entirety by reference to the Confidentiality Agreement, which is incorporated herein by reference, and a copy of which has been filed as an exhibit to the Schedule 14D-1. The Confidentiality Agreement may be examined and copies may be obtained at the places and in the manner set forth under "Available Information" in Section 8. PLANS FOR THE COMPANY Parent is conducting a detailed review of the Company and its assets, corporate and administrative structure, capitalization, operations, properties, policies, management and personnel and reserves the right to make such changes therein as it deems necessary or desirable, consistent with reasonable operating practices. Such changes could include, among other things, changes in the Company's business, corporate and administrative structure, marketing strategies, capitalization or management. The Merger Agreement provides that Parent or Purchaser shall utilize a portion of the net proceeds of the Financing, together with available cash of the Company, to (or to enable the Company to) repay or otherwise discharge in full the Company's existing indebtedness. Except as indicated in this Offer to Purchase, neither Purchaser nor Parent has any present plans or has made any proposals that would result in an extraordinary corporate transaction, such as a merger, reorganization, liquidation or sale or transfer of assets, involving the Company or any of its subsidiaries, or any material changes in the Company's capitalization, corporate and administrative structure or business or composition of its management or personnel. OTHER MATTERS Appraisal Rights. No appraisal rights are available in connection with the Offer. If the Merger is consummated, however, stockholders of the Company who have not tendered their Shares will have certain rights under the DGCL to dissent and demand appraisal of, and to receive payment in cash of the fair value of, their Shares. Stockholders who perfect such rights by complying with the procedures set forth in Section 262 of the DGCL ("Section 262") will have the fair value of their Shares (exclusive of any element of value arising from the accomplishment or expectation of the Merger) determined by the Delaware Court of Chancery and will be entitled to receive a cash payment equal to such fair value from the Surviving Corporation. In addition, such dissenting stockholders would be entitled to receive payment of a fair rate of interest from the date of consummation of the Merger on the amount determined to be the fair value of their Shares. In determining the fair value of the Shares, the court is required to take into account all relevant factors. Accordingly, such determination could be based upon considerations other than, or in addition to, the market value of the Shares, including, among other things, asset values and earning capacity. In Weinberger v. UOP, Inc., the Delaware Supreme Court stated that "proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court" should be considered in an appraisal proceeding. The Weinberger court also noted that under Section 262, fair value is to be determined "exclusive of any element of value arising from the accomplishment or expectation of the merger." In Cede & Co. v. Technicolor, Inc., however, the Delaware Supreme Court stated that, in the context of a two-step cash merger, "to the extent that value has been added following a change in majority control before cash-out, it is still value attributable to the going concern," to be included in the appraisal process. As a consequence of the foregoing, the fair value determined in any appraisal proceeding could be the same as or more or less than $13.75 per Share. Parent does not intend to object, assuming the proper procedures are followed, to the exercise of appraisal rights by any stockholder and the demand for appraisal of, and payment in cash for the fair value of, the Shares. Parent intends, however, to cause the Surviving Corporation to argue in any appraisal proceeding that, 31 34 for purposes of such proceeding, the fair value of each Share is less than the price paid in the Merger. In this regard, stockholders should be aware that opinions of investment banking firms as to the fairness from a financial point of view (including the Financial Advisor's opinion described herein) are not necessarily opinions as to "fair value" under Section 262. Several decisions by Delaware courts have held that, in certain circumstances, a controlling stockholder of a company involved in a merger has a fiduciary duty to other stockholders that requires that the merger be "entirely fair" to such other stockholders. In determining whether a merger is fair to minority stockholders, Delaware courts have considered, among other things, the type and amount of consideration to be received by the stockholders and whether there was fair dealing among the parties. The Delaware Supreme Court stated in Weinberger and in Rabkin v. Philip A. Hunt Chemical Corp. that although the remedy ordinarily available to minority stockholders in a cash-out merger that is found to be not fair to the minority stockholders is the right to appraisal described above, monetary damages, injunctive relief or such other relief as the court may fashion may be available if a merger is found to be the product of procedural unfairness, including fraud, misrepresentation or other misconduct. THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING STOCKHOLDERS UNDER THE DGCL DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY STOCKHOLDERS DESIRING TO EXERCISE ANY DISSENTERS' RIGHTS AVAILABLE UNDER THE DGCL. THE PRESERVATION AND EXERCISE OF DISSENTERS' RIGHTS REQUIRE STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF THE DGCL. Going-Private Transactions. The Merger would have to comply with any applicable federal law operative at the time of its consummation. The Commission has adopted Rule 13e-3 under the Exchange Act which is applicable to certain "going private" transactions. Purchaser does not believe that Rule 13e-3 will be applicable to the Merger unless, among other things, the Merger is consummated more than one year after the termination of the Offer. If applicable, Rule 13e-3 would require, among other things, that certain financial information concerning the Company and certain information relating to the fairness of the Merger and the consideration offered to minority stockholders in such transaction be filed with the Commission and distributed to minority stockholders before the consummation of the Merger. 13. DIVIDENDS AND DISTRIBUTIONS. The Merger Agreement provides that, without the prior written consent of Parent and except as otherwise expressly provided in the Merger Agreement, the Company will not, and will not permit any of its subsidiaries to, (i) (x) declare, set aside or pay any dividends on, or make any other distributions (whether in cash, stock or property) in respect of, any of the Company's outstanding capital stock, except for a cash dividend of $0.07 per Share paid on December 15, 1998, (y) split, combine or reclassify any of its outstanding capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its outstanding capital stock, or (z) purchase, redeem or otherwise acquire any shares of outstanding capital stock or any rights, warrants or options to acquire any such shares; or (ii) issue, sell, grant, pledge or otherwise encumber any shares of its capital stock, any other voting securities or any securities convertible into, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities, except for the issuance of Shares upon exercise of Company Stock Options outstanding prior to the date of the Merger Agreement and disclosed therein. Parent does not currently intend to permit the payment of dividends on the Shares prior to the Merger. 14. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of the Offer or the Merger Agreement, Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the Commission, including Rule l4e-1(c) under the Exchange Act (relating to Purchaser's obligation to pay for or return tendered Shares after the termination or withdrawal of the Offer), to pay for any Shares, and may terminate and withdraw the Offer, if (i) the Minimum Condition has not been satisfied, (ii) the Financing Condition has not been satisfied, (iii) the applicable waiting period under the HSR Act shall not have expired or been 32 35 terminated or (iv) at any time on or after the date of the Merger Agreement and prior to the acceptance for payment of or payment for Shares, any of the following conditions shall occur and be continuing: (a) there shall be instituted or pending any action, suit, investigation, litigation or proceeding before any domestic court, government or Governmental Entity or arbitrator, other than by Parent or Purchaser, a stockholder of Parent or Purchaser or any person affiliated with Parent or Purchaser that, in the reasonable judgment of Parent, materially adversely affects, or is reasonably likely to materially adversely affect, the Company and its subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a whole, the Financing, or the consummation of the transactions contemplated by the Merger Agreement, provided that, in any such case, Parent shall have used its commercially reasonable efforts to defeat or have vacated any such action or proceeding against Parent or Purchaser and shall have failed to do so; or (b) there shall be any action taken, or any statute, rule, regulation, injunction, interpretation, judgment, order or decree enacted, enforced, promulgated, issued or deemed applicable to Parent or any of its subsidiaries or to the Company or any of its subsidiaries or the Offer or the Merger, by any court, government or Governmental Entity, other than the application of the waiting period provision of the HSR Act to the Offer or the Merger, that, in the reasonable judgment of Parent, is likely, directly or indirectly, to result in any of the consequences referred to in paragraph (a) above; or (c) any change, event, occurrence or circumstance shall have occurred that, in the reasonable judgment of Parent, would have a Company Material Adverse Effect; or (d) there shall have occurred (i) any general suspension of trading in, or limitation on prices, for, securities on the New York Stock Exchange, which suspension or limitation shall continue for at least three consecutive trading days (excluding suspensions or limitations resulting solely from physical damage or interference with such exchange 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, (iii) a commencement of a war or armed hostilities or other national or international calamity directly or indirectly involving the United States which would reasonably be expected to have a material adverse impact on the capital markets of the United States, or (iv) in the case of any of the foregoing existing on the date of the Merger Agreement, a material acceleration, escalation or worsening thereof, or (e) the Company shall have breached or failed to perform in any material respect any of its covenants or agreements under the Merger Agreement, or (i) any of the representations and warranties of the Company set forth in the Merger Agreement that are qualified as to materiality shall not be true and correct, or (ii) any of the representations and warranties of the Company set forth in the Merger Agreement that are not so qualified shall not be true and correct in any material respect, individually or in the aggregate, in each case when made and as of the expiration of the Offer; except for changes permitted or contemplated by the Merger Agreement and except for such breaches of representations, warranties, covenants or agreements as would not have, individually or in the aggregate, a Company Material Adverse Effect or materially adversely affect the Financing or the consummation of the transactions contemplated by the Merger Agreement; or (f) the Merger Agreement shall have been terminated in accordance with its terms; or (g) any Third Party acquires beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of 25% or more of the outstanding Shares, unless such Shares have been validly tendered and not withdrawn; or (h) a tender offer or exchange offer for more than 25% of the Shares shall have been made or publicly proposed by a Third Party; (i) the Board of Directors of the Company withdraws or modifies in a manner adverse to Purchaser or Parent its approval or recommendation of the Offer, the Merger Agreement or the Merger or recommends or approves an Acquisition Proposal by a Third Party; or (j) any filing required to be made by the Company or its subsidiaries with, or any consent, approval, permit or authorization required to be obtained by the Company or its subsidiaries from, any 33 36 Governmental Entity which, either individually or in the aggregate, if not made or obtained would have a Company Material Adverse Effect at the time of or after the consummation of the Offer or would prevent the consummation of the Offer shall not have been made or obtained (as the case may be); which, in the reasonable judgment of Parent, in any such case, and regardless of the circumstances giving rise to any such condition, makes it inadvisable to proceed with the Offer and/or with such acceptance for payment or payments. The foregoing conditions are for the sole benefit of Parent and Purchaser and may be asserted by Parent or Purchaser regardless of the circumstances giving rise to such condition or may be waived by Parent or Purchaser in whole or in part at any time and from time to time in its sole discretion. The failure by Parent or Purchaser or any Affiliate of Parent or Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and circumstances shall not be deemed a waiver with respect to any other facts and circumstances and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. 15. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS. General. Except as described in this Section 15, based on a review of publicly available filings made by the Company with the Commission and other publicly available information concerning the Company, neither Purchaser nor Parent is aware of any license or regulatory permit that appears to be material to the business of the Company and its subsidiaries, taken as a whole, that might be adversely affected by Purchaser's acquisition of Shares (and the indirect acquisition of the stock of the Company's subsidiaries) 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 (and the indirect acquisition of the stock of the Company's subsidiaries) by Purchaser as contemplated herein. Should any such approval or other action be required, Purchaser and Parent 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, 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 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, 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. A number of states throughout the United States have enacted takeover statutes that purport, in varying degrees, to be applicable to attempts to acquire securities of corporations that are incorporated or have assets, stockholders, executive offices or places of business in such states. In Edgar v. MITE Corp., the Supreme Court of the United States held that the Illinois Business Takeover Act, which involved state securities laws that made the takeover of certain corporations more difficult, imposed a substantial burden on interstate commerce and therefore was unconstitutional. In CTS Corp. v. Dynamics Corp. of America, however, the Supreme Court of the United States held that a state may, as a matter of corporate law and, in particular, those laws concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without prior approval of the remaining stockholders, provided that such laws were applicable only under certain conditions. Subsequently, a number of Federal courts ruled that various state takeover statutes were unconstitutional insofar as they apply to corporations incorporated outside the state of enactment. Section 203 of the DGCL limits the ability of a Delaware corporation to engage in business combinations with "interested stockholders" (defined as any beneficial owner of 15% or more of the outstanding voting stock 34 37 of the corporation) unless, among other things, the corporation's board of directors has given its prior approval of either the business combination or the transaction that resulted in the stockholder becoming an "interested stockholder." The Company has represented in the Merger Agreement that it approved the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, and has taken all necessary steps to render Section 203 of the DGCL inapplicable to the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger. Based on information supplied by the Company and the Company's representations in the Merger Agreement, Purchaser does not believe that any state takeover statutes apply to the Offer or the Merger. Neither Purchaser nor Parent has currently complied with any state takeover statute or regulation. Purchaser and Parent reserve the right to challenge the applicability or validity of any state law purportedly applicable to the Offer or the Merger and nothing in this Offer to Purchase or any action taken in connection with the Offer or the Merger is intended to be a waiver of that right. If it is asserted that any state takeover statute is applicable to the Offer or the Merger and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer or the Merger, Purchaser might be required to file certain information with, or to receive approvals from, the relevant state authorities, and Purchaser might be unable to accept for payment or pay for Shares tendered pursuant to the Offer, or be delayed in consummating the Offer or the Merger. In such case, Purchaser may not be obligated to accept for payment or pay for any Shares tendered pursuant to the Offer. See Section 14. Antitrust Compliance. Under the HSR Act and the rules that have been promulgated thereunder by the FTC, certain acquisition transactions may not be consummated unless certain information has been furnished to the Antitrust Division and the FTC and certain waiting period requirements have been satisfied. A Notification and Report Form with respect to the Offer has been filed on behalf of Parent under the HSR Act. The waiting period under the HSR Act with respect to the Offer will expire at 11:59 p.m., New York City time, on the fifteenth calendar day after the date Parent's form is filed, unless early termination of the waiting period is granted. Before such time, however, the Antitrust Division or the FTC may extend the waiting period by requesting additional information or documentary material from Parent. If such request is made, such waiting period will expire at 11:59 p.m., New York City time, on the tenth calendar day after substantial compliance by Parent with such request. Thereafter, the waiting period may be extended only by court order or with Purchaser's consent. The waiting period will not be affected either by the failure of the Company (as opposed to Parent and Purchaser) to file a Notification and Report form or to comply with any request for additional information or materials issued by the FTC or the Antitrust Division. The Merger would not require an additional filing under the HSR Act if Purchaser owns 50% or more of the Shares outstanding at the time of the Merger or if the Merger occurs within one year after the HSR Act waiting period applicable to the Offer expires or is terminated. The FTC and the Antitrust Division frequently scrutinize the legality under the antitrust laws of transactions such as the proposed acquisition of Shares by Purchaser pursuant to the Offer. At any time before or after the purchase of Shares pursuant to the Offer by Purchaser, the FTC or the Antitrust Division could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the purchase of Shares pursuant to the Offer or seeking the divestiture of Shares purchased by Purchaser or the divestiture of substantial assets of Parent, the Company or their respective 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 information available to Purchaser relating to the businesses in which Parent, the Company and their respective subsidiaries are engaged, Parent and Purchaser believe that the Offer will not violate the antitrust laws. Nevertheless, there can be no assurance that a challenge to the Offer on antitrust grounds will not be made or, if such a challenge is made, of the results thereof. See Section 14 for certain conditions to the Offer, including conditions with respect to litigation and certain governmental actions. 35 38 16. FEES AND EXPENSES. Parent has engaged DLJ as the Dealer Manager in connection with the Offer and as exclusive financial advisor to Parent in connection with the proposed acquisition of the Company. Pursuant to the terms of DLJ's engagement, Parent will pay DLJ a fee of (i) $190,000 payable upon the commencement of the Offer, and (ii) $1.9 million, less the amount paid pursuant to clause (i), payable if Parent or any of its affiliates consummates the acquisition of at least 90% of the outstanding Shares, a merger or consolidation with the Company, an acquisition of certain assets of the Company or any other business combination with the Company (collectively, a "Transaction"). In the event that a Transaction is not consummated and Parent receives a termination fee in connection therewith, Parent shall pay to DLJ 25% of any such termination fee, less Parent's expenses incurred in connection with the Transaction and less fees previously paid, up to a maximum of $1.9 million. Parent will also reimburse DLJ for reasonable out-of-pocket expenses related to DLJ's engagement, whether or not the Offer or any other Transaction is consummated, including reasonable legal fees and expenses within limits, and DLJ and certain related parties will be indemnified against certain liabilities, including liabilities under the federal securities laws, arising out of DLJ's engagement. In the ordinary course of business, DLJ and its affiliates may actively trade or hold Shares for their own account or for the account of customers and, accordingly, may at any time hold a long or short position in Shares. Purchaser has retained Morrow & Co., Inc. to act as the Information Agent and Harris Trust Company of New York to act as Depositary in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, facsimile, telegraph and personal interviews and may request brokers, dealers and other nominees of stockholders to forward materials relating to the Offer to beneficial owners of Shares. The Depositary has not been retained to make solicitations or recommendations in its role as the Depositary. The Information Agent and the Depositary each will receive reasonable and customary compensation for their services, be reimbursed for certain reasonable out-of-pocket expenses and be indemnified against certain liabilities and expenses in connection therewith. Neither Purchaser nor Parent will pay any fees or commissions to any broker or dealer or other person for soliciting tenders of Shares pursuant to the Offer (other than the Dealer Manager, the Depositary and the Information Agent as described in this Offer to Purchase). Brokers, dealers, commercial banks and trust companies will, upon request, be reimbursed by Purchaser for customary mailing and handling expenses incurred by them in forwarding offering materials to their customers. 17. MISCELLANEOUS. 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. Neither Purchaser nor Parent is aware of any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. To the extent Purchaser or Parent becomes aware of any state law that would limit the class of offerees in the Offer, Purchaser will amend the Offer and, depending on the timing of such amendment, if any, will extend the Offer to provide adequate dissemination of such information to holders of Shares prior to the expiration of the Offer. 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 Purchaser by one or more registered brokers or dealers which are licensed under the laws of such jurisdiction. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF PURCHASER OR PARENT NOT CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER TO TRANSMITTAL, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. 36 39 Parent and Purchaser have filed with the Commission the Schedule 14D-1, together with exhibits, pursuant to Rule 14d-3 under the Exchange Act, furnishing certain additional information with respect to the Offer and may file amendment thereto. In addition, the Company has filed the Schedule 14D-9 pursuant to Rule 14d-9 under the Exchange Act, together with the exhibits setting forth its recommendation with respect to the Offer and reasons for such recommendation and furnishing such additional related information. Such Schedules and any amendments thereto, including exhibits, may be inspected at, and copies may be obtained from, the same places and in the same manner as set forth in Section 8 (except that such material will not be available at the regional offices of the Commission). MORIARTY ACQUISITION CORP. December 23, 1998 37 40 SCHEDULE I INFORMATION RELATING TO DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND PURCHASER 1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The following table sets forth the name, current business address, citizenship and the present principal occupation or employment and material occupations, positions, offices or employment for the past five years of each director and executive officer of Parent. Unless otherwise indicated (i) the business address is 233 Fortune Boulevard, Milford, Massachusetts 01757 and (ii) each of the persons listed below is a United States citizen. DIRECTORS AND EXECUTIVE OFFICERS
NAME AGE POSITIONS Jordan A. Kahn............................ 56 President, Chief Executive Officer and Director Stanley Rosenzweig........................ 34 Chief Operating Officer and Director Ira B. Morgenstern........................ 45 Senior Vice President--Finance Gregory F. White.......................... 34 Executive Vice President, Sales and Marketing and Director (Tommy) Woon Fai Liu...................... 46 Managing Director of Holmes' Far East operations David Dusseault........................... 44 Chief Financial Officer Richard K. Lubin.......................... 52 Director Randy Peeler.............................. 34 Director
JORDAN A. KAHN, founder of Parent, has served as President and Chief Executive Officer and a director since its organization in 1982. Since 1968, Mr. Kahn has also been President of Jordan Kahn Co., Inc., a manufacturer's representative representing small electric personal appliance manufacturers, including Parent, to retailers across the Northeast. STANLEY ROSENZWEIG has served Parent since 1991, initially as Vice President--Operations, and since 1993 as Chief Operating Officer and a director. From 1987 to 1988, Mr. Rosenzweig served as a management consultant with Bain & Company, and from 1988 to 1989 as a sales manager with Jolson Corporation, a Canadian appliance company. IRA B. MORGENSTERN joined Parent as Senior Vice President -- Finance in August, 1998 from Diageo, PLC, a combination of the food and beverage businesses of Grand Metropolitan PLC and Guinness PLC, where he spent over six years in a number of financial management positions in the U.S. and London, including Vice President of Strategic Marketing Finance in the U.S. drinks division. Prior to Diageo, Mr. Morgenstern served as Vice President of Ditri Associates, Inc., a leveraged acquisition firm, consultant for Touche Ross, and internal auditor with Atlantic Richfield. GREGORY F. WHITE has served as Executive Vice President, Sales and Marketing since 1995, and from 1993 to 1995 as Vice President--Marketing. He became a director in 1997. He served as Account Supervisor at Ammirati & Puris, an advertising agency, from 1992 to 1993 and as Account Manager at the advertising agency D'Arcy, Masius, Benton & Bowles from 1991 to 1992. (TOMMY) WOON FAI LIU is Managing Director of the Parent's Far East operations. From 1993 to 1996, Mr. Liu, a Hong Kong national, served as Chief Financial Officer and Executive Director of Asco General Supplies Far East Limited, a subsidiary of Parent's former majority owner, the Pentland Group plc, as well as Executive Director of Holmes Products (Far East) Limited since 1994. From 1989 to 1993, Mr. Liu was Finance Director for Johnson & Johnson Hong Kong. DAVID DUSSEAULT has served as Chief Financial Officer of Parent since 1992 and from 1988 to 1992 as Comptroller of Parent. From 1981 to 1987, Mr. Dusseault served as Comptroller at Leach and Garner Refining. I-1 41 RICHARD K. LUBIN is a Managing Director of Berkshire Partners, which he co-founded in 1986, and has been a director of many of the firm's manufacturing, retailing and transportation investments, including, among others, InteSys Technologies, Inc. and English Welsh & Scottish Railway, Ltd. In addition, Mr. Lubin is Treasurer of the Dana-Farber Cancer Institute and a Trustee of Beth Israel Deaconess Medical Center. He became a director of Parent in 1997. RANDY PEELER is a Vice President of Berkshire Partners, where he has been employed since 1996. From 1994 to 1996, he was responsible for new business ventures at Health Advances, a healthcare industry consulting firm. From 1993 to 1994, he served as Chief of Staff to the Assistant Secretary for Economic Policy at the U.S. Department of the Treasury. Prior to that, he was a consultant with Cannon Associates. He became a director of Parent in 1997, and also serves as a director of Miami Cruise Services, Inc., Charrette Corporation and Weigh-Tronix, Inc. 2. DIRECTOR AND EXECUTIVE OFFICERS OF PURCHASER. The following table sets forth the name and position with Purchaser of the director and each executive officer of Purchaser. For additional information regarding such persons, see paragraph 1 above.
