-----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, Ux7NZxGNu7ak0F2g1eIIhCUyM9CqDDen8c+gqvam/u4QlP+9r6y+bbgA9oz/5QRK xGsFeN3LQubK/eTBOc1yJg== 0000950144-00-004713.txt : 20000410 0000950144-00-004713.hdr.sgml : 20000410 ACCESSION NUMBER: 0000950144-00-004713 CONFORMED SUBMISSION TYPE: SC TO-T PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 20000407 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: JOHNSTON INDUSTRIES INC CENTRAL INDEX KEY: 0000041017 STANDARD INDUSTRIAL CLASSIFICATION: BROADWOVEN FABRIC MILS, MAN MADE FIBER & SILK [2221] IRS NUMBER: 111749980 STATE OF INCORPORATION: DE FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: SC TO-T SEC ACT: SEC FILE NUMBER: 005-10249 FILM NUMBER: 595810 BUSINESS ADDRESS: STREET 1: 105 THIRTEENTH ST CITY: COLUMBUS STATE: GA ZIP: 31901 BUSINESS PHONE: 7066413140 MAIL ADDRESS: STREET 2: 105 THIRTEENTH ST CITY: COLUMBUS STATE: GA ZIP: 31901 FORMER COMPANY: FORMER CONFORMED NAME: GI EXPORT CORP DATE OF NAME CHANGE: 19850403 FORMER COMPANY: FORMER CONFORMED NAME: GEON INDUSTRIES INC DATE OF NAME CHANGE: 19770921 FORMER COMPANY: FORMER CONFORMED NAME: GEON TRADING CORP DATE OF NAME CHANGE: 19700915 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: JI ACQUISITION CORP CENTRAL INDEX KEY: 0001110708 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-T BUSINESS ADDRESS: STREET 1: TWELVE PIEDMONT CENTER STREET 2: SUITE 210 CITY: ATLANTA STATE: GA ZIP: 30305 BUSINESS PHONE: 4048163255 SC TO-T 1 JOHNSTON INDUSTRIES, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE TO (RULE 14D-1) TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 Johnston Industries, Inc. (Name of Subject Company (Issuer)) JI Acquisition Corp. (Names of Filing Persons (Offeror)) Common Stock, $.10 par value (Title of Class of Securities) 479368102 (CUSIP Number of Class of Securities) Roy R. Bowman JI Acquisition Corp. c/o CGW Southeast Partners IV, L.P. Twelve Piedmont Center Suite 210 Atlanta, Georgia 30305 (404) 816-3255 (Name, Address, and Telephone Numbers of Person Authorized to Receive Notices and Communications on Behalf of Filing Persons) ------------------- Copy to: Sidney J. Nurkin, Esq. Mark F. McElreath, Esq. Alston & Bird LLP One Atlantic Center 1201 W. Peachtree St. Atlanta, Georgia 30309-3424 (404) 881-7000 ------------------- CALCULATION OF FILING FEE Transaction valuation* Amount of filing fee - ---------------------- -------------------- $32,138,616 $6,427.72 - ---------------------- -------------------- *For purposes of calculating amount of filing fee only. This amount assumes the purchase of 10,712,872 shares of common stock of Johnston Industries, Inc. at the offer price of $3.00 per share. The amount of the filing fee, calculated in accordance with Rule 0-11 of the Securities Exchange Act of 1934, as amended, equals 1/50 of 1% of the transaction value. [ ] Check the 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: N/A Filing Party: N/A ---------------- ---------------- Form or Registration No.: N/A Date Filed: N/A -------------- ------------------ [ ] Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. 2 Check the appropriate boxes below to designate any transactions to which the statement relates: [X] third-party tender offer subject to Rule 14d-1. [ ] issuer tender offer subject to Rule 13e-4. [ ] going-private transaction subject to Rule 13e-3. [ ] amendment to Schedule 13D under Rule 13d-2. Check the following box if the filing is a final amendment reporting the results of the tender offer: [ ] 3 This Tender Offer Statement on Schedule TO is filed by JI Acquisition Corp., a Delaware corporation (the "Purchaser") a wholly owned subsidiary of CGW Southeast Partners IV, L.P. ("CGW"). This Schedule TO relates to the offer by the Purchaser to purchase all outstanding shares of common stock, par value $.10 per share (the "Shares"), of Johnston Industries, Inc., a Delaware corporation ("Johnston"), at $3.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated April 7, 2000 (the "Offer to Purchase"), and in the related Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively (which together with any amendments or supplements thereto, collectively constitute the "Offer"). The information set forth in the Offer to Purchase and the related Letter of Transmittal is incorporated herein by reference with respect to Items 1 through 11 of this Schedule TO. ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON. None of CGW, the Purchaser or, to the best knowledge of such corporations, any of the persons listed on Schedule I to the Offer of Purchase, has during the last five years (i) been convicted in a criminal proceeding (excluding traffic violations or similar misdeameanors) or (ii) been a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. 4 ITEM 12. EXHIBITS.
EXHIBIT - ------- (a)(1) Offer to Purchase dated April 7, 2000. (a)(2) Form of Letter of Transmittal. (a)(3) Form of Notice of Guaranteed Delivery. (a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(5) Form of Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(6) Text of Press Release issued by CGW and JI Acquisition on April 7, 2000. (a)(7) Guidelines for Certification of Taxpayer Identification Number on Substitution Form W-9. (a)(8) Form of Summary Advertisement dated April 7, 2000. (a)(9) Text of press release issued by CGW and JI Acquisition on March 30, 2000; filed with the Securities and Exchange Commission under cover of Schedule TO on March 30, 2000, and incorporated herein by reference. (a)(10) Text of press release issued by Johnston Industries, Inc. on April 7, 2000. (b) None. (d) Purchase Agreement, dated as of March 30, 2000, among CGW Southeast Partners IV, L.P., JI Acquisition Corp. and Johnston Industries, Inc. (g) None. (h) None.
6 5 ITEM 13. INFORMATION REQUIRED BY SCHEDULE 13E-3. Not Applicable. SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. JI Acquisition Corp. By: /s/ James A. O'Donnell ------------------------------ Name: James A. O'Donnell ------------------------------ Title: Secretary and Treasurer ------------------------------ Dated: April 7, 2000 7 EX-99.(A)(1) 2 OFFER TO PURCHASE 1 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF JOHNSTON INDUSTRIES, INC. BY JI ACQUISITION CORP. A SUBSIDIARY OF CGW SOUTHEAST PARTNERS IV, L.P. AT $3.00 NET PER SHARE THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, MAY 5, 2000, UNLESS THE OFFER IS EXTENDED. We are making this offer pursuant to a Purchase Agreement dated as of March 30, 2000, among CGW Southeast Partners IV, L.P., JI Acquisition Corp. and Johnston Industries, Inc. The board of directors of Johnston Industries has approved the Purchase Agreement and the offer and determined that the terms of the offer are fair to you, the stockholders of Johnston. However, the board of Johnston has decided to remain neutral in recommending whether you should accept the offer and tender your shares. Our offer is conditioned upon there being validly tendered and not withdrawn prior to the expiration of the offer, 9.7% of the shares of common stock currently outstanding on a fully diluted basis. When combined with the 9,000,000 shares of Johnston common and preferred stock we will purchase directly from Johnston at the closing of the offer, we will become the majority owner of the then issued and outstanding shares of Johnston's voting capital stock. In addition, there are the other conditions to our offer which are described in Section 14. If you desire to tender all or any portion of your shares of common stock, you should do one of the following: - complete and sign the Letter of Transmittal (or facsimile thereof) in accordance with the instructions in the Letter of Transmittal, mail or deliver it and any other required documents to The Bank of New York, the depositary, and either deliver the certificates for such shares to the depositary or tender such shares pursuant to the procedures for book-entry transfer as described in Section 3; or - request your broker, dealer, commercial bank, trust company or other nominee to effect the transaction for you. Any stockholder whose shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact the broker, dealer, commercial bank, trust company or other nominee to tender such shares. If you desire to tender your shares and your certificates representing such shares are not immediately available, or if you cannot comply with the procedures for book-entry transfer on a timely basis, you may tender such shares by following the procedures for guaranteed delivery described in Section 3. Questions and requests for assistance may be directed to MacKenzie Partners, Inc., the information agent, at the location and telephone numbers on the back cover of this Offer to Purchase. Requests for additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the information agent or to brokers, dealers, commercial banks or trust companies. You may also contact brokers, dealers, commercial banks or trust companies for assistance concerning the offer. April 7, 2000 2 SUMMARY TERM SHEET JI Acquisition Corp. is offering to purchase all of the outstanding common stock of Johnston Industries, Inc. for $3.00 per share in cash. The following are some of the questions you, as a stockholder of Johnston, may have and answers to those questions. We urge you to read carefully the remainder of this Offer to Purchase and the Letter of Transmittal because the information in this summary term sheet is not complete. Additional important information is contained in the remainder of this Offer to Purchase and the Letter of Transmittal. WHO IS OFFERING TO BUY MY SECURITIES? Our name is JI Acquisition Corp. We are a Delaware corporation formed for the purpose of making a tender offer for all of the common stock of Johnston and have carried on no activities other than in connection with the Purchase Agreement among CGW Southeast Partners IV, L.P., JI Acquisition Corp. and Johnston. We are a subsidiary of CGW, a Delaware limited partnership. See Section 1 of this Offer to Purchase. WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THE OFFER? We are seeking to purchase all of the outstanding common stock of Johnston. See Section 1. HOW MUCH ARE YOU OFFERING TO PAY? WHAT IS THE FORM OF PAYMENT? WILL I HAVE TO PAY ANY FEES OR COMMISSIONS? We are offering to pay $3.00 per share, net to you, in cash. If you are the record owner of your shares and you tender your shares to us in the offer, you will not have to pay brokerage fees or similar expenses. If you own your shares through a broker or other nominee, and your broker tenders your shares on your behalf, your broker or nominee may charge you a fee for doing so. You should consult your broker or nominee to determine whether any charges will apply. See Sections 2 and 3. IS YOUR FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER IN THE OFFER? We do not think our financial condition is relevant to your decision whether to tender in the offer because the form of payment consists solely of cash. CGW, our parent company, will provide us with the funds to purchase all shares validly tendered and not withdrawn in the offer. We anticipate that a significant portion of these funds will be obtained from existing resources and through a capital call to the investors of CGW. The remainder of the funds needed to purchase your shares will come from an investment in us by BancBoston Capital, Inc. This investment is currently under negotiation and if it is not completed prior to the expiration of the Offer, the terms of Purchase Agreement will allow us to terminate the Offer. See Sections 10 and 14. HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER? You will have at least until 12:00 Midnight, New York City time, on Friday, May 5, 2000, to tender your shares in the offer. Further, if you cannot deliver everything that is required in order to make a valid tender by that time, you may be able to use a guaranteed delivery procedure, which is described later in this Offer to Purchase. See Sections 1 and 3. CAN THE OFFER BE EXTENDED AND UNDER WHAT CIRCUMSTANCES? We have agreed in the Purchase Agreement that, without the consent of Johnston, we may extend the offer: - - Beyond the scheduled expiration date if at that date any of the conditions to our obligation to accept for payment and to pay for the shares are not satisfied or waived. 3 - - For a period of not more than ten business days beyond the initial expiration date, if at that time less than 90% of the outstanding shares of common stock have been tendered. - - For any period required by any rule, regulation, interpretation or position of the Securities and Exchange Commission applicable to the offer. - - For any reason for a period of not more than ten business days beyond the latest expiration date that would otherwise apply according to extensions under the first three bullet points above. If all conditions to the offer have been satisfied or waived, we will accept for payment and pay for all shares validly tendered and not withdrawn at such time (which shares may not thereafter be withdrawn). See Section 1 of this Offer to Purchase for more details on our ability to extend the offer. HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED? If we extend the offer, we will inform The Bank of New York (the depositary for the offer) of that fact and will make a public announcement of the extension not later than 9:00 a.m., New York City time, on the next business day after the day on which the offer was scheduled to expire. See Section 1. WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER? We are not obligated to purchase any shares that are validly tendered: - - Unless the number of shares validly tendered and not withdrawn before the expiration date of the offer, when added to the shares of Johnston common and preferred stock that we will purchase directly from Johnston, represents at least a majority of the then outstanding shares of voting capital stock of Johnston, on a fully diluted basis. We call this condition the "minimum condition." - - If, among other things, there is a material adverse change in Johnston or its business. - - If the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 has not expired or been terminated. - - If we have not finalized the investment in us by BancBoston and the refinancing of Johnston's existing bank debt. The offer is also subject to a number of other conditions. We can waive any of the conditions to the offer without Johnston's consent. See Section 14. HOW DO I TENDER MY SHARES? To tender shares, you must deliver the certificates representing your shares, together with a completed Letter of Transmittal and any other documents required by the Letter of Transmittal, to The Bank of New York, the depositary for the offer, not later than the time the tender offer expires. If your shares are held in street name, the shares can be tendered by your nominee through The Depository Trust Company. If you are unable to deliver any required document or instrument to the depositary by the expiration of the tender offer, you may gain some extra time by having a broker, a bank or other fiduciary that is an eligible institution guarantee that the missing items will be received by the depositary within three New York Stock Exchange trading days. For the tender to be valid, however, the depositary must receive the missing items within that three trading day period. See Section 3. UNTIL WHAT TIME MAY I WITHDRAW PREVIOUSLY TENDERED SHARES? You may withdraw shares at any time until the offer has expired and, if we have not accepted your shares for payment by Tuesday, June 6, 2000, you may withdraw them at any time after that date until we accept shares for payment. See Section 4. -2- 4 HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES? To withdraw shares, you must deliver a written, telegraphic or facsimile transmission notice of withdrawal, with the required information to the depositary while you still have the right to withdraw the shares. See Section 4. WHAT DOES THE JOHNSTON BOARD OF DIRECTORS RECOMMEND REGARDING THE OFFER? We are making the offer pursuant to the Purchase Agreement, which has been approved by the Johnston board of directors. The board of directors of Johnston (1) determined that the terms of the offer are fair to the stockholders of Johnston, (2) approved the Purchase Agreement and the transactions contemplated thereby, including the offer and (3) has decided to remain neutral in recommending whether Johnston's stockholders should accept the offer and tender their shares pursuant to the offer. WILL THE TENDER OFFER BE FOLLOWED BY A MERGER IF ALL OF THE JOHNSTON SHARES ARE NOT TENDERED IN THE OFFER? - If we accept for payment and pay for at least 90% of the outstanding shares of Johnston voting capital stock on a fully diluted basis, a subsidiary of JI will be merged with and into Johnston. If that merger takes place, we will own all of the shares of Johnston common stock and all remaining stockholders of Johnston (other than JI and any stockholder properly exercising appraisal rights) will receive $3.00 per share in cash. See Section 11. - If we accept for payment and pay for less than 90% of the shares of Johnston voting capital stock on a fully diluted basis, a subsidiary of JI will be merged with and into Johnston. In contrast to the merger described in the first bullet, in this instance those stockholders who did not tender their shares will remain stockholders of Johnston. IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES? If the merger described in the first bullet above takes place, stockholders not tendering in the offer will receive the same amount of cash per share that they would have received had they tendered their shares in the offer, subject to any appraisal rights properly exercised under Delaware law. Therefore, if the merger described in the first bullet takes place, the only difference to you between tendering your shares and not tendering your shares is that you will be paid earlier if you tender your shares. If the type of merger described in the first bullet does not take place, however, the number of stockholders and the number of shares of Johnston that are still in the hands of the public may be so small that there no longer will be an active public trading market (or, possibly, there may not be any public trading market) for Johnston's common stock. Also, in that instance Johnston may cease making filings with the SEC or otherwise may not be required to comply with the SEC rules relating to publicly held companies. We have agreed with Johnston that if we do not accept for payment and pay for at least 90% of the shares such that we can accomplish the merger mentioned in the first bullet above, we will use our best efforts to maintain a public trading market for the Johnston common stock for a period of three years. WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE? On March 30, 2000, the last trading day before we announced the acquisition, the last sale price of Johnston common stock reported on the New York Stock Exchange was $2.3125 per share. On April 6, 2000, the last trading day before we commenced the tender offer, the closing price of Johnston common stock reported on the New York Stock Exchange was $2.75. We encourage you to obtain a recent quotation for shares of Johnston common stock in deciding whether to tender your shares. For more information on the market value of the Johnston common stock, see Section 6. -3- 5 WHAT ARE CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF TENDERING SHARES? The receipt of cash for shares pursuant to the tender offer will be a taxable transaction for United States federal income tax purposes and possibly for state, local and foreign income tax purposes as well. In general, a stockholder who sells shares pursuant to the tender offer will recognize gain or loss for United States federal income tax purposes equal to the difference, if any, between the amount of cash received and the stockholder's adjusted tax basis in the shares sold pursuant to the tender offer. If the shares exchanged constitute capital assets in the hands of the stockholder, such gain or loss will be capital gain or loss. In general, capital gains recognized by an individual will be subject to a maximum United States federal income tax rate of 20% if the shares were held for more than one year, and if held for one year or less they will be subject to tax at ordinary income tax rates. See Section 5. TO WHOM MAY I SPEAK IF I HAVE QUESTIONS ABOUT THE TENDER OFFER? You may call MacKenzie Partners, Inc., at (800) 322-2885 (toll free). MacKenzie Partners is acting as the information agent for our tender offer. See the back cover of this Offer to Purchase. -4- 6 To the Holders of Common Stock of Johnston Industries, Inc.: THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. THE OFFER 1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the offer, JI Acquisition Corp. will accept for payment and pay for all shares of Johnston common stock validly tendered prior to the expiration date and not withdrawn as described in Section 4 of this Offer to Purchase. The expiration date shall mean 12:00 Midnight, New York City time, on Friday, May 5, 2000, unless and until JI, in accordance with the terms of the Purchase Agreement, shall have extended the period of time for which the offer is open, in which event expiration date shall mean the latest time and date at which the offer, as so extended by JI, shall expire. The offer is conditioned upon, among other things, the satisfaction of the 9.7% minimum tender condition and the expiration or termination of all waiting periods imposed by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the regulations thereunder. For more information on conditions to the offer, see Section 14. If such conditions are not satisfied prior to the expiration date, JI reserves the right, but shall not be obligated to do any of the following: - decline to purchase any of the shares tendered and terminate the offer, subject to the terms of the Purchase Agreement; - waive any of the conditions to the offer, to the extent permitted by applicable law and the provisions of the Purchase Agreement, and, subject to complying with applicable rules and regulations of the Securities and Exchange Commission, purchase all shares validly tendered; or - subject to the terms of the Purchase 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. Subject to the terms of the Purchase Agreement as described below, JI expressly reserves the right, in its sole discretion, at any time or from time to time, to extend the period of time during which the offer is open and thereby delay acceptance for payment of, and the payment for, any shares, by giving oral or written notice of such extension to The Bank of New York, as the depositary. In addition, JI may amend the offer in any respect, including, without limitation, by increasing the consideration offered in the offer to holders of shares and/or by decreasing the number of shares being sought in the offer, by giving oral or written notice of such amendment to the depositary. The rights reserved by JI in this paragraph are in addition to JI's rights to terminate the offer as described in Section 14. Any extension, amendment or termination will be followed as promptly as practicable by public announcement thereof, the announcement in the case of an extension to be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date in accordance with the public announcement requirements of Rule 14d-4(d) under the Securities Exchange Act of 1934, as amended. Without limiting the obligation of JI under such rule or the manner in which JI may choose to make any public announcement, JI currently intends to make announcements by issuing a release through MacKenzie Partners, Inc., the information agent for this tender offer. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE TO BE PAID BY JI FOR THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. -5- 7 The Purchase Agreement provides that JI will not amend the 9.7% minimum tender condition, decrease the offer price, impose any further conditions to the offer or amend any other condition of the offer, without the consent of Johnston. Notwithstanding the foregoing, the Purchase Agreement provides that JI may extend the offer under the following circumstances: - if at the scheduled expiration date any of the conditions to the offer have not been satisfied, including but not limited to any legal or regulatory requirements under the Hart-Scott-Rodino Act; - if less than 90% of the outstanding shares of Johnston have been validly tendered, for a maximum of ten business days beyond the initial expiration date; - for any period required by any rule, regulation, interpretation or position of the SEC or the staff of the SEC, applicable to the offer; or - for any reason for a period of not more than ten business days beyond the latest expiration date otherwise permitted by the above. The Purchase Agreement further provides, however, that in no event may the offer be extended beyond the date of termination of the Purchase Agreement, and either party has the right to terminate the Purchase Agreement if the offer is not completed by June 30, 2000. JI will not make a subsequent offering period available after the offer expires. If JI extends the offer, or if JI is delayed in its purchase of or payment for shares, whether before or after its acceptance for payment of shares, or is unable to pay for shares pursuant to the offer for any reason, then, without prejudice to JI's rights under the offer, The Bank of New York may retain tendered shares on behalf of JI, 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 JI to delay the payment for shares which JI has accepted for payment is limited by Rule 14e-l(c) under the Exchange Act which requires that a bidder pay the consideration offered or return the securities deposited by or on behalf of holders of securities promptly after the termination or withdrawal of the offer. If JI makes a material change in the terms of the offer or the information concerning the offer or waives a material condition of the offer, JI will disseminate additional tender offer materials and extend the offer to the extent required by Rules 14d-4(d), 14d-6(c) and 14e-1 under the Exchange Act. The minimum period during which the offer must remain open following material changes in the terms of the offer or information concerning the offer, other than a change in price or a change in percentage of securities sought, will depend upon the facts and circumstances then existing, including the relative materiality of the changed terms or information. In a public release, the SEC has stated that in its view an offer must remain open for a minimum period of time following a material change in the terms of the offer and that waiver of a material condition, such as the minimum condition, is a material change in the terms of the offer. The release states than an offer should remain open for a minimum of five business days from the date a material change is first published, sent or given to security holders and that, if material changes are made with respect to information not materially less significant than the offer price and the number of shares being sought, a minimum of ten business days may be required to allow adequate dissemination and investor response. The requirement to extend the offer will not apply to the extent that the number of business days remaining between the occurrence of the change and the then- scheduled expiration date equals or exceeds the minimum extension period that would be required because of such amendment. Johnston has provided JI with a stockholder list and security position listings for the purpose of disseminating the offer to holders of shares. This Offer to Purchase and the related Letter of Transmittal will be mailed by JI to record holders of shares and will be furnished by JI to brokers, dealers, banks and similar persons whose names, or the names of whose nominees, appear on the stockholder lists or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of shares. -6- 8 2. ACCEPTANCE FOR PAYMENT AND PAYMENT. Upon the terms and subject to the conditions of the offer, JI will accept for payment and will pay, promptly after the expiration date, for all shares validly tendered prior to the expiration date and not properly withdrawn in accordance with Section 4. All determinations concerning the satisfaction of such terms and conditions will be within JI's discretion, which determinations will be final and binding. For more information on the terms and conditions of the offer, see Sections 1 and 14. JI 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 Hart-Scott-Rodino Act. Any such delays will be effected in compliance with Rule 14e-l(c) under the Exchange Act (relating to a bidder's obligation to pay the consideration offered or return the securities deposited by or on behalf of holders of securities promptly after the termination or withdrawal of such bidder's offer). In all cases, payment for shares accepted for payment pursuant to the offer will be made only after timely receipt by The Bank of New York, the depositary, of all of the following: - certificates for such shares or a timely book-entry confirmation, as described below, with respect thereto; - a Letter of Transmittal or facsimile thereof, properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer, an agent's message, as described below; and - 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. For purposes of the offer, JI will be deemed to have accepted for payment, and thereby purchased, shares properly tendered to JI and not withdrawn as, if and when JI gives written notice to the depositary, of JI's acceptance for payment of such shares. Payment for shares accepted for payment pursuant to the offer will be made by deposit of the purchase price therefor with The Bank of New York, which will act as agent for tendering stockholders for the purpose of receiving payment from JI and transmitting payment to tendering stockholders. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE TO BE PAID BY JI FOR THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. If any tendered shares are not purchased pursuant to the offer for any reason, certificates for any such shares will be returned, without expense to the tendering stockholder. In the case of shares delivered by book-entry transfer of such shares into the depositary's account at the book-entry transfer facility, as described below, pursuant to the procedures set forth in Section 3, such shares will be credited to an account maintained at the book-entry transfer facility, as promptly as practicable after the expiration or termination of the offer. JI reserves the right to transfer or assign, in whole or in part, to CGW or to one or more affiliates of JI or CGW, the right to purchase shares tendered pursuant to the offer, but any such transfer or assignment will not relieve JI of its obligations under the offer and will in no way prejudice the rights of tendering stockholders to receive payment for shares validly tendered and accepted for payment pursuant to the offer. 3. PROCEDURE FOR TENDERING SHARES. VALID TENDER For shares to be validly tendered pursuant to the offer, either a properly completed and duly executed Letter of Transmittal or facsimile thereof, together with any required signature guarantees, or in the case of a book-entry transfer, an agent's message, as described below, and any other required documents, must be received by The Bank of New York, as depositary, at one of its addresses set forth on the back cover of this Offer to Purchase prior to the expiration date and either certificates for tendered -7- 9 shares must be received by the depositary at one of such addresses or such shares must be delivered pursuant to the procedures for book-entry transfer described below, and a book-entry confirmation received by the depositary, in each case, prior to the expiration date or the tendering stockholder must comply with the guaranteed delivery procedures set forth below. The Bank of New York will establish an account with respect to the shares at The Depository Trust Company, referred to as the book-entry transfer facility, for purposes of the offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the book-entry transfer facility's systems may make book-entry delivery of shares by causing the book-entry transfer facility to transfer such shares into the depositary's account in accordance with the book-entry transfer facility's procedure for such transfer. However, although delivery of shares may be effected through book-entry transfer into the depositary's account at the book-entry transfer facility, the Letter of Transmittal, or facsimile thereof, properly completed and duly executed, with any required signature guarantees, or an agent's message, and any other required documents must, in any case, be transmitted to, and received by, the depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the expiration date, or the tendering stockholder must comply with the guaranteed delivery procedures described below. The confirmation of a book-entry transfer of shares into the depositary's account at the book-entry transfer facility as described above is referred to herein as a book-entry confirmation. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. The term agent's message means a message transmitted by the book-entry transfer facility to, and received by, The Bank of New York, as 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 JI may enforce such agreement against the participant. THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH 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 if the Letter of Transmittal is signed by the registered holder(s) (this term includes any participant in the book-entry transfer facility's systems whose name appears on a security position listing as the owner of the shares), of shares tendered therewith and such registered holder has not completed either the box entitled Special Delivery Instructions or the box entitled Special Payment Instructions on the Letter of Transmittal. In addition, no signature guarantee is required if such shares are tendered for the account of a financial institution including most commercial banks, savings and loan associations and brokerage houses that is a participant in the Security Transfer Agent's Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program. Such institutions are referred to as eligible institutions. In all other cases, all signatures on Letters of Transmittal must be guaranteed by an eligible institution. See Instructions 1 and 5 to the Letter of Transmittal. If the certificates for shares are registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made, or certificates for shares not tendered or not accepted for payment are to be returned, to a person other than the registered holder of the certificates surrendered, then the tendered certificates for such -8- 10 shares must be endorsed or accompanied by appropriate stock powers, in either case, signed exactly as the name or names of the registered holders or owners appear on the certificates, with the signatures on the certificates or stock powers guaranteed as described above. For more information on signature guarantees, see Instructions 1 and 5 to the Letter of Transmittal. GUARANTEED DELIVERY If a stockholder desires to tender shares pursuant to the offer and such stockholder's certificates for shares are not immediately available or the procedures for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach The Bank of New York prior to the expiration date, such stockholder's tender may be effected if all the following conditions are met: - such tender is made by or through an eligible institution, as described below; - a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by JI, is received by the depositary, as provided below, prior to the expiration date; and - the certificates for or a book-entry confirmation with respect to such shares, together with a properly completed and duly executed Letter of Transmittal or facsimile thereof, with any required signature guarantees, or, in the case of a book-entry transfer, an agent's message, and any other required documents are received by the depositary within three trading days after the date of execution of such Notice of Guaranteed Delivery. A trading day is any day on which the New York Stock Exchange is open for business. The Notice of Guaranteed Delivery may be delivered by hand to The Bank of New York, as the depositary, or transmitted by telegram, facsimile transmission or mail to the depositary and must include a guarantee by an eligible institution in the form set forth in such Notice of Guaranteed Delivery. Notwithstanding any other provision hereof, payment for shares accepted for payment pursuant to the offer will in all cases be made only after timely receipt by the depositary of all of the following: - certificates for, or a timely book-entry confirmation with respect to, such shares; - a Letter of Transmittal, or facsimile thereof, properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer, an agent's message; and - any other documents required by the Letter of Transmittal. Accordingly, tendering stockholders may be paid at different times depending upon when certificates for shares or book-entry confirmations with respect to shares are actually received by the depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE TO BE PAID BY JI FOR THE 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 JI upon the terms and subject to the conditions of the offer. APPOINTMENT By executing the Letter of Transmittal as set forth above, the tendering stockholder will irrevocably appoint designees of JI, and each of them, as such stockholder's attorneys-in-fact and proxies in the manner set forth in the Letter of Transmittal, each with full power of substitution, to the full extent of such stockholder's rights with respect to the shares tendered by such stockholder and accepted for payment by JI and with respect to any and all other shares or other securities or rights issued or issuable in respect of such shares. All such proxies will be considered coupled with an interest in the tendered shares. Such appointment will be effective when, and only to the extent that, JI accepts for payment shares tendered by such stockholder as provided herein. Upon such appointment, all prior powers of attorney, proxies and consents given by such stockholder with respect to such shares or other securities or rights will, without -9- 11 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 JI will thereby be empowered to exercise all voting and other rights with respect to such shares and other securities or rights, including, without limitation, in respect of any annual, special or adjourned meeting of the Johnston's stockholders, actions by written consent in lieu of any such meeting or otherwise, as they in their sole discretion deem proper. JI reserves the right to require that, in order for shares to be deemed validly tendered, immediately upon JI's acceptance for payment of such shares, JI must be able to exercise full voting, consent and other rights with respect to such shares and other related securities or rights, including voting at any meeting of stockholders. DETERMINATION OF VALIDITY All questions as to the validity, form, eligibility, including time of receipt, and acceptance of any tender of shares will be determined by JI, in its sole discretion, which determination will be final and binding. JI reserves the absolute right to reject any or all tenders of any shares determined by it not to be in proper form or the acceptance for payment of, or payment for which may, in the opinion of JI's counsel, be unlawful. JI also reserves the absolute right, in its sole discretion, subject to the provisions of the Purchase Agreement, to waive any of the conditions of the offer or any defect or irregularity in the tender of any shares of any particular stockholder, whether or not similar defects or irregularities are waived in the case of other stockholders. No tender of shares will be deemed to have been validly made until all defects or irregularities relating thereto have been cured or waived. None of JI, CGW, The Bank of New York, as the depositary, MacKenzie Partners, Inc., as the information agent, or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. JI'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 U.S. 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 on a Substitute Form W-9 and certify under penalties 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 taxpayer identification number or fails to provide the certifications described above, the Internal Revenue Service 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 main signature form and 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 JI and the depositary). Certain stockholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to backup withholding. Foreign stockholders, if exempt, should complete and sign 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. See Instruction 9 to the Letter of Transmittal. 4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4, tenders of shares are irrevocable. Shares tendered pursuant to the offer may be withdrawn pursuant to the procedures described below at any time prior to the expiration date and, unless theretofore accepted for payment and paid for by JI pursuant to the offer, may also be withdrawn at any time after June 6, 2000. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by The Bank of New York, as 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 number of shares to be withdrawn and the name of the registered holder of the shares to be withdrawn, if different from the name of the person who tendered the shares. If certificates for shares have been delivered or otherwise identified to the depositary, then, prior to the -10- 12 physical release of such certificates, the serial numbers shown on such certificates must be submitted to the depositary and, unless such shares have been tendered by an eligible institution, the signatures on the notice of withdrawal must be guaranteed by an eligible institution. If shares have been delivered pursuant to the procedures for book-entry transfer as set forth in Section 3, any notice of withdrawal must also specify the name and number of the account at the appropriate book-entry transfer facility to be credited with the withdrawn shares and otherwise comply with such book-entry transfer facility's procedures. Withdrawals of tenders of shares may not be rescinded, and any shares properly withdrawn will thereafter be deemed not validly tendered for purposes of the offer. However, withdrawn shares may be retendered by again following one of the procedures described in Section 3 any time prior to the expiration date. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by JI, in its sole discretion, which determination will be final and binding. None of JI, CGW, the depositary, the information agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. 5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash for shares pursuant to the offer will be a taxable transaction for U.S. federal income tax purposes and also may be a taxable transaction under state, local or foreign tax laws. In general, a stockholder who tenders shares in the offer will recognize gain or loss for federal income tax purposes equal to the difference, if any, between the amount of cash received and the stockholder's tax basis in the shares sold. Such gain or loss generally will be capital gain or loss if the shares disposed of were held as capital assets by the stockholder, and will be long-term capital gain or loss if the shares disposed of were held for more than one year at the date of sale. The foregoing summary constitutes a general description of certain U.S. federal income tax consequences of the offer without regard to the particular facts and circumstances of each stockholder of Johnston and is based on the provisions of the Internal Revenue Code of 1986, as amended, Treasury Department Regulations issued pursuant thereto and published rulings and court decisions in effect as of the date hereof, all of which are subject to change, possibly with retroactive effect. Special tax consequences not described herein may be applicable to certain stockholders subject to special tax treatment (including, but not limited to, insurance companies, tax-exempt organizations, financial institutions or broker dealers, foreign stockholders and stockholders who have acquired their shares pursuant to the exercise of employee stock options or otherwise as compensation). ALL STOCKHOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO SPECIFIC TAX EFFECTS APPLICABLE TO THEM OF THE OFFER, INCLUDING THE APPLICABILITY AND EFFECT OF THE ALTERNATIVE MINIMUM TAX AND ANY STATE, LOCAL AND FOREIGN TAX LAWS. -11- 13 6. PRICE RANGE OF SHARES OF JOHNSTON COMMON STOCK; DIVIDENDS ON JOHNSTON COMMON STOCK. Johnston's common stock is traded on the New York Stock Exchange under the symbol "JII." The following table sets forth, for each of the fiscal years indicated, the high and low reported sales price per share on the NYSE based on published financial sources.
