1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. 2)
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS
PERMITTED BY RULE 14a-6(e)(2)).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12.
XXXXX INCORPORATED
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT IF OTHER THAN THE REGISTRANT)
Payment of filing fee (check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, $0.10 par value
(2) Aggregate number of securities to which transaction applies:
20,435,353
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
The filing fee was determined based upon the product of (a) the
17,880,311 shares of common stock, par value $0.10 per share, proposed
to be acquired by the acquiror (which does not include the minimum of
2,555,042 shares which will be owned by the acquiror prior to the
merger), and (b) the merger consideration of $11.25 per share of common
stock, plus $5,036,707.62 payable to holders of options and warrants to
purchase shares of common stock in exchange for the cancellation of such
options and warrants (the "Total Consideration"). The payment of the
filing fee, calculated in accordance with Regulation 240.0-11 under the
Securities Exchange Act of 1934, as amended, equals one-fiftieth of one
percent of the Total Consideration.
(4) Proposed maximum aggregate value of transaction:
$206,190,206.62
(5) Total fee paid:
$41,238.04
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2
XXXXX INCORPORATED
000 XXXX XXXXXXXXX XXXXXX, XXXXX 0000
XXXXXXXXX, XXXXXXXXX 00000
June 6, 2000
TO THE SHAREHOLDERS OF XXXXX INCORPORATED:
The Board of Directors of Xxxxx Incorporated (the "Company") cordially
invites you to attend the Annual Meeting of the Shareholders of the Company to
be held on June 27, 2000 at 10:00 a.m., local time, at The University Club, 000
Xxxx Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxx 00000, and at any adjournment or
postponement thereof (the "Annual Meeting").
At the Annual Meeting, you will be asked to consider and vote on a proposal
to approve and adopt the Agreement and Plan of Merger, dated as of January 30,
2000, as amended (the "Merger Agreement"), by and among the Company, Saw Mill
Capital Fund II, L.P., a Delaware limited partnership ("Saw Mill"), Calendar
Holdings, Inc., a Delaware corporation and a wholly owned subsidiary of Saw Mill
("Parent"), Calendar Acquisition Corp., a Wisconsin corporation and a wholly
owned subsidiary of Parent ("Merger Sub"), Xxxxxxx X. Xxxxxx and Xxxx Train (the
Chairman and Chief Executive Officer of the Company, respectively, and
collectively the "Management Shareholders"), as it may be amended from time to
time, which provides for the merger of Merger Sub with and into the Company,
with the Company as the surviving corporation (the "Merger").
If the Merger is approved, each outstanding share of the Company's $0.10
par value common stock (the "Common Stock") other than Common Stock owned by the
Company or its subsidiaries or by Merger Sub and Common Stock owned by
shareholders who have perfected their dissenters' rights in accordance with
Wisconsin law, will be converted into the right to receive $11.25 in cash
without interest (the "Merger Consideration"), and each outstanding option to
acquire a share of Common Stock will be converted into the right to receive an
amount per share equal to the Merger Consideration minus the exercise price per
share for each such option, without interest. The Merger and the Merger
Agreement are each described in the accompanying Proxy Statement and a copy of
the Merger Agreement is attached as ANNEX A to the Proxy Statement. The
Wisconsin dissenters' rights laws are described in the accompanying Proxy
Statement and a complete copy of such laws is attached as ANNEX C to the Proxy
Statement. Please read all of these materials carefully.
Because the Management Shareholders are each members of the Company's Board
of Directors and will retain a continuing ownership interest in the Company
following the Merger, the Board of Directors appointed a special committee of
the Board of Directors (the "Special Committee"), consisting of four members of
the Board of Directors who are not employees of the Company and who are not
affiliated with Saw Mill, to negotiate the Merger Agreement on behalf of the
Company, to consider the fairness of the proposed Merger to the Company and its
shareholders other than the Management Shareholders, Saw Mill, Parent, Merger
Sub and their respective affiliates (collectively, the "Public Shareholders"),
and to recommend to the full Board of Directors whether to proceed with the
proposed Merger. In connection with its review and consideration of the proposed
Merger, the Special Committee retained Xxxxxx Brothers Inc. to act as its
independent financial advisor and Xxxxxxx Xxxx & Xxxxxxxxx LLP to act as its
independent legal advisor. On January 29, 2000, Xxxxxx Brothers Inc. delivered
its oral opinion, which was subsequently confirmed in writing, to the Special
Committee to the effect that, as of the date of its opinion, the Merger
Consideration of $11.25 in cash per share of Common Stock to be received in the
Merger by the Public Shareholders is fair to those shareholders from a financial
point of view. A copy of the opinion of Xxxxxx Brothers Inc. is attached as
ANNEX B to, and a description of its opinion is included in, the accompanying
Proxy Statement.
THE SPECIAL COMMITTEE HAS UNANIMOUSLY RECOMMENDED THE MERGER TO THE BOARD
OF DIRECTORS AS BEING FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND THE
PUBLIC SHAREHOLDERS. Based upon this recommendation, the Board of Directors has
approved the Merger Agreement and has determined that the Merger, the Merger
Agreement and the Merger Consideration, are fair to, and in the best interests
of, the Company and the Public Shareholders. Accordingly, the Board of Directors
recommends that the
3
shareholders of the Company vote "FOR" the approval and adoption of the Merger
Agreement at the Annual Meeting.
Generally, the receipt of the Merger Consideration in exchange for shares
of Common Stock will be a taxable transaction to the Company's shareholders for
federal income tax purposes under the Internal Revenue Code of 1986, as amended,
and may also be a taxable transaction under applicable state, local, foreign and
other tax laws.
Approval and adoption of the Merger Agreement requires the affirmative vote
of the holders of a majority the outstanding shares of Common Stock in
accordance with applicable Wisconsin law. Under a voting agreement, the
Management Shareholders and certain of their affiliates have granted an
irrevocable proxy to Merger Sub which permits Merger Sub to vote all shares of
Common Stock owned by the Management Shareholders and such affiliates
(representing approximately 37.6% of the outstanding shares of Common Stock), in
favor of the adoption and approval of the Merger Agreement and the Merger.
At the Annual Meeting, you will also be asked to consider and vote on the
election of directors and to ratify the appointment of the accounting firm of
PricewaterhouseCoopers LLP as independent auditors of the Company. The election
of each nominee for director requires the affirmative vote of a majority of the
votes represented at the Annual Meeting at which a quorum is present. The Board
of Directors recommends that shareholders of the Company vote "FOR" each nominee
for election to the Board of Directors. The appointment of independent auditors
is not required to be submitted to a vote of shareholders; however, the Board of
Directors believes it appropriate as a matter of policy to request that the
shareholders ratify the appointment. If shareholder ratification is not
received, the Board of Directors will reconsider the appointment. The
ratification of independent auditors requires the affirmative vote of a majority
of the votes represented at the Annual Meeting at which a quorum is present. The
Board of Directors recommends that shareholders of the Company vote "FOR" the
ratification of the appointment of independent auditors of the Company.
ATTACHED IS A NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS AND A PROXY
STATEMENT CONTAINING A DISCUSSION OF THE BACKGROUND OF, REASONS FOR, AND TERMS
OF THE MERGER. WE URGE YOU TO READ AND CAREFULLY CONSIDER THE INFORMATION
PRESENTED IN THE ACCOMPANYING PROXY STATEMENT. WHETHER OR NOT YOU PLAN TO ATTEND
THE ANNUAL MEETING IN PERSON AND REGARDLESS OF THE NUMBER OF SHARES OF COMMON
STOCK YOU OWN, PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD
PROMPTLY. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE YOUR SHARES OF COMMON
STOCK PERSONALLY WHETHER OR NOT YOU HAVE PREVIOUSLY SUBMITTED A PROXY.
Very truly yours,
/s/ XXXX TRAIN
Xxxx Train
Chief Executive Officer
4
XXXXX INCORPORATED
000 XXXX XXXXXXXXX XXXXXX, XXXXX 0000
XXXXXXXXX, XXXXXXXXX 00000
NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 27, 2000
June 6, 2000
TO THE SHAREHOLDERS OF XXXXX INCORPORATED:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Xxxxx
Incorporated (the "Company") will be held on June 27, 2000 at 10:00 a.m., local
time, at The University Club, 000 Xxxx Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxx 00000,
and at any adjournment or postponement thereof (the "Annual Meeting") for the
following purposes:
1. To consider and vote on a proposal to approve and adopt the Agreement
and Plan of Merger, dated as of January 30, 2000, as amended (the "Merger
Agreement"), by and among the Company, Saw Mill Capital Fund II, L.P., a
Delaware limited partnership ("Saw Mill"), Calendar Holdings, Inc., a Delaware
corporation and a wholly owned subsidiary of Saw Mill ("Parent"), Calendar
Acquisition Corp., a Wisconsin corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), Xxxxxxx X. Xxxxxx and Xxxx Train (the Chairman and Chief
Executive Officer of the Company, respectively, and collectively the "Management
Shareholders"), as it may be amended from time to time, which, among other
things, provides for (a) the merger of Merger Sub with and into the Company,
with the Company as the surviving corporation (the "Merger"), and (b) the
conversion in the Merger of each outstanding share of common stock, par value
$0.10 per share (the "Common Stock") of the Company (other than (i) Common Stock
owned by the Company or its subsidiaries, (ii) Common Stock owned by Merger Sub
(including 2,437,262 shares of Common Stock currently owned by the Management
Shareholders to be contributed to Parent prior to the Merger) and (iii) Common
Stock owned by shareholders who have perfected their dissenters' rights in
accordance with Wisconsin law) into the right to receive $11.25 in cash without
interest (the "Merger Consideration"). A copy of the Merger Agreement is
attached as ANNEX A to the accompanying Proxy Statement and is incorporated into
this Notice by reference.
2. To elect a Board of Directors to hold office until the next Annual
Meeting of Shareholders or until their respective successors have been elected
or appointed.
3. To ratify the appointment of the accounting firm of
PricewaterhouseCoopers LLP as independent auditors of the Company for its fiscal
year 2000.
4. To consider any other matters that may properly be brought before the
Annual Meeting or any adjournment(s) or postponement(s) thereof.
THE BOARD OF DIRECTORS, AFTER RECEIVING THE UNANIMOUS RECOMMENDATION OF A
SPECIAL COMMITTEE OF INDEPENDENT DIRECTORS, HAS APPROVED THE MERGER AGREEMENT
AND HAS DETERMINED THAT THE MERGER AGREEMENT, THE MERGER AND THE MERGER
CONSIDERATION ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS
SHAREHOLDERS OTHER THAN THE MANAGEMENT SHAREHOLDERS, SAW MILL, PARENT, MERGER
SUB AND THEIR RESPECTIVE AFFILIATES. THE BOARD OF DIRECTORS RECOMMENDS THAT THE
SHAREHOLDERS OF THE COMPANY VOTE "FOR" THE APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT AT THE ANNUAL MEETING. In addition, the Board of Directors recommends
that the shareholders of the Company vote "FOR" all nominees for the Board of
Directors and "FOR" the ratification of PricewaterhouseCoopers LLP as the
Company's independent auditors.
Shareholders and beneficial shareholders who do not wish to accept the
Merger Consideration and who properly perfect dissenters' rights under Wisconsin
law are entitled to have a court determine the fair value of their shares. A
copy of the relevant provisions of Wisconsin law are attached as ANNEX C to the
accompanying Proxy Statement. These dissenters' rights are subject to a number
of restrictions and technical requirements described in ANNEX C and the attached
Proxy Statement.
5
Approval and adoption of the Merger Agreement requires the affirmative vote
of the holders of a majority of the outstanding shares of Common Stock in
accordance with Wisconsin law. The election of each nominee for director and the
ratification of the appointment of independent auditors each requires the
affirmative vote of a majority of the votes represented at the Annual Meeting at
which a quorum is present. Only shareholders of record at the close of business
on May 30, 2000 are entitled to notice of, and to vote at, the Annual Meeting.
During the ten day period prior to the Annual Meeting, any shareholder may
examine a list of the Company's shareholders of record, for any purpose related
to the Annual Meeting, during ordinary business hours at the offices of the
Company at 000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxx, Xxxxxxxxx 00000.
WE CANNOT COMPLETE THE MERGER UNLESS THE HOLDERS OF A MAJORITY OF THE
OUTSTANDING SHARES OF COMMON STOCK VOTE TO APPROVE THE MERGER AGREEMENT AT THE
ANNUAL MEETING. YOUR VOTE IS VERY IMPORTANT.
WE URGE YOU TO READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THE
ACCOMPANYING PROXY STATEMENT. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING IN PERSON AND REGARDLESS OF THE NUMBER OF SHARES OF COMMON STOCK YOU
OWN, PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD PROMPTLY. IF
YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE YOUR SHARES OF COMMON STOCK
PERSONALLY WHETHER OR NOT YOU HAVE PREVIOUSLY SUBMITTED A PROXY.
By Order of the Board of Directors,
/s/ XXXXXXX X. XXXXXX
Xxxxxxx X. Xxxxxx
Chairman
PLEASE DO NOT SEND ANY STOCK CERTIFICATES AT THIS TIME. YOU WILL RECEIVE
INSTRUCTIONS REGARDING THE SURRENDER OF YOUR STOCK CERTIFICATES AND RECEIPT OF
PAYMENT FOR YOUR SHARES OF COMMON STOCK AFTER THE MERGER HAS BEEN APPROVED AND
BECOMES EFFECTIVE.
6
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 6, 2000
XXXXX INCORPORATED
000 XXXX XXXXXXXXX XXXXXX, XXXXX 0000
XXXXXXXXX, XXXXXXXXX 00000
MERGER PROPOSED -- YOUR VOTE IS IMPORTANT
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 27, 2000
This Proxy Statement is being furnished to the holders of Common Stock, par
value $0.10 per share (the "Common Stock"), of Xxxxx Incorporated (the
"Company"), in connection with the solicitation of proxies by the Board of
Directors of the Company for use at the Annual Meeting of Shareholders of the
Company to be held on June 27, 2000 at 10:00 a.m., local time, at The University
Club, 000 Xxxx Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxx 00000, and at any adjournment
or postponement thereof (the "Annual Meeting").
At the Annual Meeting, shareholders of the Company will consider a proposal
to approve and adopt the Agreement and Plan of Merger, dated as of January 30,
2000, as amended (the "Merger Agreement"), by and among the Company, Saw Mill
Capital Fund II, L.P., a Delaware limited partnership ("Saw Mill"), Calendar
Holdings, Inc., a Delaware corporation and a wholly owned subsidiary of Saw Mill
("Parent"), Calendar Acquisition Corp., a Wisconsin corporation and a wholly
owned subsidiary of Parent ("Merger Sub"), Xxxxxxx X. Xxxxxx and Xxxx Train (the
Chairman and Chief Executive Officer of the Company, respectively, and
collectively the "Management Shareholders"), as it may be amended from time to
time, providing for the merger of Merger Sub with and into the Company (the
"Merger"), with the Company as the surviving corporation (the "Surviving
Corporation"). The Merger Agreement is attached as ANNEX A to this Proxy
Statement.
The Merger will be completed on the terms and subject to the conditions set
forth in the Merger Agreement, as a result of which at the effective time of the
Merger (the "Effective Time"): (a) Merger Sub will be merged with and into the
Company and the separate existence of Merger Sub will cease; (b) the Company
will become a privately held corporation; (c) the Board of Directors of Merger
Sub will replace the Board of Directors of the Company; (d) each share of Common
Stock other than (i) Common Stock owned by the Company or its subsidiaries, (ii)
Common Stock owned by Merger Sub (including 2,437,262 shares of Common Stock
currently owned by the Management Shareholders to be contributed to Parent prior
to the Merger) and (iii) Common Stock owned by shareholders who have perfected
their dissenters' rights in accordance with Wisconsin law (collectively,
"Dissenting Shares"), will be converted into the right to receive $11.25 in cash
without interest (the "Merger Consideration"); and (e) each outstanding option
to acquire a share of Common Stock will be converted into the right to receive
an amount per share equal to the Merger Consideration minus the exercise price
per share for each such option, without interest (the "Option Consideration").
A majority of the outstanding shares of Common Stock must be voted in favor
of the Merger Agreement for the Merger Agreement and the Merger to be approved.
Under the Merger Agreement, Saw Mill, Parent and Merger Sub have agreed to vote
all shares of Common Stock beneficially owned by them, or with respect to which
they have the power, by agreement, proxy or otherwise, to cause to be voted, in
favor of the approval and adoption of the Merger Agreement and the Merger. In
addition, under a voting agreement, the Management Shareholders and certain of
their affiliates have granted an irrevocable proxy to Merger Sub which permits
Merger Sub to vote all shares of Common Stock owned by the Management
Shareholders and such affiliates (representing approximately 37.6% of the
outstanding shares of Common Stock), in favor of the adoption and approval of
the Merger Agreement and the Merger. Consequently, after taking into account the
Common Stock to be contributed to Merger Sub and the shares over which Merger
Sub has voting power under the Voting Agreement, Merger Sub will have voting
power over shares representing approximately 38.2% of the outstanding shares of
Common Stock as of the date of the Annual Meeting.
1
7
THE BOARD OF DIRECTORS, AFTER RECEIVING THE UNANIMOUS RECOMMENDATION OF A
SPECIAL COMMITTEE OF INDEPENDENT DIRECTORS, HAS APPROVED THE MERGER AGREEMENT
AND THE MERGER, AND HAS DETERMINED THAT THE MERGER AGREEMENT AND THE MERGER ARE
FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY'S SHAREHOLDERS OTHER THAN
MERGER SUB, PARENT, SAW MILL, THE MANAGEMENT SHAREHOLDERS AND THEIR RESPECTIVE
AFFILIATES (COLLECTIVELY, THE "PUBLIC SHAREHOLDERS"). THE BOARD OF DIRECTORS
RECOMMENDS THAT THE SHAREHOLDERS OF THE COMPANY VOTE "FOR" THE APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AT THE ANNUAL MEETING. SEE "SPECIAL
FACTORS -- REASONS FOR THE MERGER; FAIRNESS OF THE MERGER."
At the Annual Meeting, you will also be asked to consider and vote on the
election of directors and to ratify the appointment of independent auditors of
the Company. The election of each nominee for director requires the affirmative
vote of a majority of the votes represented at the Annual Meeting at which a
quorum is present. The Board of Directors recommends that shareholders of the
Company vote "FOR" each nominee for election to the Board of Directors. The
appointment of independent auditors is not required to be submitted to a vote of
shareholders; however, the Board of Directors believes it appropriate as a
matter of policy to request that the shareholders ratify the appointment. If
shareholder ratification is not received, the Board of Directors will reconsider
the appointment. The ratification of independent auditors requires the
affirmative vote of a majority of the votes represented at the Annual Meeting at
which a quorum is present. The Board of Directors recommends that shareholders
of the Company vote "FOR" the ratification of the appointment of independent
auditors of the Company.
Shares of Common Stock are listed and traded on The Nasdaq National Market
("NASDAQ") under the symbol "JASN". On January 28, 2000, the last trading day
prior to the public announcement of the execution of the Merger Agreement, the
reported closing price of Common Stock on NASDAQ was $7.125 per share. On June
1, 2000, the most recent practicable trading day prior to the date of this Proxy
Statement, the reported closing price of Common Stock on NASDAQ was $10.25 per
share.
As used in this Proxy Statement, unless the context otherwise requires, the
term "the Company" refers to Xxxxx Incorporated and its subsidiaries. All
information regarding the Company and its subsidiaries in this Proxy Statement
has been supplied by the Company and not the Special Committee (as defined
herein). All information regarding Saw Mill, Parent and Merger Sub in this Proxy
Statement has been supplied by Saw Mill. All information regarding the
Management Shareholders has been supplied by the Management Shareholders.
This Proxy Statement and the accompanying form of proxy are first being
sent or given to shareholders of the Company on or about June 6, 2000.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") NOR ANY
STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE TRANSACTIONS
DESCRIBED HEREIN OR PASSED UPON THE FAIRNESS OR MERITS OF SUCH TRANSACTIONS OR
UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR OTHER
DOCUMENTS TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO
PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT.
2
8
TABLE OF CONTENTS
PAGE
----
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 5
FORWARD-LOOKING STATEMENTS.................................. 5
SUMMARY..................................................... 5
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY......... 13
THE ANNUAL MEETING.......................................... 14
Purpose................................................... 14
Record Date; Voting Rights................................ 14
Required Vote............................................. 14
Proxies................................................... 15
PROPOSAL 1: MERGER OF THE COMPANY AND MERGER SUB............ 15
PARTIES TO THE MERGER....................................... 15
The Company............................................... 00
Xxx Xxxx, Xxxxxx and Merger Sub........................... 17
The Management Shareholders............................... 18
Past Transactions between the Company and Saw Mill........ 18
SPECIAL FACTORS............................................. 18
Purpose and Effects of the Merger......................... 18
Reasons for the Merger; Fairness of the Merger............ 19
Benefits and Detriments of the Merger to the Company, the
Management Shareholders and Public Shareholders........ 24
Reports, Opinions and Appraisals.......................... 26
Opinion of the Independent Financial Advisor to the
Special Committee...................................... 27
Accounting Treatment of the Merger........................ 33
Certain Tax Consequences of the Merger.................... 33
THE MERGER.................................................. 34
Merger Consideration; Cancellation of Common Stock........ 34
Background of the Merger.................................. 34
Recommendation of the Special Committee and the Board of
Directors.............................................. 38
Required Regulatory Approvals............................. 39
Interests of Certain Persons in the Merger................ 39
Financing for the Merger.................................. 43
Fees and Expenses......................................... 46
Conduct of the Company's Business if the Merger is Not
Completed.............................................. 47
Plans for the Company After the Merger.................... 47
Certain Projections of Future Operating Results........... 47
Legal Proceedings......................................... 48
RIGHTS OF DISSENTING SHAREHOLDERS........................... 48
THE MERGER AGREEMENT........................................ 50
General................................................... 50
Payment for Shares........................................ 50
Treatment of Company Stock Options........................ 51
Directors and Officers.................................... 51
Articles of Incorporation and By-laws..................... 51
Representations and Warranties............................ 51
3
9
PAGE
----
Vote of Saw Mill, Parent and Merger Sub................... 52
Third Party Transactions; Fiduciary Responsibilities...... 52
Indemnification and Insurance............................. 53
State Takeover Laws....................................... 53
Cooperation with Financing................................ 54
Equity Securities of the Company.......................... 54
Conduct of Business Pending the Merger.................... 54
Conditions to the Merger.................................. 55
Termination............................................... 56
Fees, Expenses and Other Payments......................... 57
PROPOSAL 2: ELECTION OF DIRECTORS........................... 58
Committees................................................ 58
Nominees for Election as Directors........................ 59
EXECUTIVE OFFICERS.......................................... 60
EXECUTIVE COMPENSATION...................................... 61
STOCK OPTIONS............................................... 62
COMPENSATION COMMITTEE REPORT............................... 62
STOCK PERFORMANCE........................................... 64
SECURITY OWNERSHIP.......................................... 64
PROPOSAL 3: RATIFICATION OF INDEPENDENT AUDITORS............ 66
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING............... 66
INDEPENDENT PUBLIC ACCOUNTANTS.............................. 67
OTHER MATTERS............................................... 67
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE..... 67
PERSONS MAKING THE SOLICITATION; EXPENSES OF SOLICITATION... 67
ANNUAL REPORT............................................... 67
PROVISIONS FOR UNAFFILIATED SECURITY HOLDERS................ 67
ANNEX A -- AGREEMENT AND PLAN OF MERGER, AS AMENDED
ANNEX B -- OPINION OF XXXXXX BROTHERS INC.
ANNEX C -- WISCONSIN DISSENTERS' RIGHTS STATUTES
4
10
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company incorporates by reference herein the following documents
previously filed by it with the Commission pursuant to the Securities Exchange
Act of 1934, and the rules and regulations promulgated thereunder (collectively,
the "Exchange Act"):
COMMISSION FILINGS PERIOD
------------------ ------
Annual Report on Form 10-K............... Year ended December 31, 1999
Current Report on Form 8-K............... January 30, 2000
Quarterly Report on Form 10-Q............ Quarter ended March 31, 2000
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Proxy Statement and prior to
the date of the Annual Meeting shall be deemed to be incorporated by reference
in this Proxy Statement and to be a part of this Proxy Statement from the date
of filing of such documents. Copies of the documents incorporated by reference
in this Proxy Statement without exhibits are available without charge upon
written or oral request from the Corporate Secretary, Xxxxx Incorporated, 000
Xxxx Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxx, Xxxxxxxxx 00000, (telephone (414)
000-0000). To obtain timely delivery, requests for copies should be made no
later than June 20, 2000 (five business days before the date of the Annual
Meeting).
FORWARD-LOOKING STATEMENTS
When used in this Proxy Statement or in documents incorporated by reference
herein with respect to the Company, the words "estimate," "project," "intend,"
"expect" and similar expressions are intended to identify forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this Proxy
Statement or as of the date of such other documents. Actual results may differ
materially from those contemplated in forward-looking statements and
projections. Important assumptions and factors that could cause actual results
to differ materially from those contemplated, projected, forecasted, estimated
or budgeted in, or expressed or implied by, projections and forward-looking
statements include industry trends, currency fluctuations, government fiscal and
monetary policy, the success of new product introductions, general economic and
business conditions in the markets the Company serves and actions of competitors
which may affect the Company's ability to obtain orders and the ability of the
Company to implement its plans. Other factors and assumptions not identified
above were also involved in the derivation of these forward-looking statements,
and the failure of such other assumptions to be realized, as well as other
factors, may also cause actual results to differ materially from those
projected. The Company assumes no obligation to update such forward-looking
statements or any projections to reflect actual results, changes in assumptions
or changes in other factors affecting such forward-looking statements.
SUMMARY
The following is a summary of some of the information in the Proxy
Statement. It is not meant to be comprehensive and does not contain all the
information that is important to you. We have included page references to direct
you to more complete information in the document. You should carefully read the
entire Proxy Statement and the other documents to which this Proxy Statement
refers to fully understand the merger and its consequences.
THE MERGER (See page 34) -- Calendar Holdings, Inc. will acquire Xxxxx
Incorporated by merging its wholly owned
subsidiary, Calendar Acquisition Corp., into
Xxxxx. Calendar Holdings Inc. is referred to as
"Parent" and Calendar Acquisition Corp. as
"Merger Sub" throughout this proxy statement.
Xxxxx will be the surviving corporation in the
merger and will be a wholly owned subsidiary of
Parent. Immediately after the Merger is
completed, Saw Mill Capital Fund II, L.P. will
own approximately 50% of the common stock of
Parent, on a fully diluted basis (which
percentage may be reduced as a result of the
issuance of warrants to providers of financing
for the merger), and Xxxxxxx X. Xxxxxx and
5
11
Xxxx Train, who are the Chairman and Chief
Executive Officer, respectively, of Xxxxx (and
who we refer to throughout the Proxy Statement
as the "Management Shareholders") will own, in
the aggregate, approximately 35% of the common
stock of Calendar Holdings, on a fully diluted
basis (which percentage may be reduced as a
result of the issuance of warrants to providers
of financing for the merger). On the date of
this Proxy Statement, Merger Sub owns less than
1%, and the Management Shareholders and their
affiliates own approximately 37.6%, of the
common stock of Xxxxx. Below is a diagram of the
merger which indicates the relative ownership
percentages, on a fully diluted basis, of Xxxxx
as of the date of this Proxy Statement and
immediately after the merger.
OWNERSHIP PERCENTAGES AS OF THE DATE OF THIS PROXY STATEMENT
[OWNERSHIP PERCENTAGES PROXY STATEMENT TABLE]
OWNERSHIP PERCENTAGES AS OF IMMEDIATELY AFTER THE MERGER
[OWNERSHIP PERCENTAGES MERGER TABLE]
* These percentages may be reduced as a result of the issuance of warrants to
providers of financing for the Merger.
6
12
WHY THE BOARD OF DIRECTORS
RECOMMENDS THAT YOU VOTE
FOR THE MERGER AGREEMENT
(See pages 22 and 38) -- THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE IN
FAVOR OF THE MERGER AGREEMENT. In the opinion of
the board of directors, based upon the unanimous
recommendation of the special committee, the
terms and provisions of the merger agreement and
the proposed merger are fair to and in the best
interests of Jason's shareholders (other than
Saw Mill, the Management Shareholders and each
of their respective affiliates). THE BOARD OF
DIRECTORS HAS ACCORDINGLY RECOMMENDED THAT
SHAREHOLDERS VOTE "FOR" APPROVAL OF THE MERGER
AGREEMENT.
VOTE REQUIRED TO APPROVE
THE MERGER AGREEMENT (See
page 14) -- The holders of a majority of the outstanding
shares of Jason's common stock must vote to
approve the merger agreement. Saw Mill and the
Management Shareholders currently beneficially
own a total of approximately 38.2% of Jason's
common stock. The Management Shareholders have
authorized Saw Mill to vote their shares in
favor of the merger agreement. IF YOU DO NOT
VOTE YOUR SHARES, THE EFFECT WILL BE A VOTE
AGAINST THE MERGER. THE BOARD OF DIRECTORS, WITH
THE MANAGEMENT SHAREHOLDERS ABSTAINING,
UNANIMOUSLY RECOMMENDS VOTING "FOR" THE MERGER.
SAW MILL (See page 17) -- Saw Mill is a Delaware limited partnership. It
was formed for the purpose of providing a
portion of the financing for the merger.
PARENT AND MERGER SUB (See
page 17) -- Parent and Merger Sub are subsidiaries of Saw
Mill formed for the purpose of completing the
merger. Merger Sub will merge into Xxxxx in the
Merger and will cease to exist. Following the
Merger, Parent will hold 100% of the outstanding
common stock of Xxxxx.
OPINION OF FINANCIAL
ADVISOR (See page 27) -- A special committee of Jason's Board of
Directors received a written opinion from Xxxxxx
Brothers. The written opinion states that the
merger consideration, as of January 29, 2000,
was fair from a financial point of view to the
holders of Xxxxx common stock, other than Saw
Mill, the Management Shareholders and their
respective affiliates.
WHAT YOU WILL RECEIVE IN
THE MERGER (See pages 1 and
34) -- Shareholders of Xxxxx (other than Xxxxx itself,
Merger Sub and shareholders who perfect their
dissenters' rights) will be entitled to receive
$11.25 in cash, without interest, for each share
of Jason's common stock. If you own stock
options of Xxxxx, you will be entitled to
receive, for each stock option, the difference
between $11.25 and the exercise price of each
stock option, without interest, regardless of
whether the option is fully vested.
LOCATION, DATE AND TIME OF
ANNUAL MEETING (See page
14) -- The annual meeting will be on June 27, 2000 at
10:00 a.m. local time at The University Club,
000 Xxxx Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxx,
00000. If the meeting is adjourned for any
reason, we will give you notice of the new date
and time.
7
13
PURPOSE OF THE MERGER (See
page 14) -- The purpose of the merger is to allow Saw Mill
and the Management Shareholders to acquire
Xxxxx. If the merger is completed, Xxxxx common
stock will cease to be publicly traded and
holders of common stock (other than Xxxxx
itself, Merger Sub and shareholders who perfect
their dissenter's rights described elsewhere in
this Proxy Statement) will receive $11.25 in
cash per share.
INTEREST OF MANAGEMENT
SHAREHOLDERS (See page
39) -- The Management Shareholders have interests in
the merger that are different from your
interests as a shareholder. Collectively, the
Management Shareholders now beneficially own
7,687,812 shares of Xxxxx common stock
representing approximately 37.6% of the
outstanding common stock. In connection with the
merger, the Management Shareholders will
contribute a total of 2,437,262 shares of common
stock valued at an aggregate average of $10.13
per share to Parent in exchange for shares of
Parent. In exchange for their remaining
5,250,550 shares of Xxxxx common stock, the
Management Shareholders will receive the cash
consideration of $11.25 per share resulting in
an aggregate average value of approximately
$10.90 per share in cash and stock being
received by the Management Shareholders for
their shares of Xxxxx common stock in connection
with the Merger. The Management Shareholders
also will continue to serve in their positions
as executive officers of Xxxxx after the merger
and will enter into new employment agreements
with the surviving corporation. The Management
Shareholders have agreed to allow Saw Mill to
vote their shares in favor of the Merger.
INTEREST OF MEMBERS OF THE
SPECIAL COMMITTEE (See
page 40) -- The members of the special committee, which was
established to evaluate and negotiate the
merger, own shares of Xxxxx common stock and
options to acquire Xxxxx common stock. The
treatment of Xxxxx common stock and options
owned by members of this special committee is
identical to the treatment of Xxxxx common stock
and options owned by the other Public
Shareholders. If the merger is completed, the
members of this special committee will be
entitled to receive, in the aggregate,
$2,303,831 for their shares of Xxxxx common
stock and $484,073 for their options to acquire
Xxxxx common stock.
CONDITIONS OF THE MERGER
(See page 55) -- A number of conditions must be satisfied before
any of the parties is obligated to complete the
merger, including:
- the merger must be approved by the holders of
a majority of the outstanding shares of Xxxxx
common stock; and
- there must be no legal or judicial restraints
or prohibitions preventing completion of the
merger.
-- Additional conditions must be satisfied or
waived before either Saw Mill, Parent or Merger
Sub is obligated to complete the merger,
including:
8
14
- The funding of the debt and equity financings
described in the Proxy Statement must have
occurred. This funding is subject to a number
of material conditions different than those
in the merger agreement;
- Xxxxx must have performed or complied with
all of its obligations and covenants set
forth in the merger agreement except where
failure to do so would not have a material
adverse effect on Xxxxx;
- The representations and warranties made by
Xxxxx in the merger agreement must be true
and correct except where the failure to be
true and correct would not have a material
adverse effect on Xxxxx;
- Since December 31, 1998 no event shall have
occurred which would reasonably be expected
to have a material adverse effect on Xxxxx;
and
- The shares held by shareholders who exercise
dissenters' rights must not exceed 10% of the
outstanding shares of Xxxxx common stock.
-- Additional conditions must be satisfied or
waived before Xxxxx is obligated to complete the
merger, including:
- Parent, Merger Sub and Saw Mill must have
performed or complied in all material
respects with all of their respective
obligations and covenants set forth in the
merger agreement.
TERMINATION OF THE MERGER
AGREEMENT (See page 56) -- All parties may agree at any time (including any
time after the annual meeting) to terminate the
merger agreement. In addition, either Xxxxx or
Saw Mill indirectly through Merger Sub may
terminate the merger agreement if:
- the merger has not been completed by August
31, 2000;
- a final court order or other governmental
action prohibits the merger; or
- the shareholder approval required to complete
the merger is not obtained.
-- Xxxxx xxx also terminate the merger agreement
if:
- Saw Mill, Parent or Merger Sub materially
breaches a representation, warranty, covenant
or obligation set forth in the merger
agreement and such breach is not or cannot be
cured; or
- the board of directors of Xxxxx recommends
accepting an acquisition proposal other than
the merger in accordance with merger
agreement.
-- Saw Mill indirectly through Merger Sub may also
terminate the merger agreement if:
- Xxxxx materially breaches a representation,
warranty, covenant or obligation set forth in
the merger agreement and such breach is not
or cannot be cured; or
9
15
- the board of directors of Xxxxx withdraws or
adversely modifies its recommendation of the
merger agreement or recommends that Xxxxx
shareholders approve an acquisition proposal
other than the merger.
ACQUISITION PROPOSALS (See
page 52) -- The merger agreement permits Xxxxx to provide
information to and engage in discussions and
negotiations with third parties who may be
interested in proposing a transaction with Xxxxx
if Xxxxx receives a bona fide inquiry or
proposal from a third party and the special
committee concludes in good faith that such
party is financially capable and that it has a
fiduciary duty to provide such information or
engage in such discussions or negotiations. The
merger agreement also contains limitations on
such activities if no third party proposal or
inquiry is made.
FEES AND EXPENSES (See page
57) -- Under the circumstances described above, Xxxxx
will pay Saw Mill a termination or "break up"
fee equal to $6.7 million less certain expenses.
This fee is payable if, among other things, the
merger agreement is terminated by Xxxxx or Saw
Mill, through Merger Sub, because the board of
directors of Xxxxx, based on a recommendation of
the special committee, withdraws its
recommendation of the merger agreement or
recommends a proposal for another transaction as
set out in detail in the merger agreement. The
termination fee is also payable if the merger
agreement is terminated under certain
circumstances and a transaction similar to the
merger, which was disclosed prior to the
termination, is completed within nine months of
the termination date.
CONFLICTS OF INTEREST (See
pages 18 and 39) -- Xxxxxxx X. Xxxxxx and Xxxx Train, two of the six
members of the board of directors, have a
conflict of interest in recommending approval of
the merger agreement. If the merger occurs, Xx.
Xxxxxx and Mr. Train, together with Saw Mill,
will indirectly own Jason's common stock
following the merger and as a result will
receive the benefit of any future earnings,
growth and increased value of Xxxxx while you
will no longer receive any such benefit. Xx.
Xxxxxx and Mr. Train will also continue to serve
as officers of Xxxxx after the merger. Because
of this conflict, Xx. Xxxxxx and Mr. Train
abstained from voting for the merger.
Consequently, the board of directors'
recommendation is based on the unanimous
recommendation of the special committee of
non-employee directors, which did not have a
conflict of interest in making the
recommendation.
BOARD OF DIRECTORS' ACTION
TO ENSURE THE PRICE PER
SHARE YOU WILL RECEIVE IN
THE PROPOSED MERGER IS
FAIR (See pages 19 and
38) -- The board of directors formed a special
committee consisting of four non-employee
directors to evaluate and negotiate the terms of
the merger agreement with Saw Mill and the
Management Shareholders. The special committee
independently selected and retained legal and
financial advisors to assist it in the
negotiation. The special committee received an
opinion from its financial advisor, on which the
10
16
special committee and the entire board of
directors relied, that as of the date of the
opinion, the $11.25 per share you will receive
in the proposed merger is fair to you from a
financial point of view. This fairness opinion
does not extend to the Management Shareholders,
Saw Mill or their affiliates.
ADVANTAGES OF THE MERGER TO
YOU (See pages 18 and 26) -- In the merger, you will receive a cash premium
for your Xxxxx common stock over the market
price when the proposed merger was announced.
The merger consideration of $11.25 per share
represents a premium of 57.9% over the closing
market price of Xxxxx common stock on January
28, 2000, the last trading day before the
proposed merger was announced. You also will not
bear the risk of any decrease in the value of
Xxxxx.
DISADVANTAGES OF THE MERGER
TO YOU (See pages 18 and
26) -- Following the proposed merger, you will no
longer own stock of Xxxxx and will no longer
benefit from any earnings or growth of Xxxxx.
Also, you may recognize a taxable gain as a
result of the Merger.
WHAT TO DO NOW -- Please xxxx your vote on, sign, date and mail
your proxy card in the enclosed return envelope
as soon as possible, so that your shares may be
represented and voted at the annual meeting.
RIGHTS YOU HAVE IF YOU
OPPOSE THE MERGER (See page
48) -- Shareholders who do not vote in favor of the
merger may dissent and obtain the fair value of
their shares, but only if they strictly comply
with all of the Wisconsin law procedures
explained on pages 43 to 44 and in Annex C to
this Proxy Statement.
WHO MAY VOTE ON THE MERGER
(See page 14) -- All shareholders of record as of the close of
business on May 30, 2000 will be entitled to
notice of, and to vote at, the annual meeting.
DON'T SEND YOUR STOCK
CERTIFICATES NOW -- Don't send in your stock certificates now. After
the merger is completed, we will send you a
transmittal form and written instructions for
exchanging your share certificates for the cash
merger consideration of $11.25 per share.
SHARES HELD IN "STREET
NAME" -- If your shares of Xxxxx common stock are held in
"street name" by your broker, your broker will
ONLY vote your shares if you provide
instructions on how to vote. You should follow
the directions provided by your broker regarding
how to instruct your broker to vote your shares.
CHANGING YOUR VOTE
(See page 15) -- If you have signed and mailed back your proxy
card and want to change your vote, you may
either send a written revocation or another
signed proxy card with a later date to Jason's
transfer agent, before the meeting or simply
attend the annual meeting and vote in person.
COMPLETION OF THE MERGER
(See page 18) -- We are working toward completing the merger as
quickly as possible. If the merger agreement is
approved and the other conditions to the
11
17
merger are satisfied, we expect to complete the
merger shortly after the annual meeting.
U.S. FEDERAL INCOME TAX
CONSEQUENCES OF THE
MERGER (See page 33) -- The cash you receive for your shares generally
will be taxable for U.S. federal income tax
purposes. To review the federal income tax
consequences to shareholders in greater detail,
see page 29.
OTHER MATTERS TO BE VOTED
ON AT THE ANNUAL MEETING
(See page 14) -- At the annual meeting you will also vote on the
election of directors to hold office until the
next annual meeting of shareholders, and you
will vote to ratify the appointment of
PricewaterhouseCoopers LLP as independent
auditors for the year 2000. If the merger is
completed, all of the directors of Xxxxx will be
replaced by the board of directors of Merger
Sub.
WHO CAN HELP ANSWER OTHER
QUESTIONS -- If you have more questions about the merger or
would like additional copies of this proxy
statement, you should contact the Corporate
Secretary of Xxxxx Incorporated, 000 Xxxx
Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxx,
Xxxxxxxxx 00000 (telephone (000) 000-0000).
