EXHIBIT 1
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Xxxxxx Xxxxxxxx Industries, Inc.
at
$16.50 Net Per Share
by
SY Acquisition, Inc.
a direct wholly owned subsidiary of
Falcon Products, Inc.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, JUNE 9, 1999, UNLESS THE OFFER IS EXTENDED.
THE BOARD OF DIRECTORS OF XXXXXX XXXXXXXX INDUSTRIES, INC. (THE "COMPANY") HAS
UNANIMOUSLY APPROVED THE OFFER, THE MERGER AND THE MERGER AGREEMENT (EACH AS
DEFINED HEREIN), HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER AND
THE MERGER AGREEMENT ARE ADVISABLE, FAIR TO, AND IN THE BEST INTERESTS OF, THE
COMPANY AND ITS STOCKHOLDERS, AND, PURSUANT TO THE OFFER, UNANIMOUSLY
RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES (AS DEFINED HEREIN) WHICH, TOGETHER WITH ANY SHARES BENEFICIALLY OWNED
BY PARENT OR PURCHASER, REPRESENT AT LEAST A MAJORITY OF THE SHARES
OUTSTANDING ON A FULLY DILUTED BASIS (AS DEFINED HEREIN). THE OFFER IS ALSO
SUBJECT TO OTHER TERMS AND CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE. SEE
SECTION 14. THE OFFER IS NOT CONDITIONED ON PURCHASER OBTAINING FINANCING.
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IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should either (a) complete and sign the Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal and mail or deliver the Letter of Transmittal (or such facsimile),
together with the certificate(s) representing tendered Shares and any other
required documents, to the Depositary or, in lieu of delivering certificates
representing such Shares, tender such Shares pursuant to the procedures for
book-entry transfer set forth in Section 3, or (b) request such stockholder's
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for such stockholder. A stockholder whose Shares are registered in
the name of a broker, dealer, commercial bank, trust company or other nominee
must contact such broker, dealer, commercial bank, trust company or other
nominee if such stockholder desires to tender such Shares.
A stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available or who cannot comply
with the procedures for book-entry transfer on a timely basis may tender such
Shares by following the procedures for guaranteed delivery set forth in
Section 3.
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone
numbers set forth on the back cover of this Offer to Purchase. Additional
copies of this Offer to Purchase, the Letter of Transmittal, the Notice of
Guaranteed Delivery and other related materials may be obtained from the
Dealer Manager, the Information Agent or from brokers, dealers, commercial
banks and trust companies. A stockholder may also contact brokers, dealers,
commercial banks and trust companies for assistance concerning the Offer.
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The Dealer Manager for the Offer is:
Xxxxxxxxx, Xxxxxx & Xxxxxxxx
May 12, 1999
TABLE OF CONTENTS
Page
----
INTRODUCTION............................................................. 1
THE TENDER OFFER......................................................... 3
1. Terms of the Offer............................................... 3
2. Acceptance for Payment and Payment for Shares.................... 4
3. Procedures for Tendering Shares.................................. 5
4. Withdrawal Rights................................................ 8
5. Certain Federal Income Tax Consequences.......................... 9
6. Price Range of Shares; Dividends................................. 10
7. Effect of the Offer on the Market for the Shares;
Exchange Listing and Exchange Act Registration; Margin
Regulations...................................................... 10
8. Certain Information Concerning the Company....................... 11
9. Certain Information Concerning Purchaser and Parent.............. 14
10. Background of the Offer; Contacts with the Company............... 16
11. Purpose of the Offer and the Merger; Plans for the Company....... 18
12. The Merger Agreement; Certain Other Agreements................... 20
13. Sources and Amount of Funds...................................... 27
14. Certain Conditions of the Offer.................................. 28
15. Certain Legal Matters............................................ 30
16. Fees and Expenses................................................ 32
17. Miscellaneous.................................................... 32
Schedule I--Information Concerning the Directors and Executive Officers
of Parent and Purchaser................................................. I-1
To the Holders of Shares of Common Stock
of Xxxxxx Xxxxxxxx Industries, Inc.:
INTRODUCTION
SY Acquisition, Inc., a Delaware corporation ("Purchaser") and a direct
wholly owned subsidiary of Falcon Products, Inc., a Delaware corporation
("Parent"), hereby offers to purchase all outstanding shares of the common
stock, par value $.05 per share ("Shares" or the "Common Stock"), of Xxxxxx
Xxxxxxxx Industries, Inc., a Delaware corporation (the "Company"), at a
purchase price of $16.50 per Share, net to the seller in cash, without
interest (the "Offer Price"), upon the terms and subject to the conditions set
forth in this Offer to Purchase and in the related Letter of Transmittal
(which, together with any amendments or supplements thereto, collectively
constitute the "Offer").
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer.
The Parent will pay all fees and expenses of Xxxxxxxxx, Xxxxxx & Xxxxxxxx
Securities Corporation, as Dealer Manager (in such capacity, the "Dealer
Manager"), IBJ Whitehall Bank & Trust Company, as Depositary (the
"Depositary"), and X.X. Xxxx & Co., Inc., as Information Agent (the
"Information Agent"), incurred in connection with the Offer. See Section 16.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD") HAS UNANIMOUSLY
APPROVED THE OFFER AND THE MERGER AGREEMENT (AS DEFINED BELOW), HAS DETERMINED
THAT THE TERMS OF THE OFFER, THE MERGER AND THE MERGER AGREEMENT ARE
ADVISABLE, FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS
STOCKHOLDERS, AND PURSUANT TO THE OFFER, UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES.
Lazard Freres & Co. LLC, the Company's financial advisor ("Lazard Freres"),
has delivered to the Company Board its written opinion that the consideration
to be received by the stockholders of the Company pursuant to each of the
Offer and the Merger is fair to such stockholders from a financial point of
view. A copy of the full text of the opinion of Lazard Freres, which sets
forth the assumptions made, the matters considered and the limitations on the
review undertaken by Lazard Freres, is contained in the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-
9"), which is being mailed to stockholders herewith.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES WHICH, TOGETHER WITH ANY SHARES BENEFICIALLY OWNED BY PARENT OR
PURCHASER, REPRESENT AT LEAST A MAJORITY OF THE SHARES OUTSTANDING ON A FULLY
DILUTED BASIS (THE "MINIMUM CONDITION").
"Fully Diluted Basis" means, as of any time, all of the Shares plus all
Shares required to be issued or issuable pursuant to options, warrants,
securities or obligations of any kind under employee stock or similar benefit
plans or otherwise, whether or not vested or exercisable.
The Company has represented and warranted to Purchaser and Parent in the
Merger Agreement that, as of March 10, 1999, a total of 8,761,417 Shares were
issued and outstanding, and 227,801 Shares were issuable pursuant to options
("Options") granted under the Company's option plans. Based on the foregoing,
and assuming no additional Shares (or options, warrants or rights exercisable
for, or convertible securities convertible into Shares) have been issued since
March 10, 1999 (other than Shares issued pursuant to the exercise of the stock
options referred to above), if 4,494,610 Shares were validly tendered and not
withdrawn prior to the Expiration Date (as hereinafter defined) pursuant to
the terms of the Offer, the Minimum Condition would be satisfied.
Certain other conditions to consummation of the Offer are described in
Section 14. Purchaser expressly reserves the right to waive any one or more of
the conditions to the Offer (except that the Minimum Condition may not be
waived without the Company's consent). See Section 14.
The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of May 5, 1999 (the "Merger Agreement") among Parent, Purchaser and the
Company. The Merger Agreement provides, among
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other things, that as soon as practicable after the purchase of Shares
pursuant to the Offer and the satisfaction of the other conditions set forth
in the Merger Agreement and in accordance with the relevant provisions of the
Delaware General Corporation Law (the "DGCL"), Purchaser will be merged with
and into the Company (the "Merger"). Following consummation of the Merger, the
Company will continue as the surviving corporation (the "Surviving
Corporation") and a wholly owned subsidiary of Parent. At the effective time
of the Merger (the "Effective Time"), each Share issued and outstanding
immediately prior to the Effective Time (other than Shares owned by Purchaser,
Parent, the Company or any wholly owned subsidiary of Parent or the Company
and Shares held by stockholders who perfect their dissenters' rights under the
DGCL) will be cancelled and converted automatically into the right to receive
$16.50 in cash, or any higher price that may be paid per Share in the Offer,
without interest (the "Merger Consideration"). The Merger Agreement is more
fully described in Section 12.
The Merger Agreement provides that, promptly after the later to occur of
(i) the purchase by Purchaser of a majority of the Shares pursuant to the
Offer, and (ii) compliance with Section 14(f) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and Rule 14f-1 promulgated
thereunder, Parent shall be entitled to designate that number of directors,
rounded up to the next whole number, to serve on the Company Board such that
the percentage of Parent's nominees on the Company Board equals the then
percentage of outstanding Shares beneficially owned by Parent and its
affiliates, and that the Company shall, at such time, upon the request of
Purchaser, promptly use its best efforts to take all action necessary to cause
the persons designated by Parent to be elected to the Company Board, either by
increasing the size of the Company Board or securing resignations of incumbent
directors or both.
Consummation of the Merger is conditioned upon, among other things, the
approval and adoption by the requisite vote of stockholders of the Company of
the Merger, if required by the DGCL, other applicable law and the Company's
Certificate of Incorporation ("Certificate of Incorporation"). Under the DGCL,
the affirmative vote of the holders of the majority of the outstanding Shares
is the only vote of any class or series of the Company's capital stock that
would be necessary to approve the Merger at any required meeting of the
Company's stockholders. If the Minimum Condition is satisfied as a result of
the purchase of Shares by Purchaser pursuant to the Offer, Purchaser and its
affiliates will own at least a majority of the outstanding Shares, and
Purchaser will be able to effect the Merger without the affirmative vote of
any other stockholder. Pursuant to the Merger Agreement, Parent and Purchaser
have agreed to vote the Shares acquired by them pursuant to the Offer or
otherwise in favor of the Merger. The Merger Agreement is more fully described
in Section 12.
Under the DGCL, if Purchaser acquires, pursuant to the Offer or otherwise,
at least 90% of the outstanding Shares, Purchaser will be able to approve the
Merger Agreement and the transactions contemplated thereby without a vote of
the stockholders. In such event, Parent, Purchaser and the Company have agreed
in the Merger Agreement to take, at the request of Parent and subject to the
satisfaction of the conditions set forth in the Merger Agreement, all
necessary and appropriate action to cause the Merger to become effective as
soon as reasonably practicable after such acquisition, without a meeting of
the stockholders, in accordance with Section 253 of the DGCL.
As a condition and inducement to Parent's and Purchaser's entering into the
Merger Agreement and incurring the obligations provided for therein, Xxxxxxx
Xxxxxxxxx (through two trusts established by him) and Xxxx X. Xxxxxxxxx, the
principal stockholders of the Company (collectively, the "Principal
Stockholders"), who collectively have voting power and dispositive power with
respect to an aggregate of 1,610,500 Shares and own options to acquire an
additional 9,998 Shares representing approximately 18% of the outstanding
Shares calculated on a Fully Diluted Basis, concurrently with the execution
and delivery of the Merger Agreement entered into separate stockholder
agreements (collectively, the "Stockholder Agreements"), dated May 5, 1999,
with Parent and Purchaser. Pursuant to the Stockholder Agreements, the
Principal Stockholders have agreed, among other things, to grant Parent an
irrevocable proxy with respect to the voting of their Shares in favor of the
Merger upon the terms and subject to the conditions set forth therein. The
Stockholder Agreements are more fully described in Section 12.
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
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THE TENDER OFFER
1. Terms of the Offer.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such
extension or amendment), Purchaser will accept for payment and pay for all
Shares validly tendered prior to the Expiration Date and not properly
withdrawn in accordance with the procedures set forth in Section 4. The term
"Expiration Date" means 12:00 Midnight, New York City time, on June 9, 1999,
unless and until Purchaser shall have extended the period of time during which
the Offer is open, subject to the terms of the Merger Agreement, in which
event the term "Expiration Date" shall mean the latest time and date at which
the Offer, as so extended by Purchaser, shall expire. Purchaser will extend
the Offer from time to time for the shortest time periods permitted by law and
which it reasonably believes are necessary until the consummation of the
Offer, but not later than July 15, 1999, if on the scheduled Expiration Date
any of the conditions to Purchaser's obligation to accept for payment and pay
for the Shares have not been satisfied or waived. Parent and Purchaser have
the right to extend the Offer for up to ten business days notwithstanding the
prior satisfaction of all conditions to the Offer.
Consummation of the Offer is conditioned upon satisfaction of the Minimum
Condition, the expiration or termination of all waiting periods imposed by the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and the
regulations thereunder (the "HSR Act"), and the other conditions described in
Section 14. If such conditions are not satisfied, Purchaser, subject to the
terms of the Merger Agreement and subject to complying with applicable rules
and regulations of the Securities and Exchange Commission (the "Commission"),
shall not be required to purchase any of the Shares tendered, and may delay
the acceptance for payment of any Shares or terminate or amend the Offer.
Subject to the terms and conditions contained in the Merger Agreement,
Purchaser may (but shall not be obligated to) waive in whole or in part, at
any time and from time to time, any or all of such conditions, provided that
the Minimum Condition cannot be waived by Purchaser without the written
consent of the Company. See Section 14.
Pursuant to the Merger Agreement, Purchaser may not, without the written
consent of the Company, (i) decrease the price per Share payable in the Offer,
(ii) change the form of consideration to be paid in the Offer, (iii) reduce
the maximum number of Shares to be purchased in the Offer or the Minimum
Condition, (iv) impose additional conditions to the Offer or modify the
conditions in a manner adverse to the holders of Shares, (v) amend any other
term of the Offer in a manner adverse to the holders of the Shares or (vi)
extend the expiration of the Offer beyond July 15, 1999. Subject to the terms
and conditions of the Offer and the Merger Agreement, Purchaser shall, and
Parent 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.
There can be no assurance that Purchaser will exercise its rights to extend
the Offer (other than as required by the Merger Agreement or applicable law).
Any extension, amendment or termination of the Offer, or any waiver of any
condition of the Offer, will be followed as promptly as practicable by a
public announcement. In the case of an extension, Rule 14e-1(d) under the
Exchange Act requires that the announcement be issued no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date in accordance with the public announcement requirements of
Rule 14d-4(c) under the Exchange Act. As used in this Offer to Purchase,
"business day" has the meaning set forth in Rule 14d-1 under the Exchange Act.
Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the
Exchange Act, which require that any material change in the information
published, sent or given to stockholders in connection with the Offer be
promptly disseminated to stockholders in a manner reasonably designed to
inform stockholders of such change), and without limiting the manner in which
Purchaser may choose to make any public announcement, Purchaser will not have
any obligation to publish, advertise or otherwise communicate any such public
announcement other than by making a release to the Dow Xxxxx News Service.
During any extension of the Offer, all Shares previously tendered and not
properly withdrawn will remain subject to the Offer, subject to the rights of
a tendering stockholder to withdraw its Shares in accordance with the
procedures set forth in Section 4. PURCHASER SHALL NOT HAVE ANY OBLIGATION TO
PAY INTEREST ON THE PURCHASE PRICE FOR TENDERED SHARES, REGARDLESS OF ANY
DELAY IN SUCH PAYMENT AND WHETHER OR NOT PURCHASER EXERCISES ITS RIGHT TO
EXTEND THE OFFER.
3
If Purchaser extends the Offer or if Purchaser is delayed in its acceptance
for payment of or payment for Shares (whether before or after its acceptance
for payment of Shares) or it is unable to pay for Shares pursuant to the Offer
for any reason, then, without prejudice to Purchaser's rights under the Offer,
the Depositary may retain tendered Shares on behalf of Purchaser, and such
Shares may not be withdrawn except to the extent tendering stockholders are
entitled to withdrawal rights as described in Section 4. However, the ability
of Purchaser to delay the payment for Shares that Purchaser has accepted for
payment is limited by Rule 14e-1(c) under the Exchange Act, which requires
that a bidder pay the consideration offered or return the securities deposited
by or on behalf of holders of securities promptly after the termination or
withdrawal of such bidder's offer.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer
(including, subject to the Merger Agreement, the Minimum Condition), Purchaser
will disseminate additional tender offer materials and extend the Offer to the
extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act.