POSITIONS NAME WITH PURCHASER Jordan A. Kahn.............................................. President and Director Stanley Rosenzweig.......................................... Vice President Ira B. Morgenstern.......................................... Treasurer
I-2 42 The Letter of Transmittal (or facsimile thereof), properly completed and duly executed, together with certificates for the Shares and any other required documents should be sent by each stockholder of the Company or such stockholder's broker, dealer, commercial bank, trust company or other nominee to the Depositary as follows: The Depositary for the Offer is: HARRIS TRUST COMPANY OF NEW YORK By Mail: By Hand and Overnight Courier: Harris Trust Company of New York Harris Trust Company of New York Wall Street Station 88 Pine Street P.O. Box 1023 19th Floor New York, NY 10268-1023 New York, NY 10005
By Facsimile: (212) 701-7636 (For Eligible Institutions Only) For Information and Confirmation by Telephone: (212) 701-7624 Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager as set forth below. Additional copies of the Offer to Purchase, the Letter of Transmittal and all other tender offer materials may be obtained from the Information Agent and will be furnished promptly at Purchaser's expense. Stockholders may also contact their brokers, dealers, commercial banks or trust companies for assistance concerning the Offer. The Information Agent for the Offer is: MORROW & CO., INC. 445 Park Avenue 5th Floor New York, New York 10022 Toll Free (800) 566-9061 Call Collect (212) 754-8000 Banks and Brokerage Firms Please Call: (800) 662-5200 The Dealer Manager for the Offer is: DONALDSON, LUFKIN & JENRETTE 75 State Street Boston, Massachusetts 02109 (877) 842-3456 (toll free) (617) 342-8104 EX-99.(A)(2) 3 LETTER OF TRANSMITTAL 1 LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF THE RIVAL COMPANY PURSUANT TO THE OFFER TO PURCHASE DATED DECEMBER 23, 1998 BY MORIARTY ACQUISITION CORP. A WHOLLY-OWNED SUBSIDIARY OF HOLMES PRODUCTS CORP. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 25, 1999, UNLESS THE OFFER IS EXTENDED. The Depositary for the Offer is: HARRIS TRUST COMPANY OF NEW YORK By Mail: By Hand or Overnight Courier: Harris Trust Company of New York Harris Trust Company of New York Wall Street Station 88 Pine Street P.O. Box 1023 19th Floor New York, NY 10268-1023 New York, NY 10005
By Facsimile: (212) 701-7636 (For Eligible Institutions Only) For Information and Confirmation by Telephone: (212) 701-7624 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
- ------------------------------------------------------------------------------------------------------------------------ DESCRIPTION OF SHARES TENDERED - ------------------------------------------------------------------------------------------------------------------------ NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) EXACTLY AS NAME(S) APPEAR(S) ON STOCK CERTIFICATE(S) SHARE(S) TENDERED (PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY) - ------------------------------------------------------------------------------------------------------------------------ TOTAL NUMBER OF SHARES NUMBER CERTIFICATE REPRESENTED BY OF SHARES NUMBER(S)(1) CERTIFICATE(S)(1) TENDERED(2) ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ TOTAL SHARES - ------------------------------------------------------------------------------------------------------------------------ (1) Need not be completed by stockholders tendering by book-entry transfer. (2) Unless otherwise indicated, it will be assumed that all Shares being delivered to the Depositary are being tendered. See Instruction 4. - ------------------------------------------------------------------------------------------------------------------------
2 This Letter of Transmittal is to be used either if certificates for Shares (as defined below) are to be forwarded herewith or, unless an Agent's Message (as defined in Section 3 of the Offer to Purchase dated December 23, 1998 (the "Offer to Purchase")) is utilized, if delivery of Shares is to be made by book-entry transfer to the account maintained by Harris Trust Company of New York (the "Depositary") at The Depository Trust Company or Philadelphia Depository Trust Company (each, a "Book-Entry Transfer Facility" and, collectively, the "Book-Entry Transfer Facilities") pursuant to the procedures set forth in Section 3 of the Offer to Purchase. Stockholders whose certificates for Shares are not immediately available or who cannot deliver confirmation of a book-entry transfer of their Shares into the Depositary's account at a Book-Entry Transfer Facility ("Book-Entry Confirmation") and all other documents required hereby to the Depositary on or prior to the Expiration Date (as defined in the Offer to Purchase), must tender their Shares according to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY 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 Book-Entry Transfer Facility: [ ] The Depository Trust Company [ ] Philadelphia Depository Trust Company Account Number: Transaction Code Number: [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY (AS DEFINED IN THE OFFER TO PURCHASE) PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Owner(s): Window Ticket Number (if available): Date of Execution of Notice of Guaranteed Delivery: Name of Institution that Guaranteed Delivery: If delivered by book-entry transfer, check box of applicable Book-Entry Transfer Facility: [ ] The Depository Trust Company [ ] Philadelphia Depository Trust Company Account Number: Transaction Code Number: 2 3 NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS. Ladies and Gentlemen: The undersigned hereby tenders to Moriarty Acquisition Corp., a Delaware corporation ("Purchaser") and wholly-owned subsidiary of Holmes Products Corp., a Massachusetts corporation ("Parent"), the above described shares of common stock, par value $0.01 per share (the "Shares"), of The Rival Company, a Delaware corporation (the "Company") at a purchase price of $13.75 per Share, net to the seller in cash, without interest thereon (the "Offer Price"), upon the terms and subject to the conditions set forth in the Offer to Purchase and in this Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"), receipt of which is hereby acknowledged. Subject to, and effective upon, acceptance for payment of the Shares tendered herewith in accordance with the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of such extension or amendment), the undersigned hereby sells, assigns, and transfers to, or upon the order of, Purchaser 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 or rights issued or issuable in respect thereof on or after December 17, 1998) and irrevocably constitutes and appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to the full extent of the undersigned's rights with respect to such Shares (and any other Shares or securities or rights) to (a) deliver certificates for such Shares (and any such other Shares or securities or rights), or transfer ownership of such Shares (and any such other Shares or securities or rights) 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, Purchaser 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 any such other Shares or securities or rights) for transfer on the books of the Company and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares (and any other such Shares or securities or rights), all in accordance with the terms of the Offer. The undersigned hereby irrevocably appoints Jordan A. Kahn and Ira B. Morgenstern, and each of them, and any other designee(s) of Purchaser, the attorneys-in-fact and proxies of the undersigned, each with full power of substitution, to the full extent of such stockholder's rights with respect to tendered Shares (and any and all other non-cash dividends, distributions, rights and other securities issued or issuable in respect thereof on or after December 17, 1998), to vote at any annual, special, adjourned or postponed meeting of the Company's stockholders or otherwise in such manner as each such attorney-in-fact and proxy or his substitute shall in his sole discretion deem proper with respect to, to execute any written consent concerning any matter as each such attorney-in-fact and proxy or his substitute in his sole discretion deems proper with respect to, and to otherwise act as each such attorney-in-fact and proxy or his substitute shall in his sole discretion deem proper with respect to, the Shares tendered hereby that have been accepted for payment by Purchaser prior to the time any such action is taken, and with respect to which the undersigned is entitled to vote. This power of attorney and proxy is coupled with an interest in the Shares tendered hereby, is irrevocable and is granted in consideration of, and is effective when, if and to the extent that Purchaser accepts such Shares for payment pursuant to the Offer. Such acceptance for payment shall revoke, without further action, all prior powers of attorney, proxies and consents granted by the undersigned at any time with respect to such Shares (and any such other Shares or other securities or rights), and no subsequent powers of attorney, proxies, consents or revocations may be given (and, if given, will be not be deemed effective) with respect thereto by the undersigned. The undersigned acknowledges that in order for Shares to be deemed validly tendered, immediately upon the acceptance for payment of such Shares, Purchaser or Purchaser's designee must be able to exercise full voting, consent and other rights which inure to a record and beneficial holder with respect to such Shares and other securities or rights. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby (and any and all other Shares or other securities or rights issued or issuable in respect thereof on or after December 17, 1998), and that, when the same are accepted for payment by Purchaser, Purchaser will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and the same will not be subject to any adverse claim. The undersigned, upon request, will execute and deliver any signature guarantee or additional documents deemed by the Depositary or Purchaser to be necessary or 3 4 desirable to complete or confirm the sale, assignment and transfer of the Shares tendered hereby (and any and all such other Shares or other securities or rights). All authority conferred or agreed pursuant to 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 understands that the valid tender of Shares pursuant to any of the procedures described in Section 3 of the Offer to Purchase and in the Instructions hereto will constitute a binding agreement between the undersigned and Purchaser 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 and/or return any certificates for Shares not tendered or accepted for payment in the name(s) of the undersigned. Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price and/or return any certificates for Shares not tendered or accepted for payment (and accompanying documents, as appropriate) to the undersigned at the address shown below the undersigned's signature. In the event that both the Special Delivery Instructions and the Special Payment Instructions are completed, please issue the check for the purchase price and/or return any certificates for Shares not tendered or accepted for payment (and accompanying documents, as appropriate) in the name of, and deliver such check and/or return such certificates (and accompanying documents, as appropriate) to the person or persons so indicated. Unless otherwise indicated herein under "Special Payment Instructions," please credit any Shares tendered herewith by book-entry transfer that are not accepted for payment by crediting the account at the Book Entry Transfer Facility designated above. The undersigned recognizes that Purchaser has no obligation pursuant to the "Special Payment Instructions" to transfer any Shares from the name of the registered holder thereof if Purchaser does not accept for payment any of the Shares so tendered. 4 5 ------------------------------------------------------------ SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6, AND 7) To be completed ONLY if certificates for Shares not tendered or not purchased and/or the check for the purchase price of Shares purchased are to be issued in the name of someone other than the undersigned or if Shares delivered by book-entry transfer which are not purchased are to be returned by credit to an account maintained at a Book-Entry Transfer Facility other than that designated above. Issue [ ] check and/or [ ] certificates to: Name: ---------------------------------------------------- (PLEASE PRINT) Address: -------------------------------------------------- ------------------------------------------------------------ (INCLUDE ZIP CODE) ------------------------------------------------------------ (TAX IDENTIFICATION OR SOCIAL SECURITY NO.) [ ] Credit unpurchased Shares delivered by book-entry transfer to the Book-Entry Transfer Facility account set forth below: Check appropriate box: [ ] The Depository Trust Company [ ] Philadelphia Depository Trust Company ------------------------------------------------------------ (ACCOUNT NUMBER) ------------------------------------------------------------ ------------------------------------------------------------ SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6, AND 7) To be completed ONLY if certificates for Shares not tendered or not purchased and/or the check for the purchase price of Shares purchased are to be mailed or delivered to someone other than the undersigned or to the undersigned at an address other than that indicated above. Mail or deliver [ ] check and/or [ ] certificates to: Name: ---------------------------------------------------- (PLEASE PRINT) Address: -------------------------------------------------- ------------------------------------------------------------ (INCLUDE ZIP CODE) ------------------------------------------------------------ (TAX IDENTIFICATION OR SOCIAL SECURITY NO.) ------------------------------------------------------------ 5 6 IMPORTANT STOCKHOLDERS SIGN HERE (ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW) X ------------------------------------------------------------------- X ------------------------------------------------------------------- (SIGNATURE(S) OF OWNER(S)) Dated: -------------------------------------------------, 199 ---------------- (Must be signed by the registered holder(s) exactly as name(s) appear(s) on certificate(s) for the Shares or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, please provide the following information. See Instruction 5.) Name(s): ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- (PLEASE PRINT) Capacity (full title): --------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- Address(es): --------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number: ----------------------------------------- Tax Identification or Social Security No.: --------------------------------------- GUARANTEE OF SIGNATURE(S) (IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5) Authorized Signature(s): ------------------------------------------------ Name and Title: ------------------------------------------------------ (PLEASE PRINT) Name of Firm: -------------------------------------------------------- Address: ------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone No.: --------------------------------------- Dated:---------------------, 199------------- SIGN SIGN HERE HERE HERE [ARROW] ARROW] [ARROW] [ARROW] ARROW] [ARROW]
6 7 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. Guarantee of Signatures. No signature guarantee on this Letter of Transmittal is required (i) if this Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this Instruction includes any participant in any of the Book-Entry Transfer Facilities' systems whose name appears on a security position listing as the owner of the Shares) of Shares tendered herewith, unless each such registered holder has completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on this 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 Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program (each, an "Eligible Institution"). In all other cases, all signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution. Also see Instruction 5. 2. Delivery of Letter of Transmittal and Certificates. This Letter of Transmittal is to be completed by stockholders either if certificates are to be forwarded herewith or, unless an Agent's Message (as defined herein) is utilized, if delivery 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 a stockholder validly to tender Shares pursuant to the Offer, either (a) a Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and any other required documents, must be received by the Depositary at one of its addresses set forth herein prior to the Expiration Date and either the certificates for tendered Shares must be received by the Depositary at one of such addresses or Shares must be delivered pursuant to the procedures described herein (and a Book-Entry Confirmation must be received by the Depositary), in each case, prior to the Expiration Date, or (b) the tendering stockholder must comply with the guaranteed delivery procedures described below and in Section 3 of the Offer to Purchase. If a stockholder's certificates for such Shares are not immediately available or time will not permit all required documents to reach the Depositary prior to the Expiration Date, or the procedure for book-entry transfer cannot be completed on a timely basis, such stockholder's Shares may nevertheless be tendered by properly completing and duly executing the Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures 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 Purchaser, must be received by the Depositary prior to the Expiration Date and (iii) in the case of a guarantee of Shares, the certificates for (or a Book-Entry Confirmation with respect to) all tendered Shares, in proper form for transfer, together with a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, together with any required signature guarantee(s) or, in the case of a book-entry transfer, an Agent's Message, and any other required documents, must be 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 Nasdaq National Market operated by the National Association of Securities Dealers, Inc. is open for business. If certificates for such Shares are forwarded separately to the Depositary, a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, together with any required signature guarantees, must accompany each such delivery. The term "Agent's Message" means a message, transmitted by a Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering the Shares that such participant has received and agrees to be bound by the terms of this Letter of Transmittal and that Purchaser may enforce such agreement against the participant. THE METHOD OF DELIVERY OF SHARES, THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION 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, PROPERLY INSURED REGISTERED MAIL WITH RETURN RECEIPT REQUESTED 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 a facsimile thereof), waive any right to receive any notice of the acceptance of their Shares for payment. 7 8 3. Inadequate Space. If the space provided herein is inadequate, the certificate numbers and/or the number of Shares should be listed on a separate signed schedule attached hereto. 4. Partial Tenders. (Not applicable to stockholders who tender by book-entry transfer.) If fewer than all the Shares evidenced by any certificate submitted are to be tendered, fill in the number of Shares which are to be tendered in the box entitled "Description of Shares to be Tendered." In such case, new certificate(s) for the remainder of the Shares that were evidenced by the old certificate(s) will be sent to the registered holder, unless otherwise provided in the appropriate box on this Letter of Transmittal, as soon as practicable after the Expiration Date. All Shares represented by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond exactly to the name(s) as written on the face of the certificate(s) without alteration, enlargement or 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 tendered Shares are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. If this Letter of Transmittal or any certificates or stock powers are signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to Purchaser of such person's authority so to act must be submitted. When this Letter of Transmittal is signed by the registered owner(s) of the Shares listed and transmitted hereby, no endorsement of certificates or separate stock powers is required unless payment or certificates for Shares not tendered or purchased are to be issued to a person other than the registered owner(s). Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution as defined in Instruction 1. If this Letter of Transmittal is signed by a person other than the registered owner(s) of the Shares listed, the certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear on the certificates. Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. 6. Stock Transfer Taxes. Except as set forth in this Instruction 6, Purchaser will pay or cause to be paid any stock transfer taxes with respect to the transfer and sale of purchased Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made, or if certificates for Shares not tendered or purchased are to be registered in the name of any person other than the registered holder, or if tendered certificates are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder or such person) payable on account of the transfer to such person will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes or exemption therefrom is submitted. EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF TRANSMITTAL. 7. Special Payment and Delivery Instructions. If a check and/or certificates for unpurchased Shares are to be issued in the name of a person other than the signer of this Letter of Transmittal or if a check is to be sent and/or such certificates are to be returned to someone other than the signer of this Letter of Transmittal or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Stockholders tendering Shares by book-entry transfer may request that Shares not purchased be credited to such account maintained at a Book-Entry Transfer Facility as such stockholder may designate hereon. If no such instructions are given, such Shares not purchased will be returned by crediting the account at the Book-Entry Transfer Facility designated above. 8. Requests for Assistance or Additional Copies. Requests for assistance may be directed to the Information Agent (as defined in the Offer to Purchase) at its address set forth below. Additional copies of the Offer to Purchase, this Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer Identification 8 9 Number on Substitute Form W-9 may be obtained from the Information Agent at the address set forth below or from your broker, dealer, commercial bank or trust company. 9. Waiver of Conditions. Purchaser expressly reserves the right, in its sole discretion, at any time and from time to time, to waive any of the conditions to the Offer, including the Minimum Condition (as defined in the Offer to Purchase), provided that no such waiver of the Minimum Condition shall decrease the Minimum Condition to less than a majority of the Shares outstanding on a fully diluted basis), to the extent permitted by applicable laws and the provisions of the Merger Agreement (as defined in the Offer to Purchase), in the case of any Shares tendered. 10. Substitute Form W-9. Subject to the availability of an exemption, each tendering stockholder is required to provide the Depositary with a correct Taxpayer Identification Number ("TIN") on the Substitute Form W-9, which is provided under "Important Tax Information" below, and to certify under penalties of perjury that such number is correct and that such stockholder is not subject to backup withholding. If a tendering stockholder has been notified by the Internal Revenue Service that such stockholder is subject to backup withholding, such stockholder must cross out item (2) of the Certification box of the Substitute Form W-9, unless such stockholder has since been notified by the Internal Revenue Service that such stockholder is no longer subject to backup withholding. Failure to provide the information on the Substitute Form W-9 may subject the tendering stockholder to 31% federal income tax withholding with respect to any payments received pursuant to the Offer. If the tendering stockholder has not been issued a TIN and has applied for one or intends to apply for one in the near future, such stockholder should write "Applied For" in the space provided for the TIN in Part 1 of the Substitute Form W-9, check the box in Part 3 of the Substitute Form W-9 and sign and date the Substitute Form W-9. Such a stockholder must also complete the Certificate of Awaiting Taxpayer Identification Number, which is provided below. Notwithstanding that "Applied For" is written in Part 1 and the Certificate of Awaiting Taxpayer Identification Number is completed, the Depositary will withhold 31% on all payments of the purchase price to such stockholder until a TIN is provided to the Depositary. However, such withheld amount will be refunded to such stockholder if a certified TIN is provided to the Depositary within 60 days. 11. Lost, Destroyed or Stolen Certificates. If any certificate(s) representing Shares has been lost, destroyed or stolen, the stockholder should promptly notify the Depositary. The stockholder will then be instructed as to the steps that must be taken in order to replace the certificate(s). This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost or destroyed certificates have been followed. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), PROPERLY COMPLETED AND DULY EXECUTED, TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES, OR, IN THE CASE OF A BOOK-ENTRY TRANSFER, AN AGENT'S MESSAGE, AND ANY OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE DEPOSITARY AT ONE OF ITS ADDRESSES SET FORTH HEREIN PRIOR TO THE EXPIRATION DATE AND EITHER CERTIFICATES FOR TENDERED SHARES MUST BE RECEIVED BY THE DEPOSITARY OR SHARES MUST BE DELIVERED PURSUANT TO THE PROCEDURES FOR BOOK-ENTRY TRANSFER, IN EACH CASE PRIOR TO THE EXPIRATION DATE, OR THE TENDERING STOCKHOLDER MUST COMPLY WITH THE PROCEDURES FOR GUARANTEED DELIVERY. 9 10 IMPORTANT TAX INFORMATION Under United States federal income tax law, unless an exemption applies (as described below), a stockholder whose tendered Shares are accepted for payment is required by law to provide the Depositary with such stockholder's correct TIN on Substitute Form W-9 below. If such stockholder is an individual, the TIN is generally such stockholder's social security number. If the Depositary is not provided with the correct TIN, the stockholder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments that are made to such stockholder with respect to Shares purchased pursuant to the Offer may be subject to backup withholding of 31%. Certain stockholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to these backup withholding and reporting requirements. Noncorporate foreign stockholders should sign and complete the main signature form and a Form W-8, Certificate of Foreign Status, a copy of which may be obtained from the Depositary, in order to avoid backup withholding. Exempt stockholders, other than noncorporate foreign stockholders, should furnish their TIN, write "Exempt" on the face of the Substitute Form W-9 below, and sign, date and return the Substitute Form W-9 to the Depositary. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. If backup withholding applies with respect to a stockholder, the Depositary is required to withhold 31% of any payments made to such stockholder. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup withholding on payments that are made to a stockholder with respect to Shares purchased pursuant to the Offer, the stockholder is required to notify the Depositary of such stockholder's correct TIN by completing the form below certifying (a) that the TIN provided on the Substitute Form W-9 is correct and (b) that such stockholder is not subject to backup withholding because (i) such stockholder is exempt from backup withholding, (ii) such stockholder has not been notified by the Internal Revenue Service that such stockholder is subject to backup withholding as a result of a failure to report all interest or dividends or (iii) such stockholder has been notified by the Internal Revenue Service that such stockholder is no longer subject to backup withholding. WHAT NUMBER TO GIVE THE DEPOSITARY The stockholder is required to give the Depositary the TIN (e.g., social security number or employer identification number) of the record owner 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, the stockholder should write "Applied For" in the space provided for the TIN in Part 1 of the Substitute Form W-9, check the box in Part 3 of the Substitute Form W-9 and sign and date the Substitute Form W-9. Such a stockholder must also complete the Certificate of Awaiting Taxpayer Identification Number, which is provided below. Notwithstanding that "Applied For" is written in Part 1 and the Certificate of Awaiting Taxpayer Identification Number is completed, the Depositary will withhold 31% of all payments of the purchase price to such stockholder until a TIN is provided to the Depositary. However, such withheld amount will be refunded to such stockholder if a certified TIN is provided to the Depositary within 60 days. 10 11 - ---------------------------------------------------------------------------------------------------------------------------- PAYER'S NAME: HARRIS TRUST COMPANY OF NEW YORK - ---------------------------------------------------------------------------------------------------------------------------- SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT ------------------------------- FORM W-9 AND CERTIFY BY SIGNING AND DATING BELOW Social security number DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE or PAYER'S REQUEST FOR ------------------------------- TAXPAYER IDENTIFICATION Employer identification NUMBER (TIN) number ----------------------------------------------------------------------------------------- PART 2 -- CERTIFICATION -- Under penalties of PART 3 -- Awaiting TIN [ ] perjury, I certify that: (1) The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me); and (2) I am not subject to backup withholding because (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (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. ----------------------------------------------------------------------------------------- CERTIFICATION INSTRUCTIONS -- You must cross out item (2) in Part 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 are subject to backup withholding you receive another notification from the IRS stating that you are no longer subject to backup withholding, do not cross out item (2). - --------------------------------------------------------------------------------------------------------------------------- SIGNATURE - ----------------------------------------------------------------------- DATE, -------------------------------------- 199-- - ----------------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY CASH 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. 11 12 YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECK THE BOX IN PART 3 OF SUBSTITUTE FORM W-9 CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under 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 such an application in the near future. I understand that if I do not provide a taxpayer identification number to the Depositary, 31% of all reportable payments made to me will be withheld, but that such withheld amount shall be refunded to me if I provide the Depositary with my taxpayer identification number within 60 days. Signature Date , 199 --------------------------------- ----------------- ------ Questions and requests for assistance or additional copies of the Offer to Purchase, this Letter of Transmittal and other tender offer materials may be directed to the Information Agent as set forth below: The Information Agent for the Offer is: MORROW & CO., INC. 445 Park Avenue 5th Floor New York, New York 10022 Toll Free (800) 566-9061 Call Collect (212) 754-8000 Banks and Brokerage Firms Please Call: (800) 662-5200 The Dealer Manager for the Offer is: DONALDSON, LUFKIN & JENRETTE 75 State Street Boston, Massachusetts 02109 (877) 842-3456 (toll free) (617) 342-8104 12 EX-99.(A)(3) 4 NOTICE OF GUARANTEED DELIVERY 1 NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK OF THE RIVAL COMPANY This Notice of Guaranteed Delivery, or one substantially in the form hereof, must be used to tender Shares (as defined below) pursuant to the Offer (as defined below) if (i) certificates for shares of common stock, par value $0.01 per share (the "Shares"), of The Rival Company, a Delaware corporation (the "Company"), are not immediately available; (ii) time will not permit all required documents to reach Harris Trust Company of New York, as Depositary (the "Depositary"), prior to the Expiration Date (as defined in the Offer to Purchase, dated December 23, 1998 (the "Offer to Purchase")); or (iii) 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: HARRIS TRUST COMPANY OF NEW YORK By Mail: By Hand or Overnight Courier: Harris Trust Company of New York Harris Trust Company of New York Wall Street Station 88 Pine Street P.O. Box 1023 19th Floor New York, NY 10268-1023 New York, NY 10005
By Facsimile: (212) 701-7636 (For Eligible Institutions Only) For Information and Confirmation by Telephone: (212) 701-7624 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE 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. THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED. 2 Ladies and Gentlemen: The undersigned hereby tenders to Moriarty Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Holmes Products Corp., a Massachusetts corporation, 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"), receipt of which is hereby acknowledged, the number of Shares indicated below pursuant to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. Number of Shares:------------------------------------------------------------- Name(s) of Record Holder(s):-------------------------------------------------- - ------------------------------------------------------------------------------- Please Type or Print Address(es):------------------------------------------------------------------ - ------------------------------------------------------------------------------- Zip Code Area Code and Tel. No.:------------------------------------------------------- Certificate No(s).(if available):--------------------------------------------- - ------------------------------------------------------------------------------- Signature(s):------------------------------------------------------------------ - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Dated:---------------------------------, 199-- If Shares will be tendered by book-entry transfer, check one box and provide account number [ ] The Depository Trust Company [ ] Philadelphia Depository Trust Company Account Number:---------------------------------------------------------------- GUARANTEE (Not To Be Used For Signature Guarantee) The undersigned, a firm which is a participant in the Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program (each, an "Eligible Institution"), hereby (a) represents that the tender of Shares effected hereby complied with Rule 14e-4 under the Securities Exchange Act of 1934, as amended, and (b) guarantees delivery to the Depositary, at one of its addresses set forth above, of certificates representing the Shares tendered hereby in proper form for transfer, or confirmation of book-entry transfer of such Shares into the Depositary's accounts at The Depository Trust Company or Philadelphia Depository Trust Company, in each case with delivery of 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, and any other required documents, within three Nasdaq National Market trading days after the date hereof. The Eligible Institution that completes this form must communicate the guarantee to the Depositary and must deliver the Letter of Transmittal and the certificates for Shares 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:--------------------------------------------------------- Name (Type or Print):--------------------------------------------------------- Title:------------------------------------------------------------------------ Address:---------------------------------------------------------------------- - ------------------------------------------------------------------------------- Zip Code Area Code and Tel. No.:------------------------------------------------------- Dated:----------------------, 199-- NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES FOR SHARES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL. 2 EX-99.(A)(4) 5 LETTER TO BROKERS, DEALERS ETC. 1 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF THE RIVAL COMPANY AT $13.75 NET PER SHARE BY MORIARTY ACQUISITION CORP. A WHOLLY-OWNED SUBSIDIARY OF HOLMES PRODUCTS CORP. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 25, 1999, UNLESS THE OFFER IS EXTENDED. December 23, 1998 To Brokers, Dealers, Commercial Banks, Trust Companies And Other Nominees: We have been engaged by Moriarty Acquisition Corp., a Delaware corporation ("Purchaser") and a wholly-owned subsidiary of Holmes Products Corp., a Massachusetts corporation ("Parent"), to act as the Information Agent in connection with Purchaser's offer to purchase all outstanding shares of common stock, par value $0.01 per share (the "Shares"), of The Rival Company, a Delaware corporation (the "Company"), or such lesser number of Shares which, together with any Shares then beneficially owned by Parent or Purchaser, represents at least 70% of the number of Shares outstanding on the Expiration Date (as defined in the Offer to Purchase, dated December 23, 1998 (the "Offer to Purchase")). Purchaser is tendering for all outstanding Shares at a purchase price of $13.75 per Share, net to the seller in cash, without interest thereon (the "Offer Price"), upon the terms and subject to the conditions set forth in the Offer to Purchase and in the Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). 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, or who hold Shares registered in their own names, we are enclosing the following documents: 1. The Offer to Purchase; 2. A letter from the Chairman and Chief Executive Officer of the Company and the Solicitation/Recommendation Statement on Schedule 14D-9 of the Company; 3. The Letter of Transmittal to be used by holders of Shares for your use in tendering Shares pursuant to the Offer and for the information of your clients (facsimile copies of the Letter of Transmittal may be used to tender Shares); 4. A form of letter which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer; 5. A Notice of Guaranteed Delivery to be used to accept the Offer if certificates for Shares are not immediately available or if time will not permit all required documents to reach the Depositary by the Expiration Date or if the procedure for book-entry transfer cannot be completed on a timely basis; 6. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9; and 7. A return envelope addressed to the Depositary. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF SHARES WHICH, TOGETHER WITH THE SHARES THEN BENEFICIALLY OWNED BY PARENT OR PURCHASER, REPRESENTS AT LEAST 70% OF ALL OUTSTANDING SHARES (DETERMINED ON A FULLY DILUTED BASIS ON THE EXPIRATION DATE). THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS CONTAINED IN THE OFFER TO PURCHASE. SEE SECTION 14 OF THE OFFER TO PURCHASE. 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), Purchaser will accept for payment and pay for all Shares which are validly tendered prior to the Expiration Date and not theretofore properly withdrawn when, as and if Purchaser gives oral or written notice to the Depositary of Purchaser's acceptance of such Shares for payment pursuant to the Offer. Payment for Shares purchased pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of certificates for such Shares, or timely confirmation of a book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company or Philadelphia Depository Trust Company, pursuant to the procedures described in Section 3 of the Offer to 2 Purchase, a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message (as defined in the Offer to Purchase), and any other required documents. Neither Purchaser nor Parent will pay any fees or commissions to any broker or dealer or other person for soliciting tenders of Shares pursuant to the Offer (other than the Dealer Manager, the Depositary and the Information Agent as described in the Offer to Purchase). Purchaser will, however, upon request, reimburse brokers, dealers, commercial banks and trust companies for customary mailing and handling expenses incurred by you in forwarding the enclosed materials to your clients. Purchaser will pay or cause to be paid all stock transfer taxes payable on the transfer of Shares to it, except as otherwise provided in Instruction 6 of the Letter of Transmittal. YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 25, 1999, UNLESS THE OFFER IS EXTENDED. In order to take advantage of the Offer, a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, together with any required signature guarantees, and any other required documents, should be sent to the Depositary, and certificates representing the tendered Shares should be delivered or such Shares should be tendered by book-entry transfer, all in accordance with the Instructions set forth in the Letter of Transmittal and the Offer to Purchase. If holders of Shares wish to tender, but it is impracticable for them to forward their certificates or other required documents prior to the expiration of the Offer, a tender may be effected by following the guaranteed delivery procedures specified under Section 3 of the Offer to Purchase. Any inquiries you may have with respect to the Offer should be addressed to the undersigned at our address and telephone number set forth below, or to the Dealer Manager at the address and telephone number set forth on the back cover page of the Offer to Purchase. Additional copies of the enclosed materials may be obtained from the undersigned or from brokers, dealers, commercial banks or trust companies. Very truly yours, MORROW & CO., INC. 445 Park Avenue 5th Floor New York, New York 10022 Toll Free (800) 566-9061 Call Collect (212) 754-8000 Banks and Brokerage Firms Please Call: (800) 662-5200 NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF PARENT, PURCHASER, THE DEPOSITARY OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF THE FOREGOING, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED AND THE STATEMENTS CONTAINED THEREIN. EX-99.(A)(5) 6 LETTER TO CLIENTS 1 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF THE RIVAL COMPANY AT $13.75 NET PER SHARE BY MORIARTY ACQUISITION CORP. A WHOLLY-OWNED SUBSIDIARY OF HOLMES PRODUCTS CORP. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 25, 1999, UNLESS THE OFFER IS EXTENDED. December 23, 1998 To Our Clients: Enclosed for your consideration is the Offer to Purchase, dated December 23, 1998 (the "Offer to Purchase"), and the Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer") relating to an offer by Moriarty Acquisition Corp., a Delaware corporation ("Purchaser") and a wholly-owned subsidiary of Holmes Products Corp., a Massachusetts corporation ("Parent"), to purchase all outstanding shares of common stock, par value $0.01 per share (the "Shares"), of The Rival Company, a Delaware corporation (the "Company"), or such lesser number of Shares which, together with any Shares then beneficially owned by Parent or Purchaser, represent at least 70% of the number of Shares outstanding on the Expiration Date (as defined in the Offer to Purchase). Purchaser is tendering for all outstanding Shares at a purchase price of $13.75 per Share, net to the seller in cash, without interest thereon (the "Offer Price"), upon the terms and subject to the conditions set forth in the Offer to Purchase. If a stockholder desires to tender Shares pursuant to the Offer and the certificate(s) for such stockholder's Shares are not immediately available or time will not permit all required documents to reach the Depositary prior to the Expiration Date or the procedure for book-entry transfer cannot be completed on a timely basis, such Shares may nevertheless be tendered according to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. See Instruction 2 of the Letter of Transmittal. Delivery of documents to a Book-Entry Transfer Facility (as defined in the Offer to Purchase) in accordance with the Book-Entry Transfer Facility's procedures does not constitute delivery to the Depositary. 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 tender any or all of such Shares held by us for your account, pursuant to the term and conditions set forth in the Offer. Your attention is directed to the following: 1. The tender price is $13.75 per Share, net to you in cash without interest. 2. The Offer and withdrawal rights will expire at 12:00 midnight, New York City time, on Monday, January 25, 1999, unless the Offer is extended. 2 2 3. The Board of Directors of the Company (with one director absent), by unanimous vote of all of the directors, has approved the Merger Agreement (as defined in the Offer to Purchase) and the transactions contemplated thereby and determined that each of the Offer and the Merger (as defined in the Offer to Purchase), is fair to, and in the best interest of, the stockholders of the Company. 4. The Offer is being made for all outstanding Shares. 5. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the expiration of the Offer a number of Shares which, together with any Shares then beneficially owned by Parent or Purchaser, represent at least 70% of the number of Shares outstanding on the Expiration Date. 6. Stockholders who tender Shares will not be obligated to pay brokerage commissions, solicitation fees or, except as set forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares by Purchaser pursuant to the Offer. 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. Neither Purchaser nor Parent is aware of any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. To the extent Purchaser or Parent becomes aware of any state law that would limit the class of offerees in the Offer, Purchaser may amend the Offer and, depending on the timing of such amendment, if any, may extend the Offer to provide adequate dissemination of such information to holders of Shares prior to the expiration of the Offer. 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 Purchaser by one or more registered brokers or dealers which are licensed under the laws of such jurisdiction. If you wish to have us tender any or all of your Shares, please complete, sign and return to us the form set forth below. An envelope to return your instructions to us is enclosed. Your instructions to us should be forwarded in ample time to permit us to submit a tender on your behalf prior to the expiration of the Offer. If you authorize the tender of your Shares, all such Shares will be tendered unless otherwise specified on the instruction form set forth below. ------------------------ INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF THE RIVAL COMPANY The undersigned acknowledge(s) receipt of your letter, the enclosed Offer to Purchase, dated December 23, 1998, and the Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"), relating to the offer by Moriarty Acquisition Corp., a Delaware corporation ("Purchaser") and a wholly-owned subsidiary of Holmes Products Corp., a Massachusetts corporation, to purchase all outstanding shares of common stock, par value $0.01 per share (the "Shares"), of The Rival Company, a Delaware corporation (the "Company"). 3 3 This will instruct you to tender to Purchaser the number of Shares indicated below (or if no number is indicated below, all Shares) held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer.
