Offer to Purchase for Cash
by
XXXXXXXX INDUSTRIES, INCORPORATED
of
All Shares of Its Common Stock
Held by Holders of 100 or Fewer Shares
At a Purchase Price of $2.75 per Share
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THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
[_____________________________________], UNLESS THE OFFER IS EXTENDED.
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Xxxxxxxx Industries, Incorporated, a Virginia corporation (the
"Company," "we" or "us"), is offering to purchase for cash all shares of our
common stock, $0.10 par value per share (the "Common Stock"), held by
stockholders who owned of record or beneficially 100 or fewer shares as of
the close of business on May 7, 2008 and who continue to hold such shares
through the expiration of this offer, at a price of $2.75 per share, net to
the seller in cash, less any applicable withholding taxes and without
interest, upon the terms and subject to the conditions described in this
Offer to Purchase and in the related Letter of Transmittal (which together,
as they may be amended or supplemented from time to time, constitute the
"Offer").
Stockholders eligible to accept this Offer are those who owned of record
or beneficially 100 or fewer shares as of the close of business on May 7,
2008 and who continue to hold such shares through the expiration of this
Offer.
This Offer to Purchase will expire at 5:00 P.M., New York City Time, on
[____________________], unless extended or earlier terminated. We may extend
or terminate the offer at any time, subject to applicable law.
Upon the terms and subject to the conditions of the Offer, we will pay
$2.75 per share, net to the seller in cash, less any applicable withholding
taxes and without interest, for shares of our Common Stock properly tendered
in the Offer by an eligible stockholder. Payment will be made promptly after
the expiration date of the Offer.
IF YOU ARE AN ELIGIBLE STOCKHOLDER AND WISH TO ACCEPT THE OFFER, YOU
MUST TENDER ALL OF YOUR SHARES IN THE MANNER DESCRIBED IN THIS OFFER TO
PURCHASE AND ACCOMPANYING LETTER OF TRANSMITTAL. THE OFFER IS NOT CONDITIONED
ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED. OUR OBLIGATION TO TAKE UP AND
PAY FOR ANY SHARES TENDERED UNDER THE OFFER IS, HOWEVER, CONTINGENT AS TO
EACH ELIGIBLE STOCKHOLDER'S PROPER TENDER OF ALL OF THE SHARES OF COMMON
STOCK HELD EITHER BENEFICIALLY OR OF RECORD BY SUCH STOCKHOLDER. PARTIAL
TENDERS WILL NOT BE ACCEPTED. ONCE YOU TENDER YOUR SHARES, YOU MAY NOT
WITHDRAW THEM FROM THE OFFER.
If, after we purchase shares in the Offer, we have fewer than 300
stockholders of record, as calculated under the rules and regulations of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), we may file
a Form 15 with the Securities and Exchange Commission (the "SEC"), as a
result of which the registration of our Common Stock and our duty to file
reports with the SEC ("SEC Reporting Obligations") under Sections 13(a) and
15(d) of the Exchange Act would cease, and we would no longer be a reporting
company. We would continue operations as a non-reporting company. If
approximately 100 of the eligible record holders tender their shares in the
Offer and we purchase such shares after the expiration date, we may have
fewer than 300 stockholders of record.
Our Common Stock is currently quoted on the "Pink Sheets." The Pink
Sheets is a centralized quotation service that collects and publishes market
maker quotes in real time, primarily through its website,
xxxx://xxx.xxxxxxxxxx.xxx. We anticipate our stock will continue to be traded
on the Pink Sheets. On [___________], the last full trading day prior to the
announcement and commencement of the Offer, the closing price for the Common
Stock was [$______] per share. Stockholders are urged to obtain current
market quotations for the shares of Common Stock before deciding whether to
tender their shares in the Offer.
Our board of directors, including a special committee of the independent
members of the board of directors, has approved the Offer. However, neither
we nor any member of our board of directors, Xxxxxxxx X. Xxxxxx, the
corporate secretary of the Company (the "Secretary") or American Stock
Transfer and Trust Company, the depositary for the Offer (the "Depositary")
makes any recommendation to you as to whether you should tender or refrain
from tendering your shares. Neither we nor any member of our board of
directors, the Secretary of the Depositary has authorized any person to make
any recommendation with respect to the Offer. You must make your own
decision as to whether to tender your shares. In doing so, you should
consult your own investment and tax advisors, and read carefully and evaluate
the information in the Offer to purchase and in the related Letter of
Transmittal, including our reasons for making the Offer.
Each of our directors and executive officers hold of record or
beneficially more than 100 shares of our Common Stock or no shares of our
Common Stock and thus will not be eligible to participate in the Offer.
Questions and requests for assistance may be directed to the attention
of the Secretary at the Company's address and telephone number set forth on
the back cover of this Offer to Purchase. Requests for additional copies of
this Offer to Purchase or the Letter of Transmittal should be directed to the
Secretary.
This document does not constitute an offer or a solicitation to any
person in any jurisdiction in which such offer or solicitation is unlawful.
The Offer is not being made to, and tenders of shares will not be accepted
from or on behalf of, stockholders in any jurisdiction in which the making or
acceptance of the Offer would not be in compliance with the laws of that
jurisdiction.
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___________ __, 2008
IMPORTANT
If you were a record or beneficial owner of 100 or fewer shares of our
common stock as of the close of business on May 7, 2008, you continue to hold
such shares and you want to tender your shares, you must do one of the
following before the Offer expires at 5:00 P.M., New York City time, on
[______________] (unless the Offer is extended):
_ If you hold certificates registered in your own name, complete and
sign a Letter of Transmittal according to its instructions, and deliver
it, together with the certificates for your shares and any other
documents required by the Letter of Transmittal, to American Stock
Transfer and Trust Company, the Depositary for the Offer;
_ If your shares are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee, contact the nominee and
request that the nominee tender your shares for you; or
_ If you are an institution participating in The Depository Trust
Company, which we call the "Book-Entry Transfer Facility" in this Offer
to Purchase, tender your shares according to the procedure for book-
entry transfer described in Section 3 on page 20.
IF YOU HOLD MORE THAN 100 SHARES OF THE COMPANY'S COMMON STOCK, YOU ARE
INELIGIBLE TO PARTICIPATE IN THE OFFER.
You may contact the Secretary or your broker, bank or other nominee for
assistance. Contact information for the Secretary is set forth on the back
cover of this Offer to Purchase.
WE HAVE NOT AUTHORIZED ANY PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED IN
THIS OFFER TO PURCHASE OR IN THE RELATED LETTER OF TRANSMITTAL. YOU SHOULD
NOT RELY ON ANY RECOMMENDATION, OR ANY SUCH REPRESENTATION OR INFORMATION, AS
HAVING BEEN AUTHORIZED BY US, ANY MEMBER OF OUR BOARD OF DIRECTORS, THE
SECRETARY OR THE DEPOSITARY.
TABLE OF CONTENTS
Page
----
SUMMARY TERM SHEET 1
FORWARD-LOOKING STATEMENTS 5
INTRODUCTION 6
SPECIAL FACTORS 7
THE OFFER 18
1. General 18
2. Purpose of the Offer; Certain Effects of the Offer 19
3. Procedures for Tendering Shares 19
4. No Withdrawal Rights 22
5. Purchase of Shares and Payment of Purchase Price 22
6. Conditional Tender of Shares 23
7. Conditions of the Offer 23
8. Price Range of Shares; Dividends 23
9. Source and Amount of Funds 23
10. Certain Information Concerning Us 24
11. Interests of Directors and Executive Officers;
Transactions and Arrangements Concerning the Shares 25
12. Certain Legal Matters; Regulatory Approvals 28
13. Certain U.S. Federal Income Tax Consequences 28
14. Extension of the Offer; Termination; Amendment 33
15. Fees and Expenses 33
16. Accounting Consequences 34
17. Miscellaneous 34
i
SUMMARY TERM SHEET
We are providing this summary term sheet for your convenience. It
highlights certain material information in this Offer to Purchase, but you
should realize that it does not describe all of the details of the Offer to
the same extent described elsewhere in this Offer to Purchase. We urge you to
read the entire Offer to Purchase and the related Letter of Transmittal
because they contain the full details of the Offer. We have included
references to the sections of this Offer to Purchase where you will find a
more complete discussion.
Who is offering to purchase my shares?
Xxxxxxxx Industries, Incorporated is offering to purchase shares of its
outstanding Common Stock held by stockholders who owned beneficially or of
record 100 or fewer shares of the Company's Common Stock as of the close of
business on May 7, 2008 (the "Record Date"), and continue to own beneficially
or of record 100 or fewer shares of the Company's Common Stock through the
expiration date. See Section 1 on page 18.
What is the purpose of the Offer?
The Company seeks to reduce the administrative burden associated with
having a significant number of holders of a small number of shares. The offer
also may result in the Company having fewer than 300 holders of record of its
Common Stock, which would enable the Company to terminate its SEC Reporting
Obligations and continue future operations as a non-reporting company,
thereby relieving the Company of the costs and administrative burdens
associated with operating as a company subject to SEC Reporting Obligations.
Where shares are tendered by the registered owner of those shares
directly to the Depositary, the sale of those shares in the Offer will permit
the seller to avoid the usual transaction costs associated with open market
sales. Furthermore, holders who hold shares registered in their names and
tender their shares directly to the Depositary and whose shares are purchased
under the Offer will avoid not only the payment of brokerage commissions but
also any applicable odd-lot discounts that might be payable on sales of their
shares.
We believe the Offer set forth herein represents an efficient mechanism
to provide eligible stockholders with the opportunity to tender their shares
and thereby receive a return of some or all of their investment if they so
elect. Stockholders who do not participate or who are ineligible to
participate in the Offer will automatically increase the relative percentage
ownership held by them at no additional cost to them, following the purchase,
if any, by us of shares tendered in the Offer. See Section 2 on page 19,
Section 9 on page 23 and Section 11 on page 25.
Why is the Company pursuing the Offer over other alternatives?
We believe that the Offer is in the best interests of the Company and
its stockholders and presents the best way for the Company to achieve the
purposes discussed above. We considered the recent decrease in the number of
record holders of our Common Stock and the number of such record holders that
hold odd lots and determined that the Offer was the most efficient and cost
effective means for achieving the purposes set forth above. See "Special
Factors-Alternatives Considered by the Board of Directors" on page 7.
Will the Company be a public company after the completion of this Offer?
If the Offer results in the number of our record stockholders of Common
Stock falling below 300, we may decide to terminate the registration of our
Common Stock under the Exchange Act. If, after the completion of the Offer,
there are 300 or more stockholders of record holding the Company's Common
Stock remaining, the Company will remain subject to SEC Reporting
Obligations. In that event, the Company's board of directors may consider
other options available to it and the Company at that time to reduce the
number of record stockholders to below 300 and terminate the registration of
the Company's Common Stock under the Exchange Act. Thereafter, we anticipate
that our Common Stock will continue to be quoted in the Pink Sheets, but we
cannot predict whether a market will thereafter exist for our Common Stock.
As a result, it may become more difficult for our remaining common
stockholders to sell their shares.
Am I eligible to participate in the Offer?
You are eligible to tender your shares only if you owned 100 or fewer
shares of the Company's Common Stock as of the Record Date, regardless of
whether you owned your shares of record (i.e., in your own name) or
beneficially (i.e., in "street name" held by a brokerage company account
maintained for you). We reserve the right to make all determinations of who
is eligible to participate in the Offer. The beneficial and record holders
eligible to tender shares in the Offer are referred to herein as the
"eligible stockholders." You also must continue to hold of record or
beneficially 100 or fewer of the Company's Common Stock until the offer
expires.
How many shares will we purchase in the Offer?
As of the close of business on the Record Date, an estimated maximum of
25,825 shares of our Common Stock were eligible for purchase in the Offer.
What will the purchase price for the shares be and what will be the form of
payment?
We are offering to purchase shares of Common Stock in the Offer at a
fixed purchase price of $2.75 per share in cash. If we purchase your shares
in the Offer, we will pay you the purchase price in cash, less any applicable
withholding taxes and without interest, promptly after the expiration of the
Offer. Under no circumstances will we pay interest on the purchase price,
even if there is a delay in making payment. See the Introduction and Section
1.
How will we pay for the shares?
Assuming we purchase all the shares we estimate to be eligible in the
Offer at the specified purchase price of $2.75 per share, approximately
$71,018.75 will be required to purchase such shares. We expect that the
maximum aggregate cost of this purchase (not including the aggregate purchase
price), including all fees and expenses applicable to the Offer, will be
approximately $162,000. We will borrow an amount up to $233,265.75, the
maximum aggregate purchase price for the tendered shares and the expenses and
fees, from Xxxxx X. Xxxxxxxx, Xx. at an interest rate of prime plus one
percent to purchase the tendered shares. See Section 9 on page 23.
How long do I have to tender my shares?
You may tender your shares until the Offer expires at 5:00 P.M., New
York City time, on [____________________] unless we extend the Offer. See
Section 1. We may choose to extend the Offer at any time and for any reason.
We cannot assure you, however, that we will extend the Offer or, if we extend
it, for how long. See Section 1 on page 18 and Section 14 on page 33. If a
broker, dealer, commercial bank, trust company or other nominee holds your
shares, it may have an earlier deadline for accepting the Offer. We urge you
to contact the broker, dealer, commercial bank, trust company or other
nominee that holds your shares to find out its deadline.
Am I required to tender my shares?
No. This is a voluntary offer. You may elect to tender your shares or,
in the alternative, hold your shares and maintain your rights as a
stockholder.
May I tender less than all of my shares?
No. You must tender all of your shares of the Common Stock if you wish
any of your shares to be purchased. PARTIAL TENDERS WILL NOT BE ACCEPTED.
Can the Offer be extended, amended or terminated and if so, under what
circumstances?
Yes. We can extend or amend the Offer in our sole discretion, subject to
applicable law. If we extend the Offer, we will delay the acceptance of any
shares that have been tendered. See Section 14 on page 33. If we amend the
offer and the amendment is material, we will provide notice and, if
necessary, extend the Offer to ensure that at least five business days remain
prior to expiration of the Offer, and stockholders that have tendered their
shares pursuant to the Offer prior to the amendment will have an opportunity
to withdraw their shares. We can terminate the Offer at any time. See Section
7 on page 23.
How will I be notified if you extend the Offer or amend the terms of the
Offer?
If we extend the Offer, we will issue a press release or furnish such
information on a Current Report on Form 8-K not later than 9:00 a.m., New
York City time, on the first business day after the previously scheduled
expiration date of the Offer. We will announce any amendment to the Offer by
making a public announcement of the amendment. See Section 14. For the
purposes of the Offer, a "business day" means any day other than a Saturday,
Sunday or U.S. federal holiday and consists of the time period from 12:01
a.m. through 12:00 midnight, New York City time.
Are there any conditions to the Offer?
No. The Offer is, however, contingent as to each eligible stockholder's
proper tender to the Company of all of the shares of Common Stock held either
beneficially or of record by such stockholder. Partial tenders will not be
accepted.
How do I tender my shares?