SALES PRICE -------------------------- HIGH LOW ------- ------- 1998 First Quarter $6.1250 $4.3125 Second Quarter 6.0000 4.5000 Third Quarter 4.6250 3.0625 Fourth Quarter 4.0000 2.8125 1999 First Quarter $3.3125 $2.0000 Second Quarter 2.6250 1.4375 Third Quarter 2.7500 1.6250 Fourth Quarter 2.6250 1.5625 2000 First Quarter $2.8125 $1.5625
On March 30, 2000, the last full trading day prior to the first public announcement of JI's intention to commence the offer, the last reported sales price of the shares on the NYSE was $2.3125 per share. On April 6, 2000, the last full trading day prior to the commencement of the offer, the last reported sales price of the shares on the NYSE was $2.75 per share. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES. Johnston has advised JI that Johnston has not declared or paid any cash dividends on its common stock since August 1997. 7. EFFECT OF THE OFFER ON THE MARKET FOR JOHNSTON'S COMMON STOCK; STOCK LISTING; EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS. MARKET FOR THE SHARES The purchase of shares pursuant to the offer will reduce the number of holders of shares and the number of shares that might otherwise trade publicly and, depending upon the number of shares so purchased, could adversely effect the liquidity and market value of the remaining shares held by the public. STOCK LISTING Depending upon the number of shares purchased pursuant to the offer, and the aggregate market value and per share price of any shares not purchased pursuant to the offer, the shares may no longer meet the guidelines of the New York Stock Exchange for continued listing. According to the NYSE's published guidelines, the NYSE would consider delisting the shares if, among other things, the number of recordholders of at least 100 shares each should fall below 1,200, the number of publicly held shares (exclusive of holdings of officers, directors and their families and other concentrated holdings of 10% or more) should fall below 600,000 or the average market value over a consecutive 30 trading-day period is less than $15,000,000 (exclusive of the described excluded holdings). If, as a result of the purchase of shares pursuant to the offer or otherwise, the shares no longer meet the requirements of the NYSE for continued listing and the listing of the shares is discontinued, the market for the shares could be adversely affected. In addition, pursuant to the terms of the Purchase Agreement, Johnston has agreed to sell to JI, 8,750,000 shares of common stock and 250,000 shares of preferred stock convertible into common stock -12- 14 without seeking stockholder approval for such issuance. According to the NYSE guidelines, stockholder approval is required prior to the issuance of common stock, if, among other things, the number of shares of common stock to be issued is equal to or in excess of twenty percent of the number of shares of common stock outstanding before the issuance of such stock. Therefore, as a result of the transactions described in the Purchase Agreement, upon the closing of the offer and the issuance of the additional shares of Johnston common and preferred stock to JI, Johnston may receive a notification from the NYSE regarding the potential delisting of the shares of common stock. If the NYSE were to delist the shares, it is possible that the shares would continue to trade on another securities exchange or in the over-the-counter market and that price or other quotations would be reported by such exchange or through a Nasdaq Stock Market or other sources. JI has agreed that if it acquires less than 90% of the outstanding common stock it will use its commercially reasonable best efforts to maintain a public trading market in the common stock for a period of three years. The manner in which such market is maintained, whether on an exchange or in the over-the-counter market, will depend on the number of shares remaining in the public market and their value. Further, the extent of the public market therefor and availability of such quotations would depend upon such factors as the stockholders and/or the aggregate market value of such securities remaining at such time, the interest in maintaining a market in the shares on the part of securities firms, and the possible termination of registration under the Exchange Act as described below and other factors. JI cannot predict whether the reduction in the number of shares that might otherwise trade publicly would have an adverse or beneficial effect on the market price for or marketability of the shares or whether it would cause future market prices to be greater or less than the offer price. According to Johnston's Annual Report on Form 10-K for the fiscal year ended January 1, 2000, as of January 1, 2000, there were approximately 700 holders of record of shares. According to information provided by Johnston, as of March 31, 2000, there were 10,712,872 shares outstanding. EXCHANGE ACT REGISTRATION The shares currently are registered under the Exchange Act. Registration of the shares under the Exchange Act may be terminated upon application of Johnston to the SEC if the shares are neither listed on a national securities exchange nor 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 Johnston to its stockholders and to the SEC and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the requirement of furnishing a proxy statement pursuant to Section 14(a) of the Exchange Act in connection with stockholders' meetings and the related requirement of furnishing an annual report to stockholders and the requirements of Rule 13e-3 under the Exchange Act with respect to going private transactions, no longer applicable to Johnston. Furthermore, the ability of affiliates of Johnston and persons holding restricted securities of Johnston to dispose of such securities pursuant to Rule 144 or Rule 144A promulgated under the Securities Act of 1933, as amended, may be impaired or eliminated. If registration of the shares under the Exchange Act were terminated, the shares would no longer be margin securities or be eligible for continued listing on any stock exchange. JI may seek to cause Johnston to apply for termination of registration of the shares under the Exchange Act as soon after the completion of the offer as the requirements for such termination are met. However, so long as JI is committed to maintain a public trading market in the common stock as described above, JI has agreed to continue the registration of the shares under the Exchange Act. MARGIN REGULATIONS The shares presently are margin securities under the regulations of the Board of Governors of the Federal Reserve System, which status has the effect, among other things, of allowing brokers to extend credit on the collateral of such securities. Depending upon factors similar to those described above regarding listing and market quotations, it is possible that, following the offer, the shares would no longer -13- 15 constitute margin securities for the purposes of the margin regulations of the Federal Reserve Board and therefore could no longer be used as collateral for loans made by brokers. If registration of the shares under the Exchange Act were terminated, the shares would no longer be margin securities. 8. CERTAIN INFORMATION CONCERNING JOHNSTON INDUSTRIES, INC. GENERAL The information concerning Johnston contained in this Offer to Purchase, including that set forth below under the caption "Selected Financial Information," has been furnished by Johnston or has been taken from or based upon publicly available documents and records on file with the SEC and other public sources. Neither JI nor CGW assumes responsibility for the accuracy or completeness of the information concerning Johnston contained in such documents and records or for any failure by Johnston to disclose events which may have occurred or may affect the significance or accuracy of any such information but which are unknown to JI or CGW. Johnston is a consolidated entity which includes its direct wholly owned operating subsidiary, Johnston Industries Alabama, Inc., and its indirect wholly owned subsidiaries, Johnston Industries Composite Reinforcements, Inc., Greater Washington Investments, Inc., J.I. Georgia, Inc., and Autographix, Inc. Johnston conducts its operations through four business units: (i) the Greige Fabrics Division, (ii) the Finished Fabrics Division, (iii) the Fiber Products Division, and (iv) Johnston Industries Composite Reinforcements. Johnston is a leading designer, manufacturer and marketer of finished and unfinished (greige) cotton, synthetic and blended fabrics used in a broad range of industrial and consumer applications. Its products are sold to a number of niche markets, including segments of the home furnishings, hospitality, industrial, automotive and specialty markets. In addition, Johnston reprocesses and markets waste textile fiber and off-quality fabrics for sale to a broad range of specialty markets. Johnston also manufactures fabrics used in engineered composite materials serving primarily the recreation and construction markets. Johnston is a Delaware corporation with its principal executive offices at 105 Thirteenth Street, Columbus, Georgia 31901. The telephone number of Johnston at their offices is (706) 641-3140. SELECTED FINANCIAL INFORMATION Set forth below is certain selected consolidated financial information with respect to Johnston, excerpted or derived from Johnston's Annual Reports on Forms 10-K for the years ended January 1, 2000, January 2, 1999 and January 3, 1998 filed with the SEC pursuant to the Exchange Act. -14- 16 More comprehensive financial information is included in such reports and in other documents filed by Johnston with the SEC. The following summary is qualified in its entirety by reference to such reports and other documents and all of the financial information (including any related notes) contained therein. Such reports and other documents may be inspected and copies may be obtained from the SEC in the manner set forth below. JOHNSTON INDUSTRIES, INC. SELECTED CONSOLIDATED FINANCIAL INFORMATION (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED ------------------------------------ JANUARY 1, JANUARY 2, JANUARY 3, 2000 1999 1998 ---------- ---------- ---------- STATEMENT OF OPERATIONS: Net sales $264,036 $283,724 $332,537 Operating income 586 11,003 2,630 Loss from continuing operations before income taxes (12,709) (1,799) (11,701) Net loss (8,008) (608) (8,496) Net loss per share (0.75) (0.06) (0.81) Weighted average shares outstanding 10,722 10,722 10,562 BALANCE SHEET DATA: Total assets $193,966 $219,539 $234,788 Long-term debt less current maturities 2,429 51,109 61,688 Total stockholders' equity 40,251 48,274 49,124
AVAILABLE INFORMATION Johnston is subject to the informational filing requirements of the Exchange Act and, in accordance therewith, is obligated to file reports, proxy statements and other information with the SEC relating to its business, financial condition and other matters. Information as of particular dates concerning Johnston's directors and officers, their remuneration, options granted to them, the principal holders of Johnston's securities and any material interests of such persons in transactions with Johnston is required to be disclosed in proxy statements distributed to Johnston's stockholders and filed with the SEC. Such reports, proxy statements and other information should be available for inspection at the public reference facilities of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the SEC located at Seven World Trade Center, Suite 1300, New York, NY 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661. Copies of such information should be obtainable by mail, upon payment of the SEC's customary charges, by writing to the SEC's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The SEC also maintains a website at http://www.sec.gov that contains reports, proxy statements and other information. Such material should also be available for inspection at the offices of the NYSE, located at 20 Broad Street, New York, New York 10005. 9. CERTAIN INFORMATION CONCERNING JI AND CGW. GENERAL JI, a Delaware corporation and currently a wholly owned subsidiary of CGW, was organized for the purpose of acquiring Johnston and has conducted no activities unrelated to such purpose since its organization. All of the issued and outstanding shares of capital stock of JI are currently owned by CGW. The principal executive offices of JI are located at the principal executive offices of CGW. The telephone number of JI at such offices is (404) 816-3255. CGW is a private equity investment firm which supports management teams in acquisitions and recapitalizations of middle-market companies. CGW invests through its managed partnerships, CGW -15- 17 Southeast Partners I through IV. Since its formation in 1984, the firm has focused exclusively on the middle-market. CGW has current equity capital under management in excess of $750 million. CGW is a limited partnership formed under the Delaware Revised Uniform Limited Partnership Act with its principal executive offices at Twelve Piedmont Center, Suite 210, Atlanta, Georgia 30305. Its telephone number at such offices is (404) 816-3255. Neither JI nor CGW is registered under or subject to the provisions of the Exchange Act. SELECTED FINANCIAL INFORMATION JI was only recently organized and at the date of this Offer to Purchase has no operations, assets or liabilities. CGW Southeast Partners IV, L.P. was formed on April 22, 1999. Set forth below is certain selected consolidated financial information with respect to CGW from the date of its formation through and as of December 31, 1999. This financial information has been taken from the unaudited financial statements of CGW which are attached to this Offer to Purchase as Schedule II. CGW SOUTHEAST PARTNERS IV, L.P. SELECTED CONSOLIDATED FINANCIAL INFORMATION (AMOUNTS IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1999 ----------------- Statement of Operations: Revenue -- Interest income................................ $ 4 Total expenses............................................ 6,061 Net loss.................................................. (6,056) Statement of Financial Position: Assets.................................................... $ 29,008 Borrowings on line of credit.............................. 16,000 Total partner's equity.................................... 12,700 Total committed capital................................... 404,500
CERTAIN INFORMATION The name, citizenship, business address, present principal occupation or employment and five-year employment history of each of the directors and executive officers of JI and CGW are set forth in Schedule I hereto. Except as set forth in this Offer to Purchase regarding the purchase of 8,750,000 shares of Johnston common stock and the 250,000 shares of Johnston preferred stock, neither JI, CGW, nor, to the best of their knowledge, any of the persons listed on Schedule I, nor any associate or majority-owned subsidiary of any of the foregoing, beneficially owns or has a right to acquire any shares, and neither JI, CGW, nor, to the best of their knowledge, any of the persons or entities referred to above, nor any of the respective executive officers, directors or subsidiaries of any of the foregoing, has effected any transaction in shares during the past 60 days. Except as set forth in this Offer to Purchase, neither JI, CGW, nor, to the best of their knowledge, any of the persons listed on Schedule I, has any contract, arrangement, understanding or relationship with any other person with respect to any securities of Johnston, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any securities of Johnston, 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 JI, CGW, or any of their respective affiliates, nor, to the best of their knowledge, any of the persons listed on -16- 18 Schedule I, has had, within the last two years, any business relationships or transactions with Johnston or any of its executive officers, directors or affiliates that would require reporting under the rules of the SEC. Except as set forth in this Offer to Purchase, within the last two years, there have been no contacts, negotiations or transactions between JI, CGW, or any of their respective affiliates or, to the best of their knowledge, any of the persons listed on Schedule I, and Johnston or its affiliates concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, election of directors or a sale or other transfer of a material amount of assets. 10. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by JI to purchase all of the shares pursuant to the offer and the stock purchase from Johnston and to pay related fees and expenses is expected to be approximately $60 million. JI plans to obtain approximately $45 million of the necessary funds from the purchase of its common stock by CGW and the remainder from a purchase of its common stock by BancBoston Capital, Inc. JI and CGW are currently negotiating with BancBoston concerning the investment by BancBoston in JI. If these negotiations are successful, CGW and BancBoston will enter into a Securities Purchase Agreement pursuant to which BancBoston will invest approximately $15 million in JI in exchange for shares of the common stock of JI. The Securities Purchase Agreement will contain provisions regarding the sale or transfer of that common stock, representations concerning the representation on the board of directors of JI by CGW and BancBoston, and customary registration rights with regard to the common stock. If the negotiations with BancBoston are not successful, JI and CGW do not currently have any alternative financing arrangements. Under the terms of the Purchase Agreement, JI and CGW may terminate the offer if the BancBoston financing is not successful. In addition, JI and CGW have received a commitment letter dated March 30, 2000, from Congress Financial Corporation pursuant to which Congress has committed, subject to the terms and conditions of the commitment letter, to provide Johnston with a credit facility in an initial aggregate principal amount of up to approximately $105.7 million, to be available for repayment of outstanding amounts under Johnston's current credit facility and for general corporate purposes. 11. BACKGROUND OF THE OFFER, PURPOSE OF THE OFFER, THE PURCHASE AGREEMENT AND CERTAIN OTHER AGREEMENTS. The following description was prepared by JI, CGW and Johnston. Information about Johnston was provided by Johnston and neither JI nor CGW takes any responsibility for the accuracy or completeness of any information regarding meetings or discussions in which CGW or its representatives did not participate. BACKGROUND OF THE OFFER In December 1998, Mr. Edwin A. Wahlen, Jr., a managing partner of CGW and Mr. William A. Davies, a partner of CGW, made an initial visit to the offices of Johnston to discuss a potential acquisition of Johnston by CGW. On March 2, 1999, Messrs. Wahlen and Davies again travelled to the offices of Johnston to further discuss a proposed transaction between Johnston and CGW. At this meeting, CGW entered into a Confidentiality Agreement with Johnston, pursuant to which, among other things, CGW agreed that any non-public information made available to it would be held in strict confidence. CGW further agreed to a three-year standstill with respect to initiating any purchase or sale of any securities of Johnston, and with regard to influencing the voting of any securities of Johnston, or otherwise seeking to control or influence Johnston's management, unless Johnston provided its prior written consent. On March 23, 1999, Mr. Davies met with representatives of Johnston at the offices of Johnston to review Johnston's operational structure. Shortly thereafter, CGW concluded that an acquisition of Johnston was not appropriate for CGW at that time. -17- 19 On July 20, 1999, Mr. James A. O'Donnell, a partner of CGW, and Mr. Roy R. Bowman, also a partner of CGW, visited the offices of Johnston to once again discuss the possibilities of an investment by CGW in Johnston. On August 4, 1999, Messrs. O'Donnell and Bowman visited the offices of Johnston and also toured certain of the company's manufacturing facilities. At this time further discussions of a potential investment or acquisition transaction were held with the management of Johnston. On August 9, 1999, Mr. D. Clark Ogle, president and chief executive officer of Johnston, and Mr. James J. Murray, chief financial officer of Johnston, visited CGW's offices in Atlanta, Georgia to meet with the partners of CGW and discuss a potential investment in, or acquisition of, Johnston by CGW. On August 23, 1999, CGW drafted and submitted to Johnston a letter of interest. The letter of interest contained terms of the proposed investment in, and acquisition of, Johnston. In response to CGW's letter, the board of directors of Johnston held a special meeting on August 30, 1999 to discuss the proposal. After discussing the recent alternatives to an acquisition considered by management, none of which had resulted in firm offers, the board determined to allow CGW to proceed with due diligence. For purposes of additional negotiations with CGW, the board appointed a special committee comprised of Messrs. John A. Friedman, J. Reid Bingham, William J. Hart and Gaines R. Jeffcoat, authorizing this committee to negotiate with CGW and evaluate any alternatives to the proposal. Following this board meeting, Johnston announced that it had received an unsolicited, tentative acquisition proposal involving a price of $3.00 per share, indicating that the bidder would continue with due diligence. Notwithstanding this release, Johnston did not receive any serious indications of interest from other bidders. In August, 1999, following the delivery of its letter of interest to Johnston, CGW began its due diligence process and hired certain consultants and advisors, including environmental consultants, legal advisors and accounting advisors. On September 7, 1999, Messrs. O'Donnell and Bowman made a due diligence visit to the offices of Johnston to review certain financial and operational diligence materials. On September 24, 1999, Messrs. O'Donnell and Bowman traveled to Johnston's offices for further due diligence review as well as to meet with Mr. Harold Harvey, President of the Greige Fabrics and Finished Fabrics divisions of Johnston. The discussions with Mr. Harvey concerned the operational aspects of Johnston's business. On September 27 and 28, 1999, Mr. Murray met with representatives of CGW at the offices of CGW to further review the operational structure of Johnston. Mr. Murray was joined by Mr. Ogle on September 29, 1999 for a continuation of such discussions. On October 4, 1999, CGW submitted a non-binding proposal to Johnston to acquire a controlling interest in Johnston through a purchase of its common stock. On October 18, 21, and 25, 1999, the Johnston board held special meetings to receive reports from the special committee concerning negotiations with CGW and to discuss the October 4 proposal letter. Mr. Friedman reported that due diligence had been completed. The proposal letter and a special committee proposal for an alternative structure to the transaction were discussed. Recent additional efforts by members of the board and management to determine if other potential strategic buyers were interested in a transaction were also discussed. The board then authorized the special committee to instruct Johnston's counsel to meet with CGW and its counsel to discuss alternative transaction structures. On October 18, 1999, CGW began arrangements for the financing of the proposed transaction with Johnston, including initial contact with BancBoston and Congress Financial Corporation. -18- 20 On October 28, 1999, counsel to Johnston met with CGW and their counsel at the offices of CGW to discuss various alternative structures for a transaction with Johnston, including the possibility of a direct capital infusion in Johnston by CGW. On November 17, 1999, Messrs. O'Donnell and Bowman met at CGW's offices with certain members of the special committee of the Board of Directors of Johnston to discuss the non-binding proposal, certain issues relating thereto and a timetable for consummation of the transaction. On November 23, 1999, Messrs. O'Donnell and Bowman traveled to Johnston's offices to continue their financial and operational due diligence review of Johnston. On December 7, 1999, Messrs. O'Donnell and Bowman traveled to Opp, Alabama to inspect Johnston's manufacturing operations at its Opp and Micolas, Alabama mills. On December 14, 1999, Messrs. O'Donnell and Bowman traveled to Johnston's offices to meet with Mr. Bill Henry, Vice President of Johnston. Discussions with Mr. Henry focused on overall operational matters. On January 5, 2000, Messrs. O'Donnell and Bowman and representatives from BancBoston traveled to Johnston's offices to meet with Mr. Ogle and Mr. Murray to discuss the overall transaction, certain financial and operational due diligence matters, and BancBoston's participation in the transaction. On January 25, 2000, Messrs. O'Donnell and Bowman traveled to Johnston's offices to complete their operational and financial due diligence review of Johnston. On February 21, 2000, Messrs. Bingham and Hart met with Messrs. Cravey, O'Donnell and Bowman at the offices of CGW to discuss certain terms and conditions of the proposed transaction. During January, February, and March, counsels to Johnston and CGW prepared and negotiated the Purchase Agreement and related documents setting forth the structure of the proposed transaction, during which time various negotiations were held by the special committee and CGW through counsel regarding various terms of the transaction. In February 1999, Mr. Friedman, a member of the special committee of the Johnston board of directors, became ill and, as a result, his participation in the transaction ended. On March 28, 1999, the special committee received an oral report from The Robinson-Humphrey Company, LLC as to the opinion they were prepared to render to the board of directors regarding the fairness of the consideration to be received by the public stockholders. Thereafter, the special committee, certain members of management and counsel met with CGW and its counsel at CGW's offices to discuss final outstanding matters regarding the proposed transaction. On March 29, 2000, The Robinson-Humphrey Company, LLC delivered to Johnston's board of directors its written opinion to the effect that the consideration to be received by the public stockholders of Johnston in the offer was fair to such stockholders from a financial point of view as of March 29, 2000. The opinion of The Robinson-Humphrey Company, LLC is set forth in full as an exhibit to Johnston's Schedule 14D-9, which is being mailed to the stockholders of Johnston concurrently with this Offer to Purchase. The stockholders of Johnston are urged to read that opinion in its entirety. At a special meeting held on March 29, 2000, the Johnston board of directors reviewed the transactions and, following presentations by senior officers and financial and legal advisors of Johnston, approved the Purchase Agreement and the offer. One member of the board of directors of Johnston abstained from voting on the Purchase Agreement and the offer due to conflicts and/or perceived conflicts of interest. The board of directors for Johnston decided to remain neutral in recommending whether the stockholders of Johnston should accept the offer and tender their shares. In the evening of March 30, 2000, the parties executed a Purchase Agreement. On March 31, 2000 (prior to the opening of the stock market on the first business day following execution of the Purchase Agreement) the parties publicly announced the proposed transaction. -19- 21 PURPOSE OF THE OFFER The purpose of the offer and the Purchase Agreement is to enable JI and CGW to acquire control of, and possibly the entire equity interest in, Johnston. The offer is being made pursuant to the Purchase Agreement and is intended to increase the likelihood that such control will be effected. Stockholders of Johnston who sell their shares in the offer will cease to have any equity interest in Johnston and to participate in its earnings and any future growth. If the offer is consummated, the stockholders who tender their shares will no longer have an equity interest in Johnston and instead will have only the right to receive cash consideration pursuant to the Purchase Agreement. Similarly, the stockholders of Johnston who tender their shares will not bear the risk of any decrease in the value of Johnston after selling their shares in the offer. The primary benefit of the offer to the stockholders of Johnston is that such stockholders are being afforded an opportunity to sell all of their shares for cash at a price which represents a premium of approximately 30% over the closing market price of the shares on the last full trading day prior to the initial public announcement of the offer. THE PURCHASE AGREEMENT The following is a summary of certain provisions of the Purchase Agreement. The summary is qualified in its entirety by reference to the Purchase Agreement which is incorporated herein by reference and a copy of which has been filed with the SEC as an exhibit to the Schedule TO. The Purchase Agreement may be examined and copies may be obtained at the places and in the manner set forth in Section 9 of this Offer to Purchase. The Offer. The Purchase Agreement provides that as promptly as reasonably practicable JI will commence the offer and that, upon the terms and subject to the prior satisfaction or waiver of the conditions of the offer, JI will purchase all shares validly tendered pursuant to the offer. The Purchase Agreement provides that, without Johnston's consent, JI will not amend or waive the minimum condition, decrease the offer price, or impose any further conditions to the offer or amend any condition of the offer in a manner adverse to the holders of shares. Notwithstanding the foregoing, the Purchase Agreement provides that JI may, without Johnston's consent, extend the offer under the following circumstances: - if at the scheduled expiration date any of the conditions to the offer have not been satisfied, including but not limited to any legal or regulatory requirements under the Hart-Scott-Rodino Act; - from time to time for a period of not more than ten business days beyond the initial expiration date (which initial expiration date shall be twenty business days following the commencement of the offer), if at that time less than 90% of the outstanding shares of Johnston common stock have been tendered; - for any period required by any rule, regulation, interpretation, or position of the SEC or the staff of the SEC, applicable to the offer; and - for a period of not more than ten business days beyond the latest expiration date that would otherwise apply according to extensions under the first three bullet points above. The Purchase Agreement further provides, however, that in no event may the offer be extended beyond the date of termination of the Purchase Agreement, and either party has the right to terminate the Purchase Agreement if the offer is not completed by June 30, 2000. At the time that JI pays for the shares of Johnston common stock that were validly tendered and accepted, JI has also agreed, subject to the terms and conditions of the Purchase Agreement, to purchase 8,750,000 shares of Johnston common stock and 250,000 shares of Johnston preferred stock, each for $3.00 per share, for an aggregate purchase price of $27 million. The preferred stock is to be designated as Series A preferred stock and will vote together with the common stock on all matters brought before -20- 22 Johnston's stockholders. The Series A preferred stock will also be convertible at any time, at the option of JI, into shares of common stock as long as there are sufficient shares of authorized common stock available for issuance. The Mergers. Following the consummation of the offer, the Purchase Agreement provides that, subject to the terms and conditions thereof, at the election of CGW and in accordance with Delaware law, in the event that CGW shall acquire, directly or indirectly, at least 90% of the outstanding shares of Johnston voting capital stock on a fully diluted basis, at the time CGW pays for the shares, a wholly owned subsidiary of JI shall be merged with and into Johnston and, as a result of this short-form merger, Johnston, as the surviving corporation, shall exist as a wholly owned subsidiary of JI. At the effective time of the short-form merger each issued and outstanding share (other than shares that are owned by Johnston as treasury stock, any shares owned by CGW, JI, or their affiliates, or any shares which are held by stockholders exercising appraisal rights under Delaware law) will be converted into the right to receive the price per share paid pursuant to the offer. In addition, each issued and outstanding share of the common stock of the wholly owned subsidiary of JI will be converted into one share of common stock of Johnston and, except for shares owned by CGW, JI or their affiliates, shall constitute the only outstanding shares of capital stock of Johnston. The Purchase Agreement also provides that, subject to the terms and conditions thereof, at the election of CGW and in accordance with Delaware law, in the event that CGW shall acquire, directly or indirectly, less than 90% of the outstanding shares of Johnston voting capital stock, at the time CGW pays for the shares, a wholly owned subsidiary of JI shall be merged with and into Johnston, and, as a result of this merger Johnston will be the surviving corporation and a subsidiary of JI. In contrast to the short-form merger described above, in this instance the stockholders who did not tender their shares will remain stockholders of Johnston. Johnston's Board of Directors. The Purchase Agreement provides that promptly after the purchase by JI of shares pursuant to the offer, JI shall be entitled to designate such number of directors, rounded up to the next whole number, on Johnston's board of directors as is equal to the product of the total number of directors on Johnston's board of directors (giving effect to the directors designated by JI) multiplied by the percentage that the number of shares of capital stock beneficially owned by JI or CGW bears to the total number of shares of capital stock then outstanding. Johnston will, upon request of JI, promptly take all actions necessary to cause JI's designees to be elected as directors of Johnston, including increasing the size of Johnston's board of directors or securing the resignations of such number of its incumbent directors, or both. Options and Restricted Stock. Immediately after JI has accepted for payment all shares validly tendered and not withdrawn prior to the expiration date, each outstanding option to purchase shares, other than certain designated options with exercise prices below the price per share offered in this offer, granted under Johnston's Amended and Restated Stock Incentive Plan for Key Employees and Non-Employee Directors, whether or not then exercisable or vested, shall be canceled by Johnston. Each holder of a canceled option shall be entitled to receive from JI at the same time as payment for shares is made by JI in connection with the offer, in consideration for the cancellation of such option, an amount, if any, in cash equal to the product of (a) the number of shares previously subject to such option and (b) the excess, if any, of the offer price over the exercise price per share previously subject to such option. Interim Operations; Covenants. Pursuant to the Purchase Agreement, Johnston covenants and agrees that, between the date of the Purchase Agreement and the earlier of the termination of the Purchase Agreement or the time of the election or appointment of JI's designees to Johnston's board of directors, unless CGW will otherwise agree in writing, the following: - the business of Johnston and its subsidiaries will be conducted only in, and Johnston and subsidiaries will not take any action except in, the usual, regular and ordinary course of business; - Johnston will use all reasonable efforts to preserve intact its business organization and material assets and maintain its material rights; -21- 23 - Johnston will not, and will not permit any subsidiary to take any action that would (a) materially adversely affect the ability of any party to obtain any consents required for the offer, (b) cause any of the conditions to the offer not to be satisfied, or (c) materially adversely affect the ability of any party to perform its covenants and agreements under the Purchase Agreement; and - Johnston will not: (a) amend the Certificate of Incorporation, Bylaws or other governing instruments of Johnston or its subsidiaries, or (b) incur any additional debt obligation or other obligation for borrowed money in excess of an aggregate of $100,000 except in the ordinary course of the business consistent with past practices, or impose, or suffer the imposition, on any material asset of Johnston or its subsidiaries of any lien or permit any such lien to exist; or (c) repurchase, redeem, or otherwise acquire or exchange (other than exchanges in the ordinary course under employee benefit plans), directly or indirectly, any shares, or any securities convertible into any shares, of the capital stock of Johnston or its subsidiaries, or declare or pay any dividend or make any other distribution in respect of Johnston's capital stock; or (d) except pursuant to the Purchase Agreement or upon the exercise of stock options outstanding as of March 30, 2000, issue, sell, pledge, encumber, authorize the issuance of, enter into any contract to issue, sell, pledge, encumber, or authorize the issuance of, or otherwise permit to become outstanding, any additional shares of Johnston common stock or any other capital stock of Johnston or its subsidiaries, or any stock appreciation rights, or any option, warrant, or other equity right; or (e) adjust, split, combine or reclassify any capital stock of Johnston or its subsidiaries or issue or authorize the issuance of any other securities in respect of or in substitution for shares of Johnston common stock, or sell, lease, mortgage or otherwise dispose of or otherwise encumber (x) any shares of capital stock of any subsidiary of Johnston (unless any such shares of stock are sold or otherwise transferred to another subsidiary of Johnston) or (y) any asset having a book value in excess of $25,000 other than in the ordinary course of business for reasonable and adequate consideration; or (f) purchase any securities or make any material investment, either by purchase of stock of securities, contributions to capital, asset transfers, or purchase of any assets, in any person other than a wholly owned subsidiary of Johnston, or otherwise acquire direct or indirect control over any person, other than in connection with (i) foreclosures in the ordinary course of business, or (ii) the creation of new wholly owned subsidiaries organized to conduct or continue activities otherwise permitted by the Purchase Agreement; or (g) grant any increase in compensation or benefits to the employees or officers of Johnston or its subsidiaries, except in accordance with past practice or as required by law; pay any severance or termination pay or any bonus other than pursuant to written policies or written contracts in effect on March 30, 2000; and enter into or amend any severance agreements with officers of Johnston or its subsidiaries; grant any material increase in fees or other increases in compensation or other benefits to directors of Johnston or its subsidiaries except in accordance with past practice; or (h) enter into or amend any employment contract between Johnston or its subsidiaries and any person (unless such amendment is required by law) that does not contain the unconditional right on the part of Johnston or its subsidiary to terminate without liability (other than liability for services already rendered), at any time on or after the date JI pays for the shares of Johnston common stock tendered in this offer; or (i) adopt any new employee benefit plan of Johnston or its subsidiaries or terminate or withdraw from, or make any material change in or to, any existing employee benefit plans of Johnston or its subsidiaries other than any such change that is required by law or that, in the opinion of counsel, is necessary or advisable to maintain the tax qualified status of any such plan, or make any distributions from such employee benefit plans, except as required by law, the terms of such plans or consistent with past practice; or -22- 24 (j) make any significant change in any tax or accounting methods or systems of internal accounting controls, except as may be appropriate to conform to changes in tax laws or regulatory accounting requirements or GAAP; or (k) commence any litigation other than in accordance with past practice, or settle any litigation involving any liability of Johnston or its subsidiaries for material money damages or restrictions upon the operations of Johnston or its subsidiaries; or (l) enter into, modify, amend or terminate any material contract or waive, release, compromise or assign any material rights or claims; or (m) authorize any of, or commit or agree to take any of, the foregoing actions. Pursuant to the Purchase Agreement, subject to a confidentiality agreement, from the date of the Purchase Agreement to the purchase by JI of shares pursuant to the offer, Johnston will provide CGW, during normal business hours and upon reasonable notice, access to all financial, operating and other data and information regarding the business of Johnston as CGW reasonably requests. No Solicitation. Pursuant to the Purchase Agreement, Johnston has agreed that neither Johnston nor any of its affiliates will, directly or indirectly, initiate, solicit, encourage or knowingly facilitate (including by way of furnishing information) any inquiries or the making of any acquisition proposal. Johnston and its board of directors shall be permitted: - to the extent applicable, to comply with Rule 14d-9 and Rule 14e-2 under the Exchange Act with regard to an acquisition proposal, and - to engage in any discussions or negotiations with, or provide any information to, any person in response to an unsolicited bona fide written acquisition proposal by any such person, if and only to the extent that: (a) Johnston's board of directors concludes in good faith and consistent with its fiduciary duties to Johnston's stockholders under applicable law that such acquisition proposal could reasonably be expected to result in a superior proposal, (b) prior to providing any information or data to any person in connection with an acquisition proposal by any such person, Johnston's board of directors receives from such person an executed confidentiality agreement containing confidentiality terms at least as stringent as those contained in the confidentiality agreement between Johnston and CGW, and (c) prior to providing any information or data to any person or entering into discussions