Dated: ------------------------------, 199 SIGN HERE --- ------------------------------------------- Number of Shares to be Tendered*: ------------------------------------------- x Account Number: ------------------------------------------- ------------------------------------ x ------------------------------------------- Signature(s) ------------------------------------------- ------------------------------------------- Please Print Name(s) Here ------------------------------------------- ------------------------------------------- Address(es) ------------------------------------------- ------------------------------------------- Area Code and Telephone Number(s) ------------------------------------------- ------------------------------------------- Tax Identification or Social Security No(s) * Unless otherwise indicated, it will be assumed that all of your Shares held by us for your account are to be tendered.
4 EX-99.(A)(6) 7 GUIDELINES W-9 1 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer. - ------------------------------------------------------------ GIVE THE FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY NUMBER OF-- - ------------------------------------------------------------ 1. An individual The individual 2. Two or more individuals (joint The actual owner of account) the account or, if combined funds, any one of the individuals(1) 3. Husband and wife (joint account) The actual owner of the account or, if joint funds, either person(1) 4. Custodian account of a minor The minor(2) (Uniform Gift to Minors Act) 5. Adult and minor (joint account) The adult or, if the minor is the only contributor, the minor(1) 6. Account in the name of guardian or The ward, minor, or committee for a designated ward, incompetent minor, or incompetent person person(3) 7. a. The usual revocable savings The grantor- trust account (grantor is also trustee(1) trustee) b. So-called trust account that is The actual owner(1) not a legal or valid trust under State law 8. Sole proprietorship account The owner(4) - ------------------------------------------------------------ - ------------------------------------------------------------ GIVE THE EMPLOYER FOR THIS TYPE OF ACCOUNT: IDENTIFICATION NUMBER OF-- - ------------------------------------------------------------ 9. A valid trust, estate, or pension Legal entity (Do trust not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(5) 10. Corporate account The corporation 11. Religious, charitable, or The organization educational organization account 12. Partnership account held in the The partnership name of the business 13. Association, club, or other tax- The organization exempt organization 14. A broker or registered nominee The broker or nominee 15. Account with the Department of The public entity Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments - ------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. If only one person on a joint account has a Social Security number, that person's number must be furnished. (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) You must show your individual name, but you may also enter your business or "doing business as" name. You may use either your Social Security number or Employer identification number (if you have one). (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. 2 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER OF SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number (for business and all other entities), at the local office to the Social Security Administration or the Internal Revenue Service (the "IRS") and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING 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) of the Internal Revenue Code of 1986, as amended (the "Code"), or an individual retirement plan, or a custodial account under section 403(b)(7) of the Code, if the account satisfies the requirements of section 401(f)(2) of the Code. - The United States or any agency or instrumentality thereof. - A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. - A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. - An international organization or any agency, or instrumentality thereof. - A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. - A real estate investment trust. - A common trust fund operated by a bank under section 584(a) of the Code. - An exempt charitable remainder trust, or a non-exempt trust described in section 4947(a)(1) of the Code. - An entity registered at all times under the Investment Company Act of 1940. - A foreign central bank of issue. - A middleman known in the investment community as a nominee or who is listed in the most recent publication of the American Society of Corporate Secretaries, Inc., Nominee List. 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 of the Code. - Payments to partnerships not engaged in a trade or business in the U.S. 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. - Section 401(k) payments made by an ESOP. 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 this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under section 852 of the Code). - Payments described in section 6049(b)(5) of the Code to nonresident aliens. - Payments on tax-free covenant bonds under section 1451 of the Code. - Payments made by certain foreign organizations. - Payments made to a nominee. Exempt Payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain payments other than interest dividends, and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A(a), 6045, and 6050A of the Code and the Treasury regulations promulgated thereunder. PRIVACY ACT NOTICE.--Section 6109 of the Code requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to the IRS. The IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish your taxpayer identification number to payer, you are subject to a penalty of $50 for each such failure unless your failure is due to a reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE IRS. EX-99.(A)(7) 8 SUMMARY ADVERTISEMENT 1 This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares. The Offer is made solely by the Offer to Purchase, dated December 23, 1998, and the related Letter of Transmittal. The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares residing in jurisdictions 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 Purchaser by Donaldson, Lufkin & Jenrette Securities Corporation or one or more registered brokers or dealers which are licensed under the laws of such jurisdiction. NOTICE OF OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF THE RIVAL COMPANY AT $13.75 NET PER SHARE BY MORIARTY ACQUISITION CORP. A WHOLLY-OWNED SUBSIDIARY OF HOLMES PRODUCTS CORP. Moriarty Acquisition Corp., a Delaware corporation ("Purchaser") and a wholly-owned subsidiary of Holmes Products Corp., a Massachusetts corporation ("Parent"), is offering to purchase all outstanding shares of Common Stock, par value $0.01 per share (the "Shares"), of The Rival Company, a Delaware corporation (the "Company"), upon the terms and subject to the conditions set forth in the Offer to Purchase, dated December 23, 1998 (the "Offer to Purchase"), and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"), at a purchase price of $13.75 per Share, net to the seller in cash, without interest thereon. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 25, 1999, UNLESS THE OFFER IS EXTENDED. 2 THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS (i) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF SHARES, WHICH, TOGETHER WITH ANY SHARES THEN BENEFICIALLY OWNED BY PARENT OR PURCHASER, REPRESENTS AT LEAST 70% OF THE NUMBER OF SHARES OUTSTANDING ON THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE)), (ii) PARENT AND PURCHASER HAVING OBTAINED FINANCING TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT AND (iii) ANY WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE OFFER HAVING EXPIRED OR BEEN TERMINATED. THE OFFER ALSO IS SUBJECT TO CERTAIN OTHER CONDITIONS WHICH ARE SET FORTH IN SECTION 14 OF THE OFFER TO PURCHASE. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of December 17, 1998 (the "Merger Agreement"), by and among the Company, Purchaser and Parent, which provides for the making of the Offer and, following consummation of the Offer and the satisfaction or waiver of certain conditions, the merger of Purchaser with and into the Company (the "Merger"), with the Company surviving the merger as a wholly-owned subsidiary of Parent. At the effective time of the Merger, each outstanding Share (other than Shares held by stockholders who properly demand their appraisal rights under Delaware law, Shares held in the Company's treasury and Shares owned by Parent or Purchaser) will be converted into the right to receive in cash, without interest, the cash price per Share paid pursuant to the Offer. THE BOARD OF DIRECTORS OF THE COMPANY (WITH ONE DIRECTOR ABSENT) HAS UNANIMOUSLY APPROVED 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 COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any extension or amendment), Purchaser will accept for payment and thereby purchase, at the Offer price, all Shares validly tendered prior to the Expiration Date and not properly withdrawn. For purposes of the Offer, Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares properly tendered to Purchaser and not withdrawn if, as, and when Purchaser gives oral or written notice to the Depositary (as defined in the Offer to Purchase) of Purchaser's acceptance of such Shares for payment. Payment for Shares purchased pursuant to the Offer will be made by the deposit of the aggregate purchase price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving such payment from Purchaser and transmitting such payment to tendering stockholders. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE OF THE SHARES BE PAID BY PURCHASER FOR THE TENDERED SHARES, REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates for (or a timely Book-Entry Confirmation (as defined in Section 3 of the Offer to Purchase) with respect to) such Shares, (ii) a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or, in the case of a 3 book-entry transfer, an Agent's Message (as defined in Section 3 of the Offer to Purchase), and (iii) any other documents required by the Letter of Transmittal. The term "Expiration Date" means 12:00 midnight, New York City time, on Monday, January 25, 1999, unless and until Purchaser, in its sole discretion, shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by Purchaser, shall expire. Subject to the terms of the Merger Agreement, Purchaser expressly reserves the right, in its sole discretion, at any time or from time to time, and regardless of whether or not any of the events set forth in Section 14 of the Offer to Purchase shall have occurred or shall have been determined by Purchaser to have occurred (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) except as indicated in the Offer to Purchase, to amend the Offer in any respect by giving oral or written notice of such amendment to the Depositary. Any such extension will be followed by a public announcement thereof no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Tenders of Shares made pursuant to the offer are irrevocable, provided that Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment and paid for by Purchaser pursuant to the Offer, may be withdrawn at any time after February 19, 1999. For a withdrawal to be effective, a written, telegraphic, telex or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of the addresses set forth on the back cover of the Offer to Purchase and must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder, if different from that of the person who tendered such Shares. If certificates for Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then prior to the physical release of such certificates, the serial numbers shown on such certificates must also be submitted to the Depositary as aforesaid, 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 procedure for book-entry transfer set forth in Section 3 of the Offer to Purchase, any notice of withdrawal must specify the name and number of the account at the appropriate Book-Entry Transfer Facility (as defined in Section 3 of the Offer to Purchase) to be credited with such withdrawn Shares and must otherwise comply with such Book-Entry Transfer Facility's procedures. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by Purchaser in its sole discretion, and its determination will be final and binding. The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. The Company has provided Purchaser with its list of stockholders and security position listings for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase 4 and the related Letter of Transmittal and, if required, other relevant materials, will be mailed to record holders of Shares and furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the Company's stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. THE OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH STOCKHOLDERS ARE URGED TO READ BEFORE MAKING ANY DECISION WITH RESPECT TO THE OFFER. Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager as set forth below. Additional copies of the Offer to Purchase, the Letter of Transmittal and all other tender offer materials may be obtained from the Information Agent and will be furnished promptly at Purchaser's expense. Neither Purchaser nor Parent will pay any fees or commissions to any broker or dealer or other person for soliciting tenders of Shares pursuant to the Offer (other than the Dealer Manager, the Depositary and the Information Agent as described in the Offer to Purchase). The Information Agent for the Offer is: MORROW & CO., INC. 445 Park Avenue 5th Floor New York, New York 10022 Toll Free (800) 566-9061 Call Collect (212) 754-8000 Banks and Brokerage Firms Please Call: (800) 662-5200 The Dealer Manager for the Offer is: DONALDSON, LUFKIN & JENRETTE 75 State Street Boston, Massachusetts 02109 (877) 842-3456 (toll free) (617) 342-8104 December 23, 1998 EX-99.(A)(8) 9 PRESS RELEASE DATED 17-DEC-1998 1 FOR IMMEDIATE RELEASE December 17, 1998 Investor Contact: Media Contacts: Holmes Products Corp. Holmes Products Corp. Ira Morgenstern Fred Adair Senior Vice President - Finance Senior Vice President of Human Resources 508/634-8050 508/634-8050 or The Rival Company William L. Yager President and Chief Operating Officer W. Mark Meierhoffer Senior Vice President Finance and Administration 816/943-4100 HOLMES PRODUCTS CORP. ANNOUNCES AGREEMENT TO ACQUIRE THE RIVAL COMPANY FOR $13.75 PER SHARE Milford, Massachusetts and Kansas City, Missouri - Dec. 17, 1998 --Holmes Products Corp. ("Holmes"), a leading maker of consumer comfort products, and The Rival Company ("Rival")(NASDAQ:RIVL), a leading maker of small kitchen appliances and home environment products, today announced a definitive merger agreement under which Holmes will acquire Rival for approximately $127.8 million plus the assumption of debt. Under the terms of the merger agreement, unanimously approved by Rival's Board of Directors, Holmes, through its subsidiary, Moriarty Acquisition Corp., will commence a cash tender offer to purchase all outstanding shares of Rival common stock for $13.75 per share. The transaction is subject to customary closing conditions, including the valid tender of at least 70% of Rival's outstanding shares, and is expected to be completed during the first quarter of 1999. Any shares not purchased in the tender will be acquired for the same price in cash in a second-step merger. Debt and equity commitments have been received by Holmes to fund the tender offer and the merger, to refinance certain existing indebtedness of Rival and Holmes and to pay fees and expenses related to the transaction. The directors and certain officers of Rival have agreed to tender all of the Rival shares (approximately 11.3% of the outstanding shares) beneficially owned by them in the offer. 2 "The merger of Holmes and Rival is unquestionably a win-win situation for both companies, our shareholders, our retail partners and consumers," said Jordan A. Kahn, president and chief executive officer of Holmes. "Rival is a respected company with strong brands in the kitchen appliance and home comfort markets, along with product distribution and geographic expansion capabilities that complement Holmes' established strengths." The acquisition of The Rival Company will allow Holmes to expand its product line to include such well-known brands as Bionaire(R), Patton(R) and Pollenex(R), as well as gain entry into the small kitchen appliance market through the established Rival(R) brands, including Crock-Pot(R) slow cookers. In addition, Holmes' international operations will be strengthened by Rival's more extensive global network. Holmes' strong captive offshore manufacturing will complement Rival's domestic manufacturing capability. Domestic distribution capabilities will be significantly expanded as Holmes' east and west coast distribution centers gain new territorial footholds through Rival's modern distribution centers in the midwest. "As we look to the future, Rival's Board of Directors believes this merger agreement is in the best interests of all of our stockholders. It's no secret that these are challenging times globally, and we are very pleased to unite with Holmes on a fair and equitable basis for our shareholders," said Thomas K. Manning, Rival's chairman and chief executive officer. "Holmes is known for innovation, integrity and commitment to consumers' health and comfort - values that we at Rival also embrace. Combining forces will help us continue to deliver superior products and service for our customers, with a quality work environment for associates." The acquisition will be financed, in part, by an additional equity investment by Berkshire Partners LLC ("Berkshire"), Holmes' majority shareholder following the November 1997 recapitalization of Holmes by Berkshire and management. "Our investment in Holmes to support the Rival acquisition is consistent with our strategy of investing in and supporting companies with attractive growth prospects and partnering with talented management teams," said Richard K. Lubin, Managing Director of Berkshire Partners. "We are excited about the prospect of combining the strengths of Holmes and Rival and their respective managements." Donaldson, Lufkin & Jenrette has acted as Holmes' financial advisor in connection with the transaction, and is acting as dealer manager for the tender offer. Holmes Products Corp. is a leader in the development of home comfort products, including fans, heaters, humidifiers, and air purifiers. In addition, Holmes markets and distributes a variety of home and office lighting products. Holmes' net sales for the year ended December 31, 1997 were $192.2 million, and for the nine months ended September 30, 1998 were $157.6 million. Holmes is headquartered in Milford, Massachusetts, and has offices in Toronto, Taiwan and Hong Kong. More information on Holmes may be obtained from the Company's website at http://www.holmesproducts.com. 3 The Rival Company is a leading manufacturer of a variety of products including small kitchen and personal care appliances, such as Crock-Pot(R) slow cookers, can openers and massagers. The company markets products under the brand names Rival(R), Rival Select(R), Simer(R), Bionaire(R), Patton(R), Pollenex(R) and White Mountain(R). Rival's net sales for its fiscal year ended June 30, 1998, were $376.9 million. Some of the statements in this press release may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking information is inherently subject to risks and uncertainties, which include, but are not limited to, the successful and timely completion of this transaction, the effective integration of Rival into Holmes and the overall economic, market, and industry conditions, as well as the risks described from time to time in reports filed by Holmes and Rival with the Securities and Exchange Commission, including their most recently filed Form 10-K and Form 10-Q reports. Should any such risks or uncertainties materialize, or underlying assumptions prove incorrect, actual results or outcomes may vary materially from those anticipated. # # # EX-99.(A)(9) 10 PRESS RELEASE 23-DEC-1998 1 HOLMES PRODUCTS CORP. 233 FORTUNE BOULEVARD MILFORD, MA 01757 (508) 634-8050 CONTACT: IRA B. MORGENSTERN SENIOR VICE PRESIDENT - FINANCE FOR IMMEDIATE RELEASE HOLMES PRODUCTS CORP. COMMENCES TENDER OFFER FOR ALL OUTSTANDING SHARES OF THE RIVAL COMPANY Milford, MA, December 23, 1998 --- Holmes Products Corp. ("Holmes") announced today that it has commenced, through its wholly owned subsidiary, Moriarty Acquisition Corp., a tender offer for all outstanding shares of common stock of The Rival Company (NASDAQ:RIVL) ("Rival") at $13.75 per share, net to the seller in cash, without interest thereon. The Board of Directors of Rival (with one director absent) has unanimously approved the offer and recommended that Rival stockholders tender their shares pursuant to the offer. The offer and withdrawal rights will expire at 12:00 midnight, New York City time, on Monday, January 25, 1999, unless the offer is extended. The tender offer is being made pursuant to the terms of a previously announced Merger Agreement among Holmes, Moriarty Acquisition Corp. and Rival. In the merger to occur following consummation of the tender offer, each share of Rival's common stock which is outstanding and not purchased pursuant to the tender offer will be converted into the right to receive $13.75 in cash. The tender offer is subject to customary closing conditions, including the valid tender of at least 70% of Rival's outstanding shares. Debt and equity commitments have been received by Holmes to fund the tender offer and the merger, to refinance certain existing indebtedness of Rival and Holmes and to pay fees and expenses related to the transaction. The directors and certain executive officers of Rival have agreed to tender all of the Rival shares (approximately 11.3% of the outstanding shares) beneficially owned by them in the offer. The tender offer is being made only pursuant to the terms and conditions set forth in the tender offer documents which are being filed with the Securities and Exchange Commission 2 today and will be mailed to Rival's stockholders as soon as practicable. Holmes is a leading developer, manufacturer and marketer of quality branded home comfort products, including fans, heaters, humidifiers and air purifiers. In addition, Holmes markets and distributes dehumidifiers and a variety of decorative and home office lighting products, as well as various replacement filters and accessories for its products. Holmes' net sales for the year ended December 31, 1997 were $192.2 million, and for the nine months ended September 30, 1998 were $157.6 million. Rival is a leading designer, manufacturer and marketer of a variety of products including small kitchen and personal care appliances such as Crock-Pot(R) slow cookers, can openers and massagers; products for the home environment including space heaters, air purifiers, showerheads, utility pumps, humidifiers and fans; and building supply and industrial products such as household ventilation, door chimes, ceiling fans and industrial fans. Rival's net sales for its fiscal year ended June 30, 1998 were $376.9 million. Some of the statements in this press release may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking information is inherently subject to risks and uncertainties, which include, but are not limited to, the successful and timely completion of this transaction, the effective integration of Rival into Holmes and the overall economic, market, and industry conditions, as well as the risks described from time to time in reports filed by Holmes and Rival with the Securities and Exchange Commission, including their most recently filed Form 10-K and Form 10-Q reports. Should any such risks or uncertainties materialize, or underlying assumptions prove incorrect, actual results or outcomes may vary materially from those anticipated. EX-99.(C)(1) 11 AGREEMENT AND PLAN OF MERGER 1 AGREEMENT AND PLAN OF MERGER DATED AS OF DECEMBER 17, 1998 among THE RIVAL COMPANY, HOLMES PRODUCTS CORP. and MORIARTY ACQUISITION CORP. 2 TABLE OF CONTENTS ARTICLE I. THE OFFER....................................................... 1 SECTION 1.1. THE OFFER................................................. 1 SECTION 1.2. COMPANY ACTION............................................ 3 SECTION 1.3. DIRECTORS................................................. 5 ARTICLE II. THE MERGER..................................................... 6 SECTION 2.1. THE MERGER................................................ 6 SECTION 2.2. CLOSING................................................... 6 SECTION 2.3. EFFECTIVE TIME............................................ 6 SECTION 2.4. EFFECTS OF THE MERGER..................................... 6 SECTION 2.5. CERTIFICATE OF INCORPORATION; BY-LAWS..................... 7 SECTION 2.6. DIRECTORS................................................. 7 SECTION 2.7. OFFICERS.................................................. 7 SECTION 2.8. FURTHER ASSURANCES........................................ 7 ARTICLE III................................................................. 8 EFFECT OF THE MERGER ON THE SECURITIES OF THE CONSTITUENT CORPORATIONS.... 8 SECTION 3.1. EFFECT ON CAPITAL STOCK................................... 8 SECTION 3.2. STOCK OPTIONS............................................. 9 SECTION 3.3. EXCHANGE OF CERTIFICATES.................................. 9 ARTICLE IV. REPRESENTATIONS AND WARRANTIES................................. 11 SECTION 4.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............. 11 SECTION 4.2. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.......... 26 ARTICLE V................................................................... 28 COVENANTS RELATING TO CONDUCT OF BUSINESS................................. 28 SECTION 5.1. CONDUCT OF BUSINESS OF THE COMPANY........................ 28 SECTION 5.2. OTHER ACTIONS............................................. 30 ARTICLE VI. ADDITIONAL AGREEMENTS.......................................... 30 SECTION 6.1. MEETING OF STOCKHOLDERS................................... 30 SECTION 6.2. PROXYSTATEMENT............................................ 31 SECTION 6.3. ACCESS TO INFORMATION; CONFIDENTIALITY.................... 32 SECTION 6.4. COMMERCIALLY REASONABLE EFFORTS........................... 32 SECTION 6.5. FINANCING................................................. 33 SECTION 6.6. INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE....... 33 SECTION 6.7. PUBLIC ANNOUNCEMENTS...................................... 34 SECTION 6.8. ACQUISITION PROPOSALS..................................... 34 SECTION 6.9. STOCKHOLDER LITIGATION.................................... 35 SECTION 6.10. COMPANY ACTION RELATING TO BENEFIT PLANS................. 35 SECTION 6.11. CONSENTS AND APPROVALS................................... 36 SECTION 6.12. REPAYMENT OF INDEBTEDNESS................................ 36 SECTION 6.12. GUARANTY OF SUB'S OBLIGATIONS............................ 36
i 3 ARTICLE VII. CONDITIONS PRECEDENT.......................................... 36 SECTION 7.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER 36 SECTION 7.2. CONDITIONS TO OBLIGATIONS OF PARENT AND SUB............... 37 SECTION 7.3. CONDITIONS TO OBLIGATIONS OF THE COMPANY.................. 38 SECTION 7.4. EXCEPTION.................................................. 38 SECTION 7.5 FRUSTRATION OF CONDITIONS.................................. 38 ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER............................ 39 SECTION 8.1. TERMINATION............................................... 39 SECTION 8.2. EFFECT OF TERMINATION..................................... 40 SECTION 8.3. AMENDMENT................................................. 41 SECTION 8.4. EXTENSION; WAIVER......................................... 42 ARTICLE IX. GENERAL PROVISIONS............................................. 42 SECTION 9.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES............. 42 SECTION 9.2. FEES AND EXPENSES......................................... 42 SECTION 9.3. DEFINITIONS............................................... 42 SECTION 9.4. NOTICES................................................... 42 SECTION 9.5. INTERPRETATION............................................ 43 SECTION 9.6. COUNTERPARTS.............................................. 43 SECTION 9.7. ENTIRE AGREEMENT; THIRD-PARTY BENEFICIARIES............... 43 SECTION 9.8. GOVERNING LAW............................................. 44 SECTION 9.9. ASSIGNMENT................................................ 44 SECTION 9.10. ENFORCEMENT............................................... 44 SECTION 9.11. SEVERABILITY.............................................. 44 ANNEX I...................................................................... 1 DISCLOSURE SCHEDULES......................................................... 4