If you want to tender your shares, you must do one of the following
before 5:00 P.M., New York City time, on [_________________________] or any
later time and date to which the Offer may be extended:
_ If you hold certificates registered in your own name, complete and
sign an Letter of Transmittal according to its instructions, and
deliver it, together with the certificates for your shares and any
other documents required by the Letter of Transmittal, to the
Depositary at one of its addresses appearing on the back cover page
of this Offer to Purchase;
_ If your shares are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee, contact the nominee
and request that the nominee tender your shares for you; or
_ If you are an institution participating in the Book-Entry Transfer
Facility, tender your shares according to the procedure for book-
entry transfer described in Section 3 on page 19.
You may contact the Secretary or your broker, bank or other nominee for
assistance. The contact information for the Secretary is set forth on the
back cover of this Offer to Purchase. See Section 3 on page 19 and the
instructions to the Letter of Transmittal.
Once I have tendered shares in the Offer, may I withdraw my tendered shares?
No. Once you tender your shares pursuant to the Offer, you cannot
withdraw them, unless we materially amend the terms of the Offer. See Section
4 on page 22.
What does the Company's board of directors think of the Offer?
Our board of directors, including a special independent committee of our
board of directors, has approved the Offer. However, neither we nor any
member of our board of directors or the Secretary makes any recommendation to
you as to whether you should tender or refrain from tendering your shares.
You must make your own decision as to whether to tender your shares. In doing
so, you should read carefully the information in this Offer to Purchase and
in the related Letter of Transmittal, including our reasons for making the
Offer. See Section 2 on page 19. You should discuss whether to tender your
shares with your broker or other financial or tax advisors.
Did the board of directors receive any fairness opinions or similar reports
regarding the fairness of the Offer?
No. Neither the Company nor its board of directors received any opinions
or reports from outside financial advisors regarding the fairness from a
financial point of view, or otherwise, to our eligible stockholders because
the offer is voluntary for only a limited number of odd-lot shares.
Nevertheless, a special committee of the independent members of the board of
directors received a report from Xxxx Street Partners, a wealth management
and investment banking firm, regarding different valuations for the Company
to aid in establishing the tender offer purchase price.
Will your directors and executive officers tender shares in the Offer?
None of our directors and executive officers is eligible to participate
in the Offer. See Section 11 on page 25.
If I decide not to tender, how will the Offer affect my shares?
Stockholders who decide not to tender may own a greater percentage
interest in our outstanding shares following the purchase, if any, by us of
shares tendered in the Offer. See Section 2 on page 19. When and how will you
pay me for the shares I tender?
We will pay $2.75 per share, net to the seller in cash, less applicable
withholding taxes and without interest, for the shares we purchase promptly
after the expiration of the Offer. We will pay for the shares accepted for
purchase by depositing the aggregate purchase price with the Depositary
promptly after the expiration date of the Offer. The Depositary will act as
your agent and will transmit to you the payment for all of your shares
accepted for payment. We expect the proceeds checks to be mailed
approximately ten business days after the expiration date. See Section 1 on
page 18 and Section 5 on page 22.
What is the recent market price of my shares?
On [_________________], the last full trading day before the
announcement and commencement of the Offer, the closing price for our Common
Stock on the Pink Sheets was [$______]. You are urged to obtain current
market quotations for the shares before deciding whether or not to tender
your shares. See Section 8 on page 23.
Will I have to pay brokerage commissions if I tender my shares?
If you are a registered stockholder and you tender your shares directly
to the Depositary, you will not incur any brokerage commissions. If you hold
shares through a broker, bank or other nominee, we urge you to consult your
broker, bank or other nominee to determine whether any transaction costs are
applicable. See the Introduction, Section 3 on page 19 and Section 15 on page
33.
Will I have to pay stock transfer tax if I tender my shares?
So long as you do not instruct the Depositary in the Letter of
Transmittal to make the payment for the shares to any person other than the
registered holder, you will not incur any stock transfer tax. See Section 5
on page 22.
What are the U.S. federal income tax consequences if I tender my shares?
Generally, your receipt of cash from us in exchange for the shares of
our Common Stock you tender will be a taxable transaction for U.S. federal
income tax purposes. The cash you receive for your tendered shares of our
Common Stock will generally be treated for U.S. federal income tax purposes
either as consideration received in respect of a sale or exchange of the
shares of our Common Stock purchased by us or as a distribution from us in
respect of shares of our Common Stock. See Section 13 for a more detailed
discussion of the tax treatment of the Offer. We urge you to consult with
your own tax advisor as to the particular tax consequences to you of the
Offer. Non-U.S. Holders (as defined in Section 13) may be subject to a 30%
withholding tax and are urged to consult their tax advisors regarding the
application of U.S. federal income tax withholding and backup withholding,
including eligibility for a withholding tax reduction or exemption, and the
refund procedure.
Who is the contact for questions about the Offer?
The Secretary can help answer your questions. The Secretary of the
Company is Xxxxxxxx X. Xxxxxx. The Secretary's contact information is set
forth on the back cover of this Offer to Purchase.
FORWARD-LOOKING STATEMENTS
This Offer to Purchase contains, and our periodic filings with the SEC
and written or oral statements made by our officers and directors to the
press, potential investors, securities analysts and others, may contain,
forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. These forward-looking
statements are not historical facts, but rather are predictions, and
generally can be identified by use of statements that include terms such as
"believe," "may," "expect," "anticipate," "estimate," "intend," "plan" or
"foresee" or other words or phrases of similar import. Similarly, statements
that describe or contain information related to matters such as our intent,
belief or expectation with respect to financial performance, claims
resolution, cash availability, stock redemption plans, contract awards and
performance, potential acquisitions and joint ventures and cost-cutting
measures are forward-looking statements. These forward-looking statements
often reflect a number of assumptions and involve known and unknown risks,
uncertainties and other factors that could cause our actual results to differ
materially from those currently anticipated in these forward-looking
statements. In light of these risks and uncertainties, including those
described below, the forward-looking events might or might not occur. Except
as required by law, we undertake no obligation to publicly update any
forward-looking statement, whether as a result of new information, future
events or otherwise.
INTRODUCTION
To the holders of our Common Stock:
We are offering to purchase for cash all shares of our Common Stock held
by stockholders who owned of record or beneficially 100 or fewer shares as of
the close of business on May 7, 2008 and who continue to hold such shares, or
less amount, through the expiration date of this offer, at a price of $2.75
per share, net to the seller in cash, less any applicable withholding taxes
and without interest, upon the terms and subject to the conditions described
in this Offer to Purchase and in the related Letter of Transmittal which
together, as they may be amended or supplemented from time to time,
constitute the "Offer." See Section 1 on page 18.
This Offer will expire at 5:00 P.M., New York City Time, on
[_______________________], unless extended or terminated earlier. We may
extend or terminate the Offer at any time, subject to applicable law.
Upon the terms and subject to the conditions of the Offer, we will pay
$2.75 per share, net to the seller in cash, less any applicable withholding
taxes and without interest, for shares properly tendered in the Offer by an
eligible stockholder. Payment will be made promptly after the expiration date
of the Offer. We will acquire all shares in the Offer at the same purchase
price, on the terms and subject to the conditions of the Offer. We will only
purchase shares that are properly tendered.
If you are an eligible stockholder and wish to accept the offer, you
must tender all of your shares in the manner described in this Offer to
Purchase and accompanying Letter of Transmittal. The Offer is not conditioned
on any minimum number of shares being tendered. The Offer as to each
Stockholder is, however, contingent as to each eligible Stockholder's proper
tender of all of the shares of Common Stock held either beneficially or of
record by such Stockholder. See Section 7 on page 23. Partial tenders will
not be accepted. Once you tender your shares, you may not withdraw them from
the Offer, unless the Offer is materially altered.
If, after we purchase shares in the Offer, we have fewer than 300
stockholders of record, as calculated under the rules and regulations of the
Exchange Act, we may decide to file a Form 15 with the SEC. As a result, the
registration of our Common Stock and our SEC Reporting Obligations under
Sections 13(a) and 15(d) of the Exchange Act would cease, and we would no
longer be a reporting company. In such event, we would continue operations as
a non-reporting company. If approximately 99 of the eligible record holders
tender their shares in the Offer and we purchase such shares after the
expiration date, we may have fewer than 300 stockholders of record.
Our board of directors, including a special committee of the independent
members of the board of directors, has approved the Offer. However, we do
not, nor does any member of our board of directors, the Secretary or the
Depositary, make any recommendation to you as to whether you should tender or
refrain from tendering your shares. You must make your own decision as to
whether to tender you shares. In doing so, you should read carefully the
information in this Offer to Purchase and in the related Letter of
Transmittal, including our reasons for making the Offer. See Section 2 on
page 19. You should discuss whether to tender your shares with your financial
and tax advisors.
All of our directors and executive officers hold of record or
beneficially more than 100 shares of our Common Stock or no shares of our
Common Stock and thus will not be eligible to participate in the Offer. See
Section 11 on page 25.
We will pay all fees and expenses incurred in connection with the Offer
by the Company and the Depositary. See Section 15 on page 23.
On [___________________], the last full trading day prior to the
announcement and commencement of the Offer, the closing price for the
Company's Common Stock was [$_______]. The estimated aggregate of 25,825
shares owned by all "odd-lot" stockholders, which is the estimated maximum
number of shares that we are offering to purchase pursuant to the Offer,
represent approximately 2.73% of our shares of Common Stock outstanding on
the Record Date. Our Common Stock is currently quoted on the "Pink Sheets."
The Pink Sheets is a centralized quotation service that collects and
publishes market maker quotes in real time, primarily through its website,
xxxx://xxx.xxxxxxxxxx.xxx. We anticipate that our stock will continue to be
traded on the Pink Sheets. Stockholders are urged to obtain current market
quotations for the shares of Common Stock before deciding whether to tender
their shares in the Offer. See Section 8 on page23.
Our principal executive offices are located at 0000 X.X. Reading Drive,
Manassas, Virginia 20109 and our phone number is (000) 000-0000.
SPECIAL FACTORS
Purpose of the Offer
--------------------
The Company seeks to reduce the administrative burden associated with
having a significant number of holders of a small number of shares. The Offer
also may result in the Company having fewer than 300 holders of record of its
Common Stock. This would enable the Company to terminate its SEC Reporting
Obligations and continue future operations as a non-reporting company,
thereby relieving the Company of the costs and administrative burdens
associated with operating as a company subject to SEC Reporting Obligations.
The Company does not believe that it is necessary or advantageous for its
business operations to continue its SEC reporting obligation.
Alternatives Considered by the Board of Directors
-------------------------------------------------
The Company's management and the Board of Directors have from time to
time since 2003 informally considered the possibility of pursuing actions
that would terminate the Company's SEC Reporting Obligations. Management and
the Board observed that as a consequence of the requirements of the Xxxxxxxx-
Xxxxx Act of 2002, a number of other relatively small publicly traded
companies were in the process of "going private." The reasons behind the
Company's interest in going private are numerous and included, in addition to
the impact of the Xxxxxxxx-Xxxxx legislation, among other matters:
* The Company had gone through a substantial downsizing several years
previously and was (and still is) a relatively small company.
* There are very few publicly-held construction companies and almost all
are larger than the Company.
* The Company's opportunities for growth were limited and the stock
price reflected these circumstances.
* Key officers of the Company were spending significant time on public
shareholder matters. Management believed this time and efforts could
be better spent devoted to the Company's operations.
* The Company estimated that the annual out-pocket-cost of being a
public company was, in 2003, approximately $150,000, and that amount
would certainly increase as a result of the various requirements
resulting from the Xxxxxxxx-Xxxxx legislation.
As a result of these concerns, management and the Company considered
initially a reverse split of the Company's stock. After discussions with a
consultant to consider the possibility of the Company implementing a reverse
stock split, management and the Board concluded that there were numerous
uncertainties and the cost of such a transaction appeared to be prohibitive.
Accordingly, the Company abandoned the idea of a reverse stock split.
Thereafter, for the next two years, the Company was approached from time
to time by several investment bankers seeking to assist in taking the Company
private. Although Company representatives met with one investment banker, no
investment banker was engaged, and the Company did not pursue any going
private strategies.
Due in part to legislative postponements of the required date for the
Company to comply with the requirements of Section 404 of Xxxxxxxx-Xxxxx,
discussions regarding taking the Company private did not occur again until
late in 2006. Xxxxx X. Xxxxxxxx, Xx., the Company's founder, former
President and Chairman, its largest shareholder and a member of the Board
suggested that the Company revisit the idea of a reverse stock split as a
means of taking the Company private. The Company was again facing the costs
of compliance with Section 404 of Xxxxxxxx-Xxxxx and the other reasons for
going private that were present in 2003 remained unchanged.
The Board discussed the matter at its meeting on December 13, 2006;
however, the Company was, at the time, attempting either to raise capital for
one of the Company's subsidiaries or to sell the subsidiary. The Board
agreed to delay further consideration of going private until the potential
financing or sale of the subsidiary was resolved.
At the next Board meeting on March 7, 2007, after reviewing further the
current and future costs of remaining a public corporation, the Board
approved the appointment of a committee comprised of its three independent
directors (the "Committee") to explore the possibility of taking the Company
private.
On March 8, 2007, the Committee held an organizational teleconference.
The Committee recognized that it needed to determine how many shareholders of
record the Company had, how such number was calculated, and the projected
cost of compliance with the Xxxxxxxx-Xxxxx Act. Once these matters were
determined, the Committee believed it could better assess the possible
benefits of being relieved of its SEC Reporting Obligations. The Committee
continued with the work on these matters through November 2007.
On November 15, 2007, the Committee met via telephone conference call
and discussed the methods by which the Company could "go private" and the
role of the Committee in any going private transaction. At the Board of
Directors' annual organizational meeting on December 6, 2007, Xxxxx X.
Xxxxxxxx XXX reported that the Company's legal counsel had suggested that the
Company consider an odd-lot tender offer as a means to achieve its objective
of deregistering as a public company. A discussion ensued as to the cost and
complexities associated with this type of transaction and it was concluded
that this approach may be the simplest, least costly approach to achieving
the desired objective of taking the Company private. After discussing this
suggestion, the Board agreed to hold a special meeting on January 10, 2008
for the sole propose of discussing this topic in depth.
At the January 10, 2008 Board meeting, Xxxxx X. Xxxxxxxx XXX reported
that management endorsed the Company making an "odd-lot" tender offer to
shareholders and asked for the Board's consideration and approval of such an
offer. One goal of the tender offer would be to reduce the number of
registered shareholders to less than 300, the SEC's current threshold for
comprehensive reporting purposes. As a result, the Company would be relieved
of its SEC Reporting Obligations and the Company would save the expense of
complying with the Xxxxxxxx-Xxxxx Section 404 regulations.
The Board then considered and discussed several options, including the
odd-lot tender, a reverse stock split, a general tender offer and other
considerations. During the discussion, the advantages and disadvantages of
the various approaches were discussed. The Board then discussed the need for
an independent valuation of the Company and a fairness opinion. The Board
concluded that a fairness opinion was unnecessary given the voluntary nature
of an odd-lot tender offer but that an independent valuation would be prudent
to validate the price recommended by the Committee.
After further discussion, the Board voted to move forward with an odd-
lot tender offer subject to an independent valuation of the price per share
to be offered and the Board's determination that the savings from being
relieved of the SEC Reporting Obligations, and as a result, Xxxxxxxx-Xxxxx
compliance costs substantially exceed the costs of the odd-lot tender offer.