12
18
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY
OPERATING RESULTS(1)
(in thousands except per share data)
FOR THE YEAR ENDED FOR THE QUARTER ENDED
------------------------------------------------------------------------ ---------------------
DECEMBER 31, DECEMBER 25, DECEMBER 26, DECEMBER 27, DECEMBER 29, MARCH 31, MARCH 26,
1999 1998 1997 1996 1995 2000 1999
------------ ------------ ------------ ------------ ------------ --------- ---------
Net sales................... $423,865 $390,853 $338,666 $291,676 $275,199 $121,487 $102,200
Cost of sales............... 323,841 303,568 264,766 226,070 214,657 93,604 78,985
-------- -------- -------- -------- -------- -------- --------
Gross profit................ 100,024 87,285 73,900 65,606 60,542 27,883 23,215
Selling and administrative
expense................... 65,315 58,984 50,401 43,748 40,433 18,118 16,204
-------- -------- -------- -------- -------- -------- --------
Operating income............ 34,709 28,301 23,499 21,858 20,109 9,765 7,011
Interest expense............ (6,132) (6,661) (7,837) (7,375) (7,560) (1,599) (1,522)
Merger expenses............. -- -- -- -- -- (1,631) --
Other income (expense)...... 660 1,272 1,410 211 (225) 106 348
-------- -------- -------- -------- -------- -------- --------
Income from continuing
operations before income
taxes..................... 29,237 22,912 17,072 14,694 12,324 6,641 5,837
Provision for income
taxes..................... (11,475) (8,937) (6,658) (5,730) (5,063) 3,225 2,276
-------- -------- -------- -------- -------- -------- --------
Income from continuing
operations................ 17,762 13,975 10,414 8,964 7,261 3,416 3,561
Income (loss) from
discontinued operations,
net of tax................ -- 1,278 1,813 (98) 4,270 -- --
-------- -------- -------- -------- -------- -------- --------
Net income.................. $ 17,762 $ 15,253 $ 12,227 $ 8,866 $ 11,531 $ 3,416 $ 3,561
======== ======== ======== ======== ======== ======== ========
Earnings per share -- basic
Income from continuing
operations.............. $ .87 $ .69 $ .52 $ .45 $ .36 $ .17 $ .18
Income (loss) from
discontinued
operations.............. -- .06 .08 (.01) .21 -- --
-------- -------- -------- -------- -------- -------- --------
Net income................ $ .87 $ .75 $ .60 $ .44 $ .57 $ .17 $ .18
======== ======== ======== ======== ======== ======== ========
Earnings per share --diluted
Income from continuing
operations.............. $ .86 $ .66 $ .51 $ .44 $ .36 $ .16 $ .17
Income (loss) from
discontinued
operations.............. -- .06 .08 (.01) .19 -- --
-------- -------- -------- -------- -------- -------- --------
Net income................ $ .86 $ .72 $ .59 $ .43 $ .55 $ .16 $ .17
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA(1)
(in thousands)
DECEMBER 31, DECEMBER 25, DECEMBER 26, DECEMBER 27, DECEMBER 29, MARCH 31, MARCH 26,
1999 1998 1997 1996 1995 2000 1999
------------ ------------ ------------ ------------ ------------ --------- ---------
Total assets................ $311,897 $299,181 $263,285 $290,718 $254,986 $320,589 $297,144
Long-term debt.............. 70,208 62,849 85,631 134,467 110,067 70,349 76,083
Working capital, excluding
net assets of discontinued
operations................ 44,785 45,092 36,803 45,123 33,234 46,552 40,862
Shareholders' equity........ 140,369 123,943 107,264 95,264 86,218 143,268 127,274
---------------
No cash dividends have been declared on the Common Stock for the years
presented.
(1) Historical amounts have been restated to reflect the reclassification of the
power generation businesses as discontinued operations.
13
19
THE ANNUAL MEETING
PURPOSE
This Proxy Statement is being furnished to holders of shares of Common
Stock in connection with the solicitation of proxies by the Board of Directors
for use at the Annual Meeting. At the Annual Meeting, shareholders of the
Company will consider a proposal to approve and adopt the Merger Agreement, as
it may be amended from time to time, which provides for the Merger of Merger Sub
into the Company, with the Company as the Surviving Corporation. The Merger
Agreement is attached as ANNEX A to this Proxy Statement. In addition, at the
Annual Meeting, shareholders of the Company will be asked to consider and vote
on the election of directors and to ratify the appointment of independent
auditors of the Company.
THE BOARD OF DIRECTORS, AFTER RECEIVING THE UNANIMOUS RECOMMENDATION OF A
SPECIAL COMMITTEE OF INDEPENDENT DIRECTORS (THE "SPECIAL COMMITTEE"), HAS
APPROVED THE MERGER AGREEMENT AND THE MERGER, AND HAS DETERMINED THAT THE MERGER
AGREEMENT AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE
COMPANY'S SHAREHOLDERS OTHER THAN MERGER SUB, PARENT, SAW MILL, THE MANAGEMENT
SHAREHOLDERS AND THEIR RESPECTIVE AFFILIATES (COLLECTIVELY, THE "PUBLIC
SHAREHOLDERS"). THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE
COMPANY VOTE "FOR" THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AT THE
ANNUAL MEETING. SEE "SPECIAL FACTORS -- REASONS FOR THE MERGER; FAIRNESS OF THE
MERGER." IN ADDITION, THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS OF THE
COMPANY VOTE "FOR" EACH NOMINEE FOR ELECTION TO THE BOARD OF DIRECTORS AND "FOR"
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S
INDEPENDENT AUDITORS.
RECORD DATE; VOTING RIGHTS
Only holders of shares of Common Stock at the close of business on May 30,
2000 (the "Record Date") will be entitled to notice of, and to vote at, the
Annual Meeting. 20,528,377 shares of Common Stock were outstanding on the Record
Date held by 208 holders of record. Each share of Common Stock entitles the
registered holder thereof to one vote.
REQUIRED VOTE
The Wisconsin Business Corporation Law ("WBCL") requires that a majority of
the issued and outstanding shares of Common Stock must be voted in favor of the
Merger Agreement for the Merger Agreement to be approved. Under the Merger
Agreement, Saw Mill, Parent and Merger Sub have agreed to vote all shares of
Common Stock owned by them in favor of the approval and adoption of the Merger
Agreement and the Merger. In addition, under the Voting Agreement, as
hereinafter defined, the Management Shareholders and certain of their affiliates
have granted an irrevocable proxy to Merger Sub which permits Merger Sub to vote
all shares of Common Stock owned by the Management Shareholders and such
affiliates (representing approximately 37.6% of the outstanding shares of Common
Stock), in favor of the adoption and approval of the Merger Agreement and the
Merger. Consequently, after taking into account the shares of Common Stock that
will be contributed to Merger Sub and the shares over which Merger Sub has
voting power under the Voting Agreement Merger Sub will have voting power over
shares representing approximately 38.2% of the outstanding shares of Common
Stock as of the Annual Meeting. SEE "THE MERGER -- INTERESTS OF CERTAIN PERSONS
IN THE MERGER; VOTING AGREEMENT."
The Company's By-laws provide that a majority of the votes entitled to be
cast with respect to the election of members of the Board of Directors,
represented either in person or by proxy, shall constitute a quorum with respect
to such matter. If a quorum exists, the election of each nominee for director
requires the affirmative vote of a majority of the votes represented at the
Annual Meeting.
The appointment of independent auditors is not required to be submitted to
a vote of shareholders; however, the Board of Directors believes it appropriate
as a matter of policy to request that the shareholders ratify the appointment.
If shareholder ratification is not received, the Board of Directors will
reconsider the appointment. The ratification of independent auditors requires
the affirmative vote of a majority of the votes represented at the Annual
Meeting at which a quorum is present.
14
20
Abstentions and broker non-votes (i.e., shares held by brokers in street
name, voting on certain matters due to discretionary authority or instructions
from the beneficial owner but not voting on other matters due to lack of
authority to vote on such matters without instructions from the beneficial
owner) will count toward the quorum requirement for purposes of the election of
directors and will have the effect of a vote against a proposal at the Annual
Meeting. The inspector of election appointed by the Board of Directors at the
Annual Meeting will determine the presence of a quorum and tabulate the results
of shareholder voting.
PROXIES
All shares of Common Stock represented by properly executed proxies that
are received in time for the Annual Meeting and which have not been revoked will
be voted in accordance with the instructions indicated in such proxies. If no
such instructions are indicated, such shares of Common Stock will be voted "FOR"
the approval and adoption of the Merger Agreement, "FOR" each nominee for
election to the Board of Directors and "FOR" ratification of the Company's
independent auditors. In addition, the persons designated in such proxies will
have the discretion to vote on matters incident to the conduct of the Annual
Meeting. If the Company proposes to adjourn the Annual Meeting, the person named
in the enclosed proxy card will vote all shares of Common Stock for which they
have authority, other than those that have been voted against the approval and
adoption of the Merger Agreement, in favor of such adjournment.
The grant of a proxy on the enclosed proxy card does not preclude a
shareholder from voting in person at the Annual Meeting. A shareholder may
revoke a proxy at any time prior to its exercise by delivering to the Secretary
of the Company, prior to the Annual Meeting, a written notice of revocation
bearing a later date or time than the proxy, delivering to the Secretary of the
Company a duly executed proxy bearing a later date or time than the revoked
proxy or attending the Annual Meeting and voting in person. Attendance at the
Annual Meeting will not in and of itself constitute the revocation of a proxy.
The Company will bear the cost of solicitation of proxies from its
shareholders. In addition to solicitation by mail, the directors, officers and
employees of the Company and its subsidiaries may solicit proxies from
shareholders of the Company by telephone, telegram or in person. Arrangements
will also be made with brokerage houses and other custodians, nominees and
fiduciaries for the forwarding of solicitation material to the beneficial owners
of shares of Common Stock held of record by such persons, and the Company will
reimburse such custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses.
PROPOSAL 1: MERGER OF THE COMPANY AND MERGER SUB
The description of the Merger and the Merger Agreement contained in this
Proxy Statement describes the material terms of the Merger Agreement but does
not purport to be complete and is qualified in its entirety by reference to the
Merger Agreement, a copy of which is attached to this Proxy Statement as ANNEX A
and incorporated herein by reference.
PARTIES TO THE MERGER
THE COMPANY
The Company is a diversified industrial manufacturing company with leading
positions in niche markets throughout the world. The Company operates in two
business segments: Motor Vehicle Products and Industrial Products. The Company
manufactures a wide range of products for numerous industries, and has
operations in the U.S. and 11 foreign countries.
The Company's Motor Vehicle Products business segment includes the
following three business groups serving different areas relating to motor
vehicles:
Automotive Acoustical Fiber Insulation. Janesville Products, established
in 1881, is the world's largest manufacturer of acoustical fiber insulation
for the automotive industry. Suroflex, the Company's German subsidiary, is
a manufacturer of acoustical fiber insulation for the European automotive
industry. Janesville U.K. produces acoustical fiber insulation for the U.K.
automotive industry.
15
21
Specialty Nonwovens. Sackner Products, established in 1916, designs and
manufactures polyester-based products used predominantly for acoustical
insulation in the automotive and office furniture industries and as air
filters in a variety of applications. Sackner's automotive products, which
represent approximately half of its revenues, include door panel inserts
and interior acoustical trim applications.
Seating. Milsco Manufacturing, established in 1924, designs and
manufactures seating products for Harley-Davidson(R) motorcycles,
construction equipment and turf care vehicles. The Company has been the
sole supplier of Harley-Davidson(R) motorcycle seats for over 60 years.
The Company's Motor Vehicle Products business segment has capitalized on
the trend in the automotive industry toward larger vans and sport utility
vehicles as well as new requirements for acoustical materials that have higher
acoustical performance and lower weight, that are cost effective and
environmentally friendly. As a result, the Company has increased its average
dollar sales per vehicle produced in North America by 39% over the last five
years.
The Company's Industrial Products business segment is composed of two
business groups serving various industries:
The Industrial Consumables business group consists of two separate business
units.
- Industrial Brushes. The Company's industrial brush business unit
designs and manufactures a variety of industrial power, maintenance,
strip and mill brushes, used in numerous manufacturing applications.
This unit is composed of Xxxxxx International and Sealeze and has been
operating for over 100 years.
- Industrial Buffs and Compounds. The Company's industrial buffs and
compounds business unit designs and manufacturers industrial buffs and
compounds used in a variety of industrial finishing applications.
JacksonLea, established in 1931, is the world's largest manufacturer of
industrial buffs and compounds.
Industrial Components. The Xxxxx Components business unit, established in
1919, produces custom-ordered stampings, assemblies, wire forms and
expanded metal products. This unit has capitalized on the trend of
manufacturing companies to outsource their component assembly operations.
This unit uses its design, engineering and manufacturing capabilities to
reduce its customers' manufacturing cost and increase customers'
manufacturing flexibility.
The Company was incorporated in 1985 and its principal executive offices
are located at 000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxx, Xxxxxxxxx
00000. The Company's phone number is (000) 000-0000. The Common Stock is the
Company's sole outstanding class of equity securities. As of the Record Date,
20,528,377 shares of Common Stock were outstanding.
Shares of Common Stock are listed and traded on The Nasdaq National Market
("NASDAQ") under the symbol "JASN". On January 28, 2000, the last trading day
prior to the public announcement of the execution of the Merger Agreement, the
reported closing price of Common Stock on NASDAQ was $7 1/8 per share. On June
1, 2000, the most recent practicable trading day prior to the date of this Proxy
Statement, the reported closing price of Common Stock on NASDAQ was $10.25 per
share. The Company has not paid any dividends in the previous two fiscal years.
The Company's current financing arrangements restrict the
16
22
payment of dividends. The following table sets forth, for the periods indicated,
the high and low sales prices per share of Common Stock as reported on NASDAQ
during each fiscal quarter for the past two fiscal years
HIGH LOW
--------- -----------
1998
First Quarter............................................... $10 3/4 $7 5/8
Second Quarter.............................................. 10 3/4 8 1/4
Third Quarter............................................... 8 3/4 6 1/2
Fourth Quarter.............................................. 8 5/8 7
1999
First Quarter............................................... $ 9 1/4 $7 1/4
Second Quarter.............................................. 9 1/4 6 3/4
Third Quarter............................................... 8 1/2 5 13/16
Fourth Quarter.............................................. 7 7/8 5 7/8
2000
First Quarter............................................... $11 $6
SAW MILL, PARENT AND MERGER SUB
Saw Mill is a Delaware limited partnership. The address and telephone
number of its principal business office is 555 Pleasantville Road, South
Building, Suite 000, Xxxxxxxxxx Xxxxx, Xxx Xxxx, 00000, telephone number (914)
000-0000. Saw Mill was formed solely for the purpose of investing in equity
securities of Parent.
Parent is a Delaware corporation. The address of its principal business
office is 555 Pleasantville Road, South Building, Suite 220, Briarcliff Manor,
New York, 10510, and its telephone number is (000) 000-0000. Parent was formed
solely for the purpose of holding 100% of the capital stock of Merger Sub and
after the Merger, the Surviving Corporation, as defined below. As of the date
hereof, Saw Mill owns 100% of the capital stock of Parent.
Merger Sub is a Wisconsin corporation. The address of its principal
business office is 555 Pleasantville Road, South Building, Suite 220, Briarcliff
Manor, New York, 10510, and its telephone number is (000) 000-0000. Merger Sub
is a wholly owned subsidiary of Parent and was formed solely for the purpose of
merging with and into the Company, at which time the separate corporate
existence of Merger Sub will cease and the Company will continue in existence as
the Surviving Corporation.
Xxxxxx X. Xxxxx is the President of Saw Mill Capital L.L.C. ("SMC") and the
President, Secretary and Treasurer and sole director of Parent and Merger Sub.
Xx. Xxxxx is a citizen of the United States. The address and telephone number of
Xx. Xxxxx'x principal business office is 555 Pleasantville Road, South Building,
Suite 220, Briarcliff Manor, New York, 10510 and his telephone number is (914)
741-1300. Xx. Xxxxx is engaged principally in the business of making private
equity investments. Xx. Xxxxx was a co-founder and Managing Director of Chase
Capital from 1993 to 1996. He founded and has been the Managing Partner of SMC
since 1997. Xx. Xxxxx has been a director of the Global Energy Equipment Group
since 1998 and a director of Vinings Industries since 1995.
Saw Mill Investments II, LLC is a Delaware limited liability company and is
the general partner of Saw Mill. The address of its principal business and
office is 555 Pleasantville Road, South Building, Suite 220, Briarcliff Manor,
New York, 10510 and its telephone number is (000) 000-0000. Saw Mill Investments
II, LLC was formed solely for the purpose of acting as the general partner of
Saw Mill.
During the last five years, none of Merger Sub, Parent, Saw Mill, or Saw
Mill Investments II, LLC or Xx. Xxxxx has been convicted in a criminal
proceeding, excluding traffic violations or similar misdemeanors, or was a party
to any civil proceeding of a judicial or administrative body as a result of
which such person was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws.
Xx. Xxxxx, in his individual capacity, directly owns 117,780 shares of
Common Stock (representing less than 1% of the outstanding shares of Common
Stock) as to which he has sole voting and dispositive power.
17
23
Xx. Xxxxx acquired indirect beneficial ownership of an additional 7,686,683
shares of Common Stock upon the execution of the Voting Agreement. In the
aggregate, as of the date hereof, Xx. Xxxxx has direct or indirect beneficial
ownership of 7,804,463 shares of Common Stock representing approximately 38.2%
of the total outstanding Common Stock. See "THE MERGER -- INTERESTS OF CERTAIN
PERSONS IN THE MERGER."
As of the date of this Proxy Statement, Merger Sub beneficially owns
7,686,683 shares of Common Stock, representing approximately 37.6% of the
outstanding shares as to which it has shared voting power by way of the Voting
Agreement. Each of Parent, Saw Mill, Saw Mill Investments II, LLC and Xx. Xxxxx,
exclusively through their direct or indirect control of Merger Sub also
beneficially own the same 7,686,683 shares of Common Stock, representing
approximately 37.6% of the outstanding shares of Common Stock and has shared
voting and dispositive powers over such shares by virtue of the Voting
Agreement. See "THE MERGER -- INTERESTS OF CERTAIN PERSONS IN THE MERGER."
THE MANAGEMENT SHAREHOLDERS
Xxxxxxx X. Xxxxxx is the Chairman of the Company. Xx. Xxxxxx is a citizen
of the United States. The address of Xx. Xxxxxx'x principal business office is
000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxx, Xxxxxxxxx 00000 and his
telephone number is (000) 000-0000. During the last five years, Xx. Xxxxxx has
been employed by the Company. See "PROPOSAL 2: ELECTION OF DIRECTORS -- NOMINEES
FOR ELECTION AS DIRECTORS."
Xxxx Train is the President and Chief Executive Officer of the Company. Mr.
Train is a citizen of the United States. The address of Mr. Train's principal
business office is 000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxx, Xxxxxxxxx
00000 and his telephone number is (000) 000-0000. During the last five years,
Mr. Train has been employed by the Company. See "PROPOSAL 2: ELECTION OF
DIRECTORS -- NOMINEES FOR ELECTION AS DIRECTORS."
During the last five years, neither Xx. Xxxxxx nor Mr. Train has been
convicted in a criminal proceeding, excluding traffic violations or similar
misdemeanors, or was a party to any civil proceeding of a judicial or
administrative body as a result of which such person was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
Xx. Xxxxxx beneficially owns 4,430,129 shares of Common Stock, representing
approximately 21.7% of the outstanding shares. Xx. Xxxxxx has shared voting
power as to 4,430,004 of those shares under the Voting Agreement. Mr. Train
beneficially owns 3,257,683 shares of Common Stock, representing approximately
15.9% of the outstanding shares. Mr. Train has shared voting power as to
3,256,679 of those shares under the Voting Agreement. See "THE
MERGER -- INTERESTS OF CERTAIN PERSONS IN THE MERGER."
PAST TRANSACTIONS BETWEEN THE COMPANY AND SAW MILL
On June 5, 1998, the Company completed the sale of its power generation
businesses to a management-led group backed by SMC, an affiliate of Saw Mill,
Parent and Merger Sub. Net cash proceeds to the Company from the sale
approximated $30.1 million.
SPECIAL FACTORS
PURPOSE AND EFFECTS OF THE MERGER
The purpose of the Merger is for Saw Mill and the Management Shareholders
to acquire the Company as a result of the Merger in which the Public
Shareholders will receive $11.25 per share of Common Stock, without interest. If
the Merger Agreement and Merger are approved at the Annual Meeting, the parties
to the Merger Agreement will file articles of merger (the "Articles of Merger")
with the Department of Financial Institutions of the State of Wisconsin (the
"Department of Financial Institutions") in accordance with the WBCL. The Merger
will become effective (the "Effective Time") upon filing of the Articles of
Merger with the Department of Financial Institutions. At the Effective Time,
Merger Sub will be merged with and into the
18
24
Company in accordance with Wisconsin law, whereupon the separate existence of
Merger Sub will cease, and the Company will be the Surviving Corporation. At the
Effective Time, each share of Common Stock other than Common Stock owned by the
Company or its affiliates, Common Stock owned by Merger Sub (including 2,437,262
shares of Common Stock currently owned by the Management Shareholders to be
contributed to Parent prior to the Merger) and Dissenting Shares, will be
converted into the right to receive $11.25 per share in cash without interest.
The Common Stock is currently registered under the Exchange Act. If the
Merger Agreement and the Merger are approved at the Annual Meeting and the
Merger is completed, the Common Stock will become eligible for termination of
registration under Section 12(g)(4) of the Exchange Act, and the registration of
Common Stock under the Exchange Act will be terminated as soon as practicable
after the Merger is completed. Termination of registration of the shares of
Common Stock under the Exchange Act will substantially reduce the information
required to be furnished by the Company to its shareholders and to the
Commission and will make certain provisions of the Exchange Act inapplicable to
the Company, such as the obligation to file reports under Section 15(d) of the
Exchange Act, the short-swing profit recovery provisions of Section 16(b), the
requirement of furnishing a proxy statement in connection with shareholders'
meetings and the requirements of Rule 13e-3 with respect to going-private
transactions. Furthermore, the ability of "affiliates" of the Company and
persons holding "restricted securities" of the Company to dispose of such
securities pursuant to Rule 144 or Rule 144A promulgated under the Securities
Act of 1933, as amended, may be impaired or limited. The shares of Common Stock
will also be delisted from NASDAQ as a result of the Merger.
REASONS FOR THE MERGER; FAIRNESS OF THE MERGER
THE SPECIAL COMMITTEE
In concluding that the Merger Agreement should be recommended to the Board
of Directors, and that the Merger is fair to and in the best interests of the
Public Shareholders, the Special Committee considered a number of factors. The
following discussion of the factors considered by the Special Committee is not
intended to be exhaustive but summarizes the material factors considered. The
Special Committee considered the following factors which supported its
conclusion that the Merger is fair to, and in the best interests of, the Public
Shareholders:
- MARKET PRICE AND PREMIUM. The Merger Consideration will enable the
Public Shareholders to realize a significant premium over the prices at
which the Common Stock has traded over the past two years. The
historical market prices of Common Stock were deemed relevant because
they indicate the arm's-length trading prices of Common Stock as
determined in the open market. The Merger Consideration represents a
premium of 57.9%, 45.2%, 80.0%, 21.6% and 91.5%, respectively, over the
closing market price of Common Stock one day, one week, four weeks, at
the 52-week high and at the 52-week low, respectively, prior to the
public announcement of the Merger Agreement.
- FORMATION OF SPECIAL COMMITTEE AND ARM'S-LENGTH NEGOTIATIONS. The
negotiations between the Special Committee on behalf of the Company and
the Public Shareholders, the Management Shareholders and Saw Mill and
their respective advisors were conducted at arm's-length. None of the
members of the Special Committee are employed by or affiliated with the
Company, except in their capacities as directors and shareholders, nor
will they have any equity interest in the Surviving Corporation
following the Merger.
- MERGER CONSIDERATION. The Special Committee concluded, based on its
negotiations with Saw Mill, Parent and Merger Sub, that the Merger
Consideration represented the highest price that Saw Mill, Parent and
Merger Sub were willing to pay to acquire the shares of Common Stock.
This determination was the result of the Special Committee's
arm's-length negotiations with Saw Mill, Parent and Merger Sub in an
attempt to obtain the highest possible price, the fact that the Merger
Consideration was increased by Saw Mill, Parent and Merger Sub by 18.4%
to a price equal to $1.75 per share more than the initial proposal of
$9.50 per share made by Saw Mill, Parent and Merger Sub,
19
25
and the fact that the Merger Consideration to Public Shareholders was
increased by Saw Mill, Parent and Merger Sub by a final $0.25 per share
only after the Management Shareholders agreed to accept a lower aggregate
consideration equal to approximately $10.90 per share of Common Stock
owned by them.
- XXXXXX BROTHERS FAIRNESS OPINION. Xxxxxx Brothers Inc. ("Xxxxxx
Brothers") provided an oral opinion to the Special Committee on January
29, 2000, which was subsequently confirmed in writing on January 31,
2000 (the "Xxxxxx Opinion"), to the effect that, as of January 29, 2000
and based upon and subject to certain assumptions, factors and
limitations, the Merger Consideration of $11.25 per share of Common
Stock to the Public Shareholders is fair, from a financial point of
view, to the Public Shareholders. The Special Committee also considered
the analysis underlying the Xxxxxx Opinion as presented to the Special
Committee in an extensive presentation by Xxxxxx Brothers on January 29,
2000. A copy of the Xxxxxx Opinion, setting forth the assumptions made,
matters considered and limitations on the review undertaken in
connection with its opinion, is attached as Annex B. Shareholders should
read the Xxxxxx Opinion carefully in its entirety.
- FIDUCIARY DUTIES. The Merger Agreement does not unduly deter a third
party from making, or inhibit the Special Committee and its advisors
from evaluating, negotiating or approving a transaction other than the
Merger with a third party. Specifically, the Merger Agreement includes
provisions which permit the Special Committee and its advisors to
receive unsolicited inquiries and proposals from third parties, and
permit the Special Committee to provide information to, engage in
discussions and negotiate with, directly or through its advisors, any
third party making an unsolicited inquiry or proposal, permit the Board
of Directors to terminate the Merger Agreement in order to permit the
Company to enter into an alternative transaction with a third party,
limit the Company's obligation to pay a "break up" fee upon termination
of the Merger Agreement (as a result, among other things, of the Board
of Directors withdrawing its recommendation of the Merger or
recommending an acquisition proposal or potential third party
transaction other than the Merger) to $6.7 million in the aggregate
(which amount includes reimbursable expenses to Saw Mill, Parent and
Merger Sub and represents approximately 2.0% of the total funds required
for Saw Mill, Parent and Merger Sub to complete the Merger), limit the
Company's obligation to reimburse Saw Mill, Parent and Merger Sub for
their expenses upon termination of the Merger Agreement in certain
circumstances where the break up fee is inapplicable to an aggregate of
$1.5 million, and provide that the Company will be reimbursed for its
expenses in certain circumstances up to an aggregate amount of $1.5
million. SEE "THE MERGER AGREEMENT -- FEES, EXPENSES AND OTHER
PAYMENTS."
- RECEIPT OF COMMITMENT LETTERS. Saw Mill had received executed
commitment letters from nationally recognized financial institutions to
provide the necessary debt and private equity financing for the Merger.
The Special Committee reviewed the terms and conditions of the
commitment letters in detail with the assistance of Xxxxxx Brothers.
- HISTORICAL AND PROJECTED FINANCIAL PERFORMANCE AND RELATED RISK AND
UNCERTAINTIES. The Special Committee considered information with
respect to the financial condition, results of operations, business and
prospects of the Company, including the financial projections supplied
by the Company to Xxxxxx Brothers and the inherent uncertainties and
contingencies associated with those financial projections, the size of
the Company as compared to the remaining public companies in the
Company's business segments and the economic and market conditions
affecting the Company. The Special Committee did not consider net book
value or liquidation value to be material factors in determining the
fairness of the Merger to the Public Shareholders. The Special Committee
does not believe that these factors have any significant impact on the
inherent value of the Company or the market trading prices of Common
Stock.
- LACK OF LIQUIDITY OF THE COMMON STOCK. In light of the relatively thin
trading market and the lack of liquidity of the Common Stock, the Merger
will afford Public Shareholders an
20
26
opportunity to dispose of their Common Stock without the possible
diminution of value resulting from the lack of an active trading market.
- AVAILABILITY OF DISSENTERS' RIGHTS. Although the Merger is not
structured so that approval of at least a majority of unaffiliated
shareholders is required, dissenters' rights will be available to the
holders of Common Stock under the WBCL in connection with the Merger.
Under the WBCL, shareholders who dissent will be entitled to receive the
"fair value" of their shares, which means the highest closing sales
price per share of Common Stock during the 30-day period immediately
prior to the completion of the Merger. See "RIGHTS OF DISSENTING
SHAREHOLDERS."
- LACK OF VIABLE ALTERNATIVES TO THE MERGER. Prior to the receipt of any
proposal from SMC, the Board of Directors of the Company had discussed
options available to maximize value to the Public Shareholders, including
the sale of the Company to a third party. In that regard, the Board of
Directors did not identify any logical synergistic purchasers. Following
receipt of the proposal from SMC and the formation of the Special
Committee, in its consideration of strategic alternatives, the Special
Committee considered the merits of conducting an auction of the Company
to third parties or authorizing Xxxxxx Brothers to solicit interest from
third parties, and discussed this possibility with the Management
Shareholders. The Management Shareholders informed the Special Committee
that SMC was not willing to participate in an auction of the Company and
would withdraw its proposal if the Company were put up for auction or if
Xxxxxx Brothers actively solicited third party offers. The financial
advisor and counsel to the Special Committee confirmed this fact directly
with SMC. The Management Shareholders also advised the Special Committee
that they were opposed to these alternatives. After considering these
factors, the Special Committee concluded that it would not be in the best
interests of the Public Shareholders to assume the risk that SMC would
withdraw its proposal, because the opportunity to obtain a premium price
for the Common Stock for the Public Shareholders would be lost.
Accordingly, the Special Committee did not direct Xxxxxx Brothers to
solicit offers or indications of interest from third parties. The Special
Committee also believed that the ultimate public disclosure of a merger
agreement would have an effect similar to an auction of the Company so
long as any definitive merger agreement preserved the right of the
Special Committee and its advisors to enter into negotiations and
discussions with third parties that might express an interest in
acquiring or entering into a transaction with the Company. The Special
Committee was also cognizant that, unlike a public auction, the Special
Committee would be assured in this process of a committed buyer. The
Special Committee and its legal and financial advisors were unanimous in
this view. As a result, the Special Committee insisted that the Special
Committee and its advisors retain the right to provide information to,
and enter into negotiations and discussions with, third parties that
might express an interest in acquiring, or entering into a transaction
with, the Company. See "THE MERGER AGREEMENT -- THIRD PARTY TRANSACTIONS;
FIDUCIARY RESPONSIBILITIES." Also, the Special Committee preferred the
Merger to the Company remaining a publicly traded entity because the
Merger afforded the Public Shareholders liquidity for their Common Stock
at fair value without the possible diminution of value resulting from the
lack of an active trading market, poorer than expected Company
performance and/or adverse general market conditions.
In determining that the proposed Merger is fair to, and in the best
interests of, the Public Shareholders, the Special Committee also considered the
following potential negative factors:
- LOSS OF EQUITY INTEREST. If the Merger is approved, the Public
Shareholders will not participate in the future growth of the Company.
Because of the risks and uncertainties associated with the Company's
future prospects, the Special Committee concluded that this detriment
was not quantifiable. The Special Committee also weighed the relative
merits of receiving a cash premium for the Common Stock versus a more
speculative potential future return. In addition, the Special Committee
considered the fact that Saw Mill, Parent, Merger Sub and the Management
Shareholders will continue to have the opportunity to benefit from any
increases in the value of the Company following the Merger and in this
consideration, reviewed management's projections of future sales and
21
27
earnings of the Company and determined that the future prospects of the
Company are adequately reflected in the Merger Consideration.
- POTENTIAL CONFLICTS OF INTEREST OF MEMBERS OF THE SPECIAL COMMITTEE. If
the Merger is completed, the members of the Special Committee will
receive (solely in their capacity as shareholders and optionholders of
the Company), in the aggregate, $2,303,831 in Merger Consideration and
$484,073 in Option Consideration. The Special Committee, however,
believes that its interests are consistent with the interests of all
other Public Shareholders in this regard. The members of the Special
Committee will also receive compensation for their services as members
of the Special Committee. See "THE MERGER -- INTERESTS OF CERTAIN
PERSONS IN THE MERGER -- DIRECTORS AND EXECUTIVE OFFICERS OTHER THAN
MANAGEMENT SHAREHOLDERS." The Special Committee believes that this does
not present a conflict of interest because this compensation is payable
whether or not the Merger is completed.
- FEDERAL INCOME TAX CONSEQUENCES TO PUBLIC SHAREHOLDERS. The Special
Committee considered the fact that the Public Shareholders may,
depending on their tax basis in their Common Stock, recognize a taxable
gain upon the completion of the proposed Merger. The Special Committee
believes that the opportunity to receive the cash Merger Consideration,
together with the other positive factors described above, outweighs
these potential tax consequences. See "SPECIAL FACTORS -- CERTAIN TAX
CONSEQUENCES OF THE MERGER."
In view of all of the factors considered by the Special Committee in
connection with the evaluation of the Merger and the complexity of these
matters, the Special Committee did not consider it practicable to, nor did it
attempt to, quantify, rank or otherwise assign relative weights to the specific
factors it considered in reaching its decision. However, based upon these
factors, the evaluation of all the relevant information provided to them by the
Special Committee's independent financial and legal advisors and taking into
account the existing trading ranges for the Common Stock, the Special Committee
determined that the Merger Agreement and the Merger, including the Merger
Consideration, is fair, from a financial point of view, to the Public
Shareholders. In considering the factors described above, individual members of
the Special Committee may have given different weights to different factors.
THE BOARD OF DIRECTORS
The Board of Directors considered the following factors in deciding to
recommend that shareholders vote "FOR" the adoption and approval of the Merger
Agreement at the Annual Meeting:
- the recommendation of the Special Committee;
- the factors referred to above as having been taken into account by the
Special Committee; and
- the fact that the Merger Consideration and the terms and conditions of
the Merger Agreement were the result of arm's-length negotiations
between the Special Committee and its independent legal and financial
advisors, on the one hand, and representatives of Saw Mill, Parent,
Merger Sub and the Management Shareholders, on the other hand.
In view of the factors considered by the Board of Directors in connection
with the evaluation of the Merger and the complexity of these matters, the Board
of Directors did not consider it practicable to, nor did it attempt to,
quantify, rank or otherwise assign relative weights to the specific factors it
considered in reaching its decision, nor did it evaluate whether these factors
were of equal importance. The Board of Directors also received an extensive
presentation from, and relied on the experience and expertise of, Xxxxxx
Brothers with respect to the quantitative analysis of the financial terms of the
Merger. The Board of Directors conducted a discussion of, among other things,
the factors described above, including asking questions of the Company's
management and regularly retained legal advisors, and reached the conclusion
that the Merger was advisable and in the best interests of the Company, the
Public Shareholders and the Company's other constituencies. In considering the
factors described above, individual members of the Board of Directors may have
given different weight to different factors.
22
28
The Board of Directors believes that the Merger is procedurally fair
because, among other things:
- the Special Committee consisted entirely of non-management,
non-affiliated independent directors appointed by the Board of Directors
to represent solely the interests of the Public Shareholders;
- the Special Committee retained and was advised by its own independent
financial advisor, Xxxxxx Brothers, to assist it in evaluating the
Merger and provide it with financial advice;
- the Special Committee retained and was advised by its own independent
legal counsel, Xxxxxxx Xxxx & Friedrich LLP, who negotiated on behalf of
the Special Committee;
- the Special Committee engaged in extensive negotiations and
deliberations in evaluating the Merger and Merger Consideration;
- the Merger Consideration and the other terms and conditions of the
Merger Agreement resulted from active arm's-length bargaining between
the Special Committee and Saw Mill, Parent and Merger Sub and their
respective advisors; and
- even though the Special Committee consisted of directors of the Company
and was therefore not completely unaffiliated with the Company,
committees of independent directors are a commonly utilized mechanism
which are recognized under applicable law to ensure fairness in
transactions of this type.
In view of the foregoing, the Board of Directors believes that sufficient
procedural safeguards exist to ensure fairness of the Merger and to permit the
Special Committee to effectively represent the interests of the Public
Shareholders, and therefore, additional unaffiliated representatives to act on
behalf of the Public Shareholders are not necessary.
SAW MILL, PARENT AND MERGER SUB
Saw Mill believes the Merger is fair to the Public Shareholders. However,
neither Saw Mill nor any of its affiliates has undertaken any formal evaluation
of the fairness of the Merger to the Company's shareholders. Moreover, Saw Mill
did not participate in the deliberations of the Special Committee or receive
advice from the Special Committee's financial advisor. Consequently, Saw Mill is
not in a position to specifically adopt the conclusions of the Special Committee
with respect to the fairness of the Merger to the Public Shareholders. Because
of the variety of factors considered, Saw Mill did not find it practicable to
make specific assessments of, quantify or otherwise assign relative weights to
the specific factors considered in reaching its determination. Saw Mill's
determination that the Merger is fair was made after consideration of all
factors it determined to be relevant. These factors include:
- the current and past trading prices of Common Stock compared to the
common stock of other similar manufacturers;
- the Merger will provide the Public Shareholders a significant premium
for their shares compared to the market price at the time the Company
publicly announced a possible sale;
- the Merger Agreement was the result of arm's-length negotiations in
which the Special Committee was assisted by its independent financial
and legal advisers;
- the Company has advised Saw Mill that its proposal was believed to be
the best alternative for the Company and the Public Shareholders;
- the establishment of the Special Committee to evaluate Saw Mill's
proposal as well as other alternatives;
- the unanimous recommendation of the Special Committee;
- the fact that the Special Committee received a written opinion from its
independent financial advisor as to the fairness, from a financial point
of view, of the Merger Consideration to the Public Shareholders;
23
29
- the fact that the Management Shareholders will receive a lower average
price for all of their shares of Common Stock than the Public
Shareholders; and
- the fact that the Special Committee aggressively negotiated the terms of
the Merger Agreement and the Merger.
Saw Mill believes these analyses and factors provide a reasonable basis
upon which to form its belief that the Merger is fair to the Public
Shareholders. This belief should not, however, be construed as a recommendation
to the Company's shareholders by Saw Mill to vote to approve the Merger.
Saw Mill did not consider net book value, going concern value or
liquidation value to be material factors in determining the fairness of the
Merger to the Public Shareholders. Saw Mill does not believe that these factors
have any significant impact on the market trading prices of Common Stock. Saw
Mill did not rely on any report, opinion or appraisal in determining the
fairness of the Merger to the Public Shareholders, but does not disagree with
the conclusion expressed by Xxxxxx Brothers in its opinion to the Special
Committee regarding the fairness, from a financial point of view, of the Merger
Consideration to the Public Shareholders. Saw Mill is not aware of any firm
offers made in the last 18 months by an unaffiliated person to merge or
consolidate with the Company, to acquire all or any substantial part of the
Company's assets or to acquire control of the Company. For the reasons cited
above and based upon their involvement in the process leading up to the Merger,
Saw Mill believes that the procedures used by the Special Committee were fair to
the Public Shareholders. These procedures include the formation of the Special
Committee and the fact that the Merger must be approved by the Company's
shareholders, including the Management Shareholders.
BENEFITS AND DETRIMENTS OF THE MERGER TO THE COMPANY, THE MANAGEMENT
SHAREHOLDERS AND THE PUBLIC SHAREHOLDERS
The Merger will have different benefits and detriments for each of the
Company, the Management Shareholders and the Public Shareholders. These benefits
and detriments are described, and quantified to the extent practicable, below.
BENEFITS AND DETRIMENTS TO THE COMPANY
The Company believes that the Merger will result in the following benefit
to the Company:
- If the Merger is completed, the Surviving Corporation will be eligible
to delist the Common Stock from NASDAQ and the Surviving Corporation
will no longer be required to bear the legal and administrative expense
of complying with the legal requirements applicable to companies which
have securities listed on NASDAQ. See "SPECIAL FACTORS -- PURPOSE AND
EFFECTS OF THE MERGER." In particular, the Surviving Corporation will
not be required to dedicate any time or expense to public shareholder
and analyst inquiries and investor relations. The Company expects that
its cost savings from the elimination of these items will be
approximately $225,000 per year.
The Company believes that the Merger will result in the following
detriments to the Company:
- If the Merger is completed, the Surviving Corporation will incur a
significant amount of senior and subordinated debt and will issue a
significant amount of preferred equity securities. See "THE
MERGER -- FINANCING FOR THE MERGER."
- The definitive agreements for the senior and subordinated debt and
preferred equity financing will contain certain financial and other
covenants which are expected to be more restrictive than the covenants
required by the Company's existing senior secured lenders.
- If the Merger is completed, the Surviving Corporation will be unable to
use publicly traded equity securities for acquisitions or to grant
options to its employees exercisable for publicly traded equity
securities.
24
30
BENEFITS AND DETRIMENTS TO THE MANAGEMENT SHAREHOLDERS
The Company believes that the Merger will result in the following benefits
to the Management Shareholders:
- After the Merger is completed, the Management Shareholders will benefit
from any stock price appreciation that may result from any increases in
the future earnings, growth and value of the Surviving Corporation. See
"SPECIAL FACTORS -- REASONS FOR THE MERGER; FAIRNESS OF THE MERGER."