or negotiations with any person, Johnston's board of directors notifies CGW and JI promptly of such inquiries, proposals or offers received by, any such information requested from, or any such discussions or negotiations sought to be initiated or continued with, any of its representatives indicating, in connection with such notice, the name of such person and the material terms and conditions of any inquiries, proposals or offers. Johnston agrees that it will promptly keep CGW informed of the status and terms of any such proposals or offers and the status and terms of any such discussions or negotiations. For purposes of this provision of the Purchase Agreement, a superior proposal is defined to include any proposal: - made by a third party to acquire, directly or indirectly, including pursuant to a tender offer, exchange offer, merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction, for consideration consisting of cash and/or securities, more than 50% of the combined voting power of the shares of Johnston common stock then outstanding or all or substantially all the assets of Johnston, - which the board of directors of Johnston determines in its good faith judgment that such proposal, if accepted, is reasonably likely to be consummated, taking into account all legal, financial and regulatory aspects of the proposal and the person making the proposal, and -23- 25 - which would, if consummated, result in a more favorable transaction to the stockholders of Johnston than the offer, taking into account, to the extent relevant, the long-term prospects and interests of Johnston and its stockholders. Indemnification and Insurance. Pursuant to the Purchase Agreement, CGW and JI have agreed that: - For a period of three years after the date on which JI purchases the shares tendered in the offer, JI will, and will cause Johnston to, indemnify, defend and hold harmless the present and former directors, officers, employees and agents of Johnston and its subsidiaries against all liabilities arising out of actions or omissions relating to the service or services of those persons occurring at or prior to the date on which JI purchases the shares tendered in the offer, to the fullest extent permitted under Delaware law and by Johnston's Certificate of Incorporation and Bylaws as in effect on March 30, 2000. - JI will, or will cause Johnston to, use its reasonable efforts to maintain in effect for a period of three years after the date on which JI purchases the shares tendered in the offer, Johnston's existing directors' and officers' liability insurance policy with respect to claims arising from facts or events which occurred prior to the date on which JI purchases the shares, and covering persons who are currently covered by such insurance; provided, that neither JI nor Johnston is obligated to make aggregate premium payments for such three-year period which exceed 150% of the annual premium payments on Johnston's current policy in effect as of March 30, 2000. Representations and Warranties. Pursuant to the Purchase Agreement, Johnston has made customary representations and warranties to CGW and JI with respect to, among other things, its organization, capitalization, financial statements, public filings, conduct of business, employee benefit plans, intellectual property, labor matters, compliance with laws, tax matters, litigation, environmental matters, tangible property, material contracts and undisclosed liabilities. Termination; Fees. The Purchase Agreement and the offer may be terminated at any time prior to the effective date: - by mutual written consent of CGW and Johnston; - by either CGW or Johnston if JI has not accepted for payment all shares tendered pursuant to the offer by June 30, 2000, if the offer shall have expired without any shares of Johnston common stock being purchased or if any court or other governmental authority shall have issued an order, decree or ruling or taken any other action, which permanently restrains, enjoins or otherwise prohibits the acceptance for payment of, or payment for, shares tendered pursuant to the offer and such order, decree, ruling or other action shall have become final and non-appealable; - by CGW if: (a) due to an occurrence not involving a breach by CGW or JI of their obligations under the Purchase Agreement that results in a failure to satisfy any condition of the offer, JI shall have failed to commence the offer as soon as reasonably practical following the date of the initial public announcement of the offer, or (b) Johnston shall have breached in any material respect any representation, warranty, covenant or other agreement in the Purchase Agreement or the agreements governing the investment by BancBoston or the refinancing of Johnston's debt by Congress Financial Corporation which cannot be cured prior to the date JI pays for the shares tendered in the offer; and - by Johnston if (a) JI has failed to commence the offer as soon as reasonably practical following the initial date of the public announcement of the offer, (b) CGW or JI shall have breached in any material respect any representation, warranty, covenant or other agreement in the Purchase Agreement which cannot be cured prior to 30 days after Johnston gave JI and CGW notice of such breach, or (c) prior to the purchase of shares pursuant to the offer, the board of directors of -24- 26 Johnston approves or recommends a superior proposal and enters into a definitive contract regarding such superior proposal. Pursuant to the Purchase Agreement, Johnston shall pay CGW a fee equal to $3,000,000, plus all of CGW's reasonable expenses (up to a maximum of $4,000,000 for such fee and all expenses), if: - the Purchase Agreement is terminated pursuant the board of directors of Johnston entering into a superior proposal; or - the offer shall have expired without any shares of Johnston common stock being purchased or if JI shall have not accepted for payment all shares of Johnston common stock tendered by June 30, 2000, and prior to that time a superior proposal is announced. CGW shall be entitled to receive its reasonable expenses in the event that: - the Purchase Agreement is terminated by CGW due to Johnston having breached in any material respect any representation, warranty, covenant or other agreement in the Purchase Agreement or the agreements governing the investment by BancBoston or the refinancing of Johnston's debt by Congress Financial Corporation which cannot be cured prior to the date JI pays for the shares tendered in the offer. Johnston shall be entitled to receive its reasonable expenses in the event that: - JI has failed to commence the offer as soon as reasonably practical following the initial date of the public announcement of the offer; or - CGW or JI shall have breached in any material respect any representation, warranty, covenant or other agreement in the Purchase Agreement which cannot be cured prior to 30 days after Johnston gave JI and CGW notice of such breach. Except as described above, all costs and expenses incurred in connection with the Purchase Agreement and the offer shall be paid by the party incurring such expenses, whether or not the offer is consummated. 12. PLANS FOR JOHNSTON; OTHER MATTERS. PLANS FOR JOHNSTON JI and CGW are conducting a detailed review of Johnston and its assets, corporate structure, operations, properties, policies, management and personnel and will consider, subject to the terms of the Purchase Agreement, what, if any, changes would be desirable in light of the circumstances which exist upon completion of the offer. Such changes could include changes in Johnston's business, corporate structure, board of directors or management, although, except as disclosed in this Offer to Purchase, neither JI nor CGW has any current plans with respect to any of such matters. The Purchase Agreement provides that, promptly after the purchase by JI of the shares pursuant to the offer, JI has the right to designate such number of directors, rounded up to the next whole number, on Johnston's board of directors as is equal to the product of the total number of directors on Johnston's board of directors (giving effect to the directors designated by JI) multiplied by the percentage that the number of shares beneficially owned by JI bears to the total number of shares of capital stock then outstanding. See Section 11. Except as disclosed in this Offer to Purchase, neither CGW nor JI has any present plans or proposals that would result in an extraordinary corporate transaction, such as a merger, reorganization, liquidation, relocation of operations, or sale or transfer of assets, involving Johnston or any of its subsidiaries, or any material changes in Johnston's corporate structure, business or composition of its management or personnel. -25- 27 OTHER MATTERS Short-Form Merger. Section 253 of the Delaware General Corporation Law provides that, if a corporation owns at least 90% of the outstanding shares of each class of another corporation, the corporation holding such stock may merge itself into such other corporation without any action or vote on the part of the board of directors or the stockholders of such other corporation (known as a short-form merger). In the event that CGW, JI and any of their affiliates acquire in the aggregate at least 90% of the shares of Johnston's voting capital stock, pursuant to the offer or otherwise, then, at the election of CGW, a short-form merger could be effected without any approval of the board of directors or the stockholders of Johnston, subject to compliance with the provisions of Section 253 of the DGCL. Even if CGW, JI of their affiliates do not own 90% of the outstanding shares following consummation of the offer, CGW and JI could 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. Appraisal Rights. Under the DGCL, holders of shares tendered pursuant to the offer do not have appraisal rights as a result of the offer. In connection with the short-form merger, however, stockholders of the Company may have the right to dissent and demand appraisal of their shares under the DGCL. Under the DGCL, dissenting stockholders who comply with the applicable statutory procedures will be entitled to receive a judicial determination of the fair value of their shares (exclusive of any element of value arising from the accomplishment or expectation of the short-form merger) and to receive payment of such fair value in cash, together with a fair rate of interest, if any. Any such judicial determination of the fair value of the shares could be based upon considerations other than or in addition to the offer price, the consideration per share to be paid in the short-form merger and the market value of the shares, including asset values and the investment value of the shares. Stockholders should recognize that the value so determined could be higher or lower than the price per share paid pursuant to the offer or the consideration per share to be paid in the short-form merger. THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING STOCKHOLDERS DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY STOCKHOLDERS DESIRING TO EXERCISE ANY AVAILABLE DISSENTERS' RIGHTS. THE PRESERVATION AND EXERCISE OF DISSENTERS' RIGHTS REQUIRE STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF THE DGCL. The foregoing description of the DGCL is not necessarily complete and is qualified in its entirety by reference to the DGCL. Rule 13E-3. The short-form merger would have to comply with any applicable Federal law operative at the time. Rule 13e-3 under the Exchange Act is applicable to certain going private transactions; however, JI believes that Rule 13e-3 will not be applicable to the short-form merger. If Rule 13e-3 were applicable to the short-form merger, it would require, among other things, that certain financial information concerning Johnston, and certain information relating to the fairness of the proposed transaction and the consideration offered to minority stockholders in such a transaction, be filed with the SEC and disclosed to minority stockholders prior to consummation of the transaction. 13. DIVIDENDS AND DISTRIBUTIONS. As described above, the Purchase Agreement provides that, prior to the time the designees of JI have been elected to the board of directors of Johnston, Johnston will not: - except as provided in the Purchase Agreement, or pursuant to the exercise of stock options outstanding as of March 30, 2000, issue, sell, pledge, encumber, authorize the issuance of, enter into any contract to issue, sell, pledge, encumber, or authorize the issuance of, or otherwise permit to become outstanding, any additional shares of Johnston's common stock or any other capital stock of any Johnston subsidiary, or any stock appreciation rights, or any option, warrant, or other equity right; or -26- 28 - adjust, split, combine or reclassify any capital stock of Johnston or its subsidiaries or issue or authorize the issuance of any other securities in respect of or in substitution for shares of Johnston common stock, or sell, lease, mortgage or otherwise dispose of or otherwise encumber (a) any shares of capital stock of any subsidiary of Johnston, or (b) any asset having a book value in excess of $25,000 other than in the ordinary course of business for reasonable and adequate consideration; or - repurchase, redeem, or otherwise acquire or exchange (other than exchanges in the ordinary course under employee benefit plans), directly or indirectly, any shares, or any securities convertible into any shares, of the capital stock of Johnston or its subsidiaries, or declare or pay any dividend or make any other distribution in respect of Johnston's capital stock. 14. CONDITIONS OF OFFER. Notwithstanding any other provision of the offer, JI shall not be required to accept for payment or pay for any shares tendered pursuant to the offer, and may terminate or amend the offer and may postpone the acceptance for payment of and payment for shares tendered, if the minimum condition shall not have been satisfied, any applicable waiting period under the Hart-Scott-Rodino Act shall not have expired or been terminated prior to the expiration of the offer, or at any time on or after the date of the Purchase Agreement, and prior to the acceptance for payment of shares, any of the following conditions shall exist: - there shall have been instituted, threatened or pending any litigation brought by any governmental entity or other person, or before any court or governmental authority, in each case that has a reasonable likelihood of success, (a) challenging the acquisition by CGW or JI of any shares, directly or indirectly seeking to restrain or prohibit or otherwise make more costly the making or consummation of the offer, or seeking to obtain from Johnston, CGW or JI any damages that are material in relation to Johnston and its subsidiaries, taken as a whole, (b) seeking to prohibit or limit the ownership or operation by Johnston, CGW or any of their respective subsidiaries of any material portion of the business or assets of Johnston, CGW or any of their respective subsidiaries, or to compel Johnston, CGW or any of their respective subsidiaries to dispose of or hold separate any material portion of the business or assets of Johnston, CGW or any of their respective subsidiaries, as a result of the offer, (c) seeking to impose or to confirm limitations on the ability of CGW or any of its subsidiaries effectively to acquire or hold or to exercise full rights of ownership of the shares tendered in the offer, including without limitation the right to vote any shares acquired or owned by CGW or any of its subsidiaries on all matters properly presented to the stockholders of Johnston, or the right to vote any shares of capital stock of any subsidiary directly or indirectly owned by Johnston, (d) seeking to prohibit CGW or any of its subsidiaries from effectively controlling in any material respect the business or operations of Johnston or any of its subsidiaries, or (e) which otherwise is reasonably likely to have a material adverse effect on Johnston and its subsidiaries; - there shall be any law threatened, proposed or enacted with respect to, or deemed applicable to, or any consent withheld with respect to, (a) CGW, Johnston or any of their respective subsidiaries or (b) the offer, by any governmental entity or before any court or governmental authority, that is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (a) through (d) of the first bullet above; - there shall have occurred any development that is reasonably likely to result in a material adverse effect on Johnston and its subsidiaries; - there shall have occurred (a) any general suspension of trading in, or limitation on prices for, securities on the New York Stock Exchange or in the Nasdaq Stock Market for a period in excess of 24 hours, (b) a decline of at least 25% in either the Dow Jones Average of Industrial Stocks or the Standard & Poor's 500 index from March 30, 2000, or a material disruption of or material adverse change in financial, banking or capital market conditions that could materially adversely affect syndication of loan facilities, (c) any material adverse change in United States currency exchange rates or a suspension of, or limitation on, the markets therefor, (d) a declaration of a banking -27- 29 moratorium or any suspension of payments in respect of banks in the United States, (e) any limitation (whether or not mandatory) by any domestic government or governmental, administrative or regulatory authority or agency on, or any other event that could reasonably be expected to materially adversely affect the extension of credit by banks or other lending institutions, (f) a commencement of a war or armed hostilities or other national or international calamity that has a material adverse effect on CGW, JI, Johnston or any of their subsidiaries or affecting or delaying the consummation of the offer, or (g) in the case of any of the foregoing existing on the date of the Purchase Agreement, a material acceleration or worsening thereof; - (a) it shall have been publicly disclosed or JI shall have otherwise learned that beneficial ownership of more than 20% of the outstanding shares of Johnston's common stock has been acquired by any corporation (including Johnston or any of its subsidiaries or affiliates), partnership, person or other entity or group, other than JI or any of its affiliates, or (b) (A) the board of directors of Johnston or any committee thereof shall have approved or recommended any acquisition proposal or any other acquisition of shares other than the offer, or (B) Johnston shall have entered into an agreement with respect to an acquisition proposal or (C) the board of directors of Johnston or any committee thereof shall have resolved to do any of the foregoing; - any of the representations and warranties of Johnston set forth in the Purchase Agreement that are qualified as to materiality shall not be true and correct, or any such representations and warranties that are not so qualified shall not be true and correct in any material respect, in each case as if such representations and warranties were made at the time of such determination; - Johnston shall have failed to perform in any material respect any obligation or to comply in any material respect with any agreement or covenant of Johnston to be performed or complied with by it under the Purchase Agreement; - the Purchase Agreement shall have been terminated in accordance with its terms or the offer shall have been terminated with the consent of Johnston; - all consents of and notices to or filings with governmental authorities and third parties required in connection with the offer shall not have been obtained or made; - JI shall not have received financing in an amount necessary to consummate the offer and the purchase of Johnston common and preferred stock, including the payment of fees and expenses relating to the those transactions, on terms and conditions reasonably satisfactory to JI and CGW; or - CGW and JI shall not have received confirmation from Johnston that each of the financial institutions that have made loans to employees of Johnston to purchase shares of Johnston common stock, which are guaranteed by Johnston, shall have agreed to restructure the loans on terms reasonably acceptable to CGW and JI, including the pledge by each borrower under the loans of all shares of Johnston common stock held by such borrower and purchased with the proceeds of the loan, to the lender to secure the loans; provided, however, that any employee borrower who chooses to tender their shares of Johnston common stock acquired with the loans, will not have their loan restructured and instead it will remain due and payable in accordance with its original terms. The foregoing conditions are for the sole benefit of JI and CGW and may be asserted by JI or CGW regardless of the circumstances giving rise to any such condition or may be waived by JI or CGW in whole or in part at any time and from time to time in their sole discretion. The failure by CGW or JI 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 other 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. -28- 30 15. CERTAIN LEGAL MATTERS. Except as described in this Section 15, based on information provided by Johnston, none of Johnston, JI or CGW is aware of any license or regulatory permit that appears to be material to the business of Johnston and its subsidiaries, taken as a whole, that might be adversely affected by JI's acquisition of shares (and the indirect acquisition of the stock of Johnston'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 Johnston's subsidiaries) by JI as contemplated herein. Should any such approval or other action be required, JI and CGW 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, JI 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 Johnston's business or that certain parts of Johnston'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, JI 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 have adopted laws that purport, to varying degrees, to apply to attempts to acquire corporations that are incorporated in, or that have substantial assets, stockholders, principal executive offices or principal places of business or whose business operations otherwise have substantial economic effects in, such states. Johnston, directly or through subsidiaries, conducts business in a number of states throughout the United States, some of which have enacted such laws. In Edgar v. MITE Corp., the Supreme Court of the United States invalidated on constitutional grounds the Illinois Business Takeover Statute which, as a matter of state securities law, made takeovers of corporations meeting certain requirements more difficult. However, in 1987 in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the State of Indiana could, as a matter of corporate law, constitutionally disqualify a potential acquiror from voting shares of a target corporation without the prior approval of the remaining stockholders where, among other things, the corporation is incorporated in, and has a substantial number of stockholders in, the state. Subsequently, in TLX Acquisition Corp. v. Telex Corp., a Federal District Court in Oklahoma ruled that the Oklahoma statutes were unconstitutional insofar as they apply to corporations incorporated outside Oklahoma in that they would subject such corporations to inconsistent regulations. Similarly, in Tyson Foods, Inc. v. McReynolds, a Federal District Court in Tennessee ruled that four Tennessee takeover statutes were unconstitutional as applied to corporations incorporated outside Tennessee. This decision was affirmed by the United States Court of Appeals for the Sixth Circuit. Johnston is incorporated under the laws of the State of Delaware. In general, Section 203 of the DGCL prevents an "interested stockholder" (including a person who has the right to acquire 15% or more of the corporation's outstanding voting stock) from engaging in a "business combination" (defined to include mergers and certain other actions) with a Delaware corporation for a period of three years following the date such person became an interested stockholder. Johnston's Board approved for purposes of Section 203 the entering into by JI, CGW and Johnston of the Purchase Agreement and the consummation of the transactions contemplated thereby and has taken all appropriate action so that Section 203, with respect to Johnston, will not be applicable to CGW and JI by virtue of such actions. If any government official or third party should seek to apply any state takeover law to the offer or the short-form merger or other business combination between JI or any of its affiliates and Johnston, JI -29- 31 will take such action as then appears desirable, which action may include challenging the applicability or validity of such statute in appropriate court proceedings. In the event it is asserted that one or more state takeover statutes is applicable to the offer or the short-form merger and an appropriate court does not determine that it is inapplicable or invalid as applied to the offer or the short-form merger, JI might be required to file certain information with, or to receive approvals from, the relevant state authorities or holders of shares of Johnston's common stock, and JI might be unable to accept for payment or pay for shares tendered pursuant to the offer, or be delayed in continuing or consummating the offer or the short-form merger. In such case, JI may not be obligated to accept for payment or pay for any tendered shares of Johnston's common stock. ANTITRUST The offer is subject to the Hart-Scott-Rodino Act, which provides that certain acquisition transactions may not be consummated unless certain information has been furnished to the Antitrust Division of the Department of Justice and the Federal Trade Commission and certain waiting period requirements have been satisfied. JI and Johnston expect to file soon their Notification and Report Forms with respect to the offer under the Hart-Scott-Rodino Act. The waiting period under the Hart-Scott-Rodino Act with respect to the offer will expire at 11:59 p.m., New York City time, on the fifteenth day after the date JI's form is filed unless early termination of the waiting period is granted. However, the Antitrust Division or the FTC may extend the waiting period by requesting additional information or documentary material from JI or Johnston. If such a request is made, such waiting period will expire at 11:59 p.m., New York City time, on the tenth day after substantial compliance by JI with such request. Only one extension of the waiting period pursuant to a request for additional information is authorized by the Hart-Scott-Rodino Act. Thereafter, such waiting period may be extended only by court order or with the consent of JI. In practice, complying with a request for additional information or material can take a significant amount of time. In addition, if the Antitrust Division or the FTC raises substantive issues in connection with a proposed transaction, the parties frequently engage in negotiations with the relevant governmental agency concerning possible means of addressing those issues and may agree to delay consummation of the transaction while such negotiations continue. JI will not accept for payment shares tendered pursuant to the offer unless and until the waiting period requirements imposed by the Hart-Scott-Rodino Act with respect to the offer have been satisfied. The FTC and the Antitrust Division frequently scrutinize the legality under the antitrust laws of transactions such as JI's acquisition of shares pursuant to the offer. At any time before or after JI's acquisition of shares, the Antitrust Division or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the acquisition of shares pursuant to the offer or otherwise or seeking divestiture of shares acquired by JI or divestiture of substantial assets of JI, CGW, or their affiliates. Private parties, as well as state governments, may also bring legal action under the antitrust laws under certain circumstances. Based upon an examination of publicly available information relating to the businesses in which JI, CGW, and Johnston are engaged, JI and CGW believe that the acquisition of shares by JI will not violate the antitrust laws. Nevertheless, there can be no assurance that a challenge to the offer or other acquisition of shares by JI on antitrust grounds will not be made or, if such a challenge is made, of the result. See Section 14 for certain conditions to the offer, including conditions with respect to litigation and certain governmental actions. FEDERAL RESERVE BOARD REGULATIONS Regulations U and X of the Federal Reserve Board restrict the extension or maintenance of credit for the purpose of buying or carrying margin stock, including shares of Johnston common stock, if the credit is secured directly or indirectly by margin stock. Such secured credit may not be extended or maintained in an amount that exceeds the maximum loan value of all the direct and indirect collateral securing the credit, including margin stock and other collateral. All financing for the offer will be structured so as to be in full compliance with these regulations. -30- 32 16. FEES AND EXPENSES. CGW has acted as financial advisor to JI in connection with the proposed acquisition of Johnston. As a result, JI will pay, or cause Johnston to pay, an advisory fee in connection with the transactions contemplated by the Purchase Agreement of approximately $2.1 million. JI has retained MacKenzie Partners, Inc. to act as the information agent and The Bank of New York to act as the depositary in connection with the offer. Such firms each will receive reasonable and customary compensation for their services. JI has also agreed to indemnify each such firm against certain liabilities in connection with their services, including certain liabilities under federal securities laws. JI will not pay any fees or commissions to any broker or dealer or other person (other than the information agent) for making solicitations or recommendations in connection with the offer. Brokers, dealers, banks and trust companies will be reimbursed by JI for customary mailing and handling expenses incurred by them in forwarding material to their customers. 17. MISCELLANEOUS. The offer is being made to all holders of shares of Johnston common stock other than Johnston. JI is not aware of any jurisdiction in which the making of the offer or the tender of shares in connection therewith would not be in compliance with the laws of such jurisdiction. If JI becomes aware of any jurisdiction in which the making of the offer would not be in compliance with applicable law, JI will make a good faith effort to comply with any such law. If, after such good faith effort, JI cannot comply with any such law, the offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of shares residing in such jurisdiction. In any jurisdiction where the securities, blue sky or other laws require the offer to be made by a licensed broker or dealer, the offer shall be deemed to be made on behalf of JI by one or more registered brokers or dealers licensed under the laws of such jurisdiction. No person has been authorized to give any information or to make any representation on behalf of CGW or JI not contained herein or in the Letter of Transmittal and, if given or made, such information or representation must not be relied upon as having been authorized. JI and CGW have filed with the Commission the Schedule TO pursuant to Regulation M-A under the Exchange Act, furnishing certain additional information with respect to the offer. The Schedule TO and any amendments thereto, including exhibits, may be examined and copies may be obtained from the offices of the SEC and the National Association of Securities Dealers, Inc. in the manner set forth in Section 9 of this Offer to Purchase (except that they will not be available at the regional offices of the Commission). -31- 33 JI ACQUISITION CORP. SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF CGW AND JI 1. DIRECTORS AND EXECUTIVE OFFICERS OF CGW. JI Acquisition Corp. is a subsidiary of CGW Southeast Partners IV, L.P. CGW Southeast Partners IV, L.P. is a Delaware limited partnership. The general partner of CGW Southeast Partners IV, L.P. is CGW Southeast IV, L.L.C., a Delaware limited liability company. The manager of CGW Southeast IV, L.L.C. is CGW, Inc., a Georgia corporation. The following table sets forth the name, business address and present principal occupation or employment, and material occupations, positions, offices or employment for the past five years, of each director, executive officer and shareholder of CGW, Inc. Unless otherwise indicated, each such person is a citizen of the United States of America and the business address of each such person is c/o CGW Southeast Partners IV, L.P., Twelve Piedmont Center, Suite 210, Atlanta, Georgia 30305. Unless otherwise indicated, each such person has held his or her present occupation as set forth below, or has been an executive officer of CGW, or the organization indicated, for the past five years. NAME AND ADDRESS PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS Roy R. Bowman Mr. Bowman is currently the President of JI Acquisition Corp. as well as a Vice President of CGW, Inc. Prior to joining CGW in 1999, Mr. Bowman served as a Managing Director for the Pricewaterhouse Coopers Business Regeneration Services Group from 1993 through 1999. From 1989 to 1993 he was a Senior Vice President and Managing Director of Buccino & Associates, Inc., a national turnaround consulting firm. Previously, he served for eight years as President of Carwood Manufacturing Company and Duckhead Apparel, Inc. Earlier, he served for seven years as Chief Financial Officer of Formfit Rogers, Inc. of Nashville, Tennessee. He holds a BS from Mississippi State University (1966) and an MBA from Georgia State University (1971). Richard L. Cravey Mr. Cravey is currently the sole Director of JI Acquisition Corp. Mr. Cravey is also currently a Director, Vice President, Secretary and shareholder of CGW, Inc. Prior to the formation of Cravey & Co., a predecessor to CGW, in 1984, Mr. Cravey served for two years as Senior Vice President for Acquisitions for Southeastern Capital Corporation, an American Stock Exchange-listed company primarily engaged in acquiring and operating businesses in leveraged transactions. From 1976 through 1983, Mr. Cravey was Vice President and Manager of the Citicorp Industrial Credit Corporation Southeast and Southwest regions. Mr. Cravey holds a BS (1968) from Georgia Tech and an MBA (1974) from Georgia State University. Richard L. Cravey, Jr Mr. Cravey is currently a Vice President of CGW, Inc. Prior to joining CGW, from March 1995 through 1996, Mr. Cravey held an I-1 34 Associate position at ING Capital of Atlanta, Georgia. Mr. Cravey received a BA from Furman University (1990) and an MBA from Emory University (1993). William A. Davies Mr. Davies is currently a Vice President of CGW, Inc., and has been employed with CGW during the last five years. Prior to joining CGW, Mr. Davies was a Vice President with Westinghouse Credit Corporation from 1984 through 1991, where he was primarily engaged in making equity and subordinated debt investments. Before joining Westinghouse Credit, Mr. Davies was a commercial banking officer with Pittsburgh National Bank and Equibank in Pittsburgh, Pennsylvania. Mr. Davies received a BS (1968) and an MBA (1974) from Indiana University. Garrison M. Kitchen Mr. Kitchen is currently a Vice President of CGW, Inc., and has been employed with CGW during the last five years. Prior to joining CGW in 1994, Mr. Kitchen was a Managing Director in the investment banking department of The Robinson Humphrey Company, Inc. From 1984 to 1985, Mr. Kitchen was a Vice President with Bear, Stearns & Co. in Atlanta. From 1981 through 1984, Mr. Kitchen was with the investment banking department of Dean Witter Reynolds Inc. in Atlanta. Mr. Kitchen holds a BS in Economics from the Wharton School of the University of Pennsylvania (1981) and is a Chartered Financial Analyst. Michael D. Long Mr. Long is currently a Vice President of CGW, Inc. Prior to joining CGW in 1998, Mr. Long was the CEO of Pac Pizza, LLC, a 148-unit Pizza Hut franchisee. Mr. Long was also an investor in the company through a private equity partnership, L&G Financial, which was formed in 1995 and based in Austin, Delaware. From 1977 to 1995, Mr. Long held various positions with NationsBank in its Corporate, Energy, Syndication and Commercial Banking Groups. He holds a BS (1974) in Finance/Accounting and an MBA (1975) from Oklahoma State University. Bart A. McLean Mr. McLean is currently a Vice President of CGW, Inc., and has been employed with CGW during the last five years. Prior to joining CGW, Mr. McLean was a Principal with Allsop Venture Partners in St. Louis from 1987 through 1992. Allsop Venture was focused on investing in and acquiring smaller middle-market companies. From 1983 through 1987, Mr. McLean was a Vice President of Republic Venture Group, the venture capital subsidiary of Republic Bank - Dallas. He was employed as a lending officer in Republic Bank's energy banking group from 1981 to 1983. Mr. McLean holds a BS from the University of Delaware (1979) and an MBA from Indiana University (1981). Sidney J. Nurkin Mr. Nurkin is currently an Assistant Secretary of CGW, Inc. Mr. Nurkin is also currently, and has been since 1994, a partner in Alston & Bird LLP. He concentrates his practice on mergers and acquisitions, leveraged buyouts, corporate finance, and corporate governance. His professional activities include membership in the Atlanta and American Bar Associations and the State Bar of Georgia. Mr. Nurkin is a former Chairman of the Corporate and Banking Law Section of the State Bar of Georgia and former member of the I-2 35 Committee on Corporate Laws of the Business Law Section of the American Bar Association. He is presently a member of the Committee on Corporate Practice of the American Bar Association. Mr. Nurkin holds a Bachelor of Science degree from Duke University and an LLB from the Duke University School of Law. James A. O'Donnell Mr. O'Donnell is currently the Secretary and Treasurer of JI Acquisition Corp. as well as a Vice President of CGW, Inc. Mr. O'Donnell is also currently a Director of Bestway, Inc. Mr. O'Donnell joined CGW in 1995. Beginning in 1989 and 1991, respectively, Mr. O'Donnell became a general partner of O'Donnell & Masur, L.P. and a general partner of Sherry Lane Partners, L.P., both private equity partnerships. From 1983 through 1988, he was President and Chief Executive Officer of First Republic Venture Group and its predecessor, InterFirst Venture Corp., a venture capital firm. From 1981 to 1982 Mr. O'Donnell was a Senior Vice President and Manager of the Corporate Finance Department for InterFirst Bank in Dallas. Prior to InterFirst Bank, he served as a Regional Investment Manager for The Equitable Life Assurance Society of the US. He holds a BA from Rhodes College (1974), an MBA (1974) from the Wharton School of the University of Pennsylvania (1978) and is a Chartered Financial Analyst. Edwin A. Wahlen, Jr Mr. Wahlen is currently a Director, President and Treasurer of CGW, Inc. Mr. Wahlen is also a shareholder of CGW, Inc., as well as a Director of Cameron Ashley Building Products, Inc. Prior to joining CGW, Mr. Wahlen was a Senior Vice President in the investment banking department of Dean Witter Reynolds, Inc. from 1977 to 1985. From 1973 to 1977, Mr. Wahlen was an officer in the Atlanta office of the corporate banking department of the First National Bank of Chicago and from 1970 to 1973, he served as a member of the investment banking department of Interstate Securities Corporation. Mr. Wahlen received a BS from Georgia Tech (1970), holds an MBA from the University of North Carolina at Chapel Hill (1972) and is a Chartered Financial Analyst. 2. DIRECTORS AND EXECUTIVE OFFICERS OF JI. Unless otherwise indicated, all information concerning the current business address, citizenship, principal occupation or employment and five-year employment history for each person identified below is the same as the information given in paragraph 1 above. Director Richard L. Cravey Executive Officers Roy R. Bowman -- President James A. O'Donnell -- Treasurer and Secretary I-3 36 SCHEDULE II CGW FINANCIAL STATEMENTS TABLE OF CONTENTS
PAGE ---- FINANCIAL STATEMENTS -- INCOME TAX BASIS AS OF DECEMBER 31, 1999 AND FOR THE PERIOD APRIL 22, 1999 (DATE OF FORMATION) TO DECEMBER 31, 1999: Statement of Financial Position............................. II-1 Statement of Operations..................................... II-2 Statement of Changes in Partners' Equity.................... II-3 Statement of Cash Flows..................................... II-4 Notes to Financial Statements............................... II-5
37 CGW SOUTHEAST PARTNERS IV, L.P. STATEMENT OF FINANCIAL POSITION -- INCOME TAX BASIS DECEMBER 31, 1999 ASSETS Portfolio investments Common stocks............................................. $26,433,630 Cash........................................................ 2,148,041 Prepaid management fees..................................... 235,104 Organizational costs, net................................... 170,969 Other assets................................................ 20,482 ----------- $29,008,226 =========== LIABILITIES AND PARTNERS' EQUITY Accrued liabilities......................................... $ 256,756 Borrowings on line of credit................................ 16,000,000 Accrued interest payable.................................... 51,233 Partners' equity: General partner........................................... 105,569 Limited partners.......................................... 12,594,668 ----------- Total partners' equity............................ 12,700,237 ----------- $29,008,226 ===========
See notes to financial statements. II-1 38 CGW SOUTHEAST PARTNERS IV, L.P. STATEMENT OF OPERATIONS -- INCOME TAX BASIS PERIOD APRIL 22, 1999 (DATE OF FORMATION) TO DECEMBER 31, 1999 Revenue -- Interest income.................................. $ 4,837 ----------- Expenses: Management fee............................................ 5,629,753 Interest expense.......................................... 399,827 Professional fees......................................... 9,500 Other expenses............................................ 21,846 ----------- Total expenses.................................... 6,060,926 ----------- Net loss.................................................... $(6,056,089) ===========
See notes to financial statements. II-2 39 CGW SOUTHEAST PARTNERS IV, L.P. STATEMENT OF CHANGES IN PARTNERS' EQUITY -- INCOME TAX BASIS PERIOD APRIL 22, 1999 (DATE OF FORMATION) TO DECEMBER 31, 1999
GENERAL LIMITED PARTNER PARTNERS TOTAL -------- ----------- ----------- Partners' Equity -- April 22, 1999 Contributions from partners............................. $169,417 $18,915,525 $19,084,942 Syndication expenses.................................... (3,277) (324,406) (327,683) Net loss................................................ (60,562) (5,995,527) (6,056,089) Nondeductible expenses.................................. (9) (924) (933) -------- ----------- ----------- Partners' Equity -- December 31, 1999..................... $105,569 $12,594,668 $12,700,237 ======== =========== ===========