The minimum period during which an offer must remain open following a material
change in the terms of the offer or information concerning the offer, other
than a change in price or a change in the percentage of securities sought,
will depend upon the facts and circumstances then existing, including the
relative materiality of the changed terms or information. In a public release,
the Commission has stated that in its view an offer must remain open for a
minimum period of time following a material change in the terms of the offer
and that waiver of a material condition, such as the Minimum Condition, is a
material change in the terms of the offer. The release states that 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. If,
prior to the Expiration Date, Purchaser increases the consideration offered to
holders of Shares pursuant to the Offer, such increased consideration will be
paid to all holders whose Shares are purchased in the Offer whether or not
such Shares were tendered prior to such increase in consideration. Except as
otherwise provided herein, any extension of the Offer will not constitute a
waiver by Purchaser of any of the conditions set forth in Section 14.
The Company has provided Purchaser with the Company's stockholder lists and
security position listing for the purpose of disseminating the Offer to
holders of the Shares. This Offer to Purchase, the related Letter of
Transmittal and other relevant materials will be mailed by Purchaser to record
holders of Shares and will be furnished by Purchaser to brokers, dealers,
commercial banks, trust companies and similar persons whose names, or the
names of whose nominees, appear on the stockholder lists or, if applicable,
who are listed as participants in a clearing agency's security position
listing, for subsequent transmittal to beneficial owners of Shares.
2. Acceptance for Payment and Payment for Shares.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such
extension or amendment), Purchaser will purchase, by accepting for payment,
and will pay for, as soon as it is permitted to do so under applicable law,
all Shares validly tendered prior to the Expiration Date and not properly
withdrawn in accordance with the procedures set forth in Section 4. All
determinations concerning the satisfaction of such terms and conditions will
be within Purchaser's discretion, which determinations will be final and
binding. See Sections 1 and 14. Purchaser expressly reserves the right, in its
sole discretion, to delay acceptance for payment of or payment for Shares in
order to comply in whole or in part with any applicable law, including,
without limitation, the HSR Act.
Any such delays will be effected in compliance with Rule 14e-1(c)
promulgated under the Exchange Act (relating to a bidder's obligation to pay
for or return tendered securities promptly after the termination or withdrawal
of such bidder's offer). In all cases, payment for Shares purchased pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
the certificates evidencing such Shares (the "Share Certificates") or timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such
Shares
4
into the Depositary's account at The Depository Trust Company (the "Book-Entry
Transfer Facility") pursuant to the procedures set forth in Section 3, (ii)
the Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees, or, in the case of a book-
entry transfer, an Agent's Message (as defined below) and (iii) any other
documents required by the Letter of Transmittal.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility
has received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares which are the subject of such Book-
Entry Confirmation, that such participant has received and agrees to be bound
by the terms of the Letter of Transmittal and that Purchaser may enforce such
agreement against the participant.
For purposes of the Offer, Purchaser shall be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered prior to the
Expiration Date and not properly withdrawn if, as and when Purchaser gives
oral or written notice to the Depositary of Purchaser's acceptance of such
Shares for payment pursuant to the Offer. Upon the terms and subject to the
conditions of the Offer, payment for Shares accepted pursuant to the Offer
will be made by deposit of the aggregate purchase price therefor with the
Depositary, which will act as agent for tendering stockholders for the purpose
of receiving payment from Purchaser and transmitting payment to such tendering
stockholders. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR
SHARES BE PAID REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING
SUCH PAYMENT. Upon the deposit of funds with the Depositary for the purpose of
making payments to tendering stockholders, Purchaser's obligation to make such
payment shall be satisfied and tendering stockholders must thereafter look
solely to the Depositary for payment of amounts owed to them by reason of the
acceptance for payment of Shares pursuant to the Offer. Tendering stockholders
will not be obligated to pay brokerage fees or commissions or, except as set
forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the
purchase of Shares pursuant to the Offer. Purchaser will pay any charges and
expenses of the Depositary and the Information Agent.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Share Certificates are
submitted evidencing more Shares than are tendered, Share Certificates
evidencing such unpurchased Shares or untendered Shares will be returned,
without expense to the tendering stockholder (or, in the case of Shares
tendered by book-entry transfer into the Depositary's account at the Book-
Entry Transfer Facility 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 following the expiration,
termination or withdrawal of the Offer.
The Purchaser reserves the right to transfer or assign, in whole at any
time, or in part from time to time, to one or more of its affiliates, the
right to purchase all or any portion of the Shares tendered pursuant to the
Offer, but any such transfer or assignment will not relieve Purchaser of its
obligations under the Offer or prejudice the rights of tendering stockholders
to receive payment for Shares validly tendered and accepted for payment
pursuant to the Offer.
3. Procedures for Tendering Shares.
Valid Tender of Shares. In order for Shares to be validly tendered pursuant
to the Offer, the Letter of Transmittal or a facsimile thereof, properly
completed and duly executed, with any required signature guarantees, or an
Agent's Message in connection with a book-entry delivery of Shares, and any
other required documents, must be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date and either (i) the Share Certificates evidencing tendered
Shares must be received by the Depositary along with the Letter of
Transmittal, or (ii) Shares must be tendered pursuant to the procedure for
book-entry transfer described below and a Book-Entry Confirmation must be
received by the Depositary, or (iii) the tendering stockholder must comply
with the guaranteed delivery procedures described below, in each case prior to
the Expiration Date.
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THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND
THE DELIVERY THEREOF WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
DEPOSITARY. 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.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at the Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase, and any
financial institution that is a participant in any of 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
at the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer
Facility's procedures for transfer. However, although delivery of Shares may
be effected through book-entry transfer at the Book-Entry Transfer Facility,
the Letter of Transmittal (or facsimile thereof), properly completed and duly
executed and with any required signature guarantees, or an Agent's Message in
connection with a book-entry delivery of Shares, 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. DELIVERY OF
DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-
ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a firm which is a bank, broker, dealer, credit union, savings
association or other entity that is a member in good standing of the Security
Transfer Agent's Medallion Program (each of the foregoing being referred to as
an "Eligible Institution"), unless the Shares tendered thereby are tendered
(i) by a registered holder of Shares who has not completed either the box
entitled "Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. See Instruction 1 of the Letter of Transmittal.
If a Share Certificate is registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made, or a Share
Certificate not accepted for payment or not tendered is to be returned, to a
person other than the registered holder(s), then the Share Certificate must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the Share
Certificate, with the signature(s) on such Share Certificate or stock powers
guaranteed as described above. See Instructions 1 and 5 of the Letter of
Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates are not immediately
available or time will not permit all required documents to reach the
Depositary prior to the Expiration Date or the procedure for book-entry
transfer cannot be completed on a timely basis, such Shares may nevertheless
be tendered if all the following conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser herewith, is
received by the Depositary, as provided below, prior to the Expiration
Date; and
(iii) the Share Certificates for all tendered Shares, in proper form for
transfer, or a Book-Entry Confirmation, together with a properly completed
and duly executed Letter of Transmittal (or manually signed facsimile
thereof) with any required signature guarantee (or, in the case of a book-
entry transfer, an Agent's Message) and any other documents required by
such Letter of Transmittal, are received by the Depositary within three
trading days after the date of execution of the Notice of Guaranteed
Delivery. A "trading day" is any day on which the New York Stock Exchange,
Inc. ("NYSE") is open for business.
6
Any Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Depositary and must include
a guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares purchased
pursuant to the Offer will, in all cases, be made only after timely receipt by
the Depositary of (i) the Share Certificates evidencing such Shares, or a
Book-Entry Confirmation of the delivery of such Shares, (ii) a properly
completed and duly executed Letter of Transmittal (or manually signed
facsimile thereof) (or, in the case of a book-entry transfer, an Agent's
Message) and (iii) any other documents required by the Letter of Transmittal.
Accordingly, tendering stockholders may be paid at different times depending
upon when the foregoing materials are actually received by the Depositary.
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE
SHARES TO BE PAID BY PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR
ANY DELAY IN MAKING SUCH PAYMENT.
Backup Federal Withholding Tax. To prevent backup federal income tax
withholding with respect to payment to certain stockholders of the purchase
price of Shares purchased pursuant to the Offer, each such stockholder must,
unless an exemption applies, provide the Depositary with such stockholder's
correct taxpayer identification number ("TIN") and certify, under penalty of
perjury, that such TIN is correct and that such stockholder is not subject to
backup federal income tax withholding by completing the Substitute Form W-9
included in the Letter of Transmittal. If a stockholder does not provide such
stockholder's correct TIN or fails to provide the certifications described
above, the Internal Revenue Service (the "IRS") may impose a penalty on such
stockholder and payment of cash to such stockholder pursuant to the Offer may
be subject to backup withholding of 31%. All stockholders surrendering Shares
pursuant to the Offer should complete and sign the 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 Purchaser 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 10 of the Letter of Transmittal.
Appointment as Proxy; Distributions. By executing a Letter of Transmittal
as set forth above, a tendering stockholder irrevocably appoints designees of
Purchaser as such stockholder's attorneys-in-fact and proxies, in the manner
set forth in the Letter of Transmittal, each with full power of substitution,
to the full extent of such stockholder's rights with respect to the Shares
tendered by such stockholder and accepted for payment by Purchaser (and any
and all non-cash dividends, distributions, rights, other Shares, or other
securities issued or issuable in respect of such Shares on or after the date
of the Merger Agreement). All such powers of attorney and proxies shall be
considered coupled with an interest in the tendered Shares. This appointment
will be effective if, when, and only to the extent that, Purchaser accepts
such Shares for payment pursuant to the Offer. Upon such acceptance for
payment, all prior powers of attorney and proxies given by such stockholder
with respect to such Shares and other securities will, without further action,
be revoked, and no subsequent powers of attorney or proxies may be given (and,
if given, will not be deemed effective). The designees of Purchaser will, with
respect to the Shares and other securities for which the appointment is
effective, be empowered to exercise all voting and other rights of such
stockholder as they in their sole discretion may deem proper at any annual,
special, adjourned or postponed meeting of the Company's stockholders, by
written consent or otherwise, and Purchaser reserves the right to require
that, in order for Shares or other securities to be deemed validly tendered,
immediately upon Purchaser's acceptance for payment of such Shares Purchaser
must be able to exercise full voting, consent and other rights with respect to
such Shares and other securities, including voting at any meeting of
stockholders. Such powers of attorney and proxies will be irrevocable and will
be granted in consideration of the purchase of the Shares by Purchaser in
accordance with the terms of the Offer.
7
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tendered Shares pursuant to any of the procedures described above will be
determined by Purchaser, in its sole discretion, whose determination will be
final and binding on all parties. Purchaser reserves the absolute right to
reject any or all tenders of any Shares determined by it not to be in proper
form or if the acceptance for payment of, or payment for, such Shares may, in
the opinion of Purchaser's counsel, be unlawful. Purchaser also reserves the
absolute right, in its sole discretion, subject to the Merger Agreement, to
waive any of the conditions of the Offer or any defect or irregularity in any
tender with respect to Shares of any particular stockholder, whether or not
similar defects or irregularities are waived in the case of other
stockholders. No tender of Shares will be deemed to have been validly made
until all defects and irregularities have been cured or waived.
Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be
final and binding. None of Parent, Purchaser, the Dealer Manager, the
Depositary, the Information Agent or any other person will be under any duty
to give notification of any defects or irregularities in tenders or will incur
any liability for failure to give any such notification.
Binding Agreement. A tender of Shares pursuant to any of the procedures
described above will constitute the tendering stockholder's acceptance of the
terms and conditions of the Offer. Purchaser's acceptance for payment of
Shares tendered pursuant to the Offer will constitute a binding agreement
between the tendering stockholder and Purchaser upon the terms and subject to
the conditions of the Offer.
4. Withdrawal Rights.
Except as otherwise provided in this Section 4, tenders of Shares made
pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer
may be withdrawn pursuant to the procedures set forth below at any time prior
to the Expiration Date and, unless theretofore accepted for payment by
Purchaser pursuant to the Offer, may also be withdrawn at any time after July
11, 1999.
If Purchaser extends the Offer, is delayed in its acceptance for payment of
Shares or is unable to accept Shares for payment pursuant to the Offer for any
reason, then, without prejudice to Purchaser's rights under the Offer, the
Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares,
and such Shares may not be withdrawn except to the extent that tendering
stockholders are entitled to withdrawal rights as described in this Section 4.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase.
Any such notice of withdrawal must specify the name of the person who tendered
the Shares to be withdrawn, the number of Shares to be withdrawn and the name
of the registered holder, if different from that of the person who tendered
such Shares. If Share Certificates evidencing Shares to be withdrawn have been
delivered or otherwise identified to the Depositary, then, prior to the
physical release of such Share Certificates, the serial numbers shown on such
Share Certificates must be submitted to the Depositary and the signature(s) on
the notice of withdrawal must be guaranteed by an Eligible Institution, unless
such Shares have been tendered for the account of an Eligible Institution. If
Shares have been tendered pursuant to the procedure for book-entry transfer as
set forth in Section 3, any notice of withdrawal must also specify the number
of the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Shares and otherwise comply with the Book-Entry Transfer Facility's
procedures.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser, in its sole discretion,
whose determination will be final and binding on all parties. None of Parent,
Purchaser, the Dealer Manager, the Depositary, the Information Agent or any
other person
8
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.
Any Shares properly withdrawn will thereafter be deemed to not have been
validly tendered for purposes of the Offer. Withdrawals of tenders of Shares
may not be rescinded. However, withdrawn Shares may be retendered at any time
prior to the Expiration Date by following one of the procedures described in
Section 3 on or prior to the Expiration Date.
5. Certain Federal Income Tax Consequences.
The following is a summary of certain United States federal income tax
consequences of the Offer and the Merger to stockholders whose Shares are
purchased pursuant to the Offer or whose Shares are converted to cash in the
Merger (including pursuant to the exercise of perfected dissenter rights under
the DGCL). The discussion applies only to stockholders in whose hands Shares
are capital assets, and may not apply to Shares received pursuant to the
exercise of employee stock options or otherwise as compensation, or to
stockholders who are in special tax situations (such as insurance companies,
tax-exempt organizations or dealers in securities). This discussion does not
discuss the federal income tax consequences to a stockholder who, for United
States federal income tax purposes, is a nonresident alien individual, a
foreign corporation, a foreign partnership or a foreign estate or trust.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE INCLUDED FOR
GENERAL INFORMATIONAL PURPOSES ONLY AND ARE BASED UPON CURRENT LAW. BECAUSE
INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH STOCKHOLDER SHOULD CONSULT SUCH
STOCKHOLDER'S OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES
DISCUSSED BELOW TO SUCH STOCKHOLDER AND THE PARTICULAR TAX EFFECTS TO SUCH
STOCKHOLDER OF THE OFFER AND THE MERGER, INCLUDING THE APPLICATION AND EFFECT
OF STATE, LOCAL, FOREIGN AND OTHER INCOME TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger will be
a taxable transaction for federal income tax purposes (and also may be a
taxable transaction under applicable state, local and other income tax laws).
In general, for federal income tax purposes, a stockholder will recognize gain
or loss in an amount equal to the difference between his or her adjusted tax
basis in the Shares sold pursuant to the Offer or converted into cash in the
Merger and the amount of cash received therefor. Gain or loss must be
determined separately for each block of Shares (i.e., Shares acquired at the
same cost in a single transaction) sold pursuant to the Offer or converted
into cash in the Merger. Such capital gain or loss will be long-term capital
gain or loss if the Shares were held by the holder for more than one year at
the time of the consummation of the Offer or Merger. For federal income tax
purposes, net capital gain recognized by individuals (or an estate or certain
trust) from the sale of property held for more than twelve months will
generally be taxed at a maximum tax rate of 20% (or 10% if the capital gain
would be taxed at only a 15% tax rate if such gain were treated as ordinary
income). There are limitations on the deductibility of capital losses.