- As a result of the Merger, the Management Shareholders will contribute
an aggregate of 2,437,262 shares of Common Stock valued at approximately
$10.13 per share, or $24,700,000 in the aggregate, to Parent in exchange
for shares of common stock of Parent. The Management Shareholders and
their affiliates also will receive $11.25 per share, or $59,068,688 in
the aggregate, for the 5,250,550 shares of Common Stock that they are
not contributing to Parent. The contribution and the Merger will result
in the Management Shareholders and their affiliates receiving aggregate
consideration equal to approximately $10.90 per share of Common Stock.
See "THE MERGER -- INTERESTS OF CERTAIN PERSONS IN THE MERGER."
- Each of the Management Shareholders has agreed to enter into employment
agreements with the Surviving Corporation. Under the employment
agreements, Xx. Xxxxxx will be paid a base salary of $300,000 per year
and Mr. Train will be paid a base salary of $450,000 per year. See "THE
MERGER -- INTERESTS OF CERTAIN PERSONS IN THE MERGER -- EMPLOYMENT
AGREEMENTS."
- The Management Shareholders will enter into a stockholders agreement
with the other stockholders of Parent which will entitle the Management
Shareholders to designate three directors of Parent in their sole
discretion and a fourth independent director subject to the approval of
Saw Mill. See "THE MERGER -- INTERESTS OF CERTAIN PERSONS IN THE
MERGER -- STOCKHOLDERS AGREEMENT."
The Company believes that the Merger will result in the following
detriments to the Management Shareholders:
- After the Merger is completed, the Management Shareholders will continue
to bear the risk of any stock price depreciation that may result from
the future earnings, growth and value of the Surviving Corporation.
- The Company believes that the Management Shareholders will recognize a
taxable gain upon receipt of the cash Merger Consideration. See "SPECIAL
FACTORS -- CERTAIN TAX CONSEQUENCES OF THE MERGER."
- The shares of common stock of Parent which the Management Shareholders
will receive in the Merger will be relatively illiquid and will be
subject to transfer restrictions under the stockholders agreement.
- The Management Shareholders' employment agreements will contain
non-compete provisions which will restrict the Management Shareholders
from being involved in, during the period of their employment and for
two years thereafter, any business which is in competition with the
Surviving Corporation. See "THE MERGER -- INTERESTS OF CERTAIN PERSONS
IN THE MERGER -- EMPLOYMENT AGREEMENTS."
- If the Merger is completed, Saw Mill and its affiliates will
beneficially own a majority of the common stock of Parent and, as a
result, will be able to influence the management of the Surviving
Corporation.
25
31
BENEFITS AND DETRIMENTS TO THE PUBLIC SHAREHOLDERS
The Company believes that the Merger will result in the following benefits
to the Public Shareholders:
- The Public Shareholders will receive a cash premium for their shares of
Common Stock over the market price when the proposed Merger was
announced. The Merger Consideration of $11.25 per share represents a
premium of 57.9% over the closing market price of the Common Stock on
January 28, 2000, the last trading day before the Merger was announced.
- The Public Shareholders in the aggregate will receive $142,084,811 in
Merger Consideration and $5,036,707.62 in Option Consideration as a
result of the Merger.
- After the Merger is completed, the Public Shareholders will not bear the
risk of any stock price depreciation that may result from any decreases
in the future earnings, growth and value of the Surviving Corporation.
- Dissenters' rights are available to Public Shareholders who perfect
their rights under applicable Wisconsin law and such shareholders are
entitled to receive the fair value of their shares of Common Stock, as
determined under such laws. See "RIGHTS OF DISSENTING SHAREHOLDERS."
- The Public Shareholders will not pay commissions or brokerage fees in
connection with the receipt of the Merger Consideration.
The Company believes that the Merger will result in the following
detriments to the Public Shareholders:
- After the Merger is completed, the Public Shareholders will not benefit
from any stock price appreciation which may result from any increases in
future earnings, growth and value of the Surviving Corporation. See "THE
MERGER -- REASONS FOR THE MERGER -- FAIRNESS OF THE MERGER."
- Public Shareholders may realize a taxable gain as a result of the
Merger. See "SPECIAL FACTORS -- CERTAIN TAX CONSEQUENCES OF THE MERGER."
- After the Merger is completed, the Public Shareholders will no longer
have any right to vote as shareholders of the Surviving Corporation.
REPORTS, OPINIONS AND APPRAISALS
The Special Committee has received an opinion from an independent outside
party, Xxxxxx Brothers, regarding the fairness, from a financial point of view,
of the Merger Consideration to the Public Shareholders. Xxxxxx Brothers also
provided materials and made presentations to the Special Committee and the Board
of Directors at their respective meetings to consider the Merger and the Merger
Agreement. See "THE MERGER -- BACKGROUND OF THE MERGER." The Special Committee
selected Xxxxxx Brothers based upon its reputation as an investment banking firm
of international standing and based upon the recommendation of outside counsel
to the Special Committee. The Special Committee did not undertake a formal
interview process to select its financial advisor; rather the Special Committee
considered the qualifications of a variety of nationally recognized investment
banking firms. After interviewing Xxxxxx Brothers and negotiating the terms of
Xxxxxx Brothers' engagement, the Special Committee selected Xxxxxx Brothers as
its exclusive independent financial advisor in connection with the Merger. At
the commencement of its engagement, Xxxxxx Brothers was paid a retainer fee of
$100,000. Upon delivery of the Xxxxxx Opinion, Xxxxxx Brothers was paid an
additional fee of $900,000. If the Merger is completed, Xxxxxx Brothers will
receive an additional fee of $2,000,000. Xxxxxx Brothers will also be reimbursed
for its out-of-pocket expenses in connection with the Merger. See "THE
MERGER -- FEES AND EXPENSES." Except for the foregoing, no material relationship
existed during the past two years between Xxxxxx Brothers and the Company and
its affiliates.
26
32
OPINION OF THE INDEPENDENT FINANCIAL ADVISOR TO THE SPECIAL COMMITTEE
Xxxxxx Brothers has acted as independent financial advisor to the Special
Committee in connection with the Merger and delivered the Xxxxxx Opinion to the
effect that, as of the date thereof, and based on and subject to the
assumptions, limitations and qualifications set forth in the Xxxxxx Opinion, the
Merger Consideration is fair, from a financial point of view, to the Public
Shareholders.
THE FULL TEXT OF THE XXXXXX OPINION WHICH SETS FORTH A DESCRIPTION OF THE
PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN BY XXXXXX BROTHERS IN CONNECTION WITH SUCH OPINION, IS
ATTACHED TO THIS PROXY STATEMENT AS ANNEX B AND IS INCORPORATED HEREIN BY
REFERENCE. SHAREHOLDERS MAY READ THE XXXXXX OPINION FOR A DISCUSSION OF
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN BY
XXXXXX BROTHERS IN RENDERING ITS OPINION. THE SUMMARY OF THE XXXXXX OPINION SET
FORTH IN THIS PROXY STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF THE XXXXXX OPINION ATTACHED AS ANNEX B TO THIS PROXY STATEMENT.
No limitations were imposed by the Company or the Special Committee on the
scope of Xxxxxx Brothers' investigation or the procedures followed by Xxxxxx
Brothers in connection with preparing its opinion, except that Xxxxxx Brothers
was not authorized to solicit, and did not solicit, any indications of interest
from any third party with respect to a purchase of all or a part of the
Company's business. SEE "SPECIAL FACTORS -- REASONS FOR THE MERGER; FAIRNESS OF
THE MERGER -- THE SPECIAL COMMITTEE -- LACK OF VIABLE ALTERNATIVES TO THE
MERGER." Xxxxxx Brothers was not requested to and did not make any
recommendation to the Special Committee as to the form or amount of
consideration to be received by the Public Shareholders in the Merger, which was
determined through negotiations between the Special Committee and Saw Mill,
although Xxxxxx Brothers did participate in such negotiations. In arriving at
its opinion, Xxxxxx Brothers did not ascribe a specific range of value to the
Company, but rather made its determination as to the fairness, from a financial
point of view, of the consideration to be received by the Public Shareholders in
the Merger on the basis of the financial and comparative analyses described
below. The Xxxxxx Opinion is for the use and benefit of the Special Committee
and was rendered to it in connection with its consideration of the Merger and is
not intended to be and does not constitute a recommendation to any Public
Shareholder as to how such Public Shareholder should vote with respect to the
Merger. Xxxxxx Brothers was not requested to opine as to, and its opinion does
not in any manner address, the Company's underlying business decision to proceed
with or effect the Merger.
In connection with the preparation and delivery of the Xxxxxx Opinion to
the Special Committee, Xxxxxx Brothers performed a variety of financial and
comparative analyses, as described below. The preparation of a fairness opinion
involves various determinations as to the most appropriate and relevant methods
of financial and comparative analysis and the application of those methods to
the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Furthermore, in arriving at its opinion,
Xxxxxx Brothers did not attribute any particular weight to any analysis or
factor considered by it, but rather made qualitative judgments as to the
significance and relevancy of each analysis and factor. Accordingly, Xxxxxx
Brothers believes that its analyses must be considered as a whole and that
considering any portions of its analyses and of the factors considered by it,
without considering all analyses and factors, could create a misleading or
incomplete view of the process underlying its opinion. In its analyses, Xxxxxx
Brothers made numerous assumptions with respect to industry performance, general
business and economic conditions and other matters, many of which are beyond the
Company's control. Any estimates or projections contained in these analyses are
not necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than as set forth
therein. Additionally, analyses relating to the value of businesses do not
purport to be appraisals or to reflect the prices at which businesses actually
may be sold.
In arriving at its opinion, Xxxxxx Brothers reviewed and analyzed:
- the Merger Agreement and the specific terms of the Merger;
- the annual report of the Company for the fiscal year ended December 25,
1998 filed on Form 10-K, the quarterly financial reports of the Company
for the fiscal quarters ended March 26, 1999, June 25,
27
33
1999 and September 24, 1999 filed on Form 10-Q, and such other publicly
available information concerning the Company that Xxxxxx Brothers
believed to be relevant to its analysis;
- financial and operating information with respect to the business,
operations and prospects of the Company furnished to Xxxxxx Brothers by
the Company;
- a trading history of Common Stock from June 16, 1987 to January 28, 2000
and a comparison of that trading history with other companies that
Xxxxxx Brothers deemed relevant;
- a comparison of the historical financial results and present financial
condition of the Company with other companies Xxxxxx Brothers deemed
relevant; and
- a comparison of the financial terms of the Merger with the financial
terms of certain other merger transactions that Xxxxxx Brothers deemed
relevant.
In addition, Xxxxxx Brothers had discussions with the management of the
Company concerning the industries in which it operates, as well as its
businesses, operations, assets, liabilities, financial condition and prospects
and undertook such other studies, analyses and investigations as Xxxxxx Brothers
deemed appropriate.
In arriving at its opinion, Xxxxxx Brothers assumed and relied upon the
accuracy and completeness of the financial and other information used by Xxxxxx
Brothers without assuming any responsibility for independent verification of
such information and has further relied upon the assurances of management of the
Company that they were not aware of any facts or circumstances that would make
such information inaccurate or misleading. With respect to the financial
projections of the Company, upon advice of the Company, Xxxxxx Brothers assumed
that such projections were reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the management of the Company as
to the future financial performance of the Company and that the Company will
perform substantially in accordance with such projections. In arriving at its
opinion, Xxxxxx Brothers did not conduct a physical inspection of the properties
and facilities of the Company and did not make or obtain any evaluations or
appraisals of the assets or liabilities of the Company. In addition, the Company
did not request Xxxxxx Brothers to solicit, and Xxxxxx Brothers did not solicit,
any indications of interest from any third party with respect to the purchase of
all or any part of the Company's business. The Xxxxxx Opinion is necessarily
based upon market, economic and other conditions as they existed on, and could
be evaluated as of, the date of the Xxxxxx Opinion.
COMPARABLE PUBLIC COMPANY ANALYSIS. Xxxxxx Brothers compared the
historical financial, operating and stock market performances of certain
publicly traded companies that it considered relevant with the historical
financial, operating and stock market performance of the Company, based upon
information that was publicly available at that time and based upon information
provided to Xxxxxx Brothers by management of the Company. Xxxxxx Brothers
considered companies in three principal industry segments: automotive suppliers,
industrial consumables producers and small-capitalization diversified
manufacturers. The automotive suppliers that Xxxxxx Brothers considered were
Avon Rubber PLC, CLARCOR Inc., Xxxxxxx & Xxxxxx Corporation, Xxxxxxxx
Corporation, Dura Automotive Systems, Inc., Xxxxx Group PLC, Noble
International, Ltd., Phoenix AG, Xxxxxxx Industries, Inc., STRATTEC SECURITY
CORPORATION and Xxxx'x International, Inc. (the "Comparable Automotive
Suppliers"); the industrial consumables producers considered were BHA Group
Holdings, Inc., Xxxxxxxxx Company, Inc., Xxxx Company, Flanders Corporation,
Industrial Holdings, Inc., Kennametal Inc., The X.X. Xxxxxxxx Company, Penn
Engineering and Manufacturing Corp. and SPS Technologies, Inc. (the "Comparable
Industrial Consumables Producers"); and the small-capitalization diversified
manufacturers considered were Amcast Industrial Corporation, Xxxxxx Group Inc.,
Xxxxxxxxx Technologies Corporation, Griffon Corporation, Xxxxx Industries, Inc.,
Xxxxxx Industries Inc. and Valmont Industries, Inc. (the "Comparable Small-Cap
Diversified Manufacturers" and, together with the Comparable Automotive
Suppliers and Comparable Industrial Consumables Producers, the "Comparable
Public Companies").
Xxxxxx Brothers calculated a range of market multiples for the Comparable
Public Companies by dividing the aggregate equity market value (total common
shares outstanding multiplied by the closing market price per share on January
28, 2000), plus the latest reported debt, preferred stock and minority interest
minus
28
34
latest reported cash and cash equivalents (in aggregate, the "Enterprise Value")
of each of the Comparable Public Companies by such company's latest twelve
months ("LTM") net sales; earnings before interest, taxes, depreciation and
amortization ("EBITDA"); and earnings before interest and taxes ("EBIT"), as
reported in publicly available information. In addition, Xxxxxx Brothers divided
the equity market value per share on January 28, 2000 of each of the Comparable
Public Companies by the latest reported equity book value per share as reported
in publicly available information and by projected earnings per share ("EPS")
for 2000 calendar year, as represented by the mean estimate of research analysts
as reported by First Call Corporation as of January 27, 2000. Estimates of 2000
EPS for the Company are based upon management projections. This analysis
indicated the following results:
LOW HIGH MEDIAN
------ ------ ------
Enterprise Value as a multiple of LTM net sales............ 0.31x 1.39x 0.62x
Enterprise Value as a multiple of LTM EBITDA............... 3.3x 9.9x 5.3x
Enterprise Value as a multiple of LTM EBIT................. 4.3x 22.9x 7.7x
Price per share as a multiple of book equity value per
share.................................................... 0.61x 11.36x 1.17x
Price per share as a multiple of 2000 EPS.................. 4.1x 17.5x 9.0x
Implied multiples for the Company based on the Merger price for LTM net
sales, EBITDA and EBIT were 0.74x, 6.0x and 9.2x, respectively, for equity book
value was 1.78x and for estimated calendar 2000 EPS was 11.8x.
Because of the inherent differences between the business, operations and
prospects of the Comparable Public Companies, on the one hand, and the Company,
on the other, Xxxxxx Brothers believed that it was inappropriate to, and
therefore did not, rely solely on the quantitative results of the analysis but
rather also made qualitative judgments concerning differences between the
financial and operating characteristics and prospects of the Comparable Public
Companies, on the one hand, and the Company, on the other, that would affect the
public trading values of each.
PRECEDENT TRANSACTIONS ANALYSIS. Xxxxxx Brothers compared the financial and
operating performance of certain companies that had entered into merger
transactions since 1997 (with the exception of the transaction by Xxxx
Corporation with Masland Corporation announced on May 24, 1996) and the
financial terms of such transactions, which Xxxxxx Brothers considered relevant,
with the historical financial and operating performance of the Company and the
financial terms of the Merger. Using publicly available information, Xxxxxx
Brothers analyzed the purchase prices and multiples paid in selected merger and
acquisition transactions in three different categories: automotive supplier
industry, industrial products industry and leveraged buyout transactions
involving industrial manufacturing companies.
The transactions among automotive suppliers that Xxxxxx Brothers considered
comparable to the Merger (the "Automotive Supplier Transactions") consisted of
(identified by acquiror/acquiree):
- Intermet Corporation/Ganton Technologies, Inc.
- Xxxx'x International, Inc./Goshen Rubber Companies, Inc.
- Wagon PLC/Aries Structures
- Total Fina SA's Xxxxxxxxxx XX unit/Harvard Industries Inc.'s
Xxxxxxxx-Xxxxxx unit
- Xxxx-Xxxxxx Automotive, Inc./Xxxxx Corporation's Fluid Power unit
- Xxxxxx Tire & Rubber Company/Standard Products Company
- American Axle & Manufacturing, Inc./Colfor Manufacturing, Inc.
- Dura Automotive Systems, Inc./Adwest Automotive PLC
- Dura Automotive Systems, Inc./Excel Industries, Inc.
- The General Chemical Group Inc./Defiance, Inc.
- Xxxx-Xxxxxx Automotive, Inc./Xxxxxxx Corporation
- Key Plastics LLC/the Foggini Group
29
35
- BTR PLC/Saiag SpA's Automotive Sealing unit
- Magna International, Inc./Triam Automotive Inc.
- Breed Technologies, Inc./Allied Signal Inc.'s Auto Air Bag unit
- Key Plastics Inc./TRINOVA Corporation's Interior Automotive Plastics
facilities
- Magna International, Inc./Xxxxxxx & Xxxxxxx Company
- Xxxx Corporation/Masland Corporation
The transactions among industrial products companies that Xxxxxx Brothers
considered comparable to the Merger (the "Industrial Products Transactions")
consisted of (identified by acquiror/acquiree):
- Xxxxx Incorporated/Sinjet System AB
- Xxxxxx Group Inc./Allegheny Teledyne Incorporated's nitrogen gas springs
unit
- Amsted Industries Incorporated/Varlen Corporation
- Pentair, Inc./Essef Corporation
- Applied Power Inc./ZERO Corporation
- MascoTech, Inc./TriMas Corporation
- Kennametal Inc./Greenfield Industries, Inc.
- Thyssen AG/Xxxxxxxx & Xxxxx, Inc.
- Durco International Inc./BW/IP, Inc.
- ITT Industries, Inc./Goulds Pumps, Incorporated
The leveraged buyout transactions involving industrial manufacturing
companies that Xxxxxx Brothers considered comparable to the Merger (the
"Industrial LBOs" and, together with the Automotive Supplier Transactions and
Industrial Products Transactions, the "Precedent Transactions") consisted of
(identified by acquiror/acquiree):
- Xxxxx & Company/Citation Corporation
- Carreras, Xxxxxxx & Co., L.L.C./Hilite Industries, Inc.
- Xxxxxx Brothers Inc./Xxxxxx International, Inc.
- Tinicum Capital Partners, L.P./Xxxxxx International, Inc.
- X.X. Childs Associates, Inc./American Safety Razor Company
- The Blackstone Group L.P. and Veritas Capital Partners L.P./Republic
Engineered Steels, Inc.
- BancBoston Ventures, Inc./CMI Industries, Inc.
- Xxxxxxxxx, Lufkin & Xxxxxxxx, Inc./Insilco Corporation
- Xxxxxxxxx, Lufkin & Xxxxxxxx, Inc./Thermadyne Holdings Corporation
- The Blackstone Group L.P./Xxxxxx Packaging Company
- Xxxx Capital, Inc./Sealy Corporation
- Investcorp S.A./Falcon Building Products, Inc.
- Kohlberg Kravis Xxxxxxx & Co., L.P./Amphenol Corporation
Xxxxxx Brothers calculated the purchase price (including net debt) as a
multiple of LTM net sales, EBITDA and EBIT for each acquired company for the
four fiscal quarters immediately preceding the announcement of the transaction.
This analysis indicated the following results:
LOW HIGH MEDIAN
------ ------ ------
Purchase price as a multiple of LTM net sales............... 0.37x 2.08x 1.00x
Purchase price as a multiple of LTM EBITDA.................. 3.8x 11.6x 7.3x
Purchase price as a multiple of LTM EBIT.................... 5.6x 24.4x 11.4x
30
36
Based on the Merger price, the multiple of LTM net sales, EBITDA and EBIT
paid for the Company are 0.74x, 6.0x and 9.2x, respectively.
Because the market conditions, rationale and circumstances surrounding each
of the Precedent Transactions analyzed were specific to each transaction and
because of the inherent differences between the businesses, operations and
prospects of the Precedent Transactions, on the one hand, and the Company, on
the other, Xxxxxx Brothers believed that it was inappropriate to, and therefore
did not, rely solely on the quantitative results of the analysis and,
accordingly, also made qualitative judgements concerning differences between the
characteristics of the Precedent Transactions, on the one hand, and the Company,
on the other, that would affect the acquisition value of the Company and such
acquired companies.
PREMIUMS PAID ANALYSIS. Xxxxxx Brothers also analyzed the premiums paid
relative to prices prior to announcement in connection with the Precedent
Transactions. Xxxxxx Brothers calculated the premium per share paid by the
acquiror in each of the Precedent Transactions as a percentage of the stock
price of the acquired company one day, one week, four weeks, at the 52-week high
and the 52-week low prior to the original announcement of the Precedent
Transactions. This analysis indicated the following results:
LOW HIGH MEDIAN
----- ----- ------
One day prior............................................... -8.6% 104.1% 23.8%
One week prior.............................................. 8.1% 109.8% 32.6%
Four weeks prior............................................ 0.4% 108.3% 35.8%
Vs. 52-week high............................................ -44.4% 44.4% 4.1%
Vs. 52-week low............................................. 7.7% 427.3% 76.0%
Xxxxxx Brothers compared the above-mentioned ranges and median premiums of
the Precedent Transactions to the premiums implied by the Merger price over the
closing market price of Common Stock one day, one week, four weeks, at the
52-week high and at the 52-week low prior to the initial announcement of the
Merger.
The Merger price implied premiums of 57.9%, 45.2%, 80.0%, 21.6% and 91.5%,
respectively, over the closing market price of Common Stock one day, one week,
four weeks, at the 52-week high and at the 52-week low prior to the initial
announcement of the Merger.
DISCOUNTED CASH FLOW ANALYSIS. Xxxxxx Brothers performed a discounted cash
flow analysis on the projected financial information of the Company for the
fiscal years 2000 through 2004, based upon operating and financial assumptions,
forecasts and other information provided to Xxxxxx Brothers by the management of
the Company. Using this information, Xxxxxx Brothers discounted to present value
the projected stream of unleveraged net income (earnings before interest and
after taxes) for the fiscal years 2000 through 2004 as adjusted for: certain
projected non-cash items (such as depreciation and amortization); forecasted
capital expenditures (including discretionary capital expenditures); and
forecasted changes in non-cash working capital (in aggregate, "Free Cash Flow").
To estimate the residual value of the Company at the end of the forecast (the
"Terminal Value"), Xxxxxx Brothers utilized two approaches, applying a range of
5.5x-6.5x multiples to projected fiscal 2004 EBITDA and applying terminal period
growth rates of 4.0%-5.0% to projected fiscal 2004 Free Cash Flow, and
discounted these Terminal Values to present value.
Xxxxxx Brothers applied a range of discount rates that varied from 11.5% to
12.5%, based on a weighted average cost of capital analysis of the Comparable
Public Companies derived from the Capital Asset Pricing Model. To calculate the
aggregate net present value of the equity of the Company, Xxxxxx Brothers
subtracted total debt less cash and cash equivalents of the Company as of
December 31, 1999, from the sum of the present value of the projected Free Cash
Flow and the present value of the Terminal Value. This analysis resulted in a
range of equity values of approximately $10.14 to $14.19 per share.
LEVERAGED BUYOUT ANALYSIS. Xxxxxx Brothers performed a leveraged buyout
analysis to determine the potential implied equity value per share of Common
Stock that might be achieved in an acquisition of the Company in a leveraged
buyout transaction based on current market conditions. In conducting this
analysis, Xxxxxx Brothers utilized projected financial information of the
Company, based
31
37
upon operating and financial assumptions, forecasts and other information
provided to Xxxxxx Brothers by the management of the Company for the fiscal
years 2000 through 2004, and based upon Xxxxxx Brothers' estimates for the
fiscal years 2005 through 2009, and assumed that merger financing could be
obtained in the high yield market and bank finance markets in an amount not in
excess of 4.8x 1999 estimated EBITDA. Xxxxxx Brothers assumed that a minimum
internal rate of return ranging from 20% to 30% on equity invested during a
five-year period would be required by an acquiror. This analysis resulted in a
range of equity values of the Company of $10.00 to $11.50 per share.
PRESENT VALUE OF FUTURE STOCK PRICE ANALYSIS. Xxxxxx Brothers examined the
present value to shareholders of holding the Common Stock for two years and four
years. Specifically, Xxxxxx Brothers assumed that the hypothetical future stock
price in two and four years was estimated based on multiplying projected EPS
(based on management projections) by a range of P/E multiples from 10.0x to
13.0x (assuming the Company continues not to pay a dividend to common
shareholders). Xxxxxx Brothers then discounted these hypothetical future stock
prices per share, applying a range of discount rates from 13% to 15%. The
discount rates were based on the estimated cost of equity capital for the
Company. This analysis resulted in a range of equity values of the Company of
$9.11 to $13.20 per share.
BREAK-UP ANALYSIS. The Special Committee did not request Xxxxxx Brothers
to solicit indications of interest to purchase the entire Company or any of the
divisions or assets of the Company in connection with advising the Special
Committee on the Merger. However, Xxxxxx Brothers analyzed the hypothetical
value of the Company assuming that it could be separated and sold as two
distinct, stand-alone businesses, automotive products and industrial consumable
products. The enterprise values of the separate businesses were determined based
on an analysis of the 1999 management projections for each business. A range of
multiples of enterprise value to EBITDA, derived from the Precedent Transactions
Analysis, was then applied to 1999 estimated EBITDA to determine a pretax
enterprise value for each business. The aggregate value of the two businesses
was then adjusted to reflect total debt minus cash and non-operating assets and
liabilities to arrive at equity value per share of the Company. Based upon
advice of the Company, Xxxxxx Brothers then took into account the fact that the
Company would likely incur a significant tax liability upon the sale of its
assets, resulting in an after-tax break-up value of the Company of $9.52 to
$11.16 per share.
COMMON STOCK PRICE ANALYSIS. Xxxxxx Brothers compared the Common Stock
price performance from January 31, 1995 until January 28, 2000, one day before
the initial announcement of the Merger. Using January 31, 1995 as the base of
100%, on January 28, 2000, the Common Stock price was 79.2% of the base value,
as compared to the S&P 400 Index value of 262.1%.
Xxxxxx Brothers also compared the Common Stock price performance from
January 31, 1995 until January 28, 2000 with an index of the Comparable
Automotive Suppliers, an index of the Comparable Industrial Consumables
Producers and an index of the Comparable Small-Cap Diversified Manufacturers.
Using January 31, 1995 as the base of 100%, on January 28, 2000, the Common
Stock price was 79.2% of the base value, as compared to an index of the
Comparable Automotive Suppliers, the Comparable Industrial Consumables Producers
and the Comparable Small-Cap Diversified Manufacturers values of 140.3%, 129.2%
and 135.5% of their base value, respectively.
Xxxxxx Brothers noted that the Merger price of $11.25 per share was 57.9%
above the $7.13 per share closing price of the Common Stock one day prior to the
Merger, 45.2% above the $7.75 per share closing price one week prior to the
Merger, 80.0% above the $6.25 per share closing price one month prior to the
Merger and 21.6% above the Common Stock's 52-week high through January 28, 2000
of $9.25 per share. Within the Comparable Public Companies, as of January 28,
2000, the Comparable Automotive Suppliers were down on average 28.7% from their
52-week highs, the Comparable Industrial Consumables Producers were down on
average 26.2% from their 52-week highs and the Comparable Small-Cap Diversified
Manufacturers were down on average 29.9% from their 52-week highs. Overall, the
Comparable Public Companies were down on average 28.2% from their 52-week highs.
Xxxxxx Brothers is an internationally recognized investment banking firm
and, as part of its investment banking activities, is regularly engaged in the
evaluation of businesses and their securities in connection with
32
38
mergers and acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. The Special Committee selected
Xxxxxx Brothers because of its expertise, reputation and familiarity with the
Company and because its investment banking professionals have substantial
experience in transactions similar to the Merger.
As compensation for its services in connection with the Merger, the Company
has agreed to pay Xxxxxx Brothers a fee for acting as financial advisor to the
Special Committee in connection with the Merger, including rendering its
opinion. Under the terms of an engagement letter between Xxxxxx Brothers and the
Special Committee, the Company agreed to pay Xxxxxx Brothers customary financial
advisory fees, a portion of which was payable upon the rendering of the Xxxxxx
Opinion. See "THE MERGER -- FEES AND EXPENSES."
In addition, the Company has agreed to reimburse Xxxxxx Brothers for
reasonable out-of-pocket expenses incurred in connection with the Merger and to
indemnify Xxxxxx Brothers for certain liabilities that may arise out of its
engagement by the Company and the rendering of its opinion. In the ordinary
course of its business, Xxxxxx Brothers may trade in the equity securities of
the Company for its own account and for the accounts of its customers and,
accordingly, may at any time hold a long or short position in such securities.
ACCOUNTING TREATMENT OF THE MERGER
The Merger will be accounted for as a "purchase" in accordance with
generally accepted accounting principles. Consequently, the aggregate
consideration paid by Merger Sub in connection with the Merger will be allocated
to the assets and liabilities of the Surviving Corporation based upon their fair
values, with any excess being treated as goodwill.
CERTAIN TAX CONSEQUENCES OF THE MERGER
The following is a general summary of certain U.S. federal income tax
consequences of the Merger relevant to a beneficial holder of shares of Common
Stock whose shares are converted into cash in the Merger. This discussion is for
general information only and does not purport to consider all aspects of U.S.
federal income taxation that may be relevant to a holder of shares of Common
Stock. The discussion is based on the provisions of the Internal Revenue Code of
1986 (the "Code"), existing regulations promulgated thereunder, judicial
decisions and administrative rulings, all as in effect as of the date hereof and
all of which are subject to change, possibly with retroactive effect. The
following does not address the U.S. federal income tax consequences to all
categories of holders of Common Stock that may be subject to special rules
(e.g., holders who acquired their shares of Common Stock under the exercise of
employee stock options or other compensation arrangements with the Company,
holders who perfect their dissenters' rights under the WBCL, holders who retain
a continuing ownership interest in the Surviving Corporation, foreign holders,
insurance companies, tax-exempt organizations, dealers in securities and persons
who have acquired the shares of Common Stock as part of a straddle, hedge,
conversion transaction or other integrated investment), nor does it address the
U.S. federal income tax consequences to persons who do not hold the shares of
Common Stock as "capital assets" within the meaning of Section 1221 of the Code
(generally, property held for investment). In addition, the following does not
address the U.S. federal income tax consequences to the Management Shareholders
or any other shareholder who receives cash in the Merger and who becomes the
owner of common stock or other equity securities of the Parent prior to, at or
after the Effective Time.
Each holder of Common Stock should consult his or her tax advisor as to the
particular tax consequences of the Merger, including the application and effect
of U.S. federal, state, local and foreign tax laws and possible changes in tax
laws.
The receipt of cash for shares of Common Stock in the Merger will be a
taxable transaction for U.S. federal income tax purposes and may also be a
taxable transaction under applicable state, local and foreign income and other
tax laws. For U.S. federal income tax purposes, a holder of Common Stock who
receives cash in exchange for shares of Common Stock in the Merger will
generally recognize capital gain or
33
39
loss equal to the difference, if any, between the amount of cash received and
the holder's adjusted tax basis in the shares of Common Stock surrendered for
cash in the Merger. Gain or loss will be determined separately for each block of
shares of Common Stock (i.e., shares of Common Stock acquired at the same cost
in a single transaction) surrendered for cash in the Merger. Such capital gain
or loss will be long-term capital gain or loss if the holder has held the shares
of Common Stock for more than one year at the time the Merger is completed. Net
capital gain recognized by an individual investor (or an estate or certain
trusts) upon a disposition of a share of Common Stock that has been held for
more than one year generally will be subject to a maximum tax rate of 20% or, in
the case of a share of Common Stock that has been held for one year or less,
will be subject to tax at ordinary income rates. Certain limitations apply to
the use of capital losses.
THE MERGER
MERGER CONSIDERATION; CANCELLATION OF COMMON STOCK
The Merger Agreement provides that, at the Effective Time, each issued and
outstanding share of Common Stock, other than (i) Common Stock owned by the
Company or its subsidiaries, (ii) Common Stock owned by Merger Sub (including
2,437,262 shares of Common Stock currently owned by the Management Shareholders
to be contributed to Parent prior to the Merger) and (iii) Dissenting Shares,
will be converted into the right to receive the Merger Consideration. All shares
of Common Stock so converted will no longer be outstanding and will
automatically be canceled and retired and will cease to exist.
At the Effective Time, Common Stock owned by the Company or its
subsidiaries and Common Stock owned by Merger Sub and its affiliates (including
2,437,262 shares of Common Stock currently owned by the Management Shareholders
to be contributed to Parent prior to the Merger) will be canceled and retired
without any consideration.
In addition, the Merger Agreement provides that at the Effective Time, each
issued and outstanding option to acquire Common Stock will be converted into the
right to receive the Option Consideration, and each such option will
automatically be canceled and retired and will cease to exist, in exchange for
the right to receive the Option Consideration.
Each share of Merger Sub's common stock issued and outstanding immediately
prior to the Effective Time will be converted into and become fully paid and
nonassessable shares of common stock, par value $0.01, of the Surviving
Corporation upon the surrender of the certificates previously representing such
shares of Merger Sub's common stock.
BACKGROUND OF THE MERGER
During 1998 and early 1999 the Board of Directors discussed concerns that
the Company's stock price was undervalued in view of the Company's financial
performance. Subsequently, the Board of Directors reviewed this matter, and in
January and February, 1999, invited Xxxxxx Xxxxxxx Xxxxxx Gull ("Xxxxxx") to
make a presentation to the Board of Directors concerning alternatives that might
be available to the Company to increase shareholder value. In February, 1999,
Xxxxxx made its presentation to the Board of Directors. The Board of Directors
considered this presentation and other factors deemed relevant by individual
members of the Board of Directors and concluded at the time to take no specific
action. The Board of Directors then communicated to management its concern and
encouraged management to work towards enhancing shareholder value.
In late June, 1999 and again on or about August 31, 1999, Xxxxxx X. Xxxxx,
on behalf of SMC, met with Xxxxxxx X. Xxxxxx, Chairman of the Company, regarding
whether the Management Shareholders would be interested in discussing the
possibility of participating in a buyout transaction financed by SMC. In
September, 1999, the Management Shareholders informed the Board of Directors of
SMC's interest in possibly participating in a buyout transaction with the
Management Shareholders.
On September 23, 1999, the Company received a letter from SMC (the "SMC
Letter") expressing an interest in discussing a buyout transaction with the
Company and the Management Shareholders. The SMC
34
40
Letter suggested that a price to the Company's shareholders of $9.50 per share
was possible. The Company forwarded the SMC Letter to the Board of Directors,
but did not immediately respond to the SMC Letter.
On September 23, 1999, the Company also entered into a confidentiality and
standstill agreement with SMC, pursuant to which the Company agreed to provide
SMC with certain limited financial information regarding the Company. SMC agreed
to treat all information provided by the Company to SMC as confidential and
agreed not to purchase any additional equity securities of the Company, solicit
proxies to vote Common Stock or attempt to influence the management, Board of
Directors or policies of the Company for a period of two years. Following
execution of that agreement, the Company provided certain limited financial
information to SMC.
On October 1, 1999, the Board of Directors established the Special
Committee comprised of the non-management members of the Board of Directors,
Xxxxx Xxxxx, Xxxxx Xxxxxx, Xxxxx Xxxxx and Xxxxx Xxxxxxxxx. The Special
Committee was authorized by the Board of Directors to consider strategic
alternatives available to the Company, including but not limited to the proposal
in the SMC Letter or other buyout or similar transactions. On October 1, 1999,
Xxxxxxx Xxxx & Friedrich LLP was retained by the Special Committee to serve as
independent counsel to the Special Committee and thereafter made a presentation
to the Special Committee regarding the Special Committee's fiduciary duties,
responsibilities and prerogatives as members of the Board of Directors and of a
special committee of non-management members of the Board of Directors. Xxxxxxx
Xxxx & Xxxxxxxxx LLP had not previously represented the Company or any
individual members of the Board of Directors.
On October 1, 1999, the Special Committee selected Xxxxxx Brothers as its
independent financial advisor, subject to negotiating a satisfactory engagement
agreement, which was subsequently executed by the Company as of November 15,
1999. The Special Committee directed Xxxxxx Brothers to undertake an analysis of
the strategic alternatives available to the Company, including the proposal in
the SMC Letter, remaining as an independent public company and otherwise being
acquired by a management-sponsored group or an independent third party. Xxxxxx
Brothers had not previously represented the Company.
On October 1, 1999, at the request of SMC, the Special Committee, along
with its legal and financial advisors, met with the Management Shareholders and
representatives of SMC to learn about the background, experience and
capabilities of SMC. SMC also reviewed the SMC Letter with the Special Committee
at this meeting. The Special Committee declined to engage in any further
discussions with SMC at this time.
At its meeting on October 14, 1999, the Special Committee engaged in a
further discussion of its legal duties and prerogatives and its duty to remain
independent. Xxxxxx Brothers reported on its activities and analysis to date and
also stated that, although Xxxxxx Brothers had not yet concluded its analysis of
the Company, it had determined on a preliminary basis that the price per share
referenced in the SMC Letter was inadequate. Xxxxxx Brothers also reported on
other methods to enhance shareholder value. At this meeting, counsel for the
Special Committee was directed to inform the Company that all future requests
for confidential information concerning the Company should be directed to the
Special Committee and not the Company.
At its meeting on October 26, 1999, the Special Committee determined, after
considering the Xxxxxx Brothers report of October 26, 1999 and other factors,
that it was not prepared to pursue the proposal outlined in the SMC Letter and
desired to consider other strategic alternatives available to the Company. In
addition, the Special Committee directed its legal and financial advisors to
respond to SMC that the price per share contained in the SMC Letter was
unacceptable. The Special Committee also directed its advisors to communicate to
SMC that the contingent nature of the financing discussed in the SMC Letter was
also unacceptable.
In October and November, 1999, the Special Committee considered the merits
of conducting an auction of the Company to third parties or authorizing Xxxxxx
Brothers to solicit interest from third parties, and discussed this possibility
with the Management Shareholders. During this process, the Management
Shareholders informed the Special Committee that SMC was not willing to
participate in an auction of the Company and would withdraw its proposal if the
Company were put up for auction or if Xxxxxx Brothers
35
41
actively solicited third party offers. The financial advisor and counsel to the
Special Committee later confirmed this fact directly with SMC. The Management
Shareholders also advised the Special Committee that they were opposed to these
alternatives. After considering these factors, the Special Committee concluded
that it would not be in the best interests of the Public Shareholders to assume
the risk that SMC would withdraw its proposal, because the opportunity to obtain
a premium price for the Common Stock for the Public Shareholders would be lost.
Accordingly, the Special Committee did not direct Xxxxxx Brothers to solicit
offers or indications of interest from third parties. The Special Committee also
believed that the ultimate public disclosure of a merger agreement would have an
effect similar to an auction of the Company so long as any definitive merger
agreement preserved the right of the Special Committee and its advisors to enter
into negotiations and discussions with third parties that might express an
interest in acquiring, or entering into a transaction with, the Company. The
Special Committee was also cognizant that, unlike a public auction, the Special
Committee would be assured in this process of a committed buyer. The Special
Committee and its legal and financial advisors were unanimous in this view.
On November 6, 1999, the Special Committee and its legal and financial
advisors met with the Management Shareholders to engage in a discussion of
strategic alternatives available to the Company, including a management buyout.
At this meeting, the Management Shareholders also informed the Special Committee
that SMC was desirous of presenting a revised proposal for a buyout transaction
involving the Company and provided a letter from SMC dated November 6, 1999 (the
"November SMC Letter"). The Special Committee then requested the Management
Shareholders to continue to consider other alternatives available to the
Company. In addition the Special Committee informed the Management Shareholders
that it would not immediately respond to the November SMC Letter, and would
respond in due course. Xxxxx Xxxxx was elected Chairman of the Special Committee
at this meeting.
On November 12, 1999, the Special Committee met with its legal and
financial advisors. At this meeting, the November SMC Letter was discussed in
detail by the Special Committee and Xxxxxx Brothers. The Special Committee also
discussed its unanimous desire to retain maximum flexibility to respond to other
opportunities which may be presented to the Company and engaged with counsel in
a discussion of the members' fiduciary responsibilities and prerogatives as
members of the Special Committee and Board of Directors. The Special Committee
concluded based upon these factors and the presentations from its advisors that
the proposal outlined in the November SMC Letter was unacceptable. The Special
Committee directed its advisors to communicate its position to SMC.
The Special Committee met on November 18, 1999 to further review matters
within its jurisdiction. On or about November 22, 1999, at the direction of the
Special Committee, counsel for the Special Committee informed SMC that it would
not consider any proposal involving the Management Shareholders and SMC unless
and until (i) counsel for SMC prepared and presented to the Special Committee a
form of merger agreement (excluding the economic terms of any proposed
transaction) which was satisfactory to the Special Committee in its sole
discretion, and (ii) SMC obtained signed commitment letters satisfactory to the
Special Committee and Xxxxxx Brothers which evidenced SMC's financial capacity
to consummate a transaction with the Company.