See notes to financial statements. II-3 40 CGW SOUTHEAST PARTNERS IV, L.P. STATEMENT OF CASH FLOWS -- INCOME TAX BASIS PERIOD APRIL 22, 1999 (DATE OF FORMATION) TO DECEMBER 31, 1999 Operating activities: Net loss.................................................. $(6,056,089) Adjustments to reconcile net loss to net cash used in operating activities: Amortization expense................................... 8,998 Increase in prepaid management fees.................... (235,104) Increase in other assets............................... (20,482) Increase in accrued liabilities........................ 256,756 Increase in accrued interest payable................... 51,233 Nondeductible expenses................................. (933) ----------- Net cash used in operating activities............. (5,995,621) Investing activities: Purchase of portfolio investments......................... (26,433,630) ----------- Net cash used in investing activities............. (26,433,630) Financing activities: Contributions from partners............................... 19,084,942 Syndication expenses...................................... (327,683) Organizational costs...................................... (179,967) Borrowings on line of credit.............................. 16,000,000 ----------- Net cash provided by financing activities......... 34,577,292 ----------- Increase in cash............................................ 2,148,041 Cash: Beginning of year......................................... 0 ----------- End of year............................................... $ 2,148,041 ===========
See notes to financial statements. II-4 41 CGW SOUTHEAST PARTNERS IV, L.P. NOTES TO FINANCIAL STATEMENTS -- INCOME TAX BASIS AS OF AND FOR THE PERIOD APRIL 22, 1999 (DATE OF FORMATION) TO DECEMBER 31, 1999 1. PARTNERSHIP AGREEMENT CGW Southeast Partners IV, L.P. (the "Partnership") is a limited partnership organized to acquire, along with operating management, equity positions in profitable or potentially profitable businesses and to develop and implement strategies designed to enhance the operating efficiency, financial management, and strategic direction of the businesses. The Partnership pays the General Partner an annual management fee until either January 1 or July 1 following the earlier of (i) the end of the Commitment Period, (ii) the time at which the General Partner or a majority of the Principals of the General Partner or Messrs. Cravey and Wahlen (whether or not joined by others), directly or indirectly, hold the closing of a Competing Fund, or (iii) the time when at least 90% of the aggregate Committed Contributions of all Partners has been invested, expended, or reserved, whichever is the first to occur (such period being referred to as the "2% Period"). The management fee is equal to 2% of the aggregate Committed Contributions of the Partners. After the 2% Period, and through the date of liquidation and dissolution of the Partnership, the Partnership will pay the General Partner an annual management fee equal to 1% of the Base Amount as of each January 1 and July 1 during such period (referred to as the "1% Period"). The Base Amount means the sum of (a) the aggregate cost basis of all Portfolio Investments that as of that date are not Disposed Investments, plus (b) the amount of Bridge Loans outstanding on that date that have not become Term Loans, plus (c) the amount, if any, of Distributable Proceeds retained by the Partnership to the extent the General Partner has reserved such amount for a specific investment in an acquired business that closes within seventy-five days of the date of determination. Payment of the management fee is made quarterly in advance on January 1, April 1, July 1, and October 1 of each year, in an amount equal to 25% of the annual management fee. The General Partner has entered into an agreement with CGW Southeast Management, LLC ("Management"), whereby the General Partner agrees to pay the management fees to Management. Under the terms of the Agreement, 80% of any acquired business consulting fees paid to the General Partner or Management by the portfolio companies reduces future management fees payable to the General Partner. In addition, 55% of permitted transaction fees up to aggregate retained transaction fees of $12.5 million will be offset against any future management fees; thereafter, 100% of any permitted transaction fees will be offset against any future management fees. Finally, any break-up fees payable to the General Partner or the Partnership shall be disbursed as follows: first, to reimburse the Partnership for partnership expenses incurred in connection with the transaction; second, to reimburse the General Partner for expenses incurred with respect to the transaction; and third, to the General Partner, provided, however, that 80% of such remaining amount paid to the General Partner reduces future management fees. Partnership profits or losses resulting from items of income or expense not relating to an equity investment, exclusive of certain expenses borne by the General Partner, are generally allocated to the Partners based on their respective Contribution Accounts. Contribution Accounts are defined as the amount of committed capital that has been contributed as of the date of determination. The net gain of the Partnership is allocated among the Partners to proportionately reduce the difference between their respective Target Capital Accounts and Partially Adjusted Capital Accounts as long as the Target Capital Accounts exceed the Partially Adjusted Capital Accounts. Conversely, the net loss of the Partnership is allocated to proportionately reduce the difference between their Partially Adjusted Capital Accounts and Target Capital Accounts as long as the Target Capital Accounts are less than the Partially Adjusted Capital Accounts. The Target Capital Accounts are defined as the amount each Partner would receive if all remaining assets were sold for cash at no gain or loss. Partially Adjusted II-5 42 CGW SOUTHEAST PARTNERS IV, L.P. NOTES TO FINANCIAL STATEMENTS -- INCOME TAX BASIS -- (CONTINUED) Capital Accounts represent each Partner's capital account adjusted for all items except the net gain or net loss allocation. Cash distributions attributable to interest on investments or bridge loans shall be made to the partners contributing the funds for such investment in proportion to such contribution. Any distribution made at any time before a Portfolio Investment has become a Disposed Investment shall be made to such Participating Partners in that Portfolio Investment in proportion to their respective participation percentages. Distributions made relative to Disposed Investments will be made in the following order, which is determined on an investment-by-investment basis: - - Each Participating Partner receives an annually compounded 8% Preferential Return on capital contributed for such disposed investment. - - Each Participating Partner receives a return of capital contributions with respect to such Portfolio Investment, which includes allocated management fees and expenses attributable to the Disposed Investment. - - Each Participating Partner receives a return of capital contributions with respect to all Portfolio Investments that have theretofore become Disposed Investments, which includes allocated management fees and expenses attributable to the Disposed Investments. - - Any remaining amount is distributed 50% to the General Partner and 50% to the Participating Partners (the "50% Distribution") until the General Partner has received aggregate Carried Distributions equal to 20% of the aggregate amount of distributions made to the Participating Partners for the 8% preferential return and the 50% Distribution. Carried Distributions is defined as the amount of proceeds that has been distributed to the General Partner in excess of the amount the General Partner would have received if it had been a Limited Partner and held no interest in the Partnership as a General Partner. - - Any remaining amount is distributed 80% to the Participating Partners and 20% to the General Partner. No amount shall be distributed to the General Partner unless the net asset value of the Partnership immediately following the proposed distribution plus the amount of all prior distributions to the Partners equals or exceeds an amount equal to 125% of the aggregate Contributions Accounts of all Partners. If in violation of applicable laws, Pension Fund and Bank Holding Company investors may withdraw from certain investments provided that they provide to the General Partner an opinion of counsel stating such investment would be unlawful or a violation of applicable ERISA or BHC laws. The Partnership Agreement was amended after year-end to provide that if Limited Partners whose aggregate committed contributions equal or exceed 35% of the aggregate committed contributions of all Limited Partners exercise their right to withdraw from certain investments, then each other Limited Partner whose committed contribution is equal to or greater than $5,000,000 shall also have the right to withdraw from such investment. The Partnership Agreement expires December 31, 2009. 2. SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting. The accompanying financial statements have been prepared on the basis of accounting used for income tax purposes, generally the accrual basis. Under this income tax method of accounting, investments are stated at cost. Generally accepted accounting principles would require such investments to be carried at fair value. Portfolio Investments. Portfolio investments are stated at cost. In computing gain or loss on disposal of securities, the Partnership uses the specific identification method of establishing cost. II-6 43 CGW SOUTHEAST PARTNERS IV, L.P. NOTES TO FINANCIAL STATEMENTS -- INCOME TAX BASIS -- (CONTINUED) Use of Estimates. Preparing financial statements in conformity with the basis of accounting used for income tax purposes requires management to make estimates and assumptions. Those estimates and assumptions affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Taxes on Income. Taxes on income are not provided in the financial statements of the Partnership because each Partner's share of the taxable income or loss is included in the tax returns of the respective Partner. 3. INVESTMENTS On April 23, 1999 the Partnership made its initial investment in J Three Technology Services of $8.0 million and subsequently made additional investments in J Three totaling $18.4 million. At December 31, 1999, the Partnership's investment in J Three is $26,433,630. 4. LINE OF CREDIT On April 16, 1999, the Partnership entered into a $25,000,000 line of credit agreement with a bank, which bears interest at the 90-day LIBOR rate plus 150 basis points (6.15% at December 31, 1999). This agreement extends three years from the origination date and contains three one-year discretionary extensions at the end of the initial term. As of December 31, 1999, $16,000,000 in advances was outstanding under this line and in addition $51,233 in interest has been accrued. On January 6, 2000, the Partnership repaid the $16,000,000 balance under its line of credit. 5. PARTNERS' EQUITY The Partnership's capital accounts for the general and limited partners as of December 31, 1999 are summarized as follows:
CAPITAL BALANCE TOTAL COMMITTED AT DECEMBER 31, CAPITAL 1999 --------------- --------------- General partner $ 4,045,000 $ 105,569 Limited partners 400,455,000 12,594,668 ------------ ----------- $404,500,000 $12,700,237 ============ ===========
II-7 44 Facsimile copies of the Letter of Transmittal, properly completed and duly signed, will be accepted. The Letter of Transmittal, certificates for shares and any other required documents should be sent or delivered by each stockholder of Johnston or his or her broker, dealer, commercial bank, trust company or other nominee to the depository, at one of the addresses set forth below: The Depositary for the offer is: THE BANK OF NEW YORK By Mail: Facsimile Transmission: By Hand or Overnight Courier: Tender & Exchange Department (for Eligible Institutions Tender & Exchange Department P.O. Box 11248 Only) 101 Barclay Street Church Street Station (212) 815-6213 Receive and Deliver Window New York, NY 10286-1248 New York, NY 10286
For Confirmation Telephone: (212) 815-6156 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITORY. Questions and requests for assistance or additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer Identification on Substitute Form W-9 may be directed to the information agent at the location and telephone numbers set forth below. Stockholders may also contact their broker, dealer, commercial bank or trust company for assistance concerning the offer. The Information Agent for the offer is: (MacKenzie Partners, Inc. Logo) 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (Call Collect) or CALL TOLL-FREE (800) 322-2885 EX-99.(A)(2) 3 FORM OF LETTER OF TRANSMITTAL 1 LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF JOHNSTON INDUSTRIES, INC. PURSUANT TO THE OFFER TO PURCHASE DATED APRIL 7, 2000 BY JI ACQUISITION CORP. a subsidiary of CGW SOUTHEAST PARTNERS IV, L.P. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, MAY 5, 2000, UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE"). THE DEPOSITARY FOR THE OFFER IS: THE BANK OF NEW YORK
By Mail: By Facsimile Transmission: By Hand or Overnight Delivery: -------- -------------------------- ------------------------------ (for Eligible Institutions Only) Tender & Exchange Department (212) 815-6213 Tender & Exchange Department P.O. Box 11248 101 Barclay Street Church Street Station Confirm Receipt of Facsimile by New York, New York 10286 New York, New York 10286-1248 Telephone: (212) 815-6156
DESCRIPTION OF SHARES TENDERED - --------------------------------------------------------------------------------------------------------------- NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ON TENDERED CERTIFICATE(S) SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY) - --------------------------------------------------------------------------------------------------------------- TOTAL NUMBER OF SHARES SHARE REPRESENTED BY NUMBER CERTIFICATE SHARE OF SHARES NUMBER(S)* CERTIFICATE(S) TENDERED** --------------------------------------------- --------------------------------------------- --------------------------------------------- --------------------------------------------- --------------------------------------------- --------------------------------------------- TOTAL SHARES - --------------------------------------------------------------------------------------------------------------- * Need not be completed by Book-Entry Stockholders. ** Unless otherwise indicated, it will be assumed that all Shares evidenced by any certificates delivered to the Depositary are being tendered. See Instruction 4. - ---------------------------------------------------------------------------------------------------------------
[ ] CHECK HERE IF YOU CANNOT LOCATE YOUR CERTIFICATE(S) AND REQUIRE ASSISTANCE IN REPLACING THEM. UPON RECEIPT OF NOTIFICATION BY THIS LETTER OF TRANSMITTAL, JOHNSTON INDUSTRIES, INC.'S STOCK TRANSFER AGENT WILL CONTACT YOU DIRECTLY WITH REPLACEMENT INSTRUCTIONS. 2 LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF JOHNSTON INDUSTRIES, INC. PURSUANT TO THE OFFER TO PURCHASE DATED APRIL 7, 2000, BY JI ACQUISITION CORP. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, MAY 5, 2000, UNLESS THE OFFER IS EXTENDED. DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. THIS LETTER OF TRANSMITTAL IS TO BE USED EITHER IF CERTIFICATES ARE TO BE FORWARDED HEREWITH OR IF DELIVERY OF SHARES (AS DEFINED BELOW) IS TO BE MADE BY BOOK-ENTRY TRANSFER TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY AT THE DEPOSITORY TRUST COMPANY (HEREINAFTER REFERRED TO AS THE "BOOK-ENTRY TRANSFER FACILITY") PURSUANT TO THE PROCEDURES SET FORTH IN SECTION 3 OF THE OFFER TO PURCHASE (AS DEFINED BELOW). STOCKHOLDERS WHO DELIVER SHARES BY BOOK-ENTRY TRANSFER ARE REFERRED TO HEREIN AS "BOOK-ENTRY STOCKHOLDERS" AND OTHER STOCKHOLDERS ARE REFERRED TO HEREIN AS "CERTIFICATE STOCKHOLDERS." STOCKHOLDERS WHOSE CERTIFICATES ARE NOT IMMEDIATELY AVAILABLE OR WHO CANNOT DELIVER THEIR SHARES AND ALL OTHER DOCUMENTS REQUIRED HEREBY TO THE DEPOSITARY OR COMPLETE THE PROCEDURES FOR BOOK-ENTRY TRANSFER PRIOR TO THE EXPIRATION DATE MUST TENDER THEIR SHARES ACCORDING TO THE GUARANTEED DELIVERY PROCEDURE SET FORTH IN SECTION 3 OF THE OFFER TO PURCHASE. SEE INSTRUCTION 2. DELIVERY OF DOCUMENTS TO THE 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 THE BOOK-ENTRY TRANSFER FACILITY, AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER): Name of Tendering Institution: ---------------------------------------------- Account Number: ------------------------------------------------------------- Transaction Code Number: ---------------------------------------------------- [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Owners: ----------------------------------------------- Window Ticket Number (if any): ---------------------------------------------- Date of Execution of Notice of Guaranteed Delivery: ------------------------- Name of Institution which Guaranteed Delivery: ------------------------------ Account Number: ------------------------------------------------------------- Transaction Code Number: ---------------------------------------------------- (BOXES ABOVE FOR USE BY ELIGIBLE INSTITUTIONS ONLY) -2- 3 NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. Ladies and Gentlemen: The undersigned hereby tenders to JI Acquisition Corp., a Delaware corporation (the "Purchaser") and a subsidiary of CGW Southeast Partners IV, L.P., a limited partnership formed under the Delaware Revised Uniform Limited Partnership Act ("CGW"), the above-described shares of Common Stock, $.10 par value per share (the "Shares"), of Johnston Industries, Inc., a Delaware corporation (the "Company"), pursuant to the Purchaser's offer to purchase all outstanding Shares at a price of $3.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated April 7, 2000 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which, together with the Offer to Purchase and any amendments or supplements hereto or thereto, constitute the "Offer"). The undersigned understands that the Purchaser reserves the right to transfer or assign, in whole or in part from time to time, to CGW or one or more affiliates of CGW the right to purchase Shares tendered pursuant to the Offer. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), effective upon acceptance for payment of and payment for the Shares tendered herewith, the undersigned hereby sells, assigns, and transfers all right, title and interest in and to all the Shares that are being tendered hereby (and any and all other Shares or other securities issued or issuable in respect thereof (collectively, "Distributions")), and irrevocably constitutes and appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares and all Distributions, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (i) deliver certificates for such Shares and all Distributions, or transfer ownership of such Shares and all Distributions on the account books maintained by the Book-Entry Transfer Facility, together, in any such case, with all accompanying evidences of transfer and authenticity, to or upon the order of the 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), (ii) present such Shares and all Distributions for cancellation and transfer on the Company's books and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares and all Distributions, all in accordance with the terms of the Offer. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the tendered Shares and all Distributions and that, when the same are accepted for payment by the Purchaser, the Purchaser will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, claims, charges and encumbrances, and the same will not be subject to any adverse claims. The undersigned will, upon request, execute any signature guarantees or additional documents deemed by the Depositary or the Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the tendered Shares and all Distributions. In addition, the undersigned shall promptly remit and transfer to the Depositary for the account of the Purchaser any such Distributions issued to the undersigned, in respect of the tendered Shares, accompanied by documentation of transfer, and pending such remittance or appropriate assurance thereof, the Purchaser shall be entitled to all rights and privileges as owner of any such Distributions and, subject to the terms of the Purchase Agreement (as defined in the Offer to Purchase), may withhold the entire purchase price or deduct from the purchase price the amount or value thereof, as determined by the Purchaser, in its sole discretion. All authority conferred or agreed to be conferred in this Letter of Transmittal shall be binding upon the successors, assigns, heirs, executors, administrators and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. The undersigned hereby irrevocably appoints Roy R. Bowman and James A. O'Donnell, and each of them, and any other designees of the Purchaser, the attorneys and proxies of the undersigned, each with full power of substitution, to vote at any annual, special or adjourned meeting of the Company's stockholders or -3- 4 otherwise act (including pursuant to written consent) in such manner as each such attorney and proxy or his substitute shall in his or her sole discretion deem proper, to execute any written consent concerning any matter as each such attorney and proxy or his substitute shall in his or her sole discretion deem proper with respect to, and to otherwise act with respect to, all the Shares tendered hereby which have been accepted for payment by the Purchaser prior to the time any such vote or action is taken (and any and all Distributions issued or issuable in respect thereof) and with respect to which the undersigned is entitled to vote. This appointment is effective when, and only to the extent that, the Purchaser accepts for payment such Shares as provided in the Offer to Purchase. This power of attorney and proxy is coupled with an interest in the tendered Shares, is irrevocable and is granted in consideration of the acceptance for payment of such Shares in accordance with the terms of the Offer. Such acceptance for payment shall revoke all prior powers of attorney and proxies given by the undersigned at any time with respect to such Shares and no subsequent powers of attorney or proxies may be given by the undersigned (and, if given, will not be deemed effective). The Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Purchaser's acceptance for payment of such Shares, the Purchaser must be able to exercise full voting and other rights with respect to such Shares, including voting at any stockholders meeting then scheduled. The undersigned understands that the valid tender of Shares pursuant to any one 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 the Purchaser upon the terms and subject to the conditions of the Offer. The undersigned recognizes that under certain circumstances set forth in the Offer to Purchase, the Purchaser may not be required to accept for payment any of the tendered Shares. The Purchaser's acceptance for payment of Shares pursuant to the Offer will constitute a binding agreement between the undersigned and the 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 of any Shares purchased, and/or return any certificates for Shares not tendered or accepted for payment, in the name(s) of the registered holder(s) appearing under "Description of Shares Tendered." Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price of any Shares purchased, and/or any certificates for Shares not tendered or accepted for payment (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing under "Description of Shares Tendered." In the event that both the Special Delivery Instructions and the Special Payment Instructions are completed, please issue the check for the purchase price of any Shares purchased, and/or return any certificates for Shares not tendered or accepted for payment in the name(s) of, and mail said check and/or any certificates to, the person or persons so indicated. In the case of a book-entry delivery of Shares, please credit the account maintained at the Book-Entry Transfer Facility indicated above with any Shares not accepted for payment. The undersigned recognizes that the Purchaser has no obligation pursuant to the Special Payment Instructions to transfer any Shares from the name of the registered holder(s) thereof if the 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 a certificate 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. Issue: [ ] check: [ ] certificate(s) to: Name: -------------------------------------------------------------- (PLEASE PRINT) Address: ----------------------------------------------------------- - ------------------------------------------------------------------- - ------------------------------------------------------------------- (INCLUDE ZIP CODE) - ------------------------------------------------------------------- (TAX IDENTIFICATION OR SOCIAL SECURITY NO.) (SEE SUBSTITUTE FORM W-9 INCLUDED HEREIN) [ ] Credit unpurchased Shares tendered by book-entry transfer to the Book-Entry Transfer Facility account set forth below: ------------------------------------------------------ (ACCOUNT NUMBER) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if a certificate for Shares not tendered or not purchased and/or the check for the purchase price of Shares purchased are to be SENT to someone other than the undersigned. Send: [ ] check: [ ] certificate(s) to: Name: ---------------------------------------------------------------- (PLEASE PRINT) Address: ------------------------------------------------------------- - --------------------------------------------------------------------- - --------------------------------------------------------------------- (INCLUDE ZIP CODE) - --------------------------------------------------------------------- (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER) -5- 6 STOCKHOLDERS SIGN HERE (ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (SIGNATURE(S) OF OWNER(S)) Dated: --------------- , 2000 (Must be signed by the registered holder(s) exactly as name(s) appear(s) on stock certificate(s) 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 trustee, executor, administrator, guardian, attorney-in-fact, agent, officer of a corporation or any other person acting in a fiduciary or representative capacity, please set forth full title below.) (See Instruction 5) Name(s): ------------------------------------------------------------------------ - -------------------------------------------------------------------------------- (PLEASE PRINT) Capacity (Full Title): - -------------------------------------------------------------------------------- Address: ------------------------------------------------------------------------ - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Daytime Area Code and Telephone Number: ----------------------------------------- Tax Identification Number or Social Security Number: --------------------------- - -------------------------------------------------------------------------------- (SEE SUBSTITUTE FORM W-9 BELOW) GUARANTEE OF SIGNATURE(S) (IF REQUIRED, SEE INSTRUCTIONS 1 AND 5) Authorized Signature: ----------------------------------------------------------- Name: --------------------------------------------------------------------------- (PLEASE PRINT) Title: -------------------------------------------------------------------------- Name of Firm: ------------------------------------------------------------------- Address: ------------------------------------------------------------------------ (INCLUDE ZIP CODE) Area Code and Telephone Number: ------------------------------------------------- Dated ------------ , 2000 -6- 7 INSTRUCTIONS TO LETTER OF TRANSMITTAL FORMING PART OF THE TERMS AND CONDITIONS FOR THE TENDER OFFER 1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all signatures on this Letter of Transmittal must be guaranteed by a financial institution (including most commercial banks, savings and loan associations and brokerage houses) that is a participant in the Security Transfer Agent's Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program (each an "Eligible Institution," and collectively, "Eligible Institutions"). No signature guarantee is required on this Letter of Transmittal (i) if this Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this document, shall include any participant in a Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) of Shares tendered herewith, unless such holder(s) has completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" in this Letter of Transmittal or (ii) if such Shares are tendered for the account of an Eligible Institution. See Instruction 5. 2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY PROCEDURES. This Letter of Transmittal is to be completed by stockholders either if certificates for Shares are to be forwarded herewith or if a tender of Shares is to be made pursuant to the procedures for delivery by book-entry transfer set forth in Section 3 of the Offer to Purchase. For Shares to be validly tendered pursuant to the Offer, either (i) a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), together with any required signature guarantees, or in the case of a book-entry transfer, an Agent's Message (as defined in the Offer to Purchase), and any other required documents, must be received by the Depositary at one of the Depositary's addresses set forth herein prior to the Expiration Date and either certificates for tendered Shares must be received by the Depositary at one of such addresses or such Shares must be delivered pursuant to the procedures for book-entry transfer (and a book-entry confirmation received by the Depositary), in each case, prior to the Expiration Date, or (ii) the tendering stockholder must comply with the guaranteed delivery procedure set forth below. Stockholders whose certificates for Shares are not immediately available, who cannot complete the procedures for book-entry transfer on a timely basis or who cannot deliver all required documents to the Depositary prior to the Expiration Date, may tender their Shares pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. Pursuant to such procedures, (i) such tender must be made by or through an Eligible Institution, (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Purchaser (or a manually signed facsimile thereof), must be received by the Depositary prior to the Expiration Date, and (iii) the certificates for (or a book-entry confirmation with respect to) such Shares, together with this properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and any other required documents are received by the Depositary within three trading days after the date of execution of such Notice of Guaranteed Delivery, all as provided in Section 3 of the Offer to Purchase. A "trading day" is any day on which the New York Stock Exchange, Inc. is open for business. The Notice of Guaranteed Delivery may be delivered by hand to the Depositary or transmitted by telegram, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. The method of delivery of Shares, this Letter of Transmittal and all other required documents, including delivery through the Book-Entry Transfer Facility, is at the election and risk of the tendering stockholder. Shares will be deemed delivered only when actually received by the Depositary (including, in the case of a book-entry transfer, by book-entry confirmation). If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to ensure timely delivery. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. All tendering stockholders, by execution of this Letter of Transmittal (or a manually signed 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 schedule attached hereto. 4. PARTIAL TENDERS (APPLICABLE TO CERTIFICATE STOCKHOLDERS ONLY). 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 "Number of Shares 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(s), unless otherwise provided in the appropriate box on this Letter of Transmittal, as soon as practicable after the expiration or termination of the Offer. 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 with the name(s) as written on the face of the certificate(s) without any change whatsoever. If any of the Shares tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any 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 trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and proper evidence satisfactory to the Purchaser of their authority so to act must be submitted. When this Letter of Transmittal is signed by the registered owner(s) of the Shares listed and transmitted hereby, no endorsements of certificates or separate stock powers are required unless payment or certificates for Shares not tendered or accepted for payment 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. See Instruction 1. If this Letter of Transmittal is signed by a person other than the registered owner(s) of the shares tendered hereby, the certificates evidencing the Shares tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case, signed exactly as the name(s) of the registered owner(s) appear(s) on the certificates for such Shares. Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. See Instruction 1. 6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, the Purchaser will pay, or cause to be paid, any stock transfer taxes with respect to the transfer and sale of Shares to it or its assignee pursuant to the Offer. If, however, payment of the purchase price is to be made to, or if certificates for Shares not tendered or accepted for payment are to be registered in the name of, any persons other than the registered holder(s), 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 is to be issued in the name of and/or certificates for Shares not accepted for payment are to be returned to a person other than the signer of this Letter of Transmittal or if a check is to be sent and/or such certificates are to be returned to a person other than the signer of this Letter of Transmittal or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Any stockholder tendering Shares by book-entry transfer will have any Shares not accepted for payment returned by crediting the account maintained by such stockholder at the Book-Entry Transfer Facility from which such transfer was made. -8- 9 8. WAIVER OF CONDITIONS. Except as otherwise provided in the Offer to Purchase, the Purchaser reserves the absolute right, in its sole discretion, to waive any of the conditions of the Offer or any defect or irregularity in the tender of any Shares of any particular stockholder, whether or not similar defects or irregularities are waived in the case of other stockholders. 9. SUBSTITUTE FORM W-9. The tendering stockholder (or other payee) is required, unless an exemption applies, to provide the Depositary with a correct Taxpayer Identification Number ("TIN"), generally the stockholder's social security or federal employer identification number, and with certain other information, on a 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 the stockholder (or other payee) is not subject to backup withholding. If a tendering stockholder is subject to backup withholding, he or she must cross out item 2 of the Certification Box on Substitute Form W-9 before signing such Form. Failure to furnish the correct TIN on the Substitute Form W-9 may subject the tendering stockholder (or other payee) to a $50 penalty imposed by the Internal Revenue Service and payments of cash to the tendering stockholder (or other payee) pursuant to the Offer may be subject to backup withholding of 31%. If the tendering stockholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, he or she should write "Applied For" in the space provided for the TIN in Part 1, sign and date the Substitute Form W-9 and sign and date the Certificate of Awaiting Taxpayer Identification Number. If "Applied For" is written in Part 1 and the Depositary is not provided with a TIN by the time of payment, the Depositary will withhold 31% of all such payments for surrendered Shares thereafter until a TIN is provided to the Depositary. 10. LOST OR DESTROYED CERTIFICATES. If any certificate(s) representing Shares has been lost or destroyed, the stockholder should check the appropriate box on page 1 of the Letter of Transmittal. The Company's stock transfer agent will then instruct such stockholder as to the procedure to be followed in order to replace the certificate(s). The stockholder will have to post a surety bond of approximately 2% of the current market value of the Shares. This Letter of Transmittal and related documents cannot be processed until procedures for replacing lost or destroyed certificates have been followed. 11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance or additional copies of the Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 may be directed to the Information Agent at the location and telephone numbers set forth below. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED FACSIMILE COPY THEREOF), TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES, OR IN THE CASE OF A BOOK-ENTRY TRANSFER, AN AGENT'S MESSAGE, AND CERTIFICATES, OR A BOOK-ENTRY CONFIRMATION, FOR SHARES AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE DEPOSITARY, OR THE NOTICE OF GUARANTEED DELIVERY (OR A MANUALLY SIGNED FACSIMILE COPY THEREOF) MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE EXPIRATION DATE. -9- 10 IMPORTANT TAX INFORMATION Under federal income tax law, a stockholder surrendering Shares must, unless an exemption applies, provide the Depositary (as payor) with his or her correct TIN on the Substitute Form W-9 included in this Letter of Transmittal. If the stockholder is an individual, his or her TIN is his or her social security number. If the correct TIN is not provided, the stockholder may be subject to a $50 penalty imposed by the Internal Revenue Service and payments of cash to the tendering stockholder (or other payee) 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 backup withholding. In order for an exempt foreign stockholder to avoid backup withholding, that person should complete, sign and submit a Form W-8, Certificate of Foreign Status, signed under penalties of perjury, attesting to his or her exempt status. A Form W-8 can be obtained from the Depositary. Exempt stockholders, other than foreign stockholders, should furnish their TIN, write "Exempt" on the face of the Substitute Form W-9 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, the Depositary is required to withhold 31% of any payment made to payee. Backup withholding is not an additional tax. Rather, the federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If backup withholding results in an overpayment of taxes, a refund may be obtained 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 his correct TIN (or the TIN of any other payee) by completing the Substitute Form W-9 included in this Letter of Transmittal certifying (i) that the TIN provided on the Substitute Form W-9 is correct (or that such stockholder is awaiting a TIN), and (ii) that the stockholder is not subject to backup withholding because (a) the stockholder has not been notified by the Internal Revenue Service that the stockholder is subject to backup withholding as a result of a failure to report all interest and dividends or (b) the Internal Revenue Service has notified the stockholder that the stockholder is no longer subject to backup withholding. WHAT NUMBER TO GIVE THE DEPOSITARY The stockholder is required to give the Depositary the TIN, generally the social security number or employer identification number, of the record owner(s) of the Shares. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance on which number to report. If the tendering stockholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, he or she should write "Applied For" in the space provided for the TIN in Part 1, sign and date the Substitute Form W-9 and sign and date the Certificate of Awaiting Taxpayer Identification Number, which appears in a separate box below the Substitute Form W-9. If "Applied For" is written in Part 1 and the Depositary is not provided with a TIN by the time of payment, the Depositary will withhold 31% of all payments of the purchase price until a TIN is provided to the Depositary. -10- 11 - -------------------------------------------------------------------------------- PAYER'S NAME: - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------ PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT THE ---------------------------- SUBSTITUTE RIGHT AND CERTIFY BY SIGNING AND DATING BELOW. Social Security Number(s) FORM W-9 (See Instruction 9) OR Please fill in your name and address below. ---------------------------- Employer Identification Number(s) ----------------------------------------------------------------------------------------
--------------------------- Name PART 2 -- CERTIFICATION -- Under Penalties of Perjury, I PART 3 -- certify that: ----------------------------- (1) The number shown on this form is my correct Taxpayer Awaiting TIN [ ] Address (number and street) Identification Number (or I am waiting for a number to ---------------------- be issued to me) and - ----------------------------- (2) I am not subject to backup withholding because (i) I PART 4 -- For Payee (City, State and Zip Code) am exempt from backup withholding, or (ii) I have not Exempt from been notified by the Internal Revenue Service ("IRS") Backup Withholding DEPARTMENT OF THE TREASURY that I am subject to backup withholding as a result of Exempt [ ] INTERNAL REVENUE SERVICE failure to report all interest or dividends or (iii) 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 currently subject to backup withholding PAYER'S REQUEST FOR because of under reporting interest or dividends on your tax return. However, if TAXPAYER IDENTIFICATION after being notified by the IRS that you were subject to backup withholding, you NUMBER (TIN) received another notification from the IRS stating that you are no longer subject to backup withholding, do not cross out Item (2). If you are exempt from backup withholding, check the box in Part 4 above. SIGNATURE __________ DATE __________ , 2000 - -----------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY IMPOSED BY THE INTERNAL REVENUE SERVICE AND IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON THE SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR" IN PART 1 OF THE 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 (i) 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 (ii) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all reportable payments made to me thereafter will be withheld, until I provide a number.