Payments in connection with the Offer or Merger may be subject to "back-up
withholding" at the rate of 31% unless the holder of the Shares (i) provides a
correct taxpayer identification number ("TIN") (which, for an individual
holder of Shares, is such holder's social security number) and any other
required information, or (ii) is a corporation or comes within certain other
exempt categories, and when required, demonstrates this fact, and otherwise
complies with applicable requirements of the back-up withholding rules. A
holder of Shares that does not provide a correct TIN may be subject to
penalties imposed by the IRS. Shareholders may prevent back-up withholding by
completing and signing the Substitute Form W-9 included as part of the Letter
of Transmittal. Any amount paid as back-up withholding does not constitute an
additional tax and will be creditable against such holder's federal income tax
liability, provided that the required information is given to the IRS. Each
holder of Shares should consult his or her tax advisor as to such holder's
qualifications for exemption from back-up withholding and the procedure for
obtaining such exemption.
9
6. Price Range of Shares; Dividends.
The Shares are listed and traded on the NYSE under the symbol "SY." The
following table sets forth, for the fiscal quarters indicated, the high and
low reported sales prices per Share on the NYSE as reported by the Dow Xxxxx
News Service.
High Low
--------- ---------
Fiscal Year Ended December 31, 1996:
First Quarter....................................... $12- 7/8 $10- 5/8
Second Quarter...................................... $12- 1/2 $10- 1/8
Third Quarter....................................... $13- 1/2 $10- 5/8
Fourth Quarter...................................... $14- 3/4 $12- 1/4
Fiscal Year Ended December 31, 1997:
First Quarter....................................... $17 $11- 7/8
Second Quarter...................................... $14- 3/8 $11- 3/8
Third Quarter....................................... $19- 7/8 $13- 3/4
Fourth Quarter...................................... $20- 5/8 $14- 3/4
Fiscal Year Ended December 31, 1998:
First Quarter....................................... $17- 1/8 $14- 5/8
Second Quarter...................................... $16- 1/8 $14- 5/8
Third Quarter....................................... $15- 3/4 $11- 7/8
Fourth Quarter...................................... $13- 1/8 $11- 7/8
Fiscal Year Ended December 31, 1999:
First Quarter....................................... $13- 7/16 $ 8- 5/16
Second Quarter to May 5, 1999....................... $13- 7/8 $ 9- 5/8
On May 5, 1999, the last full trading day prior to the public announcement
of the execution of the Merger Agreement and of Purchaser's intention to
commence the Offer, the closing price per Share as reported on the NYSE was
$13.75. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE
SHARES.
The Company declared and paid cash dividends on its Common Stock for the
fiscal quarters indicated below as follows:
Cash Dividends per Share
1996 1997 1998 1999
Period ---- ---- ---- ----
First Quarter........................................ $.07 $.08 $.09 $.09
Second Quarter....................................... $.07 $.08 $.09 $.09*
Third Quarter........................................ $.08 $.08 $.09
Fourth Quarter....................................... $.08 $.08 $.09
---- ---- ----
Total.............................................. $.30 $.32 $.36
==== ==== ====
--------
*declared, payable on May 17, 1999
7. Effect of the Offer on the Market for the Shares; Exchange Listing and
Exchange Act Registration; Margin Regulations.
Market for the Shares. The purchase of Shares pursuant to the Offer will
reduce the number of Shares that might otherwise trade publicly and could
reduce the number of holders of Shares, which could adversely affect the
liquidity and market value of the remaining Shares held by the public.
Stock Listing. Depending upon the number of Shares purchased pursuant to
the Offer, the Shares may no longer meet the requirements of the NYSE for
continued listing and may be delisted from the NYSE and deregistered under
Section 12(b) of the Exchange Act. Parent intends to cause the delisting by
the NYSE and deregistration of the Shares following consummation of the Offer.
10
According to the published guidelines, the NYSE would consider delisting
the Shares if, among other things, the number of holders of at least 100
Shares 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 percent or more ("NYSE Excluded Holdings")) should fall below
600,000 or the aggregate market value of publicly held Shares (exclusive of
NYSE Excluded Holdings) should fall below $5,000,000. The Company has advised
Purchaser that, as of March 10, 1999, there were 8,761,417 Shares outstanding,
held by approximately 3,000 holders of record. 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.
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 the Nasdaq Stock Market or other sources. The extent of the public
market therefor and the availability of such quotations would depend, however,
upon such factors as the number of 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, the possible termination
of registration under the Exchange Act as described below, and other factors.
Purchaser cannot predict whether the reduction in the number of 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.
Margin Regulations. The Shares are currently "margin securities," as such
term is defined under the rules of the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board"), which has the effect, among
other things, of allowing banks to extend credit on the collateral of such
securities. Depending upon factors similar to those described above regarding
listing and market quotations, following the Offer it is possible that the
Shares might no longer constitute "margin securities" for purposes of the
margin regulations of the Federal Reserve Board, in which event such Shares
might no longer be eligible as collateral for loans made by banks.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the Commission if the Shares are
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, subject to Section 15(d) of the Exchange Act,
substantially reduce the information required to be furnished by the Company
to its stockholders and to the Commission and would make certain provisions of
the Exchange Act no longer applicable to the Company, such as the short-swing
profit recovery provisions of Section 16(b) of the Exchange Act, the
requirement of furnishing a proxy or information statement pursuant to Section
14(a) or (c) 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. Furthermore, the ability of "affiliates" of the Company
and persons holding "restricted securities" of the Company to dispose of such
securities pursuant to Rule 144 or 144A promulgated under the Securities Act
of 1933, as amended, may be impaired or eliminated.
PURCHASER INTENDS TO SEEK TO CAUSE THE COMPANY TO APPLY FOR DELISTING OF
THE SHARES FROM THE NYSE AND TERMINATION OF REGISTRATION OF THE SHARES UNDER
THE EXCHANGE ACT AS SOON AFTER THE COMPLETION OF THE OFFER AS THE REQUIREMENTS
FOR SUCH DELISTING AND/OR TERMINATION ARE MET. IF REGISTRATION OF THE SHARES
IS NOT TERMINATED PRIOR TO THE MERGER, THEN THE REGISTRATION OF THE SHARES
UNDER THE EXCHANGE ACT WILL BE TERMINATED FOLLOWING THE CONSUMMATION OF THE
MERGER.
8. Certain Information Concerning the Company.
The information concerning the Company contained in this Offer to Purchase,
including financial information, has been furnished by the Company or been
taken from or based upon publicly available documents
11
and records on file with the Commission and other public sources. Neither
Parent, Purchaser nor the Dealer Manager assumes any responsibility for the
accuracy or completeness of the information concerning the Company contained
in such documents and records or for any failure by the Company to disclose
events which may have occurred or may affect the significance or accuracy of
any such information but which are unknown to Parent, Purchaser or the Dealer
Manager.
The Company is a Delaware corporation and its principal executive offices
are located at 00-000 Xxxxxxxxxxx Xxxx, Xxxxxxx, Xxxxxxxx 00000, telephone
(000) 000-0000. The Company has additional executive, operational and
administrative offices at 000 Xxxxxx Xxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxxxxxx
00000, telephone (000) 000-0000.
The Company is the leading designer, manufacturer and distributor of
seating products used in the hospitality (including lodging, gaming, interval
vacation and country club) and food service industries. The Company produces
and markets under the "XXXXXX XXXXXXXX" brand name an extensive line of
seating products, including wood, metal and rattan chairs, bar stools, sofas
and sleep sofas and stacking chairs, as well as banquet-related products under
the "XXXX XXXXXX" brand name, including folding tables, food service carts and
portable dance floors. In addition, the Company designs and manufactures
seating products under the "THONET" brand name for the university, health care
and other institutional markets. The Company also manufactures vinyl
wallcovering products for residential, hotel and office use. The Company
markets these products under the brand name "SELLERS & XXXXXXXXX." The Company
manufactures approximately 350 standard furniture products for the hospitality
and food service industries, and approximately 200 standard products for the
university, health care and other institutional markets. The majority of these
products are supplied under special order and finished and upholstered to
customer's specifications.
The Company distributes its products both domestically and internationally.
The Company has showrooms and sales offices in 13 cities in the United States,
as well as distributors in 33 foreign countries. Many of these distributors
are concentrated in Europe and Asia. In addition, the Company utilizes its
local facilities and existing distribution channels to assemble and distribute
products in the United States imported from European sources. The Company also
exhibits at major national and international trade shows.
As of December 31, 1998, the Company had 1,720 full-time employees. Of
these, 1,513 were engaged in manufacturing, 104 in administrative and clerical
positions, and 103 in sales and marketing. Those engaged in manufacturing
included 251 employees in Mexico. Hourly manufacturing employees at two of the
Company's manufacturing facilities are represented by separate bargaining
agreements with contracts expiring in November 1999 (covering approximately
600 employees) and November 2000 (covering approximately 200 employees).
Set forth below is certain selected consolidated financial information with
respect to the Company, excerpted or derived from the Company's 1998 Annual
Report to Stockholders and its Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999, both filed with the Commission pursuant to the Exchange
Act.
More comprehensive financial information is included in such reports and in
other documents filed by the Company with the Commission. The following
summary is qualified in its entirety by reference to such reports and other
documents and all of the financial information (including any related notes)
contained therein. Such reports and other documents may be inspected and
copies may be obtained from the Commission and the NYSE in the manner set
forth below.
12
XXXXXX XXXXXXXX INDUSTRIES, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except per share amounts)
Three Months Fiscal Year Ended December
Ended March 31, 31,
--------------- --------------------------
1999 1998 1998 1997 1996
------- ------- -------- -------- --------
(unaudited)
Income Statement Data:
Net sales......................... $43,128 $38,484 $165,937 $157,779 $149,481
Income from continuing operations
before income taxes.............. $ 3,538 $ 3,298 $ 16,805 $ 14,743 $ 11,476
Income from continuing operations. $ 2,264 $ 2,078 $ 10,614 $ 9,677 $ 7,756
Net income per share from
continuing
operations--diluted.............. $ 0.26 $ 0.22 $ 1.17 $ 1.05 $ 0.88
Weighted average shares
outstanding...................... 8,786 9,296 9,108 9,250 8,838
At
March 31, At December 31,
----------- ---------------
1999 1998 1997
----------- ------- -------
(unaudited)
Balance Sheet Data:
Inventories....................................... $23,307 $22,544 $17,768
Property and equipment, net....................... $25,926 $25,985 $24,611
Total assets...................................... $88,645 $89,633 $97,238
Long-term debt, including current maturities...... $ 2,000 $ 3,000 $ 7,000
Stockholders' equity.............................. $65,024 $64,695 $71,772
In the course of Parent's due diligence review of the Company, the Company
provided Parent with certain business and financial information which was not
publicly available. Such information included the Company's 1999 Summary
Business Plan prepared by management of the Company (the "Summary") which
contained estimated results of operations for the Company's fiscal year ending
December 31, 1999. The Summary does not take into account, and has not been
adjusted to reflect, any of the potential effects of the Offer or the Merger.
Moreover, the Summary was not prepared with a view to public disclosure or
compliance with published guidelines of the Commission or the guidelines
established by the American Institute of Certified Public Accountants.
The information from the Summary set forth below is included in this Offer
to Purchase solely because such information was provided to Parent in
connection with its evaluation of the Company. Parent was not furnished with
any written information regarding the assumptions used by the Company in
preparing the Summary or any schedules supporting any amounts contained
therein. Parent did not rely on the Summary to any significant degree in
formulating the Offer Price or other material terms of the Merger Agreement or
the transactions contemplated thereby.
As a matter of course, the Company does not make public projections or
forecasts of its anticipated financial position or results of operations.
Accordingly, the Company does not anticipate that it will, and it disclaims
any obligations to, furnish updated forecasts or projections to any person,
cause such information to be included in documents required to be filed with
the Commission, or otherwise make such information public.
The information from the Summary should be evaluated in conjunction with
the historical financial statements and other information regarding the
Company contained elsewhere in this Offer to Purchase and the Company's public
filings with the Commission. In light of the foregoing factors and risks
inherent in the Summary, holders of Shares are cautioned not to place undue or
significant reliance thereon. The Company's estimated results of operations
for its fiscal year 1999, as set forth in the Summary, is set forth below.
13
1999 Estimated Results of Operations
(Unaudited)
(Dollars in Thousands)
----------------------
Net Sales.......................................... $185,600
Gross Margin....................................... 44,868
Marketing Expenses................................. 14,263
Administration Expense............................. 11,049
Interest Expense (Income).......................... (174)
Miscellaneous...................................... 280
--------
Pretax Earnings.................................. $ 19,450
========
The Company is subject to the informational and reporting requirements of
the Exchange Act and is required to file reports and other information with
the Commission relating to its business, financial condition and other
matters. Information as of particular dates concerning the Company's directors
and officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities, any material interests of such persons in
transactions with the Company and other matters is required to be disclosed in
proxy statements distributed to the Company's stockholders and filed with the
Commission. These reports, proxy statements and other information should be
available for inspection at the public reference facilities of the Commission
located at Room 0000, Xxxxxxxxx Xxxxx, 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx,
X.X. 00000, and also should be available for inspection and copying at
prescribed rates at the following regional offices of the Commission: Seven
World Trade Center, 13th Floor, New York, New York 10048; and Citicorp Center,
000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000. Copies of this
material may also be obtained by mail, upon payment of the Commission's
customary fees, from the Commission's principal office at 000 Xxxxx Xxxxxx,
X.X., Xxxxxxxxxx, X.X. 00000. The Commission also maintains a World Wide Web
site on the internet at xxxx://xxx.xxx.xxx that contains reports, proxy
statements and certain other information regarding registrants including the
Company which have been filed via the Commission's XXXXX System. Reports,
proxy statements and other information concerning the Company should also be
on file at the New York Stock Exchange, Inc., 00 Xxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000.
9. Certain Information Concerning Purchaser and Parent.
Purchaser. Purchaser is a newly incorporated Delaware corporation organized
in connection with the Offer and the Merger and has not carried on any
activities other than in connection with its formation and capitalization and
the transactions contemplated by the Offer and the Merger. The principal
executive offices of Purchaser are located at 0000 Xxxxxxx Xxxxxxxxxx Xxxxx,
Xx. Xxxxx, Xxxxxxxx 00000, telephone (000) 000-0000. Purchaser is a wholly
owned subsidiary of Parent.
Parent. Parent is a corporation organized under the laws of Delaware and
its principal executive offices are located at 0000 Xxxxxxx Xxxxxxxxxx Xxxxx,
Xx. Xxxxx, Xxxxxxxx 00000, telephone (000) 000-0000.
Parent designs, manufactures and markets an extensive line of furniture and
related products for the food service, office, hospitality, health care and
retail markets, including table bases, table tops, metal and wood chairs,
booths, case goods and interior decor systems. Parent manufactures most of its
products to customer order from basic raw materials. Parent markets its
products to a wide variety of customers, including wholesale distributors,
buying groups, architectural and design firms, office furniture dealers and
end-users, through a combination of its own direct factory sales force and
independent manufacturers' representatives.
The combination of Parent's broad line of furniture products and its
vertical manufacturing capabilities enable it to offer a complete commercial
interior decor package to its customers with significant design flexibility
and short lead times. Parent integrates certain of its products into complete
interior decor systems, which include all furniture, booths, walls, wood trim
and case good components. These turnkey decor packages include case good
components such as counters, bars, divider walls, planter units, salad bars
and stands produced in a variety of high pressure laminates which are
manufactured by Parent, delivered to the customer site and installed by
employees or Parent-trained subcontractors. These packages are suitable for
either new food service installations or remodeling existing facilities.