During the period from November 22, 1999 through the date of the Merger
Agreement, representatives of SMC and the Management Shareholders met several
times and had numerous telephone conferences to generally discuss issues
regarding, among other things, possible transaction structure, financing for a
potential transaction, the terms of the Management Shareholders' participation
in a possible transaction, possible shareholder arrangements following the
transaction, accounting issues and due diligence matters. In addition, with the
approval of the Special Committee, during such period SMC met with the Company's
senior management and reviewed certain non-public financial information of the
Company, including certain projections and alternative forecasts prepared by
senior management at the request of SMC (the "Projections"), and the Special
Committee allowed SMC and its potential financing sources to conduct due
diligence with respect to the Company and its assets and operations. Prior to
delivery to SMC, the Projections were provided to and reviewed by the Special
Committee and its legal and financial advisors as described in "THE
MERGER -- CERTAIN PROJECTIONS OF FUTURE OPERATING RESULTS."
36
42
On or about December 14, 1999, counsel for SMC advised counsel for the
Special Committee that SMC was in the process of performing its due diligence
review of the Company and that a draft of a merger agreement might be submitted
to the Special Committee as early as the end of December, 1999. In addition,
counsel for SMC advised counsel for the Special Committee that negotiations with
potential financing sources were ongoing and that SMC was working to obtain
signed commitment letters to present to the Special Committee in advance of
making any further proposals to the Special Committee regarding a potential
transaction with the Company.
On December 30, 1999, counsel for SMC presented counsel for the Special
Committee with an initial draft form of merger agreement. The draft presented
did not contain any economic terms of the proposed transaction. During the first
two weeks of January 2000, counsel for SMC and counsel for the Special Committee
negotiated the form of merger agreement.
On January 21, 2000, the Special Committee met with its legal and financial
advisors to discuss the progress of SMC in obtaining draft commitment letters
and the progress of counsel in negotiating the form of merger agreement with
counsel for SMC. Xxxxxx Brothers reported to the Special Committee that it had
received and reviewed unsigned drafts of commitment letters and that, based upon
and only to the extent of the information set forth in such commitment letters,
such commitment letters were from national financial institutions and contained
terms and conditions which were customary for financing the type of transaction
proposed by SMC and the Management Shareholders. Xxxxxxx Xxxx & Friedrich LLP
reported that its negotiations with SMC's counsel were ongoing and described in
detail several non-economic terms of the proposed merger agreement which, in the
opinion of counsel, were unacceptable. From approximately 2:00 p.m. until 11:00
p.m. on January 21, 2000, the Special Committee and its legal and financial
advisors met with SMC and its counsel to negotiate the non-economic terms in the
form of merger agreement. At 11:00 p.m., the Special Committee informed SMC that
an impasse existed as to the non-economic terms of the form of merger agreement
and that further discussions were at an end.
On January 22, 2000, the Special Committee reconvened. After deliberation,
the Special Committee determined that under certain conditions it would be in
the best interests of shareholders to resume further negotiations with SMC and
authorized Xxxxxxx Xxxx & Xxxxxxxxx LLP to communicate such conditions to SMC.
Counsel for SMC agreed to proceed on the basis outlined by the Special
Committee. In addition, the Special Committee advised SMC that it would not
enter into any economic discussions regarding the Merger until an acceptable
form of merger agreement was prepared. From January 22, 2000 through January 27,
2000, counsel for the Special Committee and counsel for SMC continued to
negotiate the non-economic terms of the form of merger agreement. On January 26
and 27, 2000, Xxxxxxx Xxxx & Friedrich LLP reported to members of the Special
Committee on the negotiation of the non-economic terms of the form of merger
agreement. On January 28, 2000, the Special Committee met with Xxxxxxx Xxxx &
Xxxxxxxxx LLP to discuss the proposed form of merger agreement in detail. The
Special Committee concluded that negotiations had progressed to a point that a
meeting between the Special Committee and SMC to discuss the economic terms of
the proposed merger was appropriate.
At approximately 1:00 p.m. on January 28, 2000, the Special Committee met
with the Management Shareholders and representatives of SMC. SMC then made an
extensive proposal regarding the economic terms of the proposed merger to the
Special Committee pursuant to which SMC proposed that Saw Mill, Parent and
Merger Sub would purchase Common Stock owned by all shareholders for $10.50 per
share in cash. In addition, SMC made proposals regarding various other economic
and non-economic elements of the proposed transaction, including the
circumstances under which the Special Committee would be permitted to engage in
negotiations and discussions with respect to alternative transactions with third
parties, the proposed termination fee and a cap on expense reimbursement in
certain circumstances. The Special Committee then met privately with its legal
and financial advisors regarding each element of the SMC proposal. The Special
Committee then met with SMC and delivered a detailed response to each element of
the SMC proposal and informed SMC that a price of $10.50 per share was
unacceptable and advised SMC that its price per share must be substantially
increased. At 6:30 p.m., SMC informed the Special Committee that it was
unwilling to increase its offer. The Special Committee advised SMC that, at a
price of $10.50 per share, it would not
37
43
recommend that the Board of Directors enter into a merger agreement. The Special
Committee then adjourned.
Later that evening, the Management Shareholders contacted counsel for the
Special Committee and asked whether the Special Committee would agree to a
further meeting the next day. Following discussions with members of the Special
Committee, counsel for the Special Committee advised the Management Shareholders
that the Special Committee would make itself available to meet again on January
29, 2000. On January 29, 2000, the Special Committee reconvened. SMC then
presented a revised proposal to the Special Committee, pursuant to which SMC
proposed a price to all shareholders of $11.00 per share. After a presentation
by Xxxxxx Brothers, and based upon the views of its members, the Special
Committee concluded that $11.00 per share was inadequate and communicated its
position to SMC. Discussions continued throughout the day. SMC then advised the
Special Committee that it had restructured its proposed offer such that the
Public Shareholders would receive $11.25 per share in cash and the Management
Shareholders would receive a blended value of approximately $10.90 per share in
cash and common stock of Parent. SMC was then excused from the meeting, and
Xxxxxx Brothers presented to the Special Committee an extensive written and oral
analysis of the revised transaction structure and valuation methodologies. At
the end of such presentation, Xxxxxx Brothers advised the Special Committee
that, in its opinion, the price of $11.25 per share to the Public Shareholders
was fair to such shareholders from a financial point of view. This opinion was
confirmed in writing on January 31, 2000 in the form of the Xxxxxx Opinion
attached as ANNEX B. The Special Committee also received a point-by-point
analysis of the form of proposed merger agreement from Xxxxxxx Xxxx & Friedrich
LLP.
The Special Committee then informed SMC that, subject to final review and
analysis of the form of merger agreement incorporating the most recent economic
terms proposed by SMC and subject to final review of signed commitment letters
for financing of the proposed transaction, the Special Committee would recommend
that the Board of Directors approve the proposed merger at a price of $11.25 per
share to the Public Shareholders. The full Board of Directors then convened a
meeting to discuss the proposed merger, at which the Company's regular outside
counsel, Reinhart, Boerner, Van Deuren, Xxxxxx & Xxxxxxxxxx, s.c., was present.
At this Board of Directors meeting, Xxxxxx Brothers made an extensive
presentation to the full Board of Directors and the Company's regular counsel
regarding the SMC proposal and explained to the full Board of Directors that it
had rendered an oral opinion to the Special Committee that a price of $11.25 per
share was fair, from a financial point of view, to the Public Shareholders.
Based upon the presentation from Xxxxxx Brothers and the work and approval of
the Special Committee, the full Board of Directors voted to approve and adopt
the Merger Agreement, subject to confirmation of agreed upon changes to the form
of merger agreement and receipt of executed commitment letters from the sources
of debt and equity financing for the transaction. The Management Shareholders
were present for the full Board of Directors meeting, but abstained from voting
on the motion to recommend the Merger Agreement to the Public Shareholders.
As required by the Special Committee and the Board of Directors, on January
30, 2000, a completed form of the Merger Agreement and executed commitment
letters for the debt and equity financing were presented by SMC. The Company,
the Management Shareholders, Saw Mill, Parent and Merger Sub then executed the
Merger Agreement. The Management Shareholders, certain of their affiliates, and
Merger Sub then executed the Voting Agreement.
Prior to the opening of NASDAQ for trading on January 31, 2000, the Company
issued a press release announcing the execution of the Merger Agreement.
RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE BOARD OF DIRECTORS
The Special Committee considered a variety of factors in determining
whether to recommend that the Board of Directors approve and adopt the Merger
Agreement and submit the Merger Agreement to a vote of shareholders (SEE
"SPECIAL FACTORS -- REASONS FOR THE MERGER; FAIRNESS OF THE MERGER"). Based upon
such factors, the Special Committee unanimously recommended that the Board of
Directors approve and adopt the Merger Agreement, subject only to shareholder
approval, the right of the Board of Directors to
38
44
continue to consider proposals from third parties under the Merger Agreement,
and the continuing exercise of the fiduciary duties of the Board of Directors.
The Board of Directors considered and relied upon the conclusions and
unanimous recommendation of the Special Committee that the full Board of
Directors approve the Merger Agreement and the transactions contemplated
thereby, including the Merger. In light of the number and variety of factors
that the Special Committee and the Board of Directors considered in connection
with their evaluation of the Merger, neither the Special Committee nor the Board
of Directors found it practicable to quantify or otherwise assign relative
weights to the foregoing factors, and accordingly, neither the Special Committee
nor the Board of Directors did so. In addition, individual members of the
Special Committee and the Board of Directors may have given different weights to
different factors. The Special Committee and the Board of Directors viewed their
positions and recommendations as being based on the totality of the information
presented and considered by them, respectively.
The Board of Directors, after receiving the unanimous recommendation of the
Special Committee, has approved the Merger Agreement and the Merger, and has
determined that the Merger Agreement and the Merger are advisable, fair to and
in the best interests of the Public Shareholders. ACCORDINGLY, THE BOARD OF
DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT AT THE ANNUAL MEETING.
To avoid any potential conflict of interest with respect to the approval of
the Merger Agreement, the Management Shareholders, who are also members of the
Board of Directors, abstained from voting in their capacity as directors on the
approval and adoption of the Merger Agreement because of their relationship with
Saw Mill, Parent and Merger Sub and because the Management Shareholders will
have a substantial and continuing interest in the Surviving Corporation after
the Merger has been completed.
Under the Voting Agreement, the Management Shareholders provided Merger Sub
with their irrevocable proxy to vote 7,686,683 shares of Common Stock
beneficially owned by them in favor of the Merger. To the knowledge of the
Company after making reasonable inquiry, as of the date of this Proxy Statement,
all of the other executive officers and members of the Board of Directors of the
Company currently intend to vote all shares of Common Stock they own "FOR"
approval and adoption of the Merger Agreement at the Annual Meeting for one or
more of the reasons described under the caption "SPECIAL FACTORS -- Reasons for
the Merger; Fairness of the Merger." In the aggregate, the executive officers
and members of the Board of Directors of the Company beneficially own 8,465,996
shares of Common Stock, or 40.6% of the issued and outstanding shares of Common
Stock.
REQUIRED REGULATORY APPROVALS
Under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended,
and the rules promulgated thereunder (collectively, the "HSR Act"), certain
merger transactions may not be completed unless certain information has been
furnished to the Antitrust Division of the Department of Justice and the Federal
Trade Commission and certain waiting periods have expired or been terminated.
Based upon information provided to the Company by Saw Mill, Parent and Merger
Sub, the Company has determined that the Company is not required to make any
filing under the HSR Act. The Company has not made any inquiry or determination
with respect to whether or not parties other than the Company may be required to
make filings under the HSR Act. The Company has been advised that Xxxxxxx X.
Xxxxxx will be required to make a filing under the HSR Act. The Company has
agreed to pay Xx. Xxxxxx'x $45,000 filing fee in connection with such filing. To
the knowledge of the Company after reasonable investigation, no other regulatory
approvals must be obtained in order to complete the Merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
THE MANAGEMENT SHAREHOLDERS
Under the Merger Agreement, the Management Shareholders will contribute
2,437,262 shares of Common Stock, valued at an aggregate average of $10.13 per
share, to Parent immediately prior to the
39
45
Effective Time in exchange for common stock of Parent. In exchange, the
Management Shareholders will receive approximately 35% of the common stock of
Parent issued and outstanding immediately after the Effective Time, on a fully
diluted basis (which percentage may be reduced as a result of the issuance of
warrants to providers of financing for the Merger). The Management Shareholders
and certain of their affiliates will receive the Merger Consideration of $11.25
per share for their remaining 5,250,550 shares of Common Stock resulting in an
average value in cash and stock of approximately $10.90 per share of Common
Stock being received by the Management Shareholders for their shares of Common
Stock in connection with the Merger. The ownership of common stock of Parent
presents the Management Shareholders with inherent conflicts of interest in
connection with the Merger. In considering the recommendation of the Board of
Directors with respect to the Merger, shareholders should be aware of such
interests. The Special Committee and the Board of Directors were aware of such
interests and considered them along with other factors described under "SPECIAL
FACTORS -- Reasons for the Merger; Fairness of the Merger."
The Management Shareholders and their affiliates in the aggregate currently
own 37.6% of the Common Stock. For the year ended December 31, 1999, the net
book value of the Company and net earnings of the Company were approximately,
$140,369,000 and $17,762,000, respectively. As a result the Management
Shareholders' aggregate proportionate interest in the net book value and net
earnings of the Company for the fiscal year ended December 31, 1999 was
approximately $52,778,744 and $6,678,512, respectively. If the Merger is
completed, the Management Shareholders, in the aggregate, will own approximately
35% of Parent (which percentage may be reduced as a result of the issuance of
warrants to providers of financing for the Merger) and will have, indirectly, a
proportionate interest in the net book value and net earnings of the Surviving
Corporation for the fiscal year ended December 31, 2000.
DIRECTORS AND EXECUTIVE OFFICERS OTHER THAN MANAGEMENT SHAREHOLDERS
Each member of the Board of Directors and each executive officer, other
than the Management Shareholders, and certain other employees of the Company own
shares of Common Stock and options to acquire Common Stock which will be
converted at the Effective Time into the right to receive the Merger
Consideration and Option Consideration, respectively. At or immediately after
the Effective Time, certain executive officers (other than the Management
Shareholders) will receive vested options to acquire common stock of Parent
(which options have an aggregate value $1,927,357) which represent approximately
3.9% of the common stock of Parent issued and outstanding immediately after the
Effective Time on a fully diluted basis (which percentage may be reduced as a
result of the issuance of warrants to providers of financing for the Merger). In
addition, the same such executive officers will receive vested deferred
compensation at or immediately after the Effective Time in the aggregate amount
of $642,452. Certain of such executive officers will also be entitled to invest
cash in the aggregate amount of $1,331,253 and to obtain loans from the Parent,
at or after the Effective Time, in the maximum aggregate amount of $1,346,354,
the proceeds of each of which will be used to purchase up to 4.1% of the common
stock of Parent on a fully diluted basis (which percentage may be reduced as a
result of the issuance of warrants to providers of financing for the Merger).
Such executive officers may also receive additional time-based and
performance-based options and other compensation at or after the Effective Time
as the board of directors of Parent may determine in its sole discretion. Except
for the foregoing, the treatment of members of the Board of Directors and each
executive officer, other than the Management Shareholders, and such other
employees is identical to treatment of shareholders of the Company who are not
members of the Board of Directors, named executive officers or employees. In the
aggregate, the executive officers, other than the Management Shareholders, will
be entitled to receive $1,589,974 in Merger Consideration and $510,841 in Option
Consideration, including $137,363 with respect to options that are not
exercisable as of the date of this Proxy Statement but which provide for
accelerated vesting upon a change of control, including as a result of the
Merger, after the Effective Time. The members of the Special Committee will be
entitled to receive, in the aggregate, $2,303,831 in Merger Consideration and
$484,073 in Option Consideration after the Effective Time. All options held by
members of the Special Committee are exercisable as of the date of this Proxy
Statement.
Xxxxx Xxxxx, the Chairman of the Special Committee, will be paid a fee of
$35,000, and each other member of the Special Committee will be paid a fee of
$25,000, for their service to the Company as members of the Special Committee.
In addition, the Chairman of the Special Committee is entitled to receive a fee
of
40
46
$2,000 per meeting attended and each other member of the Special Committee is
entitled to receive a fee of $1,000 per meeting attended, plus reimbursement of
any reasonable travel expenses incurred in connection with attending such
meetings.
SAW MILL, PARENT AND MERGER SUB
The Merger is being completed to permit Saw Mill, together with the
Management Shareholders, to acquire the Company from the Public Shareholders and
take the Company from being a public corporation to being a private corporation.
After the Merger, Saw Mill will indirectly control the Surviving Corporation
through its control of Parent.
VOTING AGREEMENT
Each of Parent, Merger Sub, Saw Mill, Saw Mill Investments II, LLC and Xx.
Xxxxx acquired beneficial ownership of 7,686,683 shares of Common Stock
(representing approximately 37.6% of the outstanding Common Stock as of the date
hereof) on the execution of a voting agreement, dated as of January 30, 2000
(the "Voting Agreement"), by and between Merger Sub, the Management
Shareholders, Xxxxx X. Xxxxxx and the Xxxxxx Family Foundation. The Management
Shareholders, Xxx. Xxxxxx and the Xxxxxx Family Foundation entered into the
Voting Agreement in order to induce Merger Sub to enter into the Merger
Agreement.
Under the Voting Agreement, the Management Shareholders, Xxx. Xxxxxx and
the Xxxxxx Family Foundation have agreed that at any meeting of the Company's
shareholders called for the approval of the Merger Agreement and the
transactions contemplated by the Merger Agreement or a transaction involving the
acquisition of a material portion of the Company's assets or capital stock other
than the Merger, or in connection with any written consent of the holders of
shares of Common Stock, or in any other circumstances in which the Management
Shareholders, Xxx. Xxxxxx or the Foundation are entitled to vote, consent or
give any other approval, with respect to the Merger Agreement, the transactions
contemplated by the Merger Agreement or a third party transaction, to vote, or
cause to be voted, the shares of Common Stock held by the Management
Shareholders, Xxx. Xxxxxx and the Xxxxxx Family Foundation at the direction of
Merger Sub with respect to such transactions. The Management Shareholders, Xxx.
Xxxxxx and the Xxxxxx Family Foundation also agreed under the Voting Agreement
to vote against actions or agreements that would interfere with the completion
of the Merger.
The Management Shareholders, Xxx. Xxxxxx and the Xxxxxx Family Foundation
granted Merger Sub an irrevocable proxy to vote the shares of Common Stock held
by such shareholders as indicated above. Furthermore, the Management
Shareholders, Xxx. Xxxxxx and the Foundation agreed not to:
- transfer any of the shares of Common Stock held by the Management
Shareholders, Xxx. Xxxxxx or the Xxxxxx Family Foundation except as
contemplated by the Voting Agreement or the Merger Agreement; or
- enter into any voting arrangement or understanding with respect to the
shares of Common Stock held by the Management Shareholders, Xxx. Xxxxxx
or the Xxxxxx Family Foundation.
Under the Voting Agreement, the Management Shareholders also agreed to
enter into a registration rights agreement and stockholders agreement with the
Parent and to enter into employment agreements with the Company.
STOCKHOLDERS AGREEMENT
In connection with the Merger, Parent and certain of its shareholders will
enter into a stockholders agreement under which such shareholders of Parent will
agree to vote in favor of members of the Board of Directors of Parent designated
by groups of Parent's shareholders who are parties to the stockholders
agreement. Also, under the stockholders agreement:
- Parent will have nine directors;
41
47
- Saw Mill will designate three directors in its sole discretion and will
designate a fourth, independent director who is not an affiliate of SMC
or the Management Shareholders subject to the approval of the Management
Shareholders. Pursuant to Saw Mill's limited partnership agreement, one
of the three directors designated by Saw Mill will be designated by
Chase Capital Partners and two will be designated by Saw Mill's general
partner, Saw Mill Investments II, LLC;
- Management Shareholders will designate three directors in their sole
discretion and will designate a fourth independent director subject to
the approval of Saw Mill; and
- the ninth director will be an independent director approved by Saw Mill
and the Management Shareholders.
The stockholders agreement also gives the holders of the senior preferred
stock of Parent issued in connection with the financing of the Merger the
ability to cause the size of the Board of Directors of Parent to increase to
eleven and to fill the two new vacancies created in the event the Surviving
Corporation's leverage ratio increases beyond a specified amount.
EMPLOYMENT AGREEMENTS
Under the Voting Agreement, each of the Management Shareholders has agreed
to enter into employment agreements with the Surviving Corporation. Under the
employment agreements, Xx. Xxxxxx will be paid a base salary of $300,000 per
year and Mr. Train will be paid a base salary of $450,000 per year. In addition,
their respective employment agreements entitle Xx. Xxxxxx and Mr. Train, at or
after the Effective Time, to each participate in an option plan under which each
will be granted options to acquire 1% of the common stock of Parent at the time
of such grant. Each employment agreement has a term of five years, subject to
earlier termination by resolution of the board of directors, upon the death or
permanent disability of the executive or upon the Management Shareholder's
voluntary resignation. If a Management Shareholder is terminated without cause,
the Surviving Corporation is obligated to make severance payments consisting of
such Management Shareholder's then current salary until the end of the term of
the employment agreement together with any earned but unpaid bonuses. The
employment agreements also contain non-compete provisions which restrict the
Management Shareholders from being involved in, during the period of their
employment and for two years thereafter, any business which is in competition
with the Surviving Corporation. In addition, each employment agreement contains
an obligation of confidentiality in respect of the Surviving Corporation's
proprietary information and an agreement to assign intellectual property rights
to the Surviving Corporation.
REGISTRATION RIGHTS AGREEMENT
In connection with the Merger, each of the Parent, Saw Mill, the Management
Shareholders and certain other equity holders of Parent will enter into a
registration rights agreement. Under the registration rights agreement, the
Management Shareholders, such other equity holders and Saw Mill will have the
ability to cause Parent to register common equity securities of Parent held by
the parties to the registration rights agreement and to participate in
registrations by the Parent of its equity securities.
PLEDGE AGREEMENT
Saw Mill, Merger Sub and Parent have agreed that in the event the Merger
Agreement is terminated by the Company as a result of a material breach of any
representation, warranty or agreement contained in the Merger Agreement by
Parent, Merger Sub or Saw Mill that is not cured within twenty days, Saw Mill,
Parent and Merger Sub will pay up to $1,500,000 of the Company's expenses
incurred in connection with the Merger. To secure this obligation, Xxxxxx Xxxxx
and the Company entered into a pledge agreement under which Xx. Xxxxx has
pledged his shares of Common Stock to the Company. If neither Saw Mill, Parent
nor Merger Sub fulfill their obligations to pay the Company's expenses as
described above, the Company is entitled to Xx. Xxxxx'x shares of Common Stock
in partial satisfaction of this obligation.
42
48
FINANCING FOR THE MERGER
Saw Mill, Parent and Merger Sub estimate that the total amount of funds
required to pay the Merger Consideration, the Option Consideration and the
repayment of indebtedness for borrowed money of the Company or any of its
subsidiaries that is required to be repaid as a result of the Merger, if any,
and to pay all fees and expenses related to the Merger will be approximately
$331.8 million. Saw Mill, Parent and Merger Sub expect these funds to be
provided through the following sources:
- senior secured term loan facility of $95.0 million;
- the issuance of at least $125.0 million of senior subordinated notes;
- an investment in the preferred stock and warrants to acquire common
stock of Parent in the amount of $35.0 million provided by Chase Capital
Partners, The Northwestern Mutual Life Insurance Company and
Massachusetts Mutual Life Insurance Company;
- an investment in the common stock of Parent in the amount of
approximately $35.0 million provided by Saw Mill through the purchase of
Parent common stock;
- common equity financing in the amount of approximately $30.0 million
provided by the Management Shareholders and certain other members of the
Company's management team by way of a contribution of a portion of their
existing equity in the Company to Parent in exchange for equity
securities of Parent; and
- the assumption by the Surviving Corporation of approximately $11.8
million of the Company's existing indebtedness.
The Surviving Corporation expects to repay the debt it incurs in connection
with the financing of the Merger from its cash flow from operations and/or from
the proceeds of new debt or equity financings. The following is a summary of
certain provisions of the senior, subordinated and preferred equity financing
commitments obtained by Saw Mill and its affiliates in connection with the
Merger. Although Saw Mill has obtained commitment letters for the financing
described herein, the definitive agreements evidencing such financing may
contain additional or different terms and conditions. As provided in Section
7.15 of the Merger Agreement, Saw Mill, Parent and Merger Sub have agreed that
if any such commitment letter is terminated or the funds to be provided pursuant
to any such commitment letter shall not be available, then Saw Mill, Parent and
Merger Sub shall use commercially reasonable efforts to obtain an alternative
source of financing, in each case, on financial and other terms no less
favorable than those set forth therein, or, to the extent not set forth therein,
on terms reasonably acceptable to Saw Mill, Parent and Merger Sub. Accordingly,
if funds are not available under any such commitment letter (whether by
termination or otherwise) or any such commitment letter is not otherwise used
then, in order to consummate the Merger, Parent and/or Surviving Corporation may
enter into such senior debt facilities, issue such subordinated debt securities
and/or issue such preferred equity securities and/or warrants, in each case, in
such amounts and on such terms as are reasonably acceptable to Saw Mill, Parent
and Merger Sub.
SENIOR CREDIT FACILITIES
Credit Agricole Indosuez ("Indosuez") has committed to provide the
Surviving Corporation with a senior credit facility in an aggregate amount of
$130.0 million. The senior credit facility will be comprised of the following:
- a $20.0 million term A loan facility repayable in quarterly installments
beginning three months following the completion of the Merger and ending
on the maturity date in accordance with the chart set forth below;
- a $75.0 million term B loan facility repayable in quarterly installments
beginning three months following the completion of the Merger and ending
on the maturity date in accordance with the chart set forth below; and
- a $35.0 million revolving credit facility maturing five and one-half
years after the Merger is completed with a letter of credit sub-facility
in an amount to be determined.
43
49
REPAYMENT SCHEDULE
-----------------------------------------------------------
TERM A LOAN TERM B LOAN
------------------------------------ --------------------
PERCENT OF PERCENT OF
YEAR PRINCIPAL DUE YEAR PRINCIPAL DUE
---- ------------- ---- -------------
1 5.0% 1 1.0%
2 10.0% 2 1.0%
3 15.0% 3 1.0%
4 20.0% 4 1.0%
5 25.0% 5 1.0%
5.5 25.0% 6 10.0%
7 85.0%
The Surviving Corporation will be the borrower under the senior credit
facilities. All of the Surviving Corporation's present and future domestic
subsidiaries will guarantee the senior credit facilities. In addition, the
senior credit facilities will be secured by the following:
- substantially all of the Surviving Corporation's assets and the assets
of the Surviving Corporation's domestic subsidiaries; and
- a pledge of all of the Surviving Corporation's capital stock and the
capital stock of the Surviving Corporation's present and future domestic
subsidiaries and sixty-six percent of the capital stock of the Surviving
Corporation's present and future foreign subsidiaries.
Loans under the senior credit facilities will bear interest, at the
Surviving Corporation's option, at either:
- the base rate plus an applicable margin; or
- the London Interbank Offered Rate ("LIBOR") plus an applicable margin.
The base rate is defined as the higher of the following:
- Indosuez's prime commercial lending rate as announced from time to time
at its head office; or
- the federal funds effective rate from time to time plus 0.5%.
The initial applicable margins will be as follows:
BASE RATE LOANS LIBOR LOANS
--------------- -----------
Revolving credit facility.................. 1.5% 3.0%
Term Loan A................................ 1.5% 3.0%
Term Loan B................................ 2.0% 3.5%
Six months following the completion of the Merger, the interest rates on
the revolving credit facility and the term A loan will be subject to adjustment
based on total leverage.
Borrowings under the senior credit facilities must be repaid with the net
proceeds received by the Surviving Corporation from:
- sales of the Surviving Corporation's assets other than sales of
inventory in the ordinary course of business;
- the Surviving Corporation's incurrence of indebtedness or the issuance
of the Surviving Corporation's debt or equity securities;
- at Indosuez's discretion, certain insurance recoveries; and
- the reversion of pension plan assets.
The borrowings must also be prepaid each fiscal year with 50% of the
Surviving Corporation's cash flow above a set level. All mandatory prepayments
must be used first to reduce the term A loan and the term B loan pro rata and
then to reduce any balance under the revolving credit facility.
44
50
The documents for the senior credit facilities will contain affirmative,
negative and financial covenants and events of default customary for credit
facilities of a size and type similar to the senior credit facilities.
The funding of the senior credit facilities will be subject to satisfaction
of customary conditions for similar secured financings including:
- the Surviving Corporation will have received gross proceeds of $125
million from the issuance of the senior subordinated notes or senior
subordinated bridge loans, with the final terms and conditions of such
debt satisfactory to Indosuez; and
- Saw Mill and the preferred equity investors will have made their
respective equity investments as described in the proxy statement.
SENIOR SUBORDINATED DEBT FINANCING
Merger Sub expects the Surviving Corporation to issue at least $125 million
in senior subordinated notes. These senior subordinated notes will be the
Surviving Corporation's senior subordinated obligations, ranking behind all of
the Surviving Corporation's existing and future senior indebtedness, including
the Surviving Corporation's indebtedness under the senior credit facility. The
senior subordinated notes will be unconditionally guaranteed by each of the
Surviving Corporation's domestic subsidiaries.
In the event that the senior subordinated notes cannot be placed prior to
the completion of the Merger, SMC has arranged for Credit Suisse First Boston to
provide the Surviving Corporation with interim loans. Under the arrangement, if
issued, the interim loans will have a maturity date that is 364 days from the
closing of the Merger. Each lender of interim loans will have the option at any
time to exchange all or a portion of its interim loans for the Surviving
Corporation's senior subordinated notes (the "Exchange Notes") ranking on an
equivalent basis as the interim loans. Each lender of interim loans who does not
elect to exchange such loans for Exchange Notes will be required to extend the
maturity date of the interim loans for intervals as determined by each lender.
However, no lender will be required to extend the maturity date of the interim
loans beyond the tenth anniversary of the closing of the Merger. The interest
rate on the interim loans increases at the end of each three-month period from
the closing of the Merger until the maturity date, up to a maximum rate.
The Exchange Notes mature on the tenth anniversary of the closing of the
Merger and bear interest at a fixed rate plus an applicable margin, up to a
maximum rate. The definitive documentation for the senior subordinated notes
and/or interim loans and Exchange Notes will contain affirmative and negative
covenants and events of default customary for issuance of similar debt
securities of this size and type.
The funding of the interim loans is subject to the conditions customary for
these types of transactions, including:
- Credit Suisse First Boston having completed an environmental due
diligence review of the Company to its satisfaction;
- no event having occurred that affects the Company's business in a
material adverse manner; and
- after the date of the commitment letter, none of the following events
shall have occurred:
-- a general suspension of trading in, or limitation on prices for,
securities on any national securities exchange or in the
over-the-counter market in any applicable jurisdiction;
-- the declaration of a banking moratorium or any suspension of payments
in respect of banks in any applicable jurisdiction;
-- the commencement of a war, armed hostilities or other international or
national calamity or emergency, directly or indirectly involving any
applicable jurisdiction;
-- any limitations, whether or not mandatory, imposed by any governmental
authority on the nature or extension of credit or further extension of
credit by banks or other lending institutions; and
-- a material adverse change in the financial markets that could have a
material adverse effect on the syndication of leveraged bank credit
facilities or the consummation of high-yield note offerings.
45
51
PREFERRED EQUITY FINANCING
Parent has received a commitment letter from Chase Capital Partners, The
Northwestern Mutual Life Insurance Company and Massachusetts Mutual Life
Insurance Company to provide the preferred equity financing. The preferred
equity financing will consist of the purchase by the preferred equity investors
of Parent's senior preferred stock and warrants to purchase shares of Parent's
common stock for total consideration of $35.0 million.
The senior preferred stock issued by Parent in connection with the Merger
will have a liquidation value of $1,000 per share. Each share will accrue
dividends at a rate of 14% per year, subject to increases if Parent does not
fulfill various obligations. Upon any liquidation, dissolution or winding up of
Parent, each holder of senior preferred stock will be entitled to be paid the
liquidation value of the senior preferred stock plus accrued and unpaid
dividends. The holders of senior preferred stock will not be entitled to any
further payment. Holders of senior preferred stock must be paid before any
holders of Parent's other equity securities receive any payments for their
shares. The terms of the senior preferred stock will provide that holders of a
majority of the outstanding shares of the senior preferred stock at the time in
question will have the right to designate two members of the Parent's board of
directors so long as the ratio of total debt to earnings before interest, taxes,
depreciation and amortization exceeds 5.5:1.
The warrants issued to the preferred equity investors will be exercisable
into a total of 9% of Parent's common stock on a fully diluted basis immediately
following the completion of the Merger.
The obligation of the preferred equity investors to purchase the senior
preferred stock is subject to conditions customary for these types of
transactions, including:
- the completion of the Merger on terms and conditions satisfactory to the
preferred equity investors and their counsel;
- Parent having a credit facility of not less than $130 million of
financing under the senior credit facilities, on terms and conditions
substantially as set forth in the commitment letter for the senior
credit facilities;
- Parent having received proceeds of not less than $125 million from the
issuance of the senior subordinated notes or the senior subordinated
bridge loans on terms and conditions substantially as set forth in the
commitment letter for the senior subordinated debt;
- the investment by Saw Mill of not less than $37 million; and
- an investment in the common stock of Parent by the Management
Shareholders of not less than $26 million.
FEES AND EXPENSES
Except as disclosed in this Proxy Statement and as set forth in the Merger
Agreement, all fees and expenses incurred in connection with the Merger, the
Merger Agreement and any other transactions contemplated thereby will be paid by
the party incurring such fees and expenses, except that the Company will pay all
expenses relating to the printing, filing and mailing of the Proxy Statement and
all other related regulatory filing fees.
To date, the Company has paid to Xxxxxx Brothers a fee of $1 million. If
the Merger is approved by the Company's shareholders, the Company will be
obligated to pay Xxxxxx Brothers an additional fee of $2 million. The Company
has agreed to pay the reasonable out-of-pocket expenses incurred by Xxxxxx
Brothers.
Firstar Trust Company has been retained to act as the Paying Agent in
connection with the Merger. The Paying Agent will receive reasonable and
customary compensation for services relating to the Merger and will be
reimbursed for certain reasonable out-of-pocket expenses.
46
52
It is estimated that the fees and expenses incurred by the Company, Saw
Mill, Parent and Merger Sub in connection with the Merger and other transactions
contemplated by the Merger Agreement will be approximately as set forth below
(in millions):
Financing and Commitment Fees............................... $ 9.81
Filing Fees................................................. 0.10
Special Committee's Financial Advisor's Fee and Expenses.... 3.30
Legal Fees and Expenses..................................... 2.72
Accounting Fees and Expenses................................ 0.35
Printing and Mailing Costs.................................. 0.50
Miscellaneous............................................... 1.20
------
Total....................................................... $17.98
======
Under certain circumstances, the Company is obligated to reimburse Saw
Mill, Parent and Merger Sub for certain expenses and to pay Merger Sub the
Termination Fee. See "THE MERGER AGREEMENT -- FEES, EXPENSES AND OTHER
PAYMENTS."
CONDUCT OF THE COMPANY'S BUSINESS IF THE MERGER IS NOT COMPLETED
If the Merger Agreement is not approved at the Annual Meeting or if the
Merger is not completed for any other reason, then the Company will continue to
operate its business in the ordinary course.
PLANS FOR THE COMPANY AFTER THE MERGER
Following the completion of the Merger, Saw Mill has informed the Company
that the business and operations of the Surviving Corporation will be continued
substantially as they are being currently conducted. The board of directors and
management of the Surviving Corporation will, however, continue to evaluate the
Surviving Corporation's business, operations, corporate structure and
organization and will make changes as they deem appropriate.
CERTAIN PROJECTIONS OF FUTURE OPERATING RESULTS
In November, 1999, management prepared projections of the Company's future
operating performance for the fiscal years 2000 through 2004. The Company does
not as a matter of course make public forecasts as to future operations, and the
projections set forth below are included in this Proxy Statement only because
such information was provided to Merger Sub and to its prospective lenders and
to the Special Committee and its financial and legal advisors as described
below. The Company does not intend to update or otherwise revise the financial
projections to reflect circumstances existing after the date on which the
projections were prepared or to reflect the occurrence of unanticipated events.
Projections of this type are based on estimates and assumptions that are
inherently subject to significant economic, industry and competitive
uncertainties and contingencies, all of which are difficult to predict and many
of which are beyond the Company's control. Accordingly, there can be no
assurance that the projected results would be realized or that actual results
would not be significantly higher or lower than those projected. In addition,
the projections were prepared by the Company not with a view to public
disclosure or compliance with the published guidelines of the Commission or the
guidelines established by the American Institute of Certified Public Accountants
regarding projections and forecasts. The inclusion of this information should
not be regarded as an indication that anyone who received this information
considered it a reliable predictor of future operating results and this
information should not be relied upon as such. The projections are based upon a
variety of assumptions relating to the businesses of the Company which, although
considered reasonable by the Company, may not be realized, and are subject to
significant uncertainties and contingencies, many of which are beyond the
control of the Company. See "FORWARD-LOOKING STATEMENTS." None of the Company,
Merger Sub, the Special Committee or any other person or party assumes
responsibility for the accuracy or validity of the following projections.
47
53
Significant financial projections that were provided to Merger Sub and to
its prospective lenders and to the Special Committee and its financial and legal
advisors are as follows:
(AMOUNTS IN THOUSANDS)
FISCAL YEARS ENDING
----------------------------------------------------
2000 2001 2002 2003 2004
-------- -------- -------- -------- --------
STATEMENT OF INCOME DATA:
Net sales................................ $466,144 $491,936 $523,312 $554,937 $583,641
Operating income......................... 38,358 42,785 47,797 51,047 53,757
Net income............................... 19,555 22,691 26,723 29,942 32,977
EBITDA................................... 59,535 65,962 71,602 74,930 77,704
12/31/00 12/31/01 12/31/02 12/31/03 12/31/04
-------- -------- -------- -------- --------
BALANCE SHEET DATA:
Total assets............................. $335,756 $342,696 $345,265 $347,412 $348,839
Long-term debt (including current
portion)............................... 88,119 70,430 43,918 13,746 --
Stockholder's equity..................... 160,466 183,157 209,880 239,822 272,800
LEGAL PROCEEDINGS
Three purported class action lawsuits (collectively, the "Complaints") were
filed in the Circuit Court of the State of Wisconsin for Milwaukee County under
the captions Harbor Finance Partners v. Xxxxxxx X. Xxxxxx, et al, (Case No.
00CV000907, filed on February 1, 2000), Xxxxx Xxxxxx v. Xxxxx Incorporated, et
al, (Case No. 00CV000953, filed on February 2, 2000) and Xxxxxx Xxxxxxx v. Xxxxx
Incorporated, et al (Case No. 00CV001322, filed on February 15, 2000). Each
Complaint was filed by an alleged shareholder of the Company against the Company
and each Management Shareholder and member of the Special Committee. The
Complaints, which are substantially similar to each other, allege, among other
things, that the price to Public Shareholders of $11.25 per share is inadequate.
The Complaints seek, among other things, an order which certifies that the
lawsuits may be maintained as class actions, prevents the Merger from being
completed, rescinds the Merger in the event the Merger is consummated, awards
unspecified compensatory damages to the members of the purported class, and
awards the named plaintiffs their costs, including counsel and expert fees.
The Special Committee, the Company and the Management Shareholders all
believe the Complaints are without merit.
RIGHTS OF DISSENTING SHAREHOLDERS
Sections 180.1301 to 180.1331 of the WBCL provide that any shareholder may
dissent from the Merger and obtain payment of the fair value of his or her
shares as determined in accordance with Section 180.1301(4) of the WBCL,
provided that such shareholder delivers to the Company before the shareholder
vote on the Merger, a written notice of the such shareholder's intent to demand
payment for his or her shares if the Merger is completed, does not vote his or
her shares in favor of the Merger, and complies with all of the remaining
provisions of Sections 180.1301 to 180.1331 of the WBCL. The WBCL provides that
a dissenting shareholder may not challenge the corporate action creating his or
her entitlement to dissent unless the action is unlawful or fraudulent with
respect to such shareholder or the issuer corporation.
The following is a brief summary of Sections 180.1301 to 180.1331 of the
WBCL which set forth the procedures for demanding statutory dissenters' rights.
This summary is qualified in its entirety by reference to the full text of
Sections 180.1301 to 180.1331 which is attached to this Proxy Statement as ANNEX
C. For purposes of this summary, "shareholder" refers to shareholders of record
and beneficial shareholders who comply with the provisions of Section 180.1303
of the WBCL applicable to beneficial shareholders. For purposes of this summary,
the "Company" also refers to the Surviving Corporation in the event the Merger
is completed.
48
54
If the Merger is approved and completed, shareholders who elect to exercise
their dissenters' rights and who properly and timely perfect such rights will be
entitled to receive the "fair value" in cash for their shares of Common Stock.
Under Section 180.1301(4) of the WBCL, "fair value" means the highest closing
sales price per share of Common Stock during the 30 day period immediately prior
to the completion of the Merger.