----------------------------------------------------------------- --------------------------- , 2000 Signature Date - ------------------------------------------------------------------------------------------------------------------
-11- 12 Questions and requests for assistance or additional copies of the Offer to Purchase, Letter of Transmittal and other tender offer materials may be directed to the Information Agent at the location and telephone numbers set forth below: The Information Agent for the Offer is: (MacKenzie Partners, Inc. Logo) 156 Fifth Avenue New York, New York 10010 Tel: (212) 929-5500 (Call Collect) OR CALL TOLL-FREE (800) 322-2885 EX-99.(A)(3) 4 FORM OF NOTICE OF GUARANTEED DELIVERY 1 NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK OF JOHNSTON INDUSTRIES, INC. As set forth in Section 3 of the Offer to Purchase (as defined below), this form or one substantially equivalent hereto must be used to accept the Offer (as defined below) if certificates for shares of Common Stock, $.10 par value (the "Shares"), of Johnston Industries, Inc., a Delaware corporation (the "Company"), are not immediately available, or if 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 at the address set forth below on or prior to the Expiration Date (as defined in the Offer to Purchase). This form 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 (as defined in the Offer to Purchase). See Section 3 of the Offer to Purchase. THE DEPOSITARY FOR THE OFFER IS: THE BANK OF NEW YORK By Mail: By Hand Overnight Courier: Tender & Exchange Department Tender & Exchange Department P.O. Box 11248 101 Barclay Street Church Street Station New York, New York 10286 New York, New York 10286-1248
By Facsimile Transmission: (for Eligible Institutions only) (212) 815-6213 For Confirmation of Facsimile Transmission: (212) 815-6156 ------------------------------ DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TO A NUMBER, OTHER THAN AS SET FORTH ABOVE DOES 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. 2 LADIES AND GENTLEMEN: The undersigned hereby tenders to JI Acquisition Corp., a Delaware corporation (the "Purchaser"), and a subsidiary of CGW Southeast Partners IV, L.P., a limited partnership formed under the Delaware Revised Uniform Limited Partnership Act, upon the terms and subject to the conditions set forth in the Purchaser's Offer to Purchase dated April 7, 2000 (the "Offer to Purchase"), and 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 (as such term is defined in the Offer to Purchase) set forth below, all pursuant to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. Number of Shares: - ----------------------------------------------- Shares Certificate No(s). (if available) --------------------- - ------------------------------------------------------ - ------------------------------------------------------ If Share(s) will be tendered by book-entry transfer, check the following box [ ] The Depository Trust Company Account Number: ----------------------------------------------------------------- - -------------------------------------------------------------------------------- Name(s) of Record Holder(s): ---------------------------------------------------- - -------------------------------------------------------------------------------- (Please Print) Address(es): -------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Zip Code) Area Code and Telephone Number(s): ---------------------------------------------- - -------------------------------------------------------------------------------- Signatures: --------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Dated: ------------------, 2000 THE GUARANTEE BELOW MUST BE COMPLETED GUARANTEE (NOT TO BE USED FOR A SIGNATURE GUARANTEE) The undersigned, a participant in the Security Transfer Agent's Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program, hereby guarantees to deliver to the Depositary either the certificates representing the Shares tendered hereby, in proper form for transfer, or a Book-Entry Confirmation with respect to such Shares, in any such case together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or an Agent's Message, and any other required documents within three trading days (as defined in the Offer to Purchase) after the date hereof. The Eligible Institution that completes this form must communicate the guarantee to the Depositary and must deliver such Letter of Transmittal and such certificates for Shares, or such Book-Entry Confirmation, to the Depositary within the time period shown herein. Failure to do so could result in a financial loss to such Eligible Institution. All capitalized terms used herein have the meanings set forth in the Offer to Purchase. Name of Firm: ------------------------------------------------------------------- Address: ------------------------------------------------------------------------ - -------------------------------------------------------------------------------- Area Code and Telephone Number: --------------------------------------------------------------- - -------------------------------------------------------------------------------- (Authorized Signature) Title: -------------------------------------------------------------------------- Name: --------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Please type or print) Dated: ------------------, 2000 NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED DELIVERY. CERTIFICATES FOR SHARES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. -2- EX-99.(A)(4) 5 LETTER TO BROKERS, DEALERS, COMMERICAL BANKS 1 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF JOHNSTON INDUSTRIES, INC. BY JI ACQUISITION CORP. a subsidiary of CGW SOUTHEAST PARTNERS IV, L.P. AT $3.00 NET PER SHARE THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, MAY 5, 2000, UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE") April 7, 2000 To Brokers, Dealers, Banks, Trust Companies and Other Nominees: Enclosed is an Offer to Purchase dated April 7, 2000 (the "Offer to Purchase"), and the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer") relating to the Offer by JI Acquisition Corp., a Delaware corporation (the "Purchaser"), which is a subsidiary of CGW Southeast Partners IV, L.P., a limited partnership formed under the Delaware Revised Uniform Limited Partnership Act ("CGW"), to purchase all of the outstanding shares of Common Stock, $.10 par value per share (the "Shares"), of Johnston Industries, Inc., a Delaware corporation (the "Company"), at $3.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer. Please furnish copies of the enclosed materials to those of your clients for whom you hold Shares registered in your name or in the name of your nominee. Enclosed herewith are copies of the following documents: 1. Offer to Purchase dated April 7, 2000; 2. Letter of Transmittal to be used by stockholders of the Company in accepting the Offer. Facsimile copies of the Letter of Transmittal (with manual signatures) may be used to tender Shares; 3. A printed form of letter that may be sent to your clients for whose account you hold Shares in your name or in the name of a nominee, with space provided for obtaining such clients' instructions with regard to the Offer; 4. Notice of Guaranteed Delivery; and 5. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9. The Offer is conditioned upon, among other things, (i) there being validly tendered and not withdrawn prior to the Expiration Date of the Offer, that number of shares which represents at least nine and seven-tenths percent (9.7%) of the Shares currently outstanding on a fully diluted basis, which, combined with the 9,000,000 newly issued shares of Common and Preferred Stock of the Company to be purchased by Purchaser at the closing of the Offer, will result in Purchaser being the majority owner of the then issued and 2 outstanding shares of the Company's voting capital stock, and (ii) the other conditions set forth in the Offer to Purchase. As used herein, "fully diluted basis" takes into account issued and outstanding Shares and shares subject to issuance under stock options, warrants and other securities convertible into shares which will be outstanding after closing 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 such extension or amendment), the Purchaser will accept for payment and will pay promptly after the Expiration Date for all Shares validly tendered prior to the Expiration Date and not properly withdrawn as, if and when the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance of such Shares. Payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates for such Shares (or a timely book-entry confirmation with respect thereto), (ii) a Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer, an agent's message, and (iii) any other documents required by the Letter of Transmittal. If holders of Shares wish to tender their Shares, but it is impracticable for them to deliver their certificates on or prior to the Expiration Date or to comply with the book-entry transfer procedures on a timely basis, a tender may be effected by following the guaranteed delivery procedures specified in Section 3 of the Offer to Purchase. YOUR PROMPT ACTION IS REQUESTED. PLEASE CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, MAY 5, 2000, UNLESS EXTENDED. Neither the Purchaser nor CGW will pay any fees or commissions to any broker or dealer or other person (other than the Information Agent as described in the Offer to Purchase) in connection with the solicitation of tenders of Shares pursuant to the Offer. The Purchaser will, however, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary costs and expenses incurred by them in forwarding materials to their customers. The Purchaser will pay all stock transfer taxes applicable to its purchase of Shares pursuant to the Offer, subject to Instruction 6 of the Letter of Transmittal. Additional copies of the enclosed materials may be obtained by contacting the Information Agent at the location and telephone number set forth on the back cover of the Offer to Purchase. NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR ANY OTHER PERSON THE AGENT OF THE PURCHASER, CGW, THE DEPOSITARY OR THE INFORMATION AGENT OR ANY AFFILIATE OF ANY OF THE FOREGOING OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFER NOT CONTAINED IN THE OFFER TO PURCHASE OR THE LETTER OF TRANSMITTAL. -2- EX-99.(A)(5) 6 FORM OF LETTER TO CLIENTS FOR USE BY BROKERS 1 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF JOHNSTON INDUSTRIES, INC. AT $3.00 NET PER SHARE BY JI ACQUISITION CORP. a subsidiary of CGW SOUTHEAST PARTNERS IV, L.P. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, MAY 5, 2000, UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE") APRIL 7, 2000 To Our Clients: Enclosed for your consideration is an Offer to Purchase dated April 7, 2000 (the "Offer to Purchase"), and the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer") relating to the Offer by JI Acquisition Corp., a Delaware corporation (the "Purchaser"), which is a subsidiary of CGW Southeast Partners IV, L.P., a limited partnership formed under the Delaware Revised Uniform Limited Partnership Act ("CGW"), to purchase for cash all of the outstanding shares of Common Stock, $.10 par value per share (the "Shares") of Johnston Industries, Inc., a Delaware corporation (the "Company"), at a price of $3.00 per Share, net to the seller in cash, without interest, upon the terms and conditions set forth in the Offer. WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT. Accordingly, we request your instructions as to whether you wish to tender any of or all of the Shares held by us for your account upon the terms and subject to the conditions set forth in the Offer. Your attention is directed to the following: 1. The offer price is $3.00 per Share, net to you in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer. 2. The Offer is being made for all outstanding Shares. 3. The Board of Directors of the Company has unanimously approved the Offer and determined that the terms of the Offer are fair to the Company's stockholders. The Board of Directors has remained neutral with regard to its recommendation of the Offer to the stockholders. 4. Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares by the Purchaser pursuant to the Offer. 5. The Offer and withdrawal rights will expire at 12:00 midnight, New York City time, on Friday, May 5, 2000, unless the Offer is extended. 6. The Offer is conditioned upon, among other things, (i) there being validly tendered and not withdrawn prior to the Expiration Date of the Offer, that number of shares which represents at least nine and seven-tenths percent (9.7%) of the Shares currently outstanding on a fully diluted basis, which, combined with the 9,000,000 newly issued shares of Common and Preferred Stock of the Company to be purchased by Purchaser at the closing of the Offer, will result in Purchaser being the majority owner of the then issued and outstanding shares of the Company's voting capital stock, and (ii) the other conditions set forth in the Offer to Purchase. As used herein, "fully diluted basis" takes into account issued and outstanding Shares and shares subject to issuance under stock options, warrants and other securities convertible into shares which will be outstanding after closing of the Offer. 2 Your instructions to us should be forwarded promptly to permit us to submit a tender on your behalf prior to the expiration of the Offer. If you wish to have us tender any or all of the Shares held by us for your account, please so instruct us by completing, executing and returning to us the instruction form set forth below. An envelope to return your instructions to us is enclosed. If you authorize the tender of your Shares, all such Shares will be tendered unless otherwise specified below. Your instructions should be forwarded to us in ample time to permit us to submit a tender on your behalf prior to the expiration of the Offer. The Offer is not being made to (nor will tenders be accepted from or on behalf of) the holders of Shares residing in any jurisdiction in which the making or acceptance of the Offer would not be in compliance with the securities, blue sky or other 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 will be deemed to be made on behalf of the Purchaser by one or more registered brokers or dealers that are licensed under the laws of the jurisdiction. INSTRUCTION WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF JOHNSTON INDUSTRIES, INC. The undersigned acknowledge(s) receipt of your letter, the enclosed Offer to Purchase dated April 7, 2000, and the related Letter of Transmittal, in connection with the offer by JI Acquisition Corp., a Delaware corporation and a subsidiary of CGW Southeast Partners IV, L.P., a limited partnership formed under the Delaware Revised Uniform Limited Partnership Act, to purchase all of the outstanding shares of Common Stock, $.10 par value per share of Johnston Industries, Inc., a Delaware corporation. This will instruct you to tender to the Purchaser the number of Shares indicated below (or if no number is indicated below, all Shares) which are held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in such Offer to Purchase and related Letter of Transmittal. Dated: ----------, 2000 NUMBER OF SHARES TO BE TENDERED: SHARES ------------ Unless otherwise indicated, it will be assumed that you instruct us to tender all Shares held by us for your account. I (we) understand that if I (we) sign this instruction form without indicating a lesser number of Shares in the space above, all Shares held by you for my (our) account will be tendered. SIGN HERE Signature(s) -------------------------------------------------------------------- Print Name(s) ------------------------------------------------------------------- Print Address(es) --------------------------------------------------------------- Area Code and Telephone Number(s) ----------------------------------------------- Tax ID or Social Security Number(s) ----------------------------------------------- -2- EX-99.(A)(6) 7 TEXT OF PRESS RELEASE 1 EXHIBIT (a)(6) FOR IMMEDIATE RELEASE: Contact: Roy Bowman CGW Southeast Partners IV, L.P. (404) 816-3255 Contact: Joseph Doherty MacKenzie Partners, Inc. (212) 929-5500 (800) 322-2885 CGW SOUTHEAST PARTNERS IV, L.P. AND JI ACQUISITION CORP. COMMENCE TENDER OFFER FOR SHARES OF JOHNSTON INDUSTRIES, INC. Atlanta, Georgia -- April 7, 2000 -- On March 31, 2000, CGW Southeast Partners IV, L.P., through a wholly owned subsidiary, JI Acquisition Corp., announced that it had entered into a definitive purchase agreement with Johnston Industries, Inc. (NYSE:JII). JI Acquisition Corp. has today commenced a tender offer at $3.00 in cash per share for all of the shares of common stock of Johnston. The tender offer is scheduled to expire at 12:00 midnight, New York City time on May 5, 2000, unless extended. MacKenzie Partners, Inc. is the Information Agent for the tender offer. CGW is a Delaware limited partnership organized to make strategic investments in distribution and manufacturing businesses throughout the United States. CGW is headquartered in Atlanta, Georgia. ### EX-99.(A)(7) 8 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENT. 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 SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: NUMBER OF-- - ----------------------------------------------------------- 1. An individual's account 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 The actual owner of account) 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 The adult or, if the account) minor is the only contributor, the minor(1) 6. Account in the name of The ward, minor, or guardian or committee for a incompetent person(3) designated ward, minor, or incompetent person 7. a. The usual revocable savings The grantor- trust account (grantor is trustee(1) also trustee) b. So-called trust account The actual owner(1) that is not legal or valid trust under State law - -----------------------------------------------------------
- ----------------------------------------------------------- GIVE THE EMPLOYER IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF-- - ----------------------------------------------------------- 8. Sole proprietorship account The owner(4) 9. A valid trust, estate, or The legal entity (do pension 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 partnership the name of the business 13. Association, club, or other The organization tax-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. (2) Circle the minor's name and furnish the minor's Social Security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's Social Security number. (4) Show the name of the owner. Either the Social Security number or the Employer Identification number may be furnished. (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 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 (for individuals), or Form SS-4, Application for Employer Identification Number (for businesses and all other entities), at the local office of the Social Security Administration or the Internal Revenue Service (the "IRS") and apply for a number. PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING The following is a list of payees exempt from backup withholding and for which no information reporting is required. For interest and dividends, all listed payees are exempt except those identified in item (9). For broker transactions, payees listed in items (1) through (13) and a person registered under the Investment Advisers Act of 1940 who regularly acts as a broker are exempt. Payments subject to reporting under sections 6041 and 6041A of the Internal Revenue Code (the "Code") are generally exempt from backup withholding only if made to payees described in items (1) through (7), except a corporation that provides medical and health care services or bills and collects payments for such services is not exempt from backup withholding or information reporting. Only payees described in items (2) through (6) are exempt from backup withholding for barter exchange transactions, patronage dividends, and payments by certain fishing boat operators. (1) A corporation. (2) An organization exempt from tax under section 501(a) of the Code, or an IRA, or a custodial account under section 403(b)(7) of the Code. (3) The United States or any agencies or instrumentalities. (4) A state, the District of Columbia, a possession of the United States, or any of their political subdivisions or instrumentalities. (5) A foreign government or any of its political subdivisions, agencies or instrumentalities. (6) An international organization or any agencies or instrumentalities. (7) A foreign central bank of issue. (8) A dealer in securities or commodities required to register in the United States or a possession of the United States. (9) A futures commission merchant registered with the Commodity Futures Trading Commission. (10) A real estate investment trust. (11) An entity registered at all times during the tax year under the Investment Company Act of 1940. (12) A common trust fund operated by a bank under section 584(a) of the Code. (13) A financial institution. (14) A middleman known in the investment community as a nominee or listed in the most recent publication of the American Society of Corporate Securities, Inc., Nominee List. (15) A trust exempt from tax under section 664 of the Code or described in section 4947 of the Code. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - - Payments to partnerships not engage in a trade or business in the U.S. and which have at least one nonresident partner. - - Payments of patronage dividends not paid in money. - - Payments made by certain foreign organizations. - - Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: - - Payments of interest on obligations issued by individuals. NOTE: You may be subject to backup withholding if 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, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER. IF YOU ARE A NON-RESIDENT ALIEN OR A FOREIGN ENTITY SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER A COMPLETED INTERNAL REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS). Certain payments other than interest, dividend, and Patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see Sections 6041, 6041A(a), 6045, and 6050A and 6050N of the Code and the 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 a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not 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 -- Willfully falsifying certifications or affirmation may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR INTERNAL REVENUE SERVICE. -2- EX-99.(A)(8) 9 FORM OF SUMMARY ADVERTISMENT 1 EXHIBIT (A)(8) This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares (as defined below). The Offer (as defined below) is made solely by the Offer to Purchase dated April 7, 2000 and the related Letter of Transmittal (and any amendments thereto) and is being made to all holders of Shares. The Purchaser (as defined below) is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to state statute. If the Purchaser becomes aware of any state where the making of the Offer is prohibited, the Purchaser will make a good faith effort to comply with any such statute. If, after such good faith effort, the Purchaser cannot comply with any applicable statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. In those jurisdictions where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Purchaser by one or more registered brokers or dealers licensed under the laws of such jurisdiction. NOTICE OF OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF JOHNSTON INDUSTRIES, INC. AT $3.00 NET PER SHARE BY JI ACQUISITION CORP. A SUBSIDIARY OF CGW SOUTHEAST PARTNERS IV, L.P. JI Acquisition Corp. (the "Purchaser"), a Delaware Corporation, which is a subsidiary of CGW Southeast Partners IV, L.P., a Delaware limited partnership ("CGW"), is offering to purchase all of the outstanding shares of Common Stock, $.10 par value per share (the "Shares"), of Johnston Industries, Inc., a Delaware corporation (the "Company"), at a purchase price of $3.00 per Share net to the seller in cash without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase dated April 7, 2000 (the "Offer to Purchase") and in the related Letter of Transmittal (which, as amended from time to time, together constitute the "Offer"). - -------------------------------------------------------------------------------- THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, MAY 5, 2000, UNLESS THE OFFER IS EXTENDED. - -------------------------------------------------------------------------------- The Offer is conditioned upon, among other things, (i) there being validly tendered and not withdrawn prior to the Expiration Date of the Offer, that number of shares which represents at least nine and seven-tenths percent (9.7%) of the Shares currently outstanding on a fully diluted basis, which, combined with the 9,000,000 newly issued shares of common stock and preferred stock to be purchased by Purchaser at the closing of the Offer, will result in Purchaser being the majority owner of the then issued and outstanding shares of the Company's voting capital stock, (ii) the other conditions set forth in the Offer to Purchase and (iii) the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The Offer is being made pursuant to a Purchase Agreement, dated as of March 30, 2000 (the "Purchase Agreement"), among CGW, the Purchaser and the Company. The Purchase Agreement provides, among other things, for the making of the Offer by the Purchaser, and further provides that, following the completion of the Offer, upon the terms and subject to the conditions of the Purchase Agreement, and in accordance with the Delaware General Corporation Law (the "DGCL"), if the Purchaser acquires more than ninety percent (90%) of the shares in the Offer, then a subsidiary of the Purchaser will be merged with and into the Company (the "Merger") and each Share issued and outstanding immediately prior to the effective time of the Merger (other than Shares owned by CGW, the Purchaser or their affiliates, or held in the treasury of the Company, which shall be canceled, and other than Shares, if any, held by stockholders who have properly exercised and perfected appraisal rights under the DGCL), will, by virtue of the Merger be 2 converted into the right to receive $3.00 in cash, payable to the holder thereof, without interest, upon surrender of the certificate formerly representing such Shares, less any required withholding taxes. The Purchase Agreement is more fully described in Section 11 of the Offer to Purchase. THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE PURCHASE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO THE HOLDERS OF THE SHARES. THE BOARD OF DIRECTORS HAS REMAINED NEUTRAL WITH REGARD TO ITS RECOMMENDATION OF THE OFFER TO THE STOCKHOLDERS. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment (and thereby purchased) Shares validly tendered and not properly withdrawn as, if and when the Purchaser gives oral or written notice to The Bank of New York (the "Depositary") of the Purchaser's acceptance for payment of such Shares for payment pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payments from the Purchaser and transmitting such payments to stockholders whose Shares have been accepted for payment. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR SHARES BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. 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 representing Shares (the "Share Certificates") or timely confirmation of a book-entry transfer of such Shares into the Depositary's account at the Depository Trust Company (the "Book Entry Transfer Facility") pursuant to the procedures set forth in Section 3 of the Offer to Purchase, (ii) the Letter of Transmittal (or a manually signed facsimile thereof, properly completed and duly executed, with any required signature guarantees, or an Agent's Message (as defined in Section 3 of the Offer to Purchase) in connection with a book-entry transfer, and (iii) any other documents required by the Letter of Transmittal. As described in Section 1 of the Offer to Purchase, in the Purchase Agreement, the Purchaser and CGW have agreed with the Company not to extend, delay acceptance for payment of, or the payment for, Shares, or to terminate, waive or amend the Offer, except under certain circumstances or if certain conditions have not been satisfied. Subject to the applicable rules and regulations of the Securities and Exchange Commission and the terms of the Purchase Agreement described above, the Purchaser expressly reserves the right, in its sole discretion, at any time and from time to time, and regardless of whether or not any of the events set forth in Section 14 of the Offer to Purchase shall have occurred, to (i) extend the period of time during which the Offer is open and thereby delay acceptance for payment of, and the payment for, any Shares, by giving oral or written notice of such extension to the Depositary and (ii) amend the Offer in any respect by giving oral or written notice of such amendment to the Depositary. Any extension, delay, termination, waiver or amendment will be followed as promptly as 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 after the previously scheduled Expiration Date (as defined below). During any such extension, all Shares previously tendered and not properly withdrawn will remain subject to the Offer, subject to the rights of a tendering stockholder to withdraw such stockholder's Shares. The term "Expiration Date" means 12:00 Midnight, New York City time, on Friday, May 5, 2000, unless and until the Purchaser in its sole discretion (but subject to the terms and conditions of the Purchase Agreement), shall have extended the period during which the Offer is open, in which event the "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Purchaser, shall expire. The Purchaser will not make a subsequent offering period available after the Expiration Date. Tenders of Shares made pursuant to the Offer are irrevocable, except that Shares tendered pursuant to the Offer may be withdrawn at any time on or prior to the Expiration Date and, unless theretofore accepted for payment by the Purchaser pursuant to the Offer, may be withdrawn at any time after June 6, 2000. 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 the Offer to Purchase. Any notice of withdrawal must specify the name of the person who tendered such Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder, if different from that of the person who tendered such Shares. If Share Certificates to be withdrawn have been delivered or otherwise identified to the Depositary, then prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and the signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution (as defined in Section 3 of the Offer to Purchase) unless such Shares have been tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer as set forth in Section 3 of the Offer to Purchase, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares, in which case a notice of withdrawal will be effective if delivered to the Depositary by any method of delivery described in the second sentence of this paragraph. All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by the Purchaser in its sole discretion, which determination will be final and binding. The information required to be disclosed by Rule 14d-6(d)(1) 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 the Purchaser with the Company's stockholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase and the related Letter of Transmittal and other relevant materials will be mailed by the Purchaser to record holders of Shares and furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. 3 THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. Questions and requests for assistance may be directed to the Information Agent as set forth below. Requests for copies of the Offer to Purchase and the related Letter of Transmittal and all the tender offer materials may be directed to the Information Agent and copies will be furnished promptly at the Purchaser's expense. The Purchaser will not pay any fees or commissions to any broker or dealer or any other person (other than the Information Agent) for soliciting tenders of Shares pursuant to the Offer. The Information Agent for the Offer is: MACKENZIE PARTNERS, INC. 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (Call Collect) or CALL TOLL-FREE (800) 322-2885 April 7, 2000 EX-99.(A)(10) 10 TEXT OF PRESS RELEASE 1 EXHIBIT (a)(10) FOR: JOHNSTON INDUSTRIES, INC. FROM: MARTIN SKALA, VP NICHOLAS PATRUNO, INVESTOR RELATIONS PORTER, LEVAY & ROSE, INC. (212) 564-4700 COMPANY JAMES J. MURRAY, CHIEF FINANCIAL OFFICER CONTACT: (706) 641-3140 FOR IMMEDIATE RELEASE JOHNSTON INDUSTRIES REPORTS FOURTH QUARTER/YEAR-END RESULTS COLUMBUS, GA, APRIL 7 Johnston Industries, Inc. (NYSE: JII), a leading domestic manufacturer of industrial, home furnishing and hospitality textiles, today announced results for the fourth quarter and fiscal year ended January 1, 2000. The company reported a net loss for the quarter of $1,670,000, or sixteen cents per basic and diluted share, on revenues of $67,912,000, compared with net income of $755,000, or seven cents per basic and diluted share, on revenues of $65,250,000 for the fourth quarter of 1998. For the year, the net loss was $8,008,000, or 75 cents per basic and diluted share, on revenues of $264,036,000, compared with a loss of $608,000, or six cents per basic and diluted share, on revenues of $283,724,000 for the prior year. The lower sales and corresponding reduction in operating performance in 1999 are attributable to weakness in indirect exports, principally upholstery substrates, and soft demand in many of the company's domestic upholstery and home furnishings markets. -more- 2 2 Clark Ogle, president and CEO, stated, "The fourth quarter saw a resurgence in our upholstery substrates business, coupled with disappointing sales of decorative upholstery fabrics. An unacceptable amount of our Finished Fabrics sales, particularly our decorative upholstery lines, represented inventory closeouts and discounting. We believe that the causes of these closeouts and discounts have been addressed and are unlikely to recur. For example, our recently announced woven upholstery agreement with Covington Group has dramatically reduced our exposure to this sort of inventory risk. In addition, we recognized approximately $2 million of losses during the fourth quarter related to our guarantees of certain loans that former employees had under the old Employee Stock Purchase Plan." Ogle continued, "We reduced our borrowings under our senior credit facilities by almost $7,000,000 during the fourth quarter, our ninth straight quarter of debt reduction. From an operating income standpoint, the- fourth quarter represented the best quarter of a very disappointing year." Johnston Industries, Inc. manufactures and markets textile fabrics primarily for industrial and home furnishings end uses. One of Johnston's most promising product lines is the Caress(R) family of superior table linens. Johnston Industries Composite Reinforcements Inc. makes Vectorply(R) and other sophisticated non-crimp multiaxial reinforcing fabrics from fiberglass, carbon and aramid fibers used in a wide variety of applications. This press release contains statements of a forward-looking nature regarding future events. These statements are only predictions and actual events may differ materially. Please refer to documents that Johnston files from time to time with the Securities and Exchange Commission for a discussion of certain factors that could cause actual results to differ materially from those contained in the forward-looking statements. -more- 3 3 JOHNSTON INDUSTRIES, INC. FINANCIAL HIGHLIGHTS (UNAUDITED)
FOR THE THREE MONTHS ENDED FOR THE YEAR ENDED -------------------------- ------------------ 1/1/00 1/2/99 1/1/00 1/2/99 ------ ------ Net sales $ 67,912,000 $ 65,250,000 $ 264,036,000 $ 283,724,000 Costs and expenses: Cost of sales 58,716,000 54,701,000 235,950.000 245,278,000 Selling, general and administrative 7,427,000 5,970,000 26,872,000 26,718,000 Amortization of goodwill 155,000 161,000 628,000 632,000 Restructuring and impairment charges (3,000) 93,000 Total costs and expenses 66,298,000 60,829,000 263,450,000 272,721,000 Income from operations 1,614,000 4,421,000 586,000 11,003,000 Other expenses (income): Interest expense 2,877,000 3,279,000 12,0170,00 13,420,000 Interest income (89,000) 83,000 (572,000) (703,000) Other - net 2,119,000 (249,000) 2,599,000 392,000 Total other expenses - net 4,907,000 3,113,000 14,044.000 13,109,000 Equity in earnings of equity investee 244,000 149,000 799,000 326,000 Realized and unrealized investment loss (50,000) (19,000) Income (loss) from continuing operations (3,049,000) 1,457,000 (12,709,000) (1,799,000) (Benefit) for income taxes (1,379,000) 702,000 (4,701,000) (1,191,000) Net income (loss) (1,670,000) 755,000 (8,008,000) (608,000) Net income (loss) per common share - Basic and diluted: $ (.16) $ .07 $ (.75) $ (.06) Weighted average number of common shares outstanding 10,722,000 10,722,000 10,722,000 10,722,000
##### 2000 EX-99.(D) 11 PURCHASE AGREEMENT 1 EXHIBIT (d) PURCHASE AGREEMENT BY AND AMONG CGW SOUTHEAST PARTNERS IV, L.P., JI ACQUISITION CORP., AND JOHNSTON INDUSTRIES, INC. DATED AS OF MARCH 30, 2000 2 PURCHASE AGREEMENT THIS PURCHASE AGREEMENT (this "Agreement") is made and entered into as of March 30, 2000, by and among CGW Southeast Partners IV, L.P. ("CGW"), a limited partnership formed under the Delaware Revised Uniform Limited Partnership Act; JI Acquisition Corp. ("Purchaser"), a Delaware corporation; and Johnston Industries, Inc. ("Johnston"), a Delaware corporation. PREAMBLE The respective Boards of Directors of Johnston and Purchaser and the General Partner of CGW have approved, and deem it advisable and in the best interests of their respective stockholders to enter into this Agreement to provide for, the acquisition of Johnston Common Stock and Johnston Preferred Stock by Purchaser upon the terms and subject to the conditions set forth herein. Certain terms used in this Agreement are defined in Section 10.1 of this Agreement. NOW, THEREFORE, in consideration of the above and the mutual warranties, representations, covenants, and agreements set forth herein, the parties agree as follows: ARTICLE 1 THE OFFER 1.1 THE OFFER. (a) Subject to the provisions of this Agreement, as promptly as reasonably practicable, Purchaser shall, and CGW shall cause Purchaser to, commence (within the meaning of Rule 14d-2 under the 1934 Act) a tender offer (as it may be amended from time to time as permitted by this Agreement, the "Offer") for all of the then outstanding shares (the "Shares") of Johnston Common Stock at a price of $3.00 per Share, net to the seller in cash (such price, or any such higher price per Share as may be paid in the Offer, being referred to herein as the "Offer Price"). The obligation of Purchaser to, and of CGW to cause Purchaser to, commence the Offer and accept for payment, and pay for, any Shares tendered pursuant to the Offer shall be subject to the conditions set forth in Article 8 hereof and Exhibit 1 hereto (any of which may be waived by Purchaser in its sole discretion) and to the terms and conditions of this Agreement. Purchaser expressly reserves the right to modify the terms of the Offer, except that, without the consent of Johnston, Purchaser shall not (i) reduce the price per Share to be paid pursuant to the Offer, (ii) modify or add to the conditions set forth in Exhibit 1, (iii) except as provided in the next sentence, extend the Offer, or (iv) change the form of consideration payable in the Offer. Notwithstanding the foregoing, Purchaser may, without the consent of Johnston, (i) extend the Offer, if at the scheduled expiration date of the Offer any of the conditions to Purchaser's 3 obligations to purchase Shares shall not be satisfied, (ii) extend the Offer for a period of not more than ten business days beyond the initial expiration date of the Offer (which initial expiration date shall be 20 business days following the commencement of the Offer), if on the date of such extension less than 90% of the outstanding Shares have been validly tendered and not properly withdrawn pursuant to the Offer, notwithstanding that all conditions to the Offer are satisfied as of the date of such extension, (iii) extend the Offer for any period required by any rule, regulation, interpretation or position of the SEC or the staff thereof applicable to the Offer, and (iv) extend the Offer for any reason for a period of not more than ten business days beyond the latest expiration date that would otherwise be permitted under clause (i), (ii) or (iii) of this sentence. Notwithstanding the foregoing, the Offer may not be extended beyond the date of termination of this Agreement pursuant to Article 9. Subject to the terms and conditions of the Offer and this Agreement, Purchaser shall, and CGW shall cause Purchaser to, pay for all Shares validly tendered and not withdrawn pursuant to the Offer that Purchaser becomes obligated to purchase pursuant to the Offer as soon as practicable after the expiration of the Offer. (b) On the date of commencement of the Offer, Purchaser shall file, and CGW shall cause Purchaser to file, with the SEC a Tender Offer Statement on Schedule TO with respect to the Offer, which shall contain an offer to purchase (the "Offer to Purchase") and a related letter of transmittal and summary advertisement, all in accordance with the terms of the Offer as set forth herein (such Schedule TO and the documents included therein pursuant to which the Offer will be made, together with any supplements or amendments thereto, the "Offer Documents"). The Offer Documents shall comply in all material respects with the requirements of applicable federal securities laws and, on the date filed with the SEC and on the date first published, sent or given to Johnston's stockholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by Purchaser with respect to information furnished in writing by or on behalf of Johnston expressly for inclusion in the Offer Documents. Purchaser and Johnston each agree promptly to correct any information provided by or on its behalf for use in the Offer Documents if and to the extent that such information shall have become false or misleading in any material respect, and Purchaser further agrees to promptly take all steps necessary to amend or supplement the Offer Documents and to cause the Offer Documents as so amended or supplemented to be filed with the SEC and to be disseminated to Johnston's stockholders, in each case as to and to the extent required by applicable federal securities laws. Johnston and its counsel shall be given the opportunity to review the Schedule TO before it is filed with the SEC. In addition, Purchaser will provide Johnston and its counsel, in writing, with any comments, whether written or oral, Purchaser or its counsel may receive from time to time from the SEC or its staff with respect to the Offer Documents promptly after the receipt of such comments. 1.2 JOHNSTON ACTIONS. (a) Johnston hereby approves the making of, and consents to the Offer and represents and warrants that its Board of Directors, at a meeting duly called and held, has duly adopted resolutions (i) approving this Agreement, consenting to the Offer being made and -2- 4 approving the sale of Johnston Common Stock and Johnston Preferred Stock contemplated by Article 3 hereof (collectively, the "Transactions"), and such approval constitutes approval of the Transactions for purposes of Section 203 of the DGCL and the Stockholder Protection Agreement, dated as of May 17, 1999, between Johnston and The Bank of New York (the "Stockholder Protection Agreement"), such that the provisions of said Section 203 and the Stockholder Protection Agreement will not apply to the Transactions and (ii) determining, in reliance on the opinion described in Section 4.22 hereof, that the terms of the Transactions are fair to, and in the best interests of, the stockholders of Johnston. (b) On the date the Offer Documents are filed with the SEC, Johnston shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the Offer (together with all amendments and supplements thereto and including the exhibits thereto, the "Schedule 14D-9") which shall contain the position of the Board of Directors of Johnston and shall mail the Schedule 14D-9 to the stockholders of Johnston. The Schedule 14D-9 shall comply in all material respects with the requirements of applicable federal securities laws and, on the date filed with the SEC and on the date first published, sent or given to Johnston's stockholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by Johnston with respect to information furnished in writing by or on behalf of Purchaser expressly for inclusion in the Schedule 14D-9. Purchaser and Johnston agree promptly to correct any information provided by or on its behalf for use in the Schedule 14D-9 if and to the extent that such information shall have become false or misleading in any material respect, and Johnston further agrees to promptly take all steps necessary to amend or supplement the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or supplemented to be filed with the SEC and to be disseminated to Johnston's stockholders, in each case as to and to the extent required by applicable Federal securities laws. Purchaser and its counsel shall be given the opportunity to review the Schedule 14D-9 before it is filed with the SEC. In addition, Johnston agrees to provide Purchaser and its counsel, in writing, with any comments, whether written or oral, that Johnston or its counsel may receive from time to time from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments or other communications. (c) In connection with the Offer, Johnston will promptly furnish or cause to be furnished to Purchaser mailing labels, security position listings and any available listing, or computer file containing the names and addresses of all record holders of the Shares as of a recent date, and shall furnish Purchaser with such additional information (including, but not limited to, updated lists of holders of the Shares and their addresses, mailing labels and lists of security positions) and assistance as the Purchaser or its agents may reasonably request in communicating the Offer to the record and beneficial holders of the Shares. Subject to the requirements of applicable Law, and except for such steps as are necessary to disseminate the Offer Documents, CGW and Purchaser shall hold in confidence the information contained in any of such labels and lists and the additional information referred to in the preceding sentence, will use such information only in connection with the Offer, and, if this Agreement is terminated, will promptly deliver or cause to be delivered to Johnston all copies of such information then in their possession. -3- 5 ARTICLE 2 EFFECTIVE TIME AND CLOSING 2.1 EFFECTIVE TIME. The Transactions shall become effective on the date and at the time that payment for the Shares validly tendered and not withdrawn pursuant to the Offer has been made by Purchaser (the "Effective Time"). 2.2 TIME AND PLACE OF CLOSING. The closing of the Transactions (the "Closing") will take place at 9:00 A.M. on the date that the Effective Time occurs (or the immediately preceding day if the Effective Time is earlier than 9:00 A.M.), or at such other time as the Parties, acting through their authorized officers, may mutually agree. The Closing shall be held at such location as may be mutually agreed upon by the Parties. ARTICLE 3 STOCK PURCHASE Pursuant to the following provisions of this Article 3, Purchaser shall purchase shares of Johnston Common Stock and Johnston Preferred Stock having an aggregate value of $27 million. 3.1 PURCHASE OF COMMON STOCK. At the Closing, Purchaser shall purchase and acquire, and CGW shall cause Purchaser to purchase and acquire, and Johnston shall issue and sell to Purchaser, 8,750,000 shares of authorized but unissued Johnston Common Stock (the "Additional Common Stock") at a per share purchase price of $3.00 per share for an aggregate value of $26.25 million. The issuance of the Additional Common Stock shall have been duly approved by the Board of Directors of Johnston as required by applicable law, such that, when issued, the shares of Additional Common Stock will be duly and validly issued and outstanding and fully paid and nonassessable under the DGCL. 3.2 DESIGNATION OF SERIES A PREFERRED STOCK. Prior to the Effective Time, Johnston shall cause its Board of Directors to designate a class of Johnston Preferred Stock as Series A Preferred Stock having the designations and powers, preferences and rights, and the qualifications, limitations and restrictions set forth in the Certificate of Designation attached hereto as Exhibit 2. 