ii 4 AGREEMENT AND PLAN OF MERGER DATED AS OF DECEMBER 17, 1998 among THE RIVAL COMPANY, A DELAWARE CORPORATION (THE "COMPANY"), HOLMES PRODUCTS CORP., A MASSACHUSETTS CORPORATION ("PARENT"), and MORIARTY ACQUISITION CORP., A DELAWARE CORPORATION AND A WHOLLY OWNED SUBSIDIARY OF PARENT ("SUB") WITNESSETH: WHEREAS, the Board of Directors of the Company has determined that this Agreement and the transactions contemplated hereby including the Offer and the Merger (each as defined herein) are fair to and in the best interest of the Company and its stockholders; WHEREAS, the Board of Directors of each of Parent and Sub has determined that the transactions contemplated by this Agreement (including the Offer and the Merger) are in the best interests of Parent and Sub and their respective stockholders; and WHEREAS, the Boards of Directors of the Company, Parent and Sub, have each approved and adopted this Agreement and approved the Offer and the Merger and the other transactions contemplated hereby and agreed to recommend, in the case of the Company, acceptance of the Offer by its stockholders. NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, the parties agree as follows: ARTICLE I THE OFFER SECTION 1.1. THE OFFER. (a) PURCHASE PRICE AND CONDITIONS. Provided that nothing shall have occurred that would result in a failure to satisfy any of the conditions set forth in Annex I hereto which is not waived by Parent, Parent shall or shall cause Sub to, as promptly as practicable following the date hereof, but in no event later than five business days after the initial public announcement of the Offer, commence (within the meaning of Rule 14d-2 under the Securities 5 Exchange Act of 1934, as amended (the "Exchange Act")) a tender offer (as amended from time to time in accordance with this Agreement, the "Offer") to purchase all of the issued and outstanding shares of common stock, par value $0.01 per share, of the Company (the "Shares" or "Common Stock"), at a price of not less than $13.75 per Share, net to the seller in cash, subject to reduction only for any applicable back-up withholding or stock transfer taxes payable by the seller. For purposes of this Article 1, the party which makes the Offer, whether Parent or Sub, shall be referred to as the "Offeror." The obligation of Offeror to accept for payment and to pay for any Shares tendered in the Offer shall be subject only to (i) the condition that there shall be validly tendered in accordance with the terms of the Offer prior to the expiration date of the Offer and not withdrawn a number of Shares which, together with any Shares then owned by Parent or Sub, represents at least 70% of the Shares then outstanding (the "Minimum Condition"), (ii) the receipt of cash proceeds of the Financing (as defined in Section 4.2(d) hereof) in an amount sufficient to consummate the transactions contemplated hereby pursuant to the terms of the Commitments (as defined in said Section 4.2(d)) or such other terms as Parent and the Company shall agree or as are not materially more onerous to Parent than as set forth in the Commitments (the "Financing Condition") and (iii) the other conditions set forth in Annex I hereto (together with the Minimum Condition and the Financing Condition, the "Tender Offer Conditions"). (b) MODIFICATION OF CONDITIONS. Offeror expressly reserves the right in its sole discretion, subject to the limitations set forth in this Section 1.1(b), to waive any condition to the Offer (including the Minimum Condition, provided that no waiver of the Minimum Condition shall decrease the Minimum Condition to less than a majority of the Shares outstanding on a fully-diluted basis), to increase the price per Share payable in the Offer, to extend the Offer and to make any other changes in the terms and conditions of the Offer; provided, however, that unless previously approved by the Company in writing, Offeror will not (i) decrease the price per Share payable in the Offer, (ii) decrease the maximum number of Shares to be purchased in the Offer, (iii) impose terms and conditions to the Offer in addition to those set forth in Annex I hereto, (iv) change the terms and conditions to the Offer in any respect adverse to the Company, (v) except as provided in the next sentence, extend the Offer, (vi) change the form of consideration payable in the Offer or (vii) amend any other term or condition of the Offer in a manner adverse to the holders of the Shares. Notwithstanding the foregoing, Offeror may, without the consent of the Company, (i) extend the Offer (the initial scheduled expiration date being 20 business days following commencement of the Offer), at any time up to March 15, 1999, for one or more periods of not more than ten business days each, if any of the Tender Offer Conditions shall not be satisfied or waived, (ii) extend the Offer for any period required by any rule, regulation, interpretation or position of the Securities and Exchange Commission (the "SEC") or the staff thereof applicable to the Offer, or (iii) if all of the Tender Offer Conditions are satisfied or waived and the number of Shares tendered is at least equal to 70%, but less than 90%, of the then-outstanding number of Shares, further extend the Offer for an aggregate period of not more than ten business days beyond the then-scheduled expiration date. So long as this Agreement is in effect, the Offer has been commenced and the Tender Offer Conditions have not been satisfied or waived, the Offeror shall cause the Offer not to expire. (c) ACCEPTANCE OF SHARES. Subject to the terms and conditions of the Offer and this Agreement, Offeror shall accept for payment, and pay for, all Shares validly tendered and not withdrawn pursuant to the Offer that Offeror becomes obligated to accept for payment, and pay for, 2 6 pursuant to the Offer as soon as practicable after expiration of the Offer, subject to compliance with Rule 14e-1 (c) under the Exchange Act. Subject to the terms and conditions of the Offer, Parent and Sub will each 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 under applicable laws and regulations to consummate the Offer. (d) OFFER DOCUMENTS. As soon as practicable on the date of the commencement of the Offer, Offeror shall file with the SEC a Tender Offer Statement on Schedule 14D-1 with respect to the Offer which will contain the offer to purchase and form of the related letter of transmittal and summary advertisement (together with any supplements or amendments thereto and including exhibits thereto, the "Offer Documents"). The Offer Documents will comply in all material respects with applicable federal securities laws and any other applicable laws. Parent, Sub and the Company each agree to promptly correct any information provided by it for use in the Offer Documents if and to the extent that it shall have become false or misleading in any material respect. Offeror will take all steps necessary to cause the Offer Documents as so corrected to be filed with the SEC and to be disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws and any other applicable laws. The Company and its counsel shall be given an opportunity to review and comment on the Offer Documents and any amendments thereto prior to the filing thereof with the SEC; provided that Offeror will attempt to give the Company and its counsel as much time prior to filing to so review and comment as Offeror believes is reasonably practicable under the circumstances. Offeror will provide the Company and its counsel with any comments Offeror and its counsel may receive from the SEC or its staff with respect to the Offer Documents promptly after the receipt thereof. (e) TERMINATION OF OFFER. In the event that the Offer is terminated or withdrawn by Offeror, Parent and Sub shall cause all tendered Shares to be returned to the registered holders of the Shares represented by the certificate or certificates surrendered to the Exchange Agent (as defined in Section 3.3 hereof). SECTION 1.2. COMPANY ACTION. (a) APPROVAL BY BOARD OF DIRECTORS. The Company hereby consents to the Offer and represents that as of the date hereof its Board of Directors (the "Board of Directors"), at a meeting duly called and held, has (i) unanimously determined that this Agreement and the transactions contemplated hereby, including the Offer and the Merger (as defined in Section 2.1 hereof), are fair to and in the best interest of the Company and its stockholders, (ii) unanimously approved this Agreement and the transactions contemplated hereby, including the Offer and the Merger, which approvals are sufficient to render entirely inapplicable to the Offer and the Merger or Parent or Sub the provisions of Section 203 of the Delaware General Corporation Law (the "Delaware GCL"), assuming neither Parent nor Sub is an "interested stockholder" as defined therein, (iii) taken such action as is necessary to approve this Agreement, the purchase of Shares pursuant to the Offer, the Merger and the other transactions contemplated hereby under the provisions of the Company's Restated Certificate of Incorporation and By-laws, each as amended to date (as so amended, the "Restated Certificate of Incorporation" and "By-laws", respectively), and (iv) subject 3 7 to the terms hereof, resolved to recommend acceptance of the Offer and approval and adoption of this Agreement and the Merger by its stockholders. (b) OPINION OF FINANCIAL ADVISOR. NationsBanc Montgomery Securities LLC (the "Financial Advisor") has delivered to the Board of Directors its written opinion, as of the date hereof, subject to the qualifications and limitations stated therein, to the effect that the consideration to be received by the holders of the Shares (other than Shares owned by Parent and its Affiliates) pursuant to each of the Offer and the Merger, taken together, is fair to the holders of Shares from a financial point of view. The Company has been authorized by the Financial Advisor to permit, subject to prior review and consent by the Financial Advisor, the inclusion of the fairness opinion (or a reference thereto) in the Offer Documents and the Schedule 14D-9 (as defined in paragraph (e) of this Section 1.2) on the terms of the engagement letter between the Company and the Financial Advisor dated September 24, 1998. (c) TENDERS BY DIRECTORS AND OFFICERS. Concurrently with the execution hereof, each of the Company's directors and certain executive officers, as requested by Parent, have executed and delivered a Tender and Voting Agreement with Parent and Sub, pursuant to which each of such persons has agreed, subject to the terms thereof, to the extent of their beneficial ownership of Shares, to tender their Shares pursuant to the Offer and to vote such Shares in favor of the Merger. (d) STOCKHOLDER LIST. The Company will promptly furnish Parent with a list of its stockholders, mailing labels containing the names and addresses of all record holders of Shares and lists of securities positions of Shares held in stock depositories, in each case as of the most recent practicable date, and will provide to Parent such additional information (including, without limitation, updated lists of stockholders, mailing labels and lists of securities positions) and such other assistance as Parent may reasonably request from time to time in connection with the Offer and the Merger (including but not limited to communicating the Offer and the Merger to the record and beneficial holders of Shares). Subject to the requirements of applicable law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Offer or the Merger, Parent, Offeror and their agents and advisors shall use the information contained in any such labels and listings only in connection with the Offer and the Merger and, if this Agreement shall be terminated pursuant to Article VIII hereof, shall deliver to the Company all copies and extracts of such information then in their possession or under their control. (e) SCHEDULE 14D-9. On or prior to the date that the Offer is commenced, the Company will file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (together with any supplements or amendments thereto and including exhibits thereto, the "Schedule 14D-9"), which shall contain the recommendations of the Board of Directors referred to in Section 1.2(a) hereof, subject to the fiduciary duties of the Board of Directors under applicable law and to the terms of this Agreement. The Schedule 14D-9 will comply in all material respects with all applicable federal 4 8 securities laws and any other applicable laws. The Company, Parent and Sub each agree to promptly correct any information provided by it for use in the Schedule 14D-9 if and to the extent that it shall have become false or misleading in any material respect. The Company will take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws and any other applicable laws. Parent, Sub and their counsel shall be given an opportunity to review and comment on the Schedule 14D-9 and any amendments thereto prior to the filing thereof with the SEC; provided that the Company will attempt to give Parent, Sub and their counsel as much time prior to filing to so review and comment as the Company believes is reasonably practicable under the circumstances. The Company will provide Parent and Sub and their counsel with any comments the Company or its counsel may receive from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments. SECTION 1.3. DIRECTORS. (a) APPOINTMENT OF PARENT DESIGNEES. Effective upon the purchase of and payment for Shares by Offeror pursuant to the Offer such that Offeror shall own at least a majority of the Shares and from time to time thereafter, Parent shall be entitled to designate up to such number of directors, rounded up to the next whole number, on the Board of Directors that equals the product of (i) the total number of directors on the Board of Directors (giving effect to any increase in the number of directors pursuant to this Section 1.3) multiplied by (ii) the percentage that the number of Shares owned by Parent and Sub bears to the total number of Shares outstanding on an undiluted basis, and the Company shall take all action necessary to cause Parent's designees to be elected or appointed to the Board of Directors, including, without limitation, increasing the number of directors and/or securing the resignations of such number of incumbent directors as is necessary to enable Parent's designees to be elected to the Board of Directors and to cause Parent's designees to be so elected. At such times, the Company will use its best efforts to cause individuals designated by Parent to constitute the same percentage as such individuals represent on the Board of Directors of (x) each committee of the Board of Directors, (y) each board of directors of each Subsidiary (as defined below) of the Company and (z) each committee of each such board. Notwithstanding the foregoing, until the Effective Time (as defined in Section 2.3 hereof), the Company shall use its best efforts to ensure that not less than two persons who are directors on the date hereof shall remain as members of the Board of Directors (the "Continuing Directors") until the Effective Time, and Parent and Sub shall take no action (other than removal for cause) to prevent such Continuing Directors from so serving. In the event there is only one Continuing Director, such Continuing Director shall have the right to designate a person, who is reasonably acceptable to Offeror, to become a Continuing Director. For purposes of this Agreement, "Subsidiary" means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are directly or indirectly owned by the Company or Parent, as applicable. (b) COMPLIANCE WITH INFORMATION REQUIREMENTS. The Company's obligations to appoint designees to the Board of Directors shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. The Company, with Parent's cooperation, shall promptly take all actions required pursuant to Section 14(f) and Rule 14f-1 in order to fulfill its obligations under this Section 1.3, including mailing to the stockholders as part of the Schedule 14D-9 the information required by such Section 14(f), as is necessary to enable Parent's designees to be elected to the Board of Directors. Parent will supply to the Company in writing 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. For purposes of this Agreement, "affiliate" shall 5 9 mean, as to any person, any other person that would be deemed to be an "affiliate" of such person as that term is defined in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. (c) CONTINUING DIRECTOR APPROVAL. Following the election or appointment of Parent's designees pursuant to this Section 1.3 and prior to the Effective Time (as defined in Section 2.3), so long as there shall be at least one Continuing Director, any amendment of this Agreement, any termination of this Agreement by the Company, any extension by the Company of the time for the performance of any of the obligations or other acts of Parent or Sub, any consent of the Company contemplated hereby, any extension of the Effective Time as contemplated by the last sentence of Section 2.3, any waiver of any of the Company's rights hereunder, any amendment to the Company's Restated Certificate of Incorporation or By-laws or any action taken by the Company that materially adversely affects the interests of the stockholders of the Company (other than the Offeror) with respect to the transactions contemplated hereby, will require the concurrence of at least one of the Continuing Directors. ARTICLE II THE MERGER SECTION 2.1. THE MERGER. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the Delaware GCL, at the Effective Time, Sub shall be merged with and into the Company (the "Merger"). Upon the Effective Time, the separate existence of Sub shall cease, and the Company shall continue as the surviving corporation (sometimes referred to herein as the "Surviving Corporation"). SECTION 2.2. CLOSING. Unless this Agreement shall have been terminated and the transactions herein contemplated shall have been abandoned pursuant to Section 8. 1, and subject to the satisfaction or waiver of the conditions set forth in Article VII, the closing of the Merger (the "Closing") will take place at 10:00 a.m., Boston time, not later than the third business day following the date on which the last to be fulfilled or waived of the conditions set forth in Article VII shall be fulfilled or waived in accordance with this Agreement (the "Closing Date"), at the offices of Posternak, Blankstein & Lund, L.L.P., 100 Charles River Plaza, Boston, Massachusetts, unless another date, time or place is agreed to by the parties hereto. SECTION 2.3. EFFECTIVE TIME. The parties hereto will file with the Secretary of State of the State of Delaware (the "Delaware Secretary of State") on the Closing Date (or on such other date as Parent and the Company may agree) a Certificate of Merger or other appropriate documents, executed in accordance with the relevant provisions of the Delaware GCL, and make all other filings or recordings required under the Delaware GCL in connection with the Merger. The Merger shall become effective upon the filing of the Certificate of Merger with the Delaware Secretary of State, or at such later time as is agreed upon by the parties hereto and specified in the Certificate of Merger (the "Effective Time"). SECTION 2.4. EFFECTS OF THE MERGER. The Merger shall have the effects set forth in the appropriate provisions of the Delaware GCL. Without limiting the generality of the foregoing, 6 10 and subject thereto, at the Effective Time, all the assets, properties, rights, privileges, powers and franchises of the Company and Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Sub shall become the debts, liabilities and duties of the Surviving Corporation. SECTION 2.5. CERTIFICATE OF INCORPORATION; BY-LAWS. (a) The Company's Restated Certificate of Incorporation, as in effect at the Effective Time, shall be, from and after the Effective Time, the Certificate of Incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law. (b) The Company's By-laws, as in effect at the Effective Time, shall be, from and after the Effective Time, the By-laws of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law. SECTION 2.6. DIRECTORS. The directors of Sub at the Effective Time shall become, from and after the Effective Time, the directors of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. SECTION 2.7. OFFICERS. The officers of Sub at the Effective Time, including such officers of the Company as shall have become duly elected and qualified officers of Sub, shall become, from and after the Effective Time, the officers of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. SECTION 2.8. FURTHER ASSURANCES. 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 Sub 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 Sub, all such deeds, bills of sale, assignments and assurances and to take and do, in the name and on behalf of each of such corporations or otherwise, all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under such rights, properties or assets in the Surviving Corporation or otherwise to carry out this Agreement. 7 11 ARTICLE III EFFECT OF THE MERGER ON THE SECURITIES OF THE CONSTITUENT CORPORATIONS SECTION 3.1. EFFECT ON CAPITAL STOCK. As of the Effective Time, by virtue of the Merger and without any action on the part of any holder: (a) COMMON STOCK OF SUB. Each share of the capital stock of Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and non-assessable share of common stock, par value $0.01 per share, of the Surviving Corporation. (b) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED STOCK. Each Share issued or outstanding immediately prior to the Effective Time that is owned by the Company or by Parent or Sub shall be canceled automatically and shall cease to exist, and no cash or other consideration shall be delivered or deliverable in exchange therefor. (c) CONVERSION OF COMPANY SHARES. At the Effective Time, each Share other than (i) Shares to be canceled pursuant to Section 3.1(b) and (ii) Dissenting Shares (as hereinafter defined) shall be converted into and become the right to receive, upon surrender of the certificate representing such Shares in accordance with Section 3.3, the cash price per Share paid by Sub pursuant to the Offer (the "Merger Consideration"). (d) DISSENTING SHARES. Notwithstanding anything in this Agreement to the contrary, Shares issued and outstanding immediately prior to the Effective Time and held by a holder (a "Dissenting Stockholder"), if any, who has the right to demand, and who properly demands, an appraisal of such Shares in accordance with the Delaware GCL (including but not limited to Section 262 thereof, or any successor provision) ("Dissenting Shares") shall not be converted into a right to receive the Merger Consideration unless such Dissenting Stockholder fails to perfect or otherwise loses or withdraws such Dissenting Stockholder's right to such appraisal, if any. Provided the holder of any Dissenting Shares complies with the provisions of Delaware law, such holder shall have with respect to such Shares solely the rights provided under the Delaware GCL. If, after the Effective Time, such Dissenting Stockholder fails to perfect or otherwise loses or withdraws any such right to appraisal, each such Share of such Dissenting Stockholder shall be treated as a Share that had been converted as of the Effective Time into the right to receive the Merger Consideration in accordance with this Section 3.1. The Company shall give prompt notice to Parent of any demands received by the Company for appraisal of any Dissenting Shares, and Parent shall have the right to participate in and direct all negotiations and proceedings with respect to such demands. The Company shall not, except with the prior written consent of Parent, which consent shall not be unreasonably withheld, make any payment with respect to, or settle or offer to settle, any such demands. (e) CANCELLATION AND RETIREMENT OF COMMON STOCK. As of the Effective Time all certificates representing Shares, other than certificates representing Shares to be canceled in accordance with Section 3.1(b) or Dissenting Shares, issued and outstanding 8 12 immediately prior to the Effective Time, shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and each holder of a certificate representing any such Shares shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration upon surrender of such certificate in accordance with Section 3.3. SECTION 3.2. STOCK OPTIONS. As of the Effective Time, each outstanding, unexercised stock option to purchase Shares (a "Company Stock Option") issued under the Company's 1986 Stock Option Plan (the "1986 Plan") and the 1994 Stock Option Plan (the "1994 Plan") (collectively, the "Company Stock Option Plans") shall terminate and be canceled and each holder of a Company Stock Option shall be entitled to receive, in consideration therefor, a cash payment from the Company (which payment shall be tendered to such holder on the Closing Date, or such earlier date after the consummation of the Offer and not later than five business days after the option holder shall have tendered the option to the Company and consented to its cancellation in exchange for payment) equal to the product of (a) the excess, if any, of (x) the Merger Consideration over (y) the per Share exercise price of such Company Stock Option, times (b) the number of Shares then subject to such Company Stock Option. Such cash payment shall be net of any required withholding taxes. Not later than the second business day following the execution and delivery of this Agreement, the Company shall cause the committee administering each Company Stock Option Plan (the "Option Committee") to provide to each holder of a Company Stock Option written notice regarding the termination of such Company Stock Option as contemplated by Section 3.13(a)(i) of the 1986 Plan and Section 3.12(a)(i) of the 1994 Plan, respectively. As of the Effective Time, each outstanding Company Stock Option and each of the Company Stock Option Plans shall terminate and be of no further force or effect, and the Company shall take such action as shall be necessary to ensure, to Parent's reasonable satisfaction, that no holder of a Company Stock Option or participant in any other employee benefit plan or program of the Company will have any right to acquire any interest in the Surviving Corporation under the Company Stock Option Plans or any other such plan or program. SECTION 3.3. EXCHANGE OF CERTIFICATES. (a) EXCHANGE AGENT. As of the Effective Time, Sub (or the Company, as the Surviving Corporation) shall deposit, or shall cause to be deposited, with or for the account of a bank, trust company or other agent designated by Sub, which shall be reasonably satisfactory to the Company (the "Exchange Agent"), for the benefit of the holders of Shares, cash in an aggregate amount equal to the product of (x) the number of Shares outstanding immediately prior to the Effective Time (other than Shares to be canceled pursuant to Section 3.1(b) and Dissenting Shares), times (y) the Merger Consideration (such amount being hereinafter referred to as the 'Payment Fund"). The Exchange Agent shall invest the Payment Fund, as directed by the Surviving Corporation, in any of the following: (i) obligations issued or guaranteed by the United States of America; (ii) certificates of deposit, time deposits, commercial paper or any other obligations of any bank or trust company organized or licensed to conduct a banking business under the laws of the United States or any state thereof and having total assets of not less than $10.0 billion; (iii) commercial paper with maturities of not more than ninety days having the highest rating then given by Moody's Investors Services, Inc. or Standard & Poor's Corporation; (iv) repurchase obligations for underlying securities of the types described in clause (i) above; (v) any trust, fund, Money 9 13 Market account or other collective investment vehicle investing principally in the investments specified in clauses (i) through (iv) above; or (vi) any other investment reasonably satisfactory to the Company. Earnings on the Payment Fund shall be for the account of Parent. (b) EXCHANGE PROCEDURES. As soon as practicable after the Effective Time, each holder of an outstanding certificate or certificates which prior thereto represented outstanding Shares shall, upon surrender to the Exchange Agent of such certificate or certificates and acceptance thereof by the Exchange Agent, be entitled to the amount of cash which the aggregate number of Shares previously represented by such certificate or certificates surrendered shall have been converted into the right to receive pursuant to Section 3.1(c). The Exchange Agent shall accept such certificates upon compliance with such reasonable terms and conditions as the Exchange Agent may impose to effect an orderly exchange thereof in accordance with normal exchange practices. If the consideration to be paid in the Merger (or any portion thereof) is to be delivered to any person other than the person in whose name the certificate representing Shares surrendered in exchange therefor is registered, it shall be a condition to such exchange that the certificate so surrendered shall be properly endorsed with the signature guaranteed or otherwise be in proper form for transfer and that the person requesting such exchange shall pay to the Exchange Agent any transfer or other tax required by reason of the payment of such consideration to a person other than the registered holder of the certificate surrendered, or shall establish to the satisfaction of the Exchange Agent that such tax has been paid or is not applicable. After the Effective Time, there shall be no further transfer on the records of the Company or its transfer agent of certificates representing Shares, and if such certificates are presented to the Company for transfer, they shall be canceled against delivery of the Merger Consideration as hereinabove provided. Until surrendered as contemplated by this Section 3.3(b), each certificate representing Shares shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the Merger Consideration, without any interest thereon, as contemplated by Section 3.1. No interest will be paid or will accrue on any cash payable as Merger Consideration to any holder of Shares. (c) LETTER OF TRANSMITTAL. Promptly after the Effective Time, but in any event within five business days thereafter, the Surviving Corporation shall cause to be mailed to each record holder of certificates that immediately prior to the Effective Time represented Shares which have been converted pursuant to Section 3.1, a form of letter of transmittal and instructions for use in surrendering such certificates and receiving the consideration to which such holder shall be entitled therefor pursuant to Section 3.1. (d) NO FURTHER OWNERSHIP RIGHTS IN COMMON STOCK. The Merger Consideration paid upon the surrender for exchange of certificates representing Shares in accordance with the terms of this Article III shall be deemed to have been issued and paid in full satisfaction of all rights pertaining to the Shares theretofore represented by such certificates, and no holder of Shares shall thereby have any equity interest in the Surviving Corporation. (e) TERMINATION OF PAYMENT FUND. Any portion of the Payment Fund which remains undistributed to the holders of the certificates representing Shares more than six months after the Effective Time (including, without limitation, all interest and other income received by the Exchange Agent in respect to all funds made available to it) shall be delivered to the Surviving 10 14 Corporation, upon demand, and any such holders of Shares who have not theretofore complied with this Article III shall thereafter look only to the Surviving Corporation (subject to abandoned property, escheat and other similar laws) and only as general creditors thereof for payment of their claim for the Merger Consideration. (f) NO LIABILITY. None of Parent, Sub, the Surviving Corporation or the Exchange Agent shall be liable to any person in respect of any cash, shares, dividends or distributions payable from the Payment Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. If any certificates representing Company Shares shall not have been surrendered immediately prior to such date on which the Merger Consideration in respect of such certificate would otherwise escheat to or become the property of any Governmental Entity (as defined in Section 4.1(d)), any such cash, shares, dividends or distributions payable in respect of such certificate shall, to the extent permitted by applicable law, become the property of the Surviving Corporation, free and clear of all claims or interest of any person previously entitled thereto. (g) WITHHOLDING RIGHTS. The Surviving Corporation, Parent or Sub shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Shares, and shall promptly pay over to the appropriate Governmental Entity, such amounts as the Surviving Corporation, Parent or Sub is required to deduct and withhold with respect to the making of such payment under the Code (as defined herein), or any provision of state, local or foreign tax law, including, without limitation, withholdings required in connection with payments with respect to Company Stock Options. To the extent that amounts are so withheld by the Surviving Corporation, Parent or Sub, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder in respect of which such deduction and withholding was made. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to Parent and Sub as follows: (a) ORGANIZATION, STANDING AND CORPORATE POWER. The Company is a corporation duly organized, validly existing and in corporate good standing under the laws of the State of Delaware and has the requisite corporate power and authority to carry on its business as now being conducted and to own, operate and lease its properties as now owned, operated and leased. The Company is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed (individually or in the aggregate) would not (i) have a material adverse effect upon the business, assets, properties, condition (financial or otherwise), or results of operations of the Company and its Subsidiaries taken as a whole, or (ii) prevent the Company from consummating the transactions contemplated hereby (a "Material Adverse Effect"). The Company has delivered to Parent complete 11 15 and correct copies of its Restated Certificate of Incorporation and By-laws, as amended to the date of this Agreement. (b) SUBSIDIARIES. Section 4.1(b) of the disclosure schedule delivered by the Company to Parent contemporaneously herewith (the "Disclosure Schedule") sets forth the name, jurisdiction of incorporation, capitalization and number of shares of outstanding capital stock of each of the Company's Subsidiaries. All the issued and outstanding shares of capital stock of each Subsidiary are validly issued, fully paid and nonassessable and are owned, directly or indirectly, by the Company, beneficially and of record, free and clear of all liens, pledges, encumbrances or restrictions of any kind. No Subsidiary has outstanding any securities convertible into or exchangeable or exercisable for any shares of its capital stock, there are no outstanding options, warrants or other rights to purchase or acquire any capital stock of any Subsidiary, there are no irrevocable proxies with respect to such shares, and there are no contracts, commitments, understandings, arrangements or restrictions by which any Subsidiary or the Company is bound to issue additional shares of the capital stock of a Subsidiary. Except for the Company's Subsidiaries, and as otherwise disclosed in Section 4.1(b) of the Disclosure Schedule, the Company does not own, directly or indirectly, any capital stock or other equity securities of any corporation or have any direct or indirect equity interest in any business. Each of the Company's Subsidiaries (a) is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation; (b) has all requisite corporate power and authority to carry on its business as it is now being conducted and to own, operate and lease its properties as now owned, operated or leased; and (c) is qualified or licensed to do business as a foreign corporation and is in good standing in each of the jurisdictions in which (i) the ownership or leasing of real property or the conduct of its business requires such qualification or licensing and (ii) the failure to be so qualified or licensed, either singly or in the aggregate, would have a Material Adverse Effect. The Company has delivered to Parent complete and correct copies of the Certificate of Incorporation or other charter documents and By-laws of each of its Subsidiaries, each as amended to date. (c) CAPITALIZATION. As of the date hereof, the authorized capital stock of the Company consists solely of 15,000,000 shares of Common Stock. As of the date hereof, 9,294,227 Shares are issued and outstanding, 880,311 shares of Common Stock are reserved for issuance pursuant to outstanding Company Stock Options, and 513,497 shares of Common Stock are held by the Company in its treasury. Except as set forth above, no shares of capital stock or other equity securities of the Company are issued, reserved for issuance or outstanding. All outstanding shares of capital stock of the Company are, and all shares which may be issued pursuant to the Company Stock Option Plans will be, when issued, duly authorized, validly issued, fully paid and non-assessable and not subject to preemptive rights. Section 4.1(c) of the Disclosure Schedule accurately sets forth the number of Shares issuable upon exercise of each outstanding Company Stock Option, the vesting schedule thereof, and the applicable exercise price with respect to each such Company Stock Option. Except as set forth in Section 4.1(c) of the Disclosure Schedule, the Company has no outstanding option, warrant, subscription or other right, agreement or commitment which either (i) obligates the Company to issue, sell or transfer, repurchase, redeem or otherwise acquire or vote any shares of the capital stock of the Company or (ii) restricts the transfer of Common Stock. Except as set forth in Section 4.1(c) of the Disclosure Schedule, the Company has no outstanding stock appreciation rights, phantom stock or stock equivalents. 