A shareholder who elects to exercise his or her dissenters' rights must
perfect such rights by delivering to the Company prior to the vote at the Annual
Meeting written notice of his or her intent to demand payment and must either
vote against the Merger or abstain from voting on the Merger. Neither voting in
person or by proxy against, abstaining from voting on or failing to vote on the
proposal to approve and adopt the Merger Agreement will constitute a written
notice of intent to exercise dissenters' rights with the meaning of Section
180.1321. The written notice of intent to exercise dissenters' rights must be in
addition to, and separate from, any such proxy or vote. Any shareholder who
fails to deliver written notice prior to the vote on the Merger at the Annual
Meeting or votes in favor of the Merger will lose the right to receive the fair
value of his or her shares.
If the Merger is approved, then within ten days after such approval, the
Company will deliver to those shareholders who deliver the written notice
described above and who do not vote in favor of the Merger (each, a "Dissenting
Shareholder") a written dissenters' notice (the "Dissenters' Notice"). The
Dissenters' Notice will set forth where the Dissenting Shareholder must send the
payment demand, where and when certificates for shares of Common Stock must be
deposited and the date by which the Company must receive the payment demand,
which date must not be fewer than 30 nor more than 60 days from the date on
which the Dissenters' Notice is delivered. In addition, the Dissenters' Notice
must include a form for demanding payment which includes the date of first
announcement to the shareholders of the terms of the Merger and requires the
Dissenting Shareholder to certify whether he or she acquired beneficial
ownership of the shares of Common Stock before such date, and a copy of the
sections of the WBCL pertaining to dissenters' rights.
A Dissenting Shareholder who is sent a Dissenters' Notice must demand
payment in writing, certifying whether he or she acquired beneficial ownership
of the shares before the date specified in such notice and deposit his or her
certificates in accordance with such notice. A shareholder who does not demand
payment by the date set in the Dissenters' Notice or who does not deposit his or
her certificates where required by the date set forth in the Dissenters' Notice
is not entitled to payment of the fair value of his or her shares.
Upon the later of completion of the Merger or receipt of the payment
demand, the Company will pay each Dissenting Shareholder who has complied with
the above the fair value of the Dissenting Shareholder's shares of Common Stock,
plus accrued interest. The payment must be accompanied by the latest available
financial statements of the Company, an estimate of the fair value of the
shares, an explanation of how the interest was calculated, a statement of the
dissenters' rights if the Dissenting Shareholder is dissatisfied with the
payment and a copy of the Sections of the WBCL pertaining to dissenters' rights.
If the Dissenting Shareholder believes that the amount paid by the Company
is less than the fair value of his or her shares or that the interest due was
incorrectly calculated, the Company fails to make payment within 60 days after
the date set in the Dissenters' Notice for demanding payment, or the Merger is
not completed and the Company does not return the deposited certificates within
60 days after the date set in the Dissenters' Notice for demanding payment, the
dissenter may notify the Company of his or her estimate of the fair value of his
or her shares and the amount of interest due and demand payment of his or her
estimate, less any payment previously received. The Dissenting Shareholder must
notify the Company in writing within 30 days after the Company made or payment
for the Dissenting Shareholder's shares. If within 60 days after receipt by the
Company of a demand described in this paragraph, the demand remains unsettled,
the Company will bring a special proceeding and will petition the court to
determine the fair value of the shares and accrued interest. If the Company does
not bring the special proceeding within such 60 day period, the Company will pay
each Dissenting Shareholder whose claim remains unsettled the amount demanded.
The dissenter will be entitled to judgment for the amount by which the court
finds the fair value of his or her shares exceeds the amount paid by the
Company.
The Merger Agreement provides that it may be terminated if the holders of
more than 10% of the outstanding shares of Common Stock are Dissenting
Shareholders.
49
55
FAILURE TO COMPLY STRICTLY WITH ALL OF THE PROCEDURES SET FORTH IN SECTIONS
180.1301 TO 180.1331 OF THE WBCL WILL RESULT IN THE LOSS OF A SHAREHOLDER'S
DISSENTERS' RIGHTS. CONSEQUENTLY, ANY SHAREHOLDER WISHING TO EXERCISE
DISSENTERS' RIGHTS IS URGED TO CONSULT LEGAL COUNSEL BEFORE ATTEMPTING TO
EXERCISE SUCH RIGHTS.
SHAREHOLDERS CONSIDERING THE EXERCISE OF DISSENTERS' RIGHTS SHOULD BE AWARE
THAT THE FAIR VALUE OF THEIR SHARES AS DETERMINED UNDER SECTIONS 180.1301 TO
180.1331 COULD BE MORE THAN, THE SAME AS OR LESS THAN THE MERGER CONSIDERATION
THEY WOULD RECEIVE UNDER THE MERGER AGREEMENT IF THEY DID NOT DISSENT.
THE MERGER AGREEMENT
THE FOLLOWING IS A SUMMARY OF CERTAIN PROVISIONS OF THE MERGER AGREEMENT.
THE SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE
MERGER AGREEMENT, WHICH IS INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH
IS ATTACHED TO THIS PROXY STATEMENT AS ANNEX A. CAPITALIZED TERMS NOT OTHERWISE
DEFINED IN THE FOLLOWING SUMMARY HAVE THE MEANINGS SET FORTH IN THE MERGER
AGREEMENT. SHAREHOLDERS SHOULD READ THE MERGER AGREEMENT IN ITS ENTIRETY.
GENERAL
The Merger Agreement provides that at the Effective Time, Merger Sub will
be merged with and into the Company in accordance with the WBCL. As a result of
the Merger, the separate corporate existence of Merger Sub will cease and the
Company will become the Surviving Corporation.
At the Effective Time, each issued and outstanding share of Common Stock,
other than Dissenting Shares, shares of Common Stock held by the Company or its
subsidiaries or by Merger Sub and the Contributed Shares (as defined below),
will be converted into the right to receive $11.25 in cash without interest, and
each share of Common Stock held by Merger Sub will be canceled without
consideration.
The Merger Agreement provides that each share of Merger Sub's common stock
issued and outstanding immediately prior to the Effective Time will be converted
into and become shares of Common Stock, par value $0.01, of the Surviving
Corporation.
Pursuant to a contribution agreement to be executed immediately prior to
the Merger (the "Contribution Agreement"), the Management Shareholders will
contribute an aggregate of 2,437,262 shares of Common Stock (the "Contributed
Shares") to Parent in exchange for shares of common stock of Parent. Parent will
own 100% of the common stock of the Surviving Corporation after the Merger. For
purposes of determining the number of shares of common stock of Parent issued to
the Management Shareholders, the 2,437,262 contributed shares of Common Stock
were valued at the average price of $10.13 per share. The Chairman and Chief
Executive Officer will receive $11.25 per share of Common Stock for the
2,918,623 shares and 2,331,928 shares, respectively, that they beneficially own
and are not contributing to Parent under the Contribution Agreement
("Noncontributed Shares"). The contribution and the Merger will result in the
Management Shareholders receiving aggregate consideration equal to approximately
$10.90 per share of Common Stock for their Contributed Shares and Noncontributed
Shares combined.
PAYMENT FOR SHARES
Prior to the Effective Time, Merger Sub will designate a bank or trust
company, reasonably satisfactory to the Company, to act as paying agent in the
Merger (the "Paying Agent"). As soon as reasonably practicable after the
Effective Time, the Surviving Corporation will mail or cause to be mailed to
each holder of record of any certificate, which immediately prior to the
Effective Time represented shares of Common Stock (all such certificates, the
"Certificates"), a letter of transmittal and instructions for use in effecting
the surrender of Certificates in exchange for the Merger Consideration. These
materials will not be mailed to Merger Sub or holders of Dissenting Shares.
Properly surrendered Certificates will be canceled, and the holder will receive
the Merger Consideration, without interest, for each share of Common Stock
represented by such Certificate.
50
56
Interest will not be paid on the amounts payable upon surrender of
Certificates which formerly represented shares of Common Stock. Therefore, the
Company recommends that shareholders surrender their Certificates promptly after
the Merger is completed. Shareholders whose certificates are lost, stolen or
destroyed will be required to make an affidavit claiming such certificate or
certificates to be lost, stolen or destroyed and, if required by the Company, to
post a bond in such amount as the Company may reasonably require as indemnity
against any claim that may be made against it with respect to such certificate.
If, with respect to any shares of Common Stock, the Merger Consideration is to
be paid to a person who is not the holder of record of such shares of Common
Stock, the amount of any applicable transfer taxes will be required to be paid
by the person requesting such payment of the Merger Consideration, unless
satisfactory evidence of the payment of such taxes, or exemption therefrom, is
submitted to the Surviving Corporation.
At any time following the expiration of six months after the Effective
Time, the Surviving Corporation will be entitled to require the Paying Agent to
deliver to it any funds which have not been disbursed to holders of
Certificates, and thereafter such holders will look to the Surviving
Corporation, subject to any applicable abandoned property, escheat or similar
law, only as general creditors for payment of the Merger Consideration payable
upon due surrender of their Certificates, without interest. Neither Merger Sub,
the Management Shareholders, the Company, the Surviving Corporation nor the
Paying Agent will be liable to any person in respect of any cash delivered to a
public official or entity under any applicable abandoned property, escheat or
similar law.
TREATMENT OF COMPANY STOCK OPTIONS
The Surviving Corporation will promptly after the Effective Time pay to
each holder of an option to purchase shares of Common Stock issued under the
Company Stock Option Plan, whether or not exercisable or vested, the Option
Consideration net of applicable withholding taxes. Upon receipt of the Option
Consideration, each Company Stock Option will be canceled. The surrender of a
Company Stock Option to the Company in exchange for the Option Consideration
will release all rights the holder had or may have had in respect to such
Company Stock Option.
Except as otherwise agreed to by Merger Sub and the Company, all other
plans, programs or arrangements providing for the issuance or grant of any other
interest in the capital stock of the Company or any of its subsidiaries will
terminate at the Effective Time, and no participant in any such plans, programs
or arrangements will have any rights thereunder to acquire any equity securities
of the Company, the Surviving Corporation or any of their subsidiaries.
DIRECTORS AND OFFICERS
The Merger Agreement provides that from and after the Effective Time, the
board of directors of the Surviving Corporation will be comprised of the
directors of Merger Sub existing immediately prior to the Effective Time, and
the officers of the Surviving Corporation will be the officers of the Company
existing immediately prior to the Effective Time, in each case until the earlier
of their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be, in accordance with the Articles of
Incorporation and By-laws of the Surviving Corporation and applicable law.
ARTICLES OF INCORPORATION AND BY-LAWS
From and after the Effective Time, the Articles of Incorporation and
By-laws of Merger Sub as in effect immediately prior to the Effective Time will
be the Articles of Incorporation and By-laws of the Surviving Corporation, until
thereafter amended in accordance with their respective terms.
REPRESENTATIONS AND WARRANTIES
In the Merger Agreement, the Company has made customary representations and
warranties to Merger Sub with respect to, among other things, corporate
organization and qualification, capitalization, authority to enter into the
Merger Agreement and complete the Merger, no conflicts, filings with the
Commission and financial statements, known or asserted liabilities or
obligations, the absence of certain changes or events, the
51
57
absence of litigation, the requirement of a shareholder vote to approve the
Merger Agreement, the receipt of the Xxxxxx Opinion, no broker's or finder's
fee, the applicability of state takeover statutes, disclosures in the proxy
statement, compliance with laws, tax matters, the absence of change of control
provisions, transactions with affiliates and known violations of the Foreign
Corrupt Practices Act.
In the Merger Agreement, each of Saw Mill, Parent and Merger Sub has made
customary representations and warranties to the Company with respect to, among
other things, corporate organization and qualification, authority to enter into
the Merger Agreement and complete the Merger, no conflicts, interim operations
of Parent and Merger Sub, disclosures in the proxy statement, no broker's or
finder's fee, financing commitments, capitalization of Merger Sub, solvency, and
current estimated sources and uses of funds in connection with the completion of
the Merger. Saw Mill, Parent and Merger Sub have also represented that they have
delivered to the Company true, correct and complete copies of the Senior Debt
Commitment Letter, the Subordinated Debt Commitment Letter, the Preferred Equity
Commitment Letter (collectively, the "Commitment Letters") and Saw Mill's
agreement of limited partnership.
In the Merger Agreement, each Management Shareholder has made customary
representations and warranties to the Company, Saw Mill, Parent and Merger Sub
with respect to, among other things, no conflicts, ownership of his shares of
Common Stock, authority to enter into the Merger Agreement and perform his
obligations thereunder, no broker's or finder's fee and transactions with the
Company or any of its subsidiaries.
Certain representations and warranties in the Merger Agreement are
qualified as to "Company Material Adverse Effect." For purposes of the Merger
Agreement, the term "Company Material Adverse Effect" means, when used in
connection with the Company and its subsidiaries, any change, effect, event,
occurrence, condition or development that is or is reasonably likely to be
materially adverse to the business, assets, liabilities, properties, results of
operations or conditions, financial or otherwise, of the Company and its
subsidiaries, taken as a whole (excluding any change or effect resulting from
general economic conditions or relating to those industries specific to the
business of the Company), or the ability of the Company to perform its
obligations under the Merger Agreement, except for such changes, effects,
events, occurrences, conditions or developments directly resulting from the
Company's performance of its obligations under the Merger Agreement.
VOTE OF SAW MILL, PARENT AND MERGER SUB
Under the Merger Agreement, Saw Mill, Parent and Merger Sub have agreed to
vote all shares of Common Stock beneficially owned by them, or with respect to
which they have the power, by agreement, proxy or otherwise, to cause to be
voted, in favor of the approval and adoption of the Merger Agreement and the
Merger.
THIRD PARTY TRANSACTIONS; FIDUCIARY RESPONSIBILITIES
Prior to the Effective Time, the Board of Directors, the Company, the
Management Shareholders and the Special Committee will not, and the Company will
cause its subsidiaries not to, and the Company will not authorize nor permit any
of the Company's agents to, directly or indirectly, solicit, knowingly
encourage, participate in or initiate discussions or negotiations with, or
provide any non-public information to any person, other than Merger Sub, Parent,
Saw Mill or any of their affiliates or representatives, concerning any potential
Third Party Transaction (as defined below).
Notwithstanding the above, if, after the date of the Merger Agreement, the
Special Committee or the Company receives a bona-fide inquiry or proposal (any
such inquiry, an "Acquisition Inquiry" or any such proposal, an "Acquisition
Proposal") from a person who the Special Committee, in good faith, reasonably
determines has the financial capacity to complete a merger or similar
transaction involving the Company or the acquisition of a material portion of
the assets or capital stock of the Company or its subsidiaries (any such
transaction, other than the Merger, a "Third Party Transaction") and the Special
Committee reasonably concludes, after consultation with its legal counsel, that
the failure to provide information to, or engage in discussions or negotiations
with, such person is inconsistent with the fiduciary duties of the Board of
Directors
52
58
(the "Board's Fiduciary Duties"), then the Special Committee may provide certain
information about the Company to such person and engage in discussions and
negotiations with such person regarding the Acquisition Inquiry or Acquisition
Proposal. In the event that, after the date of the Merger Agreement and prior to
the Annual Meeting, the Special Committee or the Company receives an Acquisition
Proposal from a person whom the Special Committee, in good faith, reasonably
determines has the financial capabilities to complete such Acquisition Proposal
and the Special Committee determines, in good faith and after consultation with
its legal counsel, that the failure to do any or all of the following is
inconsistent with the Board's Fiduciary Duties, the Board of Directors acting on
the recommendation of the Special Committee may do any or all of the following:
- withdraw, modify or change the Board of Directors' approval or
recommendation of the Merger Agreement and the Merger;
- approve or recommend to the Company's shareholders such Acquisition
Proposal; or
- terminate the Merger Agreement three business days after the Board of
Directors gives Merger Sub written notice stating that the Board of
Directors intends to terminate the Agreement and disclosing certain
information with respect to any Acquisition Proposal which the Board of
Directors intends to accept or recommend.
Nothing in the Merger Agreement prohibits the Board of Directors or the
Special Committee from taking and disclosing to the Company's shareholders a
position with respect to a tender or exchange offer by a third party, or from
making such disclosure to the Company's shareholders which, in the judgment of
the Board of Directors or the Special Committee, after consultation with its
legal counsel, is necessary under applicable law or the rules of any stock
exchange to meet the Board's Fiduciary Duties.
The Merger Agreement further provides that the Company will promptly give
Merger Sub written notice of any Acquisition Inquiry or Acquisition Proposal,
including the material terms and conditions of such proposal or inquiry. In
addition, the Company is required to keep Merger Sub reasonably informed of the
status of any such Acquisition Inquiry or Acquisition Proposal, including any
change in the terms or conditions thereof.
INDEMNIFICATION AND INSURANCE
The Merger Agreement provides that the Surviving Corporation, for six and
one-half years from and after the Effective Time, will indemnify, defend and
hold harmless the present and former officers and directors of the Company
("Covered Parties") against all losses, claims, damages, liabilities, costs and
expenses, including attorneys' fees and expenses, judgments, fines, losses and
amounts paid in settlement in connection with any actual or threatened action,
suit, claim, proceeding or investigation whether arising before or after the
Effective Time (each a "Claim") to the extent that any such Claim is based on,
or arises out of, the fact that such person is or was an officer or director of
the Company or, at the request of the Company, serving as an officer or director
of another corporation, partnership, joint venture, trust or other enterprise,
based on the Merger Agreement or the transactions contemplated thereby, in each
case to the extent that such Claim pertains to any matter of fact arising,
existing or accruing prior to or at the Effective Time, to the full extent
permitted under applicable law or the Company's Articles of Incorporation,
By-laws or indemnification agreements in effect on the date of the Merger
Agreement. In addition, the Surviving Corporation will, for six and one-half
years from and after the Effective Time, maintain in effect directors' and
officers' liability insurance policies for the Covered Parties with respect to
matters occurring prior to the Effective Time that is at least equal to the
Company's current directors' and officers' liability insurance policies.
STATE TAKEOVER LAWS
Under the Merger Agreement, the Company will take all reasonably necessary
steps to exempt the transactions contemplated by the Merger Agreement, including
the Merger, from the requirements of any applicable state takeover law and to
assist Merger Sub in any challenge to the validity or applicability to such
transactions of any state takeover law.
53
59
COOPERATION WITH FINANCING
During the period prior to the Effective Time, the Company will cooperate
with Merger Sub and will use commercially reasonable efforts to cooperate with
and provide information to Merger Sub to assist with Merger Sub's financing of
the Merger.
EQUITY SECURITIES OF THE COMPANY
Under the Merger Agreement, during the period beginning on the date of the
Merger Agreement and ending on the first to occur of the completion of the
Merger or the date nine months after the date of termination of the Merger
Agreement, neither Saw Mill, Parent nor Merger Sub will, directly or indirectly,
acquire or propose to acquire ownership, beneficially or of record, of any
equity securities of the Company or any of its subsidiaries, except pursuant to
the Merger Agreement and, immediately prior to the completion of the Merger,
pursuant to the limited partnership agreement of Saw Mill and the Contribution
Agreement.
CONDUCT OF BUSINESS PENDING THE MERGER
The Company has agreed that, prior to the Effective Time, it will, and it
will cause its subsidiaries to, conduct business in the ordinary course and in a
manner consistent with past custom and practice, use commercially reasonable
efforts to, among other things, preserve the current relationships of the
Company and its subsidiaries with customers, distributors, suppliers, licensors,
licensees, contractors and other persons with which the Company or its
subsidiaries has significant business relations. Further, the Company will not,
and will cause its subsidiaries to not, prior to the Effective Time, directly or
indirectly do any of the following without the prior written consent of Merger
Sub:
- amend or otherwise change its Articles of Incorporation or By-laws;
- issue, sell, pledge, dispose of, grant or encumber, or authorize the
issuance, sale, pledge, disposition, grant or encumbrance of, any shares
of capital stock or other equity securities of any type or class of the
Company or its subsidiaries, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of such
capital stock or other equity securities, or any other ownership
interest (including, without limitation, any phantom interests), of the
Company or its subsidiaries, or any assets of the Company or its
subsidiaries, except for sales in the ordinary course of business
consistent with past custom and practice and other asset sales for
consideration or having a fair market value aggregating not more than
$500,000;
- declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of
its capital stock or other equity securities;
- reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, or propose to redeem, purchase or otherwise acquire, directly
or indirectly, any of its capital stock or other equity securities;
- acquire (including, without limitation, by merger, consolidation or
acquisition of stock or assets) or agree to acquire any corporation,
partnership, limited liability company, or other business organization
or division, other than certain acquisitions of assets previously agreed
to;
- other than under the Company's existing credit facilities as in effect
as of the date of the Merger Agreement, incur or agree to incur any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any person, or make any loans,
advances, or capital contributions to or investments in, any other
person; or authorize or make capital expenditures which are not in
accordance with the Company's calendar year 2000 budget which has been
presented to the Board of Directors prior to the date of the Merger
Agreement;
- enter into, establish, adopt, amend or renew any employment, consulting,
severance or similar agreement or arrangements with any director,
officer, or employee, or grant any salary or wage increase (other than
in the ordinary course of business consistent with past custom and
practice);
54
60
- establish, adopt, amend or increase benefits under any pension,
retirement, stock option, stock purchase, savings, profit sharing,
deferred compensation, consulting, welfare benefit contract, plan or
arrangement (other than in the ordinary course of business consistent
with past custom and practice or as may be required by applicable law);
- commence any voluntary petition, proceeding or action under any
bankruptcy, insolvency or other similar law;
- make or institute any material change in accounting methods, procedures
or practices in its accounting methods, procedures and practices unless
mandated by GAAP;
- enter into any agreement or other arrangement with any director, officer
or shareholder of the Company, its subsidiaries or any affiliate of any
of the foregoing, except in the ordinary course of business consistent
with past custom and practice and with respect to the payment of
reasonable compensation to the members of the Special Committee in
connection with their performance of services as members of the Special
Committee;
- take any action or omit to take any action which would result in a
violation of any applicable law or would cause a breach of any
agreement, contract or commitment, which violation or breach would have
or could reasonably be expected to have a Company Material Adverse
Effect; or
- license, assign or otherwise transfer to any person or entity any rights
to any material intellectual property rights owned or used by the
Company or its subsidiaries, except in the ordinary course of business
consistent with past custom or practice, or fail to maintain or enforce
any material intellectual property rights owned or used by the Company
or its subsidiaries, except in the ordinary course of business
consistent with past custom or practice.
CONDITIONS TO THE MERGER
CONDITIONS TO THE OBLIGATIONS OF EACH PARTY.
The respective obligations of the Company and Merger Sub and the Management
Shareholders to complete the Merger are subject to the satisfaction or waiver of
the following conditions:
- the Merger Agreement and the Merger will have been approved and adopted
by the affirmative vote of the requisite holders of the outstanding
shares of Common Stock in accordance with Wisconsin law and the
Company's Articles of Incorporation;
- no order, statute, rule, regulation, executive order, stay, decree,
judgment or injunction will have been enacted, entered, issued,
promulgated or enforced by any governmental authority or a court of
competent jurisdiction will be in effect which makes the Merger illegal
or otherwise prohibits completion of the Merger, or limits or restricts
the Surviving Corporation's conduct or operation of the business of the
Company after the Merger;
- all necessary and material governmental and regulatory clearances,
consents or approvals will have been received; and
- any applicable waiting period under the HSR Act relating to the Merger
and related transactions will have expired or terminated.
CONDITIONS TO THE OBLIGATIONS OF MERGER SUB.
The obligations of Merger Sub to consummate the Merger are subject to the
satisfaction or waiver by Merger Sub of the following further conditions:
- the Company will have performed, in all material respects, all of its
obligations required under the Merger Agreement to be performed by it at
or prior to the Effective Time each of the representations and
warranties of the Company contained in the Merger Agreement that are
qualified by materiality or by Company Material Adverse Effect will be
true and correct, and that are not so qualified will be
55
61
true and correct in all material respects as of the date of the Merger
Agreement and as of the Closing Date;
- Saw Mill, Parent and Merger Sub will have received an opinion of counsel
from the Special Committee's legal counsel;
- the Surviving Corporation will have obtained the Debt and Preferred
Equity Financing on the terms and conditions set forth in the Commitment
Letters or otherwise obtained debt and/or equity financing sufficient to
complete the Merger and to pay all fees and expenses in connection with
the Merger and to provide working capital for the Surviving Corporation;
- since December 31, 1998, no event has occurred or will occur which has
or which would reasonably be expected to have a Company Material Adverse
Effect;
- all Company Stock Options will be extinguished and, as of immediately
prior to Closing, the Company will have no liability or obligation with
respect to any such Company Stock Options;
- except as set forth in the Merger Agreement, all outstanding
indebtedness for borrowed money of the Company or any of its
subsidiaries will be paid in full, any letters of credit of the Company
or any of its subsidiaries will be terminated and the Company will have
obtained the release of all liens or encumbrances on the capital stock
of the Company or any of its subsidiaries and all assets of the Company
or any of its subsidiaries securing indebtedness, and the release of all
guarantees by the Company or any of its subsidiaries of indebtedness for
borrowed money;
- the Company will have obtained all consents, authorizations, approvals
and waivers from third parties which are necessary in order to enable
the completion of the transactions contemplated by the Merger Agreement
and the Surviving Corporation to conduct its business in all material
respects after the Closing Date on the same basis as it is currently
conducted; and
- the Dissenting Shares, if any, will not include more than 10% of the
issued and outstanding shares of Common Stock.
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND THE MANAGEMENT
SHAREHOLDERS.
The respective obligations of the Company and the Management Shareholders
are subject to the satisfaction or waiver by the Company and the Management
Shareholders of the following further conditions:
- each of Merger Sub, Parent and Saw Mill will have performed, in all
material respects, all of its obligations required under the Merger
Agreement to be performed by it at or prior to the Effective Time; and
- each of the representations and warranties of Merger Sub, Parent and Saw
Mill contained in the Merger Agreement that are qualified by materiality
will be true and correct, and that are not so qualified, will be true
and correct in all material respects as of the date of the Merger
Agreement and as of the Closing Date.
CONDITIONS TO THE OBLIGATIONS OF SAW MILL AND PARENT.
The respective obligations of Saw Mill to execute and deliver the
Contribution Agreement and to make the Saw Mill Contribution, and Parent to
execute and deliver the Contribution Agreement and to consummate the Pre-Merger
Contributions as defined in the Merger Agreement, are subject to the
satisfaction or waiver by Saw Mill of the "Conditions to the Obligations of Each
Party" set forth above, and the "Conditions to the Obligations of Merger Sub"
set forth above.
TERMINATION
The Merger Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time, notwithstanding the approval and adoption
of the Merger Agreement and the Merger by the shareholders of the Company:
56
62
A. by mutual written consent of the Company and Merger Sub;
B. by either the Company or Merger Sub if the waiting period under the
HSR Act has not terminated or expired, or if any court of competent
jurisdiction in the United States or other United States governmental
authority has issued an order, decree or ruling, or taken any other
action, in each case, which is final and non-appealable and which
restrains, enjoins or otherwise prohibits the Merger, or if the
Effective Time has not occurred on or before August 31, 2000, provided
that the right to terminate the Merger Agreement under this clause
will not be available to any party whose failure to fulfill any
obligation under the Merger Agreement has been the cause of or
resulted in the failure of the Closing to occur;
C. by either the Company or Merger Sub if the holders of the outstanding
shares of Common Stock fail to approve and adopt the Merger Agreement
and the Merger upon a vote taken at a meeting of shareholders,
provided that the right to terminate the Merger Agreement under this
clause will not be available to the Company if its breach of the
Merger Agreement has been the cause of or resulted in the failure to
obtain such shareholder approval;
D. by Merger Sub, if the Board of Directors or any committee thereof
(including the Special Committee) withdraws, modifies in a manner
adverse to Merger Sub, or refrains from giving its approval or
recommendation of the Merger Agreement, or recommends an Acquisition
Proposal or a potential Third Party Transaction to the Company's
shareholders pursuant to the Board's Fiduciary Duties (See "THE MERGER
AGREEMENT -- THIRD PARTY TRANSACTIONS; FIDUCIARY RESPONSIBILITIES");
E. by the Company, upon a material breach of any representation, warranty
or agreement of any of Parent, Saw Mill or Merger Sub set forth in the
Merger Agreement, provided that, if such breach is of a type curable
and is curable by Parent, Saw Mill or Merger Sub through the exercise
of its reasonable best efforts and Parent, Saw Mill or Merger Sub
continues to exercise such reasonable best efforts, the Company may
not terminate the Merger Agreement under this clause for a period of
20 business days from the date on which the Company delivers to
Parent, Saw Mill or Merger Sub written notice setting forth in
reasonable detail the circumstances giving rise to such breach;
F. by Merger Sub, upon any material breach of any representation,
warranty or agreement of the Company set forth in the Merger
Agreement, provided that, if such breach is of a type curable and is
curable by the Company through the exercise of its reasonable best
efforts and the Company continues to exercise such reasonable best
efforts, Merger Sub may not terminate the Merger Agreement under this
clause for a period of 20 business days from the date on which Merger
Sub delivers to the Company written notice setting forth in
reasonable detail the circumstances giving rise to such breach; or
G. by the Company in accordance with the Boards' Fiduciary Duties,
provided, that in order for the termination of the Merger Agreement
under this clause to be deemed effective, the Company will have
complied with all of the provisions contained in the Merger Agreement
(See "THE MERGER AGREEMENT -- THIRD PARTY TRANSACTIONS; FIDUCIARY
RESPONSIBILITIES.")
FEES, EXPENSES AND OTHER PAYMENTS
Except as otherwise provided herein and in the Merger Agreement, all fees
and expenses incurred in connection with the Merger, the Merger Agreement and
any other transactions contemplated thereby will be paid by the party incurring
such fees and expenses, except that the Company will pay all expenses relating
to the printing, filing and mailing of the Proxy Statement and all other related
regulatory filing fees.
Under the Merger Agreement, in the event the Merger Agreement is terminated
under clauses A or B under "Termination" above and certain conditions described
in "Conditions to the Obligations of Merger Sub" have not been satisfied, or
under clauses D, F or G in "THE MERGER AGREEMENT -- TERMINATION" above, on the
date of such termination, the Company will pay Saw Mill by wire transfer of
immediately available funds an amount (such amount, the "Saw Mill Reimbursable
Expenses") in cash equal to the lesser of:
57
63
- the total amount of the costs, fees and expenses of counsel,
accountants, financial advisors and other experts and advisors as well
as fees and expenses incident to the negotiation, preparation and
execution of the Merger Agreement and the attempted financing and
completion of the transactions contemplated by the Merger Agreement,
including investment banking and commitment fees, the related
documentation and the shareholders' meeting and consents ("Costs"),
including without limitation, the legal fees of the providers of the
Commitment Letters, and out-of-pocket expenses; and
- $1,500,000.
Under the Merger Agreement, in the event the Merger Agreement is terminated
under clause E in the "TERMINATION" above, Saw Mill, Parent or Merger Sub will
pay the Company by wire transfer of immediately available funds an amount (such
amount, the "Company Reimbursable Expenses") in cash equal to the lesser of:
- the aggregate amount of Costs incurred in connection with pursuing the
transactions contemplated by the Merger Agreement, and out-of-pocket
expenses; and
- $1,500,000.
Under the Merger Agreement, in the event the Merger Agreement is terminated
by Merger Sub or the Company under clauses D or G of "TERMINATION" above, on the
date of such termination, the Company will pay Saw Mill by wire transfer of
immediately available funds a payment in the amount (such amount, the
"Termination Fee") equal to $6.7 million minus the amount of Saw Mill
Reimbursable Expenses, if any, paid by the Company on or prior to the date of
such termination. If the Merger Agreement is terminated under clauses B, C or F
and a potential Third Party Transaction has been publicly disclosed prior to
such termination, then if within nine months after such termination a Third
Party Transaction is consummated, on the date of consummation of such Third
Party Transaction, the Company will pay the Termination Fee to Saw Mill by wire
transfer of immediately available funds.
PROPOSAL 2: ELECTION OF DIRECTORS
Pursuant to the authority contained in the By-laws of the Company, the
Board of Directors has established the number of directors to be six. The Board
of Directors has nominated Xxxxxxx Xxxxxx, Xxxx Train, Xxxxx Xxxxxxxxx, Xxxxx
Xxxxx, Xxxxx Xxxxxx and Xxxxx Xxxxx for election as directors, all to serve
until the 2001 Annual Meeting of Shareholders. Although Messrs. Oldenburg,
Jones, Xxxxxx and Xxxxx have been nominated for election to the Board of
Directors, it is not anticipated that any of these individuals will remain on
the Board of Directors if the Merger Agreement is approved by shareholders at
the Annual Meeting and the Merger is completed.
As indicated below, all six persons nominated by the Board of Directors are
incumbent directors. The Company anticipates that all of the nominees listed in
this Proxy Statement will be candidates when the election is held. However, if
for any reason any nominee is not a candidate at that time, Proxies will be
voted for any substitute nominee designated by the Company, except where a Proxy
withholds authority with respect to the election of directors.
COMMITTEES
The Company has both Audit and Compensation Committees of directors. The
Audit Committee of the Board of Directors is comprised of Xxxxx Xxxxx
(Chairman), Xxxxx Xxxxxx, Xxxxx Xxxxxxxxx and Xxxxx Xxxxx. The responsibilities
of the Audit Committee, in addition to such other duties as may be specified by
the Board of Directors, include the following: (1) recommendation to the Board
of Directors of independent accountants for the Company; (2) review of the
timing, scope and results of the independent accountants' audit examination; and
(3) review of periodic comments and recommendations by the independent
accountants and of the Company's response thereto regarding the adequacy of
internal accounting controls. The Audit Committee met twice in the fiscal year
ended December 31, 1999.
The Compensation Committee of the Board of Directors is comprised of Xxxxx
Xxxxxx (Chairman), Xxxxx Xxxxxxxxx, Xxxxx Xxxxx and Xxxxx Xxxxx. The
responsibility of the Compensation Committee, in addition to such other duties
as may be specified by the Board of Directors, is to make recommendations to
58
64
the Board of Directors with respect to compensation for the executive officers,
the stock option program and the management incentive compensation program. The
Compensation Committee met once in the fiscal year ended December 31, 1999.
The Board of Directors held six meetings during the Company's fiscal year
ended December 31, 1999. No incumbent director attended fewer than 75% of the
aggregate of (1) the total number of meetings of the Board of Directors and (2)
the total number of meetings held by all committees of the Board on which he
served, if any.
The Board of Directors does not have a nominating committee or other
committee to consider nominees to serve on the Board of Directors.
NOMINEES FOR ELECTION AS DIRECTORS
The nominees for election to the Board of Directors of the Company are as
follows:
XXXXXXX X. XXXXXX
Age: 60; Elected Director: 1985; Present Term Ends: 2000 Annual Meeting;
Shares Beneficially Owned: 4,430,129
Xx. Xxxxxx has been Chairman since June, 1999. Xx. Xxxxxx was Chief
Executive Officer of the Company from November, 1985 to June, 1999 and has been
a director since it was formed in November, 1985. Xx. Xxxxxx is a director of
Modine Manufacturing Company.
XXXX TRAIN
Age: 58; Elected Director: 1985; Present Term Ends: 2000 Annual Meeting;
Shares Beneficially Owned: 3,257,683
Mr. Train has been Chief Executive Officer and President since June, 1999.
Mr. Train was Executive Vice President, Secretary and Treasurer of the Company
and has been a director since it was formed in November, 1985. Mr. Train is a
member of the American Institute of Certified Public Accountants.
XXXXX XXXXXXXXX
Age: 53; Elected Director: 1987; Present Term Ends: 2000 Annual Meeting;
Shares Beneficially Owned: 147,078
Since 1981 Xx. Xxxxxxxxx has served as Chief Executive Officer of Xxxxxxxxx
Group, Inc., a privately-held industrial manufacturing company.
XXXXX XXXXX
Age: 60; Elected Director: 1987; Present Term Ends: 2000 Annual Meeting;
Shares Beneficially Owned: 65,086
For the past twelve years Xx. Xxxxx has been an independent consultant in
Tucson, Arizona. Xx. Xxxxx is a director of Modine Manufacturing Company,
Ingersoll International Incorporated, Star Cutter Co., Xxxxxxx Publications Inc.
and General Tool Co. Inc.
XXXXX XXXXX
Age: 51; Elected Director: 1989; Present Term Ends: 2000 Annual Meeting;
Shares Beneficially Owned: 67,863
Since July, 1999 Xx. Xxxxx has been President of Xxxxxxxx & Sons, LLC, a
privately-held manufacturer of commercial signs and displays. From November,
1997 through June, 1999 and from January 1, 1994 through September, 1994, Xx.
Xxxxx was an independent consultant in Milwaukee, Wisconsin. Xx. Xxxxx served as
President of Xxxxxxx-Fabralloy Co. LLC, a fabricator of gas turbine engine
components, from
59
65
October, 1994 through October, 1997. Xx. Xxxxx is a director of Plexus Corp. and
St. Xxxxxxx Capital Corporation.
XXXXX XXXXXX
Age: 55; Elected Director: 1987; Present Term Ends: 2000 Annual Meeting;
Shares Beneficially Owned: 36,010
Xx. Xxxxxx has served as Chief Executive Officer of Fiskars Consumer
Products Group whose parent is Fiskars OY AB of Helsinki, Finland, since 1978.
Fiskars is a manufacturer of consumer cutlery and power electronics.
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
NAME TITLE AGE
---- ----- ---
Xxxxxxx Xxxxxx.................................... Chairman of the Board 60
Xxxx Train........................................ Chief Executive Officer and President 58
Xxxxxxx Xxxxxxx................................... Vice President 59
Xxxx Xxxxxx....................................... Vice President-Finance and Secretary 41
Xxxxxxx Xxxxxxxx.................................. Vice President 55
Xxxxxx Xxxxxxxx................................... Vice President 50
Xxxxxxx Xxxxxxx................................... Vice President 56
Xxxxxx Xxxxxx..................................... Controller and Assistant Secretary 68
The terms of office and past business experiences of Messrs. Xxxxxx and
Train are described above.
XXXXXXX XXXXXXX, Vice President
Xx. Xxxxxxx was appointed a Vice President of the Company in May, 1993 and
is in charge of the Company's Janesville Products unit. Xx. Xxxxxxx has been
with Janesville Products since 1983 and was Vice President of Operations when
Janesville Products was acquired by the Company in January, 1986.
XXXX XXXXXX, Vice President-Finance and Secretary
Xx. Xxxxxx was appointed Vice President-Finance and Secretary in June, 1999
and serves as the Company's Chief Financial Officer. Prior to joining the
Company in June, 1999, Xx. Xxxxxx held various positions at
PricewaterhouseCoopers LLP, most recently as a Director of Audit and Business
Advisory Services. Xx. Xxxxxx is a Certified Public Accountant.
XXXXXXX XXXXXXXX, Vice President
Xx. Xxxxxxxx was appointed a Vice President of the Company in April, 1998
and is in charge of Xxxxxx International. Xx. Xxxxxxxx has been with Xxxxxx
International since 1991 and was Vice-President of Operations until appointment
as President of Xxxxxx International in April, 1997.
XXXXXX XXXXXXXX, Vice President
Xx. Xxxxxxxx was appointed a Vice President of the Company in December,
1994. He has been in charge of the Company's Sackner Products unit since June,
1993, and of its Xxxxx Components unit since September, 1998. Xx. Xxxxxxxx has
been with Sackner Products since 1977 and was Vice President of Operations when
it was acquired by the Company in June, 1991.
60
66
XXXXXXX XXXXXXX, Vice President
Xx. Xxxxxxx has been with the Company since 1987 and was appointed a Vice
President of the Company in February, 1988. He is in charge of the Company's
JacksonLea unit.
XXXXXX XXXXXX, Controller and Assistant Secretary
Xx. Xxxxxx has been the Controller and Assistant Secretary of the Company
since April, 1989. Xx. Xxxxxx has been with the Company since its formation.
EXECUTIVE COMPENSATION
The following table sets forth summary information with respect to all
compensation, including stock options granted and all cash bonuses and accrued
deferred compensation, incurred by the Company during the last three fiscal
years ended December 31, 1999, to or on behalf of the Chief Executive Officer
("CEO") and the four most highly paid executive officers, other than the CEO
(the "named executive officers"):
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
---------------
ANNUAL COMPENSATION SECURITIES
----------------------- UNDERLYING OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) OPTIONS/SARS(#) COMPENSATION($)(2)
--------------------------- ---- --------- ----------- --------------- ------------------
Xxxxxxx Xxxxxx................ 1999 412,500 160,421 0 6,400
Chairman 1998 405,000 175,500 0 6,400
1997 390,000 248,182 0 6,350
Xxxx Train.................... 1999 412,500 160,421 0 6,400
President and Chief 1998 380,000 164,667 0 6,400
Executive Officer 1997 365,000 232,273 0 6,350
Xxxxx Xxxxxxxx................ 1999 203,769 127,360 0 10,400
Vice President(3) 1998 195,423 71,711 0 10,400
1997 184,812 85,324 0 10,350
Xxxxxxx Xxxxxxx............... 1999 164,000 164,000 0 6,400
Vice President 1998 156,000 156,000 5,000 6,240
1997 148,000 93,283 5,000 5,920
Xxxxxx Xxxxxxxx............... 1999 159,000 159,000 0 6,400
Vice President 1998 126,000 126,000 0 5,040
1997 124,385 124,385 5,000 4,975
---------------
(1) Bonus earned upon achievement of performance objectives. See "Compensation
Committee Report."
(2) Company contributions under qualified employees savings and profit sharing
plan.
(3) Xx. Xxxxxxxx retired effective February 8, 2000.