3.3 PURCHASE OF PREFERRED STOCK. At the Closing, Purchaser shall purchase and acquire, and CGW shall cause Purchaser to purchase and acquire and Johnston shall issue and sell to Purchaser, 250,000 shares of Series A Preferred Stock of Johnston at a per share purchase price of $3.00 per share for an aggregate value of $750,000. The issuance of such Series A Preferred Stock shall have been duly approved by the Board of Directors of Johnston as required by applicable Law, such that, when issued, the shares of Series A Preferred Stock will be duly and validly issued and outstanding and fully paid and nonassessable under the DGCL. -4- 6 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF JOHNSTON Except as specifically set forth in the Johnston Disclosure Memorandum, Johnston hereby represents and warrants to CGW and Purchaser as follows: 4.1 ORGANIZATION, STANDING, AND POWER. Johnston is a corporation duly organized, validly existing, and in good standing under the Laws of the State of Delaware, and has the corporate power and authority to carry on its business as now conducted and to own, lease and operate its material Assets. Johnston is duly qualified or licensed to transact business as a foreign corporation in good standing in the States of the United States and foreign jurisdictions where the character of its Assets or the nature or conduct of its business requires it to be so qualified or licensed, except for such jurisdictions in which the failure to be so qualified or licensed is not reasonably likely to have, individually or in the aggregate, a Johnston Material Adverse Effect. The minute books and other organizational documents for Johnston have been made available to CGW for its review and are true and complete in all material respects as of the date of this Agreement and accurately reflect in all material respects all amendments thereto and all proceedings of the Board of Directors and stockholders thereof. 4.2 AUTHORITY OF JOHNSTON; NO BREACH BY AGREEMENT. (a) Johnston has the corporate power and authority necessary to execute, deliver, and perform its obligations under this Agreement and to consummate the Transactions. The execution, delivery, and performance of this Agreement and the consummation of the Transactions have been duly and validly authorized by all necessary corporate action in respect thereof on the part of Johnston. This Agreement represents a legal, valid, and binding obligation of Johnston, enforceable against Johnston in accordance with its terms (except in all cases as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, receivership, conservatorship, moratorium, or similar Laws affecting the enforcement of creditors' rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding may be brought). (b) Neither the execution and delivery of this Agreement by Johnston, nor the consummation by Johnston of the Transactions, nor compliance by Johnston with any of the provisions hereof, will (i) conflict with or result in a breach of any provision of Johnston's Certificate of Incorporation or Bylaws or the certificate or articles of incorporation or bylaws of any Johnston Subsidiary or any resolution adopted by the board of directors or the stockholders of any Johnston Entity, or (ii) except as set forth in Section 4.2 of the Johnston Disclosure Memorandum, constitute or result in a Default under, or require any Consent pursuant to, or result in the creation of any Lien on any material Asset of any Johnston Entity under, any Contract of any Johnston Entity, where such Default or Lien, or any failure to obtain such Consent, is reasonably likely to have, individually or in the aggregate, a Johnston Material Adverse Effect, or, (iii) subject to receipt of the requisite Consents referred to in Section 8.1(a), constitute or result in a Default under, or require any Consent pursuant to, any Law or Order applicable to any Johnston -5- 7 Entity or any of their respective material Assets (including any CGW Entity or any Johnston Entity becoming subject to or liable for the payment of any Tax or any of the Assets owned by any CGW Entity or any Johnston Entity being reassessed or revalued by any Taxing authority). (c) No notice to, filing with, or Consent of, any Governmental Entity is necessary for the consummation by Johnston of the Transactions, except for (i) the filing of a premerger notification and report form by CGW and Johnston under the HSR Act, (ii) the filing with the SEC of (y) the Schedule TO, and (z) such reports under Section 13(a) of the 1934 Act as may be required in connection with the Transactions, (iii) the filing of appropriate documents with the relevant authorities of jurisdictions in which Johnston is qualified to do business, and (iv) such other notices, filings and Consents as are disclosed in Section 4.2 of the Johnston Disclosure Memorandum. 4.3 CAPITAL STOCK. (a) The entire authorized capital stock of Johnston consists of 23,000,000 shares, of which 20,000,000 are shares of Johnston Common Stock and 3,000,000 are shares of Johnston Preferred Stock. Of the Johnston Common Stock, 10,721,872 shares are issued and outstanding and 1,745,819 are held in treasury, and of the Johnston Preferred Stock, no shares have been issued and are outstanding, except for (i) 325,000 shares which have been designated as Johnston preferred stock, series 1996, of which no shares of such Johnston preferred stock, series 1996, are outstanding and no shares are held in treasury, and (ii) 200,000 shares which have been designated as Series X Junior Participating Preferred Stock, par value $.01 per share (the "Series X Preferred Stock"), of which no shares of Series X Preferred Stock are outstanding and no shares are held in treasury. All of the issued and outstanding shares of capital stock of Johnston are duly and validly issued and outstanding and are fully paid and nonassessable under the DGCL. None of the outstanding shares of capital stock of Johnston have been issued in violation of any preemptive rights of the current or past stockholders of Johnston. (b) Except for the shares set forth above, or as disclosed in Section 4.3(b) of the Johnston Disclosure Memorandum, there are no shares of capital stock or other equity securities of Johnston outstanding and no outstanding Johnston Equity Rights. All shares of Johnston Common Stock which may be issued pursuant to Johnston Equity Rights as described in Section 4.3(b) of the Johnston Disclosure Memorandum, when issued, will have been duly authorized, validly issued, fully paid and nonassessable. Set forth on Section 4.3(b) of the Johnston Disclosure Memorandum is a list of the holders of Johnston Equity Rights, including the number of shares of Johnston Common Stock issuable upon the exercise of each such Johnston Equity Rights and the exercise price thereof. Except as set forth in Section 4.3(b) of the Johnston Disclosure Memorandum, Johnston does not have any outstanding option, warrant, subscription or other right, agreement or commitment that either (i) obligates Johnston to issue, sell or transfer, repurchase, redeem or otherwise acquire or vote any shares of the capital stock of Johnston or (ii) restricts the transfer of Johnston Common Stock. 4.4 JOHNSTON SUBSIDIARIES. Johnston has disclosed in Section 4.4 of the Johnston Disclosure Memorandum all of the Johnston Subsidiaries that are corporations (identifying its -6- 8 jurisdiction of incorporation, each jurisdiction in which it is qualified and/or licensed to transact business, and the number of shares owned and percentage ownership interest represented by such share ownership) and all of the Johnston Subsidiaries that are general or limited partnerships, limited liability companies, or other non-corporate entities (identifying the Law under which such entity is organized, each jurisdiction in which it is qualified and/or licensed to transact business, and the amount and nature of the ownership interest therein). Except as disclosed in Section 4.4 of the Johnston Disclosure Memorandum, Johnston or one of its Subsidiaries owns all of the issued and outstanding shares of capital stock (or other equity interests) of each Johnston Subsidiary. No capital stock (or other equity interest) of any Johnston Subsidiary is or may become required to be issued by reason of any Johnston Equity Rights, and there are no Contracts by which any Johnston Subsidiary is bound to issue additional shares of its capital stock (or other equity interests) or Johnston Equity Rights or by which any Johnston Entity is or may be bound to transfer any shares of the capital stock (or other equity interests) of any Johnston Subsidiary. There are no Contracts relating to the rights of any Johnston Entity to vote or to dispose of any shares of the capital stock (or other equity interests) of any Johnston Subsidiary. All of the shares of capital stock (or other equity interests) of each Johnston Subsidiary held by a Johnston a Johnston Entity are fully paid and nonassessable under the applicable corporation Law of the jurisdiction in which such Subsidiary is incorporated or organized and are owned by the Johnston Entity free and clear of any Lien. Except as disclosed in Section 4.4 of the Johnston Disclosure Memorandum, each Johnston Subsidiary is a corporation, and each such Subsidiary is duly organized, validly existing, and (as to corporations) in good standing under the Laws of the jurisdiction in which it is incorporated or organized, and has the corporate power and authority necessary for it to own, lease, and operate its material Assets and to carry on its business as now conducted. Each Johnston Subsidiary is duly qualified or licensed to transact business as a foreign corporation in good standing in the States of the United States and foreign jurisdictions where the character of its Assets or the nature or conduct of its business requires it to be so qualified or licensed, except for such jurisdictions in which the failure to be so qualified or licensed is not reasonably likely to have, individually or in the aggregate, a Johnston Material Adverse Effect. The minute books and other organizational documents for each Johnston Subsidiary have been made available to CGW for its review, and, except as disclosed in Section 4.4 of the Johnston Disclosure Memorandum, are true and complete in all material respects as in effect as of the date of this Agreement and accurately reflect all amendments thereto and all proceedings of the Board of Directors and stockholders thereof. 4.5 SEC FILINGS; FINANCIAL STATEMENTS. (a) Johnston has timely filed and made available to CGW all SEC Documents required to be filed by Johnston since January 1, 1996 (the "Johnston SEC Reports"). The Johnston SEC Reports (i) at the time filed, complied in all material respects with the applicable requirements of the Securities Laws and other applicable Laws and (ii) did not, at the time they were filed (or, if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated in such Johnston SEC Reports or necessary in order to make the statements in such Johnston SEC Reports, in light of the circumstances under which they were made, not materially misleading. No Johnston Subsidiary is required to file any SEC Documents. -7- 9 (b) Each of the Johnston Financial Statements (including, in each case, any related notes) contained in the Johnston SEC Reports, including any Johnston SEC Reports filed after the date of this Agreement until the Effective Time, complied as to form in all material respects with the applicable published rules and regulations of the SEC with respect thereto, was prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to such financial statements or, in the case of unaudited interim statements, as permitted by Form 10-Q of the SEC), and fairly presented in all material respects the consolidated financial position of Johnston and its Subsidiaries as at the respective dates and the consolidated results of operations and cash flows for the periods indicated, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments which were not or are not expected to be material in amount or effect. 4.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in Section 4.6 of the Johnston Disclosure Memorandum, no Johnston Entity has any Liabilities that are reasonably likely to have, individually or in the aggregate, a Johnston Material Adverse Effect. No Johnston Entity has incurred or paid any Liability since January 1, 1999, except for such Liabilities incurred or paid (i) in the ordinary course of business consistent with past business practice and which are not reasonably likely to have, individually or in the aggregate, a Johnston Material Adverse Effect or (ii) in connection with the transactions contemplated by this Agreement. Except as disclosed in Section 4.6 of the Johnston Disclosure Memorandum, no Johnston Entity is directly or indirectly liable, by guarantee, indemnity, or otherwise, upon or with respect to, or obligated, by discount or repurchase agreement or in any other way, to provide funds in respect to, or obligated to guarantee or assume any Liability for any Person for any amount in excess of $50,000. 4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since January 1, 1999, except as disclosed in Section 4.7 of the Johnston Disclosure Memorandum, (i) there have been no events, changes, or occurrences which have had, or are reasonably likely to have, individually or in the aggregate, a Johnston Material Adverse Effect, (ii) there has not been any split, combination or reclassification of any of Johnston's outstanding capital stock or any issuance or authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of its outstanding capital stock, (iii) there has not been any material change in the accounting methods, principles or practices by Johnston or any Johnston Subsidiaries, except insofar as may have been required by GAAP, and (iv) the Johnston Entities have not taken any action, or failed to take any action, prior to the date of this Agreement, which action or failure, if taken after the date of this Agreement, would represent or result in a material breach or violation of any of the covenants and agreements of Johnston provided in Section 6.2. 4.8 TAX MATTERS. (a) All Tax Returns required to be filed by or on behalf of any of the Johnston Entities have been timely filed or requests for extensions have been timely filed, granted, and have not expired for periods ended on or before December 31, 1997, and on or before the date of the most recent fiscal year end immediately preceding the Effective Time, all Tax Returns filed are complete and accurate in all material respects. All Taxes shown on filed Tax Returns have been -8- 10 paid. There is no audit examination, deficiency, or refund Litigation with respect to any Taxes that is reasonably likely to result in a determination that would have, individually or in the aggregate, a Johnston Material Adverse Effect, except as reserved against in the Johnston Financial Statements delivered prior to the date of this Agreement or as disclosed in Section 4.8 of the Johnston Disclosure Memorandum. Johnston's federal income Tax Returns have been audited by the IRS and accepted through June 30, 1995. All Taxes and other Liabilities due with respect to completed and settled examinations or concluded Litigation have been paid. There are no Liens with respect to Taxes upon any of the material Assets of the Johnston Entities. (b) Except as set forth in Section 4.8 of the Johnston Disclosure Memorandum, none of the Johnston Entities has executed an extension or waiver of any statute of limitations on the assessment or collection of any Tax due (excluding such statutes that relate to years currently under examination by the Internal Revenue Service or other applicable taxing authorities) that is currently in effect. (c) The provision for any Taxes due or to become due for any of the Johnston Entities for the period or periods through and including the date of the respective Johnston Financial Statements that has been made and is reflected on such Johnston Financial Statements is sufficient to cover all such Taxes. (d) Deferred Taxes of the Johnston Entities have been provided for in accordance with GAAP. (e) None of the Johnston Entities is a party to any Tax allocation or sharing agreement and none of the Johnston Entities has been a member of an Affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which was Johnston) or has any Liability for Taxes of any Person (other than Johnston and its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign Law) as a transferee or successor or by Contract or otherwise. (f) Each of the Johnston Entities is in compliance with, and its records contain all information and documents (including properly completed IRS Forms W-9) necessary to comply with, all material applicable information reporting and Tax withholding requirements under federal, state, and local Tax Laws, and such records identify with specificity all accounts subject to backup withholding under Section 3406 of the Internal Revenue Code, except for such instances of noncompliance and such omissions as are not reasonably likely to have, individually or in the aggregate, a Johnston Material Adverse Effect. (g) Except as disclosed in Section 4.8 of the Johnston Disclosure Memorandum, none of the Johnston Entities has made any payments, is obligated to make any payments, or is a party to any Contract that could obligate it to make any payments that would be disallowed as a deduction under Section 280G or 162(m) of the Internal Revenue Code. (h) There has not been an ownership change, as defined in Internal Revenue Code Section 382(g), of the Johnston Entities that occurred during or after any Taxable Period in -9- 11 which the Johnston Entities incurred a net operating loss that carries over to any Taxable Period ending after November 2, 1997. (i) No Johnston Entity has or has had in any foreign country a permanent establishment, as defined in any applicable tax treaty or convention between the United States and such foreign country. 4.9 ASSETS. (a) Except as disclosed in Section 4.9 of the Johnston Disclosure Memorandum or as disclosed or reserved against in the Johnston Financial Statements delivered prior to the date of this Agreement, the Johnston Entities have good and marketable title, free and clear of all Liens, to all of their respective material Assets, except for any such Liens or other defects of title which are not reasonably likely to have a Johnston Material Adverse Effect. All material tangible properties used in the businesses of the Johnston Entities are in good condition, reasonable wear and tear excepted, and are usable in the ordinary course of business consistent with Johnston's past practices. (b) All items of inventory of the Johnston Entities reflected on the most recent balance sheet included in the Johnston Financial Statements delivered prior to the date of this Agreement and prior to the Effective Time consisted and will consist, as applicable, of items of a quality and quantity usable and salable in the ordinary course of business and conform to generally accepted standards in the industry in which the Johnston Entities are a part. (c) The accounts receivable of the Johnston Entities as set forth on the most recent balance sheet included in the Johnston Financial Statements delivered prior to the date of this Agreement or arising since the date thereof are valid and genuine; have arisen solely out of bona fide sales of goods, performance of services and other business transactions in the ordinary course of business consistent with past practice; are not subject to valid defenses, set-offs or counterclaims; and are collectible within 90 days after billing at the full recorded amount thereof less, in the case of accounts receivable appearing on the most recent balance sheet included in the Johnston Financial Statements delivered prior to the date of this Agreement, the recorded allowance for collection losses on such balance sheet. The allowance for collection losses on such balance sheet has been determined in accordance with GAAP. (d) All Assets which are material to Johnston's business on a consolidated basis, held under leases or subleases by any of the Johnston Entities, are held under valid Contracts enforceable in accordance with their respective terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or other Laws affecting the enforcement of creditors' rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceedings may be brought), and each such Contract is in full force and effect. (e) The Johnston Entities currently maintain insurance substantially similar in amounts, scope, and coverage to that maintained by other peer organizations. None of the -10- 12 Johnston Entities has received notice from any insurance carrier that (i) any policy of insurance will be canceled or that coverage thereunder will be reduced or eliminated, or (ii) premium costs with respect to such policies of insurance will be substantially increased. Except as set forth in Section 4.9 of the Johnston Disclosure Memorandum, there are presently no claims for amounts exceeding in any individual case $50,000 pending under such policies of insurance and no notices of claims in excess of such amounts have been given by any Johnston Entity under such policies. (f) The Assets of the Johnston Entities include all Assets required to operate the business of the Johnston Entities as presently conducted. 4.10 INTELLECTUAL PROPERTY. Each Johnston Entity owns or has a license to use all of the material Intellectual Property used by such Johnston Entity in the course of its business. Each Johnston Entity is the owner of or has a license to any material Intellectual Property sold or licensed to a third party by such Johnston Entity in connection with such Johnston Entity's business operations, and such Johnston Entity has the right to convey by sale or license any material Intellectual Property so conveyed. No Johnston Entity is in Default under any of its material Intellectual Property licenses. No proceedings have been instituted, or are pending or, to Johnston's Knowledge, threatened, which challenge the rights of any Johnston Entity with respect to material Intellectual Property used, sold or licensed by such Johnston Entity in the course of its business, nor to Johnston's Knowledge has any person claimed or alleged any rights to such Intellectual Property. To Johnston's Knowledge, the conduct of the business of the Johnston Entities does not infringe any Intellectual Property of any other person. No Johnston Entity is obligated to pay any recurring royalties to any Person with respect to any such Intellectual Property. Except as disclosed in Section 4.10 of the Johnston Disclosure Memorandum, every officer, director, or employee of any Johnston Entity is a party to a Contract which requires such officer, director or employee to assign any interest in any Intellectual Property to a Johnston Entity and to keep confidential any trade secrets, proprietary data, customer information, or other business information of a Johnston Entity, and, to Johnston's Knowledge, no such officer, director or employee is party to any Contract with any Person other than a Johnston Entity which requires such officer, director or employee to assign any interest in any Intellectual Property to any Person other than a Johnston Entity or to keep confidential any trade secrets, proprietary data, customer information, or other business information of any Person other than a Johnston Entity. Except as disclosed in Section 4.10 of the Johnston Disclosure Memorandum, to Johnston's Knowledge, no officer, director or employee of any Johnston Entity is party to any Contract which restricts or prohibits such officer, director or employee from engaging in activities competitive with any Person, including any Johnston Entity. 4.11 ENVIRONMENTAL MATTERS. (a) Except as set forth in Section 4.11 of the Johnston Disclosure Memorandum, each Johnston Entity, its Participation Facilities, and its Operating Properties are, and have been during any Johnston Entity's tenure as an owner or operator thereof, and to Johnston's Knowledge were prior to such tenure, in compliance with all Environmental Laws, except for violations which are not reasonably likely to have, individually or in the aggregate, a Johnston Material Adverse Effect. -11- 13 (b) Except as set forth in Section 4.11 of the Johnston Disclosure Memorandum, there is no Litigation pending or, to the Knowledge of Johnston, threatened before any court, governmental agency, or authority or other forum in which any Johnston Entity or any of its Operating Properties or Participation Facilities (or Johnston in respect of such Operating Property or Participation Facility) has been or, with respect to threatened Litigation, may be named as a defendant (i) for alleged noncompliance with any Environmental Law or (ii) relating to the release, discharge, spillage, or disposal into the environment of any Hazardous Material, whether or not occurring at, on, under, adjacent to, or affecting (or reasonably expected to affect) a site owned, leased, or operated by any Johnston Entity or any of its Operating Properties or Participation Facilities, except for such Litigation pending or threatened that is not reasonably likely to have, individually or in the aggregate, a Johnston Material Adverse Effect, nor, to Johnston's Knowledge, is there any reasonable basis for any Litigation of a type described in this sentence, except such as is not reasonably likely to have, individually or in the aggregate, a Johnston Material Adverse Effect. (c) Except as set forth in Section 4.11 of the Johnston Disclosure Memorandum during the period of (i) any Johnston Entity's ownership or operation of any of their respective current properties, (ii) any Johnston Entity's participation in the management of any Participation Facility, or (iii) to Johnston's Knowledge, any Johnston Entity's holding of a security interest in an Operating Property, there have been no releases, discharges, spillages, or disposals of Hazardous Material in, on, under, adjacent to, or affecting (or potentially affecting) such properties, except such as are not reasonably likely to have, individually or in the aggregate, a Johnston Material Adverse Effect. Prior to the period of (i) any Johnston Entity's ownership or operation of any of their respective current properties, (ii) any Johnston Entity's participation in the management of any Participation Facility, or (iii) to Johnston's Knowledge, any Johnston Entity's holding of a security interest in a Operating Property, to the Knowledge of Johnston, there were no releases, discharges, spillages, or disposals of Hazardous Material in, on, under, or affecting any such property, Participation Facility or Operating Property, except such as are not reasonably likely to have, individually or in the aggregate, a Johnston Material Adverse Effect. 4.12 COMPLIANCE WITH LAWS. Each Johnston Entity has in effect all material Permits necessary for it to own, lease, or operate its material Assets and to carry on its business as now conducted, and there has occurred no Default under any such Permit, other than Defaults which are not reasonably likely to have, individually or in the aggregate, a Johnston Material Adverse Effect. Except as disclosed in Section 4.12 of the Johnston Disclosure Memorandum, none of the Johnston Entities: (a) is in Default under any of the provisions of its Certificate of Incorporation or Bylaws (or other governing instruments); (b) Except for the environmental issues described in Section 4.11 of the Johnston Disclosure Memorandum, is in Default under any Laws, Orders, or Permits applicable to its business or employees conducting its business, except for Defaults which -12- 14 are not reasonably likely to have, individually or in the aggregate, a Johnston Material Adverse Effect; or (c) Except for the environmental issues described in Section 4.11 of the Johnston Disclosure Memorandum, since January 1, 1995, has received any notification or communication from any agency or department of federal, state, or local government or any Regulatory Authority or the staff thereof (i) asserting that any Johnston Entity is not in compliance with any of the Laws or Orders which such governmental authority or Regulatory Authority enforces, where such noncompliance is reasonably likely to have, individually or in the aggregate, a Johnston Material Adverse Effect, (ii) threatening to revoke any material Permits, the revocation of which is reasonably likely to have, individually or in the aggregate, a Johnston Material Adverse Effect, or (iii) requiring any Johnston Entity to enter into or consent to the issuance of a cease and desist order, formal agreement, directive, commitment, or memorandum of understanding, or to adopt any Board resolution or similar undertaking. Copies of all material reports, correspondence, notices and other documents relating to any inspection, audit, monitoring or other form of review or enforcement action by a Regulatory Authority, which are in Johnston's possession, have been made available to CGW. 4.13 LABOR RELATIONS. No Johnston Entity is the subject of any Litigation asserting that it or any other Johnston Entity has committed an unfair labor practice (within the meaning of the National Labor Relations Act or comparable state law) or seeking to compel it or any other Johnston Entity to bargain with any labor organization as to wages or conditions of employment, nor is any Johnston Entity party to any collective bargaining agreement, nor is there any strike or other labor dispute involving any Johnston Entity, pending or, to Johnston's Knowledge, threatened, or to the Knowledge of Johnston, is there any activity involving any Johnston Entity's employees seeking to certify a collective bargaining unit or engaging in any other organization activity. 4.14 EMPLOYEE BENEFIT PLANS. (a) Johnston has disclosed in Section 4.14 of the Johnston Disclosure Memorandum, and has delivered or made available to CGW prior to the execution of this Agreement copies in each case of, all pension, retirement, profit-sharing, deferred compensation, stock option, employee stock ownership, severance pay, vacation, bonus, or other incentive plan, all other written employee programs, arrangements, or agreements, all medical, vision, dental, or other health plans, all life insurance plans, and all other employee benefit plans or fringe benefit plans, including "employee benefit plans" as that term is defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored in whole or in part by, or contributed to by any Johnston Entity or ERISA Affiliate thereof for the benefit of employees, retirees, dependents, spouses, directors, independent contractors, or other beneficiaries and under which employees, retirees, dependents, spouses, directors, independent contractors, or other beneficiaries are eligible to participate (collectively, the "Johnston Benefit Plans"). Any of the Johnston Benefit Plans which is an "employee pension benefit plan," as that term is defined in Section 3(2) of -13- 15 ERISA, is referred to herein as a "Johnston ERISA Plan." Each Johnston ERISA Plan which is also a "defined benefit plan" (as defined in Section 414(j) of the Internal Revenue Code) is referred to herein as an "Johnston Pension Plan." No Johnston Pension Plan is or has been a multiemployer plan within the meaning of Section 3(37) of ERISA. (b) All Johnston Benefit Plans are in compliance with the applicable terms of ERISA, the Internal Revenue Code, and any other applicable Laws the breach or violation of which are reasonably likely to have, individually or in the aggregate, a Johnston Material Adverse Effect. Each Johnston ERISA Plan which is intended to be qualified under Section 401(a) of the Internal Revenue Code has received a favorable determination letter from the Internal Revenue Service, and Johnston is not aware of any circumstances likely to result in revocation of any such favorable determination letter. No Johnston Entity has engaged in a transaction with respect to any Johnston Benefit Plan that, assuming the taxable period of such transaction expired as of the date hereof, would subject any Johnston Entity to a Tax imposed by either Section 4975 of the Internal Revenue Code or Section 502(i) of ERISA. (c) Except as set forth in Section 4.14(c) of the Johnston Disclosure Memorandum, no Johnston Pension Plan has any "unfunded current liability," as that term is defined in Section 302(d)(8)(A) of ERISA, and the fair market value of the assets of any such plan exceeds the plan's "benefit liabilities," as that term is defined in Section 4001(a)(16) of ERISA, when determined under actuarial factors that would apply if the plan terminated in accordance with all applicable legal requirements. Since the date of the most recent actuarial valuation, there has been (i) no material change in the financial position of any Johnston Pension Plan, (ii) no change in the actuarial assumptions with respect to any Johnston Pension Plan, and (iii) no increase in benefits under any Johnston Pension Plan as a result of plan amendments or changes in applicable Law which is reasonably likely to have, individually or in the aggregate, a Johnston Material Adverse Effect or materially adversely affect the funding status of any such plan. Neither any Johnston Pension Plan nor any "single-employer plan," within the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by any Johnston Entity, or the single-employer plan of any entity which is considered one employer with Johnston under Section 4001 of ERISA or Section 414 of the Internal Revenue Code or Section 302 of ERISA (whether or not waived) (an "ERISA Affiliate") has an "accumulated funding deficiency" within the meaning of Section 412 of the Internal Revenue Code or Section 302 of ERISA. No Johnston Entity has provided, or is required to provide, security to a Johnston Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the Internal Revenue Code. (d) No Liability under Subtitle C or D of Title IV of ERISA has been or is expected to be incurred by any Johnston Entity with respect to any ongoing, frozen, or terminated single-employer plan or the single-employer plan of any ERISA Affiliate. No Johnston Entity has incurred any withdrawal Liability with respect to a multiemployer plan under Subtitle B of Title IV of ERISA (regardless of whether based on contributions of an ERISA Affiliate). No notice of a "reportable event," within the meaning of Section 4043 of ERISA for which the 30-day reporting requirement has not been waived, has been required to be filed for any Johnston Pension Plan or by any ERISA Affiliate within the 12-month period ending on the date hereof. -14- 16 (e) Except as disclosed in Section 4.14 of the Johnston Disclosure Memorandum, no Johnston Entity has any Liability for retiree health and life benefits under any of the Johnston Benefit Plans and there are no restrictions on the rights of such Johnston Entity to amend or terminate any such retiree health or benefit Plan without incurring any Liability thereunder. (f) Except as disclosed in Section 4.14 of the Johnston Disclosure Memorandum, neither the execution and delivery of this Agreement nor the consummation of the Transactions will (i) result in any payment (including severance, unemployment compensation, golden parachute, or otherwise) becoming due to any director or any employee of any Johnston Entity from any Johnston Entity under any Johnston Benefit Plan or otherwise, (ii) increase any benefits otherwise payable under any Johnston Benefit Plan, or (iii) result in any acceleration of the time of payment or vesting of any such benefit. (g) The actuarial present values of all accrued deferred compensation entitlements (including entitlements under any executive compensation, supplemental retirement, or employment agreement) of employees and former employees of any Johnston Entity and their respective beneficiaries, other than entitlements accrued pursuant to funded retirement plans subject to the provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA, have been fully reflected on the Johnston Financial Statements to the extent required by and in accordance with GAAP. 4.15 MATERIAL CONTRACTS. Except as disclosed in Section 4.15 of the Johnston Disclosure Memorandum or otherwise reflected in the Johnston Financial Statements, none of the Johnston Entities, nor any of their respective Assets, businesses, or operations, is a party to, or is bound or affected by, or receives benefits under, (i) any employment, severance, termination, consulting, or retirement Contract providing for aggregate payments to any Person in any calendar year in excess of $50,000, (ii) any Contract relating to the borrowing of money by any Johnston Entity or the guarantee by any Johnston Entity of any such obligation (other than Contracts evidencing trade payables and Contracts relating to borrowings or guarantees made in the ordinary course of business), (iii) any Contract which prohibits or restricts any Johnston Entity from engaging in any business activities in any geographic area, line of business or otherwise in competition with any other Person, (iv) any Contract between or among Johnston Entities, (v) any Contract involving Intellectual Property (other than Contracts entered into in the ordinary course with customers and "shrink-wrap" software licenses), (vi) any Contract relating to the provision of data processing, network communication, or other technical services to or by any Johnston Entity, (vii) any Contract relating to the purchase or sale of any goods or services (other than Contracts entered into in the ordinary course of business and involving payments under any individual Contract not in excess of $100,000), (viii) any agreement with any holder (or Affiliate thereof) of 5% or more of any class of securities of Johnston or any Johnston Entity and (ix) any other Contract or amendment thereto that would be required to be filed as an exhibit to a Form 10-K filed by Johnston with the SEC as of the date of this Agreement (together with all Contracts referred to in Sections 4.9 and 4.14(a), the "Johnston Contracts"). With respect to each Johnston Contract and except as disclosed in Section 4.15 of the Johnston Disclosure Memorandum: -15- 17 (a) the Contract is in full force and effect; (b) no Johnston Entity is in Default thereunder, other than Defaults which are not reasonably likely to have, individually or in the aggregate, a Johnston Material Adverse Effect, (c) no Johnston Entity has repudiated or waived any material provision of any such Contract; and (d) no other party to any such Contract is, to the Knowledge of Johnston, in Default in any respect, other than Defaults which are not reasonably likely to have, individually or in the aggregate, a Johnston Material Adverse Effect, or has repudiated or waived any material provision thereunder. Except as set forth in Section 4.15 of the Johnston Disclosure Memorandum, all of the indebtedness of any Johnston Entity for money borrowed is prepayable at any time by such Johnston Entity without penalty or premium. 4.16 LEGAL PROCEEDINGS. There is no Litigation instituted or pending, or, to the Knowledge of Johnston, threatened (or unasserted but considered probable of assertion and which if asserted would have at least a reasonable probability of an unfavorable outcome) against any Johnston Entity, or against any director, employee or employee benefit plan of any Johnston Entity, or against any material Asset, interest, or right of any of them, that is reasonably likely to have, individually or in the aggregate, a Johnston Material Adverse Effect, nor are there any Orders of any Regulatory Authorities, other governmental authorities, or arbitrators outstanding against any Johnston Entity, that are reasonably likely to have, individually or in the aggregate, a Johnston Material Adverse Effect. Section 4.16 of the Johnston Disclosure Memorandum contains a summary of all Litigation as of the date of this Agreement to which any Johnston Entity is a party and which names a Johnston Entity as a defendant or cross-defendant or for which, to Johnston's Knowledge, any Johnston Entity has any potential Liability. 4.17 REPORTS. Since January 1, 1996, or the date of organization if later, each Johnston Entity has timely filed all reports and statements, together with any amendments required to be made with respect thereto, that it was required to file with Regulatory Authorities (except failures to file which are not reasonably likely to have, individually or in the aggregate, a Johnston Material Adverse Effect). As of their respective dates, each of such reports and documents, including the financial statements, exhibits, and schedules thereto, complied in all material respects with all applicable Laws. As of its respective date, each such report and document did not, in all material respects, 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 made therein, in light of the circumstances under which they were made, not materially misleading. 4.18 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument, or other writing furnished or to be furnished by any Johnston Entity or any Affiliate thereof to CGW pursuant to this Agreement or in connection with the Transactions contains or will contain, when considered in light of all information provided to CGW pursuant hereto, any untrue statement of material fact or will omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the information supplied or to be supplied by Johnston, or any of its officers, directors, employees, representatives or agents, for inclusion or incorporation by reference in the Offer Documents or the Schedule 14D-9 including any amendments or supplements thereto, will at the respective times the Offer Documents or the Schedule 14D-9 are filed with the SEC or first published, sent or given to Johnston's stockholders, contain any statement which, at such time and in light of the circumstances under which it is made, is false or misleading with respect to any material fact, or, in light of the -16- 18 circumstances under which they were made, omit to state any material fact necessary in order to make the statements therein not false or misleading; provided, that Johnston makes no representation or warranty with respect to information that has been or will be supplied in writing by or on behalf of CGW, Purchaser or any CGW Subsidiaries, or their officers, directors, employees, representatives or agents, for inclusion or incorporation by reference in any of the foregoing documents. The Schedule 14D-9 and any amendments or supplements thereto will comply in all material respects with the applicable provisions of the 1934 Act and the rules and regulations thereunder and all other documents that any Johnston Entity or any Affiliate thereof is responsible for filing with any Regulatory Authority in connection with the Transactions will comply as to form in all material respects with the provisions of applicable Law. 4.19 REGULATORY MATTERS. No Johnston Entity or any Affiliate thereof has taken or agreed to take any action or has any Knowledge of any fact or circumstance that is reasonably likely to materially impede or delay receipt of any Consents of Regulatory Authorities referred to in Section 8.1(a) or result in the imposition of a condition or restriction of the type referred to in the last sentence of such Section. 4.20 STATE TAKEOVER LAWS. Each Johnston Entity has taken all necessary action to exempt the transactions contemplated by this Agreement from, or if necessary to challenge the validity or applicability of, any applicable "moratorium," "fair price," "business combination," "control share," or other anti-takeover Laws (collectively, "Takeover Laws"). 4.21 CHARTER PROVISIONS. Each Johnston Entity has taken all action so that the entering into of this Agreement and the consummation of the Transactions do not and will not result in the grant of any rights to any Person under the Certificate of Incorporation, Bylaws or other governing instruments of any Johnston Entity or restrict or impair the ability of CGW or any of its Subsidiaries to vote, or otherwise to exercise the rights of a stockholder with respect to, shares of any Johnston Entity that may be directly or indirectly acquired or controlled by them. 4.22 OPINION OF FINANCIAL ADVISOR. Johnston has received the opinion of The Robinson-Humphrey Company, LLC, dated the date of this Agreement, to the effect that the consideration to be received by the holders of Johnston Common Stock is fair, from a financial point of view, to such holders, a signed copy of which has been delivered to CGW. ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser hereby represents and warrants to Johnston as follows: 5.1 ORGANIZATION, STANDING, AND POWER. Purchaser is a corporation duly organized, validly existing, and in good standing under the Laws of the State of Delaware, and has the corporate power and authority to carry on its business as now conducted and to own, -17- 19 lease and operate its material Assets. Purchaser is duly qualified or licensed to transact business as a foreign corporation in good standing in the States of the United States and foreign jurisdictions where the character of its Assets or the nature or conduct of its business requires it to be so qualified or licensed, except for such jurisdictions in which the failure to be so qualified or licensed is not reasonably likely to have, individually or in the aggregate, a Purchaser Material Adverse Effect. 5.2 AUTHORITY; NO BREACH BY AGREEMENT. (a) Purchaser has the corporate power and authority necessary to execute, deliver and perform its obligations under this Agreement and to consummate the Transactions. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated herein have been duly and validly authorized by all necessary corporate action in respect thereof on the part of Purchaser. This Agreement represents a legal, valid, and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms (except in all cases as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, receivership, conservatorship, moratorium, or similar Laws affecting the enforcement of creditors' rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding may be brought). (b) Neither the execution and delivery of this Agreement by Purchaser, nor the consummation by Purchaser of the Transactions, nor compliance by Purchaser with any of the provisions hereof, will, subject to receipt of the requisite Consents referred to in Section 8.1(a), constitute or result in a Default under, or require any Consent pursuant to, any Law or Order applicable to Purchaser. (c) No notice to, filing with, or Consent of, any Governmental Entity is necessary for the consummation by Purchaser of the Transactions, except for (i) the filing of a premerger notification and report form by Purchaser under the HSR Act, (ii) the filing with the SEC of the Offer Documents and such reports under Sections 13 and 16(a) of the 1934 Act as may be required in connection with the Transactions, and (iii) such other notices, filings and Consents as may be required under the Takeover Laws or "blue-sky" Laws of various states. 5.3 LEGAL PROCEEDINGS. There is no Litigation instituted or pending, or, to the Knowledge of Purchaser, threatened (or unasserted but considered probable of assertion and which if asserted would have at least a reasonable probability of an unfavorable outcome) against Purchaser, that is reasonably likely to prevent, materially delay or materially impair the ability of Purchaser to consummate the transactions contemplated hereby. 