14
Parent has registered, either directly or through a subsidiary, the
"FALCON," "CHARLOTTE," "FLIGHT," "GENESIS," "XXXX," "DIFFRIENT," "STORM,"
"TUTOR" and "TEMPEST" trademarks, in addition to numerous other trademarks,
with the United States Patent and Trademark Office.
As of December 31, 1998, Parent employed approximately 1,371 persons in its
four domestic manufacturing facilities and support locations, 429 in its
manufacturing facilities in Mexico, 12 in China, 20 in Denmark and 378 in its
manufacturing facilities in Mimon, Czech Republic. Approximately 52 persons
were employed in sales, 303 persons in administration and 1,855 in
manufacturing.
Set forth below is certain selected consolidated financial information with
respect to Parent and its subsidiaries for the thirteen weeks ended January
30, 1999 and January 31, 1998 and the fiscal years ended October 31, 1998,
November 1, 1997, and November 2, 1996. Such financial information has been
taken from the periodic reports and other documents filed by Parent with the
Commission. More comprehensive information concerning Parent is included in
such reports and other documents and all of the financial information and
notes contained therein. Such reports and other documents may be inspected and
copies may be obtained from the offices of the Commission and the NYSE in the
manner set forth below.
FALCON PRODUCTS, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except per share amounts)
Thirteen Weeks Ended Fiscal Year Ended
----------------------- -----------------------------------
January 30, January 31, October 31, November 1, November 2,
1999 1998 1998 1997 1996
----------- ----------- ----------- ----------- -----------
(unaudited)
Income Statement Data:
Net sales............. $34,595 $28,060 $143,426 $113,010 $100,702
Operating profit...... $ 3,289 $ 2,786 $ 10,606 $ 7,759 $ 11,108
Net earnings from
continuing
operations........... $ 1,864 $ 1,782 $ 6,350 $ 4,926 $ 7,001
Earnings per share
from continuing
operations--basic.... $ 0.21 $ 0.19 $ 0.69 $ 0.51 $ 0.73
Earnings per share
from continuing
operations--diluted.. $ 0.21 $ 0.19 $ 0.68 $ 0.50 $ 0.71
Shares used in
computing basic
earnings per share... 8,958 9,348 9,282 9,876 9,793
Shares used in
computing diluted
earnings per share... 9,042 9,534 9,156 9,665 9,591
---------------------
Note: All earnings per share and weighted average shares outstanding figures
have been adjusted to reflect a 10% stock dividend distributed on January 2,
1996.
At At At
January 30, October 31, November 1,
1999 1998 1997
----------- ----------- -----------
(unaudited)
Balance Sheet Data:
Inventories, net......................... $ 26,736 $ 24,877 $22,687
Property and equipment, net.............. $ 27,826 $ 27,498 $25,211
Total assets............................. $113,965 $111,974 $99,357
Long-term debt, including current
maturities.............................. $ 19,390 $ 18,815 $ 1,794
Stockholders' equity..................... $ 73,632 $ 71,946 $73,264
Parent is subject to the informational and reporting requirements of the
Exchange Act and is required to file reports and other information with the
Commission relating to its business, financial condition and other matters.
Information as of particular dates concerning Parent's directors and officers,
their remuneration, stock options granted to them, the principal holders of
Parent's securities, any material interests of such persons in transactions
15
with Parent and other matters is required to be disclosed in proxy statements
distributed to Parent's stockholders and filed with the Commission. These
reports, proxy statements and other information should be available for
inspection and copies may be obtained in the same manner as set forth for the
Company in Section 8.
The name, citizenship, business address, principal occupation or employment
and five-year employment history for each of the directors and executive
officers of Purchaser and Parent are set forth in Schedule I hereto.
Except as provided in the Stockholder Agreements or otherwise described in
this Offer to Purchase, none of Parent or Purchaser, or, to the best knowledge
of Parent or Purchaser, any of the persons listed in Schedule I hereto, or any
associate or majority-owned subsidiary of such persons, beneficially owns any
equity security of the Company, and neither Parent nor Purchaser, nor, to the
best knowledge of Parent and Purchaser, any of the other persons referred to
above, or any of the respective directors, executive officers or subsidiaries
of any of the foregoing, has effected any transaction in any equity security
of the Company during the past 60 days.
Except as provided in the Stockholder Agreements or otherwise described in
this Offer to Purchase, none of Parent or Purchaser, or, to the best of the
knowledge of Parent and Purchaser, any of the persons listed in Schedule I
hereto or any associate or majority-owned subsidiary of any of the foregoing,
has any contract, arrangement, understanding or relationship with any other
person with respect to any securities of the Company, including, without
limitation, any contract, arrangement, understanding or relationship
concerning the transfer or the voting of any securities of the Company, joint
ventures, loan or option arrangements, puts or calls, guaranties of loans,
guaranties against loss or the giving or withholding of proxies. Except as set
forth in this Offer to Purchase, none of Parent or Purchaser, or, to the best
of the knowledge of Parent and Purchaser, any of the persons listed in
Schedule I hereto or any associate or majority-owned subsidiary of any of the
foregoing, has had any transactions with the Company, or any of its executive
officers, directors or affiliates that would require reporting under the rules
of the Commission.
Except as provided in the Stockholder Agreements or otherwise set forth in
this Offer to Purchase, there have been no contacts, negotiations or
transactions between Parent or Purchaser, or the subsidiaries of either of
them, or, to the best of the knowledge of Parent or Purchaser, any of the
persons listed in Schedule I hereto, on the one hand, and the Company or its
executive officers, directors or affiliates, on the other hand, concerning a
merger, consolidation or acquisition, tender offer or other acquisition of
securities, election of directors, or a sale or other transfer of a material
amount of assets.
10. Background of the Offer; Contacts with the Company.
Through Xxxxxxxx X. Xxxxxx, the Chairman and Chief Executive Officer of
Parent, and Xxxxxxx Xxxxxxxxx, the Chairman of the Executive Committee of the
Company Board (and the former Chairman and Chief Executive Officer of the
Company), who have known each other for many years, Parent and the Company had
held informal discussions in the past to explore the possibility of a business
combination or other transaction between Parent and the Company. In December
1998, Xx. Xxxxxx spoke to Xxxx Xxxxxxxxx, Chairman of the Board and Chief
Executive Officer of the Company for the purpose of exploring a possible
transaction between the Company and Parent. At that time, Xx. Xxxxxx indicated
that Parent might have an interest in acquiring the Company.
In February 1999, Xx. Xxxxxx contacted Xxxxxxxxx, Xxxxxx & Xxxxxxxx
Securities Corporation ("DLJ") to express his interests in pursuing a possible
transaction with the Company. On March 11, 1999, representatives of DLJ met
with Xxxxxx's senior managers in St. Louis to discuss the financial impact of
a potential acquisition of the Company by Parent. Following this meeting, Xx.
Xxxxxx called Xxxxxxx Xxxxxxxxx, indicating to Xx. Xxxxxxxxx his interest in a
potential transaction with the Company and to arrange a meeting to discuss
such a transaction. On March 16, 1999, Xx. Xxxxxx met with Xxxxxxx Xxxxxxxxx
in Chicago to discuss the possibility of a negotiated transaction. On March
22, 1999, Xx. Xxxxxx received a telephone call from Xx. Xxxxxxxxx indicating
that the Company would not be interested in exploring a possible transaction
with Parent at that time. In response to this telephone conversation, and to
express Xxxxxx's strong interest in exploring a transaction with the Company,
Parent, with the assistance of DLJ, prepared a preliminary term sheet,
contemplating the purchase by Parent of all of the Company's outstanding
Shares for cash at a price range of $14.00 to $15.00 per Share.
16
On March 30, 1999, DLJ submitted the preliminary term sheet to the Company
and Lazard Freres.
On or about April 1, 1999, after consultation with the Company, Lazard
Freres informed DLJ that the price range indicated in the term sheet was not
sufficient to warrant additional discussions. Lazard Freres indicated that a
price of $17.00 per Share might be considered, and further indicated that the
Company had other options which it was then pursuing.
On April 5, 1999, the Board of Directors of Parent (the "Parent Board") met
to discuss a potential acquisition of the Company, following which the Parent
Board authorized Xx. Xxxxxx and other members of Parent's management team to
continue to explore the possibility of pursuing a transaction with the
Company, and to pursue securing appropriate financing for the transaction.
On April 14, 1999, DLJ contacted Lazard Freres to indicate that Parent had
begun to take steps necessary to secure the financing for a purchase of the
Company. DLJ also indicated that Parent was prepared to offer a price per
Share slightly higher than $15.00 per Share, subject to (i) the satisfactory
completion of business, legal and accounting due diligence of the Company, and
(ii) the negotiation of a mutually satisfactory definitive merger agreement.
On April 19, 1999, the Parent Board met again to discuss the transaction,
to receive an update on recent developments pertaining to the transaction from
Parent's senior management team, and to be advised concerning the willingness
of DLJ or its affiliates to consider providing financing for the Offer and the
Merger. The Parent Board then authorized the continued discussions of Parent's
potential acquisition of the Company at an increased cash purchase price of
$16.00 per Share.
On April 20, 1999, DLJ communicated Parent's offer to acquire the Company
to Lazard Freres, indicating that Parent would be willing to offer the
Company's shareholders cash consideration of $16.00 per Share. After
consulting with the Company, Lazard Freres indicated to DLJ the Company's
willingness to meet to discuss a potential transaction.
On April 21, 1999, Xx. Xxxxxx received a telephone call from Xxxxxxx
Xxxxxxxxx during which Xx. Xxxxxxxxx urged Xx. Xxxxxx to consider increasing
Parent's proposed offer price of $16.00 per Share. Xx. Xxxxxx informed DLJ of
this development and a meeting was arranged between Xx. Xxxxxx and Xxxxxxx
Xxxxxxxxx to discuss a potential transaction. On the same day, representatives
of Lazard Freres and DLJ met in Chicago to further discuss Xxxxxx's interest
in acquiring the Company.
On April 22, 1999, Xx. Xxxxxx and representatives of DLJ met in Chicago
with Xxxxxxx Xxxxxxxxx, Xxxx Xxxxxxxxx and representatives of Lazard Freres.
All parties expressed interest in a possible acquisition by Parent (or a
wholly owned subsidiary of Parent) of all of the outstanding capital stock of
the Company at a cash purchase price of $16.50 per Share, subject to, among
other things, customary due diligence, negotiation of definitive transaction
documentation and the approval of the Parent Board and the Company Board.
Parent and the Company then entered into the Confidentiality Agreement
described in Section 12.
On April 23, 1999, the Parent Board met with Xx. Xxxxxx, other senior
executives of Parent and Parent's legal and financial advisors to consider the
proposed merger transaction. Xx. Xxxxxx updated the directors of the results
of the negotiations that had occurred since the April 19, 1999 meeting of the
Parent Board. Xx. Xxxxxx advised the Directors that he believed that a cash
purchase price of $16.50 per Share would be required to gain support of the
Company Board and believed that this cash purchase price was fair and in the
best interest of Parent, subject to, among other things, Parent's due
diligence review of the Company. The Directors also reviewed a summary of the
financial aspects of the then current proposed transaction with the Company
and posed questions to Xx. Xxxxxx, the other senior executives of Parent
present at the meeting, the DLJ representatives and Parent's counsel regarding
the financial and operational aspects of a combined company and the legal
requirements and duties with respect to the proposed transaction. After a
thorough discussion, the Parent
17
Board authorized Xx. Xxxxxx and DLJ to discuss a transaction with the
appropriate representatives of the Company at a cash purchase price as $16.50
per share, and instructed counsel to prepare a draft of the Merger Agreement
to reflect the transaction as discussed at the meeting.
On April 26, 1999, the Company was furnished a draft of the Merger
Agreement and commencing on April 29, 1999, representatives of Parent, the
Company, the Principal Stockholders, and their respective counsel began
negotiating the Merger Agreement and the Stockholder Agreements.
During the week of April 26, 1999, members of Parent's management team and
representatives of Parent's financial and legal advisors met at the Company's
Morristown, Tennessee facility to conduct a detailed business, financial and
legal review of the Company, including a review of the Company's operations,
technology and prospects, in order to further assess the strategic
opportunities of a business combination with the Company. During this same
time period, and as part of Parent's due diligence review of the Company,
certain members of Parent's management team and representatives of DLJ
conducted on-site facility visits and met with local plant management of each
of the Company's manufacturing plants. From time to time during such due
diligence review, representatives of Parent requested and received certain
additional information from the Company. The due diligence review continued
through April 29, 1999.
On April 29, 1999, Xxxxxx's senior management met internally to consider
the results of its due diligence review of the Company, and after having
received input from its financial and legal advisors, discussed the strategic
opportunities presented by an acquisition of the Company. Xxxxxx's senior
management decided to recommend to the Parent Board that Parent proceed with
an acquisition of the Company at a cash purchase price of $16.50 per share,
subject to the agreement by the Principal Stockholders to enter into the
Stockholder Agreements and upon the terms and subject to the conditions of the
draft Merger Agreement.
On the same day, representatives of Lazard Freres contacted representatives
of DLJ to inform Parent that the Company had received a written preliminary
indication of interest from a third party which contemplated an acquisition of
the Company for a price of $17.00 per Share and that Parent would need to
adjust its price per Share accordingly. Lazard Freres indicated that the
$17.00 per Xxxxx proposal contemplated consideration comprised of both cash
and shares of capital stock of the third party. Representatives of DLJ
promptly communicated this information to certain senior managers of Parent,
including Xx. Xxxxxx, and thoroughly discussed with such managers the
situation and alternatives available to Parent. Promptly thereafter, at the
direction of Parent's management, representatives of DLJ informed the Company
through representatives of Lazard Freres that Parent was unwilling to raise
its offer price per Share and emphasized the benefits of an all-cash
transaction to the Company's shareholders. The representatives of DLJ also
emphasized the speed and certainty with which a transaction could be completed
with Parent and that DLJ was prepared to provide a financing commitment letter
with respect to the entire proposed transaction at a price of $16.50 per
Share.
On May 3, 1999, the Parent Board met to discuss the status of the Merger
Agreement and Stockholder Agreements negotiations and the financing
arrangements which had been agreed to in principle by Parent and DLJ. Xxxxxx's
legal and financial advisors were present at this meeting. Xxxxxx's legal
counsel reviewed with the Parent Directors the current terms contained in the
draft agreements, the status of the negotiations with counsel for the Company,
and certain remaining unresolved issues. The DLJ representatives advised the
Parent Board that the Company Board was scheduled to meet the next day (May 4)
to review the proposed transaction and any remaining unresolved issues and
would reconvene the following day (May 5) in Chicago to act upon the proposed
transaction, subject to the resolution of all outstanding issues.
On the afternoon of May 5, 1999, the Parent Board met, at which time the
Company's legal counsel and its financial advisors updated the Parent Board as
to the resolution of those issues which had been outstanding at the May 3
meeting of the Parent Board. The DLJ representatives advised the Parent Board
that the Company Board was meeting simultaneously and would act upon the
Merger Agreement upon being advised that the Merger Agreement had been
approved by the Parent Board. After full discussion, at which time questions
were posed to the Chairman and other members of senior management present in
the meeting, and to Parent's financial
18
and legal advisors, the Parent Board unanimously approved the Offer, the
Merger Agreement, the Stockholder Agreements and the financing arrangements as
specified in the Commitment Letter. Thereafter, Parent was advised that the
Company Board had received a fairness opinion from Lazard Freres and had
authorized the execution of the Merger Agreement and had approved the
Stockholder Agreements and the transactions contemplated thereby and by the
Merger Agreement. Following receipt of such advice, after the close of
business on May 5, 1999, the Merger Agreement was executed and delivered by
Parent, Purchaser and the Company and Parent, Purchaser and the Principal
Stockholders entered into the Stockholder Agreements.