Reasons for the Offer
---------------------
Reduce Expenses Associated with Administering Odd-Lot Holder Accounts
The expense of administering accounts of odd-lot holders is
disproportionate to their ownership interest in the Company. As of the Record
Date, there were approximately 237 stockholders of record holding 100 or
fewer shares, other than participants in the Book-Entry Transfer Facility,
and an estimated 190 stockholders known to us beneficially owning 100 shares
or fewer of the Company's Common Stock. These eligible record and beneficial
stockholders hold an estimated aggregate of approximately 25,825 shares, or
approximately 2.73%, of our outstanding Common Stock. Approximately 59.55% of
the marginal administrative expense relating to our record stockholder
accounts relate to holders owning less than 2.73% of our outstanding Common
Stock. Regardless of whether the record stockholder base falls below 300, we
believe that every tender by an eligible holder will reduce our
administrative expenses going forward.
The Company's board of directors does not believe the costs associated
with maintaining the Company's stockholder accounts with 100 or fewer shares
are justified. The Company's board of directors believes that it is in the
Company's best interests and the best interests of the Company's stockholders
as a whole to eliminate, to the extent possible, the administrative burden
and costs associated with maintaining stockholder accounts of 100 shares or
fewer.
Liquidity Opportunity For Odd-Lot Holders
There is a very limited trading market for our Common Stock and a more
limited trading market for odd-lot holders' shares. As a result, we believe
that stockholders are unable to efficiently trade in our shares when they
choose. In particular, stockholders holding small amounts of Common Stock may
find it uneconomical to dispose of shares due to minimum brokerage
commissions that are often charged. The Offer will permit eligible
stockholders to directly tender the small amounts of shares of Common Stock
that they hold at a premium to the current market price, without paying the
minimum brokerage commissions typically charged, and to do so without
material impact to the Company's capital structure, equity value, balance
sheet or operations.
Cost-Savings Associated with Termination of SEC Reporting Obligations
If the Company continues to have more than 300 holders of record of the
Company's Common Stock after completion of the Offer, the Company will
eliminate administrative expenses (such as printing and mailing costs related
to stockholders communications and proxy and information statements) related
to the small stockholders who tendered their shares pursuant to the Offer.
If the Company has fewer than 300 holders of record of the Company's
Common Stock after completion of the Offer, it may seek to terminate its SEC
Reporting Obligations. The Company incurs direct and indirect costs
associated with its status as a public-reporting company. Among the most
significant are the costs associated with compliance with the SEC Reporting
Obligations. Direct costs associated with compliance with the SEC Reporting
Obligations include, but are not limited to:
_ auditing fees;
_ legal fees;
_ financial printer fees; and
_ miscellaneous clerical and other administrative expenses, such as
word processing, conversion to XXXXX, telephone and fax charges
associated with the filing of periodic reports with the SEC.
Based on the Company's experience in prior years, the Company's direct
costs of complying with the SEC Reporting Obligations are estimated to be
approximately $190,500 annually, based on estimated annual audit and
accounting fees of $105,000, which represents estimated fees of $180,000 less
the $75,000 estimated for a non-reporting company audit, estimated annual
legal fees of $40,000, estimated financial printer fees of $10,000 estimated
transfer agent fees of $18,000, estimated costs associated with filing
reports with the SEC (including internal administrative staff) of $10,000 and
estimated miscellaneous costs of $7,500.
Indirect costs associated with compliance with the SEC Reporting
Obligations include, among other things, the time the Company's executive
officers expend to prepare and review the Company's periodic reports, which
the Company estimates requires varying percentages of the total time the
executive officers expend in the management of the Company. It is estimated
that Xx. Xxxxxx Xxxxx, the Company's comptroller, expends 50% of his time in
meeting compliance obligations. For the fiscal year ending July 31, 2008,
the Company is subject to additional regulations and compliance procedures
required of public companies under Section 404(a) of the Xxxxxxxx-Xxxxx Act
of 2002. Section 404(a) requires that Company's management establish and
maintain an adequate internal control structure and procedure for financial
reporting. In addition, management will have to include in the Company's
annual report, an assessment of the effectiveness of these internal controls
and procedures. The Company's direct and indirect costs in the categories
identified above necessary to comply with Section 404(a) is estimated at
$200,000 in the initial year of compliance and will range between $120,000
and $150,000 in each subsequent year. In addition, for the fiscal year ending
July 31, 2009, the Company will be subject to all provisions of Section 404
of the Xxxxxxxx-Xxxxx Act of 2002. As a result, the Company will need to
comply with Section 404(b), which requires the Company's external auditor to
test the Company's internal controls and procedures and provide an assessment
thereon. The SEC has issued a proposed Rule that would extend the deadline
for compliance by an additional year. The Company expects its direct and
indirect costs to increase by an additional estimated $140,000 to comply with
these additional requirements. These costs may include, among other things,
the cost of the hiring of additional personnel dedicated to regulatory
compliance, fees paid to consultants to assist in the implementation of new
procedures and additional audit fees. Because the Company would anticipate
hiring additional dedicated compliance personnel as well as a significant
increase in audit fees, the Company estimates that ongoing costs of
compliance and ongoing cost of being a public company could amount to as much
as $480,500 annually. These costs are substantial when compared to the
Company's total general and administrative expenses for 2007 of $7,202,000.
In comparison, the Company estimates the one-time fees payable in
connection with the Offer will be a maximum of approximately $162,000, which
includes the Xxxx Street Partners' report, legal fees, Depositary fees,
filing fees, printing and mailing. The Company did not include the payment of
the purchase price for shares purchased in the Offer estimated to be
$71,018.75 in the comparison against the costs of complying with the SEC
Reporting Obligations because the expenditure of the purchase price for the
shares will be made directly to the Company's stockholders holding 100 or
fewer shares and will result in each share (on a pre-Offer basis) held by
remaining stockholders representing a greater ownership interest following
the Offer.
The Company anticipates that, if the SEC Reporting Obligations are
terminated, it will continue to incur some costs associated with soliciting
proxies for purposes of its annual meeting as required under Virginia law, as
well as meeting other state corporate law requirements. However, these costs
should be significantly less than the direct and indirect costs of complying
with the SEC Reporting Obligations as described above.
The board of directors has periodically considered the cost to the
Company of continuing to file periodic reports with the SEC and complying
with the proxy and annual report requirements under the Exchange Act compared
to the benefits to the Company and its stockholders of continuing to operate
as a public company. Under the Company's particular circumstances, for the
reasons discussed below under "Lack of Capital from Public Sector", the board
of directors has determined that the benefits that the Company and its
stockholders would typically expect to derive from the Company's status as a
public company are not being realized and are not likely to be realized in
the foreseeable future. As discussed below under "Lack of Capital from Public
Sector", benefits of being a public company that are not likely to inure to
the benefit of the Company include raising capital in the public markets and
using Common Stock for acquisition purposes. As a result, in the event that
the Company has fewer than 300 holders of record after the completion of the
Offer, the board of directors may decide that the elimination of the costs of
complying with the Company's SEC Reporting Obligations would outweigh the
benefits of continuing to incur such costs. In the event that the Company is
able to terminate, and does terminate, the SEC Reporting Obligations, the
actual savings to be realized from terminating the Company's SEC Reporting
Obligations may be higher or lower than such estimates.
Lack of Capital from Public Sector
The Company's circumstances are such that management believes that it is
not likely to be able to take advantage of the capital available through the
public markets. The Company's board of directors does not have any present
intention to raise capital through sales of the Company's securities in a
public offering or to acquire other business entities using the Company's
Common Stock as the consideration for such acquisition. The Company does not
believe, as a practical matter, that it will be able to build up or achieve
an active market for the Company's securities. Accordingly, the Company has
not and is not likely to make use of, or benefit from, the advantages
generally associated with operating as a public company.
During its regular meeting on March 7, 2007, the Company's board of
directors, after reviewing the current and future costs of remaining a public
corporation, approved the appointment of a committee of its independent
members to explore the possibility of taking the company private with the
objective of eliminating the costs associated with being a public company.
Effects
-------
Effects of the Offer on Affiliated Stockholders
Except as provided below, the Offer will affect both affiliated and
unaffiliated stockholders of the Company who are not eligible to participate
in the offer in the same manner. As used in this Offer to Purchase, the term
"affiliated stockholder" means any stockholder who is a director or executive
officer of the Company or any other person who directly or indirectly through
one or more intermediaries controls, is controlled by, or is under common
control with the Company. "Affiliated stockholder" therefore includes the
directors and executive officers listed in "The Offer-Interests of Directors
and Executive Officers; Transactions and Arrangements Concerning the Shares."
The term "unaffiliated stockholder" means any stockholder other than an
affiliated stockholder. As none of the affiliated stockholders of the Company
are eligible to participate in the Offer, the effects of the Offer on each of
the affiliated stockholders will be the same. We expect that our executive
officers and directors will continue to beneficially own immediately after
the Offer the shares of Common Stock reported as beneficially owned by them
below under "The Offer-Interests of Directors and Executive Officers;
Transactions and Arrangements Concerning the Shares" on page 25.
Other potential effects of the Offer which are applicable to the
affiliated stockholders include the following:
_ Reduced reporting requirements for officers and directors. If we
terminate the SEC Reporting Obligations, the directors, executive
officers and persons owning more than 10% of our outstanding shares
of Common Stock will no longer be subject to the reporting and
short-swing profit provisions under the Exchange Act with respect to
changes in their beneficial ownership of our Common Stock; and
_ Share Ownership. The number of stockholders holding 100 shares or
fewer of the Company's Common Stock constitutes an estimated maximum
of 2.73% of the issued and outstanding shares of the Company's
Common Stock. If the Offer is fully subscribed, we believe it will
not materially impact the percentage of beneficial ownership of the
Company's Common Stock held by other stockholders. As of May 7,
2008, the directors and executive officers of the Company
beneficially owned in the aggregate approximately 57% of the
Company's combined voting power. Following a fully subscribed Offer,
they would own in the aggregate approximately 57%.
Effects of the Offer on Unaffiliated Stockholders
The effects of the Offer on unaffiliated stockholders will vary
depending on whether or not the unaffiliated stockholder is eligible to
participate in the Offer and chooses to tender his or her shares pursuant to
the Offer. Eligible and tendering unaffiliated stockholders will:
_ receive $2.75 per share, net to the seller in cash, less any
applicable withholding taxes and without interest;
_ after completion of the Offer, no longer have any equity interest in
the Company and therefore will not participate in its future
potential earnings or growth, if any, or bear the risk of any
possible future depreciation in value of that equity interest;
_ be required to pay federal and, if applicable, state and local
income taxes on the cash received in the Offer; and
_ be able to sell their shares directly to the Company without paying
brokerage commissions; transaction costs may be applicable, however,
if the shares are tendered through a broker, bank or other
institution.
Potential effects on unaffiliated stockholders who remain stockholders
after the Offer include the following:
_ Decreased Access to Information. If the Offer results in reducing
the number of stockholders by the required amount, we may terminate
the registration of our Common Stock under the Exchange Act. As a
result, the Company would no longer be subject to the SEC Reporting
Obligations. Similarly, executive officers, directors and other
affiliates would no longer be subject to many of the reporting
requirements and restrictions of the Exchange Act, including Section
13, Section 14 and Section 16 of the Exchange Act.
_ Continued Lack of Liquidity. If the Offer results in reducing the
number of stockholders by the required amount, we may terminate the
registration of our Common Stock under the Exchange Act. If this
occurs, the liquidity of the shares of Common Stock held by
unaffiliated stockholders may not be increased by the termination of
the registration of the Common Stock under the Exchange Act. Future
trading in our Common Stock after the Offer, if we deregister our
Common Stock under the Exchange Act, may continue to occur in the
Pink Sheets or in privately negotiated sales. No active trading
market is expected to develop in our Common Stock for the
foreseeable future.
_ Book value per share. If the Offer is fully subscribed, neither the
book value per share of Common Stock nor earnings per share will be
materially affected.
_ Share Ownership. If the Offer is fully subscribed, we expect that
the percentage of beneficial ownership of the Company's Common Stock
held by affiliated stockholders will increase by less than 1.0%.
Effects of the Offer on the Company
The Offer is expected to reduce the number of the Company's stockholders
and the number of the Company's outstanding shares of Common Stock. The
Company's Certificate of Incorporation currently authorizes the issuance of
10,000,000 shares of Common Stock, $0.10 par value. As of May 7, 2008,
3,690,029 shares of the Company's Common Stock were outstanding. Shares
purchased by the Company in the Offer will become unissued shares. If the
Offer is fully subscribed, the Company believes that the Offer will reduce
the number of holders of record of the Company's Common Stock from 398 to
approximately 161.
Based on the aggregate number of holders of the Company's Common Stock,
the Company estimates there were 237 holders of record owning 100 or fewer
shares of the Company's Common Stock, as of the Record Date. The Company also
estimates that an additional 000 xxxxxxx xxxxx xx xxxxxx name 100 shares or
fewer of the Company's Common Stock. Assuming all of these stockholders elect
to participate in the Offer, and the shares are properly tendered at the
offer price of $2.75 per share, approximately $71,018.75 will be required to
purchase such shares. We expect that the maximum aggregate cost of these
purchases (exclusive of the foregoing purchase price), including all fees and
expenses applicable to the Offer, will be approximately $162,000.
Our Common Stock is currently quoted on the "Pink Sheets." The Pink
Sheets is a centralized quotation service that collects and publishes market
maker quotes in real time, primarily through its website,
xxxx://xxx.xxxxxxxxxx.xxx. The Company intends for this source of liquidity
to be available to the Company's stockholders following the Offer.
The Company's Common Stock will continue to have the same par value
following the consummation of the Offer. In addition, each post-Offer share
of the Company's Common Stock will be entitled to one (1) vote per one (1)
whole share.
The Company has no current plans to issue Common Stock, but the Company
reserves the right to do so at any time and from time to time at such prices
and on such terms as the Company's board of directors determines to be in the
Company's best interests and the best interests of the Company's then
stockholders. The Company has no current plans or proposals to effect any
extraordinary corporate transaction such as a merger, reorganization or
liquidation, to change the Company's board of directors or management, to
change materially the Company's capitalization, or otherwise to effect any
material change in the Company's corporate structure or business.
The Company is undertaking the Offer at this time because, among other
reasons, the Company believes that it will save substantial costs associated
with having a significant number of small stockholders. In the event that the
Offer results in the Company having fewer than 300 stockholders of record,
the Company also may terminate the SEC Reporting Obligations, which it
believes would save substantial costs associated with compliance with the SEC
Reporting Obligations, particularly in light of the requirement to comply
with Section 404(a) of the Xxxxxxxx-Xxxxx Act for the 2008 fiscal year and
all of Section 404 for the 2009 fiscal year. However, the Company's cost-
saving estimates may be inaccurate, and the actual savings to be realized
from reducing the number of small stockholders and, if applicable, from
terminating the Company's SEC Reporting Obligations might be higher or lower
than the Company's estimates. Should the Offer not result in the Company
having fewer than 300 holders of its Common Stock, the Company will continue
to operate as a public-reporting company, subject to SEC Reporting
Obligations and related expenses and may reconsider other alternatives for
deregistration.