The Company, by policy, provides that each of its officers, including the
named executive officers, is entitled to receive their base salaries for one
year after termination if the Company terminates their employment without cause.
If termination is for cause, which includes gross negligence in the course of
employment and other forms of misconduct, the salary continuation is forfeited.
Directors of the Company, other than salaried employees of the Company,
receive directors' fees of $15,000 per year and $1,000 per meeting. All
directors are reimbursed for reasonable out-of-pocket expenses incurred in
attending meetings of the Board of Directors.
61
67
STOCK OPTIONS
On April 16, 1987, the Company adopted a nonqualified stock option plan,
which was amended on April 25, 1991 (the "Plan"). The Plan provides for the
grant to key employees and outside directors of the Company of options covering
shares of Common Stock. The Plan is administered by the Board of Directors which
has discretion to increase the number of shares covered by the Plan, select
optionees, designate the number of shares to be covered by each option,
establish vesting schedules, specify the amount and type of consideration to be
paid to the Company on exercise, and to specify certain other terms of the
options. The exercise price of options granted under the Plan must be at least
85% of the fair market value of Common Stock on the date of grant. The Company
has reserved 2,687,500 shares of Common Stock for issuance under the Plan
subject to adjustment for certain dilutive events. At December 31, 1999, options
to purchase 1,323,184 shares were outstanding. During fiscal 1999, options were
granted to purchase 27,000 shares of Common Stock at per share exercise prices
of $7.38 to $8.19 and options for 80,720 shares were exercised at exercise
prices of $1.30 to $7.69 per share. A total of 743,048 shares of Common Stock
remain available for future grants under the Plan.
No stock options were granted to the named executive officers during the
fiscal year ended December 31, 1999.
The following table shows certain information regarding stock options held
by the named executive officers as of December 31, 1999:
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION/SAR VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING EXERCISE IN-THE-MONEY
OPTIONS/SARS AT FY-END OPTIONS/SARS AT FY-END
SHARES ACQUIRED (#) ($)*
ON EXERCISE VALUE --------------------------- ---------------------------
NAME (#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ----------- ----------- ------------- ----------- -------------
Xxxxxxx Xxxxxx............ 0 -- -- -- -- --
Xxxx Train................ 0 -- -- -- -- --
Xxxxx Xxxxxxxx............ 0 -- 60,000 -- 19,375 --
Xxxxxxx Xxxxxxx........... 0 -- 41,915 10,000 43,112 --
Xxxxxx Xxxxxxxx........... 0 -- 43,439 5,000 22,111 --
---------------
* Calculated based on the closing sale price of $7.25 per share on December 31,
1999.
COMPENSATION COMMITTEE REPORT
As is the case each year, the Compensation Committee reviewed the proposed
2000 salary and bonuses and considered 1999 stock option grants for the
executive officers at the Compensation Committee meeting on December 16, 1999.
Base salaries for all executive officers are established at levels considered
appropriate considering the scope of each officer's responsibilities. The
proposed salary levels were compared to nationally recognized published
compensation surveys and were in line with or below the average salary levels in
the report for comparable positions of responsibility.
A significant amount of the total compensation of Xx. Xxxxxx, Mr. Train and
each other executive officer is dependent on the performance of the Company.
Presidents of the Company's operating divisions (including Messrs. Xxxxxxxx,
Xxxxxxx and Xxxxxxxx) earn bonuses equal to a stated percentage of their base
salary based on the return on average capital employed for their respective
divisions. The other corporate officers earn bonuses based on the Company's net
income. For competitive reasons, the Compensation Committee has determined not
to specify the target return rates. Executive officers other than Messrs. Xxxxxx
and Train can elect, at the beginning of each fiscal year, to defer 25% of their
bonus into a growth bonus program for three years. They receive interest on
their deferred amounts plus a growth bonus equal to the four year compound
62
68
annual growth in earnings per share (up to a maximum of 20%) calculated from a
base equal to the earnings per share for the fiscal year ended just prior to
election. This growth rate is multiplied by the maximum incentive bonus that
could have been paid for the fiscal year of election. Because of the scope of
their responsibilities as Chairman and Chief Executive Officer, respectively,
and given the substantial equity stake they each have in the Company, the
Compensation Committee separately considers the compensation of Messrs. Xxxxxx
and Train. Their salaries, like those of the other officers, are determined by
reference to published compensation surveys, and their salary levels are in line
with or below such published salary levels for comparable positions of
responsibility. The Compensation Committee believes a significant portion of the
total annual compensation of Messrs. Xxxxxx and Train should be directly tied to
the Company's performance. Accordingly, Messrs. Xxxxxx and Train also earn cash
bonuses based on an increase in earnings per share in the current fiscal year
compared to the prior year. The bonuses for 2000 are earned if earnings per
share exceed $0.86 and increase to a maximum of 100% of base salary if the
Company's earnings per share are 50% above this amount, i.e., $1.29. The
Compensation Committee considers earnings per share a meaningful objective
standard by which to measure the Company's performance and the effectiveness of
the efforts of Messrs. Xxxxxx and Train.
The Compensation Committee customarily grants stock options to the
Company's officers in December of each year. In fixing such stock option grants,
the Compensation Committee considers the current stock holdings of each officer,
their responsibilities and historical and anticipated future contributions to
the Company's performance. The Compensation Committee believes that selective
grants of stock options, along with the performance-based cash compensation
described above, promote an identity of interest between the Company's officers
and its shareholders. The Compensation Committee did not grant any options in
December, 1999 in view of the proposed transaction with Merger Sub and the
Management Shareholders.
The Compensation Committee is of the opinion that the compensation levels
for the named executive officers are reasonable when compared to similar
positions of responsibility and scope in similar industries and that an
appropriate amount of total compensation is based on the performance of the
Company, and therefore provides sufficient incentive for these individuals to
attain improved results in the future.
COMPENSATION COMMITTEE
Xxxxx Xxxxxx, Chairman Xxxxx Xxxxx
Xxxxx Xxxxx Xxxxx Xxxxxxxxx
63
69
STOCK PERFORMANCE
The following chart tracks the value of $100 invested on January 1, 1995,
in Xxxxx Incorporated common stock compared to the change in the Xxxxxxx 2000
Index and the Barclays Global Investors (BGI) Micro Cap Index. The chart shows
that $100 invested five years ago in Xxxxx Incorporated common stock was worth
$80.56 at December 31, 1999, compared to $204.48 for the Xxxxxxx 2000 and
$233.68 for the BGI Micro Cap Index.
[PERFORMANCE CHART]
XXXXX XXXXXXX 0000 XXX MICRO CAP INDEX
----- ------------ -------------------
Jan-95 100.00 100.00 100.00
97.22 103.94 103.43
95.83 105.64 105.29
102.78 107.83 108.29
106.94 109.48 110.54
113.89 114.90 117.78
Jul-95 108.33 121.42 124.86
108.33 123.68 129.46
94.44 125.74 132.60
72.22 120.01 126.16
79.17 125.01 128.97
72.22 128.00 131.57
Jan-96 73.61 127.76 133.39
80.56 131.63 136.96
77.78 134.00 140.52
83.33 141.09 150.33
88.89 146.59 159.91
93.06 140.41 151.81
Jul-96 91.67 128.01 137.10
83.33 135.26 144.18
83.33 140.32 149.48
77.78 137.97 146.71
79.17 143.45 150.51
72.22 146.89 154.52
Jan-97 73.61 149.67 161.25
77.78 145.86 157.16
72.92 138.77 148.93
69.44 138.95 143.50
66.67 154.25 159.09
63.89 160.57 168.25
Jul-97 69.44 167.91 176.66
83.33 171.53 183.89
91.67 183.84 200.70
88.89 175.52 194.01
87.50 174.16 190.70
88.89 177.04 189.75
Jan-98 91.67 174.22 187.73
93.06 187.09 198.81
119.44 194.73 208.43
119.44 195.62 212.36
113.89 184.98 201.50
106.94 185.29 197.98
Jul-98 97.22 170.04 185.25
88.89 136.91 147.92
87.50 147.29 156.58
88.89 153.19 160.89
95.83 161.13 173.05
94.44 170.94 179.32
Jan-99 91.67 173.07 185.76
93.75 158.91 166.24
94.44 161.08 162.68
77.78 175.33 178.34
94.44 177.71 183.01
88.89 185.41 194.25
Jul-99 91.67 180.18 194.06
77.78 173.32 190.36
87.50 173.10 189.83
84.03 173.64 188.23
86.11 183.95 208.22
80.56 204.48 233.68
SECURITY OWNERSHIP
The following table sets forth certain information regarding the beneficial
ownership of shares of Common Stock as of February 15, 2000 by each person known
to the Company to own beneficially more than 5% of the Common Stock, each
director of the Company, the named executive officers, and all directors and
officers as a group.
The Company has determined beneficial ownership in accordance with the
rules of the Commission. Unless otherwise indicated, the persons and entities
included in the table have sole voting and investment power with respect to all
shares beneficially owned, subject to applicable community property laws. Shares
of common stock subject to options that are either currently exercisable or
exercisable within 60 days of February 15, 2000 are treated as outstanding and
beneficially owned by the option holder for the purpose of computing the
percentage ownership of the option holder. However, these shares are not treated
as outstanding for the purpose of computing the percentage ownership of any
other person.
NUMBER OF
SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED PERCENT
------------------------------------ --------- -------
XXXXXXX XXXXXX.............................................. 4,430,129(1) 21.7%
000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
XXXX TRAIN.................................................. 3,257,683(2) 15.9%
000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
64
70
NUMBER OF
SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED PERCENT
------------------------------------ --------- -------
STATE OF WISCONSIN INVESTMENT BOARD......................... 2,080,675(3) 10.2%
X.X. Xxx 0000
Xxxxxxx, XX 00000
DIMENSIONAL FUND ADVISORS INC............................... 1,326,699(4) 6.5%
0000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxx Xxxxxx, XX 00000
UBS AG...................................................... 1,316,689(5) 6.4%
Xxxxxxxxxxxxxx 00
0000, Xxxxxx, Xxxxxxxxxxx
XXXXXX XXXXXXX, INC......................................... 1,102,502(6) 5.4%
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
XXXXX XXXXXXXX.............................................. 88,263(7) (15)
0000 X. 00xx Xxxxxx
Xxxxxxxxx, XX 00000
XXXXXXX XXXXXXX............................................. 96,275(8) (15)
000 Xxxxx Xxxxxxx Xxxx
Xxxxxxx, XX 00000
XXXXX XXXXXXXXX............................................. 147,078(9) (15)
0000 Xxxx Xxxxxxx Xxxx
Xxxxxxxxx, XX 00000
XXXXX XXXXX................................................. 65,086(10) (15)
0000 Xxxxx Xx. Xxxxxxx Xxxxx
Xxxxxx, XX 00000
XXXXXX XXXXXXXX............................................. 67,712(11) (15)
000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
XXXXX XXXXX................................................. 67,863(12) (15)
000 Xxxxx 00xx Xxxxxx
Xxxx Xxxxx, XX 00000
XXXXX XXXXXX................................................ 36,010(13) (15)
000 Xxxxxxx Xxxxx
Xxxxxxx, XX 00000
All directors and officers as a group (thirteen persons).... 8,465,996(14) 40.6%
---------------
(1) Includes 4,430,004 shares that are subject to the Voting Agreement (see
"THE MERGER -- INTERESTS OF CERTAIN PERSONS IN THE MERGER") and 125 shares
that are not subject to the Voting Agreement and that are held by a trust
of which Xx. Xxxxxx is trustee.
(2) Includes 3,256,679 shares that are subject to the Voting Agreement (see
"THE MERGER -- INTERESTS OF CERTAIN PERSONS IN THE MERGER -- VOTING
AGREEMENT") and 1,004 shares that are not subject to the Voting Agreement
and that are held by trusts of which Mr. Train is trustee.
(3) The State of Wisconsin Investment Board has reported to the Company that a
Schedule 13G was filed with the Securities and Exchange Commission
indicating that as of December 31, 1999, it had sole power to vote
2,080,675 shares.
65
71
(4) Dimensional Fund Advisors has reported to the Company that a Schedule 13G
was filed with the Securities and Exchange Commission indicating that as of
December 31, 1999, it had sole power to vote 1,326,699 shares.
(5) UBS AG has reported to the Company that a Schedule 13G was filed with the
Securities and Exchange Commission indicating that as of December 31, 1999,
it had sole power to vote 1,315,689 shares and shared power to dispose of
1,316,689 shares.
(6) Xxxxxx Xxxxxxx, Inc. has reported to the Company that a Schedule 13G was
filed with the Securities and Exchange Commission indicating that as of
December 31, 1999, it had sole power to vote 1,102,502 shares.
(7) Includes options to purchase 60,000 shares.
(8) Includes options to purchase 41,915 shares.
(9) Includes options to purchase 27,813 shares.
(10) Includes options to purchase 27,813 shares.
(11) Includes options to purchase 43,439 shares.
(12) Includes options to purchase 27,813 shares.
(13) Includes options to purchase 27,813 shares.
(14) Includes options to purchase 432,068 shares
(15) Less than 1%.
PROPOSAL 3: RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors has appointed PricewaterhouseCoopers LLP as
independent certified public accountants to examine the financial statements of
the Company for the 2000 fiscal year. Unless otherwise directed, the Proxy will
be voted in favor of the ratification of such appointment.
Although this appointment is not required to be submitted to a vote of
shareholders, the Board of Directors believes it appropriate as a matter of
policy to request that the shareholders ratify the appointment. If shareholder
ratification is not received, the Board of Directors will reconsider the
appointment.
PricewaterhouseCoopers LLP has served as auditors for the Company since its
formation in 1985. A representative of PricewaterhouseCoopers LLP is expected to
be present at the Annual Meeting and will be provided an opportunity to make a
statement if he or she desires and will be available to respond to appropriate
questions.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
If the Merger is completed, the Company will not have any public
shareholders and, therefore, no public participation in any future shareholder
meetings. However, if the Merger is not completed, the Company's public
shareholders will continue to be entitled to attend and participate in meetings
of the Company's shareholders. If the Merger is not completed, any shareholder
who desires to submit a proposal pursuant to Rule 14a-8 of the Exchange Act for
the 2001 Proxy Statement and Annual Meeting should submit the proposal in
writing to Xxxx Train, Chief Executive Officer, Xxxxx Incorporated, 000 Xxxx
Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxx, Xxxxxxxxx 00000. The proposal, together
with any supporting statement, may not exceed 500 words in length. The Company
must receive a proposal by February 7, 2001, in order to consider it for
inclusion in the 2001 Proxy Statement. Proposals submitted other than pursuant
to Rule 14a-8 will be considered untimely if received after April 23, 2001, and
the Company will not be required to present any such proposal at the 2001 Annual
Meeting of Shareholders. If the Board of Directors decides to present a proposal
despite its untimeliness, the people named in the proxies will have the right to
exercise discretionary voting power with respect to such proposal.
66
72
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated balance sheets of the Company and its subsidiaries as of
December 31, 1999, and the related consolidated statements of income,
shareholders' equity, and cash flows for the year ended December 31, 1999
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1999 and incorporated by reference in this Proxy Statement, have been
audited by PricewaterhouseCoopers LLP, independent auditors, in accordance with
auditing standards generally accepted in the United States.
OTHER MATTERS
The Board of Directors of the Company knows of no other matters to be
presented at the Annual Meeting. However, if any other matters properly come
before the Annual Meeting, the persons named in the enclosed proxy will vote on
such matters in accordance with their best judgment.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the Commission. Officers, directors and greater than 10%
shareholders are required by the Exchange Act to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on review of the copies of such forms furnished to the
Company, or written representations that no Forms 5 were required, the Company
believes that during fiscal 1999 all Section 16(a) filing requirements
applicable to its officers, directors and greater than 10% beneficial owners
were complied with.
PERSONS MAKING THE SOLICITATION; EXPENSES OF SOLICITATION
Your Proxies are being solicited by the Company. The cost of this
solicitation of Proxies will be paid by the Company. It is anticipated that the
Proxies will be solicited only by mail, except that solicitation personally or
by telephone may also be made by the Company's regular employees who will
receive no additional compensation for their services in connection with the
solicitation. Arrangements will be made with brokerage houses and other
custodians, nominees and fiduciaries for the forwarding of solicitation material
and annual reports to beneficial owners of stock held by such persons. The
Company will reimburse such parties for their expenses in so doing.
ANNUAL REPORT
Copies of the Company's 1999 Annual Report and the Annual Report on Form
10-K for the year ended December 31, 1999 accompany this Proxy Statement.
Additional copies of the Annual Report on Form 10-K for the year ended December
31, 1999 will be provided without charge on written request of any shareholder
whose Proxy is being solicited by the Board of Directors. The written request
should be directed to: Corporate Secretary, Xxxxx Incorporated, 000 Xxxx
Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxx, Xxxxxxxxx, 00000.
PROVISIONS FOR UNAFFILIATED SECURITY HOLDERS
Neither the Company, Saw Mill, Parent, Merger Sub nor the Management
Shareholders have made any provision to grant unaffiliated security holders
access to the corporate files of such persons or to obtain counsel or appraisal
services at the expense of such persons; however, shareholders of the Company
are entitled to inspect the books and records of the Company as provided by the
Company's by-laws and the WBCL.
67
73
ANNEX A
AGREEMENT AND PLAN OF MERGER
AMONG
SAW MILL CAPITAL FUND II, L.P.,
CALENDAR HOLDINGS, INC.,
CALENDAR ACQUISITION CORP.,
XXXXX INCORPORATED
AND
THE SHAREHOLDERS OF THE COMPANY NAMED HEREIN
JANUARY 30, 2000
74
TABLE OF CONTENTS
PAGE
----
ARTICLE I
THE MERGER AND THE OTHER TRANSACTIONS..................... 2
SECTION 1.01 Contribution Agreement...................... 2
SECTION 1.02 Debt and Preferred Equity Financing......... 2
SECTION 1.03 The Merger.................................. 2
SECTION 1.04 Effective Time; Closing..................... 2
SECTION 1.05 Effect of the Merger........................ 2
SECTION 1.06 Articles of Incorporation; By-laws.......... 3
SECTION 1.07 Directors and Officers...................... 3
SECTION 1.08 Additional Actions.......................... 3
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES;
DEPOSIT................................................ 3
SECTION 2.01 Effect on Capital Stock and Company Stock
Options................................................ 3
SECTION 2.02 Exchange of Certificates.................... 4
SECTION 2.03 Company Stock Options; Plans................ 5
SECTION 2.04 Shares of Dissenting Shareholders........... 6
SECTION 2.05 Adjustment of Merger Consideration and
Option Consideration................................... 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............. 7
SECTION 3.01 Organization and Qualification;
Subsidiaries........................................... 7
SECTION 3.02 Articles of Incorporation and By-laws....... 8
SECTION 3.03 Capitalization.............................. 8
SECTION 3.04 Authority Relative to this Agreement........ 8
SECTION 3.05 No Conflict; Required Filings and
Consents............................................... 9
SECTION 3.06 SEC Filings; Financial Statements;
Undisclosed Liabilities................................ 9
SECTION 3.07 Absence of Certain Changes or Events........ 10
SECTION 3.08 Absence of Litigation....................... 10
SECTION 3.09 Shareholder Vote Required................... 11
SECTION 3.10 Opinion of Financial Advisor................ 11
SECTION 3.11 Brokers..................................... 11
SECTION 3.12 Company Action; State Takeover Statutes..... 11
SECTION 3.13 Information Supplied........................ 11
SECTION 3.14 Compliance with Laws........................ 11
SECTION 3.15 Tax Matters................................. 11
SECTION 3.16 Change of Control Provisions................ 12
SECTION 3.17 Transactions with Affiliates................ 12
SECTION 3.18 Foreign Corrupt Practices Act............... 12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SAW MILL, PARENT AND
MERGER SUB............................................. 12
SECTION 4.01 Organization and Qualification;
Subsidiaries........................................... 12
SECTION 4.02 Authority Relative to this Agreement........ 12
SECTION 4.03 No Conflict; Required Filings and
Consents............................................... 13
SECTION 4.04 Interim Operations of Parent and Merger
Sub.................................................... 13
SECTION 4.05 Information Supplied........................ 13
SECTION 4.06 Brokers..................................... 13
SECTION 4.07 Financing................................... 14
SECTION 4.08 Capitalization of Merger Sub................ 14
i
75
PAGE
----
SECTION 4.09 Solvency.................................... 14
SECTION 4.10 Pro Formas.................................. 14
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS........ 15
SECTION 5.01 No Conflict; Required Filings and
Consents............................................... 15
SECTION 5.02 Ownership of Owned Shares................... 15
SECTION 5.03 Authority Relative to this Agreement........ 15
SECTION 5.04 No Finder's Fees............................ 15
SECTION 5.05 Transactions with Shareholders.............. 15
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER.................... 16
SECTION 6.01 Conduct of Business by the Company Pending
the Merger............................................. 16
ARTICLE VII
ADDITIONAL AGREEMENTS..................................... 17
SECTION 7.01 Shareholders' Meeting....................... 17
SECTION 7.02 Preparation of Proxy Statement.............. 18
SECTION 7.03 Appropriate Action; Consents; Filings;
Further Assurances..................................... 18
SECTION 7.04 Confidentiality; Access to Information...... 19
SECTION 7.05 Fiduciary Responsibilities.................. 20
SECTION 7.06 Indemnification and Insurance............... 22
SECTION 7.07 Notification of Certain Matters............. 23
SECTION 7.08 Public Announcements........................ 23
SECTION 7.09 Cooperation with Financing.................. 24
SECTION 7.10 Shareholder Approval........................ 24
SECTION 7.11 Exchange Act and NASDAQ Filings............. 24
SECTION 7.12 Solvency Opinion............................ 24
SECTION 7.13 State Takeover Laws......................... 24
SECTION 7.14 Capital Stock of Merger Sub and Parent...... 24
SECTION 7.15 Debt and Preferred Equity Financing......... 25
SECTION 7.16 Equity Securities of the Company............ 25
ARTICLE VIII
CONDITIONS TO THE MERGER.................................. 25
SECTION 8.01 Conditions to the Obligations of Each
Party.................................................. 25
SECTION 8.02 Conditions to the Obligations of Merger
Sub.................................................... 25
SECTION 8.03 Conditions to the Obligations of the Company
and the Shareholders................................... 26
SECTION 8.04 Conditions to the Obligations of Saw Mill
and Parent............................................. 27
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER......................... 27
SECTION 9.01 Termination................................. 27
SECTION 9.02 Method of Termination; Effect of
Termination............................................ 28
SECTION 9.03 Fees and Expenses........................... 28
SECTION 9.04 Amendment................................... 30
SECTION 9.05 Waiver...................................... 30
ARTICLE X
GENERAL PROVISIONS........................................ 30
SECTION 10.01 Non-Survival of Representations and
Warranties............................................. 30
SECTION 10.02 Notices.................................... 30
SECTION 10.03 Certain Definitions........................ 31
SECTION 10.04 Accounting Terms........................... 33
SECTION 10.05 Severability............................... 33
ii
76
PAGE
----
SECTION 10.06 Entire Agreement; Assignment............... 33
SECTION 10.07 Parties in Interest........................ 33
SECTION 10.08 Specific Performance....................... 33
SECTION 10.09 Governing Law.............................. 33
SECTION 10.10 Headings................................... 33
SECTION 10.11 Counterparts............................... 33
SECTION 10.12 Construction............................... 33
SECTION 10.13 Recitals................................... 34
SECTION 10.14 Knowledge of Saw Mill, Parent and Merger
Sub.................................................... 34
EXHIBITS:
Exhibit A -- Form of Contribution Agreement
Exhibit B -- Pro Formas
Exhibit C -- Owned Shares
Exhibit D -- Permitted Indebtedness for Borrowed Money
Exhibit E -- Required Consents
Exhibit F -- Agreements with Shareholder Related Parties
Exhibit G-1 -- Senior Debt Commitment Letter
Exhibit G-2 -- Subordinated Debt Commitment Letter
Exhibit G-3 -- Preferred Equity Commitment Letter
Exhibit H -- Form of Legal Opinion
DISCLOSURE SCHEDULES:
Company Disclosure Schedule
iii
77
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of January 30, 2000 (this
"Agreement") among Saw Mill Capital Fund II, L.P., a Delaware limited
partnership ("Saw Mill"), Calendar Holdings, Inc., a Delaware corporation and a
wholly-owned subsidiary of Saw Mill ("Parent"), Calendar Acquisition Corp., a
Wisconsin corporation and a wholly-owned subsidiary of Parent, ("Merger Sub"),
Xxxxx Incorporated, a Wisconsin corporation (the "Company"), Xxxxxxx X. Xxxxxx
("Chairman"), and Xxxx Train ("Chief Executive Officer", and together with the
Chairman, the "Shareholders"). Capitalized terms used herein but not otherwise
defined shall have the meanings set forth in Section 10.03.
WHEREAS, the Board of Directors of the Company formed a special committee
of the Board of Directors consisting entirely of outside, independent members of
the Company's Board of Directors (the "Special Committee");
WHEREAS, the Special Committee has engaged independent legal and financial
advisors (the "Independent Advisors"), and together with the Independent
Advisors, has explored various strategic alternatives for the Company;
WHEREAS, after exploring the various available strategic alternatives for
the Company and after consultation with the Independent Advisors, the Special
Committee has determined that the Acquisition is fair to, and is in the best
interest of the Company and the holders of shares of Company Common Stock (as
such term is defined in Section 3.03), and the Board of Directors of the Company
has adopted the recommendation of the Special Committee;
WHEREAS, immediately prior to the Closing (as defined below), Parent,
Merger Sub, Saw Mill and the Shareholders shall (i) execute and deliver a
contribution agreement substantially in the form attached hereto as Exhibit A
(the "Contribution Agreement") and (ii) consummate the transactions contemplated
thereby (the "Pre-Merger Contributions");
WHEREAS, pursuant to the terms of the Contribution Agreement, immediately
prior to the Closing, the Shareholders are contributing 2,552,817 shares of
Company Common Stock at an agreed upon value per share of Company Common Stock
as set forth in the Contribution Agreement and, pursuant to the terms of this
Agreement, at the Closing, the Shareholders and certain of the Shareholders'
related parties will be entitled to receive $11.25 per share of Company Common
Stock (other than any Contributed Company Common Shares (as such term is defined
in the Contribution Agreement)); accordingly, in connection with the
consummation of the transactions contemplated by this Agreement, the
Shareholders and such related parties of the Shareholders shall be entitled to
receive aggregate consideration equal to approximately $10.896 per share of
Company Common Stock owned by them;
WHEREAS, the respective Boards of Directors of the Company and Merger Sub
have approved and declared advisable a merger (the "Merger") of Merger Sub with
and into the Company upon the terms and subject to the conditions set forth in
this Agreement, with the Company surviving the Merger, and the Board of
Directors of the Company (acting upon the recommendation of the Special
Committee) has resolved to recommend, subject to its obligations under
applicable law, that the holders of shares of Company Common Stock approve the
Acquisition upon the terms of this Agreement;
WHEREAS, the Boards of Directors of Merger Sub and Company have determined
that the Merger is fair to and in the best interests of their respective
shareholders;
WHEREAS, the Merger is subject to the approval by the requisite holders of
the outstanding shares of Company Common Stock and satisfaction of certain other
conditions described in this Agreement;
WHEREAS, the Surviving Corporation and/or Parent, as the case may be,
shall, contemporaneously with the Merger, obtain the debt and preferred equity
financing (the "Debt and Preferred Equity Financing") described in the
Commitment Letters (as defined below) to fund a portion of the Merger
Consideration (as defined below); and
1
78
WHEREAS, it is intended that the transactions contemplated by this
Agreement be recorded as a purchase of the Company for financial reporting
purposes.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
ARTICLE I
THE MERGER AND THE OTHER TRANSACTIONS
SECTION 1.01 Contribution Agreement. Subject to the conditions set forth in
this Agreement, (i) Parent, Merger Sub, Saw Mill and the Shareholders hereby
agree to execute and deliver the Contribution Agreement as of immediately prior
to the Closing, (ii) Saw Mill and Parent hereby agree to consummate the Saw Mill
Contribution (as such term is defined in the Contribution Agreement) as of
immediately prior to the Closing, (iii) Chairman and Parent hereby agree to
consummate the Chairman Contribution (as such term is defined in the
Contribution Agreement) as of immediately prior to the Closing, (iv) Chief
Executive Officer and Parent hereby agree to consummate the CEO Contribution (as
such term is defined in the Contribution Agreement) as of immediately prior to
the Closing and (v) immediately after the consummation of the Saw Mill
Contribution, the Chairman Contribution and the CEO Contribution, Parent and
Merger Sub hereby agree to consummate the Parent Contribution (as such term is
defined in the Contribution Agreement).
SECTION 1.02 Debt and Preferred Equity Financing. Contemporaneously with
the Merger, the Surviving Corporation and/or Parent, as the case may be, will
consummate the Debt and Preferred Equity Financing. Upon receipt, Parent hereby
agrees to immediately contribute the net proceeds of any Debt and Preferred
Equity Financing received by Parent to Merger Sub (if received by Parent prior
to the Merger) or to the Surviving Corporation (if received by Parent
contemporaneously with the Merger).
SECTION 1.03 The Merger. Upon the terms and subject to the conditions set
forth in Article VIII, and in accordance with Section 180.1101 of the Wisconsin
Business Corporation Law ("Wisconsin Law"), at the Effective Time (as defined
below), Merger Sub shall be merged with and into the Company. As a result of the
Merger, the separate corporate existence of Merger Sub shall cease, and the
Company shall be the surviving corporation of the Merger (the "Surviving
Corporation").
SECTION 1.04 Effective Time; Closing. As promptly as practicable, and in no
event later than five business days after the satisfaction or, if permissible,
waiver of the conditions set forth in Article VIII (other than those conditions
that can only be satisfied on the Closing Date (as defined below)), including,
without limitation, the approval of the Merger by an affirmative vote of the
requisite holders of the outstanding shares of the Company Common Stock, the
parties hereto shall cause the Merger to be consummated by filing articles of
merger (the "Articles of Merger") with the Department of Financial Institutions
of the State of Wisconsin, in such form as is required by, and executed in
accordance with, Section 180.1105 of Wisconsin Law. The term "Effective Time"
means the date and time of the filing of the Articles of Merger with the
Department of Financial Institutions of the State of Wisconsin (or such later
time as may be agreed by the parties hereto and specified in the Articles of
Merger). Immediately prior to the filing of the Articles of Merger, a closing
(the "Closing") will be held at the offices of Xxxxxxxx & Xxxxx, Citicorp
Center, 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (or such other place as
the parties may agree) (the date on which such closing takes place being the
"Closing Date").
SECTION 1.05 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of Wisconsin Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the property, rights, immunities, privileges, powers and
franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, without further act or deed, and all debts, liabilities,
obligations, restrictions, disabilities and duties of each of the Company and
Merger Sub shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Corporation and be enforceable against
the Surviving Corporation to the same extent as if the same had been contracted
by the Surviving Corporation.
2
79
SECTION 1.06 Articles of Incorporation; By-laws.
(a) From and after the Effective Time, subject to the terms of Section
7.06, the Articles of Incorporation of the Surviving Corporation shall be
the Articles of Incorporation of Merger Sub as in effect immediately prior
to the Effective Time until thereafter amended in accordance with its terms
and as provided by applicable Law (as herein defined) and this Agreement,
except that, as of the Effective Time, Article I of such Articles of
Incorporation shall be amended to read as follows: "The name of the
Corporation is "Xxxxx Incorporated".
(b) From and after the Effective Time, subject to the terms of Section
7.06, the By-laws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the By-laws of the Surviving Corporation until
thereafter amended as provided by applicable Law, the Articles of
Incorporation of the Surviving Corporation and such By-laws.
SECTION 1.07 Directors and Officers.
(a) Directors. From and after the Effective Time, the directors of
Merger Sub immediately prior to the Effective Time shall be the directors
of the Surviving Corporation until the earlier of their resignation or
removal or until their respective successors are duly elected and
qualified, as the case may be, in accordance with the Articles of
Incorporation and By-laws of the Surviving Corporation and applicable Law.
(b) Officers. From and after the Effective Time, the officers of the
Company immediately prior to the Effective Time shall be the officers of
the Surviving Corporation and shall hold office until the earlier of their
resignation or removal or until their respective successors are duly
elected and qualified, as the case may be, in accordance with the Articles
of Incorporation and By-laws of the Surviving Corporation and applicable
Law.
SECTION 1.08 Additional Actions. If, at any time at or after the Effective
Time, the Surviving Corporation shall consider or be advised that any further
deeds, assignments or assurances in law or any other acts are necessary or
desirable to (a) vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation its rights, title or interest in, to or under any of the
rights, properties or assets of the Company or its subsidiaries, or (b)
otherwise carry out the provisions of this Agreement, the Company and its
officers and directors shall be deemed to have granted to the Surviving
Corporation an irrevocable power of attorney to execute and deliver all such
deeds, assignments or assurances in law and to take all acts necessary, proper
or desirable to vest, perfect or confirm title to and possession of such rights,
properties or assets in the Surviving Corporation and otherwise to carry out the
provisions of this Agreement, and the officers and directors of the Surviving
Corporation are authorized in the name of the Company or otherwise to take any
and all such action.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES; DEPOSIT
SECTION 2.01 Effect on Capital Stock and Company Stock Options. As of the
Effective Time, by virtue of the Merger and without any action on the part of
the holder of any Company Common Stock or any other holder of capital stock of
the Company or any shares of capital stock of Merger Sub:
(a) Cancellation of Company Owned Stock. All shares of Company Common
Stock that are held (i) in the treasury of the Company, (ii) by any wholly
owned subsidiary of the Company or (iii) by Merger Sub (including the
Contributed Company Common Shares (as such term is defined in the
Contribution Agreement)) shall be canceled and retired and shall cease to
exist without any consideration payable therefor.
(b) Conversion of Company Common Stock. Each share of Company Common
Stock issued and outstanding immediately prior to Effective Time (other
than Dissenting Shares (as herein defined) and shares of the Company Common
Stock referred to in Section 2.01(a) (including the Contributed Company
Common Shares (as such term is defined in the Contribution Agreement))
shall be converted
3
80
into the right to receive from the Surviving Corporation in cash $11.25 per
share of Company Common Stock (the "Merger Consideration") without interest
thereon upon surrender of the certificate previously representing such
share of Company Common Stock. As of the Effective Time, all such shares of
Company Common Stock shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and each holder of a
certificate representing any such share of Company Common Stock shall cease
to have any rights with respect thereto, except the right to receive the
cash into which their shares of Company Common Stock have been converted by
the Merger as provided in this Section 2.01(b).
(c) Conversion of Common Stock of Merger Sub. Each share of Merger
Sub's common stock issued and outstanding immediately prior to the
Effective Time shall be converted into and become that certain number of
fully paid and nonassessable (except as set forth in Section 180.0622 of
Wisconsin Law as judicially interpreted) shares of Common Stock, par value
$0.01, of the Surviving Corporation (the "Surviving Corporation Common
Stock") equal to the Conversion Number (as herein defined) upon the
surrender of the certificates previously representing such share(s) of
Merger Sub's common stock. For purposes of this Agreement, the "Conversion
Number" shall equal the sum of (i) the number of Contributed Company Common
Shares (as such term is defined in the Contribution Agreement) plus (ii)
(x) the amount of Saw Mill Contributed Cash (as such term is defined in the
Contribution Agreement) plus 100 divided by (y) the per share Merger
Consideration.
(d) Conversion of Company Stock Options. Each Company Stock Option (as
defined in Section 2.03(a) hereof), issued and outstanding immediately
prior to the Effective Time shall be converted into the right to receive
from the Surviving Corporation the Option Consideration (as defined in
Section 2.03(a) hereof) without interest thereon. As of the Effective Time,
all such Company Stock Options shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
holder of any such Company Stock Option shall cease to have any rights with
respect thereto, except the right to receive the cash into which their
Company Stock Options have been converted by the Merger as provided in this
Section 2.01(d) and Section 2.03(a).
SECTION 2.02 Exchange of Certificates.
(a) Paying Agent. Prior to the Effective Time, Merger Sub shall
designate a bank or trust company, reasonably satisfactory to the Company,
to act as paying agent in the Merger (the "Paying Agent").
(b) At the Closing, Merger Sub or Surviving Corporation shall deliver:
(i) to the Persons who shall have surrendered to the Merger Sub at
the Closing the certificates which, immediately prior to the Effective
Time, represented shares of outstanding common stock of Merger Sub, the
securities of the Surviving Corporation into which the shares of common
stock of Merger Sub represented by such certificates have been converted
pursuant to the provisions of this Article II; and
(ii) to the Paying Agent, for the benefit of the holders of Company
Common Stock entitled to receive Merger Consideration, the amount of
Merger Consideration which such holders of Company Common Stock are
entitled to receive pursuant to the provisions of this Article II.
(c) Exchange Procedure. As soon as reasonably practicable after the
Effective Time, the Surviving Corporation shall mail or caused to be mailed
to each holder of record of any certificate, which as of immediately prior
to the Effective Time represented shares of Company Common Stock and as of
the Effective Time represents the right to receive Merger Consideration
(all such certificates, the "Certificates"), (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the
Certificates to the address specified therein) and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for the
applicable Merger Consideration. Upon surrender of a Certificate for
cancellation to the Paying Agent, together with such letter of transmittal,
duly executed, and such other documents as may reasonably be required by
the Paying Agent, the holder of such Certificate shall be entitled to
receive in exchange therefor from
4
81
the Paying Agent the amount of cash into which the shares of Company Common
Stock theretofore represented by such Certificate shall have been converted
pursuant to Section 2.01, and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of the
shares of Company Common Stock that is not registered in the transfer
records of the Company, payment may be made to a person other than the
person in whose name the Certificate so surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay any transfer or
other taxes required by reason of the payment to a person other than the
registered holder of such Certificate or establish to the satisfaction of
the Surviving Corporation that such tax has been paid or is not applicable.
Until surrendered as contemplated by this Section 2.02, each Certificate
shall be deemed at any time after the Effective Time to represent only the
right to receive upon such surrender the amount of cash, without interest,
into which the shares of Company Common Stock theretofore represented by
such Certificate shall have been converted pursuant to Section 2.01. No
interest will be paid or will accrue on the cash payable upon the surrender
of any Certificate. In the event any Certificate shall have been lost,
stolen or destroyed, upon making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed, the Surviving
Corporation will pay in exchange for such lost, stolen or destroyed
Certificate, the amount of cash into which the shares of Company Common
Stock theretofore represented by such Certificate have been converted
pursuant to Section 2.01, except that when authorizing such payment, the
Board of Directors of the Surviving Corporation, may, in its discretion and
as a condition precedent to such payment, require the owner of such lost,
stolen or destroyed Certificate to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
the Surviving Corporation or the Paying Agent with respect to such
Certificate.
(d) Withholding. Merger Sub, Surviving Corporation and Paying Agent
shall be entitled to deduct and withhold from the Merger Consideration
otherwise payable or issuable pursuant to this Agreement to any holder of
Company Common Stock such amount as Merger Sub, Surviving Corporation or
Paying Agent is required to deduct and withhold with respect to such
payment or issuance under the Code, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld, such withheld
amounts shall be treated for all purposes of this Agreement as having been
paid to the holder of Company Common Stock in respect of which such
deduction and withholding was made.
(e) No Further Ownership Rights in Company Common Stock. All cash paid
upon the surrender of Certificates in accordance with the terms of this
Article II shall be deemed to have been paid in full satisfaction of all
rights pertaining to the shares of Company Common Stock theretofore
represented by such Certificates. At the Effective Time, the stock transfer
books of the Company shall be closed, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Paying Agent
for any reason, they shall be canceled and exchanged as provided in this
Article II.
(f) No Liability. At any time following the expiration of six months
after the Effective Time, the Surviving Corporation shall, in its sole
discretion, be entitled to require the Paying Agent to deliver to it any
funds (including any interest received with respect thereto) which had been
made available to the Paying Agent and which have not been disbursed to
holders of Certificates, and thereafter such holders shall be entitled to
look to the Surviving Corporation (subject to any applicable abandoned
property, escheat or similar law) only as general creditors thereof with
respect to the Merger Consideration payable upon due surrender of their
Certificates, without any interest thereon. Notwithstanding the foregoing,
none of Merger Sub, the Shareholders, the Company, the Surviving
Corporation or the Paying Agent shall be liable to any person in respect of
any cash delivered to a public official or entity pursuant to any
applicable abandoned property, escheat or similar law.
SECTION 2.03 Company Stock Options; Plans.
(a) Except as set forth in this Section 2.03 and except to the extent
that Merger Sub and the holder of any option otherwise agree, the Surviving
Corporation shall promptly after the Effective Time pay to
5
82
each holder of an outstanding option to purchase Company Common Stock (a
"Company Stock Option") issued pursuant to the Company's 1987 Nonqualified
Stock Option Plan dated April 16, 1987, as amended and restated January 30,
1989 (the "Company Stock Option Plan"), in settlement of each such Company
Stock Option, whether or not exercisable or vested, an amount of cash in
respect thereof equal to the product of (x) the excess, if any, of the
Merger Consideration over the exercise price of each such Company Stock
Option, and (y) the number of shares of Company Common Stock subject to the
Company Stock Option immediately prior to its settlement (the "Option
Consideration") (such payment to be net of applicable withholding taxes).
Upon receipt of the Option Consideration, the Company Stock Option shall be
canceled. The surrender of a Company Stock Option to the Company in
exchange for the Option Consideration shall be deemed a release of all
rights the holder had or may have had in respect of that Company Stock
Option.