On May 6, 1999, prior to the opening of trading on the New York Stock
Exchange, Parent and the Company issued a joint press release announcing the
execution of the Merger Agreement. A copy of the press release has been filed
with the Commission as an exhibit to the Schedule 14D-1. On May 12, 1999,
pursuant to the terms of the Merger Agreement, Parent and Purchaser commenced
the Offer.
11. Purpose of the Offer and the Merger; Plans for the Company.
General. The purpose of the Offer is to acquire control of, and the entire
equity interest in, the Company. The purpose of the Merger is to acquire all
Shares not beneficially owned by Purchaser following consummation of the
Offer. Upon the consummation of the Merger, the Company will become a wholly
owned subsidiary of Purchaser.
The DGCL requires, among other things, that the adoption of any plan of
merger or consolidation of the Company must be approved by the Company Board
and generally by the holders of a majority of the Company's outstanding voting
securities, unless 90% or more of such securities are owned by one person or
entity as described below. The Company Board has approved the Offer, the
Merger and the Merger Agreement and the transactions contemplated thereby;
consequently, the only additional action of the Company that may be necessary
to effect the Merger is approval by such stockholders if the "short-form"
merger procedure described below is not available.
Certain Effects of the Merger. Stockholders of the Company who sell their
Shares in the Offer will cease to have any equity interest in the Company or
any rights to participate in its earnings and future growth. If the Merger is
consummated, non-tendering stockholders will no longer have an equity interest
in the Company and instead will have only the right to receive cash
consideration pursuant to the Merger Agreement or to exercise statutory
appraisal rights under Section 262 of the DGCL, discussed below. Similarly,
after selling their shares in the offer or the subsequent Merger, stockholders
of the Company will not bear the risk of any decrease in the value of the
Company.
Plans for the Company. It is currently expected that, following
consummation of the Offer, initially the business and the operations of the
Company, except as set forth in this Offer to Purchase, will be continued by
the Company, at the discretion of the Company Board which will consist of a
majority of Parent's representatives, substantially as they are currently
being conducted with such changes as deemed appropriate by such Board. Parent
will continue to evaluate the business and operations of the Company during
the pendency of the Offer and after the consummation of the Offer and the
Merger, and will take such actions as its deems appropriate under the
circumstances then existing. Parent intends to seek additional information
about the Company during this period. Thereafter, Parent intends to review
such information as part of a comprehensive review of the Company's business,
operations, capitalization and management with a view to maximizing the
Company's potential in conjunction with Parent's businesses. It is expected
that the business and operations of the Company will form an important part of
Parent's future business plans.
Except as indicated in this Offer to Purchase, neither Parent nor Purchaser
has any present plans or proposals which relate to or would result in an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation, involving the Company or any of its subsidiaries, a sale or
transfer of a material amount of assets of the Company or any of its
subsidiaries or any material change in the Company's capitalization or
dividend policy or any other material changes in the Company's corporate
structure, business or management.
19
The Merger. In general, under the DGCL and the Company's Certificate of
Incorporation, the Merger requires the approval of the Company Board and the
approval by the holders of a majority of all outstanding Shares.
If Purchaser acquires, through the Offer or otherwise, voting power with
respect to at least a majority of the outstanding Shares (which would be the
case if the Minimum Condition is satisfied and Purchaser were to accept for
payment Shares tendered pursuant to the Offer), Purchaser would have
sufficient voting power to effect the Merger without the vote of any other
stockholders.
Further, the DGCL provides that if the Parent corporation owns 90% or more
of each class of outstanding shares of a Delaware subsidiary, the Delaware
subsidiary may be the surviving corporation of a merger with its Parent
corporation upon a majority vote of each corporation's entire board of
directors, without action or vote by the stockholders of either corporation.
Accordingly, if Purchaser acquires at least 90% or more of the outstanding
Shares pursuant to the Offer or otherwise, Purchaser will be able to approve
the Merger without a vote of the Company's stockholders. In such event,
Purchaser has agreed that it will take all necessary and appropriate action to
cause the Merger to become effective as soon as reasonably practicable after
such acquisition. If Purchaser does not acquire at least 90% of the
outstanding Shares pursuant to the Offer or otherwise, a significantly longer
time may be required to effect the Merger because a vote or the consent of the
Company's stockholders would be required under the DGCL.
Appraisal Rights. No appraisal rights are available in connection with the
Offer. However, if the Merger is consummated, stockholders of the Company at
the time of the Merger will have certain rights under the DGCL to dissent and
demand appraisal of, and to receive payment in cash of the fair value of,
their Shares. Such rights to dissent, if the statutory procedures are complied
with, could lead to a judicial determination of the fair value of the Shares
(excluding any element of value arising from the accomplishment or expectation
of the Merger), required to be paid in cash to such dissenting holders for
their Shares. In addition, such dissenting stockholders would be entitled to
receive payment of a fair rate of interest from the date of consummation of
the Merger on the amount determined to be the fair value of their Shares. In
determining the fair value of the Shares, a Delaware court would be required
to take into account all relevant factors. Accordingly, such determination
could be based upon considerations other than, or in addition to, the market
value of the Shares, including among other things, asset values and earning
capacity of the Company. In Xxxxxxxxxx v. UOP, Inc., the Delaware Supreme
Court stated, among other things, that "proof of value by any techniques or
methods which are generally considered acceptable in the financial community
and otherwise admissible in court" should be considered in an appraisal
proceeding. Therefore, the value so determined in any appraisal proceeding
could be different from the price being paid in the Offer. The Delaware
Supreme Court stated in Xxxxxxxxxx and Xxxxxx v. Xxxxxx X. Xxxx Chemical Corp.
that although the remedy ordinarily available to minority stockholders in a
cash-out merger is the right to appraisal described above, a damages remedy or
injunctive relief may be available if a merger is found to be the product of
procedural unfairness, including fraud, misrepresentation or other misconduct.
Rule 13e-3. The Merger would have to comply with any applicable Federal law
operative at the time. Rule 13e-3 under the Exchange Act is applicable to
certain "going private" transactions. Purchaser does not believe that Rule
13e-3 will be applicable to the Merger. Rule 13e-3 requires, among other
things, that certain financial information concerning the Company, and certain
information relating to the fairness of the proposed transaction and the
consideration offered to minority stockholders in such a transaction, be filed
with the Commission and disclosed to minority stockholders prior to
consummation of the transaction.
12. The Merger Agreement; Certain Other Agreements.
The Merger Agreement. The following is a summary of certain provisions of
the Merger Agreement. The summary is qualified in its entirety by reference to
the Merger Agreement, which has been filed with the Commission as an exhibit
to the Schedule 14D-1 and is incorporated herein by reference. Capitalized
terms used in Sections 12 and 14 but not defined herein or therein shall have
the meanings given to them in the Merger Agreement.
20
The Offer. The Merger Agreement provides that Purchaser will commence the
Offer and that, upon the terms and subject to prior satisfaction or waiver of
the conditions of the Offer, Purchaser will purchase all Shares validly
tendered and not properly withdrawn pursuant to the Offer. The Offer is
conditioned upon, among other things, there being tendered and not withdrawn
prior to the Expiration Date a number of Shares which, together with any
Shares beneficially owned by Parent or Purchaser, represent a majority of
Shares then outstanding on a Fully Diluted Basis. The Merger Agreement
provides that, without the written consent of the Company, Purchaser will not
decrease the Offer Price, change the form of consideration to be paid in the
Offer, reduce the maximum number of Shares to be purchased in the Offer or the
Minimum Condition, impose additional conditions to the Offer or amend any
condition of the Offer in a manner adverse to the holders of Shares.
Additionally, the Merger Agreement provides that if all conditions are not
satisfied or waived prior to the scheduled Expiration Date, Purchaser will
extend the Expiration Date of the Offer from time to time for the shortest
time periods permitted by law and which it reasonably believes are necessary,
until the earlier to occur of (i) such time as such conditions are satisfied
or waived, and (ii) July 15, 1999; and that notwithstanding the prior
satisfaction of all conditions, Purchaser may extend the Offer for up to ten
days after the initial scheduled Expiration Date. Purchaser will, on the terms
and subject to the prior satisfaction or waiver of the conditions of the
Offer, accept for payment and pay for Shares validly tendered and not properly
withdrawn as soon as practicable after expiration of the Offer.
The Merger. Following the consummation of the Offer, the Merger Agreement
provides that, subject to the terms and conditions thereof, and in accordance
with the DGCL, as soon as practicable, Purchaser will be merged with and into
the Company. As a result of the Merger, the separate corporate existence of
Purchaser will cease and the Company will continue as the Surviving
Corporation.
The obligations of each of Parent and Purchaser, on the one hand, and the
Company, on the other hand, to effect the Merger are subject to the
satisfaction on or prior to the Closing Date (as defined in the Merger
Agreement) of each of the following conditions: (i) Purchaser shall have
purchased all Shares validly tendered and not withdrawn pursuant to the Offer;
(ii) if required by applicable law, the Merger shall have been approved and
adopted by the requisite vote of the holders of Shares; (iii) no statute,
rule, regulation, executive order, decree, ruling or injunction shall have
been enacted, entered, promulgated or enforced by any court or other tribunal
or governmental body or authority which prohibits the consummation of the
transactions contemplated by the Merger Agreement substantially on the terms
contemplated thereby; and (iv) any waiting periods applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated.
At the Effective Time of the Merger (i) each issued and outstanding Share
(other than Dissenting Shares, any Shares that are owned by the Company or any
wholly owned subsidiary of the Company, and any Shares owned by Parent or any
wholly owned subsidiary of Parent) will be converted into the right to receive
the Merger Consideration, and (ii) each issued and outstanding share of
capital stock of Purchaser will be converted into one share of common stock of
the Surviving Corporation.
The Company Board. The Merger Agreement provides that upon the purchase and
payment by Parent or Purchaser of Shares representing at least a majority of
the outstanding Shares on a Fully Diluted Basis, Parent shall be entitled to
designate such number of directors (rounded up to the next whole number) on
the Company Board so that the percentage of directors that are Parent's
nominees equals the percentage of outstanding Shares beneficially owned by
Parent and its affiliates; and that the Company shall, at such time, upon the
request of Purchaser, promptly use its best efforts to take all action
necessary to cause such persons designated by Parent to be elected to the
Company Board, either by increasing the size of the Company Board or securing
resignations of incumbent directors, or both. At such time, the Company shall
also cause persons designated by Parent to constitute at least the same
percentage (rounded up to the next whole number) as is on the Company Board of
(i) each committee of the Company Board, (ii) each board of directors (or
similar body) of each subsidiary of the Company and (iii) each committee (or
similar body) of each such subsidiary board of directors.
The Merger Agreement further provides that, notwithstanding the provisions
of the foregoing paragraph, until the Effective Time of the Merger, the
Company Board shall include at least two directors who were
21
directors on the date of the Merger Agreement (the "Independent Directors");
that from and after the time, if any, that Parent's designees constitute a
majority of the Company Board, the affirmative vote of a majority of
Independent Directors shall be required and shall be sufficient to authorize
any termination of the Merger Agreement by the Company, any amendment of the
Merger Agreement requiring action by the Company Board, any extension of time
for the performance of any of the obligations or other acts of Parent or
Purchaser under the Merger Agreement, any waiver of compliance with any of the
agreements or conditions under the Merger Agreement for the benefit of the
Company, any action to seek to enforce any obligation of Parent or Purchaser
under the Merger Agreement and any other action by the Company Board under or
in connection with the Merger Agreement; and that the Independent Directors
shall be appointed as a Special Committee of the Company Board and have full
power and authority solely with respect to the matters set forth in the
previous sentence.
Stockholders' Meeting. Pursuant to the Merger Agreement, the Company will,
if required by applicable law in order to consummate the Merger: (i) duly
call, give notice of, convene and hold a special meeting of its stockholders
(the "Special Meeting") as soon as practicable following the purchase of
Shares by Purchaser pursuant to the Offer for the purpose of considering and
taking action upon the Merger and the adoption of the Merger Agreement; (ii)
prepare and file with the Commission a preliminary proxy or information
statement relating to the Merger and the Merger Agreement and include in any
preliminary or definitive proxy statement or information statement with
respect to the Special Meeting (the "Proxy Statement") the recommendation of
the Company Board that stockholders of the Company vote in favor of the
approval of the Merger Agreement and the transactions contemplated thereby
unless the Company Board determines in good faith, based on advice of its
outside counsel, that not taking any such action is necessary in order for the
Company Board to comply with its obligations or duties to the Company or its
stockholders under applicable law; and (iii) use all reasonable efforts (A) to
obtain and furnish the information required to be included by it in the Proxy
Statement and, after consultation with the Parent and Purchaser, respond
promptly to any comments made by the Commission with respect to the Proxy
Statement and any preliminary version thereof and cause the Proxy Statement to
be mailed to its stockholders at the earliest practicable time following the
expiration or termination of the Offer and (B) obtain the necessary approvals
by its stockholders of the Merger Agreement and the transactions contemplated
thereby unless the Company Board determines in good faith, based on advice of
its outside counsel, that not taking any such action is necessary in order for
the Company Board to comply with its obligations or duties to the Company or
its stockholders under applicable law. Purchaser and Parent have agreed to use
commercially reasonable efforts to cause the Special Meeting to occur within
90 days after the purchase of Shares pursuant to the Offer and Parent has
agreed that it will vote, or cause to be voted, all of the Shares then owned
by it, Purchaser or any of its other subsidiaries and affiliates in favor of
the approval of the Merger and the adoption of the Merger Agreement. If
Purchaser acquires, through the Offer or otherwise, at least a majority of the
outstanding Shares, Purchaser will have sufficient voting power to approve the
Merger, even if no other stockholders vote in favor of the Merger.
The Merger Agreement provides that if Purchaser acquires at least 90% of
the then outstanding Shares, the parties agree to take all necessary and
appropriate action to cause the Merger to become effective, in accordance with
Section 253 of the DGCL, as soon as practicable after such acquisition,
without a meeting of the stockholders of the Company.
Options. Pursuant to the Merger Agreement, each Option granted to the
Company's employees, consultants or directors that is outstanding immediately
prior to the purchase of Shares pursuant to the Offer (irrespective of whether
such Option is then exercisable) shall, on the fifth business day after the
purchase by Purchaser of Shares pursuant to the Offer, be cancelled in
exchange for a single lump sum cash payment equal to the product of (i) the
number of shares of Common Stock subject to such Option and (ii) the excess of
the Offer Price over the exercise price per share of such Option. Subject to
the previous sentence, each Option that is outstanding immediately prior to
the Effective Time, whether or not then vested or exercisable, shall,
effective as of the Effective Time, be cancelled and no payments shall be made
with respect thereto.