12 16 (d) AUTHORITY; ENFORCEABILITY; NONCONTRAVENTION. The Company has the requisite corporate power and authority to enter into this Agreement and, subject to the approval of its stockholders, if required, as set forth in Section 7.1(a) with respect to the consummation of the Merger, to consummate the Merger and the other transactions contemplated by this Agreement. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company, subject to the approval of its stockholders as set forth in Section 7.1(a). This Agreement has been duly executed and delivered by the Company and constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except that the enforceability hereof may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated by this Agreement and compliance with the provisions hereof will not, (i) violate any of the provisions of the Restated Certificate of Incorporation or By-laws of the Company, (ii) except as otherwise set forth in Section 4.1(d) of the Disclosure Schedule and subject to the governmental filings and other matters referred to in the following sentence, contravene any law, rule or regulation of any state or of the United States or any political subdivision thereof or therein, or any order, writ, judgment, injunction, decree, determination or award currently in effect, or (iii) violate, conflict with or constitute a breach under any contract, agreement, indenture, mortgage, deed of trust, lease or other instrument to which the Company or any of its Subsidiaries is a party or by which any of its assets is bound or subject, which, in the case of clauses (ii) and (iii) above, singly or in the aggregate, would have a Material Adverse Effect or prevent consummation of the transactions contemplated hereby. No consent, approval or authorization of, or declaration or filing with, or notice to, any governmental agency, board, commission, department or regulatory authority, domestic or foreign (a "Governmental Entity"), which has not been received or made, is required by or with respect to the Company or any Subsidiary in connection with the execution and delivery of this Agreement by the Company or the consummation by the Company of the transactions contemplated hereby, except for (i) compliance with any applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder, (ii) state securities or blue sky laws and state takeover, antitrust and compensation law filings and approvals, (iii) compliance with any applicable requirements of The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (iv) the filing of the Certificate of Merger with the Delaware Secretary of State and appropriate documents with the relevant authorities of other states in which the Company is qualified to do business, and (v) such other consents, approvals, authorizations, filings or notices as are set forth in Section 4.1(d) of the Disclosure Schedule or as to which the failure to so receive or make would not have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a party or subject to, or bound by, any contract, agreement, indenture, mortgage, deed of trust, lease or other instrument which prevents or restricts its power and authority or its ability to grant liens upon or otherwise pledge its assets, to guarantee obligations of third parties or pay dividends on its capital stock, except as set forth in Section 4.1(d) of the Disclosure Schedule. 13 17 (e) FINANCIAL STATEMENTS; SEC REPORTS. The Company has previously furnished Parent and Sub with true and complete copies of (i) its Annual Reports on Form 10-K for the fiscal years ended June 30, 1996 (the "1996 Annual Report"), June 30, 1997 (the "1997 Annual Report") and June 30, 1998 (the "1998 Annual Report" and, together with the 1996 Annual Report, the 1997 Annual Report, and the Form 10-Q as defined below, the "Reports") filed by the Company with the SEC, (ii) its Quarterly Report on Form 10-Q for the three months ended September 30, 1998 (the "Form 10-Q") filed by the Company with SEC, (iii) the unaudited consolidated balance sheets and the unaudited consolidated statements of operations of the Company and its Subsidiaries as at October 31, 1998, November 30, 1998 and for the months then ended (the "Monthly Financial Statements"), (iv) proxy statements relating to all of the Company's meetings of stockholders (whether annual or special) held or scheduled to be held since June 30, 1996 and (v) each other registration statement, proxy or information statement or current report on Form 8-K filed since June 30, 1996 by the Company with the SEC. Since the effective date of its initial public offering in 1992, the Company has complied in all material respects with its SEC filing obligations under the Exchange Act and the Securities Act of 1933, as amended (the "Securities Act"). The financial statements and related schedules and notes thereto of the Company contained in the Reports (or incorporated therein by reference) and the Monthly Financial Statements were prepared in accordance with generally accepted accounting principles (except, in the case of interim unaudited financial statements, as permitted by the rules and regulations applicable to Form 10-Q) applied on a consistent basis except as noted therein, and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended, subject (in the case of interim unaudited financial statements) to normal year-end audit adjustments, and such financial statements complied as to form as of their respective dates in all material respects with applicable rules and regulations of the SEC. Each such registration statement, proxy statement and Report was prepared in accordance with the requirements of the Securities Act or the Exchange Act and did not, on the date of effectiveness in the case of such registration statements, on the date of mailing in the case of such proxy statements and on the date of filing in the case of such Reports, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (f) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as may be disclosed in the Reports or as otherwise disclosed in Section 4.1(f) of the Disclosure Schedule, since June 30, 1998 there has not been (i) any declaration, setting aside or payment of any dividend or other distribution in respect of the capital stock of the Company or any redemption or other acquisition by the Company of any of its capital stock, other than cash dividends of $.07 per Share paid or to be paid to stockholders on or about September 15, 1998 and December 15, 1998; (ii) any issuance by the Company, or agreement or commitment of the Company to issue, any shares of its Common Stock or securities convertible into or exchangeable for shares of its Common Stock, except for stock options and stock purchase rights set forth in Section 4.1(c) of the Disclosure Schedule; (iii) any change by the Company in accounting methods, principles or practices, except as required by generally accepted accounting principles; (iv) any increase in wage or bonus, severance, profit sharing, retirement, deferred compensation, change of control, insurance or other compensation or benefits or any new compensation or benefit plans or arrangements or any amendments to any 14 18 Benefit Plans (as hereinafter defined) existing on June 30, 1998, other than as required under written agreements or commitments in effect as of June 30, 1998 and other than customary increases or bonus payments made in the ordinary course of business consistent with prior practice (not including, however, any new or additional Benefit Plans unless disclosed in Section 4.1(f) of the Disclosure Schedule); (v) any damage, destruction or loss (whether or not covered by insurance) with respect to any assets of the Company or its Subsidiaries which would have a Material Adverse Effect; (vi) any other event or change which would have a Material Adverse Effect; or (vii) any agreement or commitment to which the Company is a party, whether in writing or otherwise, to take any action described in this subsection 4.1(f). Since June 30, 1998, the Company and its Subsidiaries have conducted their respective businesses in all material respects only in the ordinary course, consistent with past custom and practice, except as contemplated by this Agreement or as described in Schedule 5.1 of the Disclosure Schedule. (g) NO UNDISCLOSED LIABILITIES. Except as set forth in the Reports, or as contemplated by the Restructuring (as defined in Section 5.1), neither the Company nor any of its Subsidiaries has any liabilities (absolute, accrued, contingent or otherwise), except liabilities (i) in the aggregate adequately provided for in the Company's audited balance sheet (including any related notes thereto) for the fiscal year ended June 30, 1998 included in the 1998 Annual Report (the "1998 Balance Sheet"), (ii) incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected on the 1998 Balance Sheet, (iii) incurred since June 30, 1998 in the ordinary course of business consistent with past practice, (iv) incurred in connection with this Agreement or (v) which would not have a Material Adverse Effect. (h) COMPLIANCE WITH LAWS. The business of the Company and each of the Subsidiaries has been operated at all times in compliance with applicable statutes, laws, rules, regulations, permits, licenses, orders, injunctions and judgments (collectively, "Laws"), including, without limitation, applicable Laws governing or regulating environmental matters, manufacturing, marketing and distribution of products, product safety (including the regulations of the Consumer Product Safety Commission, the Canadian Standards Association and Underwriters' Laboratory), product recalls, wages and hours, plant closings or reductions of activities at any facility, layoffs or reductions in force, working conditions and health and safety, except for such violations or failures to comply that, individually or in the aggregate, would not have a Material Adverse Effect. (i) LITIGATION. Except as set forth in Section 4.1(i) of the Disclosure Schedule or otherwise disclosed in the Reports, there is no suit, action or proceeding pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries which, individually or in the aggregate, would have a Material Adverse Effect, nor is there any judgment, decree, injunction, ruling or order of any Governmental Entity outstanding against the Company or any of its Subsidiaries which, individually or in the aggregate, would have a Material Adverse Effect. (j) EMPLOYEE BENEFIT MATTERS. (A) Section 4.1(j) of the Disclosure Schedule sets forth a list of all material employee welfare benefit plans (as defined in Section 3(l) of the Employee Retirement 15 19 Income Security Act of 1974, as amended ("ERISA")), employee pension benefit plans (as defined in Section 3(2) of ERISA), 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 or director of, or independent contractor or consultant to, the Company or its Subsidiaries (together, the "Benefit Plans") and any employment, severance or termination agreement to which the Company or any Subsidiary is a party. The Company has made available to Parent true and complete copies of all Benefit Plans, as in effect, together with all amendments thereto which will become effective at a later date, as well as the latest Internal Revenue Service ("IRS") determination letters obtained with respect to any Benefit 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) 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, (iv) most recent annual and periodic accounting of related plan assets, if any, and (v) such other materials with respect to the Employee Plans reasonably requested by Parent in each case, relating to the Benefit Plans, have been or will be delivered to Parent and are, or will be, correct in all material respects. (B) Except to the extent that any of the following, either alone or in the aggregate, would not have a Material Adverse Effect, or as set forth on Schedule 4.1(j) of the Disclosure Schedule: (i) neither the Company nor, to the Company's knowledge, any of its directors, officers, employees or agents has, with respect to any Benefit 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 penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the Code, in each case applicable to the Company or any Benefit Plan; (ii) all Benefit Plans are and have been at all times in compliance in all respects with the currently applicable requirements prescribed by all statutes, orders, or governmental rules or regulations currently in effect with respect to such Benefit 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 Benefit Plans, which have been asserted or instituted against the Company, any Benefit Plan or the assets of any trust for any Benefit Plan, nor, to the knowledge of the Company, is there any basis for one; (iii) each Benefit Plan intended to be qualified under Section 401(a) of the Code, is so qualified, and has heretofore been determined by the IRS to be so qualified; (iv) neither the Company nor any trade or business which, together with the Company, is treated as a single employer under Section 414(t) of the Code (an "ERISA Affiliate") has, or at any time has had, an obligation to contribute to a "defined benefit plan" as defined in Section 16 20 3(35) of ERISA, a pension plan subject to the funding standards of Section 302 of ERISA or Section 412 of the Code, a "multiemployer plan" within the meaning of Section 3(37) or 4001(a)(13) of ERISA or Section 414(f) of the Code or a "multiple employer plan" within the meaning of Section 210(a) of ERISA or Section 413(c) of the Code; (v) with respect to each group health plan benefiting any current or former employee of the Company, or any ERISA Affiliate, that is subject to Section 4980B of the Code, the Company and any ERISA Affiliate, have complied with (A) the continuation coverage requirements of Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA and (B) the Health Insurance Portability and Accountability Act of 1996, as amended; (vi) all (A) insurance premiums required to be paid with respect to, (B) benefits, expenses, and other amounts due and payable under, and (C) contributions, transfers, or payments required to be made to, any Benefit Plan prior to the Effective Time will have been paid, made or accrued on or before the Effective Time; (vii) with respect to any insurance policy providing funding for benefits under any Benefit Plan, (A) there is no liability of the Company or any of its Subsidiaries, in the nature of a retroactive rate adjustment, loss sharing arrangement, or other actual or contingent liability, nor would there be any such liability if such insurance policy was terminated on the date hereof, and (B) no insurance company issuing any such policy is in receivership, conservatorship, liquidation or similar proceeding and, to the knowledge of the Company, no such proceedings with respect to any insurer are imminent; (viii) no Benefit Plan provides benefits, including, without limitation, death or medical benefits, beyond termination of service or retirement other than (A) coverage mandated by law, (B) death or retirement benefits under any qualified Benefit Plan, or (C) deferred compensation benefits reflected on the books of the Company; (ix) the execution and performance of this Agreement will not (A) constitute a stated triggering event under any Benefit Plan that will result in any payment (whether of severance pay or otherwise) becoming due from the Company or any of the Company's Subsidiaries to any officer, director, employee, or former employee (or dependents of such employee), or (B) accelerate the time of payment or vesting, or increase the amount of compensation due to any employee, officer or director of the Company; (x) any amount that could be received (whether in cash or property or the vesting of property) as a result of any of the transactions contemplated by this Agreement by any employee, officer or director of the Company or any of its affiliates who is a "disqualified individual" (as such term is defined in proposed Treasury Regulation Section 1.280G-1) under any employment, severance or termination agreement, other compensation arrangement or Benefit Plan currently in effect would not be characterized as an "excess parachute payment" (as such term is defined in Section 280G(b)(1) of the Code); (xi) the disallowance of a deduction under Section 162(m) of the Code for employee remuneration will not apply to any amount paid or payable by the Company or any affiliate of the Company under any contract, Benefit Plan, program, arrangement or understanding currently in effect; (xii) neither the Company nor any ERISA Affiliate has any current or future liability with respect to any "employee benefit plans" (within the meaning of Section 3(3) of ERISA), other than the Benefit Plans, previously maintained or contributed to by the Company, any ERISA Affiliate or any predecessor to either 17 21 thereof, or to which the Company, any ERISA Affiliate, or any such predecessor previously had an obligation to contribute. (k) TAXES. Except as disclosed in the Reports or in Section 4.1(k) of the Disclosure Schedule, each of the Company and the Subsidiaries (i) has timely filed all federal and, except as would not have a Material Adverse Effect, state and foreign Tax Returns required to be filed by the Company and each Subsidiary, respectively, for tax years ended prior to the date of this Agreement and all such Tax Returns are correct and complete in all material respects, (ii) has timely paid, withheld or accrued all Taxes due and payable, whether or not reflected on such Tax Returns, except as would not have a Material Adverse Effect, (iii) has not entered into any agreement or waiver which would extend the statute of limitations for filing any Tax Returns that have not yet been filed, and (iv) has "open" years for federal income Tax Returns only as set forth in Section 4.1(k) of the Disclosure Schedule. There are no liens for Taxes on the assets of the Company or the Subsidiaries except for liens for current Taxes not yet due, and, except as set forth in the Reports or in Section 4.1(k) of the Disclosure Schedule, there is no pending, nor has the Company or any Subsidiary received written notice of any threatened, Tax audit, examination, refund litigation or adjustment in controversy. Neither the Company nor any Subsidiary is a party to any agreement providing for the allocation or sharing of Taxes. All Taxes which each of the Company and the Subsidiaries has been required to collect or withhold have been duly collected or withheld and to the extent required when due, have been or will be duly and timely paid to the proper taxing authority, except as would not have a Material Adverse Effect. Further, (A) no Taxes have been incurred after June 30, 1998 which were not incurred in the ordinary course of business consistent with prior practice, except as would not have a Material Adverse Effect, (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, and (E) within the past three years, the Company has not been a member of an affiliated group filing consolidated or combined Tax Returns other than a federal income tax group the common parent of which is the Company. As used in the foregoing paragraph, (a) "Taxes" shall mean (i) all taxes, charges, fees, levies or other assessments, including, without limitation, income, gross receipts, excise, real and personal property, sales, transfer, use, license, payroll and franchise taxes, imposed by the United States, or any state, county, local or foreign government or subdivision or agency thereof, and such term shall include any interest, penalties or additions to tax attributable to such taxes, charges, fees, levies or other assessments and any obligations under any agreement or arrangements with any other person with respect to such amounts and including any liability for taxes of a predecessor entity and (ii) all obligations, including joint and several liability pursuant to the law of any jurisdiction or otherwise, for the payment of any of the types of taxes referred to in clause (i) of this definition as a result of being a member of an affiliated, consolidated, combined or unitary group for any taxable period, and (b) "Tax Returns" shall mean any report, return or other information required to be supplied to any taxing authority in connection with Taxes. 18 22 (l) BUSINESS COMBINATION STATUTE. The Board of Directors has taken all action necessary to render Section 203 of the Delaware GCL inapplicable to the Offer, the Merger, this Agreement, and any of the transactions contemplated hereby and thereby, assuming neither Parent nor Sub is an "interested stockholder" as defined in such Section 203. (m) CONDUCT OF BUSINESS. (A) The Company and its Subsidiaries hold all licenses, permits, variances, consents, authorizations, waivers, grants, franchises, concessions, exemptions, orders, registrations and approvals of any Governmental Entity or other persons necessary for the ownership, leasing, operation, occupancy and use of their respective property and assets and the conduct of their respective businesses as currently conducted ("Permits"), except where the failure to hold such Permits individually and in the aggregate would not have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries has received notice that any Permit will be terminated or modified or cannot be renewed in the ordinary course of business, and the Company has no knowledge of any reasonable basis for any such termination, modification or non-renewal, except for such terminations, modifications or non-renewals as individually and in the aggregate would not have a Material Adverse Effect. (B) The Company has provided to Parent a true and accurate listing of the Company's and its Subsidiaries' material insurance policies. Each of such policies is in full force and effect as of the date hereof, and the Company and its Subsidiaries have no knowledge of any noncompliance with the terms of such policies or any threatened termination of any of such policies, except as would not have a Material Adverse Effect. Neither the Company nor any Subsidiary, as of the date hereof, (i) self-insures against any occurrence subsequent to December 31, 1993 (except for self-insurance retentions or deductibles not exceeding $500,000 with respect to any single occurrence) or (ii) is a participant or shareholder in any captive or industry insurance program, except as set forth in Section 4.1(m) of the Disclosure Schedule. (C) The Company has provided to Parent a report, true and accurate as of its date, as to the Company's and its Subsidiaries' computer and system readiness for the Year 2000, including but not limited to, their ability to conduct and operate their business and to maintain and operate their books and records, to use and operate their computers and other systems and software and to process dates and date-related data both before and after the Year 2000 (collectively, "Year 2000 Compliance"). The Company and its Subsidiaries have used commercially reasonable efforts to identify and address their internal and third-party risks on a timely basis in order to achieve Year 2000 Compliance, except for such non-compliance as would not have a Material Adverse Effect. 19 23 (n) INTELLECTUAL PROPERTY. (A) The Company has previously provided to Parent a true and complete list of all of the Company's and its Subsidiaries' (i) patents, (ii) trademark and service mark registrations, (iii) material copyright registrations, and (iv) all material licenses related to the foregoing. (B) Except as set forth in Section 4.1(n) of the Disclosure Schedule, the Company and its Subsidiaries own or have the valid right to use all intellectual property used by them in connection with their business, including: (i) trademarks and service marks (registered or unregistered) and trade names, and all goodwill associated therewith; (ii) patents, patentable inventions, discoveries, improvements, ideas, know-how, processes and computer programs, software and databases (including source code); (iii) trade secrets and the right to limit the use or disclosure thereof; (iv) copyrights in all works, including software programs and mask works; and (v) domain names (collectively "Intellectual Property"), except where the failure to own or have the valid right to use the Intellectual Property would not have a Material Adverse Effect. (C) Except as set forth in Section 4.1(n) of the Disclosure Schedule or as would not have a Material Adverse Effect, all grants, registrations and applications for Intellectual Property that are used in the conduct of the business of the Company and its Subsidiaries as currently conducted (i) are valid, subsisting, in proper form 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. (D) Except as set forth in Section 4.1(n) of the Disclosure Schedule, to the Company's knowledge, (i) 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, and (ii) the conduct of the business of the Company and its Subsidiaries as currently conducted does not conflict with or infringe any proprietary right of any third party, which conflict or infringement would have a Material Adverse Effect. Except as set forth in Section 4.1(n) of the Disclosure Schedule, there is no claim, suit, action or proceeding pending or, to the Company's knowledge, threatened against the Company or any Subsidiary (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 in the aggregate have a Material Adverse Effect. (E) Except as set forth in Section 4.1(n) of the Disclosure Schedule or as would not have a Material Adverse Effect, no former or present employees, officers or directors of the Company or any Subsidiary hold any right, title or interest directly or indirectly, in whole or in part, in or to any Intellectual Property. 20 24 (o) MATERIAL CONTRACTS. (A) Other than the contracts or agreements of the Company included as exhibits to the 1998 Annual Report (the "Material Contracts"), and contracts or agreements between the Company and its wholly owned Subsidiaries or between wholly owned Subsidiaries of the Company, true and complete copies of each of the following contracts and agreements to which the Company or any of its Subsidiaries is a party or by which any of them is bound (contracts and agreements of the types described below being "Identified Contracts") has been previously delivered to Parent, in each case as such Identified Contract is in effect on the date hereof: (i) each contract or agreement for (A) the purchase of inventories, goods or other materials by, or for the furnishing of services to, the Company or any of its Subsidiaries that requires payments by the Company or any of its Subsidiaries in excess of $250,000 in the aggregate, or (B) for the sale of inventories, goods or other materials by the Company or any of its Subsidiaries other than in the ordinary course of business; that, in the case of both (A) and (B), has a remaining term of one year or more and is not terminable by the Company or Subsidiary party thereto, as the case may be, on notice of six months or less without penalty; (ii) manufacturer's representative, sales agency and distribution contracts and agreements that have a term of one year or more and are not terminable by the Company or Subsidiary party thereto, as the case may be, on notice of six months or less without penalty; (iii) each contract, agreement or instrument (A) governing the terms of indebtedness, or guarantees of indebtedness, of the Company or any of its Subsidiaries in excess of $50,000 principal amount in the aggregate, all of which such indebtedness the Company represents is unsecured, or (B) governing the terms of capital leases or leases that would be classified as operating leases under generally accepted accounting principles but as a loan or financing arrangement for federal income tax purposes, pursuant to which the Company or any of its Subsidiaries has financial obligations in excess of $50,000, or (C) evidencing, governing the terms of or providing for any letters of credit, documentary acceptances, trade bills, trust receipt loans, shipside bonds, standby letters of credit or performance bonds to which the Company or any Subsidiary is a party, or (D) providing for obligations of the Company and its Subsidiaries in respect of interest rate swap or similar agreements, commodity swaps or options or similar agreements or foreign currency hedge, exchange or similar agreements or any other derivative instrument (a list of the Identified Contracts included in this paragraph (iii), together with the outstanding balances thereunder, is set forth on 21 25 Section 4.1(o) of the Disclosure Schedule, which list shall be updated by the Company as of each expiration date of the Offer and as of the Closing Date); (iv) contracts and agreements entered into since January 1, 1995 providing for the acquisition or disposition of assets (including the capital stock of any entity) having a value in excess of $1,000,000 other than sales or purchases of inventories in the ordinary course of business and sales of obsolete equipment; (v) joint venture agreements, partnership agreements and other similar contracts and agreements involving a sharing of profits and expenses; and (vi) contracts and agreements providing for future payments that are conditioned, in whole or in part, on a change in control of the Company or any of its Subsidiaries. (B) Each contract or agreement to which the Company or any of its Subsidiaries is a party or by which any of them is bound is in full force and effect, and neither the Company nor any of its Subsidiaries, nor, to the actual knowledge of the Company, any other person, is in breach of, or default under, any such contract or agreement, and no event has occurred that with notice or passage of time or both would constitute such a breach or default thereunder by the Company or any of its Subsidiaries, or, to the actual knowledge of the Company, any other person, except for such failures to be in full force and effect and such breaches and defaults as individually and in the aggregate would not have a Material Adverse Effect. (p) ENVIRONMENTAL MATTERS. (A) Except as disclosed in the Reports, as disclosed in Section 4.1(p) of the Disclosure Schedule, or as would not have a Material Adverse Effect, and except for those noncompliance matters that have been and are resolved, the Company and its Subsidiaries are and have been in compliance with all applicable Environmental Laws (as hereinafter defined). (B) Except as disclosed in the Reports, as disclosed in Section 4.1(p) of the Disclosure Schedule, or as would not have a Material Adverse Effect, (i) there has been no Release and/or Threat of Release (each, as hereinafter defined) of any Hazardous Substance (as hereinafter defined), and there is no Hazardous Substance present, on, in, under, above, migrating to and/or about any of the properties or assets owned, leased or operated by the Company or its Subsidiaries, and (ii) the Company and its Subsidiaries have not caused or allowed, nor contracted with any party for, the generation, use, transportation, treatment, storage or disposal of any Hazardous Substance; except, in the case of clauses (i) and (ii), for such quantities of Hazardous Substances as are stored, used 22 26 and disposed of in the ordinary course of business in compliance with all Environmental Laws. (C) Except as disclosed in the Reports or as disclosed in Section 4.1(p) of the Disclosure Schedule, there are no Environmental Claims (as hereinafter defined) pending or threatened against the Company or any of its Subsidiaries that individually or in the aggregate would have a Material Adverse Effect nor, to the Company's knowledge, does any basis for such an Environmental Claim exist. (D) The Company has disclosed and, where requested, made available to Parent all material information, including such studies, analyses and test results, and litigation and/or administrative case files, in the possession, custody or control of or otherwise known and available to the Company or any of its Subsidiaries relating to Hazardous Substances, the Release and/or Threat of Release of Hazardous Substances, and/or the environmental conditions on, in, under, above, migrating to and/or about any of the properties or assets owned, leased, or operated by any of the Company and its Subsidiaries or any predecessor in interest thereto at the present time or in the past. (E) As used in this Agreement: (i) the term "Environmental Claim" means any written claim, demand, suit, action, proceeding, investigation or notice to the Company or any of its Subsidiaries by any person or entity including, without limitation, any Governmental Entity, alleging any liability or potential liability of any name or nature, both in law and in equity (including, without limitation, potential liability for investigatory costs, cleanup costs, governmental response costs, natural resource damages, real or personal property damage or penalties) arising, in part or in whole, out of, based on, or resulting from the presence, Release and/or Threat of Release, of any Hazardous Substance at any location, whether or not owned, leased, operated or used by the Company or its Subsidiaries; (ii) the term "Environmental Laws" means all Laws relating to emissions, discharges, Releases or threatened Releases of Hazardous Substances, and/or otherwise relating to the clean-up, manufacture, generation, processing, distribution, use, sale, treatment, receipt, storage, disposal, transport, handling, licensing and/or permitting of Hazardous Substances, including the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), the