(b) Prior to the Effective Time, the Company shall use its
commercially reasonable best efforts to obtain any consents from holders of
the Company Stock Options and make any amendments to the terms of the
Company Stock Option Plans or arrangements that are necessary to give
effect to the transactions contemplated by Section 2.01(d) and this Section
2.03.
(c) Except as may otherwise be agreed by Merger Sub and the Company,
the Company Stock Option Plan shall terminate as of the Effective Time, and
no holder of Company Stock Options or any participant in the Company Stock
Option Plan shall have any rights thereunder, including any rights to
acquire any equity securities of the Company, the Surviving Corporation or
any subsidiary thereof, other than to receive Option Consideration payable
pursuant to Section 2.03(a).
(d) Except as may otherwise be agreed by Merger Sub and the Company,
all other plans, programs or arrangements providing for the issuance or
grant of any other interest in respect of the capital stock of the Company
or any of its subsidiaries shall terminate as of the Effective Time, and no
participant in any such plans, programs or arrangements shall have any
rights thereunder to acquire any equity securities of the Company, the
Surviving Corporation or any subsidiary thereof.
SECTION 2.04 Shares of Dissenting Shareholders.
(a) Notwithstanding anything in this Agreement to the contrary, any
shares of Company Common Stock that are issued and outstanding as of the
Effective Time and that are held by a holder who has not voted in favor of
the Merger or consented thereto in writing and who has properly exercised
his or her appraisal rights (the "Dissenting Shares") under Wisconsin Law,
shall not be converted into the right to receive the Merger Consideration,
unless and until such holder shall have failed to perfect, or shall have
effectively withdrawn or lost, his or her right to dissent from the Merger
under Wisconsin Law and to receive such consideration as may be determined
to be due with respect to such Dissenting Shares pursuant to and subject to
the requirements of Wisconsin Law. If, after the Effective Time, any such
holder shall have failed to perfect or shall have effectively withdrawn or
lost such right, each share of such holder's Company Common Stock shall
thereupon be deemed to have been converted into and to have become, as of
the Effective Time, the right to receive, without interest or dividends
thereon, the consideration provided for in this Article II.
(b) The Company shall give Merger Sub and Saw Mill (i) prompt notice
of any notices or demands for appraisal or payment for shares of Company
Common Stock received by the Company and (ii) the opportunity to
participate in all negotiations and proceedings with respect to any such
demands or notices. Any decision to settle, offer to settle, make any
payments or otherwise negotiate, with respect to any such demands, shall be
mutually agreeable to Saw Mill and the Company.
(c) Dissenting Shares, if any, after payments of fair value in respect
thereto have been made to the holders thereof pursuant to Wisconsin Law,
shall be canceled.
SECTION 2.05 Adjustment of Merger Consideration and Option
Consideration. In the event that, subsequent to the date of this Agreement but
prior to the Effective Time, the outstanding shares of Company Common Stock
shall have been changed into a different number of shares of a different class
as a result of a stock split, reverse stock split, stock dividend, subdivision,
reclassification, split, combination, exchange,
6
83
recapitalization or other similar transaction, the Merger Consideration and the
Option Consideration shall be appropriately adjusted. The Merger Consideration
and the Option Consideration have been calculated based upon the representations
and warranties made by the Company in Section 3.03. The provisions of this
Section 2.05 shall not, in any event, derogate from the representation and
warranty set forth in Section 3.03.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
For the avoidance of doubt and notwithstanding anything to the contrary set
forth herein, all representations and warranties made by the Company herein are
made solely by the Company and not by any member of the Special Committee in his
individual capacity. No member of the Special Committee shall have any liability
for any breach of any representation or warranty of the Company set forth
herein.
Except as disclosed in a separate disclosure schedule referring to the
Sections contained in this Agreement, which is attached hereto (the "Company
Disclosure Schedule") (any matter disclosed with respect to a particular Section
on the Company Disclosure Schedule shall be deemed to be disclosed with respect
to each other Section of this Article III to which it relates), the Company
hereby represents and warrants to Merger Sub that:
SECTION 3.01 Organization and Qualification; Subsidiaries.
(a) Each of the Company and its subsidiaries is duly formed and
organized, validly existing and in good standing (or the equivalent
thereof) under the laws of the jurisdiction of its incorporation or
formation, as applicable, and has the requisite power and authority and all
necessary and material governmental approvals to own, lease and operate the
properties and assets it currently owns, operates or holds under lease and
to carry on its business as it is now being conducted. Each of the Company
and its subsidiaries is duly qualified or licensed as a foreign corporation
or other entity to do business, and is in good standing (or the equivalent
thereof), in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such
qualification or licensing necessary, except for such failures to be so
qualified or licensed and in good standing that would not, individually or
in the aggregate, have a Company Material Adverse Effect. The term "Company
Material Adverse Effect" means, when used in connection with the Company
and its subsidiaries, any change, effect, event, occurrence, condition or
development that is or is reasonably likely to be materially adverse to (i)
the business, assets, liabilities, properties, results of operations or
condition (financial or otherwise) of the Company and its subsidiaries,
taken as a whole (excluding any change or effect resulting from general
economic conditions or relating to those industries specific to the
business of the Company) or (ii) the ability of the Company to perform its
obligations under this Agreement, except for such changes, effects, events,
occurrences, conditions or developments directly resulting from the
Company's performance of its obligations under this Agreement.
(b) Except as set forth in Section 3.01 of the Company Disclosure
Schedule, the Company does not directly or indirectly own any equity or
similar interest in, or any interest convertible into or exchangeable or
exercisable for any equity or similar interest in, any corporation,
partnership, limited liability company, joint venture or other business
association or entity. Section 3.01 of the Company Disclosure Schedule sets
forth the name, owner, jurisdiction of organization and type and
percentages of outstanding equity securities owned, directly or indirectly,
by the Company, with respect to each corporation, partnership, limited
liability company, joint venture or other business association or entity of
which the Company owns directly or indirectly, any equity or equity related
securities. Except as set forth in Section 3.01 of the Company Disclosure
Schedule, all outstanding shares of stock or other equity securities of
each subsidiary of the Company have been duly authorized and validly issued
and are fully paid and non-assessable, and are owned, directly or
indirectly, by the Company free and clear of any Liens, and there are no
outstanding options, warrants, convertible securities, calls, rights,
commitments, preemptive rights or agreements or instruments or
understandings of any character, obligating any subsidiary of the Company
to issue, deliver or sell, or cause to be issued, delivered or sold,
contingently or otherwise, additional shares of such subsidiary or any
securities or obligations convertible or exchangeable for such
7
84
shares or to grant, extend or enter into any such option, warrant,
convertible security, call, right, commitment, preemptive right or
agreement.
SECTION 3.02 Articles of Incorporation and By-laws. The Company has
heretofore made available to Merger Sub complete and correct copies of its
Articles of Incorporation and Bylaws, each as amended to the date hereof. Such
Articles of Incorporation and By-laws are in full force and effect and have not
been modified or amended in any way. The Company is not in any material
violation of any provision of its Articles of Incorporation or By-laws.
SECTION 3.03 Capitalization. The authorized capital stock of the Company
consists of 30,000,000 shares of Common Stock par value $0.10 per share
("Company Common Stock"). As of the date hereof, there are 20,435,353 shares of
Company Common Stock issued and outstanding. Section 3.03 of the Company
Disclosure Schedule identifies and describes the number of shares of Company
Common Stock to be received upon exercise or conversion and the exercise or
conversion price of each outstanding Company Stock Option (the "Company Common
Stock Equivalents") as well as the aggregate number of shares of Company Common
Stock and the aggregate exercise price for all of the outstanding Company Common
Stock Equivalents. All of the Company Common Stock Equivalents will be fully
vested upon a change of control of the Company. Except for the Company Common
Stock Equivalents or as contemplated by this Agreement, there are no existing
options, warrants, convertible securities, calls, subscriptions, or other rights
or other agreements or commitments obligating the Company to issue, transfer or
sell, or caused to be issued, transferred or sold, contingently or otherwise,
any shares of capital stock of the Company or any other securities convertible
into or evidencing the right to subscribe for any such shares. Except as
identified and described in Section 3.03 of the Company Disclosure Schedule,
there are no outstanding stock appreciation rights or similar phantom equity
securities with respect to the capital stock of the Company. All issued and
outstanding shares of Company Common Stock are duly authorized and validly
issued, fully paid, non-assessable and free of preemptive rights with respect
thereto, except as set forth in Section 180.0622 of Wisconsin Law as judicially
interpreted. To the Company's Knowledge, other than the Voting Agreement, there
are no voting trusts or shareholder agreements to which the Company is a party
with respect to the voting of the capital stock of the Company and, to the
Company's Knowledge, there are no such agreements among its shareholders other
than those listed in Section 3.03 of the Company Disclosure Schedule. To the
Company's Knowledge, other than the Voting Agreement, there are no irrevocable
proxies with respect to shares of capital stock of the Company or any Subsidiary
that cover more than 2% of the Company's outstanding capital stock. A list of
the holders of record of shares of the Company's capital stock and their
respective state of residency as of a recent date is set forth in Section 3.03
of the Company Disclosure Schedule.
SECTION 3.04 Authority Relative to this Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the Acquisition. The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the Acquisition have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
Acquisition (other than, with respect to the Merger, the adoption of this
Agreement by the holders of the shares of Company Common Stock and the filing
and recordation of appropriate merger documents as required by Wisconsin Law).
This Agreement has been duly and validly executed and delivered by the Company
and, assuming the due authorization, execution and delivery by Merger Sub,
Parent, Saw Mill and the Shareholders, constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles.
8
85
SECTION 3.05 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Subject to the approval of the Company's shareholders and
compliance with applicable provisions of Wisconsin Law or any other
applicable Law, the execution and delivery of this Agreement by the Company
does not, and the consummation by the Company of the Acquisition will not
(i) conflict with or violate the Articles of Incorporation or By-laws of
the Company or any of its subsidiaries, (ii) to the Company's Knowledge,
conflict with or violate any domestic (federal, state or local) or foreign
law, rule, regulation, order, judgment or decree (collectively, "Laws")
applicable to the Company or its subsidiaries or by which any of their
respective properties or assets is bound or affected or (iii) to the
Company's Knowledge, result in a violation or breach of or constitute a
default (or an event which with notice or lapse of time or both would
become a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a
Lien on any property or asset of the Company or its subsidiaries pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Company or its subsidiaries is a party or by which the Company, its
subsidiaries or any of its properties or assets is bound or affected,
except as disclosed in Section 3.05(a) of the Company Disclosure Schedule
and except, in the case of clauses (ii) and (iii) above, conflicts,
violations, breaches or defaults which would not, individually or in the
aggregate, have or be reasonably expected to have a Company Material
Adverse Effect.
(b) To the Company's Knowledge, the execution and delivery of this
Agreement by the Company do not, and the consummation by the Company of the
Acquisition will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or
subdivision thereof, or any administrative, governmental or regulatory
authority, agency, commission, tribunal or body, domestic, foreign or
supranational, except for (i) applicable requirements, if any, of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Securities Act of 1933, as amended (the "Securities Act"), state securities
or "blue sky" laws ("Blue Sky Laws"), the rules of the National Association
of Securities Dealers ("NASD"), state takeover laws, the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended, and the rules and
regulations thereunder (the "HSR Act"), and Wisconsin Law or any other
applicable Law and (ii) where the failure to obtain such other consents,
approvals, authorizations, or permits, or to make such filings or
notifications, would not, individually or in the aggregate, have or be
reasonably expected to have a Company Material Adverse Effect.
SECTION 3.06 SEC Filings; Financial Statements; Undisclosed Liabilities.
(a) To the Company's Knowledge, the Company has filed all forms,
reports and documents required to be filed by it with the Securities and
Exchange Commission (the "SEC") since January 1, 1997 and has made
available to the Merger Sub all registration statements filed by the
Company with the SEC, including all exhibits filed in connection therewith
(on all forms applicable to the registration of securities) since January
1, 1997 and prior to the date of this Agreement (collectively, the "Company
SEC Reports"). To the Company's Knowledge, as of their respective dates,
the Company SEC Reports (i) complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be,
and the rules and regulations thereunder and (ii) did not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
made therein, in the light of the circumstances under which they were made,
not misleading. The Company will deliver to the Merger Sub as soon as they
become available true and complete copies of any Company SEC Reports filed
subsequent to the date hereof and prior to the Effective Time.
(b) Each of the financial statements (including, in each case, any
notes and schedules thereto) contained in the Company SEC Reports complied
as to form in all material respects with the applicable accounting
requirements and rules and regulations of the SEC and was prepared in
accordance with United States generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods indicated
(except as may be indicated in the notes thereto), and each fairly
presented in all material respects the consolidated financial position,
results of operations and cash flows of the Company and its consolidated
subsidiaries as at the respective dates thereof and for the respective
9
86
periods indicated therein in accordance with GAAP (subject, in the case of
unaudited statements (the "Interim Financial Statements"), to normal and
recurring year-end adjustments and the absence of footnotes none of which
would, individually or in the aggregate, have or be reasonably expected to
have a Company Material Adverse Effect).
(c) Except as set forth on Section 3.06 of the Company Disclosure
Schedule, since December 31, 1998, to the Company's Knowledge, there has
not been any Company Material Adverse Effect, or any event, condition or
development which is reasonably likely to result in a Company Material
Adverse Effect.
(d) To the Company's Knowledge, neither the Company nor its
subsidiaries have any known or asserted liabilities or obligations (whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated and whether due or to become due, including any liability for
taxes) including without limitation any liabilities or obligations with
respect to environmental, health or safety matters, other than such
liabilities or obligations (i) disclosed in the Company Disclosure
Statement, (ii) that have been specifically disclosed or reserved for in
the audited consolidated balance sheet of the Company for calendar year
1998 as filed with the SEC, (iii) that have been incurred in the ordinary
course of business consistent with past practice since December 31, 1998,
or (iv) that would not, individually or in the aggregate, have or be
expected to have a Company Material Adverse Effect.
(e) Section 3.06 of the Company Disclosure Schedule sets forth a list
of all of the Company's and its subsidiaries' indebtedness for borrowed
money which is outstanding as of December 31, 1999, except for amounts of
indebtedness which are not individually in excess of $250,000.
SECTION 3.07 Absence of Certain Changes or Events. Except as disclosed in
Section 3.07 of the Company Disclosure Schedule or in the Company SEC Reports
and except for the execution of this Agreement and the consummation of the
transactions contemplated hereby, since December 31, 1998, (i) to the Company's
Knowledge, the Company and its subsidiaries have conducted their respective
businesses only in, and have not engaged in any material transaction other than
in accordance with, the ordinary course of business consistent with past custom
and practice (including with respect to quantity and frequency) in all material
respects and (ii) neither the Company nor any of its subsidiaries have, directly
or indirectly:
(a) redeemed, purchased, otherwise acquired, or agreed to redeem,
purchase or otherwise acquire, any shares of capital stock of the Company,
or declared, set aside or paid any dividend or otherwise made a
distribution (whether in cash, stock or property or any combination
thereof) in respect of the Company's capital stock;
(b) instituted any material change in its accounting methods,
principles or practices;
(c) granted any increase in the base compensation of, or made any
other material change in the employment terms for, any of its directors,
officers and/or employees, except (i) for increases or changes reflecting
or based upon changed responsibilities or duties and increases or changes
made in the ordinary course of business consistent with past practice and
(ii) reasonable compensation payable to the members of the Special
Committee in connection with their performance of services as members of
the Special Committee; or
(d) adopted, modified or terminated any bonus, profit-sharing,
incentive, severance or other plan or contract for the benefit of any of
its directors, officers and/or employees other than changes which do not
materially increase the aggregate cost of such plan or contract and changes
made in the ordinary course of business consistent with past practices.
SECTION 3.08 Absence of Litigation. Except as disclosed in the Company SEC
Reports, as of the date hereof, there is no claim, action, proceeding or
investigation pending or, to the Company's Knowledge, threatened in writing
against the Company, its subsidiaries, or any of its properties or assets,
before any court, arbitrator or Governmental Authority, which, individually or
when aggregated with other claims, actions, proceedings or investigations or
product liability claims, would have or could reasonably be expected to have a
Company Material Adverse Effect. As of the date hereof, neither the Company nor
its subsidiaries nor any of
10
87
their respective properties or assets is subject to any order, writ, judgment,
injunction, decree, determination or award having or which could reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect.
SECTION 3.09 Shareholder Vote Required. The affirmative vote of the holders
of the outstanding shares of Company Common Stock in accordance with Wisconsin
Law and other applicable Law is the only vote of the holders of any class or
series of securities of the Company necessary to approve the Merger, this
Agreement and the other transactions contemplated hereby.
SECTION 3.10 Opinion of Financial Advisor. The Special Committee has
received the opinion, dated January 29, 2000 (the "Xxxxxx Opinion"), of Xxxxxx
Brothers Inc. (the "Company Financial Advisor"), to the effect that the Merger
Consideration is fair to the Company's shareholders (other than the
Shareholders) from a financial point of view.
SECTION 3.11 Brokers. No broker, finder or investment banker (other than
the Company Financial Advisor) is entitled to any brokerage, finder's or other
fee or commission in connection with the Merger based upon arrangements made by
or on behalf of the Company or any of its subsidiaries. The Company has
heretofore furnished to Merger Sub a complete and correct copy of all agreements
between the Company and the Company Financial Advisor pursuant to which such
firm would be entitled to any payment relating to the Merger and the other
transactions contemplated hereby, and there have been no amendments to such
agreements.
SECTION 3.12 Company Action; State Takeover Statutes. The Company's Board
of Directors (at a meeting duly called and held) has by requisite vote of
directors (i) approved and adopted this Agreement, the Merger and all of the
other transactions contemplated hereby and (ii) agreed to recommend that the
shareholders of the Company approve and adopt this Agreement, the Merger and all
of the other transactions contemplated hereby.
SECTION 3.13 Information Supplied. The Proxy Statement (as defined below)
and any other document to be filed with the SEC or any Governmental Authority in
connection with the Acquisition (the "Other Filings") will not, at the
respective times filed with the SEC or other Governmental Authority, to the
Company's Knowledge, contain any untrue statement of a material fact (other than
information furnished by Merger Sub, Parent or Saw Mill for which no
representation or warranty is being made by the Company) or omit to state any
material fact (other than information required to be furnished by Merger Sub,
Parent or Saw Mill for which no representation or warranty is being made by the
Company) required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances in which they were made,
not misleading. The Proxy Statement will, to the Company's Knowledge, comply as
to form in all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder.
SECTION 3.14 Compliance with Laws. To the Company's Knowledge, neither the
Company nor any of its subsidiaries is in violation of or has violated or failed
to comply with any Law, including without limitation any relating to
environmental, health or safety matters, except for violations and failures to
comply that would not, individually or in the aggregate, be reasonably likely to
result in a Company Material Adverse Effect.
SECTION 3.15 Tax Matters.
(a) The Company, each domestic subsidiary of the Company and, to the
Company's Knowledge, each foreign subsidiary of the Company has filed all
Tax Returns that it was required to file prior to the date hereof. To the
Company's Knowledge, all such Tax Returns were filed in good faith and were
complete in all material respects. All Taxes owed by any of the Company and
each subsidiary of the Company (whether or not shown on any Tax Return)
have been paid or reserved. Except as provided in Section 3.15 of the
Company Disclosure Schedule, neither the Company nor any domestic
subsidiary of the Company currently is the beneficiary of any extension of
time within which to file any Tax Return. No claim has ever been made by an
authority in a jurisdiction where any of the Company or any subsidiary of
the Company does not file Tax Returns that the Company or any such
subsidiary so not filing is or may be subject to taxation by that
jurisdiction except for claims which, individually or in the aggregate,
would not result or be expected to result in a Company Material Adverse
Effect.
11
88
(b) Neither the Company nor any subsidiary of the Company has made any
payments, is obligated to make any payments, or is a party to any agreement
that under certain circumstances could obligate it to make any payments
that will not be deductible under Code ss.280G. Neither the Company nor any
subsidiary of the Company has made any payments or is obligated to make any
payments (other than payments required as a result of the operation of this
Agreement) that may not be deductible under Code ss.162(m).
(c) Neither the Company nor any subsidiary of the Company has any
liability for the Taxes of any person other than the Company and the
subsidiaries of the Company (i) under Treas. Reg. ss.1.1502-6 (or any
similar provision of state, local, or foreign law), (ii) as a transferee or
successor, (iii) by contract, or (iv) otherwise. Neither the Company nor
any subsidiary of the Company is a party to any Tax allocation or sharing
agreement.
SECTION 3.16 Change of Control Provisions. Except as disclosed on Section
3.16 of the Company Disclosure Schedule or as expressly provided for in or
permitted by this Agreement, no director, officer or employee of the Company or
any subsidiary of the Company (other than the Shareholders) will be entitled to
receive additional compensation, other payments or other rights (whether as a
result of any employee benefit plan, program or arrangement, any contract or
other agreement, or otherwise) as a result of the execution of this Agreement,
the consummation of the Merger, the consummation of any of the other
transactions contemplated hereby or otherwise in connection with a change of
control of the Company.
SECTION 3.17 Transactions with Affiliates. Except as disclosed on Section
3.17 of the Company Disclosure Schedule and subject to the final sentence of
this Section 3.17, neither the Company nor any of its subsidiaries is a party to
any executory contract or other arrangement with any of its affiliates, and no
affiliate of the Company or any of its subsidiaries (other than the Company and
its subsidiaries) owns any material asset, property, or right, tangible or
intangible, that is used in the Company's or any of its subsidiaries'
businesses. For purpose of this Section 3.17, the term "affiliate" shall not
include any of the Shareholders. Notwithstanding the foregoing, the Company
makes the representations set forth in the first sentence of this Section 3.17
to its Knowledge with respect to the Company's Chinese and Romanian ventures.
SECTION 3.18 Foreign Corrupt Practices Act. To the Company's Knowledge,
neither the Company, any subsidiary of the Company, nor any director, manager,
officer, agent, employee or other person associated with or acting on behalf of
the Company or any of its subsidiaries has used any funds for any unlawful
contribution, gift, entertainment or other expense relating to political
activity or made any direct or indirect unlawful payment to any United States or
foreign government official or employee from company funds or violated or is in
violation of any provision of the Foreign Corrupt Practices Act of 1977 or paid
or made any bribe, rebate, payoff, influence payment, kickback, or other
unlawful payment.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
SAW MILL, PARENT AND MERGER SUB
Saw Mill, Parent and Merger Sub hereby jointly and severally represent and
warrant to the Company that:
SECTION 4.01 Organization and Qualification; Subsidiaries. Each of Merger
Sub, Parent and Saw Mill is duly organized, validly existing and in good
standing (or the equivalent thereof) under the laws of the jurisdiction of its
incorporation or formation, as applicable, and has the requisite power and
authority to carry on its respective business as now being conducted, except
where the failure to have such power of authority would not be reasonably
expected to prevent or materially delay the consummation of the Merger.
SECTION 4.02 Authority Relative to this Agreement. Each of Merger Sub,
Parent and Saw Mill has all necessary power and authority to execute and deliver
this Agreement, to perform its respective obligations hereunder and to
consummate the Acquisition. The execution and delivery of this Agreement by each
of Merger Sub, Parent and Saw Mill and the consummation by each of Merger Sub,
Parent and Saw Mill of the Acquisition have been duly and validly authorized by
all necessary action and no other proceedings on the part
12
89
of Merger Sub, Parent or Saw Mill are necessary to authorize this Agreement or
to consummate the Merger (other than the filing and recordation of appropriate
merger documents as required by Wisconsin Law). This Agreement has been duly and
validly executed and delivered by each of Merger Sub, Parent or Saw Mill and,
assuming the due authorization, execution and delivery by the Company and the
Shareholders, constitutes a legal, valid and binding obligation of each of
Merger Sub, Parent and Saw Mill, enforceable against each of Merger Sub, Parent
and Saw Mill in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
SECTION 4.03 No Conflict; Required Filings and Consents.
(a) Subject to compliance with applicable provisions of Wisconsin Law
or any other applicable Law, the execution and delivery of this Agreement
by each of Merger Sub, Parent and Saw Mill does not, and the consummation
of the Acquisition by each of Merger Sub, Parent and Saw Mill will not (i)
conflict with or violate the charter documents, By-laws or other
organizational documents of Merger Sub, Parent or Saw Mill, (ii) to Merger
Sub's, Parent's and Saw Mill's knowledge, conflict with or violate any Laws
applicable to Merger Sub, Parent or Saw Mill or by which any of their
respective properties or assets is bound or affected, or (iii) to Merger
Sub's, Parent's and Saw Mill's knowledge, result in a violation or any
breach of or constitute a default (or an event which with notice or lapse
of time or both would become a default) under any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Merger Sub, Parent or Saw Mill is a party
or by which Merger Sub, Parent or Saw Mill or any property or asset of
Merger Sub, Parent or Saw Mill is bound or affected, except, in the case of
clauses (ii) and (iii), for violations, breaches or defaults which would
not, individually or in the aggregate, be reasonably expected to prevent or
materially delay the consummation of the Acquisition.
(b) To Merger Sub's, Parent's and Saw Mill's knowledge, the execution
and delivery of this Agreement by each of Merger Sub, Parent and Saw Mill
does not, and the consummation of this Agreement by each of Merger Sub,
Parent and Saw Mill will not, require any consent, approval, authorization
or permit of, or filing with or notification to, any government or
subdivision thereof, or any administration, governmental or regulatory
authority, agency, commission, tribunal or body, domestic, foreign or
supranational, except (i) for applicable requirements, if any, of the
Exchange Act, the Securities Act, Blue Sky Laws, the rules of any
applicable stock exchange, state takeover laws, the HSR Act, and by
Wisconsin Law or any other applicable Law, and (ii) where the failure to
obtain such other consents, approvals, authorizations, or permits, or to
make such filings or notifications, would not, individually or in the
aggregate, be reasonably expected to prevent or materially delay the
consummation of the Acquisition.
SECTION 4.04 Interim Operations of Parent and Merger Sub. Parent and Merger
Sub were each formed solely for the purpose of engaging in the transactions
contemplated hereby, has engaged in no other business activities (other than
those incident to its organization and the execution of this Agreement and
obtaining the Commitment Letters (as herein defined)) and has conducted its
operations only as contemplated hereby.
SECTION 4.05 Information Supplied. None of the information supplied in
writing or to be supplied in writing by Merger Sub specifically for inclusion or
incorporation by reference in the Proxy Statement or the Other Filings, at the
respective time filed with the SEC or such other Governmental Authority, and, in
addition, in the case of the Proxy Statement, at the date it is first mailed to
the Company's shareholders or at the time of the Shareholders Meeting (as
defined below), contains or will contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading.
SECTION 4.06 Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or investment banker's fee or commission in connection
with the Merger based upon arrangements made by or on behalf of Merger Sub,
Parent or Saw Mill.
13
90
SECTION 4.07 Financing. Saw Mill has received written commitments from (a)
Credit Agricole Indosuez (the "Senior Lender"), dated as of January 20, 2000
(the "Senior Debt Commitment Letter"), pursuant to which the Senior Lender has
committed, subject to the terms and conditions contained therein, to provide up
to $130,000,000 in senior debt financing for the Transactions, (b) Credit Suisse
First Boston (the "Subordinated Debt Lender"), dated as of January 19, 2000 (the
"Subordinated Debt Commitment Letter"), pursuant to which the Subordinated Debt
Lender has committed, subject to the terms and conditions contained therein, to
provide up to $125,000,000 in subordinated debt financing for the Transactions,
and (c) Chase Capital Partners, Massachusetts Mutual Life Insurance Company and
The Northwestern Mutual Life Insurance Company (collectively, the "Preferred
Equity Investors"), dated as of January 27, 2000 (the "Preferred Equity
Commitment Letter", and collectively with the Senior Debt Commitment Letter and
the Subordinated Debt Commitment Letter, the "Commitment Letters"), pursuant to
which the Preferred Equity Investors have committed, subject to the terms and
conditions contained therein, to provide up to $35,000,000 in preferred equity
financing for the Transactions. The proceeds from the Debt and Preferred Equity
Financing, assuming the Commitment Letters have been funded pursuant to and in
accordance with their respective terms, together with the Pre-Merger
Contributions, shall provide sufficient funds to pay, pursuant to the Merger,
the Merger Consideration, the Option Consideration and the repayment of
indebtedness for borrowed money of the Company or any of its subsidiaries that
is required to be repaid as a result of the Transactions, if any, and to pay all
fees and expenses related to the Transactions. A true, correct and complete copy
of (i) the Senior Debt Commitment Letter is attached hereto as Exhibit G-1, (ii)
the Subordinated Debt Commitment Letter is attached hereto as Exhibit G-2, (iii)
the Preferred Equity Commitment Letter is attached hereto as Exhibit G-3 and
(iv) Saw Mill's agreement of limited partnership (the "Saw Mill Limited
Partnership Agreement") has been provided to the Special Committee prior to date
hereof. The partners named in the Saw Mill Limited Partnership Agreement, taken
together, have committed, subject to the terms and conditions contained therein,
to contribute the Contributed Cash and the Contributed Company Common Shares to
Saw Mill. Merger Sub is not aware of any facts which in its reasonable judgment
would prevent the consummation of the financing contemplated by the Commitment
Letters. As of the date hereof, the Commitment Letters and the Saw Mill Limited
Partnership Agreement have not been modified or amended and are in full force
and effect.
SECTION 4.08 Capitalization of Merger Sub. Immediately prior to the
Effective Time, the authorized capital stock of Merger Sub will consist of
shares of common stock, par value $0.01 per share, of which only one share will
be issued and outstanding and such share shall be owned by Parent.
SECTION 4.09 Solvency. Immediately after giving effect to the Transactions,
the Surviving Corporation shall be able to pay its debts as they become due,
shall own assets having a fair market value greater than the amounts required to
pay its debts (including a reasonable estimate of the amount of contingent
liabilities) and shall not have an unreasonably small amount of capital to
conduct its business. No transfer of property is being made, and no obligation
is being incurred, in connection with the Transactions with the intent to
hinder, delay or defraud present or future creditors of the Company, Parent,
Merger Sub or Surviving Corporation.
SECTION 4.10 Pro Formas. Set forth on Exhibit B is the current estimated
sources and uses of funds in connection with the Contribution Agreement, the
Debt and Preferred Equity Financing and the consummation of the Transactions,
which reflect the current assumptions regarding the sources and uses of funds
for such purposes, and Merger Sub shall notify the Special Committee of any
material changes in such estimated sources and uses of funds.
14
91
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder hereby severally but not jointly represents and warrants
to the Company, Saw Mill, Parent and Merger Sub that:
SECTION 5.01 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by such Shareholder
does not, and the consummation of the Acquisition will not, (i) to such
Shareholder's knowledge, violate any Law applicable to such Shareholder,
(ii) prevent or materially delay the consummation of the Merger or (iii) to
such Shareholder's knowledge, result in a violation or any breach of or
constitute a default (or an event which with notice or lapse of time or
both would become a default) under any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument
or obligation to which such Shareholder is a party.
(b) To such Shareholder's knowledge, the execution and delivery of
this Agreement by such Shareholder does not, and the consummation of the
Acquisition will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any government or subdivision
thereof, or any administrative, governmental or regulatory authority,
agency, commission, tribunal or body, domestic, foreign or supranational,
except for applicable requirements, if any, of the Exchange Act, the
Securities Act, Blue Sky Laws, the rules of any applicable exchange, state
takeover laws, the HSR Act, and filings and recordation of appropriate
merger documents as required by Wisconsin Law or any other applicable Law.
SECTION 5.02 Ownership of Owned Shares. Except as set forth on Exhibit C
hereof, as of the date hereof, such Shareholder is the sole record and
beneficial owner of the number of shares of Company Common Stock listed opposite
such Shareholder's name on Exhibit C hereof, free and clear of any Liens
(including, without limitation, any restriction on the right to vote, sell or
otherwise dispose of the Owned Shares or any interest therein) except pursuant
to this Agreement, the Voting Agreement or applicable securities Laws. The Owned
Shares constitute all of the capital stock of the Company owned of record or
beneficially owned by such Shareholder. Exhibit C hereof sets forth for each
Owned Share the date such Owned Share was acquired by the respective Shareholder
and the purchase price paid for such Owned Share by the respective Shareholder.
SECTION 5.03 Authority Relative to this Agreement. Each Shareholder has all
necessary capacity to execute and deliver this Agreement and to perform his
obligations hereunder. This Agreement has been duly and validly executed and
delivered by such Shareholder and, assuming the due authorization, execution and
delivery by Merger Sub, Parent, Saw Mill, the other Shareholder and the Company,
constitutes a legal, valid and binding obligation of such Shareholder,
enforceable against such Shareholder in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
SECTION 5.04 No Finder's Fees. No broker, investment banker, financial
advisor or other person is entitled to any broker's finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of such
Shareholder.
SECTION 5.05 Transactions with Shareholders. Except as set forth on Exhibit
F hereof, neither the Company nor any of its subsidiaries is a party to any
executory contract or other arrangement with any Shareholder or any family
member or affiliate of any Shareholder (other than the Company or any of its
subsidiaries) (collectively, the "Shareholder Related Parties") and no
Shareholder Related Party owns any material asset, property or right, tangible
or intangible, that is used in the Company's or any of its subsidiaries'
businesses.
15
92
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.01 Conduct of Business by the Company Pending the Merger. The
Company covenants and agrees that, between the date of this Agreement and the
Effective Time, except as set forth in Section 6.01 of the Company Disclosure
Schedule or as otherwise expressly provided for in this Agreement, unless Merger
Sub shall otherwise agree in writing, the Company shall, and shall cause its
subsidiaries, to conduct its business in the ordinary course and in a manner
consistent with past custom and practice (including with respect to quantity and
frequency in all material respects). The Company shall, and shall cause its
subsidiaries to, use commercially reasonable efforts to (i) preserve intact its
business organization, (ii) keep available the services of the current officers,
employees and consultants of the Company and its subsidiaries, (iii) preserve
the current relationships of the Company and its subsidiaries with customers,
distributors, suppliers, licensors, licensees, contractors and other persons
with which the Company or its subsidiaries has significant business relations,
(iv) maintain all assets in good repair and condition (except for ordinary wear
and tear) other than those disposed of in the ordinary course of business
consistent with past custom and practice, (v) maintain all insurance currently
used in the conduct of the Company's and its subsidiaries' business as currently
conducted, (vi) maintain the Company's and its subsidiaries' books of account
and records in the usual, regular and ordinary manner and (vii) maintain and
protect all of its material Intellectual Property Rights, in each case, in a
manner consistent in all material respects with the Company's ordinary course of
business, consistent with past practice. Except as contemplated by this
Agreement, or as set forth in Section 6.01 of the Company Disclosure Schedule,
the Company shall not, and shall cause its subsidiaries not to, between the date
of this Agreement and the Effective Time, directly or indirectly do any of the
following without the prior written consent of Merger Sub (which consent shall
not be unreasonably withheld or delayed):
(a) amend or otherwise change its Articles of Incorporation or
By-laws;
(b) issue, sell, pledge, dispose of, grant or encumber, or authorize
the issuance, sale, pledge, disposition, grant or encumbrance of, (i) any
shares of capital stock or other equity securities of any type or class of
the Company or its subsidiaries, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of such
capital stock or other equity securities, or any other ownership interest
(including, without limitation, any phantom interests), of the Company or
its subsidiaries or (ii) any assets of the Company or its subsidiaries,
except for sales in the ordinary course of business consistent with past
custom and practice and other asset sales for consideration or having a
fair market value aggregating not more than $500,000;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock or other equity securities;
(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, or propose to redeem, purchase or otherwise acquire,
directly or indirectly, any of its capital stock or other equity
securities;
(e) acquire (including, without limitation, by merger, consolidation
or acquisition of stock or assets) or agree to acquire any corporation,
partnership, limited liability company, or other business organization or
division thereof, other than the acquisition of assets pursuant to the
Letter of Intent, dated September 27, 1999;
(f) (i) other than under the Company's existing credit facilities as
in effect as of the date hereof, incur or agree to incur any indebtedness
for borrowed money or issue any debt securities or assume, guarantee or
endorse, or otherwise as an accommodation become responsible for, the
obligations of any person, or make any loans, advances, or capital
contributions to or investments in, any other person; or (ii) authorize or
make capital expenditures which are not in accordance with the Company's
calendar year 2000 budget which has been presented to the Company's board
of directors prior to the date hereof;
(g) enter into, establish, adopt, amend or renew any employment,
consulting, severance or similar agreement or arrangements with any
director, officer, or employee, or grant any salary or wage increase (other
than in the ordinary course of business consistent with past custom and
practice);
16
93
(h) establish, adopt, amend or increase benefits under any pension,
retirement, stock option, stock purchase, savings, profit sharing, deferred
compensation, consulting, welfare benefit contract, plan or arrangement
(other than in the ordinary course of business consistent with past custom
and practice or as may be required by applicable Law);
(i) commence any voluntary petition, proceeding or action under any
bankruptcy, insolvency or other similar law;
(j) make or institute any material change in accounting methods,
procedures or practices in its accounting methods, procedures and practices
unless mandated by GAAP;
(k) enter into any agreement or other arrangement with any director,
officer or shareholder of the Company, its subsidiaries or any affiliate of
any of the foregoing, except (i) in the ordinary course of business
consistent with past custom and practice and (ii) with respect to the
payment of reasonable compensation to the members of the Special Committee
in connection with their performance of services as members of the Special
Committee;
(l) take any action or omit to take any action which would result in a
violation of any applicable Law or would cause a breach of any agreement,
contract or commitment, which violation or breach would have or could
reasonably be expected to have a Company Material Adverse Effect;
(m) license, assign or otherwise transfer to any person or entity any
rights to any material Intellectual Property Rights owned or used by the
Company or its subsidiaries, except in the ordinary course of business
consistent with past custom or practice, or fail to maintain or enforce any
material Intellectual Property Rights owned or used by the Company or its
subsidiaries, except in the ordinary course of business consistent with
past custom or practice; or
(n) authorize, propose, or agree to take, any of the foregoing actions
prohibited under the other provisions of this Section 6.01.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01 Shareholders' Meeting.
(a) Subject to the provisions of Section 7.05 and Section 9.01, the
Company shall, consistent with applicable Law, call and hold a meeting of
the holders of shares of Company Common Stock (the "Shareholders' Meeting")
as promptly as practicable for the purpose of voting upon the approval and
adoption of this Agreement and the Merger. The Company, through its Board
of Directors, shall recommend to its shareholders approval and adoption of
this Agreement and the Merger, which recommendation shall be contained in
the Proxy Statement (as defined below); provided, however, that the Board
of Directors may fail to make its recommendation to the shareholders of the
Company or may withdraw, modify or change its recommendation to the
shareholders of the Company, in accordance with Section 7.05(a). Subject to
the foregoing, the Company shall solicit from the holders of shares of
Company Common Stock proxies in favor of the approval and adoption of the
Merger, and shall take all other action necessary or advisable to secure
the vote or consent of such holders required by Wisconsin Law.
(b) Saw Mill, Parent and Merger Sub shall vote (or consent with
respect to) any shares of Company Common Stock beneficially owned by them,
or with respect to which they have the power (by agreement, proxy or
otherwise) to cause to be voted (or to provide a consent), in favor of the
approval and adoption of this Agreement and the Merger at any meeting of
the shareholders of the Company at which this Agreement and the Merger
shall be submitted for approval and adoption and at all adjournments or
postponements thereof (or, if applicable, by any action of the shareholders
of the Company by consent in lieu of a meeting).
17
94
SECTION 7.02 Preparation of Proxy Statement.
(a) The Company, the Shareholders, Merger Sub, Parent and Saw Mill
shall furnish to each other all information concerning such person or such
person's business that is required for the Proxy Statement (as herein
defined). Under the direct control of the Special Committee, the Company
shall, as soon as practicable, prepare and file (after providing Merger Sub
with a reasonable opportunity to review and comment thereon) preliminary
proxy materials (including, without limitation, a Schedule 13e-3 filing)
relating to the meeting of the holders of shares of Company Common Stock to
be held in connection with the Merger (together with any amendments thereof
or supplements thereto, the "Proxy Statement") with the SEC and shall use
its best efforts to respond to any comments of the SEC (after providing
Merger Sub with a reasonable opportunity to review and comment thereon) and
to cause the Proxy Statement to be mailed to the Company's shareholders as
promptly as practicable after responding to all such comments to the
satisfaction of the staff; provided, that, subject to Saw Mill's, Parent's
and Merger Sub's compliance with the immediately preceding sentence, in no
event shall the Company file the Proxy Statement with the SEC any later
than the date forty-five (45) days after the date hereof. The Company shall
notify Merger Sub promptly of the receipt of any comments from the SEC and
of any request by the SEC for amendments or supplements to the Proxy
Statement or for additional information and shall supply Merger Sub with
copies of all correspondence between the Company or any of its
representatives, on the one hand, and the SEC, on the other hand, with
respect to the Proxy Statement or the Transactions. The Company will cause
the Proxy Statement to comply in all material respects with the applicable
provisions of the Exchange Act and the rules and regulations thereunder
applicable to the Proxy Statement and the solicitation of proxies for the
Shareholders' Meeting (including any requirement to amend or supplement the
Proxy Statement) and each party shall furnish to the other such information
relating to it and its affiliates and the Transactions and such further and
supplemental information as may be reasonably requested by the other party.