Interim Operations. Pursuant to the Merger Agreement, the Company has
agreed that, except as expressly contemplated by the Merger Agreement or
agreed to in writing by Parent, prior to the time the directors of the Parent
constitute a majority of the Company Board, the Company shall, and shall cause
each of its Subsidiaries
22
to, (a) conduct its operations in all material respects according to their
ordinary and usual course of business in substantially the same manner as
conducted prior to the date of the Merger Agreement; (b) use reasonable best
efforts to preserve intact its business organization in all material respects,
keep available the services of its executive officers and key employees as a
group, subject to changes in the ordinary course, and maintain satisfactory
relationships with suppliers, distributors, customers and others having
business relationships with them; (c) confer at such times as Parent may
reasonably request with one or more representatives of Parent to report
material operational matters and the general status of ongoing operations (in
each case to the extent Parent reasonably requires such information) and
consult with Parent regarding material operational decisions; (d) promptly
notify Parent of any emergency or other change in the normal course of its
businesses or in the operation of its properties and of any complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) of any governmental body or authority; (e) not authorize or pay
any dividends on or make any distribution with respect to its outstanding
shares of stock; (f) not, except as otherwise contemplated by the Merger
Agreement or as may be required by applicable law, enter into or amend any
employment, severance or similar agreements or arrangements with any of their
directors or executive officers; (g) not, subject to the provisions described
below under the heading "No Solicitation," authorize, announce an intention to
authorize, or enter into an agreement with respect to, any merger,
consolidation or business combination other than the Merger, any acquisition
of a material amount of assets or securities, any disposition of a material
amount of assets or securities or any release or relinquishment of any
material contract rights, in each case, not in the ordinary course of
business; (h) not propose or adopt any amendments to its corporate charter or
by-laws, except pursuant to the Merger as provided in the Merger Agreement;
(i) not issue any shares of capital stock, except upon exercise of options
previously issued pursuant to existing employee plans, programs or
arrangements and non-employee director plans; (j) not grant, confer or award
any options, warrants, conversion rights or other rights not existing on the
date of the Merger Agreement, to acquire any shares of its capital stock; (k)
not purchase, redeem, or offer to purchase or redeem any shares of its stock
or any securities convertible into or exchangeable for shares of stock, except
for the deemed repurchase of options in accordance with the terms of the
Merger Agreement, or purchases, redemptions and offers to purchase in the
ordinary course of business in connection with employee incentive and benefit
plans, programs or arrangements in existence on the date of the Merger
Agreement; (l) not, except as contemplated by the Merger Agreement or as may
be required by applicable law, amend in any material respect the terms of its
employee benefit plans, programs or arrangements or any severance or similar
agreements or arrangements in existence on the date of the Merger Agreement,
enter into or amend any employment or consulting agreement, adopt or enter
into any new employee benefit plans, programs or arrangements or any severance
or similar agreements or arrangements or increase the base salary of any
person who is a party to a Change of Control Employment Agreement or make any
payments under any benefit plan to any director, employee, independent
contractor or consultant (except in the ordinary course of business and in
amounts and in a manner consistent with past practice or as otherwise required
by law or the provisions of such benefit plan); (m) not (i) enter into any
material loan agreement or incur any indebtedness in excess of an aggregate of
$100,000 or amend any Company credit facility to increase the amount that may
be borrowed thereunder, (ii) make or enter into any agreement or contract for
capital expenditures in excess of $50,000, (iii) enter into any lease for real
property in excess of $50,000 or any lease for personal property in excess of
$20,000, or (iv) enter into any agreement or contract outside of the ordinary
course of business of the Company or any of the Company's subsidiaries that
involves performance of services or delivery of goods or materials by or to
the Company or any of the Company's subsidiaries of an amount or value in
excess of $50,000; (n) not make or change any material Tax election, file any
amendment to any federal income Tax Return unless required by law, enter into
any closing agreement, or settle or compromise any material Tax liability; (o)
not adjust, split, combine or reclassify its capital stock; (p) not enter into
any agreement, understanding or arrangement with respect to the sale or voting
of its capital stock; (q) not create any new subsidiaries; (r) except as
required by the Merger Agreement, not take any action which could reasonably
be expected to adversely affect or delay the ability of any of the parties to
obtain any approval of any governmental or regulatory body required to
consummate the transactions contemplated thereby; (s) not directly or
indirectly sell, transfer, lease, pledge, mortgage, encumber or otherwise
dispose of any material property or assets other than in the ordinary course
of business; (t) not enter into any financial derivative contracts; (u) not
change in any material respect its accounting policies, methods or procedures
except as required by GAAP; (v) except as may
23
be required by the Merger Agreement or applicable law, not do any act or omit
to do any act which would cause a breach of any contract, commitment or
obligation; (w) except as otherwise permitted by the Merger Agreement, not
take any action with the intent of causing the conditions to the Offer set
forth in the Merger Agreement to not be satisfied; (x) not, other than
pursuant to the Merger Agreement, take any action to cause the Common Stock to
cease to be quoted on any of the stock exchanges on which the Common Stock is
now quoted; (y) continue to provide training for employees of the Company and
its subsidiaries commensurate with the training provided by the Company and
its subsidiaries over the past twelve months; (z) subject to the limitations
contained in the Merger Agreement, continue the level of recruiting activity
and process employed by the Company and its subsidiaries over the past twelve
months; (aa) not agree, in writing or otherwise, to take any of the foregoing
actions or take any action which would make any representation or warranty
contained in the Merger Agreement (except for representations and warranties
made as of a specified date) untrue and incorrect in any material respect as
of the Effective Time; (bb) not pay, discharge or satisfy any claim, liability
or obligation (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the ordinary
course of business and consistent with past practice, of liabilities reflected
or reserved against in the March 31, 1999 balance sheet or subsequently
incurred in the ordinary course of business and consistent with past practice;
and (cc) not settle or compromise any pending or threatened suit, action or
claim not covered by insurance (without giving effect to deductibles in
determining whether coverage exists) that is material or which relates to the
Merger Agreement and the transactions contemplated thereby, including the
Offer and the Merger.
No Solicitation. Pursuant to the Merger Agreement: The Company shall not,
and shall not authorize or permit, any of its officers, directors, employees,
attorneys, financial advisors, agents or other representatives or those of any
of its Subsidiaries to, directly or indirectly, (a) solicit, initiate or
knowingly encourage any Takeover Proposal, including without limitation by
disclosure of non-public information, or (b) engage in discussions or
negotiations relating to or accept any Takeover Proposal; provided, however,
that nothing shall prohibit the Company and its Board from (i) taking and
disclosing a position with respect to a tender offer by a third party pursuant
to Rules 14d-9 and 14e-2(a) promulgated by the Commission under the Exchange
Act, or (ii) at any time prior to the purchase of Shares pursuant to the
Offer, engaging in discussions or negotiations with, and furnishing
information (including non-public information) concerning the Company and its
Subsidiaries, businesses, properties or assets to, any third party which makes
a Takeover Proposal (without any solicitation or initiation, directly or
indirectly, by the Company or any of its representatives after the date of the
Merger Agreement) if the Company Board determines in good faith, based on
advice of its outside counsel (who may be its regularly engaged outside
counsel), that the failure to take such action will violate its obligations or
duties to the Company or its stockholders under applicable law, or (iii)
provided the Merger Agreement is terminated as described below in clause (iv)
under the heading "Termination; Fees," accepting a Superior Proposal. Prior to
furnishing information to or entering into discussions or negotiations with
any person, the Company shall receive from such person or entity an executed
confidentiality agreement in reasonably customary form on terms not in the
aggregate materially more favorable to such person or entity than the terms
contained in the Confidentiality Agreement (as defined below). The Company
shall immediately cease and cause to be terminated any existing solicitation,
initiation, encouragement, activity, discussion or negotiation with any person
conducted prior to the date of the Merger Agreement by the Company or any of
its representatives with respect to any Takeover Proposal existing on the date
of the Merger Agreement. The Company agrees not to release any third party
from, or waive any provision of, any standstill agreement to which it is a
party or any confidentiality agreement between it and another person who has
made, or who may reasonably be considered likely to make, or who was given
access in order to consider making, a Takeover Proposal, unless the Company
Board determines in good faith, based on advice of its outside counsel (who
may be its regularly engaged outside counsel), that failure to take such
action will violate its obligations or duties to the Company or its
stockholders under applicable law. The Company shall notify Parent orally and
in writing of any such Takeover Proposal received (including, without
limitation, the terms and conditions of any such proposal and the identity of
the person making it), within 24 hours of the receipt thereof, and shall keep
Parent informed of the general status and any material changes in the terms
and conditions of such Takeover Proposal. The Company agrees to promptly
provide to Parent any information concerning the Company, its subsidiaries,
business, properties or assets furnished to any third party
24
which makes a Takeover Proposal and which has not previously been provided to
Parent. Except as set forth in the Merger Agreement, neither the Company Board
nor any committee thereof shall (i) withdraw or modify, or propose to withdraw
or modify, in a manner adverse to Parent, the approval or recommendation by
the Company Board of the Offer, the Merger Agreement or the Merger, (ii)
approve or recommend, or propose to approve or recommend, any Takeover
Proposal or (iii) enter into any agreement with respect to any Takeover
Proposal. Subject to compliance with all of the applicable provisions of the
Merger Agreement, prior to the time of acceptance for payment of Shares
pursuant to the Offer, the Company Board may withdraw or modify its approval
or recommendation of the Offer, the Merger Agreement or the Merger, approve or
recommend a Superior Proposal, or enter into an agreement with respect to a
Superior Proposal, in each case at any time after the third business day
following Parent's receipt of written notice (including by facsimile) from the
Company advising Parent that the Company Board has received a Superior
Proposal which it intends to accept, specifying the material terms and
conditions of such Superior Proposal and identifying the person making such
Superior Proposal, but only if the Company shall have caused its financial and
legal advisors to negotiate with Parent to make such adjustments to the terms
and conditions of this Agreement as would enable the Company to proceed with
the transactions contemplated hereby on such adjusted terms.
Termination; Fees. The Merger Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time, whether before or after
approval of the stockholders of the Company, (i) by mutual written consent of
Parent and the Company; (ii) by (a) either the Company or Parent if Shares
have not been purchased pursuant to the Offer on or before July 15, 1999 and
(b) the Company if after 90 days following the commencement of the Offer the
conditions to the Offer have not been satisfied or waived and Purchaser shall
not have elected to extend the Offer; provided, that such right to terminate
pursuant to clause (ii) will not be available to any party whose failure in
any material respect to fulfill its obligations under the Merger Agreement
proximately contributed to, or resulted in, the failure of Parent or Purchaser
to purchase the Shares pursuant to the Offer on or before such date; (iii) by
either the Company or Parent if (a) a statute, rule, regulation or executive
order shall have been enacted, entered or promulgated prohibiting the purchase
of Shares pursuant to the Offer or the consummation of the Merger
substantially on the terms contemplated by the Merger Agreement or (b) an
order, decree, ruling or injunction shall have been entered permanently
restraining, enjoining or otherwise prohibiting the purchase of Shares
pursuant to the Offer or the consummation of the Merger substantially on the
terms contemplated by the Merger Agreement and such order, decree, ruling or
injunction shall have become final and non-appealable; provided, that the
party seeking to terminate the Merger Agreement shall have used its reasonable
best efforts to remove such injunction, order or decree; (iv) by the Company
prior to the purchase of Shares pursuant to the Offer if the Company Board
determines in good faith based upon advice of its outside counsel that (a) a
Takeover Proposal constitutes a Superior Proposal and (b) failure to accept
such Superior Proposal will violate its obligations or duties to the Company
or the Company's stockholders under applicable law, provided, that the Merger
Agreement shall not terminate unless (Y) the Company has provided Parent with
two business days' prior written notice of its intention to accept such
Superior Proposal, together with a detailed description of the terms and
conditions of such Superior Proposal and (Z) simultaneously with such
termination the Company enters into a definitive acquisition, merger or
similar agreement to effect such Superior Proposal and pays the Termination
Fee; (v) by either the Company or Parent prior to the purchase of any Shares
pursuant to the Offer if the other party shall have breached, or failed to
comply with, in any material respect any of its obligations under the Merger
Agreement or any representation or warranty made by such other party shall
have been untrue when made or as of the time of such termination as if made on
and as of such time (except for representations and warranties made as of a
specified date, which need be true only as of the specified date), provided
such breach, failure or misrepresentation is not cured within ten days after
notice thereof from the other party or two business days prior to the date on
which the Offer expires, and with respect to any representation or warranty
not qualified by "Material Adverse Effect," such breaches, failures or
misrepresentations, individually or in the aggregate, result or are reasonably
likely to result in a Material Adverse Effect on the Company or Parent, as the
case may be; (vi) by Parent if the Company Board or any committee of the
Company Board, (a) shall withdraw, modify or change in any adverse manner
(including by amendment of the Schedule 14D-9) or fail to reconfirm upon the
request of Parent its approval or recommendation of the Merger Agreement, the
Offer or the Merger, (b) shall approve or recommend any Takeover Proposal,
other than
25
by Parent or an affiliate of Parent, or (c) shall resolve to take any of the
actions specified in clause (a) or (b); (vii) by the Company if Purchaser
fails to commence the Offer on or prior to five business days following the
date of initial public announcement of the Offer, provided that the Company
may not terminate the Merger Agreement pursuant to this provision if the
Company is at such time in breach in any material respect of its obligations
under the Merger Agreement; or (viii) by either of the Company or Parent if
the Offer shall have been terminated, or the Offer has expired without any
Shares being purchased therein; provided, however, that the right to terminate
the Merger Agreement pursuant to this provision shall not be available to any
party whose failure to fulfill any obligation under the Merger Agreement has
been the cause of, or resulted in, the termination of the Offer or the failure
of Parent or Purchaser, as the case may be, to purchase Shares pursuant to the
Offer on or prior to such date. Notwithstanding the foregoing, no termination
by the Company shall be effective pursuant to clause (iv) above under
circumstances in which a Termination Fee would be payable by the Company
unless concurrently with such termination, such Termination Fee is paid in
full by the Company in accordance with the provisions of the Merger Agreement.
Pursuant to the Merger Agreement, if (i) prior to the termination of the
Merger Agreement any person shall have commenced, publicly proposed or
communicated to the Company a Takeover Proposal and (a) the Minimum Condition
shall not have been satisfied, (b) the Merger Agreement shall have been
terminated pursuant to the provisions described in clause (ii), (iii), (v) or
(vii) of the preceding paragraph and (c) prior to the first anniversary of
such termination, the Company shall consummate with any third party any
transaction of the type described in the definition of the term "Takeover
Proposal"; or (ii) the Merger Agreement is terminated by the Company or Parent
pursuant to clause (iv) or (vi), respectively, of the preceding paragraph,
then in such event the Company shall pay Parent a termination fee of $4.75
million (the "Termination Fee"), which amount shall be paid by wire transfer
of immediately available funds to an account designated by Parent.
Indemnification. Pursuant to the Merger Agreement, for three years after
the Effective Time, the Parent and the Surviving Corporation (or any successor
to the Surviving Corporation) will indemnify the present and former officers
and directors of the Company and its subsidiaries with respect to matters
occurring at or prior to the Effective Time to the full extent permitted under
the DGCL and the terms of the Company's charter, by-laws and indemnification
agreements, each as in effect as of the date of the Merger Agreement; and for
three years from the Effective Time, Parent shall maintain in effect the
Company's directors' and officers' liability insurance policies and shall
purchase such policy at or prior to the Closing Date.
Representations and Warranties. Pursuant to the Merger Agreement, the
Company has made customary representations and warranties to Parent and
Purchaser with respect to, among other things, its organization,
capitalization, authority, financial statements, need for consents or
approvals, public filings, conduct of business, employee benefit plans,
intellectual property, employment matters, compliance with laws, tax matters,
insurance, litigation, title to properties, environmental matters, vote
required to approve the Merger Agreement, undisclosed liabilities, information
to be contained in the Proxy Statement, the opinion of its financial advisor
and significant vendor arrangements.
Pursuant to the Merger Agreement, Parent and Purchaser have made
substantially similar representations and warranties as to their organization,
authority, need for consents or approvals and information to be contained in
the Proxy Statement.
Confidentiality Agreement. Pursuant to the Confidentiality Agreement
entered into on April 22, 1999 by Parent and the Company (the "Confidentiality
Agreement"), the Company and Parent agreed to provide, among other things, for
the confidential treatment of their discussions regarding the Offer and the
Merger and the exchange of certain confidential information concerning the
Company. The Confidentiality Agreement is incorporated herein by reference and
a copy of it has been filed with the Commission as an exhibit to the Schedule
14D-1.
Stockholder Agreements. The following is a summary of certain provisions of
the Stockholder Agreements. This summary is not a complete description of the
terms and conditions of the Stockholder Agreements and is qualified in its
entirety by reference to the full text of the Stockholder Agreements, the form
of which has been
26
filed with the Commission as an exhibit to the Schedule 14D-1 and incorporated
herein by reference. Capitalized terms not otherwise defined below shall have
the same meaning set forth in the Merger Agreement or the Stockholder
Agreements, as the context may require. The Stockholder Agreements may be
examined, and copies obtained, as set forth in Section 8 of this Offer to
Purchase.