Factors Considered by the Board of Directors as to the Fairness of the Offer
----------------------------------------------------------------------------
A special committee of the independent members of the board of directors
has analyzed the Offer and its anticipated effects on the Company's
stockholders. In addition, the board of directors has analyzed the Offer and
its anticipated effects on the Company's stockholders. All of the members of
the Company's board of directors deemed the Offer to be substantively and
procedurally fair to, and in the best interests of, the Company's affiliated
and unaffiliated stockholders, whether or not such stockholders are eligible
to participate in the Offer. In reaching this conclusion, the board of
directors has considered, in the course of exploring strategic alternatives
for the Company, in no particular order and without preference, the following
factors:
* Based upon the independent board members' analysis of the Xxxx Street
Partners' report, the independent board members concluded that the
$2.75 per share offer price reflected a reasonable adjustment to the
highest value in the Xxxx Street Partners' report, the value utilizing
the Hybrid/Greater Value approach. The Hybrid/Greater Value approach
assumed that $3.8 million of funds would be available in the next two
years to finance the Company's move of two operating subsidiaries and
upgrade technology for both operations. The independent board members
concluded that obtaining the necessary financing for implementing this
strategy was unlikely. The Hybrid/Greater Value approach also assumed
that a sale of some or all of the Company was feasible. Based on the
Company's past experience with investment bankers, the independent
board members had to discount this approach as unlikely. Accordingly,
the independent board members discounted the valuation reached by Xxxx
Street Partners and the operating forecasts on which it was based.
* The independent board members discounted the value attributed to the
Company's real estate in the Hybrid/Greater Value approach because the
report did not account for well-publicized weaknesses in the real
estate market since the real estate was last appraised in 2006.
* In addition to the Xxxx Street Partners' report, the independent board
members also considered that the Company's stock has traded at less
than $2.44 per share for over eighteen months. The independent board
members agreed that the offering price should provide a reasonable
premium over the recent and current stock market price, consistent
with reasonable valuations in the Xxxx Street Partners' report.
* The independent board members also noted that the $2.75 per share
price also approximates the average of the medium and high prices of
the asset liquidation values presented in the Xxxx Street Partners'
report and provides a premium of more than ___% over the current
trading price of the Company's stock.
Substantive Factors Favoring the Offer
The Offer presents stockholders owning beneficially or of record 100 or
fewer shares of our Common Stock with the opportunity to dispose of their
holdings at a price greater than recent market prices. A special committee of
the independent members of the board of directors received a report from an
outside financial analyst, Xxxx Street Partners, a wealth management and
investment banking firm, regarding different valuations for the Company to
aid in determining the per share purchase price to be paid in the Offer. Xxxx
Street Partners provided to the special committee a price range for the
Company's stock based on several approaches to valuation, including an
ongoing business value, an asset liquidation value and a hybrid/greater
value. Within these sets of values, the financial analyst estimated a low
and high range from zero to $4.73 per share. Odd-lot tender holders may
obtain a copy of Xxxx Street Partners' report by written request to the
Secretary at the address provided herein. After detailed discussions with
Xxxx Street Partners, both during Xxxx Street Partners' initial engagement
and when the draft report was presented, and after further discussions of the
special committee, the special committee concluded that a fair price, in the
circumstances and for the limited purpose of the odd-lot tender discussed
above, is $2.75 per share, a price equal to an average of the mid points of
the asset liquidation value and the hybrid/greater value amounts. In addition
to the report by Xxxx Street Partners, the special committee considered other
factors. The special committee reviewed the historic stock prices for the
Company's common stock as well as information regarding competitors and the
Company's lack of success with selling itself or parts of itself previously.
On May 7, 2008, the closing price for the Company's Common Stock was $1.58.
The purpose of the Offer is to reduce the number of stockholders who
hold a small number of shares and thereby relieve the Company of the
administrative burden of having a significant number of holders of a small
number of shares. If the Offer results in the Company having fewer than 300
stockholders of record, the Company will consider terminating its SEC
Reporting Obligations and continuing operations in the future as a non-
reporting company.
It should, however, be noted that, as a result of the Offer, the major
stockholders of the Company will slightly increase their ownership interest
in the Company following the Offer. See "Procedural Factors Disfavoring the
Offer and Interests of the Company's Directors and Executive Officers in the
Offer."
Procedural Factors Favoring the Offer
The Offer is available to all Odd-Lot Holders. The Offer will be
applied equally to all stockholders of the Company owning of record or
beneficially 100 or fewer shares, whether affiliated or unaffiliated
stockholders. No director or officer of the Company is eligible to
participate in the Offer.
The Offer provides the Company's Odd-Lot Holders with liquidity. The
Offer provides the Company's stockholders owning beneficially or of record
100 or fewer shares of Common Stock with liquidity. The average daily trading
volume for the Company's Common Stock over the last three months was
approximately 600 shares per day, which renders the Common Stock illiquid by
most standards. The Offer will provide stockholders who hold 100 or fewer
shares the opportunity to liquidate their investment in the Company.
It should be noted that the Company does not currently satisfy the
listing standards for the New York Stock Exchange or NASDAQ. The Company's
Common Stock trades on the over the counter markets under the symbol
("XXXX.XX"), and as discussed elsewhere is currently quoted on the "Pink
Sheets," a centralized quotation service. The Company's limited operations
are such that it does not believe it will be able to attract analyst coverage
or significant investor interest, and it therefore does not believe that
attempts to qualify for listing on a national securities exchange would be
beneficial to stockholders.
In addition, eligible stockholders who directly tender their shares to
the Company will avoid brokerage commissions that would otherwise be incurred
if the shares were sold in an open market transaction.
The Offer is voluntary; eligible stockholders are not required to tender
their shares. Current holders of 100 or fewer shares of the Company's
Common Stock may elect not to tender and instead to remain stockholders of
the Company. Also, as noted above, as a result of the Offer, the stockholders
who own 101 or more shares and odd-lot holders who do not tender their shares
will increase their percentage ownership interest in the Company as a result
of the Offer. The Company's board of directors and a special committee of
its independent members consider the structure of the Offer to be fair to all
eligible stockholders because it allows the holders to control the decision
of whether to remain a stockholder of the Company following the Offer or to
receive the purchase price offered in connection with the Offer.
There will not be a complete loss of a public market for the Company's
Common Stock resulting from the Offer for unaffiliated stockholders who elect
to remain stockholders of the Company, since the Company anticipates that its
Common Stock will continue to be quoted on the "Pink Sheets."
The unaffiliated stockholders who own 100 shares or fewer and elect not
to tender their shares in the Offer will continue to own a small percentage
of the Company in comparison to the dominant majority of ownership interest
in the Company held by the affiliated stockholders and existing large
stockholders after the Offer. However, because the affiliated stockholders
and existing large stockholders currently own a very significant ownership
interest in the Company, any increase in ownership percentage by the
affiliated stockholders and existing large stockholders resulting from the
Offer will not have a material impact on the ability of affiliated
stockholders and existing large stockholders to control the Company or the
inability of the unaffiliated stockholders to control the Company after the
Offer. Finally, the unaffiliated stockholders owning 100 shares or fewer who
elect to remain stockholders of the Company will have no guarantee of
dividends in the future. Therefore, the Company believes that, because the
adverse effect on the liquidity of the Company's Common Stock and minority
position of unaffiliated stockholders will likely not be material, providing
the opportunity for stockholders to remain stockholders after the Offer was a
procedural factor favoring the Offer. Furthermore, since the lack of interest
in the Company's Common Stock makes it more difficult for stockholders to
sell their shares, providing a mechanism for stockholders who own 100 shares
or fewer to completely liquidate their ownership interest was a procedural
factor favoring an alternative such as the Offer.
No Unusual Conditions to the Offer. The board of directors also
considered the likelihood that the Offer would be implemented. In this
regard, it took into consideration that there are no unusual requirements or
conditions to the Offer, and the fact that the Company has the financial
resources to implement the Offer expeditiously.
Substantive Factors Disfavoring the Offer
Neither the Company, the Special Committee, nor the Board of Directors
received a fairness opinion or report on the share price to be offered. As
described above, a special committee of the independent members of the board
of directors determined the purchase price in the Offer taking into
consideration a report provided by an outside financial analyst from Xxxx
Street Partners. However, this report is not a fairness opinion nor report on
the share price to be offered. The special committee formulated the price
based on numerous factors, which included the report by Xxxx Street Partners.
After detailed discussions with Xxxx Street Partners, the special committee
concluded and recommended to the board of directors that a fair price, in the
circumstances and for the limited purpose of the odd-lot tender, is $2.75 per
share. This purchase price is equal to an average of the mid points of the
financial analyst's asset liquidation value and the hybrid/greater value
amounts. The foregoing notwithstanding, neither the Company nor its board of
directors, including its special committee, received any opinions or reports
from outside financial advisors regarding the fairness from a financial point
of view, or otherwise, to our eligible stockholders because the Offer is
voluntary for only a limited number of odd-lot shares. Any stockholder that
does not view the price to be adequate will not be required to participate.
Cessation of Public Sale Opportunities. Following the Offer, the
Company may apply for the termination of its SEC Reporting Obligations if it
is eligible to do so. As a result, it is possible that the public market for
shares of the Company's Common Stock could be substantially less active,
particularly due to the possible lack of publicly-available information,
which is described below in "Cessation of Publicly Available Information."
The Company intends for its Common Stock to continue to be quoted on the
Pink Sheets. Additionally, the Company does not have any present intention
or plans to sell the Company or enter into any other transaction that would
provide liquidity for the shares.
The current public market is highly illiquid. Since, as a practical
matter, for several years, there has existed very little liquidity for the
Company's Common Stock, the Company believes that, if the Company has fewer
than 300 stockholders of record and terminates it SEC Reporting Obligations,
deregistering would have little effect on unaffiliated stockholders and would
be outweighed by the benefits of terminating the Company's SEC Reporting
Obligations.
Cessation of Publicly Available Information. If the Company were to
terminate its SEC Reporting Obligations, the Company would no longer file,
among other things, annual or quarterly reports with the SEC. In addition,
the Company, its executives and its directors would no longer be subject to
Section 13, Section 14 and Section 16 of the Exchange Act. Information
regarding the Company's business, results of operations and financial
condition that is currently available to the general public and the Company's
investors would not be available if the Company were to terminate the
registration of the Company's securities and the Company's SEC Reporting
Obligations. As a result of termination of the Company's SEC Reporting
Obligations, the remaining stockholders after the Offer would not receive the
benefit of the protections provided to stockholders of a company subject to
SEC Reporting Obligations, including, but not limited to, certain corporate
governance, reporting, and management certifications required under the
Xxxxxxxx-Xxxxx Act of 2002 and disclosure and liability applicable to reports
and statements made pursuant to the requirements of the Exchange Act. If
Company were to terminate its SEC Reporting Obligations, it would continue to
report to its stockholders in accordance with Virginia law. The Company would
continue to hold annual meetings of stockholders as required under Virginia
law and in conjunction with such meetings distribute proxy materials and an
annual report that are similar to, but likely not as extensive as, those that
would be required if the Company remained subject to the SEC Reporting
Obligations. Under Virginia law, the Company is not required to mail or
otherwise distribute quarterly or annual reports to stockholders. However,
the Company presently intends that, should its SEC Reporting Obligations
cease, it would report its quarterly and annual financial results through its
web site. The board of directors does not believe that this factor makes a
transaction involving a termination of the Company's SEC Reporting
Obligations unfair to unaffiliated stockholders because any detriment to
unaffiliated stockholders that may result from the termination of the
registration of the Company's securities and the Company's periodic filings
would be offset by the anticipated cost-saving benefits to the Company of no
longer being required to publicly file such reports.
Inability to participate in any future increase in the value of the
Company's Common Stock. Eligible stockholders who tender their shares in
the Offer will have no further interest in the Company, and thus will not
have the opportunity to participate in the potential upside of any increase
in the value of such shares. The board of directors does not consider this
factor unfavorable to unaffiliated eligible stockholders because those
unaffiliated eligible stockholders who desire to continue to hold shares of
the Company's Common Stock after the Offer can do so by electing not to
tender.
Procedural Factors Disfavoring the Offer and Interests of the
Company's Directors and Executive Officers in the Offer
Among the factors weighing against the procedural fairness of the Offer
is the fact that approval of the majority of unaffiliated stockholders will
not be required, that the applicable laws do not provide for appraisal rights
to stockholders of the Company, and that the special committee of
independent members of the board of directors did not engage an unaffiliated
representative to act solely on behalf of unaffiliated stockholders for the
purposes of negotiating the terms of the Offer, although the independent
committee did receive a report from Xxxx Street Partners regarding different
valuations for the Company.
However, even though it was not required, the board of directors and a
special committee of its independent members unanimously approved the Offer.
As described above, a special committee of the independent members of the
board of directors determined the purchase price in the Offer taking into
consideration a report provided by outside financial analysts from Xxxx
Street Partners. After detailed discussions with Xxxx Street Partners, the
special committee concluded and recommended to the board of directors that a
fair price, in the circumstances and for the limited purpose of the odd-lot
tender discussed above, is $2.75 per share. Although there is no party to
negotiate on behalf of the unaffiliated eligible stockholders, the board of
directors is tasked with determining a fair price to offer all eligible
stockholders and, considering that the maximum number of shares eligible for
tender in the Offer is equal to less than 2.73% of the outstanding Common
Stock, the board of directors, which includes individuals with years of
investment experience and experience assessing strategic alternatives for the
Company, did not deem the expense of motivating an unaffiliated eligible
stockholder to negotiate the price or represent solely the interest of the
unaffiliated eligible stockholders to be practical. Finally, the Company
believes that the board of directors' long-standing familiarity with the
Company, the Company's unique history and financial condition, and the
Company's prospects make the time and expense of negotiating with an
independent representative unnecessary.
Furthermore, the applicable laws of the Commonwealth of Virginia, the
jurisdiction under which the Company is incorporated, do not provide for
appraisal rights for the fair value of the shares of Common Stock of the
Company for stockholders who do tender their shares in the Offer.
Despite the fact that the Offer has not been structured to require an
approval of a majority of unaffiliated stockholders for the reasons discussed
above or provide for appraisal rights, the board of directors believes that,
because (1) the consideration to be paid for each share of Common Stock of
the Company will be the same in the Offer irrespective of whether such shares
are held by affiliated or unaffiliated eligible stockholders and (2)
affiliated stockholders are not eligible to participate in the Offer, such
factors favor the procedural fairness to unaffiliated stockholders and
sufficiently protect the rights of the unaffiliated stockholders of the
Company in the Offer.
The Offer was approved unanimously by a special committee of the
independent members of the board of directors and by our board of directors,
including all of the board of directors who are not Company employees, on
April 30, 2008. The board of directors appointed a special committee of
independent directors. In addition, the independent committee and the board
of directors obtained an unaffiliated representative to prepare a report
relating to the value of the Company, but not to the fairness of the
consideration, to be offered pursuant to the Offer. The board of directors
has determined that the engagement of an unaffiliated stockholder
representative on behalf of unaffiliated stockholders to not be necessary,
practical or advisable and to constitute an unnecessary expense in light of
the very small size of the strategic transactions contemplated by the
Company, including the Offer. Furthermore, the Offer is voluntary and the
purchase price offered represents a premium over the current market price on
the record date and will be less costly to tendering record stockholders than
ordinary open market sales because of the absence of brokerage commissions.
Also, stockholders, including those ineligible to participate in the
Offer, have been notified of the Offer and the implications of the
transaction on them by receipt of a copy of this Offer to Purchase and have
the opportunity to sell their shares before or after completion of the Offer.