5.4 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument or other writing furnished or to be furnished by Purchaser or any Affiliate thereof to Johnston pursuant to this Agreement contains or will contain, when considered in light of all information provided to Johnston pursuant hereto, any untrue statement of material fact or will omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were -18- 20 made, not misleading. None of the information supplied or to be supplied by Purchaser, or any of its officers, directors, employees, representatives or agents for inclusion or incorporation by reference in the Offer Documents or the Schedule 14D-9 including any amendments or supplements thereto, will at the respective times they are filed with the SEC or first published or sent or given to Johnston's stockholders, contain any statement which, at such time and in light of the circumstances under which it is made, is false or misleading with respect to any material fact, or, in light of the circumstances under which they were made, omit to state any material fact necessary in order to make the statements therein not false or misleading. Notwithstanding the foregoing, Purchaser does not make any representation or warranty with respect to the information that has been supplied in writing by or on behalf of any Johnston Entity or their respective officers, directors, employees, representatives or agents for inclusion or incorporation by reference in any of the foregoing documents. The Offer Documents and any amendments or supplements thereto will comply in all material respects with the applicable provisions of the 1934 Act and the rules and regulations thereunder and all other documents that Purchaser or any Affiliate thereof is responsible for filing with any Regulatory Authority in connection with the Transactions will comply as to form in all material respects with the provisions of applicable Law. 5.5 REGULATORY MATTERS. Neither Purchaser nor any Affiliate thereof has taken or agreed to take any action or has any Knowledge of any fact or circumstance that is reasonably likely to materially impede or delay receipt of any Consents of Regulatory Authorities referred to in Section 8.1(a) or result in the imposition of a condition or restriction of the type referred to in the last sentence of such Section. 5.6 COMMITMENT LETTER. Purchaser has received a commitment letter, dated the date hereof, from a lender to restructure the Bank Credit Agreement, dated as of March 28, 1996, as amended, between Johnston, the Johnston Subsidiaries and the banks named therein, The Chase Manhattan Bank, N.A. as Administrative Agent, Chase Securities, Inc. as Arranger, and NationsBank, N.A. as Syndication Agent, on terms and conditions satisfactory to Purchaser. 5.7 INVESTMENT INTENT. Purchaser is acquiring the Additional Common Stock and Series A Preferred Stock to be issued pursuant to Article 3 of this Agreement for investment only, for Purchaser's own account and not as a nominee or agent, and not with the view to, or for resale in connection with, any distribution thereof or participation therein. Purchaser is an "accredited investor" as such term is defined in Rule 501(a) under the Securities Act. Purchaser understands that the shares of Johnston Common Stock and Series A Preferred Stock to be issued pursuant to Article 3 of this Agreement have not been, and will not be, registered under the 1933 Act in reliance upon the representations set forth herein. ARTICLE 6 CONDUCT OF BUSINESS PENDING CONSUMMATION 6.1 AFFIRMATIVE COVENANTS OF JOHNSTON. From the date of this Agreement until the earlier of the termination of this Agreement or the time designees of Purchaser have been elected to and constitute a majority of the Board of Directors of Johnston (the "Appointment Date"), -19- 21 unless the prior written consent of Purchaser shall have been obtained, and except as otherwise expressly contemplated herein, Johnston shall and shall cause each of its Subsidiaries to (a) operate its business only in the usual, regular, and ordinary course, (b) preserve intact its business organization and material Assets and maintain its material rights, and (c) take no action which would (i) materially adversely affect the ability of any Party to obtain any Consents required for the Transactions without imposition of a condition or restriction of the type referred to in the last sentences of Section 8.1(a) or 8.1(b), (ii) except as otherwise permitted by Section 7.9, cause any of the conditions to the Offers set forth in Exhibit 1, not to be satisfied, or (iii) materially adversely affect the ability of any Party to perform its covenants and agreements under this Agreement. 6.2 NEGATIVE COVENANTS OF JOHNSTON. From the date of this Agreement until the earlier of the termination of this Agreement or the Appointment Date, unless the prior written consent of Purchaser shall have been obtained, and except as otherwise expressly contemplated herein, Johnston covenants and agrees that it will not do or agree or commit to do, or permit any of its Subsidiaries to do or agree or commit to do, any of the following: (a) amend the Certificate of Incorporation, Bylaws or other governing instruments of any Johnston Entity, or (b) incur any additional debt obligation or other obligation for borrowed money (other than indebtedness of a Johnston Entity to another Johnston Entity) in excess of an aggregate of $100,000 (for all the Johnston Entities on a consolidated basis) except in the ordinary course of the business of the Johnston Entities consistent with past practices, or impose, or suffer the imposition, on any material Asset of any Johnston Entity of any Lien or permit any such Lien to exist (other than in connection with Liens in effect as of the date hereof that are disclosed in the Johnston Disclosure Memorandum); or (c) repurchase, redeem, or otherwise acquire or exchange (other than exchanges in the ordinary course under employee benefit plans), directly or indirectly, any shares, or any securities convertible into any shares, of the capital stock of any Johnston Entity, or declare or pay any dividend or make any other distribution in respect of Johnston's capital stock; or (d) except for this Agreement, or pursuant to the exercise of stock options outstanding as of the date hereof and pursuant to the terms thereof in existence on the date hereof, issue, sell, pledge, encumber, authorize the issuance of, enter into any Contract to issue, sell, pledge, encumber, or authorize the issuance of, or otherwise permit to become outstanding, any additional shares of Johnston Common Stock or any other capital stock of any Johnston Entity, or any stock appreciation rights, or any option, warrant, or other Johnston Equity Right; or (e) adjust, split, combine or reclassify any capital stock of any Johnston Entity or issue or authorize the issuance of any other securities in respect of or in substitution for shares of Johnston Common Stock, or sell, lease, mortgage or otherwise dispose of or -20- 22 otherwise encumber (x) any shares of capital stock of any Johnston Subsidiary (unless any such shares of stock are sold or otherwise transferred to another Johnston Entity) or (y) any Asset having a book value in excess of $25,000 other than in the ordinary course of business for reasonable and adequate consideration; or (f) purchase any securities or make any material investment, either by purchase of stock of securities, contributions to capital, Asset transfers, or purchase of any Assets, in any Person other than a wholly owned Johnston Subsidiary, or otherwise acquire direct or indirect control over any Person, other than in connection with (i) foreclosures in the ordinary course of business, or (ii) the creation of new wholly owned Subsidiaries organized to conduct or continue activities otherwise permitted by this Agreement; or (g) grant any increase in compensation or benefits to the employees or officers of any Johnston Entity, except in accordance with past practice disclosed in Section 6.2(g) of the Johnston Disclosure Memorandum or as required by Law; pay any severance or termination pay or any bonus other than pursuant to written policies or written Contracts in effect on the date of this Agreement and disclosed in Section 6.2(g) of the Johnston Disclosure Memorandum; and enter into or amend any severance agreements with officers of any Johnston Entity; grant any material increase in fees or other increases in compensation or other benefits to directors of any Johnston Entity except in accordance with past practice disclosed in Section 6.2(g) of the Johnston Disclosure Memorandum; or (h) enter into or amend any employment Contract between any Johnston Entity and any Person (unless such amendment is required by Law) that the Johnston Entity does not have the unconditional right to terminate without Liability (other than Liability for services already rendered), at any time on or after the Effective Time; or (i) adopt any new employee benefit plan of any Johnston Entity or terminate or withdraw from, or make any material change in or to, any existing employee benefit plans of any Johnston Entity other than any such change that is required by Law or that, in the opinion of counsel, is necessary or advisable to maintain the tax qualified status of any such plan, or make any distributions from such employee benefit plans, except as required by Law, the terms of such plans or consistent with past practice; or (j) make any significant change in any Tax or accounting methods or systems of internal accounting controls, except as may be appropriate to conform to changes in Tax Laws or regulatory accounting requirements or GAAP; or (k) commence any Litigation other than in accordance with past practice, or settle any Litigation involving any Liability of any Johnston Entity for material money damages or restrictions upon the operations of any Johnston Entity; or (l) enter into, modify, amend or terminate any material Contract or waive, release, compromise or assign any material rights or claims; or -21- 23 (m) authorize any of, or commit or agree to take any of, the foregoing actions. 6.3 ADVERSE CHANGES IN CONDITION. Johnston agrees to give written notice promptly to CGW and Purchaser upon becoming aware of the occurrence or impending occurrence of any event or circumstance relating to it or any of its Subsidiaries which (i) is reasonably likely to have, individually or in the aggregate, a Johnston Material Adverse Effect or (ii) would cause or constitute a material breach of any of its representations, warranties, or covenants contained herein, and to use its reasonable efforts to prevent or promptly to remedy the same. ARTICLE 7 ADDITIONAL AGREEMENTS 7.1 MERGER WITHOUT MEETING OF STOCKHOLDERS. In the event that Purchaser and any Affiliates shall acquire in the aggregate at least 90% of the outstanding shares of the voting capital stock of Johnston, pursuant to the Offer or otherwise (including the purchase of Additional Common Stock and Series A Preferred Stock pursuant to Article 3 of this Agreement), the parties hereto shall, at the request of Purchaser and subject to the provisions of this Article 7, take all necessary and appropriate action to cause a wholly owned subsidiary of Purchaser to be merged with and into Johnston, with Johnston as the surviving corporation (the "Merger"), without a meeting of stockholders of Johnston, in accordance with the DGCL; such that each share of capital stock of the wholly owned subsidiary of Purchaser owned by Purchaser or its Affiliates shall be cancelled and cease to be outstanding and each share of Johnston Common Stock, other than those held by CGW, Purchaser or their Affiliates, shall be exchanged for cash consideration equal to the Offer Price. 7.2 ALTERNATIVE MERGER. In the event that Purchaser and any Affiliates shall acquire in the aggregate at least 50.1% of the outstanding shares of the voting capital stock of Johnston, pursuant to the Offer or otherwise (including the purchase of the Additional Common Stock and Series A Preferred Stock pursuant to Article 3 of this Agreement), then as soon as practicable after the Closing the parties hereto shall, subject to the provisions of this Article 7, take all necessary and appropriate action to cause a wholly owned subsidiary of Purchaser to be merged with and into Johnston, with Johnston as the surviving corporation (the "Alternative Merger") without a meeting of stockholders of Johnston, in accordance with the DGCL; such that each share of capital stock of the wholly owned subsidiary of Purchaser owned by Purchaser or its Affiliates shall be cancelled and cease to be outstanding. 7.3 APPLICATIONS; ANTITRUST NOTIFICATION. Purchaser shall promptly prepare and file, and Johnston shall cooperate in the preparation and, where appropriate, filing of, applications with all Regulatory Authorities having jurisdiction over the transactions contemplated by this Agreement seeking the requisite Consents necessary to consummate the transactions contemplated by this Agreement. To the extent required by the HSR Act, each of the Parties will promptly file with the United States Federal Trade Commission and the United States Department of Justice the notification and report form required for the Transactions and any supplemental or -22- 24 additional information which may reasonably be requested in connection therewith pursuant to the HSR Act and will comply in all material respects with the requirements of the HSR Act. The Parties shall deliver to each other copies of all filings, correspondence and orders to and from all Regulatory Authorities in connection with the Transactions. 7.4 FILINGS WITH STATE OFFICES. If required pursuant to Sections 7.1 or 7.2, Johnston shall execute and file the necessary Certificate of Merger with the Secretary of State of the State of Delaware. 7.5 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and conditions of this Agreement, each Party agrees to use, and to cause its Subsidiaries to use, its reasonable 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 to consummate and make effective, as soon as reasonably practicable after the date of this Agreement, the transactions contemplated by this Agreement, including using its reasonable efforts to lift or rescind any Order adversely affecting its ability to consummate the transactions contemplated herein and to cause to be satisfied the conditions referred to in Exhibit 1 and in Article 8; provided, that nothing herein shall preclude either Party from exercising its rights under this Agreement. Each Party shall use, and shall cause each of its Subsidiaries to use, its reasonable efforts to obtain all Consents necessary or desirable for the consummation of the transactions contemplated by this Agreement. 7.6 BOARD OF DIRECTORS OF JOHNSTON. (a) Promptly upon the purchase of and payment for shares of Johnston Common Stock and Series A Preferred Stock by Purchaser pursuant to Article 1 and Article 3 hereof, which represent at least a majority of the outstanding shares of Johnston's capital stock, Purchaser shall be entitled to designate such number of directors, rounded up to the next whole number, on the Board of Directors of Johnston as is equal to the product of the total number of directors on such Board (giving effect to the directors designated by Purchaser pursuant to this sentence) multiplied by the percentage that the number of shares of Johnston capital stock so purchased bears to the total number of shares of Johnston capital stock then outstanding. In furtherance thereof, Johnston shall, upon the request of Purchaser, use its commercially reasonable efforts promptly either to increase the size of its Board of Directors, including amending the By-laws of Johnston if necessary to so increase the size of Johnston's Board of Directors, or secure the resignations of such number of its incumbent directors, or both, as is necessary to enable Purchaser's designees to be so elected to Johnston's Board of Directors, and shall take all actions available to Johnston to cause Purchaser's designees to be so elected. At such time, Johnston shall, if requested by Purchaser, also cause persons designated by Purchaser to constitute at least the same percentage (rounded up to the next whole number) as is on Johnston's Board of Directors of (i) each committee of Johnston's Board of Directors, (ii) of each Johnston Subsidiary and (iii) each committee (or similar body) of each such board. (b) Johnston shall promptly take all actions required pursuant to Section 14(f) of the 1934 Act and Rule 14f-1 promulgated thereunder in order to fulfill its obligations under Section 7.6(a), including mailing to stockholders the information required by Section 14(f) of the -23- 25 1934 Act and Rule 14f-1 as is necessary to enable CGW's designees to be elected to Johnston's Board of Directors. Purchaser shall supply Johnston and be solely responsible for any information with respect to it and its nominees, officers, directors and Affiliates required by this Section 7.6(b). The rights and obligations provided for in this Section 7.6(b) are in addition to and shall not limit any rights which Purchaser or any of its Affiliates may have as a holder or beneficial owner of shares of Johnston Common Stock as a matter of law with respect to the election of directors or otherwise. 7.7 PAYMENT IN RESPECT OF JOHNSTON EQUITY RIGHTS. As soon as practicable after the date of this Agreement and following the effectiveness of the Merger or the Alternative Merger, the Board of Directors of Johnston (or if appropriate, any committee administering the Johnston Stock Plans) shall adopt such resolutions or take such other actions as are required to adjust the terms of all outstanding Johnston Equity Rights to purchase shares of Johnston Common Stock (except for those Johnston Equity Rights set forth on Schedule 7.7, the "Retained Johnston Equity Rights") to provide that each Johnston Equity Right (excluding the Retained Johnston Equity Rights) outstanding immediately prior to the acceptance for payment of Shares pursuant to the Offer shall be cancelled and the holder thereof shall be entitled to receive a cash payment from Purchaser at the Effective Time of an amount equal to (i) the excess, if any, of (x) the price per Share to be paid pursuant to the Offer over (y) the exercise or conversion price per Share of such Johnston Equity Right, multiplied by (ii) the number of Shares for which such Johnston Equity Right shall not theretofore been exercised (the "Option Consideration"). Until surrendered for payment in accordance with the provisions of this Section 7.7, all Johnston Equity Rights (excluding the Retained Johnston Equity Rights) shall, from and after the Effective Time, represent for all purposes only the right to receive the consideration provided in this Section 7.7, without any interest thereon. Johnston shall use its best efforts to obtain all necessary Consents or releases from holders of Johnston Equity Rights, to the extent required by the terms of the plans or agreements governing such Johnston Equity Rights, as the case may be, or pursuant to the terms of any Johnston Equity Right granted thereunder, and take all such other lawful action as may be necessary to give effect to the transactions contemplated by this Section 7.7 (except for such action that may require the approval of Johnston's stockholders). 7.8 INVESTIGATION AND CONFIDENTIALITY. (a) Prior to the Effective Time, Johnston shall keep CGW advised of all material developments relevant to its business and shall permit CGW to make or cause to be made such investigation of the business and properties of Johnston and its Subsidiaries and of their respective financial and legal conditions as CGW reasonably requests, provided that such investigation shall be reasonably related to the Transactions and shall not interfere unnecessarily with normal operations. No investigation by a Party shall affect the representations and warranties of the other Party. (b) In addition to CGW's obligations under the Confidentiality Agreement, which is hereby reaffirmed and adopted, and incorporated by reference herein, CGW shall, and -24- 26 shall cause Purchaser and their respective advisers and agents to, maintain the confidentiality of all confidential information furnished to it or any of them by Johnston concerning Johnston and its Subsidiaries' businesses, operations, and financial positions and shall not use such information for any purpose except in furtherance of the transactions contemplated by this Agreement. If this Agreement is terminated prior to the Effective Time, CGW shall promptly return or cause to be returned, or certify or cause to be certified the destruction of, all documents and copies thereof, and all work papers containing confidential information received from Johnston. (c) Johnston shall use its best efforts to exercise and enforce its rights, and shall not, without the prior written consent of Purchaser, waive any of its rights, under confidentiality agreements entered into with Persons which were considering an acquisition proposal with respect to Johnston. (d) Each Party agrees to give the other Party notice as soon as practicable after any determination by it of any fact or occurrence relating to the other Party which it has discovered through the course of its investigation and which represents, or is reasonably likely to represent, either a material breach of any representation, warranty, covenant or agreement of the other Party or which has had or is reasonably likely to have a Johnston Material Adverse Effect or a CGW Material Adverse Effect, as applicable. 7.9 PRESS RELEASES. Prior to the Effective Time, the Parties shall consult with each other as to the form and substance of any press release or other public disclosure materially related to this Agreement or any other transaction contemplated hereby; provided, that nothing in this Section 7.9 shall be deemed to prohibit any Party from making any disclosure which its counsel deems necessary or advisable in order to satisfy such Party's disclosure obligations imposed by Law. 7.10 CERTAIN ACTIONS. Except with respect to this Agreement and the Transactions, and as provided below, no Johnston Entity nor any Affiliate thereof nor any Representatives thereof retained by any Johnston Entity shall directly or indirectly initiate, solicit, encourage or knowingly facilitate (including by way of furnishing information) any inquiries or the making of any acquisition proposal. Notwithstanding anything herein to the contrary, Johnston and its Board of Directors shall be permitted (i) to the extent applicable, to comply with Rule 14d-9 and Rule 14e-2 promulgated under the 1934 Act with regard to an acquisition proposal, and (ii) to engage in any discussions or negotiations with, or provide any information to, any Person in response to an unsolicited bona fide written acquisition proposal by any such Person, if and only to the extent that (a) Johnston's Board of Directors concludes in good faith and consistent with its fiduciary duties to Johnston's stockholders under applicable Law that such acquisition proposal could reasonably be expected to result in a Superior Proposal, (b) prior to providing any information or data to any Person in connection with an acquisition proposal by any such Person, Johnston's Board of Directors receives from such Person an executed confidentiality agreement containing confidentiality terms at least as stringent as those contained in the confidentiality agreement between Johnston and CGW, and (c) prior to providing any information or data to any Person or entering into discussions or negotiations with any Person, Johnston's Board of Directors notifies CGW and Purchaser promptly of such inquiries, proposals or offers received by, any such -25- 27 information requested from, or any such discussions or negotiations sought to be initiated or continued with, any of its Representatives indicating, in connection with such notice, the name of such Person and the material terms and conditions of any inquiries, proposals or offers. Johnston agrees that it will promptly keep CGW informed of the status and terms of any such proposals or offers and the status and terms of any such discussions or negotiations. Johnston agrees that it will, and will cause its officers, directors and Representatives to, immediately cease and cause to be terminated any activities, discussions or negotiations existing as of the date of this Agreement with any parties conducted heretofore with respect to any acquisition proposal. Johnston agrees that it will use reasonable best efforts to promptly inform its directors, officers, key employees, agents and Representatives of the obligations undertaken in this Section 7.10. Nothing in this Section shall (x) permit Johnston to terminate this Agreement (except as specifically provided in Article 9 thereof) or (y) affect any other obligation of CGW, Purchaser or Johnston under this Agreement. 7.11 STATE TAKEOVER LAWS. Each Johnston Entity shall take all necessary steps to exempt the transactions contemplated by this Agreement from, or if necessary to challenge the validity or applicability of, any applicable state takeover law, including Section 203 of the DGCL. 7.12 CHARTER PROVISIONS. Each Johnston Entity shall take all necessary action to ensure that the entering into of this Agreement and the consummation of the Transactions do not and will not result in the grant of any rights to any Person under the Certificate of Incorporation, Bylaws or other governing instruments of any Johnston Entity or restrict or impair the ability of CGW or any of its Subsidiaries to vote, or otherwise to exercise the rights of a stockholder with respect to, shares of any Johnston Entity that may be directly or indirectly acquired or controlled by them. 7.13 INDEMNIFICATION. (a) For a period of three years after the Effective Time, Purchaser shall, and shall cause Johnston to, indemnify, defend and hold harmless the present and former directors, officers, employees and agents of the Johnston Entities (each, an "Indemnified Party") against all Liabilities arising out of actions or omissions relating to the Indemnified Party's service or services as directors, officers, employees or agents of Johnston or, at Johnston's request, of another corporation, partnership, joint venture, trust or other enterprise occurring at or prior to the Effective Time (including the transactions contemplated by this Agreement) to the fullest extent permitted under Delaware Law and by Johnston's Certificate of Incorporation and Bylaws as in effect on the date hereof, including provisions relating to advances of expenses incurred in the defense of any Litigation and whether or not Purchaser is insured against any such matter. Without limiting the foregoing, in any case in which approval by Johnston is required to effectuate any indemnification, Johnston shall direct, at the election of the Indemnified Party, that the determination of any such approval shall be made by independent counsel mutually agreed upon between Purchaser and the Indemnified Party. (b) Purchaser shall, or shall cause Johnston to, use its reasonable efforts (and Johnston shall cooperate prior to the Effective Time in these efforts) to maintain in effect for a -26- 28 period of three years after the Effective Time Johnston's existing directors' and officers' liability insurance policy (provided that Purchaser may substitute therefor (i) policies of at least the same coverage and amounts containing terms and conditions which are substantially no less advantageous or (ii) with the consent of Johnston given prior to the Effective Time, any other policy) with respect to claims arising from facts or events which occurred prior to the Effective Time and covering persons who are currently covered by such insurance; provided, that neither Purchaser, the surviving corporation of the Merger, if applicable, nor Johnston shall be obligated to make aggregate premium payments for such three-year period in respect of such policy (or coverage replacing such policy) which exceed, for the portion related to Johnston's directors and officers, 150% of the annual premium payments on Johnston's current policy in effect as of the date of this Agreement (the "Maximum Amount"). If the amount of the premiums necessary to maintain or procure such insurance coverage exceeds the Maximum Amount, Purchaser shall use its reasonable efforts to maintain the most advantageous policies of directors' and officers' liability insurance obtainable for a premium equal to the Maximum Amount. (c) Any Indemnified Party wishing to claim indemnification under paragraph (a) of this Section 7.13, upon learning of any such Liability or Litigation, shall promptly notify Purchaser thereof. In the event of any such Litigation (whether arising before or after the Effective Time), (i) CGW or Johnston shall have the right to assume the defense thereof and neither Purchaser nor Johnston shall be liable to such Indemnified Parties for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified Parties in connection with the defense thereof, except that if Purchaser or Johnston elects not to assume such defense or counsel for the Indemnified Parties advises that there are substantive issues which raise conflicts of interest between Purchaser or Johnston and the Indemnified Parties, the Indemnified Parties may retain counsel satisfactory to them, and Purchaser or Johnston shall pay all reasonable fees and expenses of such counsel for the Indemnified Parties promptly as statements therefor are received; provided, that Purchaser and Johnston shall be obligated pursuant to this paragraph (c) to pay for only one firm of counsel for all Indemnified Parties in any jurisdiction, (ii) the Indemnified Parties will cooperate in the defense of any such Litigation, and (iii) neither Purchaser nor Johnston shall be liable for any settlement effected without its prior written consent; and provided further that neither Purchaser nor Johnston shall have any obligation hereunder to any Indemnified Party when and if a court of competent jurisdiction shall determine, and such determination shall have become final, that the indemnification of such Indemnified Party in the manner contemplated hereby is prohibited by applicable Law. (d) If Purchaser or Johnston or any successors or assigns shall consolidate with or merge into any other Person and shall not be the continuing or surviving Person of such consolidation or merger or shall transfer all or substantially all of its assets to any Person, then and in each case, proper provision shall be made so that the successors and assigns of Purchaser or Johnston shall assume the obligations set forth in this Section 7.13. (e) The provisions of this Section 7.13 are intended to be for the benefit of and shall be enforceable by, each Indemnified Party and their respective heirs and representatives. -27- 29 7.14 MAINTENANCE OF PUBLIC TRADING MARKET. In the event that the Minimum Tender Condition is met but the Purchaser and any Affiliates shall not have acquired in the aggregate at least 90% of the outstanding Shares of Johnston pursuant to the Transactions, CGW and Purchaser shall, for a period of three years after the Effective Date use their commercially reasonable best efforts to maintain a public trading market for the Johnston Common Stock either on a national securities exchange, any of the Nasdaq Stock Markets, or in over-the-counter trading, and as long as such public trading market exists CGW and Purchaser shall comply with the 1934 Act, and the rules and regulations promulgated thereunder. ARTICLE 8 CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE 8.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations of each Party to perform this Agreement and the other Transactions are subject to the satisfaction of the following conditions, unless waived by both Parties pursuant to Section 10.6: (A) REGULATORY APPROVALS. All Consents of, filings and registrations with, and notifications to, all Regulatory Authorities required for consummation of the Transactions shall have been obtained or made and shall be in full force and effect and all waiting periods required by Law shall have expired. No Consent obtained from any Regulatory Authority which is necessary to consummate the Transactions shall be conditioned or restricted in a manner (including requirements relating to the raising of additional capital or the disposition of Assets) which in the reasonable judgment of the Board of Directors of Purchaser and the General Partner of CGW would so materially adversely impact the economic or business benefits of the transactions contemplated by this Agreement that, had such condition or requirement been known, CGW and Purchaser would not have entered into this Agreement. (B) CONSENTS AND APPROVALS. Each Party shall have obtained any and all Consents required for the preventing of any Default under any Contract or Permit of such Party which, if not obtained or made, is reasonably likely to have, individually or in the aggregate, a Johnston Material Adverse Effect or a Purchaser Material Adverse Effect, as applicable. No Consent so obtained which is necessary to consummate the Transactions shall be conditioned or restricted in a manner which in the reasonable judgment of the Board of Directors of Purchaser and the General Partner of CGW would so materially adversely impact the economic or business benefits of the transactions contemplated by this Agreement that, had such condition or requirement been known, CGW and Purchaser would not have entered into this Agreement. (C) LEGAL PROCEEDINGS. No court or governmental or regulatory authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Law or Order (whether temporary, preliminary or permanent) or taken any other action which prohibits, restricts or makes illegal consummation of the Transactions contemplated by this Agreement. -28- 30 (D) PURCHASE OF SHARES IN OFFER. Purchaser shall have purchased Shares pursuant to the Offer, except that this condition shall not apply if Purchaser shall have failed to purchase Shares pursuant to the Offer in breach of their obligations under this Agreement. (E) EMPLOYEE LOANS. Each of the financial institutions that have made loans to employees of Johnston to purchase shares of Johnston Common Stock ("Employee Loans"), and which loans are guaranteed by Johnston (such employees, the lending institutions and the outstanding amounts under their loans are set forth on Schedule A hereto), shall have agreed to restructure the Employee Loans on terms reasonably acceptable to the Parties, including the pledge by each borrower under the Employee Loans of all shares of Johnston Common Stock held by such borrower and purchased with the proceeds of the Employee Loan to the lender to secure the Employee Loans; provided, however, that should any such employee borrower choose to tender such shares of Johnston Common Stock acquired with the Employee Loans, the Employee Loan relating to that employee borrower shall not be restructured and shall remain due and payable in accordance with its original terms. (F) REFINANCING OF JOHNSTON DEBT. Purchaser shall have restructured the Bank Credit Agreement, dated as of March 28, 1996, as amended, between Johnston, the Johnston Subsidiaries and the banks named therein, The Chase Manhattan Bank, N.A as Administrative Agent, Chase Securities, Inc. as Arranger, and NationsBank, N.A. as Syndication Agent, on terms and conditions satisfactory to Purchaser. (G) FINANCING. Purchaser will have prior to the Effective Time, sufficient cash, available lines of credit or other sources of immediately available funds to enable it to make the aggregate cash payment required to be paid pursuant to Article 2 of this Agreement and to purchase and pay for the Additional Common Stock and the Series A Preferred Stock pursuant to Article 3 of this Agreement (the financing described in this paragraph (g), together with the financing described in paragraph (f) above, hereinafter referred to as the "Financing"). 8.2 CONDITIONS TO OBLIGATIONS OF CGW AND PURCHASER. The obligations of CGW and Purchaser to perform their respective obligations under this Agreement are subject to the satisfaction of the following conditions, unless waived by CGW and Purchaser pursuant to Section 10.6(a): (A) REPRESENTATIONS AND WARRANTIES. For purposes of this Section 8.2(a), the accuracy of the representations and warranties of Johnston set forth in this Agreement shall be assessed as of the date of this Agreement and as of the Effective Time with the same effect as though all such representations and warranties had been made on and as of the Effective Time (provided that representations and warranties which are confined to a specified date shall speak only as of such date). The representations and warranties set forth in Section 4.3 shall be true and correct (except for inaccuracies which are de minimus in amount). The representations and warranties set forth in Sections 4.20, and 4.21 shall be -29- 31 true and correct in all material respects. There shall not exist inaccuracies in the representations and warranties of Johnston set forth in this Agreement (including the representations and warranties set forth in Sections 4.3, 4.20, and 4.21) such that the aggregate effect of such inaccuracies has, or is reasonably likely to have, a Johnston Material Adverse Effect; provided that, for purposes of this sentence only, those representations and warranties which are qualified by references to "material" or "Material Adverse Effect" or to the "Knowledge" of any Person shall be deemed not to include such qualifications. (B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the agreements and covenants of Johnston to be performed and complied with pursuant to this Agreement and the other agreements contemplated hereby prior to the Effective Time shall have been duly performed and complied with in all material respects. (C) CERTIFICATES. Johnston shall have delivered to CGW and Purchaser (i) a certificate, dated as of the Effective Time and signed on its behalf by its chief executive officer and its chief financial officer, to the effect that the conditions set forth in Section 8.1 as relates to Johnston and in Section 8.2(a) and 8.2(b) have been satisfied, and (ii) certified copies of resolutions duly adopted by Johnston's Board of Directors evidencing the taking of all corporate action necessary to authorize the execution, delivery and performance of this Agreement, and the consummation of the Transactions, all in such reasonable detail as CGW, Purchaser and their counsel shall request. 8.3 CONDITIONS TO OBLIGATIONS OF JOHNSTON. The obligations of Johnston to perform its obligations under this Agreement are subject to the satisfaction of the following conditions, unless waived by Johnston pursuant to Section 10.6(b): (A) REPRESENTATIONS AND WARRANTIES. For purposes of this Section 8.3(a), the accuracy of the representations and warranties of Purchaser set forth in this Agreement shall be assessed as of the date of this Agreement and as of the Effective Time with the same effect as though all such representations and warranties had been made on and as of the Effective Time (provided that representations and warranties which are confined to a specified date shall speak only as of such date). The representations and warranties of Purchaser set forth in Sections 5.5 and 5.7 shall be true and correct in all material respects. There shall not exist inaccuracies in the representations and warranties of Purchaser set forth in this Agreement (including the representations and warranties set forth in Sections 5.5 and 5.7) such that the aggregate effect of such inaccuracies has, or is reasonably likely to have, a Purchaser Material Adverse Effect; provided that, for purposes of this sentence only, those representations and warranties which are qualified by references to "material" or "Material Adverse Effect" or to the "Knowledge" of any Person shall be deemed not to include such qualifications. (B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the agreements and covenants of CGW and Purchaser to be performed and complied with pursuant to this Agreement, including, but not limited to the provisions set forth in Article 3 -30- 32 herein and Section 8.1(f) hereof, and the other agreements contemplated hereby prior to the Effective Time shall have been duly performed and complied with in all material respects. (C) CERTIFICATES. Purchaser shall have delivered to Johnston (i) a certificate, dated as of the Effective Time and signed on its behalf by its president, to the effect that the conditions set forth in Section 8.1 as relates to CGW and Purchaser and in Section 8.3(a) and 8.3(b) have been satisfied, and (ii) certified copies of resolutions duly adopted by Purchaser's Board of Directors evidencing the taking of all corporate action necessary to authorize the execution, delivery and performance of this Agreement, and the consummation of the Transactions, all in such reasonable detail as Johnston and its counsel shall request. (D) PAYING AGENT CERTIFICATION. The bank or trust company selected by CGW to act as paying agent (the "Paying Agent") shall have delivered to Johnston a certificate, dated as of the Effective Time, to the effect that Purchaser has deposited with the Paying Agent sufficient funds to pay the aggregate cash payments required to be paid pursuant to Article 1. ARTICLE 9 TERMINATION 9.1 TERMINATION. Notwithstanding any other provision of this Agreement, and notwithstanding the approval of this Agreement by the stockholders of Johnston and CGW or both, this Agreement may be terminated at any time prior to the Effective Time: (a) By mutual consent of CGW and Johnston; or (b) By either of Johnston or CGW: (i) if (A) the Offer shall have expired without any Shares being purchased therein or (B) Purchaser shall not have accepted for payment all Shares tendered pursuant to the Offer by June 30, 2000; provided, however, that the right to terminate this Agreement under this Section 9.1(b)(i) shall not be available to any Party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of Purchaser, to purchase the Shares pursuant to the Offer on or prior to such date; or (ii) if any court, arbitration tribunal, administrative agency or commission or other governmental or regulatory authority or agency (a "Governmental Entity") shall have issued an order, decree or ruling or taken any other action (which order, decree, ruling or other action the parties hereto shall use their reasonable efforts to lift), which permanently restrains, enjoins or otherwise prohibits the acceptance for payment of, or payment for, Shares pursuant to the Offer and such order, decree, ruling or other action shall have become and final and non-appealable; or (c) By Johnston: -31- 33 (i) if Purchaser shall have failed to commence the Offer as soon as reasonably practical following the date of the initial public announcement of the Offer; provided, that Johnston may not terminate this Agreement pursuant to this Section 9.1(c)(i) if Johnston is at such time in willful and material breach of this Agreement; or (ii) if CGW or Purchaser shall have breached in any material respect any of their respective representations, warranties, covenants or other agreements contained in this Agreement, which breach cannot be or has not been cured, in all material respects, within 30 days after the giving of written notice to CGW or Purchaser, as applicable; or (iii) if the Board of Directors of Johnston shall have determined to endorse, enter into and recommend to Johnstons' shareholders a Superior Proposal and shall have concurrently therewith entered into a definitive Contract with a Person in accordance with Section 7.10 with respect to such Superior Proposal, provided it has complied with all of the provisions thereof, including the notice provisions thereof; or (d) By CGW: (i) if, due to an occurrence not involving a breach by CGW or Purchaser of their obligations hereunder, which makes it impossible to satisfy any of the conditions set forth in Exhibit 1, Purchaser shall have failed to commence the Offer as soon as reasonably practical following the date of the initial public announcement of the Offer; or (ii) if prior to the purchase of Shares pursuant to the Offer, Johnston shall have breached in any material respect any representation, warranty, covenant or other agreement contained in this Agreement or in the agreements governing the Financing, which (A) would give rise to the failure of a condition set forth in paragraph (f), (g) and (j) of Exhibit 1, and (B) as of the Closing, cannot be or has not been cured, in all material respects. 9.2 EFFECT OF TERMINATION. In the event of the termination and abandonment of this Agreement pursuant to Section 9.1, this Agreement shall become void and have no effect, except that (i) the provisions of this Section 9.2 and Article 10 shall survive any such termination and abandonment, and (ii) a termination other than pursuant to Section 9.1(a) shall not relieve the breaching Party from Liability for an uncured willful breach of a representation, warranty, covenant, or agreement giving rise to such termination. 9.3 NON-SURVIVAL OF REPRESENTATIONS AND COVENANTS. The respective representations, warranties, obligations, covenants, and agreements of the Parties shall not survive the Effective Time except this Section 9.3 and Articles 2, 10 and Section 7.13. -32- 34 ARTICLE 10 MISCELLANEOUS 10.1 DEFINITIONS. (a) Except as otherwise provided herein, the capitalized terms set forth below shall have the following meanings: "1933 ACT" shall mean the Securities Act of 1933, as amended. "1934 ACT" shall mean the Securities Exchange Act of 1934, as amended. "AFFILIATE" of a Person shall mean: (i) any other Person directly, or indirectly through one or more intermediaries, controlling, controlled by or under common control with such Person; (ii) any officer, director, partner, employer, or direct or indirect beneficial owner of any 10% or greater equity or voting interest of such Person; or (iii) any other Person for which a Person described in clause (ii) acts in any such capacity. "AGREEMENT" shall mean this Purchase Agreement, including the Exhibits delivered pursuant hereto and incorporated herein by reference. "ASSETS" of a Person shall mean all of the assets, properties, businesses and rights of such Person of every kind, nature, character and description, whether real, personal or mixed, tangible or intangible, accrued or contingent, or otherwise relating to or utilized in such Person's business, directly or indirectly, in whole or in part, whether or not carried on the books and records of such Person, and whether or not owned in the name of such Person or any Affiliate of such Person and wherever located. "CONFIDENTIALITY AGREEMENT" shall mean that certain Confidentiality Agreement dated March 2, 1999, between Johnston and CGW. "CONSENT" shall mean any consent, approval, authorization, clearance, exemption, waiver, or similar affirmation by any Person pursuant to any Contract, Law, Order, or Permit. "CONTRACT" shall mean any written or oral agreement, arrangement, authorization, commitment, contract, indenture, instrument, lease, obligation, plan, practice, restriction, understanding, or undertaking of any kind or character, or other document to which any Person is a party or that is binding on any Person or its capital stock, Assets or business. "DGCL" shall mean the Delaware General Corporation Law. "DEFAULT" shall mean (i) any breach or violation of, default under, contravention of, or conflict with, any Contract, Law, Order, or Permit, (ii) any occurrence of any event that with the passage of time or the giving of notice or both would constitute a breach or -33- 35 violation of, default under, contravention of, or conflict with, any Contract, Law, Order, or Permit, or (iii) any occurrence of any event that with or without the passage of time or the giving of notice would give rise to a right of any Person to exercise any remedy or obtain any relief under, terminate or revoke, suspend, cancel, or modify or change the current terms of, or renegotiate, or to accelerate the maturity or performance of, or to increase or impose any Liability under, any Contract, Law, Order, or Permit. "JOHNSTON COMMON STOCK" shall mean the $.10 par value per share, common stock of Johnston. "JOHNSTON DISCLOSURE MEMORANDUM" shall mean the written information entitled "Johnston Disclosure Memorandum" delivered prior to the date of this Agreement to CGW describing in reasonable detail the matters contained therein and, with respect to each disclosure made therein, specifically referencing each Section of this Agreement under which such disclosure is being made. Information disclosed with respect to one Section shall be deemed to be disclosed for purposes of any other Section for which such disclosure is applicable, if such applicability is clear in the specific context and cross-referenced in the appropriate sections. "JOHNSTON ENTITIES" shall mean, collectively, Johnston and all Johnston Subsidiaries. "JOHNSTON EQUITY RIGHTS" shall mean all arrangements, calls, commitments, Contracts, options (including employee stock options), rights to subscribe to, scrip, understandings, warrants, or other binding obligations of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, shares of the capital stock of a Person or by which a Person is or may be bound to issue additional shares of its capital stock or other Equity Rights. "JOHNSTON FINANCIAL STATEMENTS" shall mean (i) the consolidated balance sheets (including related notes and schedules, if any) of Johnston as of January 2, 1999, January 3, 1998 and December 28, 1996, and the related statements of operations, changes in stockholders' equity, and cash flows (including related notes and schedules, if any) for the three months ended October 2, 1999, and for each of the three fiscal years ended January 2, 1999, January 3, 1998 and December 28, 1996, as filed by Johnston in SEC Documents, and (ii) the consolidated balance sheets of Johnston (including related notes and schedules, if any) and related statements of operations, changes in stockholders' equity, and cash flows (including related notes and schedules, if any) included in SEC Documents filed with respect to periods ended subsequent to January 2, 1999. "JOHNSTON MATERIAL ADVERSE EFFECT" shall mean an event, change or occurrence which, individually or together with any other event, change or occurrence, has a material adverse impact on (i) the financial position, business, or results of operations of Johnston and its Subsidiaries, taken as a whole, or (ii) the ability of Johnston to perform its obligations under this Agreement or the other transactions contemplated by this Agreement. -34- 36 "JOHNSTON PREFERRED STOCK" shall mean the $.01 par value per share, preferred stock of Johnston. "JOHNSTON STOCK PLANS" shall mean the existing stock option and other stock-based compensation plans of Johnston set forth in Schedule 4.14 of the Johnston Disclosure Memorandum. "JOHNSTON SUBSIDIARIES" shall mean the Subsidiaries of Johnston, which shall include the Johnston Subsidiaries described in Section 4.4 and any corporation or other organization acquired as a Subsidiary of Johnston in the future and held as a Subsidiary by Johnston at the Effective Time. "ENVIRONMENTAL LAWS" shall mean all currently existing Laws relating to pollution or protection of human health or the environment (including ambient air, surface water, ground water, land surface, or subsurface strata) and which are administered, interpreted, or enforced by the United States Environmental Protection Agency and state and local agencies with jurisdiction over, and including common law in respect of, pollution or protection of the environment, including the Comprehensive Environmental Response Compensation and Liability Act, as amended, 42 U.S.C. 9601 et seq. ("CERCLA"), the Resource Conservation and Recovery Act, as amended, 42 U.S.C. 6901 et seq. ("RCRA"), and other currently existing Laws relating to emissions, discharges, releases, or threatened releases of any Hazardous Material, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of any Hazardous Material. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "EXHIBIT 1" shall mean the Exhibit so marked, a copy of which is attached to this Agreement. Such Exhibit is hereby incorporated by reference herein and made a part hereof, and may be referred to in this Agreement and any other related instrument or document without being attached hereto. "GAAP" shall mean generally accepted accounting principles, consistently applied during the periods involved. "HAZARDOUS MATERIAL" shall mean (i) any hazardous substance, hazardous material, hazardous waste, regulated substance, or toxic substance (as those terms are defined by any applicable Environmental Laws) and (ii) any chemicals, pollutants, contaminants, petroleum, petroleum products, or oil (and specifically shall include asbestos requiring abatement, removal, or encapsulation pursuant to the requirements of governmental authorities and any polychlorinated biphenyls). "HSR ACT" shall mean Section 7A of the Clayton Act, as added by Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder. -35- 37 "INTELLECTUAL PROPERTY" shall mean copyrights, patents, trademarks, service marks, service names, trade names, applications therefor, technology rights and licenses, computer software (including any source or object codes therefor or documentation relating thereto), trade secrets, franchises, know-how, inventions, and other intellectual property rights. "INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder. "KNOWLEDGE" as used with respect to a Person (including references to such Person being aware of a particular matter) shall mean those facts that are known or should reasonably have been known after due inquiry by the president, chief financial officer, chief accounting officer, chief operating officer, or any senior or executive vice president of such Person. "LAW" shall mean any code, law (including common law), ordinance, regulation, reporting or licensing requirement, rule, or statute applicable to a Person or its Assets, Liabilities, or business, including those promulgated, interpreted or enforced by any Regulatory Authority. "LIABILITY" shall mean any direct or indirect, primary or secondary, liability, indebtedness, obligation, penalty, cost or expense (including costs of investigation, collection and defense), claim, deficiency, guaranty or endorsement of or by any Person (other than endorsements of notes, bills, checks, and drafts presented for collection or deposit in the ordinary course of business) of any type, whether accrued, absolute or contingent, liquidated or unliquidated, matured or unmatured, or otherwise. "LIEN" shall mean any conditional sale agreement, default of title, easement, encroachment, encumbrance, hypothecation, infringement, lien, mortgage, pledge, reservation, restriction, security interest, title retention or other security arrangement, or any adverse right or interest, charge, or claim of any nature whatsoever of, on, or with respect to any property or property interest, other than (i) Liens for current property Taxes not yet due and payable, and (iii) Liens which do not materially impair the use of or title to the Assets subject to such Lien. "LITIGATION" shall mean any action, arbitration, cause of action, claim, complaint, criminal prosecution, governmental or other examination or investigation, hearing, administrative or other proceeding relating to or affecting a Party, its business, its Assets (including Contracts related to it), or the transactions contemplated by this Agreement. "MATERIAL" for purposes of this Agreement shall be determined in light of the facts and circumstances of the matter in question; provided that any specific monetary amount stated in this Agreement shall determine materiality in that instance. "OPERATING PROPERTY" shall mean any property owned, leased, or operated by the Party in question or by any of its Subsidiaries or in which such Party or Subsidiary holds -36- 38 a security interest or other interest (including an interest in a fiduciary capacity), and, where required by the context, includes the owner or operator of such property, but only with respect to such property. "ORDER" shall mean any administrative decision or award, decree, injunction, judgment, order, quasi-judicial decision or award, ruling, or writ of any federal, state, local or foreign or other court, arbitrator, mediator, tribunal, administrative agency, or Regulatory Authority. "PARTICIPATION FACILITY" shall mean any facility or property in which the Party in question or any of its Subsidiaries participates to a material degree in the management and, where required by the context, said term means the owner or operator of such facility or property, but only with respect to such facility or property. "PARTY" shall mean either Johnston or CGW, and "PARTIES" shall mean both Johnston and CGW. "PERMIT" shall mean any federal, state, local, and foreign governmental approval, authorization, certificate, easement, filing, franchise, license, notice, permit, or right to which any Person is a party or that is or may be binding upon or inure to the benefit of any Person or its securities, Assets, or business. "PERSON" shall mean a natural person or any legal, commercial or governmental entity, such as, but not limited to, a corporation, general partnership, joint venture, limited partnership, limited liability company, trust, business association, group acting in concert, or any person acting in a representative capacity. "PURCHASER MATERIAL ADVERSE EFFECT" shall mean an event, change or occurrence which, individually or together with any other event, change or occurrence, has a material adverse impact on the ability of CGW or Purchaser to perform their respective obligations under this Agreement. "REGULATORY AUTHORITIES" shall mean, collectively, the SEC, the NYSE, the Nasdaq National Market, the Federal Trade Commission, the United States Department of Justice, and all other federal, state, county, local or other governmental or regulatory agencies, authorities (including self-regulatory authorities), instrumentalities, commissions, boards or bodies having jurisdiction over the Parties and their respective Subsidiaries. "REPRESENTATIVE" shall mean any investment banker, financial advisor, attorney, accountant, consultant, or other representative engaged by a Person. "SEC DOCUMENTS" shall mean all forms, proxy statements, registration statements, reports, schedules, and other documents filed, or required to be filed, by a Party or any of its Subsidiaries with any Regulatory Authority pursuant to the Securities Laws. "SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the Investment Company Act of 1940, as amended, the Investment Advisors Act of 1940, as amended, the -37- 39 Trust Indenture Act of 1939, as amended, and the rules and regulations of any Regulatory Authority promulgated thereunder. "SUBSIDIARIES" shall mean all those corporations, associations, or other business entities of which the entity in question either (i) owns or controls 50% or more of the outstanding equity securities either directly or through an unbroken chain of entities as to each of which 50% or more of the outstanding equity securities is owned directly or indirectly by its parent (provided, there shall not be included any such entity the equity securities of which are owned or controlled in a fiduciary capacity), (ii) in the case of partnerships, serves as a general partner, (iii) in the case of a limited liability company, serves as a managing member, or (iv) otherwise has the ability to elect a majority of the directors, trustees or managing members thereof. "SUPERIOR PROPOSAL" shall mean any proposal (i) made by a third party to acquire, directly or indirectly, including pursuant to a tender offer, exchange offer, merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction, for consideration consisting of cash and/or securities, more than 50% of the combined voting power of the shares of Johnston Common Stock then outstanding or all or substantially all the assets of Johnston, (ii) which the Board of Directors of Johnston determines in its good faith judgment that such proposal, if accepted, is reasonably likely to be consummated, taking into account all legal, financial and regulatory aspects of the proposal and the Person making the proposal and (iii) which would, if consummated, result in a more favorable transaction to the shareholders of Johnston than the transaction contemplated by this Agreement, taking into account, to the extent relevant, the long-term prospects and interests of Johnston and its stockholders. "TAX" or "TAXES" shall mean any federal, state, county, local, or foreign taxes, charges, fees, levies, imposts, duties, or other assessments, including income, gross receipts, excise, employment, sales, use, transfer, license, payroll, franchise, severance, stamp, occupation, windfall profits, environmental, federal highway use, commercial rent, customs duties, capital stock, paid-up capital, profits, withholding, Social Security, single business and unemployment, disability, real property, personal property, registration, ad valorem, value added, alternative or add-on minimum, estimated, or other tax or governmental fee of any kind whatsoever, imposes or required to be withheld by the United States or any state, county, local or foreign government or subdivision or agency thereof, including any interest, penalties, and additions imposed thereon or with respect thereto. "TAX RETURN" shall mean any report, return, information return, or other information required to be supplied to a taxing authority in connection with Taxes, including any return of an Affiliated or combined or unitary group that includes a Party or its Subsidiaries. (b) The terms set forth below shall have the meanings ascribed thereto in the referenced sections: Additional Common Stock Section 3.1
-38- 40 Appointment Date Section 6.1 Alternative Merger Section 7.2 Closing Section 2.2 Johnston Benefit Plans Section 4.14 Johnston Contracts Section 4.15 Johnston ERISA Plan Section 4.14 Johnston Pension Plan Section 4.14 Johnston SEC Reports Section 4.5 Effective Time Section 2.1 ERISA Affiliate Section 4.14 Fully Diluted Shares Exhibit 1 Governmental Entity Section 9.1 Indemnified Party Section 7.13 Maximum Amount Section 7.13 Merger Section 7.1 Offer Section 1.1 Offer Documents Section 1.1 Offer Price Section 1.1 Offer to Purchase Section 1.1 Option Consideration Section 7.7 Paying Agent Section 8.3 Schedule TO Section 1.1 Schedule 14D-9 Section 1.2 Shares Section 1.1 Stockholder Protection Agreement Section 1.2 Takeover Laws Section 4.20 Transactions Section 1.2
(c) Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed followed by the words "without limitation." 10.2 EXPENSES. (a) Except as otherwise provided in this Section 10.2, each of the Parties shall bear and pay all direct costs and expenses incurred by it or on its behalf in connection with the transactions contemplated hereunder, including filing, registration and application fees, printing fees, and fees and expenses of its own financial or other consultants, investment bankers, accountants, and counsel. (b) If (i) Johnston terminates this Agreement pursuant to Section 9.1(c)(iii), or (ii) either Johnston or CGW terminates this Agreement pursuant to Section 9.1(b)(i) and prior thereto there shall have been publicly announced another acquisition proposal, Johnston shall pay to CGW, an amount equal to $3,000,000, plus an amount equal to CGW's actual, reasonable and reasonably documented out-of-pocket fees and expenses incurred by CGW and Purchaser in -39- 41 connection with the Offer, this Agreement and the consummation of the Transactions, which shall be payable in same day funds, provided that in no event shall Johnston be obligated to pay any such fees and expenses in excess of $4,000,000. (c) If Johnston terminates this Agreement pursuant to Section 9.1(c)(i) or (ii), then CGW shall pay to Johnston an amount equal to Johnston's reasonable and reasonably documented legal fees and expenses incurred, as of the date of such termination, with respect to this Agreement and the Transactions. (d) If CGW terminates this Agreement pursuant to Section 9.1(d)(ii), then Johnston shall pay to CGW an amount equal to CGW's reasonable and reasonably documented legal fees and expenses incurred, as of the date of such termination, with respect to this Agreement and the Transactions. (e) If, upon expiration of the Offer, the Minimum Tender Condition (as defined in Exhibit 1 hereto) is not satisfied, Johnston shall pay to CGW an amount equal to CGW's reasonable and reasonably documented legal fees and expenses incurred, with respect to this Agreement and the Transactions. (f) Nothing contained in this Section 10.2 shall constitute or shall be deemed to constitute liquidated damages for the willful breach by a Party of the terms of this Agreement or otherwise limit the rights of the nonbreaching Party. 10.3 BROKERS AND FINDERS. Each of the Parties represents and warrants that neither it nor any of its officers, directors, employees, or Affiliates has employed any broker or finder or incurred any Liability for any financial advisory fees, investment bankers' fees, brokerage fees, commissions, or finders' fees in connection with this Agreement or the Transactions. In the event of a claim by any broker or finder based upon his or its representing or being retained by or allegedly representing or being retained by Johnston or by CGW, each of Johnston and CGW, as the case may be, agrees to indemnify and hold the other Party harmless of and from any Liability in respect of any such claim. 10.4 ENTIRE AGREEMENT. Except as otherwise expressly provided herein, this Agreement (including the documents and instruments referred to herein) constitutes the entire agreement between the Parties with respect to the transactions contemplated hereunder and supersedes all prior arrangements or understandings with respect thereto, written or oral (except, as to Section 7.10(b), for the Confidentiality Agreement). Nothing in this Agreement expressed or implied, is intended to confer upon any Person, other than the Parties or their respective successors, any rights, remedies, obligations, or liabilities under or by reason of this Agreement. 10.5 AMENDMENTS. To the extent permitted by Law, this Agreement may be amended by a subsequent writing signed by each of the Parties upon the approval of each of the Parties. -40- 42 10.6 WAIVERS. (a) Prior to or at the Effective Time, CGW, acting through its General Partner, shall have the right to waive, for itself and for Purchaser, any Default in the performance of any term of this Agreement by Johnston, to waive or extend the time for the compliance or fulfillment by Johnston of any and all of its obligations under this Agreement, and to waive any or all of the conditions precedent to the obligations of CGW under this Agreement, except any condition which, if not satisfied, would result in the violation of any Law. No such waiver shall be effective unless in writing signed by the General Partner of CGW. (b) Prior to or at the Effective Time, Johnston, acting at the direction of its Board of Directors, shall have the right to waive any Default in the performance of any term of this Agreement by CGW or Purchaser, to waive or extend the time for the compliance or fulfillment by CGW or Purchaser of any and all of these respective obligations under this Agreement, and to waive any or all of the conditions precedent to the obligations of Johnston under this Agreement, except any condition which, if not satisfied, would result in the violation of any Law. No such waiver shall be effective unless in writing signed by a duly authorized officer of Johnston. (c) The failure of any Party at any time or times to require performance of any provision hereof shall in no manner affect the right of such Party at a later time to enforce the same or any other provision of this Agreement. No waiver of any condition or of the breach of any term contained in this Agreement in one or more instances shall be deemed to be or construed as a further or continuing waiver of such condition or breach or a waiver of any other condition or of the breach of any other term of this Agreement. 10.7 ASSIGNMENT. Except as expressly contemplated hereby, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any Party hereto (whether by operation of Law or otherwise) without the prior written consent of the other Party. 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. 10.8 NOTICES. All notices or other communications which are required or permitted hereunder shall be in writing and sufficient if delivered by hand, by facsimile transmission, by registered or certified mail, postage pre-paid, or by courier or overnight carrier, to the persons at the addresses set forth below (or at such other address as may be provided hereunder), and shall be deemed to have been delivered as of the date so delivered: Johnston: Johnston Industries, Inc., 105 Thirteenth Street Columbus, Georgia 31901 Telecopy Number: (706) 641-3159 Attention: D. Clark Ogle -41- 43 Copy to Counsel: Paul, Hastings, Janofsky & Walker LLP 600 Peachtree Street Atlanta, GA 30308 Telecopy Number: (404) 815-2400 Attention: Elizabeth H. Noe CGW or Purchaser: CGW Southeast Partners IV, L.P. Twelve Piedmont Center, Suite 210 Atlanta, Georgia 30305 Telecopy Number: (404) 816-3258 Attention: Roy R. Bowman Copy to Counsel: Alston & Bird LLP 1201 West Peachtree Street Atlanta, GA 30309-7260 Telecopy Number: (404) 881-4777 Attention: Sidney J. Nurkin 10.9 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the Laws of the State of Georgia, without regard to any applicable conflicts of Laws. 10.10 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. 10.11 CAPTIONS; ARTICLES AND SECTIONS. The captions contained in this Agreement are for reference purposes only and are not part of this Agreement. Unless otherwise indicated, all references to particular Articles or Sections shall mean and refer to the referenced Articles and Sections of this Agreement. 10.12 INTERPRETATIONS. Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against any party, whether under any rule of construction or otherwise. No party to this Agreement shall be considered the draftsman. The parties acknowledge and agree that this Agreement has been reviewed, negotiated, and accepted by all parties and their attorneys and shall be construed and interpreted according to the ordinary meaning of the words used so as fairly to accomplish the purposes and intentions of all parties hereto. 10.13 SEVERABILITY. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such -42- 44 invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable. IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed on its behalf by its duly authorized officers as of the day and year first above written. CGW Southeast Partners IV, L.P. By: CGW Southeast IV, L.L.C., its General Partner By: CGW, Inc., its Manager By: ----------------------------------------------- Name: --------------------------------------------- Title: -------------------------------------------- JI Acquisition Corp. By: ----------------------------------------------- Name: --------------------------------------------- Title: --------------------------------------------- Johnston Industries, Inc. By: ----------------------------------------------- Name: --------------------------------------------- Title: --------------------------------------------- -43- 45 EXHIBIT 1 CONDITIONS OF THE OFFER The capitalized terms used in this Exhibit 1 have the meanings assigned to them in the Purchase Agreement to which this Exhibit 1 is attached. Notwithstanding any other provision of the Offer or the Purchase Agreement, Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the 1934 Act (relating to Purchaser's obligation to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), pay for any Shares tendered pursuant to the Offer, and may postpone the acceptance for payment or, subject to the restriction referred to above, payment for any Shares tendered pursuant to the Offer, and may amend or terminate the Offer as to any Shares not then paid for unless (i) there shall have been validly tendered and not withdrawn, prior to the expiration of the Offer, that number of Shares which, when aggregated with the shares of Johnston Common Stock and Series A Preferred Stock to be acquired by the Purchaser pursuant to Article 3 hereof, would represent at least a majority of the Fully Diluted Shares (as defined below) (the "Minimum Tender Condition") and (ii) any waiting period under the HSR Act applicable to the purchase of Shares pursuant to the Offer shall have expired or been terminated. The term "Fully Diluted Shares" means all outstanding securities entitled generally to vote in the election of directors of Johnston on a fully diluted basis, after giving effect to the exercise or conversion of all Retained Johnston Equity Rights exercisable or convertible into such voting securities and the purchase of the Additional Common Stock and Series A Preferred Stock pursuant to Article 3 of the Agreement. Furthermore, notwithstanding any other term of the Offer or the Purchase Agreement, Purchaser shall not be required to accept for payment or, subject as aforesaid, to pay for any Shares not theretofore accepted for payment or paid for, and may terminate or amend the Offer, with the consent of Johnston or if, at any time on or after the date of the Purchase Agreement and prior to the acceptance for payment of Shares or the payment therefor, any of the following conditions exists: (a) there shall have been instituted, threatened or pending any Litigation brought by any Governmental Entity or other person, or before any court or governmental authority, agency or tribunal, domestic or foreign, in each case that has a reasonable likelihood of success, (i) challenging the acquisition by CGW or Purchaser of any Shares, directly or indirectly seeking to restrain or prohibit or otherwise make more costly the making or consummation of the Offer, or seeking to obtain from Johnston, CGW or Purchaser any damages that are material in relation to Johnston and its Subsidiaries, taken as a whole, (ii) seeking to prohibit or limit the ownership or operation by Johnston, CGW or any of their respective Subsidiaries of any material portion of the business or assets of Johnston, CGW or any of their respective Subsidiaries, or to compel Johnston, CGW or any of their respective Subsidiaries to dispose of or hold separate any material portion of the business or assets of Johnston, CGW or any of their respective Subsidiaries, as a result of the Offer, 46 (iii) seeking to impose or to confirm limitations on the ability of CGW or any of its Subsidiaries effectively to acquire or hold or to exercise full rights of ownership of Shares, including without limitation the right to vote any Shares acquired or owned by CGW or any of its Subsidiaries on all matters properly presented to the stockholders of Johnston, or the right to vote any shares of capital stock of any Subsidiary directly or indirectly owned by Johnston, (iv) seeking to prohibit CGW or any of its Subsidiaries from effectively controlling in any material respect the business or operations of Johnston or any of its Subsidiaries, or (v) which otherwise is reasonably likely to have a Johnston Material Adverse Effect (b) there shall be any Law or Order threatened, proposed, sought, enacted, entered, enforced, promulgated, amended or issued with respect to, or deemed applicable to, or any Consent withheld with respect to, (i) CGW, Johnston or any of their respective Subsidiaries or (ii) the Offer, by any Governmental Entity or before any court or governmental authority, agency or tribunal, domestic or foreign, that is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (i) through (iv) of paragraph (a) above; (c) there shall have occurred any Johnston Material Adverse Effect or any development that, insofar as reasonably can be foreseen, is reasonably likely to result in a Johnston Material Adverse Effect; (d) there shall have occurred (i) any general suspension of trading in, or limitation on prices for, securities on the New York Stock Exchange or in the Nasdaq National Market for a period in excess of 24 hours (excluding suspensions or limitations resulting solely from physical damage or interference not relating to monetary conditions), (ii) a decline of at least 25% in either the Dow Jones Average of Industrial Stocks or the Standard & Poor's 500 index from the date hereof, or a material disruption of or material adverse change in financial, banking or capital market conditions that could materially adversely affect syndication of loan facilities, (iii) any material adverse change in United States currency exchange rates or a suspension of, or limitation on, the markets therefor, (iv) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (v) any limitation (whether or not mandatory) by any domestic government or governmental, administrative or regulatory authority or agency on, or any other event that could reasonably be expected to materially adversely affect the extension of credit by banks or other lending institutions, (vi) a commencement of a war or armed hostilities or other national or international calamity having a Johnston Material Adverse Effect or CGW Material Adverse Effect or materially adversely affecting (or materially delaying) the consummation of the Offer or (vii) in the case of any of the foregoing existing on the date of the Purchase Agreement, a material acceleration or worsening thereof; (e) (i) it shall have been publicly disclosed or Purchaser shall have otherwise learned that beneficial ownership (determined for the purposes of this paragraph as set forth in Rule 13d-3 promulgated under the 1934 Act) of more than 20% of the outstanding Shares has been acquired by any corporation (including Johnston or any of its Subsidiaries or -2- 47 Affiliates), partnership, person or other entity or "group" (within the meaning of Section 13(d)(3) of the 1934 Act), other than Purchaser or any of its Affiliates, or (ii) (A) the Board of Directors of Johnston or any committee thereof shall have approved or recommended any acquisition proposal or any other acquisition of Shares other than the Offer or (B) Johnston shall have entered into an agreement with respect to an acquisition proposal or (C) the Board of Directors of Johnston or any committee thereof shall have resolved to do any of the foregoing; (f) any of the representations and warranties of Johnston set forth in the Purchase Agreement that are qualified as to materiality shall not be true and correct, or any such representations and warranties that are not so qualified shall not be true and correct in any material respect, in each case as if such representations and warranties were made at the time of such determination; (g) Johnston shall have failed to perform in any material respect any obligation or to comply in any material respect with any agreement or covenant of Johnston to be performed or complied with by it under the Purchase Agreement; (h) the Purchase Agreement shall have been terminated in accordance with its terms or the Offer shall have been terminated with the consent of Johnston; (i) all Consents of and notices to or filings with governmental authorities and third parties required in connection with the Transactions shall not have been obtained or made other than those the absence of which, individually or in the aggregate, would not have a Johnston Material Adverse Effect or prevent or materially delay consummation of any of the Transactions; (j) Notwithstanding Section 5.6 of the Purchase Agreement, Purchaser shall not have received financing in an amount necessary to consummate the Transactions, including the payment of fees and expenses relating to the Transactions, on terms and conditions reasonably satisfactory to Purchaser and CGW; or (k) CGW and Purchaser shall not have received confirmation from Johnston that each of the financial institutions that have made loans to employees of Johnston to purchase shares of Johnston Common Stock ("Employee Loans"), and which loans are guaranteed by Johnston (such employees, the lending institutions and the outstanding amounts under their loans are set forth on Schedule A hereto), shall have agreed to restructure the Employee Loans on terms reasonably acceptable to CGW and Purchaser, including the pledge by each borrower under the Employee Loans of all shares of Johnston Common Stock held by such borrower and purchased with the proceeds of the Employee Loan to the lender to secure the Employee Loans; provided, however, that should any such employee borrower choose to tender such shares of Johnston Common Stock acquired with the Employee Loans, the Employee Loan relating to that employee borrower shall not be restructured and shall remain due and payable in accordance with its original terms; -3- 48 which, in the sole and reasonable judgment of CGW or Purchaser, in any such case, and regardless of the circumstances giving rise to any such condition (including any action or inaction by CGW or any of its Affiliates), makes it inadvisable to proceed with such acceptance for payment or payment. The foregoing conditions are for the sole benefit of CGW and Purchaser and may be asserted by CGW or Purchaser regardless of the circumstances giving rise to any such condition or may be waived by CGW or Purchaser in whole or in part at any time and from time to time in their sole discretion (subject in each case to the terms of the Purchase Agreement). The failure by CGW 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 other 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. Any determination by CGW or Purchaser concerning the events described in this Exhibit 1 will be final and binding upon all parties. -4- 49 EXHIBIT 2 SERIES B PREFERRED STOCK DESIGNATION 50 CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES A CONVERTIBLE PREFERRED STOCK OF JOHNSTON INDUSTRIES, INC. Pursuant to Section 151 of the General Corporation Law of the State of Delaware, we, D. Clark Ogle, President and Chief Executive Officer, and F. Ferrell Walton, Secretary of JOHNSTON INDUSTRIES, INC. (the "Corporation"), a corporation organized and existing under the General Corporation Law of the State of Delaware, in accordance with provisions of Section 103 thereof, DO HEREBY CERTIFY: That pursuant to the authority conferred upon the Board of Directors by the Certificate of Incorporation, as amended, of the said Corporation, the said Board of Directors on ___________ ___, 2000, adopted the following resolution creating a series of 250,000 shares of Preferred Stock designated as Series A Convertible Preferred Stock: RESOLVED, that a series of the Corporation's Preferred Stock consisting of 250,000 shares of Preferred Stock, par value $.01 per share, be and hereby is, designated as "Series A Convertible Preferred Stock" (the "Series A Preferred Stock"), and that the Series A Preferred Stock shall have the designations, powers, preferences, rights and qualifications, limitations and restrictions substantially as set forth in the Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock (the "Certificate") described below. This Certificate states that the Board of Directors does hereby fix and herein state and express such designations, powers, preferences and relative and other special rights and qualifications, limitations and restrictions thereof as follows (all terms used herein which are defined in the Certificate of Incorporation shall be deemed to have the meanings provided therein): SECTION 1. DESIGNATION AND AMOUNT The shares of such series shall be designated as "Series A Convertible Preferred Stock" (the "Series A Preferred Stock") and the number of shares constituting such series shall be 250,000. Such number of shares of Series A Preferred Stock may be increased or decreased by resolution of the Board of Directors; provided however, that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares of Series A Preferred Stock then outstanding plus the number of shares of Series A Preferred Stock reserved for issuance upon the exercise of outstanding options, rights or warrants exercisable for, or upon the conversion of any outstanding securities issued by the Corporation convertible into, Series A Preferred Stock. SECTION 2. DIVIDENDS AND DISTRIBUTIONS (A) Subject to the prior and superior rights of the holders of any shares of any series of preferred stock ranking prior and superior to the shares of Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available therefor, dividends payable in cash, property, or in shares of the Common Stock, par value $.01 per share of the Corporation (the "Common Stock") in an amount per share equal to that amount of cash, 51 property or Common Stock per share declared and paid out of funds legally available therefor, on the Common Stock. (B) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in paragraph (A) above immediately after it declares a dividend or distribution on the Common Stock. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the date of declaration of dividends on the Common Stock. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such accrued dividends shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof. SECTION 3. VOTING RIGHTS The holders of shares of Series A Preferred Stock shall have the same voting rights with respect to matters which the holders of Common Stock are entitled to vote, and, except as expressly set forth in the General Corporation Law of the State of Delaware, the holders of shares of Series A Preferred Stock shall vote together with the holders of Common Stock as a single class. SECTION 4. CERTAIN RESTRICTIONS (A) Whenever dividends or distributions payable on the Series A Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends on, make any other distribution on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock; (ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid or distributions made ratably on the Series A Preferred Stock and all such stock ranking on a parity with respect to the particular dividend or distribution in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (both as to dividends and upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or (iv) purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series -2- 52 and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. SECTION 5. CONVERSION RIGHTS (A) General Rights. The shares of Series A Preferred Stock shall be convertible into Common Stock on the following terms and conditions: (a) Term. Pursuant to the provisions of paragraph 5(A)(g), the outstanding shares of Series A Preferred Stock shall be convertible into such number of fully paid and nonassessable shares of Common Stock as are issuable pursuant to the conversion formula set forth in paragraph 5(A)(c), as the same may be adjusted from time to time pursuant to Section 5(B). The Corporation shall make no payment or adjustment on account of distributions accrued or in arrears on the Series A Preferred Stock surrendered for conversion and no adjustment on account of distributions on the shares of Common Stock issuable upon conversion. (b) Surrender of Shares. Upon the occurrence of the provisions set forth in paragraph 5(A)(g), the holders of Series A Preferred Stock may surrender the certificate or certificates for such shares of Series A Preferred Stock at the offices of the Corporation, or at such other place or places, if any, as the Board of Directors of the Corporation may determine, duly endorsed to the Corporation or in blank or accompanied by proper instruments of transfer to the Corporation or in blank, and shall state in writing therein the name or names in which the holder wishes the certificate or certificates for shares of Common Stock issuable on such conversion to be issued. The surrender of shares of Series A Preferred Stock shall constitute a contract between the holder and the Corporation whereby (i) such holder shall be deemed to subscribe for the amount of Common Stock which he will be entitled to receive upon such conversion and, in payment and satisfaction of such subscription, to surrender the shares of Series A Preferred Stock and to release the Corporation from all obligation thereon, and (ii) the Corporation shall be deemed to agree that the surrender of the certificate or certificates for such shares of Series A Preferred Stock and the extinguishment of obligation thereon shall constitute full payment of such subscription for the Common Stock so subscribed for and to be issued upon such conversion. The Corporation will as soon as practicable after such deposit of certificates for shares of Series A Preferred Stock, issue and deliver to the person for whose account such shares of Series A Preferred Stock were so surrendered, or to his nominee or nominees, a certificate or certificates for the number of full shares of Common Stock to which the holder shall be entitled as aforesaid, together with a check or cash in respect of any fraction of a share as hereinafter provided in paragraph 5(A)(f). Subject to the following provisions of this Section 5, such conversion shall be deemed to have been made on the Business Day on which a holder of Series A Preferred Stock has surrendered its shares of Series A Preferred Stock in accordance with the conditions described in paragraph 5(A), and the person or persons entitled to receive the Common Stock issuable -3- 53 upon conversion of the Series A Preferred Stock shall be deemed for all purposes to have become the record holder or holders of such Common Stock and to have ceased to be the holder of Series A Preferred Stock on such Business Day. (c) Stock Unit. Each share of Series A Preferred Stock shall be convertible, at the times and places and in the manner referred to in this Section 5, into one "Stock Unit". The contents of a Stock Unit as of the date of filing of this Certificate of Designation with the Secretary of State of the State of Delaware, shall be one (1) share of Common Stock (as constituted upon such date) of the Corporation. The contents of a Stock Unit shall thereafter be subject to adjustment in accordance with the provisions of Section 5(B). (d) Taxes. The issue of share certificates on conversion of the Series A Preferred Stock shall be made free of any tax in respect of such issue. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares in a name other than that of the holder of Series A Preferred Stock converted, and the Corporation shall not be required to issue or deliver any such share certificate unless and until the person or persons requesting the issuance thereof shall have paid to the Corporation the amount of any such tax or shall have established to the satisfaction of the Corporation that such tax has been paid. (e) Reservation of Shares. The Corporation shall at all times reserve and keep available, out of its authorized and unissued shares, solely for the purpose of effecting the conversion of Series A Preferred Stock, such number of shares of Common Stock as shall from time to time be sufficient to effect the conversion of all shares of Series A Preferred Stock from time to time outstanding. The Corporation shall from time to time, in accordance with the General Corporation Law of the State of Delaware, use its best efforts to cause the number of authorized shares of its Common Stock to be increased if at any time the number of authorized shares of Common Stock remaining unissued shall not be sufficient to permit the conversion of all of the then outstanding shares of Series A Preferred Stock. (f) Fractional Shares. The Corporation shall not be required to issue fractional shares of Common Stock or scrip upon conversion of Series A Preferred Stock. As to any final fraction of a share of Common Stock which a holder of one or more shares of Series A Preferred Stock would otherwise be entitled to receive upon conversion of Series A Preferred Stock, the Corporation shall pay a cash adjustment in respect of such final fraction in an amount equal to $3.00 per share of Series A Preferred Stock. (g) Terms of Conversion. The shares of Series A Preferred Stock shall be convertible to Common Stock, at the times and places and in the manner referred to in this Section 5(A), at the election of the holders of the Series A Preferred Stock, provided the number of shares of Common Stock authorized but unissued under the Corporation's Certificate of Incorporation is sufficient to satisfy the number of shares of Series A Preferred Stock being converted at such time. (B) Antidilution. The number of shares of Common Stock comprising a Stock Unit shall be subject to adjustment from time to time, as follows: -4- 54 (a) Recapitalization. In case the Corporation after the date of filing of this Certificate of Designation with the Secretary of State of the State of Delaware (the "Base Date") shall (i) issue a share dividend to the holders of its Common Stock, (ii) combine its outstanding shares of Common Stock into a smaller number of shares, or (iii) issue by reclassification of its shares of Common Stock any shares of the Corporation, then the number of shares of Common Stock comprising a Stock Unit immediately after the happening of any of the events described above shall be adjusted by multiplying the Stock Unit in effect immediately prior to such event by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Similar adjustments to the content of a Stock Unit shall be made if any of the events described above in this subparagraph (a) shall thereafter occur. An adjustment made pursuant to this subparagraph (a) shall become effective retroactively immediately after the record date in the case of a share dividend, and shall become effective immediately after the effective date in the case of a combination or reclassification. (b) Other Actions by Corporation. In case the Corporation after the Base Date shall take any action affecting the Common Stock, other than action described in subparagraph (a) of this Section 5(B), which in the opinion of the Board of Directors of the Corporation would materially affect the rights of the holders of the Series A Preferred Stock, the Common Stock included in a Stock Unit shall be adjusted in such manner, if any, and at such time, as the Board of Directors of the Corporation, in its sole discretion, may determine to be equitable in the circumstances. Failure of the Board of Directors of the Corporation to provide for an adjustment prior to the effective date of any such action by the Corporation affecting the Common Stock shall be conclusive evidence that the Board of Directors of the Corporation has determined that it is equitable to make no adjustment in the circumstances. (c) Notices of Adjustment. Whenever the content of a Stock Unit is adjusted pursuant to this Section 5(B), the Corporation shall promptly mail to each holder of record of the shares of Series A Preferred Stock, a certificate signed by the President or Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Corporation setting forth in reasonable detail the events requiring the adjustment and the method by which such adjustment was calculated and specifying the number, or kind, or class of shares or other securities or property comprising a Stock Unit after giving effect to such adjustment. Failure to file any certificate or notice or to publish or mail any notice, or any defect in any certificate or notice, pursuant to this Section 5(B) shall not affect the legality or validity of the adjustment in the content of a Stock Unit or of any transaction giving rise thereto. SECTION 6. REACQUIRED SHARES Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be -5- 55 created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein. SECTION 7. LIQUIDATION, DISSOLUTION OR WINDING UP (A) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received [$3.00] per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, if declared, to the date of such payment (the "Series A Liquidation Preference"). Following the payment of the full amount of the Series A Liquidation Preference, holders of Series A Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of remaining assets to be distributed. (B) In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of preferred stock, if any, which rank on a parity with the Series A Preferred Stock, then such remaining assets shall be distributed ratably to the holders of the Series A Preferred Stock and the holders of such parity shares in proportion to their respective liquidation preferences. SECTION 8. NO REDEMPTION The shares of Series A Preferred Stock shall not be redeemable. SECTION 9. RANKING The Series A Preferred Stock shall rank junior to all other series of the Corporation's preferred stock, if any, as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise. Nothing in this Certificate shall limit the power of the Board of Directors to create a new series of preferred stock ranking senior to the Series A Preferred Stock in any respect. SECTION 10. AMENDMENT The Certificate of Incorporation of the Corporation shall not be further amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of two-thirds or more of the outstanding shares of Series A Preferred Stock, voting separately as a class. SECTION 11. FRACTIONAL SHARES -6- 56 Series A Preferred Stock may be issued in fractions of a share, which shall entitle the holder, in proportion to such holder's fractional shares, to receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Preferred Stock. IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do affirm the foregoing as true under the penalties of perjury this _____ day of ____, 2000. --------------------------------------- D. Clark Ogle, President Attest: -------------------------------- F. Ferrell Walton, Secretary -----END PRIVACY-ENHANCED MESSAGE-----