As a condition and inducement to Parent's and Purchaser's entering into the
Merger Agreement and incurring the liabilities therein, the Principal
Stockholders, who collectively have voting power and dispositive power with
respect to an aggregate of 1,610,500 Shares and hold options to acquire 9,998
Shares, representing approximately 18% of the outstanding Shares on a Fully
Diluted Basis, concurrently with the execution and delivery of the Merger
Agreement entered into the Stockholder Agreements with Parent and Purchaser.
Pursuant to the Stockholder Agreements, the Principal Stockholders have
agreed, among other things, to grant Parent an irrevocable proxy for the term
of the Stockholder Agreements with respect to the voting of their Shares in
favor of the Merger and against any other Takeover Proposal with respect to
such Shares upon the terms and subject to the conditions set forth therein.
The Principal Stockholders have also agreed to tender their Shares upon the
direction of Purchaser and not to withdraw their Shares so long as the
Stockholder Agreements remain in effect. The Stockholders Agreements will
terminate on the earlier of (i) the Effective Time and (ii) the termination of
the Merger Agreement.
During the period ("Restricted Period") from May 5, 1999 through and
including the earlier of (i) the Effective Time, and (ii) the termination of
the Stockholder Agreements, each Principal Stockholder has agreed not to: (A)
except pursuant to the terms of the Stockholder Agreements and except for the
tender of Shares in the Offer, offer for sale, sell, transfer, tender, pledge,
encumber, assign or otherwise dispose of, or enter into any contract, option
or other arrangement to do so; (B) except pursuant to the terms of the
Stockholder Agreements, grant any proxies (other than proxies relating to the
election of management's slate of directors at an annual meeting of the
Company's stockholders, and other routine matters which would not require the
filing of a preliminary proxy statement under Rule 14a-6(a) of the Exchange
Act), or powers of attorney, deposit any of his Shares in a voting trust or
enter into a voting agreement with respect to any of their Shares; or (C) take
any action that would make any representation or warranty contained in the
Stockholder Agreements untrue or incorrect or have the effect of impairing the
ability of the Principal Stockholder to perform his obligations under the
applicable Stockholder Agreement or preventing or delaying the consummation of
any of the transactions contemplated by the applicable Stockholder Agreement
and the Merger Agreement.
Each Principal Stockholder has agreed to unconditionally release, as of the
Effective Time, any and all claims and causes of action that he may have
against the Company or any of its Subsidiaries or any present or former
director, officer, employee or agent of the Company or any of its Subsidiaries
resulting from any act, omission or occurrence prior to the Effective Time;
provided, however, that such release not shall apply to any claim or cause of
action insofar as it relates to any entitlement to indemnification or to
compensation or benefits earned or accrued by or for the benefit of such
Principal Stockholder prior to the Effective Time in respect of services
performed by such Principal Stockholder to the Company as a director, officer,
consultant or employee of the Company.
Each Principal Stockholder has agreed that, in his capacity as a
stockholder, he will not respond to any inquiries or the making of any
proposal by any person or entity (other than Parent or any affiliate of
Parent) concerning any business combination, merger, tender offer, exchange
offer, sale of assets, sale of shares of capital stock or debt securities or
similar transactions involving the Company or any Subsidiary, division or
operating or principal business unit of the Company. If such Principal
Stockholder, in the capacity as a stockholder, receives any such inquiry or
proposal, then the Principal Stockholder has agreed to promptly inform Parent
of the existence thereof. Each Principal Stockholder, in the capacity as a
stockholder, has agreed to immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties previously
conducted with respect to any of the foregoing.
Certain Other Agreements. Parent has agreed to cause the Company to
continue to employ Xxxx X. Xxxxxxxxx for the remainder of calendar year 1999
at his current annual base salary and benefits, including participation in the
Company's 1999 Senior Management Incentive Plan, pursuant to an employment
agreement to be executed
27
as of the Effective Time. The agreement will also contain a covenant that Xx.
Xxxxxxxxx will not compete with the Company for a period of one year after the
termination of his employment. Certain other officers and key management
employees of the Company, including its Chief Operating Officer and Chief
Financial Officer, will be offered employment agreements for a period of two
years at the salary, with respect to each of them, equal to such employee's
salary in effect at the Effective Date.
Xx. Xxxxxxx Xxxxxxxxx has an understanding with the Company, which has been
approved by the Parent, that he will provide consulting services to the
Company for the remainder of calendar year 1999 in exchange for a consulting
fee of $12,000 per month.
13. Sources and Amount of Funds.
The amount required to purchase the Shares validly tendered pursuant to the
Offer, consummate the Merger, and pay the costs and expenses related to the
Offer and the Merger is estimated to be approximately $157.2 million. Funds
required in connection with the Offer and the Merger will be obtained from (i)
not less than $8.7 million in cash on hand of the Parent, (ii) the proceeds of
a term loan (the "Term Loan") of $70 million to be provided by DLJ Capital
Funding, Inc. ("DLJ Capital Funding") and (iii) the net proceeds of Parent's
ten year senior subordinated notes (the "Parent Notes") in the aggregate
principal amount of $100 million, to be privately placed with certain
institutional investors. Such funds will also be used for the repayment in
full of all amounts owing under Xxxxxx's current revolving credit arrangement
with an unrelated banking institution and repayment in full of certain
existing indebtedness of the Company.
In addition to the Term Loan to be provided by it, DLJ Capital Funding will
also provide Parent with a revolving credit facility (the "Revolving Credit
Facility") of up to $50 million to be used by Parent, for working capital and
general corporate purposes. Funds to be provided under the Revolving Credit
Facility may not be used by Parent in connection with the Offer or the Merger,
other than in payment of expenses. DLJ Capital Funding will syndicate the Term
Loan and the Revolving Facility (together, the "Credit Facility") among
various lenders pursuant to customary industry practices.
If the contemplated private placement of the Parent Notes has not been
completed at the time the Offer is completed, then DLJ Bridge Finance, Inc.,
an affiliate of DLJ, will purchase from Parent up to $100 million in senior
subordinated increasing rate notes (the "Bridge Notes") the proceeds of which
will be used to complete the Offer and the Merger pending completion of such
private placement of the Parent Notes.
Parent has entered into a commitment letter (the "Commitment Letter") with
DLJ Capital Funding and DLJ Bridge Finance to provide the Term Loan and the
Revolving Credit Facility and, if necessary, to purchase the Bridge Notes, all
upon the terms and subject to the conditions set forth therein.
Pursuant to the Commitment Letter, the Term Loan will have a term of six
years with quarterly amortization resulting in aggregate annual principal
payments as follows: (i) $7.0 million during the second year thereof, (ii)
$10.5 million during the third year thereof, (iii) $14.0 million during the
fourth year thereof, (iv) $17.5 million during the fifth year thereof, and (v)
$21.0 million during the sixth year thereof. The Term Loan and the Revolving
Credit Facility will bear interest, at Parent's option, at reserve-adjusted
LIBOR or the base rate, plus, in each case, a margin which will initially be
2.75% and 1.75% per annum, respectively, for the six-month period following
the closing and which will thereafter be based on the ratio of consolidated
total debt to consolidated earnings before interest, taxes, depreciation and
amortization (EBITDA) of the Parent and its subsidiaries as determined from
time to time.
The Term Loan and the Revolving Credit Facility will contain certain
representations and warranties, certain negative and affirmative covenants,
certain conditions and events of default which are customarily required for
similar financings. Such covenants will include restrictions and limitations
on dividends and stock redemptions and the redemption and/or prepayment of
other debt, capital expenditures, leases, incurrence of debt, liens,
investments, transactions with affiliates, acquisitions, mergers,
consolidations and asset sales. Furthermore, Parent will be required to
maintain compliance with certain customary financial covenants. The terms of
the
28
Credit Facility will require Parent to grant a security interest in all
existing and after-acquired property of Parent, including, without limitation,
a security interest in all accounts receivable, inventory, equipment,
intellectual property and other personal property and all real property
interests, and the pledge of the capital stock of all U.S.-based subsidiaries
of Parent and 66% of the capital stock of its foreign subsidiaries.
The Credit Facility will be guaranteed by all direct and indirect
subsidiaries of Parent (the "Guarantors"). The Guarantors shall secure their
obligations with all of the existing and after-acquired property of
Guarantors.
Parent has agreed to pay the reasonable costs and expenses arising in
connection with the commitment letter, the financing agreements and the
syndication of the credit facilities and has also agreed to pay financing,
commitment, annual and other fees customary for commitments of the type
provided for in the Commitment Letter.
Parent and Purchaser anticipate that indebtedness incurred through the
above described borrowings in connection with the Offer and Merger will be
repaid from a number of possible sources, which may include, but may not be
limited to, funds generated internally by Parent and its subsidiaries, bank
financing, and/or the public or private sale of debt or equity securities. No
decision has been made concerning the method Parent and Purchaser will employ
to repay such indebtedness. Such decision will be made based on review from
time to time of the advisability of particular actions, as well as on
prevailing interest rates and financial and other economic conditions and such
other factors as Parent and Purchaser may deem appropriate.
14. Certain Conditions of the Offer.
Annex A to the Merger Agreement provides that notwithstanding any other
provision of the Offer, and in addition to (and not in limitation of)
Purchaser's rights to extend the Offer under certain circumstances (subject to
the provisions of the Merger Agreement), Purchaser shall not be required to
accept for payment or, subject to the applicable rules and regulations of the
Commission, pay for, and may delay the acceptance for payment of or, subject
to the applicable rules and regulations of the Commission, payment for, any
Shares tendered pursuant to the Offer, and may terminate the Offer and not
accept for payment any Shares, if (x) any applicable waiting period under the
HSR Act has not expired or terminated prior to the expiration of the Offer,
(y) the Minimum Condition has not been satisfied or (z) at any time on or
after the date of the Merger Agreement and before the time of acceptance of
Shares pursuant to the Offer, any of the following events shall have occurred:
(a) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated, or deemed applicable,
pursuant to an authoritative interpretation by or on behalf of a
Governmental Entity, to the Offer or the Merger, that (i) prohibits or
imposes any material limitations on Parent's or Purchaser's ownership or
operation (or that of any of their respective subsidiaries or affiliates)
of all or a portion of their or the Company's businesses or assets, or to
compel Parent or Purchaser or their respective subsidiaries and affiliates
to dispose of or hold separate any portion of the business or assets of the
Company or Parent and their respective subsidiaries, which prohibition,
limitation, disposition or hold separate obligation could reasonably be
expected to have a Material Adverse Effect on Parent, (ii) restrains or
prohibits the making or consummation of the Offer or the Merger or the
performance of any of the other transactions contemplated by the Merger
Agreement, (iii) imposes material limitations on the ability of Purchaser,
or renders Purchaser unable, to accept for payment, pay for or purchase
some or all of the Shares pursuant to the Offer and the Merger, or (iv)
imposes material limitations on the ability of Purchaser or Parent
effectively to exercise full rights of ownership of the Shares, including,
without limitation, the right to vote the Shares purchased by it on all
matters properly presented to the Company's stockholders; or
(b) (i) the Company Board (or any committee thereof) shall have
withdrawn, modified or changed in any adverse manner to Parent and
Purchaser or failed to reconfirm upon the request of Parent, its approval
or recommendation of the Offer, the Merger, or the Merger Agreement, or
shall have endorsed, approved or recommended any other Takeover Proposal or
(ii) the Company shall have entered into any agreement with respect to any
Superior Proposal pursuant to the provision described in clause (iv) under
the heading "Termination; Fees" in Section 12 hereof; or
29
(c) the representations and warranties of the Company set forth in the
Merger Agreement shall not be true and correct, in each case (i) as of the
date referred to in any representation or warranty which addresses matters
as of a particular date, or (ii) as to all other representations and
warranties, as of the date of the Merger Agreement and as of the scheduled
expiration of the Offer, and with respect to any representations and
warranties not qualified by "Material Adverse Effect," unless the
inaccuracies under such representation and warranties, taking all the
inaccuracies under all such representations and warranties together in
their entirety, could not, individually or in the aggregate, result in a
Material Adverse Effect on the Company; or
(d) the Company shall have failed to perform any obligation or to comply
with any agreement or covenant to be performed or complied with by it under
the Merger Agreement other than any failure which could not, either
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company; or
(e) the Merger Agreement shall have been terminated by the Company or
Parent or Purchaser in accordance with its terms or Parent or Purchaser
shall have reached an agreement or understanding in writing with the
Company providing for termination or amendment of the Offer or delay in
payment for the Shares; which, in the reasonable judgment of Parent and
Purchaser, in any such case, and regardless of the circumstances giving
rise to any such conditions, makes it inadvisable to proceed with the Offer
and/or with such acceptance for payment of or payment for Shares; or
(f) there shall have been an event, occurrence, development, or state of
circumstances or facts that is reasonably likely to have a Material Adverse
Effect upon the Company;
(g) any person or "group" (as defined in Section 13(d)(3) of the
Exchange Act), other than Parent, Purchaser, any affiliate of either of
them, or any group of which any of them is a member, shall have acquired or
commenced a tender or exchange offer to acquire beneficial ownership (as
determined pursuant to Rule 13d-3 promulgated under the Exchange Act) of
20% or more of the Shares; or
(h) there shall have occurred and be continuing (1) any general
suspension of trading in, or limitation on prices for, securities on the
New York Stock Exchange, Inc., or any material disruption or material
adverse change in the financial or capital markets generally or for
syndicated bank credits or high yield securities similar to those of the
Senior Facilities or Bridge Notes referred to in the Commitment Letter, (2)
the declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States (whether or not mandatory), (3) the
commencement of a war, armed hostilities or other international and
national calamity directly or indirectly involving the United States and
having had or being reasonably likely to have a Material Adverse Effect or
would restrain, prohibit, or delay beyond the Final Termination Date the
consummation of the Offer, or (4) in the case of any of the situations
described in clauses (1) through (3) inclusive existing at the date of the
Merger Agreement, a material acceleration, escalation or worsening thereof.
Annex A provides that the foregoing conditions (other than the Minimum
Condition) are for the sole benefit of Parent and Purchaser and, subject to
the Merger Agreement, may be asserted by Parent or Purchaser regardless of the
circumstances giving rise to such condition or may be waived by Parent or
Purchaser in whole or in part at any time and from time to time in its sole
discretion; and that the failure by Parent or Purchaser at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
15. Certain Legal Matters.
Except as described in this Section 15, based on information provided by
the Company, none of the Company, Purchaser or Parent is aware of any license
or regulatory permit that appears to be material to the business of the
Company and its subsidiaries, taken as a whole, that might be adversely
affected by Purchaser's acquisition of Shares (and the indirect acquisition of
the stock of the Company's subsidiaries) as contemplated herein or of any
approval or other action by a domestic or foreign governmental, administrative
or regulatory agency or authority that would be required or desirable for the
acquisition and ownership of the Shares (and the
30
indirect acquisition of the stock of the Company's subsidiaries) by Purchaser
as contemplated herein. Should any such approval or other action be required
or desirable, Purchaser and Parent presently contemplate that such approval or
other action will be sought, except as described below under "State Takeover
Laws." While, except as otherwise described in this Offer to Purchase,
Purchaser does not presently intend to delay the acceptance for payment of or
payment for Shares tendered pursuant to the Offer pending the outcome of any
such matter, there can be no assurance that any such approval or other action,
if needed, would be obtained, or would be obtained without substantial
conditions, or that failure to obtain any such approval or other action might
not result in consequences adverse to the Company's business or that certain
parts of the Company's business might not have to be disposed of or other
substantial conditions complied with in the event that such approvals were not
obtained or such other actions were not taken in order to obtain any such
approval or other action. If certain types of adverse action are taken with
respect to the matters discussed below, Purchaser could decline to accept for
payment or pay for any Shares tendered. See Section 14 for certain conditions
to the Offer, including conditions with respect to governmental actions.