The Company's directors and officers are not eligible to participate in
the Offer because each either holds more than 100 or no shares of the Common
Stock. As a result of the Offer, the stockholders who own more than 100
shares of Common Stock as of the date of this Offer to Purchase, such as
certain of the Company's executive officers and directors, will slightly
increase their percentage ownership interest in the Company. However, because
such increases will be minimal and because ownership of the majority of the
Company's shares is highly concentrated, any increase in ownership percentage
by the affiliated stockholders resulting from the Offer will not have a
material impact on the ability of affiliated stockholders to control the
Company or the inability of the unaffiliated stockholders to control the
Company. Therefore, the board of directors has determined the equal treatment
of holders (in this case the fact that the per share consideration to be paid
in the Offer will be the same for every eligible stockholder) to be a more
material factor than any slight increase in the ownership of the Company by
the affiliated stockholders and the already concentrated ownership of the
Company by its large stockholders.
Fairness of the Offer
---------------------
The board of directors of the Company and a special committee of its
independent members have unanimously approved the Offer and declared it
advisable, in the best interests of, and substantively and procedurally fair
to, the Company's unaffiliated stockholders, whether or not they are eligible
to participate.
Neither we nor any member of our board of directors, the Secretary or
the Depositary makes any recommendation to you as to whether you should
tender or refrain from tendering your shares. Neither we nor any member of
our board of directors, the Secretary or the Depositary has authorized any
person to make any recommendation with respect to the Offer. You must make
your own decision as to whether to tender your shares. In doing so, you
should consult your own investment and tax advisors, and read carefully and
evaluate the information in this Offer to purchase and in the related Letter
of Transmittal, including our reasons for making the Offer.
THE OFFER
1. General.
Upon the terms and subject to the conditions of the Offer, we are
offering to purchase all shares of our Common Stock held by stockholders who
own of record or beneficially 100 or fewer shares of our Common Stock as of
the close of business on May 7, 2008, the Record Date. Properly tendered
shares by these odd-lot stockholders will be purchased at a price of $2.75
per share net to the seller in cash, less any applicable withholding taxes
and without interest. The purchase price for the Offer was determined by a
special committee of the independent members of the board of directors and
approved by the entire board of directors. Payment for properly tendered
shares will be made promptly upon the expiration of the Offer.
You may participate in the Offer and tender your shares only if you are
_ the owner of record of 100 or fewer shares of the Company's Common
Stock on the Record Date; or
_ the beneficial owner of 100 or fewer shares of the Company's Common
Stock held in "street name" on the Record Date; these shares will
often be held in a brokerage account maintained by you.
Participation in the Offer is voluntary. You may choose to continue to
hold your shares and retain your rights as a stockholder. If you are a holder
of 100 or fewer shares of our Common Stock and you elect to accept this
Offer, however, you must tender all of your shares of Common Stock. Only
shares properly tendered will be purchased.
The Offer is not conditioned on any minimum number of shares being
tendered. We will not accept any alternative, conditional or contingent
tenders. Any tender of shares by any eligible stockholder must be for all
shares of the Company's Common Stock owned by such stockholder. We reserve
the right in our discretion to reject any improper tender. If we fail at any
time to exercise our rights, it shall not constitute a waiver of those
rights.
The term "expiration date" means 5:00 P.M., New York City time, on
[_______________________], unless and until we, in our sole discretion, shall
have extended the period of time during which the Offer will remain open, in
which event the term "expiration date" shall refer to the latest time and
date at which the Offer, as so extended by us, shall expire. See Section 14
for a description of our right to extend, delay, terminate or amend the
Offer.
This Offer to Purchase and the related Letter of Transmittal will be
mailed to record holders of the shares and will be furnished to brokers,
dealers, commercial banks, trust companies and other nominees and similar
persons whose names, or the names of whose nominees, appear on our
stockholder list or, if applicable, who are listed as participants in a
clearing agency's security position listing for subsequent transmittal to
beneficial owners of shares.
2. Purpose of the Offer; Certain Effects of the Offer.
The Company seeks to reduce the administrative burden associated with
having a significant number of holders of a small number of shares. The Offer
also may result in the Company having fewer than 300 holders of record of its
Common Stock, which would enable the Company to terminate its SEC Reporting
Obligations and continue future operations as a non-reporting company,
thereby relieving the Company of the costs and administrative burdens
associated with operating as a company subject to SEC Reporting Obligations.
See "Special Factors."
Our board of directors, including a special committee of the independent
members of the board of directors, has approved the Offer. However, neither
we nor any member of our board of directors, the Secretary or the Depositary
makes any recommendation to you as to whether you should tender or refrain
from tendering your shares. You must make your own decision as to whether to
tender your shares.
Shares we acquire pursuant to the Offer will become unissued shares.
Except as otherwise disclosed in this Offer to Purchase, we currently
have no plans, proposals or negotiations that relate to or would result in:
_ any extraordinary transaction, such as a merger, reorganization or
liquidation, involving us or any of our subsidiaries;
_ any purchase, sale or transfer of an amount of our assets or any of
our subsidiaries' assets which is material to us and our
subsidiaries, taken as a whole;
_ any material change in our present board of directors or management
or any plans or proposals to change the number or the terms of
directors (although we may fill the existing vacancy and any other
vacancies arising on the board of directors) or to change any
material term of the employment contract of any executive officer;
_ any material change in our present dividend rate or policy, our
indebtedness or capitalization, corporate structure or business;
_ the termination or suspension of our obligation to file reports
under Sections 13(a) or 15(d) of the Exchange Act;
_ the acquisition or disposition by any person of our securities; or
_ any changes in our charter, bylaws or other governing instruments or
other actions that could impede the acquisition of control of us.
Nothing in this Offer will preclude us from pursuing, developing or engaging
in future plans, proposals or negotiations that relate to or would result in
one or more of the foregoing events, subject to applicable law.
3. Procedures for Tendering Shares.
Proper Tender of Shares. For shares to be tendered pursuant to the
Offer, the certificates for such shares (or confirmation of receipt of such
shares pursuant to the procedure for book-entry transfer set forth below),
together with a properly completed and duly executed Letter of Transmittal
(or a manually signed facsimile of the Letter of Transmittal) and any other
documents required by the Letter of Transmittal, must be received before 5:00
P.M., New York City time, on [_____________________] by the Depositary at the
address set forth on the back cover of this Offer to Purchase.
Stockholders holding their shares through a broker, dealer, commercial
bank, trust company or other nominee must contact the nominee in order to
tender their shares. Stockholders who hold shares through nominees are urged
to consult their nominees to determine whether transaction costs may apply if
stockholders tender shares through the nominees and not directly to the
Depositary.
Method of Delivery. Payment for shares tendered and accepted for
payment pursuant to the Offer will be made only after timely receipt by the
Depositary of:
_ one of (a) certificates for the shares or (b) a timely confirmation
of the book-entry transfer of the shares into the Depositary's
account at the Book-Entry Transfer Facility as described below;
_ a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile of the Letter of Transmittal); and
_ any other documents required by the Letter of Transmittal.
The method of delivery of all documents, including certificates for
shares, the Letter of Transmittal and any other required documents, is at the
election and risk of the tendering stockholder. If delivery is by mail, then
registered mail with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to ensure timely
delivery.
All deliveries in connection with the Offer, including an Letter of
Transmittal and certificates for shares, must be made to the Depositary and
not to us, the Secretary or the Book-Entry Transfer Facility. ANY DOCUMENTS
DELIVERED TO US, THE SECRETARY OR THE BOOK-ENTRY TRANSFER FACILITY WILL NOT
BE FORWARDED TO THE DEPOSITARY AND WILL NOT BE DEEMED TO BE PROPERLY
TENDERED.
Book-Entry Delivery. The Depositary will establish an account with
respect to the shares for purposes of the Offer at the Book-Entry Transfer
Facility within two business days after the date of this Offer to Purchase,
and any financial institution that is a participant in the Book-Entry
Transfer Facility's system may make book-entry delivery of the shares by
means of a book-entry transfer by causing the Book-Entry Transfer Facility to
transfer shares into the Depositary's account in accordance with the Book-
Entry Transfer Facility's procedures for transfer. Although delivery of
shares may be effected through a book-entry transfer into the Depositary's
account at the Book-Entry Transfer Facility, Book-Entry Transfer Facility
participants must deliver a properly completed and duly executed Letter of
Transmittal and any other required documents to the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase before the
expiration date. Book-Entry Transfer Facility participants may deliver an
"Agent's Message" as a substitute for a Letter of Transmittal. An "Agent's
Message" is a message transmitted by the Book-Entry Transfer Facility to, and
received by, the Depositary, 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 that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that we may enforce such agreement against the participant. Delivery of the
Letter of Transmittal and any other required documents to the Book-Entry
Transfer Facility does not constitute delivery to the Depositary.
Return of Unpurchased Shares. If any tendered shares are not
purchased under the Offer, we will return certificates for unpurchased shares
promptly after the expiration or termination of the Offer or, in the case of
shares tendered by book-entry transfer at the Book-Entry Transfer Facility,
the shares will be credited to the appropriate account maintained by the
tendering stockholder at the Book-Entry Transfer Facility, in each case
without expense to the stockholder.
Determination of Validity; Rejection of Shares; Waiver of Defects; No
Obligation to Give Notice of Defects. All questions as to the number of
shares to be accepted, the purchase price to be paid for shares to be
accepted and the validity, form, eligibility (including time of receipt) and
acceptance for payment of any tender of shares will be determined by us, in
our sole discretion, and our determination will be final and binding on all
parties. We reserve the absolute right to reject any or all tenders of any
shares that we determine are not in proper form or the acceptance for payment
of or payment for which may, in the opinion of our counsel, be unlawful. We
also reserve the absolute right to waive any of the conditions of the Offer
on or prior to the expiration date, or any defect or irregularity in any
tender with respect to any particular shares or any particular stockholder
(whether or not we waive similar defects or irregularities in the case of
other stockholders), and our interpretation of the terms of the Offer will be
final and binding on all parties. In the event a condition is waived with
respect to any particular stockholder, the same condition will be waived with
respect to all stockholders. No tender of shares will be deemed to have been
properly made until all defects or irregularities have been cured by the
tendering stockholder or waived by us. We will not be liable for failure to
waive any condition of the Offer, or any defect or irregularity in any tender
of shares. Neither we nor the Depositary, the Secretary or any other person
will be obligated to give notice of any defects or irregularities in tenders,
nor will any of the foregoing incur any liability for failure to give any
such notification.
Tendering Stockholder's Representation and Warranty; Our Acceptance
Constitutes an Agreement. A tender of our Common Stock in accordance with
the procedures described above will constitute the tendering stockholder's
acceptance of the terms and conditions of the Offer. Our acceptance for
payment of Common Stock tendered pursuant to the Offer will constitute a
binding agreement between the tendering stockholder and us on the terms and
subject to the conditions of the Offer.
Each stockholder that validly tenders shares pursuant to the Offer shall
be deemed to have represented, warranted and agreed that:
_ Such stockholder has full power and authority to tender, sell,
assign and transfer the shares and, when the same are accepted for
payment, the Company will acquire good title thereto, free and clear
of all liens, security interests, restrictions, charges, claims,
encumbrances, conditional sales agreements or other similar
obligations relating to the sale or transfer of the shares, and the
same will not be subject to any adverse claim or right;
_ Such stockholder will, upon request by the Depositary or us, execute
any additional documents deemed by the Depositary or us to be
necessary or desirable to complete the sale, assignment and transfer
of the shares (and any and all such other shares or other securities
or rights), all in accordance with the terms of the Offer; and
_ All authority conferred or agreed to be conferred pursuant to the
Letter of Transmittal shall be binding on the successors, assigns,
heirs, personal representatives, executors, administrators and other
legal representatives of such stockholder and shall not be affected
by, and shall survive, the death or incapacity of the stockholder.
Lost or Destroyed Certificates. Stockholders whose certificates for
part or all of their shares have been lost, destroyed or stolen may
participate in the Offer. If an Letter of Transmittal is received without
share certificate(s) representing the shares being tendered, the
certificate(s) will be considered lost, and the tendering stockholder's
signature on the Letter of Transmittal will acknowledge agreement with the
terms of the Offer and the Statement for Lost Stock Certificate(s) included
in the Letter of Transmittal. An insurance bonding and filing fee of three
percent (3%) of the value of the lost stock certificate(s) to secure against
the risk that the certificates may be subsequently recirculated will be
deducted from the payment for the tendered shares. Questions regarding lost
stock certificates may be directed to the Secretary at (000) 000-0000.
Backup Withholding.
Under the U.S. federal income tax laws, payments to a tendering
stockholder may be subject to "backup withholding" at the applicable
statutory rate (currently 28%), unless a tendering stockholder:
_ provides a correct taxpayer identification number (which, for an
individual stockholder, is the stockholder's social security number)
and any other required information; or
_ is an exempt recipient and, when required, demonstrates this fact
and otherwise complies with applicable requirements of the backup
withholding rules.
A stockholder that does not provide a correct taxpayer identification
number may be subject to penalties imposed by the Internal Revenue Service
(the "IRS"). To prevent backup withholding on cash payable under the Offer,
each stockholder who has not previously provided the Depositary with his or
her correct taxpayer identification number and certified that he or she is
not subject to backup withholding should do so by completing an IRS Form W-9,
a copy of which may be obtained from the Depositary, and submitting such form
to the Depositary. Non-U.S. Holders should complete and sign the appropriate
IRS Form W-8, a copy of which may be obtained from the Depositary, to avoid
backup withholding. See Section 13 and Instruction 10 to the Letter of
Transmittal.
Backup withholding is not an additional tax. Taxpayers may use amounts
withheld as a credit against their U.S. federal income tax liability or may
claim a refund of such amounts if they timely provide certain required
information to the IRS. See Section 13 on page 28.
4. No Withdrawal Rights.
Tenders of shares pursuant to the Offer are irrevocable. If we extend
the Offer, are delayed in our purchase of shares or are unable to purchase
shares pursuant to the Offer for any reason, then, without prejudice to our
rights under the Offer, the Depositary may, subject to applicable law, retain
tendered shares on our behalf, and the shares may not be withdrawn.
5. Purchase of Shares and Payment of Purchase Price.
On the terms and subject to the conditions of the Offer, promptly
following the expiration date, we will accept for payment and pay for (and
thereby purchase) shares properly tendered prior to the expiration date. We
expect the proceeds checks to be mailed approximately ten business days after
the expiration date of the Offer.
For purposes of the Offer, we will be deemed to have accepted for
payment (and therefore purchased) shares that are properly tendered only
when, as and if we give oral or written notice to the Depositary of our
acceptance of the shares for payment pursuant to the Offer. All tendering
eligible stockholders, by executing the Letter of Transmittal, waive any
right to receive notice of the acceptance for payment of their shares.
On the terms and subject to the conditions of the Offer, promptly after
the expiration date, we will accept for purchase and pay the per share
purchase price for all of the shares accepted for payment in accordance with
the Offer. In all cases, payment for shares tendered and accepted for payment
in accordance with the Offer will be made promptly, but only after timely
receipt by the Depositary of:
_ certificates for shares or a timely confirmation of a book-entry
transfer of shares into the Depositary's account at the Book-Entry
Transfer Facility;
_ a properly completed and duly executed Letter of Transmittal; and
_ any other documents required by the Letter of Transmittal.