Resource Conservation and Recovery Act ("RCRA"), and the Occupational Safety and Health Act; (iii) the term "Hazardous Substance" means (1) chemicals, pollutants, contaminants, hazardous wastes, toxic substances, and oil and petroleum products, (2) any substance that is or contains friable asbestos, urea formaldehyde foam 23 27 insulation, polychlorinated biphenyls, petroleum or petroleum-derived substances or wastes, radon gas or related materials, (3) any substance that requires removal, remediation, permitting, licensing and/or government approved plans under any Environmental Law, or is defined, listed or identified as a "hazardous waste" or "hazardous substance" thereunder, (4) any substance that is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic, or otherwise hazardous; in each case in clauses (1)-(4) above which is regulated under any Environmental Law, (5) hazardous waste as defined under RCRA, (6) hazardous substances as defined under CERCLA, and (7) "pollutants" as defined under the Federal Clean Air Act; (iv) (a) the term "Release" means any releasing, disposing, discharging, spilling, leaking, pumping, pouring, escaping, leaching, dumping, emitting, migration, transporting, placing and the like, including into or upon, any land, soil, surface water, ground water or air, or otherwise entering into the environment; and (b) the term "Threat of Release" means a substantial likelihood of a Release which requires action to prevent or mitigate damage to the environment which may result from such Release. (q) LABOR RELATIONS; EMPLOYEES. Except as set forth in Section 4.1(q) of the Disclosure Schedule, there are no collective bargaining agreements covering any of the employees of the Company or any of its Subsidiaries. Except as set forth in Section 4.1(q) of the Disclosure Schedule or as would not have a Material Adverse Effect, there are no pending or, to the knowledge of the Company, threatened (i) employment discrimination charges or complaints against or involving the Company or any of its Subsidiaries before any Governmental Entity, (ii) unfair labor practice charges or complaints, disputes or grievances affecting the Company or any of its Subsidiaries, (iii) union representation petitions or other organizing activity respecting the employees of the Company or any of its Subsidiaries, or (iv) strikes, picketing, slow downs, work stoppages or lockouts or threats thereof affecting the Company or any of its Subsidiaries. Except as set forth in Section 4.1(q) of the Disclosure Schedule, to the Company's knowledge, the Company and its Subsidiaries are in compliance with all applicable Laws respecting employment and employment practices, including provisions of such Laws relating to wages, hours, equal opportunity, collective bargaining and the payment of social security and other Taxes, except where the failure to so comply would not have a Material Adverse Effect. (r) DISCLOSURE DOCUMENTS. (A) Each document required to be filed by the Company with the SEC in connection with the transactions contemplated by this Agreement (the "Company Disclosure Documents"), including, without limitation, the Schedule 14D-9, the proxy or information statement of the Company (the "Company Proxy Statement"), if any, to be filed with the SEC in connection with the Merger, and any amendments or supplements thereto, will, when 24 28 filed, comply as to form in all material respects with the applicable requirements of the Exchange Act and the rules and regulations thereunder. (B) At the time the Company Proxy Statement or any amendment or supplement thereto is first mailed to stockholders of the Company, at the time such stockholders vote on adoption of this Agreement and approval of the Merger and at the Effective Time, the Company Proxy Statement, as supplemented or amended, if applicable, will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. At the time of the filing of any Company Disclosure Document other than the Company Proxy Statement, at the time of any distribution thereof and throughout the remaining pendency of the Offer, each such Company Disclosure Document will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The representations and warranties contained in paragraphs (A) and (B) of this Section 4.1(r) will not apply to statements or omissions included in the Company Disclosure Documents or the Company Proxy Statement, if any, based upon information furnished to the Company in writing by Parent or Sub specifically for use therein. (C) The information with respect to the Company or any Company Subsidiary that the Company furnishes to Parent or Sub in writing specifically for use in the Offer Documents will not, at the time of the filing thereof, at the time of any distribution thereof and throughout the remaining pendency of the Offer, 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 made therein, in the light of the circumstances under which they were made, not misleading. (s) FAIRNESS OPINION. The Board of Directors has received from the Financial Advisor the written opinion referred to in Section 1.2(b) hereof, and such opinion has not been withdrawn or modified as of the date hereof. (t) BROKERS. No broker, investment banker, financial advisor or other person, the fees and expenses of which will be paid by the Company, is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement, other than pursuant to an engagement letter with the Financial Advisor, a copy of which has been furnished to Parent. (u) BOARD RECOMMENDATION. The Company's Board of Directors has taken the actions specified in Section 1.2(a) hereof as of the date hereof. (v) OPTION AGREEMENTS. Each outstanding option agreement executed in connection with a Company Stock Option pursuant to the Company Stock Option Plans is in substantially the form provided to Purchaser as an exhibit to the 1986 Plan or the 1994 Plan, as the case may be. 25 29 SECTION 4.2. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB. Parent and Sub represent and warrant to the Company as follows: (a) ORGANIZATION, STANDING AND CORPORATE POWER. Parent is a corporation duly organized, validly existing and in corporate good standing under the laws of the Commonwealth of Massachusetts. Sub is a corporation duly organized, validly existing and in corporate good standing under the laws of the State of Delaware. Each of Parent and Sub has the requisite corporate power and authority to carry on its business as now being conducted. Each of Parent and Sub is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed (individually or in the aggregate) would not have a material adverse effect on the business, financial condition or results of operations of Parent and Sub taken as a whole. (b) CAPITALIZATION. As of the date of this Agreement, the authorized capital stock of Sub consists of 1,000 shares of common stock, par value $0.01 per share, 1,000 shares of which are presently issued and outstanding, which constitutes all of the issued and outstanding capital stock of Sub. All of the issued and outstanding shares of capital stock of Sub are validly issued, fully paid and non-assessable and are held by Parent. (c) AUTHORITY; ENFORCEABILITY; NONCONTRAVENTION. Parent and Sub have all requisite corporate power and authority to enter into this Agreement and to consummate the Merger and the other transactions contemplated by this Agreement. The execution and delivery of this Agreement by Parent and Sub and the consummation by Parent and Sub of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate action on the part of Parent and Sub. This Agreement has been duly executed and delivered by and constitutes a valid and binding obligation of each of Parent and Sub, enforceable against such party in accordance with its terms, except that the enforceability hereof may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated by this Agreement and compliance with the provisions of this Agreement will not (i) violate any of the provisions of the charter documents or By-laws of Parent or Sub, (ii) subject to the governmental filings and other matters referred to in the following sentence, contravene any law, rule or regulation of any state or of the United States or any political subdivision thereof or therein, or any order, writ, judgment, injunction, decree, determination or award currently in effect, or (iii) except for (A) the existing credit agreement dated as of November 26, 1997 among Parent and certain of its subsidiaries and BankBoston, N.A. and certain other lenders party thereto (the "Parent Credit Agreement") which is to be refinanced with a portion of the proceeds of the Financing, and (B) certain filings and notices required to be made under the Indenture dated as of November 26, 1997 among Parent, certain of its subsidiaries and State Street Bank and Trust Company as trustee, violate, conflict with or constitute a breach under any contract, agreement, indenture, mortgage, deed of trust, lease or other instrument to which 26 30 Parent or any of its Subsidiaries is a party or by which any of their assets is bound or subject, which, in the case of clauses (ii) and (iii) above, singly or in the aggregate, would have a material adverse effect on the business, financial condition or results of operations of Parent and Sub taken as a whole or prevent consummation of the transactions contemplated hereby. No consent, approval or authorization of, or declaration or filing with, or notice to, any Governmental Entity which has not been received or made is required by or with respect to Parent or Sub in connection with the execution and delivery of this Agreement by Parent or Sub or the consummation by Parent or Sub, as the case may be, of any of the transactions contemplated by this Agreement, except for (i) compliance with any applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder, (ii) state securities or blue sky laws and state takeover, antitrust and competition law filings and approvals, (iii) compliance with any applicable requirements of the HSR Act, (iv) the filing of the Certificate of Merger with the Delaware Secretary of State and appropriate documents with the relevant authorities of other states in which the Company is qualified to do business, and (v) such other consents, approvals, authorizations, filings or notices as are set forth in Section 4.1(d) of the Disclosure Schedule or as to which the failure to so receive or make would not have a material adverse effect on the business, financial condition or results of operations of Parent and Sub taken as a whole or prevent Parent and Sub from consummating the transactions contemplated hereby. (d) FINANCING. Parent and Sub have received and accepted (i) a written commitment from BankBoston, N.A. (the "Bank") for the provision of a senior credit facility or facilities (the "Credit Facility") for the transactions contemplated hereby, in an amount of up to $325 million, (ii) a written commitment from BancBoston Robertson Stephens Inc. ("BRS") and Lehman Brothers Inc. ("Lehman") for the issuance of senior subordinated debt securities (the "Debt Securities") for the transactions contemplated hereby in an amount of at least $30 million, and (iii) written commitments from stockholders of Parent and their affiliates to subscribe for an aggregate of $50 million of equity securities of Parent to finance the transactions contemplated hereby (the "Equity Infusion"). The aggregate amount of the financing (the "Financing") contemplated by the commitments from the Bank for the Credit Facility, from BRS and Lehman for the Debt Securities and from stockholders of Parent and their affiliates for the Equity Infusion (collectively, the "Commitments"), will be sufficient to consummate the Offer and the Merger. Parent has provided true and correct copies of the Commitments to the Company prior to the date hereof, and will provide copies of any material amendments or modifications thereto. To the knowledge of Parent and Sub, there exists no condition with respect to Parent or Sub as of the date of this Agreement that would materially adversely affect the ability of Parent and Sub to satisfy in all respects the conditions set forth in the Commitments. (e) DISCLOSURE DOCUMENTS. (A) The information with respect to Parent and its Subsidiaries that Parent furnishes to the Company in writing specifically for use in any Company Disclosure Document 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 made therein, in the light of the circumstances under which they were made, not misleading (i) in the case of the Company Proxy Statement, if any, at the time the Company Proxy Statement or any amendment or supplement 27 31 thereto is first mailed to stockholders of the Company, at the time the stockholders vote on adoption of this Agreement and at the Effective Time, and (ii) in the case of any Company Disclosure Document other than the Company Proxy Statement, at the time of the filing thereof, at the time of any distribution thereof and throughout the remaining pendency of the Offer. (B) The Offer Documents will comply in all material respects with the applicable requirements of the Exchange Act and will not, at the time of the filing thereof, at the time of any distribution thereof and throughout the remaining pendency of the Offer contain any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading; provided, that no representation is made by Parent or Sub with respect to statements or omissions in the Offer Documents based upon information furnished to Parent or Sub in writing by the Company specifically for use therein. (f) BROKERS. No broker, investment banker, financial advisor or other person, the fees and expenses of which will be paid by Parent or Sub, is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement, except for fees and expenses payable to Donaldson, Lufkin & Jenrette Securities Corporation and fees payable to the providers of the Commitments, which fees and expenses shall remain the sole responsibility of Parent and Sub. (g) OWNERSHIP OF SHARES. Neither Parent, Sub nor any other subsidiary of Parent is the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of any Shares. ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER SECTION 5.1. CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated by this Agreement, during the period from the date of this Agreement to the Effective Time, the Company shall operate, and shall cause each Subsidiary to operate, its business in the ordinary course of business in a manner consistent with past practices. Without limiting the generality of the foregoing, during the period from the date of this Agreement to the Effective Time, except as expressly contemplated by this Agreement, and except for actions requested by a majority of those directors of the Company designated by Parent pursuant to Section 1.3(a), the Company and the Subsidiaries shall not, without the prior written consent of Parent: (i) (x) declare, set aside or pay any dividends on, or make any other distributions (whether in cash, stock or property) in respect of, any of the Company's outstanding capital stock, except for a cash dividend of $.07 per Share payable on December 15, 1998, (y) split, combine or reclassify any of its outstanding capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its outstanding capital stock, or (z) purchase, redeem or otherwise acquire any shares of outstanding capital stock or any rights, warrants or options to acquire any such shares; 28 32 (ii) issue, sell, grant, pledge or otherwise encumber any shares of its capital stock, any other voting securities or any securities convertible into, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities, except for the issuance of Shares upon exercise of Company Stock Options outstanding prior to the date of this Agreement and disclosed in Section 4.1(c), or take any action that would make the Company's representations and warranties set forth in Section 4.1(c) not true and correct in all material respects; (iii) amend its Restated Certificate of Incorporation or By-laws or the comparable charter or organizational documents of any of its Subsidiaries; (iv) acquire any business or any corporation, partnership, joint venture, association or other business organization or division thereof (or any interest therein), or form any subsidiaries; (v) sell or otherwise dispose of any of its assets, except in the ordinary course of business, other than (x) obsolete or immaterial equipment or tooling, and (y) in connection with the restructuring described in Section 5.1 of the Disclosure Schedule (the "Restructuring"); (vi) make any capital expenditures, enter into leases or agreements for new locations, close any locations (other than in connection with the Restructuring), or make other commitments with respect thereto, except capital expenditures, leases, agreements or commitments (x) set forth on Section 5.1 of the Disclosure Schedule, or (y) not exceeding $100,000 in the aggregate as the Company may, in its discretion, deem appropriate; (vii) (x) incur any indebtedness for borrowed money or guaranty any such indebtedness of another person, other than (A) borrowings in the ordinary course under existing lines of credit, (B) indebtedness owing to, or guaranties of indebtedness owing to, the Company or (C) in connection with the Financing, or (y) make any loans or advances to any other person, other than routine advances to employees; (viii) except as disclosed in Section 4.1(f) of the Disclosure Schedule, grant or agree to grant to any employee any increase in wages or bonus, severance, profit sharing, retirement, deferred compensation, insurance or other compensation or benefits, or establish any new compensation or benefit plans or arrangements, or amend or agree to amend any existing Benefit Plans, except (x) as may be required under existing agreements, and (y) customary increases in the ordinary course of business consistent with prior practice (not including, however, any new or additional Benefit Plan unless disclosed in Section 4.1(f) of the Disclosure Schedule); (ix) merge, amalgamate or consolidate with any other person or entity in any transaction, sell all or substantially all of its business or assets, or acquire all or substantially all of the business or assets of any other person or entity; (x) except as disclosed in Section 4.1(f) or 5.1 of the Disclosure Schedule, enter into or amend any employment, consulting (except for consulting agreements for development services for 29 33 new products involving payments by the Company or any Subsidiary of less than $500,000 in the aggregate, prior to March 31, 1999, and less than $500,000 in the aggregate for the period from April 1, 1999 to June 30, 1999), severance or similar agreement with any person or amend the Company's engagement letter with the Financial Advisor; (xi) change its accounting policies in any material respect, except as required by generally accepted accounting principles; (xii) except as set forth in Section 4.1(f) of the Disclosure Schedule, enter into any material contract, agreement or commitment not otherwise permitted under this Section 5.1, including, without limitation, any contract, agreement or commitment involving expenditures by the Company or any of its Subsidiaries in excess of $50,000 or which is not terminable by the Company upon giving 30 days or less prior written notice, except in the ordinary course of business consistent with prior practice; (xiii) settle or compromise any pending or threatened suit, action or claim, except for products liability cases being defended in the ordinary course of business, if such settlement or compromise involves the payment of more than $100,000 by the Company or any Subsidiary or would impose any material obligations on, or (other than releasing the Company's or any Subsidiary's claim for relief in such proceeding and the Company's or any Subsidiary's right to a trial of such claim) waive or affect any material right or interest of, the Company, any Subsidiary, Parent or Sub; or (xiv) commit or agree to take any of the foregoing actions. SECTION 5.2. OTHER ACTIONS. The Company shall not, and shall cause its Subsidiaries not to, take any action that would, or that could reasonably be expected to, result in (i) any of the representations and warranties of the Company set forth in this Agreement that are qualified as to materiality becoming untrue, (ii) any of such representations and warranties that are not so qualified becoming untrue in any material respect or (iii) any of the conditions of the Offer set forth in Annex I or of the Merger set forth in Article VII not being satisfied. ARTICLE VI ADDITIONAL AGREEMENTS SECTION 6.1. MEETING OF STOCKHOLDERS. (a) Following the expiration of the Offer (or at such earlier time as the parties hereto shall mutually agree), unless the Merger is to be effected pursuant to Section 253 of the Delaware GCL or pursuant to written consents, the Company will promptly take all action necessary in accordance with applicable law and its Restated Certificate of Incorporation and By-laws to duly call, give notice of, and convene a meeting of its stockholders (the "Stockholders' Meeting") to consider and vote upon the adoption and approval of this Agreement and the Merger and all actions contemplated hereby which require approval and adoption by the Company's stockholders; provided, 30 34 however, that the obligations contained herein shall be subject to the provisions of Section 6.8. Parent shall agree to cause all of the shares of capital stock of the Company held by Parent and/or Sub to be voted, either in person or by proxy, in favor of the adoption and approval of this Agreement and the Merger at the Stockholders' Meeting. (b) Subject to the earlier termination of this Agreement in accordance with the provisions of Section 8.1 (other than Section 8.1(b)(A)), if, as of March 15, 1999, (i) more than 50% of the then-outstanding Shares shall have been validly tendered in the Offer and not withdrawn, (ii) all of the Tender Offer Conditions other than the Minimum Condition shall have been satisfied or waived by Offeror, and (iii) the Minimum Condition shall not have been waived by Offeror in order to purchase the Shares pursuant to the Offer, then, upon the written request of Parent or Company given to the other within five days following the expiration of the Offer, the Company shall promptly proceed to take the actions specified in Section 6.1(a) above with respect to the Stockholders Meeting, and the parties hereto shall, subject to the provisions of Article VII and Section 8.1 hereof (other than Section 8.1(b)(A)), undertake in an expeditious manner the efforts required by Section 6.4 hereof to consummate and make effective the Merger. SECTION 6.2. PROXY STATEMENT. (a) In connection with the Stockholders' Meeting contemplated hereby, as promptly as practicable after Offeror first purchases Shares pursuant to the Offer or if the parties proceed under Section 6.1(b) hereof, and if required by applicable law, the Company will promptly prepare and file, and Parent will cooperate with the Company in the preparation and filing of, a preliminary Company Proxy Statement (the "Preliminary Proxy Statement") with the SEC and will use its commercially reasonable best efforts to respond to the comments of the SEC concerning the Preliminary Proxy Statement and to cause the Company Proxy Statement to be mailed to the Company's stockholders, in each case as soon as reasonably practicable. The Company shall pay the filing fees for the Preliminary Proxy Statement. Each party to this Agreement will notify the other parties promptly of the receipt of the comments of the SEC, if any, and of any request by the SEC for amendments or supplements to the Preliminary Proxy Statement or the Company Proxy Statement or for additional information, and will supply the other parties with copies of all correspondence between such party or its representatives, on the one hand, and the SEC or members of its staff, on the other hand, with respect to the Preliminary Proxy Statement, the Company Proxy Statement or the Merger. (b) If at any time prior to the Stockholders' Meeting, any event should occur relating to the Company or any of the Subsidiaries which should be set forth in an amendment of, or a supplement to, the Company Proxy Statement, the Company will promptly inform Parent. If at any time prior to the Stockholders' Meeting, any event should occur relating to Parent or Sub or any of their respective Associates or Affiliates, or relating to the plans of any such persons for the Surviving Corporation after the Effective Time of the Merger, or relating to the Financing, that should be set forth in an amendment of, or a supplement to, the Company Proxy Statement, the Company, with the cooperation of Parent, will, upon learning of such event, promptly prepare, file and, if required, mail such amendment or supplement to the Company's stockholders; provided that, prior to such filing or 31 35 mailing, the Company shall consult with Parent with respect to such amendment or supplement and shall afford Parent reasonable opportunity to comment thereon. (c) Parent will furnish to the Company the information relating to Parent and Sub, their respective Associates and Affiliates and the plans of such persons for the Surviving Corporation after the Effective Time of the Merger, and relating to the Financing, which is required to be set forth in the Preliminary Proxy Statement or the Company Proxy Statement under the Exchange Act and the rules and regulations of the SEC thereunder. The Company shall use its best efforts to cause to be included as an exhibit to the Preliminary Proxy Statement and the Company Proxy Statement the fairness opinion of the Financial Advisor referred to in Section 4.1(s). SECTION 6.3. ACCESS TO INFORMATION; CONFIDENTIALITY. From and after the date hereof, the Company will provide to Parent, its financing sources and their respective Representatives (as defined below), reasonable access, upon notice and during normal business hours, to the Company's facilities, books and records and shall cause the directors, employees, accountants, attorneys, financial advisors, lenders and other agents and representatives (collectively, "Representatives") of the Company to continue to cooperate fully with Parent and Parent's Representatives in order to enhance such persons' knowledge of the Company's assets, contracts, liabilities, operations, records and other aspects of its business (including any environmental investigation of the Company's facilities) and the efforts of Parent and Sub to secure the Financing as described in Section 4.2(d). As soon as reasonably practicable after monthly financial statements of the Company become available to senior officers of the Company, the Company shall provide Parent with a copy of the same. Parent shall, and shall cause Parent's Representatives to, keep all information supplied or made available to Parent hereunder in confidence in accordance with and subject to the terms of that certain letter agreement between Parent and BancAmerica Securities, Inc. dated October 1, 1998 (the "Confidentiality Agreement"). SECTION 6.4. COMMERCIALLY REASONABLE EFFORTS. (a) Upon the terms and subject to the conditions and other agreements set forth in this Agreement, each of the parties agrees to use commercially reasonable efforts to take, or cause to be taken (including, without limitation, by such parties' respective Representatives), all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Offer, the Merger, the Financing and the other transactions contemplated by this Agreement, including the satisfaction of the respective conditions set forth in Annex I and Article VII hereof. Following the purchase by Offeror of Shares pursuant to the Offer, neither Parent nor Sub will take any action as a stockholder of the Company that would cause the Company to breach any of the Company's obligations contained in this Agreement. (b) Parent and the Company shall promptly notify each other of (i) the occurrence or non-occurrence of any fact or event which would be reasonably likely (A) to cause 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) to cause any covenant, condition or obligation under this Agreement not to be complied with or satisfied in any material 32 36 respect, and (ii) any failure of the Company or Parent or Sub, as the case may be, to comply with or satisfy any covenant, condition or obligation to be complied with or satisfied by it hereunder in any material respect; provided, however, that no such notification shall affect the representations or warranties of any party or the conditions to the obligations of any party hereunder. SECTION 6.5. FINANCING. Each of Parent and Sub shall use commercially reasonable efforts to accept and close the Financing on terms consistent with the Commitments or such other terms as shall be satisfactory to Parent or as are not materially more onerous to Parent than as set forth in the Commitments, and to execute and deliver definitive agreements with respect to the Financing (the "Definitive Financing Agreements") on or before the Closing Date. Parent and Sub shall use commercially reasonable efforts to satisfy on or before the Closing Date all requirements of the Definitive Financing Agreements which are conditions to closing the transactions constituting the Financing and to drawing the cash proceeds thereunder. The obligations contained herein are not intended, nor shall they be construed, to benefit or confer any rights upon any person, firm or entity other than the Company. SECTION 6.6. INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. (a) The Certificate of Incorporation and By-laws of the Company or the Surviving Corporation, as the case may be, shall not be amended, repealed or otherwise modified for a period from the date hereof until six years after the Effective Time in any manner that would adversely affect the rights thereunder of individuals who as of the date hereof are or were directors, officers, employees, fiduciaries or agents of the Company and its Subsidiaries or otherwise entitled to indemnification, advancement of expenses or exculpation from liability under the Company's Restated 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, Parent shall, and shall cause the Surviving Corporation to, 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 threatened, pending or completed claim, action, suit, proceeding or investigation, including without limitation liabilities arising out of this transaction, to the extent that it was based on the fact that such Indemnified Party is or was a director, officer, employee, fiduciary or agent of the Company or its Subsidiaries and arising out of actions or omissions or alleged actions or omissions occurring at or prior to the Effective Time, and in the event of any such claim, action, suit proceeding, or investigation (whether arising before or after the Effective Time), (i) Parent, the Company or the Surviving Corporation, as applicable, shall advance expenses to such Indemnified Parties in advance of the final disposition thereof upon receipt of the undertaking specified in Section 145 of the Delaware GCL, including payment of the reasonable fees and expenses of counsel selected by the Indemnified Parties, which counsel shall be reasonably satisfactory to Parent, promptly as statements therefor are received and (ii) Parent, the Company and the Surviving Corporation will cooperate in the defense of any such matter; provided, however, that neither Parent, the Company 33 37 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 Parent, the Company nor the Surviving Corporation shall be obliged pursuant to this Section 6.6 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 written opinion of counsel for the Indemnified Parties, two or more of such Indemnified Parties have conflicting interests in the outcome of such action. Any determination required to be made with respect to whether an Indemnified Party's conduct complies with the standards set forth under Delaware law, the Certificate of Incorporation or By-laws, as the case may be, shall be made by independent counsel mutually acceptable to Parent and the Indemnified Party. (b) At or prior to the Effective Time, Parent, the Company or the Surviving Corporation shall obtain a fully-paid officers' and directors' liability insurance policy covering the Indemnified Parties who are currently covered by the Company's officers' and directors' liability insurance policy for a term of six years on terms not materially less favorable than those in effect on the date hereof in terms of coverage and amounts. This Section 6.6 shall survive the consummation of the Merger. Notwithstanding Section 9.7 hereof, this Section 6.6 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. (c) 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 6.6. SECTION 6.7. PUBLIC ANNOUNCEMENTS. Parent and Sub, on the one hand, and the Company, on the other hand, will consult with each other before issuing, and provide each other the opportunity to review and comment upon, any press release or other public statements with respect to the existence of and transactions contemplated by this Agreement, and shall not issue any such press release or make any such public statement without the consent of the other party following such consultation, except as may be required by applicable law, regulation or judicial process, and in such case only after reasonable notice to the other party. SECTION 6.8. ACQUISITION PROPOSALS. The Company shall not, nor shall it authorize or permit any of its Representatives to, directly or indirectly, (i) solicit, initiate or knowingly encourage any Third Party (as hereinafter defined) with respect to the submission of any Acquisition Proposal (as hereinafter defined) or (ii) participate in any discussions or negotiations regarding, or furnish to any Third Party any non-public information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Acquisition Proposal; provided, however, that the foregoing shall not prohibit the Board of Directors of the Company (or, if applicable, a duly appointed committee thereof (the "Special Committee")) from: (i) furnishing information to, or entering into discussions or negotiations with, any Third Party in connection with an unsolicited bona fide Acquisition 34 38 Proposal by such Third Party if, and to the extent that, the Board of Directors of the Company (or the Special Committee), after consultation with independent legal counsel (who may be the Company's regularly engaged independent counsel), determines in good faith that such action is required for the Board of Directors of the Company to comply with its fiduciary obligations under applicable law; (ii) withdrawing or modifying its recommendation referred to in Section 1.2(a) following receipt of a bona fide unsolicited Acquisition Proposal if the Board of Directors of the Company (or the Special Committee), after consultation with independent legal counsel (who may be the Company's regularly engaged independent counsel), determines in good faith that such action is necessary for the Board of Directors of the Company to comply with its fiduciary obligations under applicable law; or (iii) making to the Company's stockholders any recommendation and related filing with the SEC as required by Rule 14e-2 and 14d-9 under the Exchange Act, with respect to any tender offer, or taking any other equally required action (including, without limitation, the making of public disclosures as may be necessary or advisable under applicable securities laws); and provided further, that, in the event of an exercise of the Company's or its Board of Director's (or the Special Committee's) rights under clause (i), (ii) or (iii) above, notwithstanding anything contained in this Agreement to the contrary, such action shall not constitute a breach of this Agreement by the Company. The Company shall provide immediate written notice to Parent of the receipt of any oral or written inquiry or proposal from a Third Party with respect to a merger, consolidation, share exchange, tender offer or similar transaction involving the Company, or any purchase or other acquisition of all or substantially all of the assets or equity interests of the Company, other than the transactions contemplated by this Agreement (an "Acquisition Transaction") and of the Company's intention to furnish information to, or enter into discussions or negotiations with, such person or entity, along with a copy of any such written inquiry or proposal and copies of any information furnished to such Third Party, to the extent not previously provided to Parent. For purposes of this Agreement, (i) "Acquisition Proposal" means any written proposal with respect to an Acquisition Transaction that the Board of Directors of the Company (or the Special Committee), after consultation with and receipt of advice from the Financial Advisor or another nationally recognized investment banking firm, determines in good faith in the exercise of its fiduciary obligations under applicable law to be more favorable than the transactions contemplated by this Agreement; and (ii) "Third Party" means any corporation, partnership, person or other entity or "group" (as defined in Section 13(d)(3) of the Exchange Act) other than Parent, Sub or any Affiliates of Parent or Sub and their respective directors, officers, employees, representatives and agents. SECTION 6.9. STOCKHOLDER LITIGATION. The Company shall give Parent the opportunity to participate, at the expense of Parent, in the defense or settlement of any stockholder litigation against the Company and its Representatives relating to the transactions contemplated by this Agreement; provided, however, that no such settlement shall be agreed to without Parent's consent, which consent shall not be unreasonably withheld. SECTION 6.10. COMPANY ACTION RELATING TO BENEFIT PLANS. Without Parent's prior written consent, no action shall be taken by or on behalf of the Company, any Subsidiary or any trustee or administrative committee with respect to any Benefit Plan which action would, by itself, constitute cause for any employee of the Company or a Subsidiary party to any employment, severance or change of control agreement to claim constructive termination under such agreement. 