State Anti-Takeover Laws. The Company is incorporated under the laws of the
State of Delaware. In general, Section 203 of the DGCL prevents an "interested
stockholder" (e.g., a person who owns or has the right to acquire 15% or more
of a corporation's outstanding voting stock) from engaging in a "business
combination" (defined to include mergers and certain other transactions) with
a Delaware corporation for a period of three years following the time such
person became an interested stockholder unless, among other things, the
corporation's board of directors approves such business combination or the
transaction in which the interested stockholder becomes such prior to the time
the interested stockholder becomes such. The provisions of Section 203 of the
DGCL are not applicable to any of the transactions contemplated in the Merger
Agreement or the Stockholder Agreements because the Merger Agreement, the
Stockholder Agreements and the transactions contemplated thereby were approved
by the Board of Directors of the Company, for the purposes of Section 203 of
the DGCL, prior to the execution thereof. A number of other states have
adopted laws and regulations that purport to be applicable to attempts to
acquire securities of corporations which are incorporated, or have substantial
assets, stockholders, principal executive offices or principal places of
business, or whose business operations otherwise have substantial economic
effects in such states. In Xxxxx x. 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 may, as a matter of corporate law and, in particular, with
respect to those aspects of corporate law concerning corporate governance,
constitutionally disqualify a potential acquiror from voting on the affairs of
a target corporation without the prior approval of the remaining presenting
stockholders. The state law before the Supreme Court was by its terms
applicable only to corporations that had a substantial number of stockholders
in the state and were incorporated there.
Except as described above with respect to Section 203 of the DGCL,
Xxxxxxxxx has not attempted to comply with the takeover laws of any other
state. Should any person seek to apply any state takeover law, Purchaser will
take such action as then appears desirable, which may include challenging the
validity or applicability of any such statute in appropriate court
proceedings. In the event it is asserted that one or more state takeover laws
are applicable to the Offer or the Merger, and an appropriate court does not
determine that such law or laws are inapplicable or invalid as applied to the
Offer, Purchaser might be required to file certain information with, or
receive approvals from, the relevant state authorities. In addition, if
enjoined, Purchaser might be unable to accept for payment any Shares tendered
pursuant to the Offer, or be delayed in continuing or consummating the Offer
and the Merger. In such case, Purchaser may not be obligated to accept for
payment any Shares tendered. See Section 14.
The Company and certain of its subsidiaries conduct business in a number of
other states throughout the United States, some of which have enacted takeover
laws and regulations. Neither Parent nor Purchaser knows whether any or all of
these takeover laws and regulations will by their terms apply to the Offer,
and, except as set forth above, neither Parent nor Purchaser has currently
complied with any other state takeover statute or regulation. Purchaser
reserves the right to challenge the applicability or validity of any state law
purportedly
31
applicable to the Offer and nothing in this Offer to Purchase or any action
taken in connection with the Offer is intended as a waiver of such right. If
it is asserted that any state takeover statute is applicable to the Offer and
an appropriate court does not determine that it is inapplicable or invalid as
applied to the Offer, Purchaser might be required to file certain information
with, or to receive approvals from, the relevant state authorities, and
Purchaser might be unable to accept for payment or pay for Shares tendered
pursuant to the Offer, or may be delayed in consummating the Offer. In such
case, Purchaser may not be obligated to accept for payment or pay for any
Shares tendered pursuant to the Offer. See Section 14.
Antitrust. The Offer and the Merger are subject to the HSR 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 (the "Antitrust Division") and the Federal Trade
Commission (the "FTC") and certain waiting period requirements have been
satisfied.
Parent and the Company expect to file their Notification and Report Forms
with respect to the Offer under the HSR Act in the near future. The waiting
period under the HSR Act with respect to the Offer will expire at 11:59 p.m.,
New York City time, on the 15th day after the date Parent'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 Parent or the Company. 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 Parent with
such request. Only one extension of the waiting period pursuant to a request
for additional information is authorized by the HSR Act. Thereafter, such
waiting period may be extended only by court order or with the consent of
Parent. 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. Purchaser will not accept for payment Shares tendered pursuant to
the Offer unless and until the waiting period requirements imposed by the HSR
Act with respect to the Offer have been satisfied. See Section 14.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as Purchaser's acquisition of Shares
pursuant to the Offer and the Merger. At any time before or after Purchaser's
acquisition of Shares, the Antitrust Division or the FTC could take such
action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the acquisition of Shares
pursuant to the Offer or otherwise or seeking divestiture of Shares acquired
by Purchaser or divestiture of substantial assets of Parent or its
subsidiaries. Private parties, as well as state governments, may also bring
legal action under the antitrust laws under certain circumstances. Based upon
an examination of information provided by the Company relating to the
businesses in which Parent and the Company are engaged, Parent and Purchaser
believe that the acquisition of Shares by Purchaser will not violate the
antitrust laws. Nevertheless, there can be no assurance that a challenge to
the Offer or other acquisition of Shares by Purchaser on antitrust grounds
will not be made or, if such a challenge is made, of the result. See Section
14 for certain conditions to the Offer, including conditions with respect to
injunctions and certain governmental actions.
Federal Reserve Board Regulations. Regulations G, U and X (the "Margin
Regulations") of the Federal Reserve Board restrict the extension or
maintenance of credit for the purpose of buying or carrying margin stock,
including the Shares, if the credit is secured directly or indirectly by
margin stock. Such secured credit may not be extended or maintained in an
amount that exceeds the maximum loan value of all the direct and indirect
collateral securing the credit, including margin stock and other collateral.
As described in Section 13 of this Offer to Purchase, the financing of the
Offer will not be directly or indirectly secured by the Shares or other
securities which constitute margin stock. Accordingly, all financing for the
Offer will be in full compliance with the Margin Regulations.
32
16. Fees and Expenses.
Except as set forth below, neither Parent nor Purchaser will pay any fees
or commissions to any broker, dealer or other person for soliciting tenders of
Shares pursuant to the Offer.
Xxxxxx has engaged DLJ to act as its financial advisor in connection with
the Offer and the Merger. Parent will pay DLJ customary compensation for its
financial advisory services in connection with the Offer and Merger. Parent
has agreed to reimburse DLJ for all reasonable out-of-pocket fees, expenses
and costs, including reasonable fees and expenses of legal counsel, and to
indemnify DLJ and certain related persons against certain liabilities and
expenses in connection with the Offer and Merger, including certain
liabilities under the federal securities laws.
Purchaser and Parent have retained X.X. Xxxx & Co., Inc. to serve as the
Information Agent and IBJ Whitehall Bank & Trust Company to serve as the
Depositary in connection with Offer. The Information Agent may contact holders
of Shares by personal interview, mail, telephone, telex and other methods of
electronic communication and may request brokers, dealers, commercial banks,
trust companies and other nominees to forward the Offer materials to
beneficial holders. The Information Agent and the Depositary will each receive
reasonable and customary compensation for their services, be reimbursed for
certain reasonable out-of-pocket expenses and be indemnified against certain
liabilities in connection with their services, including certain liabilities
and expenses under the federal securities laws.
17. Miscellaneous.
Purchaser is not aware of any jurisdiction where the making of the Offer is
prohibited by any administrative or judicial action pursuant to any valid
state statute. If Purchaser becomes aware of any valid state statute
prohibiting the making of the Offer or the acceptance of the Shares pursuant
thereto, Purchaser will make a good faith effort to comply with such state
statute. If, after such good faith effort, Purchaser cannot comply with any
such state statute, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of Shares in such state. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made
on behalf of Purchaser by the Dealer Manager or one or more registered brokers
or dealers which are licensed under the laws of such jurisdiction.
No person has been authorized to give any information or make any
representation on behalf of Parent, Purchaser or the Company not contained in
this Offer to Purchase or in the Letter of Transmittal and, if given or made,
such information or representation must not be relied upon as having been
authorized. Neither the delivery of this Offer to Purchase nor any purchase
pursuant to the Offer, shall, under any circumstances, create any implication
that there has been no change in the affairs of Parent, Purchaser or the
Company since the date as of which information is furnished or the date of
this Offer to Purchase.
Parent and Purchaser have filed with the Commission a Schedule 14D-1,
together with exhibits, pursuant to Rule 14d-3 of the General Rules and
Regulations under the Exchange Act, furnishing certain additional information
with respect to the Offer, and may file amendments thereto. In addition, the
Company has filed with the Commission a Solicitation/Recommendation Statement
on Schedule 14D-9 (including exhibits) pursuant to Rule 14d-9 under the
Exchange Act. Such statements and any amendments thereto, including exhibits,
may be inspected at, and copies may be obtained from, the same places and in
the same manner as set forth in Section 8 (except that such material will not
be available at the regional offices of the Commission).
SY Acquisition, Inc.
May 12, 1999
33
SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE
OFFICERS OF PARENT AND PURCHASER
1. Directors and Executive Officers of Parent. Set forth below is the name,
current business address, citizenship and the present principal occupation or
employment and material occupations, positions, offices or employments for the
past five years of each director and executive officer of Parent.
Unless otherwise indicated, each person identified below is employed by
Xxxxxx. The principal address of Parent and, unless otherwise indicated below,
the current business address for each individual listed below is 0000 Xxxxxxx
Xxxxxxxxxx Xxxxx, Xx. Xxxxx, Xxxxxxxx 00000. Directors are identified by an
asterisk. Unless otherwise indicated, each such person is a citizen of the
United States.
Name and Current Present Principal Occupation or Employment;
Business Address Material Positions Held During the Past Five Years
*Xxxxxxxx X. Xxxxxx............ Chairman of the Board and Chief Executive Officer of
Parent for more than the last five years and President of
Parent until December 1995; Director of Top Air
Manufacturing, Inc.
*Xxxxxx X. Xxxxxx.............. Attorney-at-law; Chairman of the law firm of Gallop,
Xxxxxxx & Xxxxxx, X.X., for more than the last five
years; Director of Data Research Associates, Inc.
*X. Xxx Xxxxx.................. Chairman of the Board of Xxxxx Xxxxxxx & Co., L.P., a
merchant banking company, for more than the last five
years; Director of Xxxxxxx Xxxxx, Inc., Electro Rent
Corporation, Hanover Direct, Inc., Xxxxx Xxxxxx Toys,
Inc., National Beverage Corp., Top Air Manufacturing,
Inc. and Union Planters Corporation.
*Xxxxxx X. Xxxxx............... Chairman Emeritus of Deutsche Financial Services, a
commercial finance company, since June 30, 1998; prior
thereto, Vice Chairman of Deutsche Financial Services,
since January 1997; prior thereto, President and Chief
Executive Officer of Deutsche Financial Services, since
May 1995; prior thereto, President of ITT Commercial
Finance Corporation, for more than five years.
*Xxxxx X. Xxxxxxxx............. Retired. Prior to September 1, 1989, President and Chief
Executive Officer of Graybar Electric Company, Inc., a
distributor of electrical and telecommunications
equipment, for more than the last five years.
*Xxx X. Xxxxxxxx............... Chairman emeritus and consultant to Laclede Gas Company,
a retail natural gas distribution public utility, since
January 1994; prior thereto, Chairman of the Board and,
until August 1991, Chief Executive Officer of Laclede Gas
Company, for more than the last five years; Director of
CPI Corporation, Furniture Brands International and DT
Industries, Inc.
*Xxxxxx X. Xxxxxxx............. President of Woodsmiths, Incorporated, a manufacturer of
table tops, for more than the last five years.
*Xxxxx Xxxxxxxxx............... Broker-International Monetary Market, Chicago Mercantile
Exchange, for more than the last five years.
I-1
Name and Current Present Principal Occupation or Employment;
Business Address Material Positions Held During the Past Five Years
*Xxxxxx X. Xxxxxx.............. President and Chief Operating Officer of Parent since
December 1995; prior thereto, Executive Vice President-
Operations since May 1995; prior thereto, Senior Vice
President-Operations since 1993; and prior thereto, Vice
President-Operations since January 1988.
Xxxxxxx X. Xxxxxxx............. Vice President-Finance and Chief Financial Officer,
Secretary and Treasurer of Parent since January 1996;
prior thereto, Vice President and Chief Financial Officer
of JDI Group, Inc., a distributor of residential
furniture.
Xxxxxxx X. Xxxxx............... Vice President-Sales and Marketing of Parent since August
1998; prior thereto, Vice President-Sales since November
1996; Vice President-Sales Western Region since October
1995; Vice President-Sales Midwestern Region since March
1995.
Xxxxxxx X. Xxxxxxx............. Vice President-Operations of Parent since November 1998;
prior thereto, Director of West Michigan Manufacturing
Operations-Xxxxxx Xxxxxx, Inc., a manufacturer of office
furniture.
Xxxxxxx X. Xxxx................ Vice PresidentCorporate Technology & Development of
Parent since November 1998; Vice President-Operations
since July 1996; prior thereto, Senior Vice President-
Operations of the Gunlocke Company, a subsidiary of HON
Industries, Inc., a manufacturer of office furniture.
Xxxxxxx Xxxxxx................. Senior Vice President-International Sales/New Chain
Development of Parent since August 1998; Senior Vice
President-Sales since December 1993; Vice President-Sales
since November 1986.
2. Directors and Executive Officers of Purchaser. Set forth below is the
name, current business address, citizenship and the present principal
occupation or employment and material occupations, positions, offices or
employments for the past five years of each director and officer of Purchaser.
Unless otherwise indicated, each person identified below is employed by
Purchaser. The principal address of Purchaser and, unless otherwise indicated
below, the current business address for each individual listed below is 0000
Xxxxxxx Xxxxxxxxxx Xxxxx, Xx. Xxxxx, Xxxxxxxx 00000. Directors are identified
by an asterisk. Unless otherwise indicated, each such person is a citizen of
the United States.
Name and Current Present Principal Occupation or Employment;
Business Address Material Positions Held During the Past Five Years
*Xxxxxxxx X. Xxxxxx............ President of Purchaser since May 1999; Chairman of the
Board and Chief Executive Officer of Parent for more than
the last five years and President of the Parent until
December 1995; Director of Top Air Manufacturing, Inc.
*Xxxxxx X. Xxxxxx.............. Vice President and Treasurer of Purchaser since May 1999;
President and Chief Operating Officer of Parent since
December 1995; prior thereto, Executive Vice President-
Operations of Parent since May 1995; prior thereto,
Senior Vice President-Operations of Parent since 1993;
and prior thereto, Vice President-Operations of Parent
since January 1988.
*Xxxxxxx X. Xxxxxxx............ Vice President and Secretary of Purchaser since May 1999;
Vice President-Finance and Chief Financial Officer,
Secretary and Treasurer of Parent since January 1996;
prior to joining the Parent, Vice President and Chief
Financial Officer of JDI Group, Inc., a distributor of
residential furniture.
I-2
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for the
Shares and any other required documents should be sent by each stockholder of
the Company or his broker-dealer, commercial bank, trust company or other
nominee to the Depository as follows:
The Depository for the Offer is:
IBJ Whitehall Bank & Trust Company
Telephone: (000) 000-0000
By Mail: Facsimile Transmission: By Hand, Courier, or
(000) 000-0000(for Certified or Express
eligible institutions Mail:
only)
IBJ Whitehall Bank & Trust Company
P.O. Box 84
Bowling Green Station IBJ Whitehall Bank & Trust Company
New York, New York 00000- Xxx Xxxxx Xxxxxx
0000 Xxx Xxxx, Xxx Xxxx 00000
Attn: Reorganization Attn: Securities
Operations Processing Window,
Subcellar One, (SC-1)
Confirmation of Receipt of
Facsimile by Telephone: (000) 000-0000
Any questions or requests for assistance or additional copies of the Offer
to Purchase and the Letter of Transmittal may be directed to the Information
Agent or the Dealer Manager at the telephone numbers and locations listed
below. You may also contact your broker, dealer, commercial bank or trust
company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
X.X. Xxxx & Co., Inc.
00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Banks and Brokers Call Collect (000) 000-0000
All Others Call Toll Free (000) 000-0000
The Dealer Manager for the Offer is:
Xxxxxxxxx, Xxxxxx & Xxxxxxxx
000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Toll Free: (000) 000-0000
(000) 000-0000