We will pay for shares purchased pursuant to the Offer by depositing the
aggregate purchase price for the shares with the Depositary, which will act
as agent for tendering stockholders for the purpose of receiving payment from
us and transmitting payment to the tendering stockholders. Certificates for
all shares tendered and not purchased will be returned, or, in the case of
shares tendered by book-entry transfer, will be credited to the account
maintained with the Book-Entry Transfer Facility by the participant who
delivered the shares, to the tendering stockholder promptly after the
expiration or termination of the Offer at our expense.
Under no circumstances will interest be paid on the Purchase Price for
the shares, regardless of any delay in making payment.
6. Conditional Tender of Shares.
We will not accept any alternative, conditional or contingent tenders..
7. Conditions of the Offer.
The Offer is not conditioned on any minimum number of shares being
tendered; the Offer is, however, contingent as to each eligible stockholder,
such stockholder's proper tender of all of the shares of Common Stock held
either beneficially or of record by such stockholder. Any tender of shares by
any eligible stockholder must be for all shares of the Company's Common Stock
owned by such stockholder. We reserve the right in our discretion to reject
any improper tender. If we fail at any time to exercise our rights, it shall
not constitute a waiver of those rights. Notwithstanding any other provision
of the Offer, we will not be required to accept for payment, purchase or pay
for any shares tendered, and may terminate or amend the Offer or may postpone
the acceptance for payment of or the payment for shares tendered, subject to
applicable law.
8. Price Range of Shares; Dividends.
The Company's Common Stock trades on the over the counter markets under
the symbol ("XXXX.XX"), and is currently quoted on the "Pink Sheets," a
centralized quotation service. The following table sets forth the high and
low sales prices for the periods indicated, as obtained from market makers in
the Company's stock.
5/01/06 8/01/06 11/01/06 2/01/07 5/01/07 8/01/07 11/01/07 2/01/08
7/31/06 10/31/06 1/31/07 4/30/07 7/31/07 10/31/07 1/31/08 4/30/08
------- ------- ------- ------- ------- ------- ------- -------
$2.55 $2.49 $2.40 $2.38 $2.23 $2.40 $2.30 $2.29
$1.98 $2.13 $2.05 $2.01 $2.12 $2.05 $2.07 $1.60
The prices shown reflect published prices, without retail mark-up, markdown,
or commissions and may not necessarily reflect actual transactions.
There were approximately 398 common stockholders of record as of May 7,
2008.
The Company paid no cash dividends during the fiscal years ended July
31, 2007 or 2006. Further, there are covenants in the Company's current
credit agreements that prohibit cash dividends without the lenders'
permission. Subject to lenders' approval, any future determination to pay
cash dividends will be made at the discretion of the board of directors of
the Company, which determines the Company's dividend policy based on its
results of operations, capital requirements and other factors that the board
of directors deems relevant.
On [____________________], the last full trading day before the
announcement and commencement of the Offer, the closing price of our Common
Stock was [$___________] per share. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT
MARKET QUOTATIONS FOR OUR COMMON STOCK.
9. Source and Amount of Funds.
We estimate that, as of May 7, 2008, the record date for the Offer,
approximately 427 eligible stockholders may participate in the Offer. These
eligible stockholders own or have the right to acquire an estimated 25,825
issued and outstanding shares of our Common Stock. Assuming all of these
eligible stockholders elect to participate in the Offer, and the shares are
properly tendered at the offer price of $2.75 per share, approximately
$71,018.75 will be required to purchase such shares. We expect that the
maximum aggregate cost of these purchases, including all fees and expenses
applicable to the Offer, will be approximately 233,265.75. We will borrow an
amount up to $233,265.75, the maximum aggregate purchase price for the
tendered shares and fees and expenses, from Xxxxx X. Xxxxxxxx, Xx. at an
interest rate of prime plus one percent to purchase the tendered shares. The
amount we borrow from Xxxxx X. Xxxxxxxx, Xx. to purchase the tendered shares
as well as fees and other expenses related to the transaction are not
expected to have any material adverse effect on the Company's capitalization,
liquidity, results of operations or cash flows.
The Company's cash and restricted cash, as of January 31, 2008 and July
31, 2007, were approximately $130,000 and $694,000, respectively.
10. Certain Information Concerning Us.
We are subject to the informational filing requirements of the Exchange
Act which obligates us to file reports, statements and other information with
the SEC relating to our business, financial condition and other matters.
Information, as of particular dates, concerning our directors and officers,
their remuneration, the principal holders of our securities and any material
interest of these persons in transactions with us, among other matters, are
required to be disclosed in proxy statements distributed to our stockholders
and filed with the SEC. As required by Exchange Act Rule 13e-3, we have also
filed with the SEC a Transaction Statement on Schedule 13E-3 (the "Schedule
13E-3"), which includes additional information relating to the Offer.
These reports, statements and other information can be inspected and
copied at the public reference facilities maintained by the SEC at 000 X
Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000. Copies of this material may also be
obtained by mail, upon payment of the SEC's customary charges, from the
Public Reference Section of the SEC at 000 X Xxxxxx, X.X., Xxxxxxxxxx, X.X.
00000. The SEC also maintains a web site on the Internet at
xxxx://xxx.xxx.xxx that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
SEC, including the Company's Schedule 13E-3 and documents of the Company
incorporated by reference. You may obtain information about the Public
Reference Room by calling the SEC for more information at 1-800-SEC-0330.
Incorporation by Reference. The rules of the SEC allow us to
"incorporate by reference" information into this document, which means that
we can disclose important information to you by referring you to another
document filed separately with the SEC. We hereby incorporate by reference
each of the following documents:
SEC FILINGS PERIOD OR DATE FILED
-------------------------------- -----------------------------------
Annual Report on Form 10-K Year ended July 31, 2007
Quarterly Reports on Form 10-Q Quarters ended October 31, 2007
and January 31, 2008
Current Reports on Form 8-K Filed on March 13, 2008, January 7,
2008 and September 6, 2007.
Proxy Statement Filed on October 23, 2007
You can obtain any of the documents incorporated by reference in this
document from us or from the SEC's web site xxx.xxx.xxx. Documents
incorporated by reference are available from us without charge, excluding any
exhibits to those documents, at our principal executive offices located at
0000 X.X. Reading Drive, Manassas, Virginia 20109 and our phone number is
(000) 000-0000. Please be sure to include your complete name and address in
your request. If you request any incorporated documents, we will mail them to
you by first class mail, or another equally prompt means, within one business
day after we receive your request.
Summary Financial Information
Before making a decision to tender your shares, you should read the
financial information incorporated by reference into this Offer to Purchase
in their entirety. For information on how to obtain the financial information
incorporated by reference, see "Incorporation by Reference" on page 24.
Certain Transactions
Before making a decision to tender your shares, you should read the
section entitled "Certain Transactions" in the Company's Proxy Statement
filed October 23, 2007, which is incorporated by reference into this Offer to
Purchase in its entirety. For information on how to obtain the information
incorporated by reference, see "Incorporation by Reference" on page 24.
11. Interests of Directors and Executive Officers; Transactions and
Arrangements Concerning the Shares.
Beneficial Ownership. A person is deemed to be a beneficial owner of
the Company's Common Stock if that person has voting and/or investment power
with respect to such Common Stock or has the right to acquire such Common
Stock within 60 days. The following table sets forth information regarding
each person known by the Company to beneficially own 5% or more of the
outstanding shares of Common Stock of the Company.
Number of Shares
Name and Address of Beneficial Owners of of Common Percent of
More Than 5% of the Common Stock of the Company Stock Common Stock
----------------------------------------------- ------------ ------------
Xxxxx X. Xxxxxxxx, Xx. 1,916,789 (a) 51.9%
0000-X Xxxxxxxx Xxxx
Xxxxx Xxxxxx, Xxxxxxxx 00000
Xxxxx X. Xxxxxxxx, III 1,272,409 (b) 34.5%
Xxxxxxxx Industries, Incorporated
8624 X.X. Reading Drive
Manassas, Virginia 20109
-----------------------------------------------
(a) Includes 176,879 shares owned by his wife, as to which Xx. Xxxxxxxx,
Xx. disclaims beneficial ownership; 826,456 owned or controlled by the
Xxxxxxxx Family Limited Partnership of which Xx. Xxxxxxxx, Xx. is the
control person and beneficial owner; 338,300 shares by Xxxxxxxx
Enterprises of Georgia, Inc., of which Xx. Xxxxxxxx Xx. is the control
person as Chairman of the Board and a beneficial owner (as are Xx. Xxxxx
X. Xxxxxxxx, III, and X. Xxxxxx Xxxxxxxx); 13,000 shares as trustee for
minor grandchildren (as to which Xx. Xxxxxxxx, Xx. disclaims beneficial
ownership); and 50,100 shares held by the Xxxxxxxx Family Foundation, a
charitable organization exempt under Section 501(c)(3) of the Internal
Revenue Code of 1986 (as to which Xx. Xxxxxxxx, Xx. disclaims beneficial
ownership). The Foundation's purpose is to use and apply its income and
principal assets exclusively for charitable, scientific, literary, and
educational purposes. Xx. Xxxxxxxx, Xx. is a trustee of the Foundation
and votes the stock. The Xxxxxxxx Family Limited Partnership has
pledged 150,000 shares to a financial institution to secure indebtedness
of the Xxxxxxxx Family Limited Partnership and Xxxxxxxx Enterprises of
Georgia, Inc. has pledged 338,300 shares to a financial institution to
secure indebtedness of the Xxxxxxxx Enterprises of Georgia, Inc. These
pledges grant dispositive power to the lenders, who may dispose of the
shares without further consent of the owner in the event of default on
the underlying indebtedness. Includes options granted to directors.
(b) Includes 826,456 shares owned or controlled by the Xxxxxxxx Family
Limited Partnership, duplicative of the shares listed for Xx. Xxxxxxxx,
Xx., but included here because Xx. Xxxxxxxx, III, has a beneficial
interest in these shares; 338,300 shares owned by Xxxxxxxx Enterprises
of Georgia, Inc., duplicative of shares listed for Xx. Xxxxxxxx, Xx.,
but listed here because Xx. Xxxxxxxx, III, has a beneficial interest;
344 shares owned by his wife to which Xx. Xxxxxxxx, XXX, disclaims
beneficial interest; and 3,000 shares held in trust for his minor child.
Xx. Xxxxxxxx, XXX, is also trustee of the Xxxxxxxx Family Foundation,
which holds 50,100 shares that are not included in Xx. Xxxxxxxx XXX's
total but are included in the shares controlled by Xx. Xxxxxxxx, Xx.
Includes options granted to directors. The Xxxxxxxx Family Limited
Partnership has pledged 150,000 shares to a financial institution to
secure indebtedness of the Xxxxxxxx Family Limited Partnership and
Xxxxxxxx Enterprises of Georgia, Inc. has pledged 338,300 shares to a
financial institution to secure indebtedness of the Xxxxxxxx Enterprises
of Georgia, Inc. These pledges grant dispositive power to the lenders,
who may dispose of the shares without further consent of the owner in
the event of default on the underlying indebtedness. Includes options
granted to directors.
The following table sets forth information as of May 7, 2008 regarding
the beneficial ownership of shares of Common Stock by the current directors
and executive officers, and by all current directors and executive officers
as a group. The persons as to whom information is given in the table below
have sole voting and investment power over the shares beneficially owned by
them, unless otherwise noted in the footnotes following the table. Unless
otherwise indicated, the address of each of the persons identified in the
table below is: c/x Xxxxxxxx Industries, Incorporated, 8624 X.X. Reading
Drive, Manassas, Virginia 20109.
Percent of Common
Certain Beneficial Owners of Shares Number of Shares Stock
of Common Stock of the Company of Common Stock (*Less than 1%)
----------------------------------- ----------------- ----------------
Xxxxx X. Xxxxxxxx, Xx.
0000-X Xxxxxxxx Xxxx
Xxxxx Xxxxxx, Xxxxxxxx 00000 1,916,789 (a) 51.9%
Xxxxx X. Xxxxxxxx, III 1,272,409 (b) 34.5%
Xxxxxxx X. Xxxxxx 32,295 (c) *
Xxxxxxx X. Xxx 23,795 (d) *
Xxxx X. Xxxxxxx 8,149 (e) *
All Directors and Current Executive
Officers as a Group (10 Persons) 2,120,842 (f) 57.4%
-----------------------------------
(a) Includes 176,879 shares owned by his wife, as to which Xx. Xxxxxxxx, Xx.
disclaims beneficial ownership; 826,456 owned or controlled by the
Xxxxxxxx Family Limited Partnership of which Xx. Xxxxxxxx, Xx. is the
control person and beneficial owner; 338,300 shares by Xxxxxxxx
Enterprises of Georgia, Inc., of which Xx. Xxxxxxxx Xx. is the control
person as Chairman of the Board and a beneficial owner (as are Xx. Xxxxx
X. Xxxxxxxx, XXX, and X. Xxxxxx Xxxxxxxx); 11,500 shares as trustee for
minor grandchildren (as to which Xx. Xxxxxxxx, Xx. disclaims beneficial
ownership); and 50,100 shares held by the Xxxxxxxx Family Foundation, a
charitable organization exempt under Section 501(c)(3) of the Internal
Revenue Code of 1986 (as to which Xx. Xxxxxxxx, Xx. disclaims beneficial
ownership). The Foundation's purpose is to use and apply its income and
principal assets exclusively for charitable, scientific, literary, and
educational purposes. Xx. Xxxxxxxx, Xx. is a trustee of the Foundation
and votes the stock. The Xxxxxxxx Family Limited Partnership has
pledged 150,000 shares to a financial institution to secure indebtedness
of the Xxxxxxxx Family Limited Partnership and Xxxxxxxx Enterprises of
Georgia, Inc. has pledged 338,300 shares to a financial institution to
secure indebtedness of the Xxxxxxxx Enterprises of Georgia, Inc. These
pledges grant dispositive power to the lenders, who may dispose of the
shares without further consent of the owner in the event of default on
the underlying indebtedness. Includes options granted to directors.
(b) Includes 826,456 shares owned or controlled by the Xxxxxxxx Family
Limited Partnership, duplicative of the shares listed for Xx. Xxxxxxxx,
Xx., but included here because Xx. Xxxxxxxx, III, has a beneficial
interest in these shares; 338,300 shares owned by Xxxxxxxx Enterprises
of Georgia, Inc., duplicative of shares listed for Xx. Xxxxxxxx, Xx.,
but listed here because Xx. Xxxxxxxx, III, has a beneficial interest;
344 shares owned by his wife to which Xx. Xxxxxxxx, XXX, disclaims
beneficial interest; and 3,000 shares held in trust for his minor child.
Xx. Xxxxxxxx, XXX, is also trustee of the Xxxxxxxx Family Foundation,
which holds 50,100 shares that are not included in Xx. Xxxxxxxx XXX's
total but are included in the shares controlled by Xx. Xxxxxxxx, Xx.
Includes options granted to directors. The Xxxxxxxx Family Limited
Partnership has pledged 150,000 shares to a financial institution to
secure indebtedness of the Xxxxxxxx Family Limited Partnership and
Xxxxxxxx Enterprises of Georgia, Inc. has pledged 338,300 shares to a
financial institution to secure indebtedness of the Xxxxxxxx Enterprises
of Georgia, Inc. These pledges grant dispositive power to the lenders,
who may dispose of the shares without further consent of the owner in
the event of default on the underlying indebtedness. Includes options
granted to directors.