35 39 SECTION 6.11. CONSENTS AND APPROVALS. As soon as practicable following the date of this Agreement, the Company and Parent and Sub shall make all filings and notifications required to be made with and seek all consents, approvals, permits and authorizations required to be obtained from, any third parties or Governmental Entities in connection with this Agreement and the transactions contemplated hereby, including, without limitation, the filing of any required notification under the HSR Act as promptly as practicable, and any other filing, consent or approval listed on Section 4.1(d) of the Disclosure Schedule. The Company shall pay any required filing fees or other expense in connection therewith; provided that Parent shall pay the required filing fee under the HSR Act. SECTION 6.12. REPAYMENT OF INDEBTEDNESS. Parent or Sub shall utilize a portion of the net proceeds of the Financing, together with available cash of the Company, to (or to enable the Company to) repay, satisfy or otherwise discharge, in full, the Company's or its Subsidiaries' indebtedness (including under any guaranty or surety obligation) to (i) NationsBank, N.A. and the other banks party to the Credit Agreement dated April 15, 1996, as amended, (ii) Bank of America Canada pursuant to the revolving credit facility dated September 2, 1998, (iii) Bank of America National Trust and Savings Association pursuant to the Hong Kong letter of credit facility dated June 2, 1998, and (iv) the noteholders pursuant to the Note Purchase Agreements dated July 23, 1993 and April 15, 1996, in each case as existing on the Closing Date (or make such other arrangements with respect to the foregoing indebtedness as shall be satisfactory to the lenders thereof). SECTION 6.13. GUARANTY OF SUB'S OBLIGATIONS. Parent hereby unconditionally guaranties to the Company the due and punctual performance by Sub of all of Sub's obligations hereunder. ARTICLE VII CONDITIONS PRECEDENT SECTION 7.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The respective obligation of each party to effect the Merger is subject to the satisfaction or waiver on or prior to the Closing Date of the following conditions: (a) STOCKHOLDER APPROVAL. The Merger and this Agreement shall have been adopted and approved by the requisite vote of the holders of outstanding Shares, if required by the Delaware GCL. (b) GOVERNMENTAL CONSENTS. All filings required to be made prior to the Effective Time with, and all consents, approvals, permits and authorizations required to be obtained prior to the Effective Time from, any Governmental Entities under the HSR Act which, either individually or in the aggregate, if not made or obtained would have a Material Adverse Effect or would prevent consummation of the Merger, shall have been made or obtained (as the case may be). (c) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order, judgment, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or 36 40 other legal restraint or prohibition preventing the consummation of the Merger shall be in effect; provided, however, that the parties invoking this condition shall use their best efforts to have any such order or injunction vacated. SECTION 7.2. CONDITIONS TO OBLIGATIONS OF PARENT AND SUB. The obligations of Parent and Sub to effect the Merger are further subject to the satisfaction, or waiver by Parent, on or prior to the Closing Date, of the following conditions: (a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Company set forth in Section 4.1 that are qualified by materiality shall be true and correct, and the representations and warranties of the Company set forth in Section 4.1 that are not so qualified shall be true and correct in all material respects, individually and in the aggregate, as of the Closing Date as though made on and as of the Closing Date, except (i) for changes permitted or contemplated by this Agreement, and (ii) in the case of any breach of such representations and warranties, where such breach or breaches would not, individually or in the aggregate, have a Material Adverse Effect. (b) COMPANY OBLIGATIONS. The Company shall have performed in all material respects all obligations and complied in all material respects with all agreements and covenants of the Company required to be performed or complied with by it under this Agreement including, without limitation, its obligations under Articles V and VI hereof, except, in the case of any breach of any such obligation, agreement or covenant, where such breach or breaches would not, individually or in the aggregate, have a Material Adverse Effect. (c) OFFICERS' CERTIFICATE. The Company shall have furnished Parent with such certificates and other documents to evidence the fulfillment of the conditions set forth in this Section 7.2 as Parent may reasonably request. (d) FINANCING. The Financing Condition shall have been satisfied. (e) GOVERNMENTAL CONSENTS. All filings required to be made by the Company or its Subsidiaries prior to the Effective Time with, and all consents, approvals, permits and authorizations required to be obtained by the Company or its Subsidiaries prior to the Effective Time from, any Governmental Entities, which, either individually or in the aggregate, if not made or obtained would have a Material Adverse Effect on or after the Effective Time or would prevent consummation of the Merger, shall have been made or obtained (as the case may be). (f) MATERIAL ADVERSE CHANGE. Between the date of the Agreement and the Effective Time, there shall not have been a material adverse change in the business, assets, properties, condition (financial or otherwise), or results of operations of the Company and its Subsidiaries taken as a whole. 37 41 (g) DISSENTING SHARES. The percentage of Dissenting Shares shall not be greater than 10% of the aggregate number of Shares outstanding immediately prior to the Effective Time. SECTION 7.3. CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of the Company to effect the Merger are further subject to the satisfaction, or waiver by the Company, on or prior to the Closing Date, of the following conditions: (a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of Parent and Sub set forth in Section 4.2 that are qualified by materiality shall be true and correct, and the representations and warranties of Parent and Sub set forth in Section 4.2 that are not so qualified shall be true and correct in all material respects, individually and in the aggregate, as of the Closing Date as though made on and as of the Closing Date, except (i) for changes permitted or contemplated by this Agreement, and (ii) in the case of any breach of such representations and warranties, where such breach or breaches would not, individually or in the aggregate, materially and adversely affect the consummation of the Merger. (b) PARENT OBLIGATIONS. Parent and Sub shall have performed in all material respects all obligations and complied in all material respects with all agreements and covenants required to be performed or complied with by them under this Agreement including, without limitation, their respective obligations under Article VI hereof, except, in the case of any breach of any such obligation, agreement or covenant, where such breach or breaches would not, individually or in the aggregate, materially adversely affect the consummation of the Merger. (c) OFFICERS' CERTIFICATE. Parent shall have furnished the Company with such certificates and other documents to evidence the fulfillment of the conditions set forth in this Section 7.3 as the Company may reasonably request. (d) GOVERNMENTAL CONSENTS. All filings required to be made by Parent or its subsidiaries prior to the Effective Time with, and all consents, approvals, permits and authorizations required to be obtained by Parent or its subsidiaries prior to the Effective Time from, any Governmental Entities, which, either individually or in the aggregate, if not made or obtained would prevent consummation of the Merger, shall have been made or obtained (as the case may be). SECTION 7.4. EXCEPTION. The conditions set forth in Sections 7.2 and 7.3 hereof shall cease to be conditions to the obligations of any of the parties hereto if Offeror shall have accepted for payment and paid for Shares validly tendered pursuant to the Offer. SECTION 7.5. FRUSTRATION OF CONDITIONS. No party hereto may rely on the failure of any condition set forth in this Article to be satisfied if such failure was caused by such party's failure to use commercially reasonable efforts to consummate the transactions contemplated by this Agreement. 38 42 ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER SECTION 8.1. TERMINATION. This Agreement may be terminated and abandoned at any time prior to the Effective Time, whether before or after approval of the Merger by the stockholders of the Company: (a) by mutual written consent of Parent and the Company prior to the purchase of Shares pursuant to the Offer; or (b) (A) by either Parent or the Company, if: (i) the Offer shall not have been commenced within the time period specified in Section 1.1(a), unless the failure to have commenced the Offer is as a result of any judgment, injunction, order, decree or other legal restraint or prohibition enjoining or otherwise restraining the commencement of the Offer, and provided notice of termination under this subsection has been given prior to the actual commencement of the Offer (even if such commencement occurs later than the time period specified in Section 1.1(a)), or (ii) the Offer shall have terminated or expired or been withdrawn in accordance with its terms without Offeror having purchased any Shares pursuant to the Offer, or (iii) at any time after March 15, 1999 (or such later date to which the Offer shall have been extended pursuant to Section 1.1(b)) the Offer has not been consummated; but only to the extent that the parties shall not then be required to proceed under Section 6.1(b) and provided that the failure to commence or consummate the Offer, as the case may be, is not attributable to the failure of the terminating party to fulfill its obligations pursuant to this Agreement; or (B) by the Company prior to the purchase of Shares pursuant to the Offer, if any change to the Offer is made by Offeror in contravention of the provisions of Section 1.1; or (c) by either Parent or the Company, if: (i) upon a vote at the Stockholders Meeting, or any adjournment thereof, the adoption and approval of this Agreement and the Merger by the stockholders of the Company required by Delaware law, the Company's Restated Certificate of Incorporation or By-laws or the terms of this Agreement shall not have been obtained; or (ii) the Merger shall not have been consummated on or before June 15, 1999, provided that the failure to consummate the Merger is not attributable to the failure of the terminating party to fulfill its obligations pursuant to this Agreement; or (iii) there shall be any law or regulation that makes consummation of the Offer or the Merger illegal or otherwise prohibited, or if any judgment, injunction, order or decree enjoining or otherwise restraining Offeror from purchasing Shares pursuant to the Offer or Parent, Sub or the Company from consummating the Merger is entered and such judgment, injunction, order or decree shall become final and non-appealable; provided that neither Parent nor the Company may terminate this Agreement pursuant to clause (i) or (ii) hereof if the Shares are purchased pursuant to the Offer; or (d) by the Company prior to the purchase of Shares pursuant to the Offer, immediately after payment to Parent of the Termination Amount as defined in Section 8.2(b), if the Board of Directors shall have withdrawn or modified in a manner adverse to Parent or Sub its approval or recommendation of the Offer, this Agreement or the Merger in order to permit the Company to 39 43 execute an Acquisition Proposal providing for the acquisition of the Company by a Third Party as determined by the Board of Directors in good faith after consultation with independent legal counsel (who may be the Company's regularly engaged independent counsel) that such action is required for the Board of Directors of the Company to comply with its fiduciary obligations to stockholders under applicable law; or (e) by Parent prior to the purchase of Shares pursuant to the Offer, if the Board of Directors of the Company shall have approved an Acquisition Proposal or withdrawn or modified (including by amendment of the Schedule 14D-9), in a manner adverse to Parent or Sub, the Board of Director's recommendation pursuant to Section 1.2(a); or (f) by Parent prior to the purchase of Shares pursuant to the Offer, if any of the conditions set forth in Sections 7.1 or 7.2 shall have become incapable of fulfillment, and shall not have been waived by Parent, or if the Company shall breach in any respect any of its representations, warranties or obligations hereunder and such breach shall have a Material Adverse Effect, and the Company shall not have provided reasonable assurance that such breach will be cured in all material respects on or before the Closing Date; or (g) by the Company prior to the purchase of Shares pursuant to the Offer, if any of the conditions set forth in Sections 7.1 or 7.3 shall have become incapable of fulfillment, and shall not have been waived by the Company, or if Parent or Sub shall breach in any respect any of their respective representations, warranties or obligations hereunder and such breach shall have a material adverse effect on the consummation of the transactions contemplated by this Agreement, and Parent or Sub, as the case may be, shall not have provided reasonable assurance that such breach will be cured in all material respects on or before the Closing Date; provided, however, that the party seeking termination pursuant to clause (f) or (g) hereof is not in material breach of any of its representations, warranties, covenants or agreements contained in this Agreement. SECTION 8.2. EFFECT OF TERMINATION. (a) AGREEMENT VOID. In the event of the termination and abandonment of this Agreement pursuant to Section 8.1 hereof, this Agreement shall forthwith become void and have no effect, without any liability on the part of any party hereto or its affiliates, directors, officers or stockholders and all rights and obligations of any party hereto shall cease, except for agreements contained in Sections 6.6, 8.2 and 9.2; provided, however, that (i) nothing contained in this Section 8.2 shall relieve any party from liability for any breach of this Agreement nor relieve the Company from any liability under this Article VIII, and (ii) the Confidentiality Agreement shall remain in full force and effect in accordance with its terms. (b) TERMINATION AMOUNT. If this Agreement is terminated pursuant to either of Sections 8.1(d) or 8.1(e), then the Company shall (provided that neither Parent nor Sub is then in material breach of its obligations under this Agreement) promptly (but not later than the second 40 44 business day following such termination) pay to Parent the sum of $4.5 million in cash (the "Termination Amount"). (c) ACQUISITION PROPOSAL FOLLOWING TERMINATION. If (i) as of the expiration or other termination of the Offer in accordance with its terms, the number of Shares then validly tendered in the Offer and not withdrawn shall be equal to or less than 50% of the then outstanding number of Shares, and this Agreement is terminated, (ii) all Tender Offer Conditions are satisfied at the time of the expiration or termination of the Offer (except (x) any condition that requires tender of 50% or more of the Shares, (y) in the case of the Financing Condition, the parties issuing the Commitments would be then prepared to provide the financing thereunder (if the required number of Shares were tendered), and (z) condition (e) set forth on Annex I, provided Parent or Sub have not terminated the Agreement for any breach of the Agreement which constitutes a violation of said condition (e)), and (iii) at any time prior to or within one year after termination of this Agreement, the Company enters into an agreement relating to an Acquisition Proposal at a value (if the consideration is other than a cash payment) or at a price per Share to stockholders which is greater (after giving effect to any stock dividends, stock splits, recapitalizations and similar events affecting the Shares) than the per share price set forth in this Agreement, with a person other than Parent or Sub or their Affiliates and Associates, which agreement is Consummated within such one year period, then, upon the Consummation thereof, the Company shall pay to Parent the Termination Amount. At no time prior to or within one year after termination of this Agreement shall the Company enter into any agreement relating to any such Acquisition Proposal which is to be Consummated within such one year period with a person other than Parent or Sub or their Affiliates and Associates unless such agreement provides that such person shall, upon the execution of such agreement, pay any Termination Amount due Parent under this Section 8.2 which at that time remains unpaid. For purposes hereof, an Acquisition Proposal shall be "Consummated" on the first date after the execution thereof that the other party thereto acquires any Shares or assets of the Company or its Subsidiaries, whether by purchase, exchange, merger, consolidation or otherwise. (d) REASONABLE INDUCEMENT. The parties acknowledge and agree that the provisions for payment of the Termination Amount are included herein in order to reasonably induce Parent to enter into this Agreement and to reimburse Parent for incurring the costs and expenses related to entering into this Agreement, obtaining the Commitments and the Financing, and consummating the transactions contemplated by this Agreement. (e) COSTS OF ENFORCEMENT. Notwithstanding anything to the contrary set forth in this Agreement, in the event Parent and/or Sub files suit to seek all or a portion of the Termination Amount, the prevailing party in any such suit shall be entitled, in addition to any other relief to which it may be entitled, to payment by the non-prevailing party of all expenses, including reasonable attorneys' fees and expenses, which it incurs in enforcing its rights under this Section 8.2. SECTION 8.3. AMENDMENT. Subject to the applicable provisions of the Delaware GCL, at any time prior to the Effective Time, the parties hereto may modify or amend this Agreement, by written agreement executed and delivered by duly authorized officers of the respective parties; provided, however, that after approval of the Merger by the stockholders of the Company, no amendment shall be made which reduces the consideration payable in the Merger or adversely 41 45 affects the rights of the Company's stockholders hereunder without the approval of such stockholders. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties. SECTION 8.4. EXTENSION; WAIVER. At any time prior to the Effective Time, the parties may (a) extend the time for the performance of any of the obligations or other acts of the other parties, (b) waive any inaccuracies in the representations and warranties of the other parties contained in this Agreement or in any document delivered pursuant to this Agreement or (c) subject to Section 8.2, waive compliance with any of the agreements or conditions of the other parties contained in this Agreement. Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights. ARTICLE IX GENERAL PROVISIONS SECTION 9.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the representations and warranties set forth in this Agreement shall survive the Effective Time or, if earlier, the date of the purchase of Shares pursuant to the Offer. This Section 9.1 shall not limit any covenant or agreement of the parties which by its terms contemplates performance after such time or date, including, without limitation, Section 6.6. SECTION 9.2. FEES AND EXPENSES. Except as provided otherwise in this Agreement, including, without limitation, in Sections 6.2, 6.11 and 8.2, whether or not the Merger shall be consummated, each party hereto shall pay its own expenses incident to preparing for, entering into and carrying out this Agreement and the consummation of the transactions contemplated hereby. SECTION 9.3. DEFINITIONS. For purposes of this Agreement: (a) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act; and (b) "person" means an individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or other entity. SECTION 9.4. NOTICES. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given when delivered personally or sent by overnight courier (providing proof of delivery) or telecopy to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to Parent or Sub, to: Holmes Products Corp. 233 Fortune Boulevard Milford, MA 01757 42 46 Attn: Jordan A. Kahn, President Telecopy No.: (508) 634-8734 with copies to: Berkshire Partners LLC One Boston Place Boston, MA 02108 Attn: Richard K. Lubin, Managing Director Telecopy No.: (617) 227-6105 - and - Posternak, Blankstein & Lund, L.L.P. 100 Charles River Plaza Boston, MA 02114 Attn: Donald H. Siegel, P.C. Telecopy No.: (617) 367-2315 (b) if to the Company, to: The Rival Company 800 East 101st Terrace Kansas City, MO 64131 Attn: Board of Directors Telecopy No.: 816-943-4107 with a copy to: Morrison & Hecker LLP Two Crown Center 2420 Pershing Road Kansas City, MO 64108 Attn: Kent Whittaker, Esq. Telecopy No.: (816) 421-2896 SECTION 9.5. INTERPRETATION. When a reference is made in this Agreement to a Section or Schedule, such reference shall be to a Section of, or a Schedule to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." SECTION 9.6. COUNTERPARTS. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. SECTION 9.7. ENTIRE AGREEMENT; THIRD-PARTY BENEFICIARIES. This Agreement and the other agreements referred to herein, including without limitation the Confidentiality Agreement, constitute the entire agreement, and supersede all prior agreements and 43 47 understandings, both written and oral, among the parties with respect to the subject matter of this Agreement. This Agreement is not intended to confer upon any person, other than the parties hereto and the third party beneficiaries referred to in the following sentence, any rights or remedies. The parties hereto expressly intend the provisions of Section 6.6 to confer a benefit upon and be enforceable by, as third party beneficiaries of this Agreement, the third persons referred to in, or intended to be benefited by, such provisions. SECTION 9.8. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. SECTION 9.9. ASSIGNMENT. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the parties without the prior written consent of the other parties, and any such assignment that is not consented to shall be null and void, except that Parent may assign this Agreement (i) to any wholly owned subsidiary of Parent or (ii) together with all of the outstanding capital stock of Sub, to an entity organized under the corporate or limited liability laws of jurisdiction of one of the United States of America, the ownership interests of which entity are substantially identical to the ownership interests of Parent immediately prior to such assignment and which entity specifically and expressly assumes by written agreement the obligations of Parent under this Agreement; in either case so long as such assignment shall not adversely affect the ability of Parent and Sub to secure the Financing described in Section 4.2(d) and without Parent being released from liability hereunder and such transfer or assignment will not relieve Parent or Sub of their obligations under the Offer or prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns. SECTION 9.10. ENFORCEMENT. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically (without requirement to post a bond) the terms and provisions of this Agreement, this being in addition to any other remedy to which they are entitled at law or in equity. SECTION 9.11. SEVERABILITY. Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein. [Remainder of Page Intentionally Left Blank.] 44 48 IN WITNESS WHEREOF, the Company, Parent and Sub have caused this Agreement to be executed as an agreement under seal by their respective officers thereunto duly authorized, all as of the date first written above. THE RIVAL COMPANY By: /s/ THOMAS K. MANNING -------------------------------------- Name: Thomas K. Manning Title: Chairman/Chief Executive Officer HOLMES PRODUCTS CORP. By: /s/ JORDAN A. KAHN --------------------------------------- Name: Jordan A. Kahn Title: President and Chief Executive Officer MORIARTY ACQUISITION CORP. By: /s/ JORDAN A. KAHN --------------------------------------- Name: Jordan A. Kahn Title: President 45 49 ANNEX I The capitalized terms used in this Annex have the meanings set forth in the attached Agreement, except that the term "Merger Agreement" shall be deemed to refer to the attached Agreement. Notwithstanding any other provision of the Offer or the Merger Agreement, Offeror shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1 (c) under the Exchange Act (relating to Offeror's obligation to pay for or return tendered Shares after the termination or withdrawal of the Offer), to pay for any Shares, and may terminate and withdraw the Offer, if (i) the Minimum Condition has not been satisfied, (ii) the applicable waiting period under the HSR Act shall not have expired or been terminated, (iii) the Financing Condition has not been satisfied, or (iv) at any time on or after the date of the Merger Agreement and prior to the acceptance for payment of or payment for Shares, any of the following conditions shall occur and be continuing: (a) there shall be instituted or pending any action, suit, investigation, litigation or proceeding before any domestic court, government or Governmental Entity or arbitrator, other than by Parent or Sub, a stockholder of Parent or Sub or any person affiliated with Parent or Sub that, in the reasonable judgment of Parent, materially adversely affects, or is reasonably likely to materially adversely affect, the Company and its Subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a whole, the Financing, or the consummation of the transactions contemplated by the Merger Agreement, provided that, in any such case, Parent shall have used commercially reasonable efforts to defeat or have vacated any such action or proceeding against Parent or Sub and shall have failed to do so; or (b) there shall be any action taken, or any statute, rule, regulation, injunction, interpretation, judgment, order or decree enacted, enforced, promulgated, issued or deemed applicable to Parent or any of its Subsidiaries or to the Company or any of its Subsidiaries or the Offer or the Merger, by any court, government or Governmental Entity, other than the application of the waiting period provision of the HSR Act to the Offer or the Merger that, in the reasonable judgment of Parent, is likely, directly or indirectly, to result in any of the consequences referred to in paragraph (a) above; or (c) any change, event, occurrence or circumstance shall have occurred that, in the reasonable judgment of Parent, would have a Material Adverse Effect; or (d) there shall have occurred (i) any general suspension of trading in, or limitation on prices for, securities on the New York Stock Exchange, which suspension or limitation shall continue for at least three consecutive trading days (excluding suspensions or limitations resulting solely from physical damage or interference with such exchange 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, (iii) a commencement of a war or armed hostilities or other national or international calamity directly or indirectly involving the United States which would reasonably be expected to 50 have a material adverse impact on the capital markets of the United States, or (iv) in the case of any of the foregoing existing on the date of the Merger Agreement, a material acceleration, escalation or worsening thereof; or (e) the Company shall have breached or failed to perform in any material respect any of its covenants or agreements under the Merger Agreement, or (i) any of the representations and warranties of the Company set forth in the Merger Agreement that are qualified as to materiality shall not be true and correct, or (ii) any of the representations and warranties of the Company set forth in the Merger Agreement that are not so qualified shall not be true and correct in any material respect, individually or in the aggregate, in each case when made and as of the expiration of the Offer; except for changes permitted or contemplated by the Merger Agreement and except for such breaches of representations, warranties, covenants or agreements as would not have, individually or in the aggregate, a Material Adverse Effect or materially adversely affect the Financing or the consummation of the transactions contemplated by the Merger Agreement; or (f) the Merger Agreement shall have been terminated in accordance with its terms; or (g) any Third Party acquires beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of 25% or more of the outstanding Shares, unless such Shares have been validly tendered and not withdrawn; or (h) a tender offer or exchange offer for more than 25% of the Shares shall have been made or publicly proposed by a Third Party; or (i) the Board of Directors of the Company withdraws or modifies in a manner adverse to Sub or Parent its approval or recommendation of the Offer, the Merger Agreement or the Merger or recommends or approves an Acquisition Proposal by a Third Party; or (j) any filing required to be made by the Company or its Subsidiaries with, or any consent, approval, permit or authorization required to be obtained by the Company or its Subsidiaries from, any Governmental Entity which, either individually or in the aggregate, if not made or obtained would have a Material Adverse Effect at the time of or after the consummation of the Offer or would prevent the consummation of the Offer shall not have been made or obtained (as the case may be); which, in the reasonable judgment of Parent, in any such case, and regardless of the circumstances giving rise to any such condition, makes it inadvisable to proceed with the Offer and/or with such acceptance for payment or payments. The foregoing conditions are for the sole benefit of Parent and Sub and may be asserted by Parent or Sub regardless of the circumstances giving rise to such condition or may be waived by Parent or Sub in whole or in part at any time and from time to time in its sole discretion. The failure by Parent or Sub or any Affiliate of Parent or Sub at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and 51 circumstances shall not be deemed a waiver with respect to any other facts and circumstances and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. EX-99.