(c) Includes options granted to directors.
(d) Includes options granted to directors.
(e) Includes options granted to directors.
(f) Includes options granted to directors.
Biographical Information About our Directors and Executive Officers.
Xx. Xxxxx X. Xxxxxxxx, III has held the position of Chairman of the
Board and President since November 1994. On September 8, 1994, he was elected
Chief Financial Officer. He was elected as a vice president of the
Corporation in 1991. For more than five years prior thereto he was an officer
of various Company subsidiaries and remains an officer and/or director of
several subsidiaries.
Xx. Xxxxx X. Xxxxxxxx, Xx., until November 1994, was the Chairman of the
Board and President of Xxxxxxxx Industries, Inc. He is a founder and Chairman
of Bosworth Steel Erectors, Inc., formerly known as the Xxxxxxxx and Xxxxxxx
Company; the Chairman of the Board of Xxxxxxxx Enterprises of Georgia, Inc.;
and the principal owner of Structural Concrete Products and Industrial Alloy
Fabricators, LLC; all organizations that are not otherwise affiliated with
Xxxxxxxx Industries, Inc. Xx. Xxxxxxxx, Xx. is also the Chairman of the
Board of Xxxxxx Group Holdings, a member of the board of Capital Bank, and a
member of the Regulatory Fairness Board of the U.S. Small Business
Administration (SBA).
Xx. Xxxxxxx X. Xxxxxx is a principal with SAS advisors, an area
consulting firm, and Chairman of the Board of Capital Bank, N.A., Rockville,
Maryland. Xx. Xxxxxx serves on the advisory boards of: Prudent Capital, a
mezzanine fund; NextGen Capital, a venture capital fund; and Ategra
Community Financial Institutions, a hedge fund. He is active in a number of
charitable and arts organizations in the Washington, DC metropolitan area.
Xx. Xxxxxxx X. Xxx is founder, President and CEO of Midlothian
Associates, a specialty consulting firm in the utility and construction
field. Prior to founding Midlothian Mr. Xxx was Senior Vice President of
Pepco Holdings, Inc. (PHI), and also President and Chief Executive Officer
of Potomac Electric Power Company (Pepco) and Atlantic City Electric (ACE).
PHI is a regional energy holding company that provides utility service to
nearly two million customers and is the parent company of Pepco, an electric
utility serving Washington, D.C. and suburban Maryland; Delmarva Power, an
electric and gas utility serving Delaware and the rest of the Delmarva
peninsula; and ACE, an electric utility serving southern New Jersey. In his
PHI position, Mr. Xxx was responsible for utility operations across all PHI
utilities. Mr. Xxx is also active in a number of business and civic
organizations, as well as being a registered professional engineer.
Xx. Xxxx X. Xxxxxxx is a self-employed financial consultant, a position
he has held since June 2002. Prior to that time, he was a senior audit
partner in the international accounting firm of Deloitte & Touche. During
his 39 years with the firm, Xx. Xxxxxxx held a variety of positions including
Partner-in-Charge of Audit for the Washington, D.C. practice, Managing
Partner for the Baltimore practice and for several years prior to his
retirement, was Deputy Professional Practice Director for the Washington,
D.C./Baltimore practice. He is presently serving on the board of a privately
held company, and serves on the finance committee of Vital Voices Global
Partnership, Inc., a nonprofit organization supporting the economic and
political advancement of women in developing countries.
Except as otherwise described herein, neither we nor, to the best of our
knowledge, any of our affiliates, directors or executive officers, is a party
to any contract, agreement, arrangement, understanding or relationship with
any other person with respect to any of our securities.
12. Certain Legal Matters; Regulatory Approvals.
The Company is not aware of any material governmental or regulatory
approval required for completion of the Offer, other than compliance with the
applicable federal and state securities laws and the corporate laws of the
Commonwealth of Virginia. The Company is not aware of any license or
regulatory permit that is reasonably likely to be material to our business
that might be adversely affected by our acquisition of shares as contemplated
in the Offer or of any approval or other action by any governmental,
administrative or regulatory authority or agency, domestic, foreign or
supranational, that would be required to consummate the acquisition of shares
in the Offer, other than approvals, filings or notices required under federal
and state securities laws.
13. Certain U.S. Federal Income Tax Consequences.
Treasury Department Circular 230 Notice: To ensure compliance with
Circular 230, stockholders are hereby notified that: any discussion of
federal tax issues contained or referenced to in the Offer is not intended or
written to be used, and cannot be used, by stockholders for the purpose of
avoiding penalties that may be imposed on them under the Internal Revenue
Code of 1986, as amended to the date of the Offer (The "Code"); such
discussion is written in connection with the Offer; stockholders should seek
advice based on their particular circumstances from an independent tax
advisor.
The following is a summary of certain U.S. federal income tax
consequences of the Offer to stockholders whose shares of our Common Stock
are properly tendered and accepted for payment pursuant to the Offer. Those
stockholders who do not participate in the Offer should not incur any U.S.
federal income tax liability from the exchange. This summary is based upon
the Code, existing and proposed U.S. Treasury Regulations promulgated under
the Code, published rulings, administrative pronouncements and judicial
decisions, any changes to which could affect the tax consequences described
in this Offer to Purchase (possibly on a retroactive basis). This summary
addresses only shares of our Common Stock held as capital assets. It does not
address all of the tax consequences that may be relevant to particular
stockholders because of their personal circumstances (including, without
limitation, certain financial institutions, brokers, dealers or traders in
securities or commodities, insurance companies, "S" corporations,
partnerships (including entities treated as partnerships for U.S. federal
income tax purposes), expatriates, tax-exempt organizations, tax-qualified
retirement plans, persons who are subject to alternative minimum tax, persons
who hold shares of our Common Stock as a position in a "straddle" or as part
of a "hedging," "conversion" or "integrated" transaction, or persons that
have a functional currency other than the U.S. dollar). This summary may not
be applicable with respect to shares of our Common Stock acquired as
compensation, upon the exercise of stock options, under a tax-qualified
retirement plan or under our employee stock purchase plan. This summary also
does not address tax considerations arising under any state, local or foreign
laws, or under U.S. federal estate or gift tax laws.
In addition, if a partnership (including any entity treated as a
partnership for U.S. federal income tax purposes) is a stockholder, the tax
treatment of a partner in the partnership will generally depend upon the
status of the partner and the activities of the partnership. A stockholder
that is a partnership, and partners in such partnership, should consult their
own tax advisors regarding the tax consequences of participating in the
Offer. You are urged to consult your tax advisor as to the particular
consequences to you of participating in the Offer.
For purposes of this summary, a "U.S. Holder" is a beneficial owner of
shares of our Common Stock that for U.S. federal income tax purposes is:
_ a citizen or resident of the United States;
_ a corporation (or other entity taxable as a corporation for U.S.
federal income tax purposes) created or organized in or under the
laws of the United States or any state or the District of Columbia;
_ an estate the income of which is subject to U.S. federal income
taxation regardless of its source; or
_ a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or
more U.S. persons has the authority to control all substantial
decisions of the trust, or certain other trusts considered U.S.
Holders for U.S. federal income tax purposes.
A "Non-U.S. Holder" is a beneficial owner of shares of our Common Stock
other than a U.S. Holder or a partnership for U.S. federal income tax
purposes.
Consequences of the Offer to U.S. Holders.
Characterization of the Purchase-Distribution vs. Sale Treatment. Our
purchase of shares of our Common Stock from a U.S. Holder pursuant to the
Offer will be a taxable transaction for U.S. federal income tax purposes. As
a consequence of any such purchase, a U.S. Holder will, depending on the U.S.
Xxxxxx's particular circumstances, be treated either as having sold the U.S.
Holder's shares of our Common Stock or as having received a distribution in
respect of such U.S. Holder's shares of our Common Stock.
The purchase of shares of our Common Stock pursuant to the Offer will be
treated as a sale for any U.S. Holder if, following such purchase, such
holder does not own any shares of our stock, either directly or as a result
of the constructive ownership rules of Section 318 of the Code. Under those
rules, a U.S. Holder is treated as owning not only shares of our Common Stock
actually owned by such holder but also shares of our Common Stock actually
(and in some cases constructively) owned by certain related entities and
individuals. Under the constructive ownership rules, a U.S. Holder will be
considered to own shares of our Common Stock owned, directly or indirectly,
by certain members of the holder's family and certain entities (such as
corporations, partnerships, trusts and estates) in which the U.S. Holder has
an equity interest, as well as certain shares of our Common Stock which the
U.S. Holder has an option to acquire.
A U.S. Holder that continues to own shares of our stock following the
purchase, either directly or as a result of the constructive ownership rules
(described above), will be subject to sale treatment if such holder meets any
of the three tests discussed below (the "Section 302 tests"). The purchase
will be treated as a distribution if such U.S. Holder does not satisfy at
least one of the Section 302 tests. We cannot predict whether any particular
U.S. Holder will be subject to sale or distribution treatment.
A U.S. Holder that is treated as having sold the shares of our Common
Stock purchased by us pursuant to the Offer generally will recognize capital
gain or capital loss (subject to certain limits on deductibility of losses,
including the wash sale rules under the Code) in an amount equal to the
difference between the amount of cash received under the Offer and the U.S.
Holder's tax basis in such shares of our Common Stock. This capital gain or
loss will be long-term capital gain or loss if the U.S. Holder held the
shares of our Common Stock for more than one year as of the date of our
purchase pursuant to the Offer. Currently the maximum long-term capital gain
rate for individual U.S. Holders is 15%. Certain limitations apply to the
deductibility of capital losses by U.S. Holders. A U.S. Holder must calculate
gain or loss separately for each block of shares of our Common Stock
(generally, shares of our Common Stock acquired at the same cost in a single
transaction) that we purchase from a U.S. Holder under the Offer.
If a U.S. Holder is not subject to sale treatment, the full amount
received by the U.S. Holder with respect to our purchase of shares of our
Common Stock under the Offer will be treated as a distribution to the U.S.
Holder with respect to the U.S. Holder's shares of our Common Stock. This
distribution will be treated as a dividend to the U.S. Holder to the extent
of the U.S. Xxxxxx's share of our current and accumulated earnings and
profits, if any, as determined under U.S. federal income tax principles. Such
a dividend would be includible in the U.S. Holder's gross income without
reduction for the tax basis of the shares of our Common Stock exchanged, and
no current loss would be recognized. Currently, dividends are taxable at a
maximum rate for individual U.S. Holders of 15%, which is the same as the
maximum tax rate for long-term capital gains, if certain holding period and
other requirements are met. As of the date of this Offer to Purchase, we
believe that the total amount of our current and accumulated earnings and
profits will be greater than the aggregate amount that we will pay in fees,
expenses and borrow from Xxxxx X. Xxxxxxxx, Xx. to purchase the tendered
shares of our Common Stock. To the extent that the amount received by a U.S.
Holder exceeds the U.S. Xxxxxx's share of our current and accumulated
earnings and profits, the excess first will be treated as a tax-free return
of capital to the extent, generally, of the U.S. Holder's tax basis in its
shares of our Common Stock and any remainder will be treated as capital gain
from the sale of shares of our Common Stock. To the extent that a purchase of
a U.S. Xxxxxx's shares of our Common Stock by us in the Offer is treated as
the receipt of a dividend, the U.S. Xxxxxx's remaining adjusted tax basis
(after the adjustment as described in the preceding sentence) in the
purchased shares of our Common Stock will be added to any shares of our
Common Stock retained by the holder, subject to certain adjustments in the
case of a corporate stockholder.
To the extent that a corporate U.S. Holder is treated as receiving a
dividend, as described above, it may be eligible for a dividends received
deduction (subject to applicable limitations). In addition, any amount
received by a corporate U.S. Holder that is treated as a dividend may
constitute an "extraordinary dividend" under Section 1059 of the Code,
thereby resulting in a reduction of tax basis or possible gain recognition in
an amount equal to the non-taxed portion of the dividend. Corporate U.S.
Holders should consult their own tax advisors as to the application of
Section 1059 of the Code to the Offer, and to the tax consequences of a
dividend treatment of the purchase of shares of our Common Stock pursuant to
this Offer in their particular circumstances.
Section 302 Tests-Determination of Sale or Distribution Treatment.
Our purchase of shares of our Common Stock pursuant to the Offer will be
treated as a sale of the shares of our Common Stock by a U.S. Holder if any
of the following Section 302 tests is satisfied:
_ as a result of the purchase, there is a "complete redemption" of the
U.S. Xxxxxx's equity interest in us;
_ as a result of the purchase, there is a "substantially
disproportionate" reduction in the U.S. Holder's equity interest in
us; or
_ the receipt of cash by the U.S. Holder is "not essentially
equivalent to a dividend."
As indicated above, if none of these tests is met with respect to a
particular U.S. Holder, then our purchase of shares of our Common Stock
pursuant to the Offer will be treated as a distribution. In applying the
Section 302 tests, the constructive ownership rules of Section 318 of the
Code (as discussed above) generally apply.
_ Complete Redemption. The purchase of shares of our Common Stock
pursuant to the Offer will result in a "complete redemption" of a U.S.
Holder's equity interest in the Company, if, immediately after such
purchase, such holder owns, actually and constructively, none of our
shares of our Common Stock. Because the Offer requires a U.S. Holder
to tender all of our Common Stock owned by such stockholder, the
purchase should result in a complete redemption unless such holder
continues to own an interest in the Company as a result of the
constructive ownership rules. In applying the "complete redemption"
test, U.S. Holders may be able to waive the application of
constructive ownership through the family attribution rules, provided
that such holders comply with the provisions of Section 302(c) of the
Code and applicable Treasury Regulations. U.S. Holders wishing to
satisfy the "complete redemption" test through satisfaction of the
special conditions set forth in Section 302(c) of the Code should
consult their tax advisors concerning the mechanics and desirability
of those conditions.
_ Substantially Disproportionate. In general, our purchase of a U.S.
Xxxxxx's shares of our Common Stock pursuant to the Offer will be
"substantially disproportionate" as to a U.S. Holder if, immediately
after the purchase, the percentage of the outstanding shares of our
Common Stock that the U.S. Holder actually and constructively owns
(including shares of our Common Stock constructively owned as a result
of the ownership of options) is less than 80% of the percentage of
the outstanding shares of our Common Stock actually and constructively
owned by the U.S. Holder immediately before the purchase.
_ Not Essentially Equivalent to a Dividend. Our purchase of a U.S.
Xxxxxx's shares of our Common Stock pursuant to the Offer will be
treated as "not essentially equivalent to a dividend" if it results in
a "meaningful reduction" in the U.S. Holder's proportionate interest
in us, given the U.S. Xxxxxx's particular facts and circumstances. The
IRS has indicated in a published ruling that even a small reduction in
the percentage interest of a stockholder whose relative stock interest
in a publicly held corporation is minimal and who exercises no control
over corporate affairs should constitute a "meaningful reduction."