(C)(2) 12 TENDER AND VOTING AGREEMENT 1 TENDER AND VOTING AGREEMENT TENDER AND VOTING AGREEMENT (this "Agreement"), dated as of December 17, 1998, by and among Holmes Products Corp., a Massachusetts corporation ("Parent"), Moriarty Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Parent ("Sub"), and the individuals set forth on Exhibit A hereto (the "Stockholders," or individually, a "Stockholder"), each of whom holds shares of The Rival Company, a Delaware corporation (the "Company"). WHEREAS, concurrently herewith, Parent, Sub and the Company, are entering into an Agreement and Plan of Merger of even date herewith (the "Merger Agreement"; capitalized terms used but not defined herein shall have the meanings set forth in the Merger Agreement), pursuant to which Sub agrees to make a tender offer (the "Offer") for all outstanding shares of Common Stock, par value $.01 per share (the "Shares"), of the Company at $13.75 per share, net to the seller in cash (the "Offer Price"), to be followed by the merger of Sub with the Company (the "Merger"), with the corporation surviving the Merger becoming a wholly-owned subsidiary of Parent; WHEREAS, as of the date hereof, the Stockholders beneficially own the Shares set forth on Exhibit A hereto (the "Owned Shares"); and WHEREAS, as a condition to their willingness to enter into the Merger Agreement, Parent and Sub have required that the Stockholders agree, and the Stockholders have agreed (i) to tender pursuant to the Offer all of the Owned Shares (which term shall include any Shares acquired by them after the date hereof), (ii) to vote the Owned Shares in favor of the adoption of the Merger Agreement and the approval of the Merger, (iii) to appoint Parent as the Stockholders' proxy to vote the Owned Shares in connection with the Merger Agreement and the Merger and (iv) with respect to other matters put to stockholders of the Company for a vote, to vote the Owned Shares, in each case, in accordance with the terms and conditions of this Agreement; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration given to each party hereto, the receipt of which is hereby acknowledged, the parties agree as follows: 1. Agreement to Tender and Vote. 1.1 Tender. Each of the Stockholders hereby agrees to validly tender (or cause the record owner to tender), and not to withdraw, pursuant to and in accordance with the terms of the Offer, not later than three (3) business days prior to the initial expiration of the Offer, the Owned Shares beneficially owned by him on the date hereof and any additional Shares acquired by such Stockholder in any capacity after the date hereof and prior to the termination of this Agreement (whether upon the exercise of options, warrants or rights, the conversion or exchange of 2 convertible or exchangeable securities, or by means of purchase, dividend, distribution, gift, bequest, inheritance or as a successor in interest in any capacity or otherwise) beneficially owned by such Stockholder, which additional Shares shall constitute Owned Shares for all purposes of this Agreement. Parent and Sub agree to accept and pay for the Owned Shares in the Offer, subject to the terms and conditions of the Offer. The parties agree that the Stockholders will, for all Owned Shares tendered by the Stockholders in the Offer and accepted for payment and paid for by Sub, receive the same per share consideration paid to other shareholders who have tendered Shares into the Offer. The transfer by the Stockholders of the Owned Shares to Sub in the Offer shall, upon payment therefor, pass to and unconditionally vest in Sub good and valid title to the Owned Shares, free and clear of all claims, liens, restrictions, security interests, pledges, limitations and encumbrances whatsoever. 1.2 Voting. Each Stockholder hereby agrees that, during the time this Agreement is in effect, at any meeting of the shareholders of the Company, however called, or any other opportunity to vote, he shall (a) vote all of the Owned Shares as are beneficially owned by him on the record date for determining stockholders of record entitled to vote at such meeting in favor of the adoption of the Merger Agreement and approval of the Merger; (b) vote such Owned Shares against any action or agreement that would result in a breach in any material respect of any covenant, representation or warranty or any other obligation or agreement of the Company under the Merger Agreement; and (c) vote such Owned Shares against any action or agreement (other than the Merger Agreement or the transactions contemplated thereby) that would impede, interfere with, delay, postpone or attempt to discourage the Merger, including, but not limited to: (i) any extraordinary corporate transaction, such as a merger, consolidation or other business combination involving the Company; or (ii) a sale or transfer of a material amount of assets of the Company or any of its subsidiaries or a reorganization, recapitalization or liquidation of the Company or any of its subsidiaries. Each Stockholder shall forward to Parent any proxy cards that such Stockholders receive with respect to the Merger Agreement duly executed by such Stockholder. 1.3 Irrevocable Proxy. Each Stockholder (without any further action on such Stockholder's part) shall be deemed to have hereby irrevocably appointed Parent as the attorney and proxy of such Stockholder, with full power of substitution, to vote, and otherwise act (by written consent or otherwise) with respect to all Owned Shares that such Stockholder is entitled to vote at any meeting of stockholders of the Company (whether annual or special and whether or not an adjourned or postponed meeting) or consent in lieu of any such meeting or otherwise, to vote such Shares as set forth in Section 1.2 above. THIS PROXY AND POWER OF ATTORNEY IS IRREVOCABLE AND COUPLED WITH AN INTEREST. Each Stockholder hereby revokes, effective upon the execution and delivery of the Merger Agreement by the parties thereto, all other proxies and powers of attorney with respect to the Owned Shares that he may have heretofore appointed or granted, and no subsequent proxy or power of attorney (except in furtherance of such Stockholder's obligations under Section 1.2 hereof) shall be given or written consent executed (and if given or executed, shall not be effective) by such Stockholder with respect thereto so long as the Stockholder's obligations under this Section remain in effect. 2 3 The proxy granted hereunder shall automatically be revoked and of no further force and effect upon termination of this Agreement. 2. Termination of Agreement. (a) This Agreement and the Stockholders' obligations hereunder shall terminate on the earlier of (i) the consummation of the Merger, (ii) the termination of the Offer pursuant to the terms of the Merger Agreement without any Shares having been purchased pursuant thereto, or (iii) the termination of the Merger Agreement in accordance with its terms, including as such terms may be amended or extended by the parties thereto. (b) The obligations of any Stockholder hereunder may be terminated by such Stockholder if (i) Purchaser or Sub shall have failed to comply with any of its obligations under Article I of the Merger Agreement or (ii) Purchaser or Sub shall have violated any provisions of this Agreement. 3. Representations and Warranties. 3.1 Representations and Warranties of Parent and Sub. Parent and Sub hereby represent and warrant to Stockholder as follows: (a) Organization; Due Authorization. Parent is a corporation duly organized, validly existing and in good standing under the laws of Commonwealth of Massachusetts. Parent has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Parent, and no other corporate proceedings on the part of Parent are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Parent and constitutes a valid and binding agreement of Parent, enforceable against Parent in accordance with its terms, except to the extent (i) such enforcement may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights and (ii) the remedy of specific enforcement and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. (b) Organization; Due Authorization. Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Sub has full corporate power and authority to execute and deliver this Agreement. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Sub, and no other corporate proceedings on the part of Sub are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Sub and constitutes a valid and binding agreement of Sub, enforceable against Sub in accordance with its terms, except to the extent (i) such enforcement may be limited by applicable 3 4 bankruptcy, insolvency or similar laws affecting creditors' rights and (ii) the remedy of specific enforcement and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. 3.2 Representations and Warranties of The Stockholders. Each Stockholder hereby severally represents and warrants to Parent and Sub as follows: (a) Title. Such Stockholder has good and valid title (which may include holding in nominee or "street" name) to the number of Owned Shares set opposite his name on Exhibit A, free and clear of any lien, charge, encumbrance or claim of whatever nature. (b) Ownership of Shares. On the date hereof, the Stockholder beneficially owns the number of Shares set opposite his name on Exhibit A, all of which are held of record by him (except as otherwise set forth on Exhibit A). Such Stockholder has sole voting power and sole power of disposition with respect to the number Owned Shares set opposite his name on Exhibit A, with no restrictions, subject to applicable federal securities laws, on his rights of disposition pertaining thereto; provided that, if any of the Owned Shares are held jointly, such Stockholder agrees to cause each joint owner of such Owned Shares to comply with the provisions of this Agreement. (c) Power; Binding Agreement. Such Stockholder has the legal capacity, power and authority to enter into and perform all of his obligations under this Agreement. The execution, delivery and performance of this Agreement by such Stockholder will not violate any other agreement to which such Stockholder is a party including, without limitation, any voting agreement, stockholders agreement or voting trust. This Agreement has been duly and validly executed and delivered by such Stockholder and constitutes a valid and binding agreement of such Stockholder, enforceable against such Stockholder in accordance with its terms, except to the extent (i) such enforcement may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights and (ii) the remedy of specific enforcement and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. (d) No Conflicts. The execution, delivery and performance of this Agreement by such Stockholder will not constitute a breach, violation or default (or any event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any lien or encumbrance upon any of the properties or assets of the Stockholder under, any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument to which such Stockholder is a party or by which his respective properties or assets are bound. 4. Certain Covenants of the Stockholders. Each Stockholder hereby covenants and agrees while this Agreement is in effect, as follows: 4 5 4.1 Restriction on Transfer, Proxies and Non-Interference. Not to (i) sell, transfer, pledge, encumber, assign or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, pledge, encumbrance, assignment or other disposition of, any of his Owned Shares, (ii) grant any proxies, deposit any shares of capital stock of the Company into a voting trust or enter into a voting agreement with respect to any such Shares or (iii) take any action that would make any representation or warranty of such Stockholder contained herein untrue or incorrect or have the effect of preventing or disabling such Stockholder from performing his obligations under this Agreement; provided, however, that such Stockholder shall be permitted to transfer any of the Owned Shares to any member of the immediate family of such Stockholder or any trust, limited partnership or other entity the beneficial ownership of which is held by the Stockholder or such family members (each, a "Permitted Transferee"), so long as such Permitted Transferee agrees in writing, in form and substance satisfactory to Parent and Sub, to be bound by the terms hereof to the same extent as such Stockholder is bound and provided further, however, that no such transfer shall relieve such Stockholder of his obligations hereunder if such Permitted Transferee does not perform such obligations; 4.2 Additional Shares. To promptly notify Parent and Sub of the number of additional Shares acquired by such Stockholder, if any, after the date hereof, which additional Shares shall be deemed Owned Shares for all purposes of this Agreement; and 4.3 No Solicitation of Transactions. Subject to the provisions of Section 6.8 of the Merger Agreement relating to actions by such Stockholder in his capacity as a director or officer of the Company, not to directly or indirectly, solicit, initiate or participate, or offer to participate with any person or entity in any Acquisition Proposal or offer from any person or entity, or engage in discussions or negotiations relating thereto (including by way of furnishing information). While this Agreement is in effect, such Stockholder shall promptly advise Purchaser of his receipt of any Acquisition Proposal (and provide the details thereof) or if any inquiries are received by, any information or documents are requested from, or any negotiations or discussions are sought to be instituted or continued with, such Stockholder or any of his affiliates. 5. Further Assurances. From time to time, at the other party's request and without further consideration, each party hereto shall execute and deliver such additional documents and take all such further action as may be necessary or desirable to consummate and make effective the transactions contemplated by Section 1 of this Agreement. 6. Miscellaneous. 6.1 Entire Agreement, Assignment. This Agreement (i) constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, among the parties with respect to the 5 6 subject matter hereof and (ii) shall not be assigned by operation of law or otherwise, provided that Parent or Sub may assign its rights and obligations hereunder to any direct or indirect wholly-owned subsidiary of Parent, but no such assignment shall relieve Parent or Sub of its obligations hereunder if such assignee does not perform such obligations. The obligations of the Stockholders under this Agreement are several, and not joint. 6.2 Notice. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly received if so given) by hand delivery, telegram, telex or telecopy, by mail (registered or certified mail, postage prepaid, return receipt requested) or by any courier service, such as Federal Express, providing proof of delivery. All communications hereunder shall be delivered to the respective parties at the following addresses: To the Stockholders: c/o The Rival Company 800 East 101st Terrace Attn: Board of Directors Kansas City, Missouri 64131 copy to: Morrison & Hecker LLP 2420 Pershing Road Fourth Floor Kansas City, Missouri 64108-2537 Attention: Kent E. Whittaker, Esq. To Parent or Sub: Holmes Products Corp. 233 Fortune Boulevard Milford, Massachusetts 01757 Attention: Ira Morgenstern copies to: Berkshire Partners One Boston Place Boston, Massachusetts 02108-4401 Attention: Richard K. Lubin 6 7 and Posternak, Blankstein & Lund, L.L.P. 100 Charles River Plaza Boston, Massachusetts 02114 Attention: Donald H. Siegel, P.C. or to such other address as the person to whom notice is given may have previously furnished to the others in writing in the manner set forth above. 6.3 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. 6.4 Specific Performance. Each of the parties hereto recognizes and acknowledges that a breach by it of any covenants or agreements contained in this Agreement will cause the other party to sustain damages for which it would not have an adequate remedy at law for money damages, and therefore each of the parties hereby agrees that in the event of any such breach the aggrieved party shall be entitled to the remedy of specific performance of such covenants and agreements and injunctive and other equitable relief in addition to any other remedy to which it may be entitled, at law or in equity. 6.5 Counterparts. This Agreement may be executed in one or more counterparts, whether original signatures or facsimile copies, which together shall form one complete Agreement. 6.6 Descriptive Headings. The descriptive headings used herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. 6.7 Severability. Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein. IN WITNESS WHEREOF, the parties hereto have executed this Agreement under seal on the date and year first above written. 7 8 PARENT: HOLMES PRODUCTS CORP. By: /s/ Stan Rosenzweig --------------------------------- Its: Chief Operating Officer ------------------------------- SUB: MORIARTY ACQUISITION CORP. By: /s/ Stan Rosenzweig --------------------------------- Its: Vice President ------------------------------- 8 9 STOCKHOLDERS: /s/ Thomas K. Manning ------------------------------------- Name: Thomas K. Manning /s/ William L. Yager ------------------------------------- Name: William L. Yager /s/W. Mark Meieroffer ------------------------------------- Name: W. Mark Meierhoffer /s/ Darrel M. Sanders ------------------------------------- Name: Darrel M. Sanders /s/ Stanley D. Biggs ------------------------------------- Name: Stanley D. Biggs /s/ Jack J. Culberg ------------------------------------- Name: Jack J. Culberg /s/ Todd Goodwin ------------------------------------- Name: Todd Goodwin /s/ John E. Grimm, III ------------------------------------- Name: John E. Grimm, III /s/ Lanny R. Julian ------------------------------------- Name: Lanny R. Julian /s/ Noel Thomas Patton ------------------------------------- Name: Noel Thomas Patton /s/ Beatrice B. Smith ------------------------------------- Name: Beatrice B. Smith 9 10 EXHIBIT A
Name, Title and Address No. of Owned Shares ----------------------- ------------------- Thomas K. Manning 69,563 Chairman, Chief Executive Officer, Director William. L. Yager 6,000 President, Chief Operating Officer, Director W. Mark Meierhoffer 2,000 Senior Vice President - Finance & Administration, CFO Darrel M. Sanders 26,054 Senior Vice President - Operations, Director Stanley D. Biggs 2,314 Vice President, Treasurer, Corporate Secretary Jack J. Culberg 34,900 Director Todd Goodwin 54,238 Director John E. Grimm, III 2,300 Director Lanny R. Julian 1,200 Director Noel Thomas Patton 850,000 Director Beatrice B. Smith 1,200 Director
10 EX-99.(C)(3) 13 CONFIDENTIALITY AGREEMENT 1 BA PARTNERS - - DIVISION OF BANCAMERICA SECURITIES, INC. - - BANKAMERICA COMPANY OCTOBER 1, 1998 STRICTLY CONFIDENTIAL Mr. Jerry Kahn President and Chief Executive Officer Holmes Products Corp. 233 Fortune Boulevard Milford, MA 0175 7 Dear Mr. Kahn: You have requested information from The Rival Company and its affiliates (collectively the "Company") in connection with your consideration of a possible transaction between the Company or its shareholders and you. As a condition to your being furnished such information, you agree to treat any information (whether prepared by the Company, its advisors or otherwise, and whether oral or written) that is furnished to you or your representatives (which term shall include your directors, officers, partners, employees, agents, advisors, accountants, attorneys and potential financing sources) by or on behalf of the Company (herein collectively referred to as the "Evaluation Material') in accordance with the provisions of this letter and to take or abstain from taking certain other actions herein set forth. The term "Evaluation Material" does not include information that (i) is already lawfully in your possession, provided that such information is not known by you to be subject to another confidentiality agreement with or other obligation of secrecy to the Company or another party, or (ii) is or becomes generally available to the public other then as a result of a disclosure by you, your representatives or anyone acting on your or their behalf, or (iii) is or becomes available to you on a non-confidential basis from a source other than the Company or its advisors, provided that such source is not known by you to be bound by a Confidentiality agreement with or other obligation of secrecy to the Company or another party, or (iv) is independently developed by you or your representatives without violating any provision hereof. You hereby agree that the Evaluation Material will be used solely for the purpose of evaluating a possible transaction between the Company or its shareholders and you (the "Transaction"), and will be kept confidential by you and your representatives. You further agree the Evaluation Material will not be provided, disclosed or otherwise made 2 Holmes Products Corp. October 1, 1998 Page 2 directly or indirectly available to any person or entity other than those individuals who need to know such information for the purpose of evaluating or financing any such possible Transaction and who agree to keep such information confidential and to be bound by this agreement to the same extent as if they were parties hereto and subject to all of your obligations hereunder. You will be responsible for any breach of this agreement by your representatives. You hereby acknowledge that you are aware, and that you will advise your representatives who are informed as to the matters which are the subject of this letter, that the United States securities laws may prohibit any person who has received material, non-public information concerning the matters which are the subject of this letter from purchasing or selling securities of such issue 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. Notwithstanding any provision of this letter agreement to the contrary, in the event you or your representatives are requested or required in a judicial administrative or governmental proceeding, or required by statute or pursuant to any rule or regulation promulgated by the Securities and Exchange Commission (the "Rules and Regulations") to disclose any Evaluation Material or the existence, content or status of negotiations relating to the Transaction, you agree to provide the Company with prompt notice of such circumstance and all related proceedings and information so that the Company may seek an appropriate protective order, take other action deemed advisable by the Company or waive your compliance with the confidentiality provisions of this letter agreement. If, as a result of any such request or requirement you or your representatives are, in the written opinion of your outside counsel ("Counsel"), compelled to disclose Evaluation Material or the existence, content or status of negotiations relating to the Transaction you may disclose that portion of the Evaluation Material which your Counsel advises in writing that you or your representatives are legally compelled to disclose without liability hereunder, provided that you comply with the notice provisions of this paragraph and apply for confidential treatment of such portions of the Evaluation Material as may be permitted under the Rules and Regulations. You agree that you will not, and will cause your representatives not to, disclose to any person either the fact that discussions or negotiations are taking place concerning a possible transaction between the Company or its shareholders and you or any of the terms, conditions or other facts with respect to any such possible transaction, including the status thereof, except that disclosure of such information may be made to the extent required by applicable law and the Rules and Regulations; provided that prior to any such disclosure, you shall first give the Company a reasonable opportunity to review the proposed disclosure and to comment thereon. 3 Holmes Products Corp. October 1, 1998 Page 3 Until the earlier of (i) the consummation of a transaction between the Company and you, or (ii) one year from the date of this letter, you agree not to initiate or maintain contact (except for contact in the ordinary course of business) with any officer, director or employee of the Company for the purposes of obtaining information regarding the Company's operations, assets, prospects or finances, except with the express written permission of the Company. Each party also hereby agrees that, for the period ending one year from the date of this letter, such party will not, without the other party's written consent, directly or indirectly, solicit the employment of any person who is a senior executive officer of the other party, and with whom such soliciting party had contacts in conjunction with the Transaction, other than pursuant to a general solicitation not specifically directed at such officers. You hereby acknowledge that the Evaluation Material is being furnished to you in consideration of your agreement that for a period of twelve months from the date hereof you and your affiliates (as defined in Rule 12b-2 under the Exchange Act) will not (and you and they will not assist, provide or arrange financing to or for others or encourage others to), directly or indirectly, acting alone or in concert with others, unless specifically requested in writing or otherwise consented to in advance by the Board of Directors of the Company: (i) acquire or agree, offer, seek or propose to acquire (or request permission to do so), ownership (including, but not limited to, beneficial ownership as defined in Rule l3d-3 under the Exchange Act) of any of the assets or busin6sses of the Company or any securities issued by the Company, or any rights or options to acquire such ownership (including from a third party), or make any public announcement (or request permission to make any such announcement) with respect to any of the foregoing, or (ii) seek or propose to influence or control the management or the policies of the Company or to obtain representation on the Company's Board of Directors, or solicit. or participate in the solicitation of, any proxies or consents with respect to any securities of the Company, or make any public announcement with respect to any of the foregoing or request permission to do any of the foregoing, or (iii) enter into any discussions, negotiations, arrangements or understandings with any third party with respect to any of the foregoing. Notwithstanding the foregoing however, (i) you shall be permitted at all times to make (A) any proposals to the Company regarding transactions in the ordinary course of business between the parties and (B) any confidential proposals to the Company concerning the Transaction, or any other transaction, including but limited to, any 4 Holmes Products Corp. October 1, 1998 Page 4 acquisition of any of the assets or business of the Company or any of its securities or rights or options to acquire such ownership, and (ii) in the event that the Company enters into or announces a definitive agreement relating to a business combination transaction with an unaffiliated third party, you shall be permitted to make or propose an unsolicited competing proposal. Although the Company has endeavored to include in the Evaluation Material information which it believes to be relevant for the purpose of your investigation, you understand that neither the Company nor any of its representatives or advisors have made or makes herein any representation or warranty as to the accuracy or completeness of the Evaluation Material, You agree that neither the Company nor its representatives or advisors shall have any liability hereunder to you or any of your representatives resulting from the use or contents of the Evaluation Material or from any action taken or any inaction occurring in reliance on the Evaluation Material. At the request of the Company in the event that you do not proceed with a Transaction which is the subject of this letter, you and your representatives shall promptly redeliver to the Company all written Evaluation Material and will not retain any copies, extracts or other reproductions in whole or in part of such written material. At the request of the Company in the event that you do not proceed with a transaction which is the subject of this letter, all documents, memoranda, notes and other writings whatsoever prepared by you or your representatives based on the Evaluation Material shall be destroyed, and such destruction shall be certified in writing to the Company by an authorized officer supervising such destruction. The term "writing" shall include data in computer format. It is further 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 right., power or privilege hereunder. You agree that unless and until a definitive agreement between the Company and you with respect to any Transaction 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 or any written or oral expression with respect to such a Transaction by any of its directors, officers, employees, agents or my other representatives or its advisors except for the matters specifically agreed to in this letter. You further agree that the Company shall have no obligation to authorize or pursue with you or any other party any Transaction and you understand that the Company has not, as of the date hereof, authorized any such Transaction. The agreements set forth in this letter may be modified or waived only by a separate writing by the Company and you expressly so modifying or waiving such agreements. 5 Holmes Products Corp. October 1, 1998 Page 5 The parties hereto agree and acknowledge that they are engaged in similar lines of business, and neither this agreement, the furnishing of the Evaluation Material, nor any investigation by you shall be deemed to restrict you in any way, except as herein specifically set forth, from developing, manufacturing, marketing or selling products that are similar to or competitive with those of the Company, or communicating with, contracting with or otherwise dealing with the Company's suppliers, customers or distributors in the ordinary course of your business as it may be conducted from time to time. The parties hereto acknowledge that money damages are an inadequate remedy for breach of this letter agreement because of the difficulty of ascertaining the, amount of damage that will be suffered by a party in the event that this agreement is breached. Therefore, you, on behalf of yourself and your representatives, and we, on behalf of the Company, acknowledge and agree that in the event of any breach of this Agreement by you or your representatives on the one hand, or the Company on the other, and without prejudice to any rights and remedies otherwise available to such non-breaching party, such non-breaching party shall be entitled (i) to equitable relief by way of injunction and (ii) to compel specific performance without the need of proof of actual damages. We each further agree to waive, and to cause our representatives to waive, any requirement for the securing or posting of any bond in connection with such remedies. If any term, provision, covenant or restriction of this letter agreement is hold by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. This letter shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to principles of conflicts of laws, Sincerely, BancAmerica Securities, Inc. on behalf of THE RIVAL COMPANY By: /s/ Michael E. Levy ------------------------------- Title: Vice President ----------------------------- Agreed and accepted this 1st day of October, 1998. Holmes Products Corp. By: /s/ Jordan A. Kahn ------------------------------ Title: President -------------------------- -----END PRIVACY-ENHANCED MESSAGE-----