U.S. Holders who intend to qualify for sale treatment by demonstrating
that the proceeds received from us are "not essentially equivalent to
a dividend" are strongly urged to consult their tax advisor because
this test will be met only if the reduction in such holder's
proportionate interest in us is "meaningful" given the particular
facts and circumstances of the holder in the context of the Offer. In
particular, depending on the total number of shares of our Common
Stock purchased pursuant to the Offer, it is possible that a tendering
stockholder's percentage interest in us (including any interest
attributable to shares of our Common Stock constructively owned by the
stockholder as a result of the ownership of options) could increase
even though the total number of shares of our Common Stock held by
such stockholder decreases.
If a U.S. Holder sells shares of our Common Stock to persons other than
us, gain or loss recognized on such sales will be capital gain or loss and
will be long-term capital gain or loss if the holder held the shares of our
Common Stock for more than one year at the date of the sale. If such sale
occurs at or about the time such holder also sells shares of our Common Stock
pursuant to the Offer, and the various sales effected by the U.S. Holder are
part of an overall plan to reduce or terminate such holder's proportionate
interest in us, then the sales to persons other than us may, for U.S. federal
income tax purposes, be integrated with the U.S. Holder's exchange of shares
of our Common Stock pursuant to the Offer and, if integrated, should be taken
into account in determining whether such holder satisfies any of the Section
302 tests with respect to shares of our Common Stock sold to us.
Information Reporting and Backup Withholding. Payments made to
holders in the Offer may be reported to the IRS. In addition, under the U.S.
federal income tax laws, the Depositary will be required to backup withhold
at the applicable statutory rate on the purchase price paid to certain
stockholders (who are not "exempt" recipients) pursuant to the Offer. To
avoid such backup withholding, each such U.S. Holder must provide the
Depositary with such stockholder's taxpayer identification number and certify
that such stockholder is not subject to backup withholding. Stockholders who
have not previously done so, may do so by completing an IRS Form W-9, or
otherwise establish to the satisfaction of the Depositary that such
stockholder is not subject to backup withholding.
Backup withholding is not an additional tax. Any amounts withheld under
the backup withholding rules will be refunded or credited against the
stockholder's U.S. federal income tax liability if certain required
information is furnished to the IRS. Stockholders should consult their own
tax advisors regarding application of backup withholding in their particular
circumstances and the availability of, and procedure for obtaining, an
exemption from backup withholding under current Treasury Regulations.
Consequences of the Offer to Non-U.S. Holders of Shares. The U.S.
federal income tax treatment of our purchase of shares of our Common Stock
from a Non-U.S. Holder pursuant to the Offer will depend on whether such
holder is treated, based on the Non-U.S. Xxxxxx's particular circumstances,
as having sold the tendered shares of our Common Stock or as having received
a distribution in respect of such Non-U.S. Holder's shares of our Common
Stock. The appropriate treatment of the purchase of shares of our Common
Stock will be determined in the manner described above with respect to the
U.S. federal income tax treatment of a purchase of shares of our Common Stock
pursuant to the Offer in the case of U.S. Holders (see "Consequences of the
Offer to U.S. Holders-Section 302 Tests-Determination of Sale or Distribution
Treatment.").
A Non-U.S. Holder that satisfies any of the Section 302 tests explained
above will be treated as having sold the shares of our Common Stock purchased
by us pursuant to the Offer. A Non-U.S. Holder will generally not be subject
to U.S. federal income tax (and would be eligible to obtain a refund of any
amounts withheld as described below) on gain recognized on a sale of shares
of our Common Stock unless any one or more of the following is true:
_ the gain is effectively connected with a trade or business of the
Non-U.S. Holder in the United States and, if certain tax treaties
apply, is attributable to a permanent establishment in the United
States maintained by such holder;
_ in the case of an individual Non-U.S. Holder who holds the stock as
a capital asset, the individual is present in the United States for
183 or more days in the taxable year of the disposition and certain
other conditions are met; or
_ in the case of a Non-U.S. Holder who owns or has owned, directly or
indirectly, during the relevant statutory period more than 5% of our
stock, we are or have been a "U.S. real property holding corporation"
and certain other requirements are met.
We do not believe that we have been or currently are a "U.S. real
property holding corporation." Individual Non-U.S. Holders who are treated,
for U.S. federal income tax purposes, as having sold their shares of our
Common Stock to us pursuant to the Offer and that are present in the United
States for 183 days or more during the year will be taxed on their gains from
sale of shares of our Common Stock, net of applicable U.S. gains and losses
from sale or exchanges of other capital assets incurred during the year, at a
flat rate of 30%. Other Non-U.S. Holders who are treated as having sold their
shares of our Common Stock to us pursuant to the Offer and that are subject
to U.S. federal income tax on such sale (as described above) generally will
be taxed on such disposition in the same manner in which a U.S. Holder would
be taxed.
If a Non-U.S. Holder does not satisfy any of the Section 302 tests
explained above, the full amount received by the Non-U.S. Holder with respect
to our purchase of shares of our Common Stock under the Offer will be treated
as a distribution to the Non-U.S. Holder with respect to the Non-U.S.
Holder's shares of our Common Stock. The treatment, for U.S. federal income
tax purposes, of such distribution as a dividend, a tax-free return of
capital, or as a capital gain from the sale of shares of our Common Stock
will be determined in the manner described above with respect to the U.S.
federal income tax treatment of a purchase of shares of our Common Stock
pursuant to the Offer in the case of U.S. Holders (see "Consequences of the
Offer to U.S. Holders-Characterization of the Purchase-Distribution vs. Sale
Treatment."). As described more fully below, to the extent amounts received
by a Non-U.S. Holder are treated as a dividend, such Non-U.S. Holder will be
subject to withholding.
Withholding For Non-U.S. Holders. Because, as described above, we
cannot predict whether any particular stockholder will be subject to sale or
distribution treatment, the Depositary generally will treat the cash received
by a Non-U.S. Holder participating in the Offer as a dividend distribution
from us. Accordingly, the Depositary generally will withhold U.S. federal
income taxes equal to 30% of the gross proceeds payable to the Non-U.S Holder
or his or her agent, unless (i) an exemption from, or a reduced rate of,
withholding tax is available under a tax treaty or such gross proceeds are
effectively connected with the conduct of a trade or business of the Non-U.S.
Holder within the United States and (ii) the stockholder so certifies on the
appropriate IRS Form W-8 as described below. To obtain a reduced rate of
withholding under a tax treaty, a Non-U.S. Holder must deliver to the
Depositary before the payment a properly completed and executed IRS Form W-
8BEN and/or W-8IMY. To obtain an exemption from withholding on the grounds
that the gross proceeds paid under the Offer are effectively connected with
the conduct of a trade or business within the United States a Non-U.S. Holder
must deliver to the Depositary a properly completed and executed IRS Form W-
8ECI. If tax is withheld, a Non-U.S. Holder may be eligible to obtain a
refund of all or a portion of such tax withheld if such Non-U.S. Holder
satisfies one of the Section 302 tests described above or is otherwise able
to establish that no withholding or a reduced amount of withholding is due.
Backup withholding generally will not apply to amounts subject to the 30% or
treaty-reduced rate of U.S. federal income tax withholding.
NON-U.S. HOLDERS MAY BE SUBJECT TO INCOME TAX ON THE SALE OF SHARES
PURSUANT TO THE OFFER, EVEN IF SUCH HOLDERS WOULD NOT BE SUBJECT TO TAX IF
THOSE SAME SHARES WERE SOLD ON THE OPEN MARKET. IN ADDITION, NON-U.S. HOLDERS
MAY BE SUBJECT TO A 30% WITHHOLDING TAX ON THE SALE OF SHARES PURSUANT TO THE
OFFER, EVEN IF THE TRANSACTION IS NOT SUBJECT TO INCOME TAX. THE TAX
CONSEQUENCES OF THE OFFER TO NON-U.S. HOLDERS ARE COMPLEX AND SUCH HOLDERS
ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE U.S. TAX CONSEQUENCES
OF PARTICIPATION IN THE OFFER, INCLUDING THE APPLICATION OF U.S. FEDERAL
INCOME TAX WITHHOLDING RULES, ELIGIBILITY FOR A REDUCTION OF OR AN EXEMPTION
FROM WITHHOLDING TAX, AND THE REFUND PROCEDURE.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION
ONLY AND IS NOT TAX ADVICE. YOU ARE URGED TO CONSULT YOUR TAX ADVISOR TO
DETERMINE THE PARTICULAR TAX CONSEQUENCES TO YOU OF THE OFFER, INCLUDING THE
APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
14. Extension of the Offer; Termination; Amendment.
We expressly reserve the right to extend the period of time the Offer is
open and delay acceptance for payment of, and payment for, any shares of our
Common Stock by giving oral or written notice of such extension to the
Depositary and making a public announcement of such extension. During any
such extension, all shares of our Common Stock previously tendered and not
properly withdrawn will remain subject to the Offer.
We also expressly reserve the right, in our sole discretion, not to
accept for payment and not pay for any shares of our Common Stock not
previously accepted for payment or paid for, subject to applicable law, to
postpone payment for shares of our Common Stock or terminate the Offer by
giving oral or written notice of the termination or postponement to the
Depositary and making a public announcement of the termination or
postponement.
Subject to compliance with applicable law, we further reserve the right,
in our reasonable discretion, to amend the Offer in any respect (including,
without limitation, by decreasing or increasing the consideration offered in
the Offer to holders of shares of our Common Stock) in our sole discretion.
Amendments to the Offer may be made at any time and from time to time by
public announcement of the amendment. In the case of an extension, the
amendment shall be issued no later than 9:00 a.m., New York City time, on the
next business day after the last previously scheduled or announced expiration
date. Any public announcement made pursuant to the Offer will be disseminated
promptly to stockholders in a manner reasonably designed to inform
stockholders of the change. Without limiting the manner in which we may
choose to make a public announcement, except as required by applicable law,
we will have no obligation to publish, advertise or otherwise communicate any
public announcement other than by issuing a press release to the Dow Xxxxx
News Service or comparable service or furnishing such information on a Form
8-K. If the amendment is material, we will extend the Offer to ensure that at
least five business days remain prior to expiration of the offer and
stockholders that have tendered their shares pursuant to the Offer prior to
the amendment shall have an opportunity to withdraw their shares. Business
day means any day other than a Saturday, Sunday or U.S. federal holiday. Any
period measured in business days includes the first day of such period.
15. Fees and Expenses.
The following is a reasonably itemized statement of the fees and
expenses that have been incurred or that are estimated to be incurred in
connection with the Offer:
_ $75,000 to the Company's legal counsel;
_ $50,000 to Xxxx Street Partners for valuation report;
_ $15,000 to the Depositary and $17,000 for printing and other costs
in connection with the mailing of this Offer to Purchase and related
materials;
_ $1,247 SEC filing and XXXXX xxx; and
_ $4,000 for miscellaneous fees and services.
We have retained American Stock Transfer and Trust Company to act as
Depositary in connection with the Offer. The Depositary will receive
reasonable, customary compensation for its services and will be reimbursed by
us for reasonable out-of-pocket expenses.
We will not pay any fees or commissions to brokers, dealers, commercial
banks, trust companies or other persons (other than fees to the Depositary as
described above) for soliciting tenders of shares pursuant to the Offer.
Stockholders holding shares through brokers or banks are urged to consult the
brokers or banks to determine whether transaction costs may apply if
stockholders tender shares through the brokers or banks and not directly to
the Depositary. We will, however, upon request, reimburse brokers, dealers,
commercial banks, trust companies or other nominees for customary mailing and
handling expenses incurred by them in forwarding the Offer to Purchase, the
Letter of Transmittal and related materials to the beneficial owners of
shares held by them as a nominee or in a fiduciary capacity. No broker,
dealer, commercial bank, trust company or other nominee has been authorized
to act as our agent or the agent of the Secretary or the Depositary for
purposes of the Offer. We will pay or cause to be paid all stock transfer
taxes, if any, on our purchase of shares.
16. Accounting Consequences
The Offer will not affect the par value of the Company's Common Stock,
which will remain at $0.10 per share. The Offer will result in an increase in
per share net income or loss and net book value of the Company's Common Stock
because fewer shares of the Company's Common Stock will be outstanding. The
Company's Annual Report on Form 10-K for the year ended July 31, 2007,
incorporated herein by reference, does not reflect the Offer.
17. Miscellaneous.
We are not aware of any jurisdiction where the making of the Offer is
not in compliance with applicable law. If we become aware of any jurisdiction
where the making of the Offer or the acceptance of shares pursuant to the
Offer is not in compliance with any applicable law, we will make a good faith
effort to comply with the applicable law. If, after a good faith effort, we
cannot comply with the applicable law, the Offer will not be made to, nor
will tenders be accepted from or on behalf of, the holders of shares residing
in that jurisdiction. In any jurisdiction where the securities, "blue sky" or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer will be deemed to be made on our behalf by one or more registered
brokers or dealers licensed under the laws of the jurisdiction. Pursuant to
Exchange Act Rule 13e-3, we have filed with the SEC the Schedule 13E-3, which
contains additional information relating to the Offer. The Schedule 13E-3,
including the exhibits and any amendments thereto, may be examined, and
copies may be obtained, at the same places and in the same manner set forth
in Section 10 with respect to information concerning our company.
We have not authorized any person to make any recommendation on our
behalf as to whether or not you should tender your shares in the Offer. We
have not authorized any person to give any information or to make any
representation in connection with the Offer other than those contained in
this document or in the Letter of Transmittal. Any recommendation or any such
information or representation made by anyone else must not be relied upon as
having been authorized by Xxxxxxxx Industries, Incorporated. The Depositary
or the Secretary.
WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR
BEHALF AS TO WHETHER OR NOT YOU SHOULD TENDER YOUR SHARES IN THE OFFER. WE
HAVE NOT AUTHORIZED ANY PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED IN
THIS DOCUMENT OR IN THE LETTER OF TRANSMITTAL. ANY RECOMMENDATION OR ANY SUCH
INFORMATION OR REPRESENTATION MADE BY ANYONE ELSE MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY XXXXXXXX INDUSTRIES, INCORPORATED. THE DEPOSITARY
OR THE SECRETARY.
XXXXXXXX INDUSTRIES, INCORPORATED
[________________]
The Letter of Transmittal and certificates for shares, and any other
required documents should be sent or delivered by each stockholder or the
stockholder's broker, dealer, commercial bank, trust company or nominee to
the Depositary at one of its addresses set forth below. To confirm delivery
of shares, stockholders are directed to contact the Depositary. Stockholders
submitting certificates representing shares to be tendered must deliver such
certificates together with the Letter of Transmittal and any other required
documents by mail or overnight courier. Facsimile copies of share
certificates will not be accepted.
The Depositary for the Offer is:
American Stock Transfer and Trust Company
By Mail:
American Stock Transfer and Trust Company Operations Center
ATTN: Reorganization Department
0000 00xx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
(000) 000-0000
-------------------------
Any questions or requests for assistance may be directed to the
attention of the Secretary at the Company's telephone number and address set
forth below. Requests for additional copies of the Offer to Purchase, this
Letter of Transmittal or related documents may be directed to the attention
of the Secretary at the Company's telephone number or address set forth
below. You may also contact your broker, dealer, commercial bank, trust
company or other nominee for assistance concerning the Offer.
The Company's corporate secretary is Xxxxxxxx X. Xxxxxx (the "Secretary").
The Company's executive offices are located at
0000 X.X. Reading Drive, Manassas, Virginia 20109
and our phone number is (000) 000-0000
The Company's mailing address is
P.O. Box 1770, Manassas, Virginia 20108