If at any time prior to the Shareholders Meeting there shall occur any
event that should be set forth in an amendment or supplement to the Proxy
Statement, the Company shall promptly prepare and mail to its shareholders
such an amendment or supplement; provided, that no such amendment or
supplement to the Proxy Statement will be made by the Company without
providing the Merger Sub the reasonable opportunity to review and comment
thereon and without the approval of Merger Sub, which approval shall not be
unreasonably withheld. To the extent practicable, the Special Committee and
its counsel shall permit Merger Sub and its counsel and the Company and its
counsel to participate in all communications with the SEC and its staff,
including all meetings and telephone conferences, relating to the Proxy
Statement, this Agreement or the Transactions; provided that in the event
that such participation by Merger Sub or the Company is not practicable,
the Special Committee shall promptly inform Merger Sub and the Company of
the content of all such communications and the participants involved
therein.
(b) Subject to the provisions of Section 7.05 and Section 9.01, the
Company agrees to include in the Proxy Statement the recommendation of the
Company's Board of Directors, subject to any modification, amendment or
withdrawal thereof as provided in this Agreement. The Proxy Statement shall
contain a copy of the Xxxxxx Opinion.
SECTION 7.03 Appropriate Action; Consents; Filings; Further Assurances.
(a) Subject to the provisions of Section 7.05 and Section 9.01, the
Company, Merger Sub, Parent and Saw Mill shall use their commercially
reasonable efforts to (i) take, or cause to be taken, all appropriate
action and do, or cause to be done, all things necessary, proper or
advisable under applicable Law or otherwise to consummate the Transactions
and make effective the Merger as promptly as practicable, (ii) obtain
expeditiously from any Governmental Authorities any consents, licenses,
permits, waivers, approvals, authorizations or orders required to be
obtained or made by Merger Sub, Parent or the Company or any of its
subsidiaries in connection with the authorization, execution and delivery
of this Agreement and the consummation of the Transactions, and (iii) as
promptly as practicable, make all necessary filings, and thereafter make
any other required submissions, with respect to this Agreement and the
Transactions required under (A) the Securities Act and the Exchange Act,
and any other applicable federal or state securities Laws, (B) the HSR Act
and any related governmental request thereunder and
18
95
(C) any other applicable Law; provided, that Merger Sub, Parent and the
Company shall cooperate with each other in connection with the making of
all such filings, including providing copies of all such documents to the
non-filing party and its advisors prior to filing. From the date of this
Agreement until the Effective Time, each party shall promptly notify the
other party in writing of any pending or, to the knowledge of the first
party, threatened action, proceeding or investigation by any Governmental
Authority or any other person (i) challenging or seeking material damages
in connection with the Merger or the conversion of the Company Common Stock
into cash pursuant to the Merger or (ii) seeking to restrain or prohibit
the consummation of the Transactions or otherwise limit the right of
Surviving Corporation to own or operate all or any portion of the
businesses or assets of the Company or its subsidiaries, which in either
case would have a Company Material Adverse Effect prior to or after the
Effective Time, or a Surviving Corporation Material Adverse Effect after
the Effective Time. The term "Surviving Corporation Material Adverse
Effect" means, when used in connection with the Surviving Corporation, any
change, effect, event, occurrence, condition or development that is or is
reasonably likely to be materially adverse to the business, assets,
liabilities, properties, results of operations or condition (financial or
otherwise) of the Surviving Corporation and its subsidiaries, taken as a
whole.
(b) The Company, the Shareholders, Merger Sub, Parent and Saw Mill
shall furnish to each other all information required for any application or
other filing to be made pursuant to the rules and regulations of any
applicable Law (including all information required to be included in the
Proxy Statement) in connection with the transactions contemplated by this
Agreement.
(c) Each of Merger Sub, Parent, Saw Mill and the Company shall give
(or shall cause its respective subsidiaries to give) any notices to third
parties and use, and cause its respective subsidiaries to use, their
respective commercially reasonable efforts, at, subject to Section 9.03(b),
Merger Sub's expense, to obtain any third party consents, (A) necessary,
proper or advisable to consummate the Transactions, (B) disclosed or
required to be disclosed in the Company Disclosure Schedule or (C) required
to prevent a Company Material Adverse Effect from occurring prior to or
after the Effective Time or a Surviving Corporation Material Adverse Effect
from occurring after the Effective Time. In the event that Merger Sub,
Parent or the Company shall fail to obtain any third party consent
described in the immediately preceding sentence, it shall use its
commercially reasonable efforts, at, subject to Section 9.03(b), Merger
Sub's expense, and shall take any such actions reasonably requested by the
other party, to minimize any adverse effect upon the Company, Merger Sub
and Parent, their respective subsidiaries, and their respective businesses
resulting, or which could reasonably be expected to result after the
Effective Time, from the failure to obtain such consent.
(d) If any state takeover statute or similar statute or regulation
becomes applicable to this Agreement or any of the Transactions, the
Company, Merger Sub and Parent will take all action reasonably necessary to
ensure that the Merger and the other Transactions may be lawfully
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or
regulation on the Merger and the other Transactions.
(e) If at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement,
including the execution of additional documents, the proper officers and
directors of each party to this Agreement (including the Shareholders)
shall take all such necessary action.
SECTION 7.04 Confidentiality; Access to Information.
(a) Merger Sub, Parent and Saw Mill shall each, and shall each use its
reasonable best efforts to cause its Representatives (as defined below) to,
keep confidential and not disclose to any other person (other than such
Representatives) or use for its own benefit or the benefit of any other
person any trade secrets or other confidential proprietary information in
its or their possession or control regarding the Company or any of its
subsidiaries. The obligation of Merger Sub, Parent and Saw Mill under this
Section 7.04(a) shall not apply to information which (i) is or becomes
generally available to the public without breach of the commitment provided
for in this Section 7.04(a); or (ii) is required to be disclosed by Law or
a Governmental Authority; provided, however, that, in any such case, the
person subject to
19
96
such requirement shall notify the Company as early as reasonably
practicable prior to disclosure to allow the Company to take appropriate
measures to preserve the confidentiality of such information. The
provisions of this Section 7.04(a) (other than the provisions of this
sentence) shall terminate as of the Effective Time and all confidentiality
agreements entered into between the Company and Saw Mill and/or any
affiliate of Saw Mill (including Saw Mill Capital LLC) prior to the date
hereof are hereby terminated and have no further force or effect.
Notwithstanding the foregoing, nothing in this Section 7.04(a) shall
prevent the Company from complying with its obligations contained in
Section 7.09.
(b) The Shareholders shall each, and shall each use his reasonable
best efforts to cause his accountants, consultants, legal counsel, agents
and other representatives, as applicable, to, keep confidential and not
disclose to any other person or use for his or its own benefit or the
benefit of any other person any trade secrets or other confidential
proprietary information in his, its or their possession or control
regarding Merger Sub, Parent, Saw Mill or any of their respective
affiliates. The obligation of the Shareholders under this Section 7.04(b)
shall not apply to information which (i) is or becomes generally available
to the public without breach of the commitment provided for in this Section
7.04(b); or (ii) is required to be disclosed by Law or a Governmental
Authority; provided, however, that, in any such case, the Shareholder
subject to such requirement shall notify Merger Sub and Parent as early as
reasonably practicable prior to disclosure to allow Merger Sub and Parent
to take appropriate measures to preserve the confidentiality of such
information.
(c) Except as otherwise dictated by the legal duties or legal
obligations of the Special Committee or the Company and subject to the
requirements of agreements with third parties, from the date hereof to the
Effective Time, the Company shall (and shall cause each of its subsidiaries
to) provide to Merger Sub (and its lenders, other financing sources,
officers, directors, employees, accountants, consultants, legal counsel,
agents and other representatives, collectively, "Representatives")
reasonable access to all information and documents which Merger Sub may
reasonably request regarding the business, assets, liabilities, employees
and other aspects of the Company or its subsidiaries.
(d) Except as otherwise dictated by the legal duties or legal
obligations of the Special Committee or the Company and subject to the
requirements of agreements with third parties, from the date hereof to the
Effective Time, the Company shall (and shall cause each of its subsidiaries
to): (i) provide to Merger Sub and its Representatives access at reasonable
times upon prior notice to the officers, employees, agents, properties,
offices and other facilities of the Company and its subsidiaries and to the
books and records thereof and (ii) furnish promptly such information
concerning the business, properties, contracts, assets, liabilities,
personnel and other aspects of the Company and its subsidiaries as Merger
Sub or its Representatives may reasonably request.
(e) No investigation by Merger Sub or the Company, as applicable,
whether prior to the execution of this Agreement or pursuant to this
Section 7.04, shall affect any representation or warranty in this Agreement
of any party hereto or any condition to the obligations of the parties
hereto.
(f) Merger Sub and its Representatives shall have the right to conduct
any environmental and engineering inspections at any of the Company's
properties (whether owned or leased), which inspections shall be, subject
to Section 9.03(b), at Merger Sub's expense; provided, that in no event
shall Merger Sub have the right to conduct so-called "Phase II"
environmental tests without the Company's prior consent, which consent
shall not be unreasonably withheld. Notwithstanding anything contained
herein to the contrary, all of Merger Sub's and their Representatives'
activities pursuant to this Section 7.04(f) shall be conducted in a manner
that does not unreasonably interfere with the ongoing operations of the
Company and its subsidiaries.
SECTION 7.05 Fiduciary Responsibilities.
(a) If, after the date of this Agreement, the Special Committee or the
Company receives a bona-fide inquiry or proposal (any such inquiry, an
"Acquisition Inquiry" or any such proposal, an "Acquisition Proposal") from
a person whom the Special Committee, in good faith, reasonably determines
has the financial capacity to consummate a merger, consolidation, tender
offer, exchange offer, recapitalization or
20
97
other business combination involving the Company or the acquisition (of any
kind) of a material portion of the assets or capital stock of the Company
or its subsidiaries (any such transaction, other than the Merger, a "Third
Party Transaction") and the Special Committee reasonably concludes, after
consultation with its legal counsel, that the failure to provide
information to, or to engage in discussions or negotiations with, such
person would be inconsistent with the fiduciary duties of the Company's
directors to the Company's shareholders under applicable Law (the "Board's
Fiduciary Duties"), then (i) the Special Committee may, through any of the
Company's directors, officers, employees, agents, representatives or
affiliates (the "Company's Agents"), directly or indirectly, (x) provide
access to, furnish or cause to be furnished information concerning the
Company's business, properties, assets, financial position, operations
and/or prospects to such person pursuant to an appropriate confidentiality
agreement, and (y) engage in discussions related thereto; and (ii) the
Special Committee may, through any of the Company's Agents, participate in
and engage in discussions and negotiations with such person regarding the
Acquisition Inquiry or Acquisition Proposal, as the case may be. In the
event that, after the date of this Agreement and prior to the Shareholders'
Meeting, the Special Committee or the Company receives an Acquisition
Proposal from a person whom the Special Committee, in good faith,
reasonably determines has the financial capabilities to consummate such
Acquisition Proposal and the Special Committee determines, in good faith
and after consultation with its legal counsel, that the failure to do any
or all of the following would be inconsistent with the Board's Fiduciary
Duties, the Board of Directors of the Company (acting on the recommendation
of the Special Committee) may do any or all of the following: (xx)
withdraw, modify or change the Company's Board of Directors' approval or
recommendation of this Agreement and the Merger; (yy) approve or recommend
to the Company's shareholders such Acquisition Proposal; and (zz) terminate
this Agreement. The Board of Directors of the Company shall not take the
action described in clause (zz) above prior to three business days after
the Board of Directors of the Company shall have given Merger Sub written
notice stating that the Board of Directors of the Company intends to
terminate this Agreement and setting forth the information specified in
Section 7.05(d) hereof with respect to any Acquisition Proposal which the
Board of Directors of the Company intends to accept or recommend. If the
Company shall exercise its right to terminate this Agreement pursuant to
clause (zz) of this Section 7.05(a), the Company shall deliver to Saw Mill
(or at Saw Mill's direction, such other person as Saw Mill may designate in
writing), and any such termination shall be conditioned upon Saw Mill's or
such other person's receipt of, a wire transfer of same day funds in the
amount of the Termination Fee (as defined in Section 9.03(d)).
Notwithstanding anything contained in this Agreement to the contrary, so
long as there has been no breach of Section 7.05(b), the exercise of the
rights of the Board of Directors of the Company and the Special Committee
pursuant to this Section 7.05 shall not constitute a breach of this
Agreement by the Company.
(b) Notwithstanding anything contained herein to the contrary, the
Board of Directors of the Company, the Shareholders and the Special
Committee shall not, and the Company shall cause its subsidiaries not to,
and the Company agrees that it shall not authorize nor permit any of the
Company's Agents to, directly or indirectly, solicit, knowingly encourage,
participate in or initiate discussions or negotiations with, or provide any
non-public information to any person (other than Merger Sub, Parent, Saw
Mill or any of their affiliates or representatives) concerning any
potential Third Party Transaction; provided, that after the Special
Committee (i) has received an Acquisition Inquiry or Acquisition Proposal
and (ii) has reached the applicable conclusions required by the first
sentence of Section 7.05(a) with respect to such Acquisition Inquiry or
Acquisition Proposal, as the case may be, the Special Committee may,
through any of the Company's Agents, directly or indirectly participate in
or initiate discussions or negotiations or provide information and conduct
any other activities it determines, in good faith, after consultation with
its legal counsel, are necessary to satisfy the Board's Fiduciary Duties
regarding such Acquisition Inquiry or Acquisition Proposal, as the case may
be, but only in the manner and to the extent expressly permitted by Section
7.05(a).
(c) Subject to Section 7.05(a) hereof, nothing contained in this
Section 7.05 shall prohibit the Company's Board of Directors or the Special
Committee from taking and disclosing to the Company's shareholders a
position with respect to a tender or exchange offer by a third party
pursuant to Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act or
from making such disclosure to the Company's
21
98
shareholders which, in the judgment of the Board of Directors of the
Company or the Special Committee, after consultation with its legal
counsel, is necessary under applicable Law or the rules of any stock
exchange to meet the Board's Fiduciary Duties. The Company shall give
Merger Sub prompt written notice and a copy of any such disclosure.
(d) The Company shall promptly, but in any event within one business
day, give Merger Sub written notice of any Acquisition Inquiry or
Acquisition Proposal, which written notice shall include the material terms
and conditions of such Acquisition Inquiry or Acquisition Proposal, as the
case may be. The Company shall keep Merger Sub reasonably informed of the
status of any such Acquisition Inquiry or Acquisition Proposal, including
any change in the material terms or conditions thereof.
(e) Notwithstanding anything contained herein to the contrary, the
initial press release issued by the Company announcing the execution of
this Agreement, which press release may not be issued in any manner other
than as is customary for issuing a press release for a transaction such as
the Merger, may include the following language and the inclusion of such
language shall not be a breach of any provision of this Section 7.05 and
Saw Mill, Parent and Merger Sub hereby consent to the inclusion of the
following language in any such press release:
"Notwithstanding its recommendation and consistent with the terms of the
Merger Agreement, the Special Committee of the Company's Board of
Directors requested that the Special Committee's financial advisor,
Xxxxxx Brothers Inc., and legal advisor, Xxxxxxx Xxxx & Xxxxxxxxx LLP,
be available to receive unsolicited inquiries from any other parties
interested in the possible acquisition of the Company. If the Special
Committee of the Company's Board of Directors concludes that the failure
to provide information to, or engage in discussions or negotiations
with, such parties would be inconsistent with its fiduciary duties to
the Company's shareholders, Xxxxxx Brothers Inc. and Xxxxxxx Xxxx &
Friedrich LLP, in conjunction with the Special Committee of the
Company's Board of Directors, may provide information to and engage in
discussions and negotiations with such parties in connection with any
such indicated interest."
(f) Nothing in this Agreement shall require or be deemed to require
the Special Committee or the Company's Board of Directors to take or
refrain from taking any action which would violate any obligation
(including any fiduciary duty) under applicable Law. In taking or
refraining from taking such action, the Special Committee or the Company's
Board of Directors shall act in good faith and shall obtain the written
advice from its counsel; provided, that, in the event that the Special
Committee or the Company's Board of Directors, as the case may be, shall
exercise any of its rights under this Section 7.05(f) with respect to any
action taken or any inaction, the Special Committee or the Company's Board
of Directors, as the case may be, shall give prompt written notice to Saw
Mill, of such action or inaction (along with a reasonable description
thereof) and the basis for the exercise of such right(s).
SECTION 7.06 Indemnification and Insurance.
(a) The Surviving Corporation, the Shareholders and the Company agree
that, except as may be limited by applicable Laws, for six and one half
years from and after the Effective Time, the Surviving Corporation shall
indemnify, defend and hold harmless any person who is now, or has been at
any time prior to the date hereof, or who becomes prior to the Effective
Time, an officer or director ("Covered Parties") of the Company against all
losses, claims, damages, liabilities, costs and expenses (including
attorneys' fees and expenses), judgments, fines, losses, and amounts paid
in settlement in connection with any actual or threatened action, suit,
claim, proceeding or investigation (whether arising before or after the
Effective Time) (each a "Claim") to the extent that any such Claim is based
on, or arises out of, (i) the fact that such person is or was a director or
officer of the Company or is or was serving at the request of the Company
as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, or (ii) this Agreement, or any of the
transactions contemplated hereby, in each case to the extent that any such
Claim pertains to any matter or fact arising, existing or occurring prior
to or at the Effective Time, regardless of whether such Claim is asserted
or claimed prior to, at or after the Effective Time, to the full extent
permitted under applicable Law or the Company's Articles of
22
99
Incorporation, By-laws or indemnification agreements in effect at the date
hereof, including provisions relating to the advancement of expenses
incurred in the defense of any action or suit. Without limiting the
foregoing, in the event any Covered Party becomes involved in any capacity
in any Claim, then from and after the Effective Time, the Surviving
Corporation shall periodically advance to such Covered Party its legal and
other expenses (including the cost of any investigation and preparation
incurred in connection therewith), subject to the provision by such Covered
Party of an undertaking to reimburse the amounts so advanced in the event
of a final non-appealable determination by a court of competent
jurisdiction that such Covered Party is not entitled thereto.
(b) The Surviving Corporation shall maintain in effect, for six and
one half years from and after the Effective Time, directors' and officers'
liability insurance policies for the Covered Parties on terms not
materially less favorable than the existing insurance coverage with respect
to matters occurring prior to the Effective Time and otherwise on terms
reasonably satisfactory to such directors.
(c) Subject to the fiduciary duties of the Special Committee and the
Company's Board of Directors under Wisconsin Law, in the event that any
action, suit, proceeding or investigation relating thereto or to the
transactions contemplated by this Agreement is commenced, whether before or
after the Effective Time, the parties hereto agree to cooperate and use
their respective reasonable efforts to vigorously defend against and
respond thereto.
(d) The provisions of this Section 7.06 are for the benefit of, and
shall be enforceable by, the Covered Parties. This Section 7.06 shall be
binding on the Surviving Corporation and its successors and assigns.
SECTION 7.07 Notification of Certain Matters. From and after the date of
this Agreement until the Effective Time, each party hereto shall promptly notify
the other parties hereto of:
(a) the occurrence, or non-occurrence, of any event the occurrence or
non-occurrence of which would be reasonably likely to cause any (i)
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect or (ii) any covenant or any condition to
the obligations of any party to effect the Merger not to be complied with
or satisfied;
(b) the failure of any party hereto to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
pursuant to this Agreement;
(c) the receipt of any notice or other communication from any person
alleging that the consent of such person is or may be required in
connection with the Transactions;
(d) the receipt of any notice or other communication from any
Governmental Authority in connection with the Transactions; and
(e) any actions, suits, claims, investigations or proceedings
commenced or, to the knowledge of the party, threatened against, relating
to or involving or otherwise affecting the Company or Merger Sub, which
relates to the consummation of the Transactions;
in each case, to the extent such event or circumstance is or becomes known to
the party required to give such notice; provided, however, that the delivery of
any notice pursuant to this Section 7.07 shall not be deemed to be an amendment
of this Agreement or any Section in the Company Disclosure Schedule and shall
not cure any breach of any representation or warranty requiring disclosure of
such matter prior to the date of this Agreement.
SECTION 7.08 Public Announcements. Subject to the fiduciary duties of the
Special Committee and the Company's Board of Directors under Wisconsin Law,
during the period beginning on the date hereof and ending on the Closing, Merger
Sub, Parent, Saw Mill and the Company shall consult with each other before
issuing (and give one another a reasonable opportunity to comment on) any press
release or otherwise making any public statements with respect to this Agreement
or any of the Transactions, except as may be required by Law or any listing
agreement with the NASD or any national securities exchange to which Merger Sub,
23
100
Parent, Saw Mill or the Company is a party and, in such case, shall use
reasonable efforts to consult with all the parties hereto prior to such release
or statement being issued.
SECTION 7.09 Cooperation with Financing. In order to assist with the
financing of the Transactions, at or prior to Closing, the Company shall, and
shall cause its subsidiaries to, take such commercially reasonable steps as are
necessary to cause the following to occur:
(a) At Merger Sub's request and, subject to Section 9.03(b), expense,
(i) with respect to each real property leased by the Company or its
subsidiaries within the United States, the Company shall use its
commercially reasonable best efforts to deliver to Merger Sub, if required
by the lender of any such financing, a nondisturbance agreement, a consent
and waiver and/or an estoppel letter executed by the landlord, lessor
and/or licensor of such leased property and (ii) with respect to each
parcel of real property owned by the Company or its subsidiaries that is
located within the United States, the Company shall deliver title insurance
and surveys, in each case, in form and substance reasonably acceptable to
Merger Sub;
(b) At Merger Sub's request and, subject to Section 9.03(b), expense,
the Company shall furnish such financial statements as may be reasonably
requested by Merger Sub in connection with the financing of the
Transactions; and
(c) At Merger Sub's request and, subject to Section 9.03(b), expense,
the Company shall cause its and its subsidiaries' officers, employees,
consultants, agents, accountants and attorneys to cooperate with Merger Sub
and its lenders and authorized representatives in connection with a review
of the Company and the financing of the Transactions, including the
preparation by Merger Sub and its financing sources of any offering
memorandum or other documents related to the financing of the Transactions
and making senior management available to meet with any prospective
providers of financing (including pursuant to any "road show").
SECTION 7.10 Shareholder Approval. Subject to the provisions of Section
7.05 and Section 9.01, the Company shall take all reasonable action necessary in
accordance with Wisconsin Law and its Articles of Incorporation and By-laws to
obtain the requisite approval and adoption of this Agreement and the Merger by
the shareholders of the Company.
SECTION 7.11 Exchange Act and NASDAQ Filings. Unless an exemption shall be
expressly applicable to the Company, or unless Merger Sub agrees otherwise in
writing, the Company will file with the SEC and the National Association of
Security Dealers ("NASD") all reports required to be filed by it pursuant to the
rules and regulations of the SEC and NASD (including, without limitation, all
required financial statements). Such reports and other information shall comply
in all material respects with all of the requirements of the SEC and NASD rules
and regulations, and when filed, to the Company's Knowledge, will not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
SECTION 7.12 Solvency Opinion. If any of the providers of the Debt and
Preferred Equity Financing require the delivery of a solvency opinion from an
independent valuation firm at the Closing, Merger Sub shall cause such solvency
opinion to also be delivered to the Special Committee.
SECTION 7.13 State Takeover Laws. The Company shall take all reasonably
necessary steps to exempt the Transactions contemplated by this Agreement,
including the Merger, from the requirements of any applicable state takeover law
and to assist Merger Sub in any challenge to the validity or applicability to
the Transactions of any state takeover law.
SECTION 7.14 Capital Stock of Merger Sub and Parent. Except as contemplated
by this Agreement and the Contribution Agreement, during the period beginning on
the date hereof and ending on the Closing, (i) Merger Sub shall not issue or
commit to issue any capital stock to any person, (ii) Parent shall not sell,
transfer or otherwise dispose of any capital stock of Merger Sub and (iii) Saw
Mill shall not sell, transfer or otherwise dispose of any capital stock of
Parent, in each case, without the approval of the Company (which approval shall
not be unreasonably withheld or delayed).
24
101
SECTION 7.15 Debt and Preferred Equity Financing. Merger Sub, Parent and
Saw Mill shall be solely responsible for all negotiations with respect to
definitive agreements regarding the financing contemplated by the Commitment
Letters. Merger Sub, Parent and Saw Mill shall conduct such negotiations
reasonably and in good faith and, at the request of the Special Committee, shall
promptly inform the Special Committee as to the status of such negotiations. So
long as the Company is in compliance with Sections 7.04(c), 7.04(d), 7.04(f) and
7.09, Saw Mill, Merger Sub and Parent shall use commercially reasonable efforts
to satisfy the requirements of the Commitment Letters and to obtain the funding
contemplated by and on the terms contained in the Commitment Letters, or if any
of the Commitment Letters is terminated or such funds shall not otherwise be
available, use commercially reasonable efforts to obtain an alternative source
of financing, in each case, on financial and other terms no less favorable than
those set forth in the respective Commitment Letters or to the extent not set
forth therein, on terms reasonably acceptable to Saw Mill, Merger Sub and
Parent. Following the date hereof, any amendment, termination, cancellation or
modification of any Commitment Letter or any information known to Merger Sub
which makes it unlikely to obtain the financing on the terms set forth in the
Commitment Letters, shall be promptly disclosed to the Special Committee;
provided, that Merger Sub shall consult with the Company Financial Advisor with
respect to any such amendment or modification.
SECTION 7.16 Equity Securities of the Company. During the period beginning
on the date hereof and ending on the first to occur of (x) the Closing or (y)
the date nine months after the date of the termination of this Agreement,
neither Saw Mill, Parent nor Merger Sub shall, directly or indirectly, acquire
or propose to acquire ownership, beneficially or of record, of any equity
securities of the Company or any subsidiary thereof, except (i) pursuant to and
as contemplated by this Agreement and (ii) immediately prior to the Closing,
pursuant to and as contemplated by the Saw Mill Limited Partnership Agreement
and the Contribution Agreement.
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.01 Conditions to the Obligations of Each Party. The obligations
of the Company, Merger Sub and the Shareholders to consummate the Merger are
subject to the satisfaction (or, if permitted by applicable Law, waiver by the
party for whose benefit such condition exist) of the following conditions:
(a) this Agreement and the Merger shall have been approved and adopted
by the affirmative vote of the requisite holders of the outstanding shares
of Company Common Stock in accordance with Wisconsin Law and the Company's
Articles of Incorporation;
(b) any applicable waiting period under the HSR Act relating to the
Merger and/or the Pre-Merger Contributions shall have expired or been
terminated;
(c) no order, statute, rule, regulation, executive order, stay,
decree, judgment or injunction shall have been enacted, entered, issued,
promulgated or enforced by any Governmental Authority or a court of
competent jurisdiction shall be in effect which has the effect of making
the Merger illegal or otherwise prohibiting consummation of the Merger or
of limiting or restricting the Surviving Corporation's conduct or operation
of the business of the Company after the Merger; and
(d) all other necessary and material governmental and regulatory
clearances, consents, or approvals shall have been received.
SECTION 8.02 Conditions to the Obligations of Merger Sub. The obligations
of Merger Sub to consummate the Merger are subject to the satisfaction or, if
permitted by applicable Law, waiver by Merger Sub of the following further
conditions:
(a) The Company shall have performed, in all material respects, all of
its obligations hereunder required to be performed by it at or prior to the
Effective Time; each of the representations and warranties of the Company
contained in this Agreement (i) that are qualified by materiality or by
Company Material Adverse Effect shall be true and correct and (ii) that are
not qualified by materiality
25
102
or by Company Material Adverse Effect shall be true and correct in all
material respects, in each case, as of the date hereof and as of the
Closing Date as if made at and as of such time; and Merger Sub shall have
received a certificate signed by an executive officer of the Company as to
compliance with the conditions set forth in this Section 8.02(a);
(b) Saw Mill, Parent and Merger Sub shall have received an opinion of
counsel from Xxxxxxx Xxxx & Xxxxxxxxx LLP, which opinion of counsel shall
be substantially in the form attached hereto as Exhibit H;
(c) Surviving Corporation shall have obtained the Debt and Preferred
Equity Financing on the terms and conditions set forth in the Commitment
Letters or otherwise obtained debt and/or other financing sufficient to
consummate the Merger (including the payment of the Merger Consideration,
the Option Consideration and the repayment of indebtedness for borrowed
money of the Company or any of its subsidiaries that is required to be
repaid as a result of the Transactions, if any) and to pay all fees and
expenses in connection therewith and to provide working capital for the
Surviving Corporation;
(d) Since December 31, 1998, no event shall have occurred which has or
which would reasonably be expected to have a Company Material Adverse
Effect;
(e) All Company Stock Options shall be extinguished and, as of
immediately prior to Closing, the Company shall have no liability or
obligation with respect to any such Company Stock Options, except as
provided in Section 2.03;
(f) Except as set forth on Exhibit D hereto, all outstanding
indebtedness for borrowed money of the Company or any of its subsidiaries
shall be paid in full, (ii) any letters of credit of the Company or any of
its subsidiaries shall be terminated and (iii) the Company shall have
obtained (x) the release of all liens or encumbrances on the capital stock
of the Company or any of its subsidiaries and all assets of the Company or
any of its subsidiaries securing indebtedness and (y) the release of all
guarantees by the Company or any of its subsidiaries of indebtedness for
borrowed money. At the Closing, the Company shall provide or arrange to be
provided to Merger Sub all releases and other documents in form and
substance reasonably satisfactory to Merger Sub demonstrating the release
of such liens, encumbrances and guarantees;
(g) The Company shall have obtained all consents, authorizations,
approvals and waivers from third parties, in form reasonably acceptable to
Merger Sub (x) which are necessary in order to enable (i) the consummation
of the Transactions and (ii) the Surviving Corporation to conduct its
business in all material respects after the Closing Date on the same basis
as conducted prior to the date hereof, in each case, except for those
failure of which to obtain would not have, individually or in the
aggregate, a Company Material Adverse Effect and (y) which are listed on
Exhibit E hereto; and
(h) The Dissenting Shares, if any, shall not include greater than 10%
of the issued and outstanding shares of Company Common Stock.
SECTION 8.03 Conditions to the Obligations of the Company and the
Shareholders. The obligations of the Company and the Shareholders to consummate
the Merger are subject to the satisfaction or, if permitted by applicable Law,
waiver by the Company or the Shareholders, as the case may be, of the following
further conditions:
(a) Each of Merger Sub, Parent and Saw Mill shall have performed, in
all material respects, all of its obligations hereunder required to be
performed by it at or prior to the Effective Time; each of the
representations and warranties of Merger Sub, Parent and Saw Mill contained
in this Agreement (i) that are qualified by materiality shall be true and
correct and (ii) that are not qualified by materiality, shall be true and
correct in all material respects, in each case, as of date hereof and as of
the Closing Date as if made at and as of such time; and the Company and
Shareholders shall have received a certificate signed by an executive
officer of Merger Sub, an executive officer of Parent and an authorized
person of Saw Mill as to compliance with the conditions set forth in this
Section 8.03(a).
26
103
SECTION 8.04 Conditions to the Obligations of Saw Mill and Parent. The
obligations of Saw Mill to execute and deliver the Contribution Agreement and to
make the Saw Mill Contribution (as such term is defined in the Contribution
Agreement) and the obligations of Parent to execute and deliver the Contribution
Agreement and to consummate the Pre-Merger Contributions are subject to the
satisfaction or, if permitted by applicable Law, waiver by Saw Mill of the
following conditions:
(a) the conditions set forth in Section 8.01 of this Agreement; and
(b) the conditions set forth in Section 8.02.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01 Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, notwithstanding any
requisite approval and adoption of this Agreement and the transactions
contemplated hereby by the shareholders of the Company:
(a) by mutual written consent of the Company and Merger Sub;
(b) by Merger Sub or the Company, if (i) the waiting period applicable
to the consummation of the Merger under the HSR Act shall not have expired
or been terminated prior to Xxxxxx 00, 0000, (xx) any court of competent
jurisdiction in the United States or other United States Governmental
Authority shall have issued an order (other than a temporary restraining
order), decree or ruling, or taken any other action, in each case, which is
final and non-appealable and which restrains, enjoins or otherwise
prohibits the Merger or (iii) the Effective Time shall not have occurred on
or before August 31, 2000; provided, that the right to terminate this
Agreement under this Section 9.01(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the
cause of or resulted in the failure of the Closing to occur;
(c) by Merger Sub or the Company, if the Shareholders' Meeting shall
have been held and the holders of outstanding shares of Company Common
Stock shall have failed to approve and adopt this Agreement and the Merger
upon a vote taken at such meeting (including any adjournment or
postponement thereof); provided, that the right to terminate this Agreement
under this Section 9.01(c) shall not be available to the Company if its
breach of this Agreement has been the cause of or resulted in the failure
to obtain such shareholder approval;
(d) by Merger Sub, if the Board of Directors of the Company or any
committee thereof (including the Special Committee) (i) shall withdraw,
modify in a manner adverse to Merger Sub, or refrain from giving its
approval or recommendation of this Agreement or any of the Transactions or
(ii) recommends an Acquisition Proposal or a potential Third Party
Transaction to the Company's shareholders pursuant to Section 7.05;
(e) by the Company, upon a material breach of any representation,
warranty, or agreement of any of Parent, Saw Mill or Merger Sub set forth
in this Agreement; provided, however, that, if such breach is of a type
curable and is curable by Parent, Saw Mill or Merger Sub, as the case may
be, through the exercise of its reasonable best efforts and Parent, Saw
Mill or Merger Sub, as the case may be, continues to exercise such
reasonable best efforts, the Company may not terminate this Agreement under
this Section 9.01(e) for a period of 20 business days from the date on
which the Company delivers to Parent, Saw Mill or Merger Sub, as the case
may be, written notice setting forth in reasonable detail the circumstances
giving rise to such breach;
(f) by Merger Sub, upon a material breach of any representation,
warranty, or agreement of the Company set forth in this Agreement;
provided, however, that, if such breach (other than a breach of Section
7.05) is of a type curable and is curable by the Company through the
exercise of its reasonable best efforts and the Company continues to
exercise such reasonable best efforts, Merger Sub may not terminate this
Agreement under this Section 9.01(f) for a period of 20 business days from
the date on
27
104
which Merger Sub delivers to the Company written notice setting forth in
reasonable detail the circumstances giving rise to such breach; or
(g) by the Company in accordance with Section 7.05(a); provided, that
in order for the termination of this Agreement pursuant to this Section
9.01(g) to be deemed effective, the Company shall have complied with all of
the provisions of Section 7.05, including the notice provisions contained
therein and the payment of the Termination Fee.
SECTION 9.02 Method of Termination; Effect of Termination.
(a) Any such right of termination hereunder shall be exercised by
written notice of termination given by the terminating party to the
applicable other parties hereto in the manner hereinafter provided in
Section 10.02.
(b) In the event of the termination of this Agreement pursuant to
Section 9.01, this Agreement shall forthwith become void, there shall be no
liability under this Agreement on the part of any of the parties hereto or
any of their respective officers or directors and all rights and
obligations of any party hereto shall cease, except for (i) fraud, (ii) as
set forth in Section 9.03 and (iii) the provisions of Sections 7.04;
provided, however, that nothing herein shall relieve any party from
liability for, or be deemed to waive any rights of specific performance of
this Agreement available to a party by reason of, any intentional breach by
the other party or parties of this Agreement.
SECTION 9.03 Fees and Expenses.
(a) Except as provided in this Section 9.03, all expenses incurred by
the parties hereto shall be borne solely and entirely by the party which
has incurred the same; provided, however, that (i) the Company shall bear
all expenses related to printing, filing and mailing the Proxy Statement
and all SEC and other regulatory filing fees incurred in connection with
the Proxy Statement, and (ii) Merger Sub and the Company shall each pay
one-half of the filing fee in connection with any filing by Merger Sub and
the Company under the HSR Act which relates to the Merger.
(b) In the event that this Agreement is terminated pursuant to
Sections 9.01(a) or 9.01(b) and at the time of such termination the
conditions contained in Section 8.02(d) have not been satisfied (other than
from an event which is directly caused by or directly results from facts
known by Merger Sub as of the date hereof) or pursuant to Sections 9.01(d),
9.01(f) or 9.01(g), on the date of such termination, the Company shall pay
Saw Mill (or at Saw Mill's direction, to such other person as Saw Mill may
designate in writing) by wire transfer of immediately available funds to an
account specified by Saw Mill an amount (such amount, the "Saw Mill
Reimbursable Expenses") in cash equal to the lesser of (x) the aggregate
amount of (i) the costs, fees and expenses of counsel, accountants,
financial advisors and other experts and advisors as well as fees and
expenses incident to the negotiation, preparation and execution of this
Agreement and the attempted financing and consummation of the transactions
contemplated by this Agreement (including investment banking and commitment
fees), the related documentation and the shareholders' meetings and
consents ("Costs"), including without limitation, the legal fees of the
providers of the Commitment Letters and (ii) out-of-pocket expenses, in
each case, of Parent, Merger Sub, Saw Mill and/or any of their respective
affiliates (as such Costs and out-of-pocket expenses may be estimated by
Saw Mill in good faith prior to the date of such payment, subject to an
adjustment payment between the parties upon Saw Mill's definitive
determination of such Costs and out-of-pocket expenses) and (y) $1,500,000;
provided, however, that Saw Mill shall have no right to receive Saw Mill
Reimbursable Expenses pursuant to this Section 9.03(b) if (i) Saw Mill's,
Parent's or Merger Sub's breach of or failure to fulfill any obligation
under this Agreement caused or resulted in the termination of this
Agreement or (ii) if this Agreement is terminated pursuant to Section
9.01(d)(i) and the applicable withdrawal or modification referred to in
Section 9.01(d)(i) is a direct result of (xx) Saw Mill's, Parent's and/or
Merger Sub's breach of Section 7.15 which continues for a period of 20
business days from the date on which the Company delivers to Saw Mill
written notice setting forth in reasonable detail the circumstances giving
rise to such breach (other than if prior to such termination an event has
occurred which has or which would reasonably be expected to have a Company
Material Adverse Effect or the
28
105
Company has materially breached any of its representations, warranties or
covenants contained in this Agreement) or (yy) a material adverse change in
any of the Commitment Letters, which results in a material adverse change
in the capital structure for the Surviving Corporation as of immediately
after the Closing (the "Surviving Corporation Capital Structure") as
compared to the Surviving Corporation Capital Structure as contemplated as
of the date hereof, which causes the Company Financial Advisor to either
withdraw the Xxxxxx Opinion or modify the Xxxxxx Opinion in a manner which
is materially adverse to the consummation of the Merger, but only if the
Company Financial Advisor has provided Saw Mill with a period of at least
20 business days (which period shall commence upon written notice from the
Company Financial Advisor setting forth its concerns regarding the changed
Surviving Corporation Capital Structure and the reasons for the issuance of
such negative opinion), during which time Saw Mill has had an opportunity
to address or cure the Company Financial Advisor's concerns regarding the
changed Surviving Corporation Capital Structure; provided, further, that if
the Company at any time pays the Termination Fee, the Company shall
thereafter have no obligation to pay any Saw Mill Reimbursable Expenses.
(c) In the event that this Agreement is terminated pursuant to Section
9.01(e), Saw Mill, Parent or Merger Sub shall pay the Company by wire
transfer of immediately available funds to an account specified by the
Company an amount (such amount, the "Company Reimbursable Expenses") in
cash equal to the lesser of (x) the aggregate amount of (i) the Costs
incurred in connection with pursuing the transactions contemplated by this
Agreement and (ii) out-of-pocket expenses, in each case, of the Company (as
such Costs and out-of-pocket expenses may be estimated by the Company in
good faith prior to the date of such payment, subject to an adjustment
payment between the parties upon the Company's definitive determination of
such Costs and out-of-pocket expenses) and (y) $1,500,000; provided,
however, that the Company shall have no right to receive Company
Reimbursable Expenses pursuant to this Section 9.03(c) if the Company's
breach of or failure to fulfill any obligation under this Agreement caused
or resulted in the termination of this Agreement.
(d) In the event that this Agreement is terminated by Merger Sub or
the Company pursuant to Section 9.01(d) or Section 9.01(g), on the date of
such termination, the Company shall pay Saw Mill (or at Saw Mill's
direction, such other person as Saw Mill may designate in writing) by wire
transfer of immediately available funds to an account specified by Saw Mill
a payment in the amount (such amount, the "Termination Fee") equal to (i)
$6,700,000 minus (ii) the amount of Saw Mill Reimbursable Expenses, if any,
paid by the Company on or prior to the date of such termination; provided,
however, that Saw Mill shall have no right to receive the Termination Fee
pursuant to this Section 9.03(d) if this Agreement is terminated pursuant
to Section 9.01(d)(i) and the applicable withdrawal or modification
referred to in Section 9.01(d)(i) is a result of (x) Saw Mill's, Parent's
and/or Merger Sub's breach of Section 7.15 which continues for a period of
20 business days from the date on which the Company delivers to Saw Mill
written notice setting forth in reasonable detail the circumstances giving
rise to such breach (other than if prior to such termination an event has
occurred which has or which would reasonably be expected to have a Company
Material Adverse Effect or the Company has materially breached any of its
representations, warranties or covenants contained in this Agreement) or
(y) a material adverse change in any of the Commitment Letters, which
results in a material adverse change in the Surviving Corporation Capital
Structure as compared to the Surviving Corporation Capital Structure as
contemplated as of the date hereof, which causes the Company Financial
Advisor to either withdraw the Xxxxxx Opinion or modify the Xxxxxx Opinion
in a manner which is materially adverse to the consummation of the Merger,
but only if the Company Financial Advisor has provided Saw Mill with a
period of at least 20 business days (which period shall commence upon
written notice from the Company Financial Advisor setting forth its
concerns regarding the changed Surviving Corporation Capital Structure and
the reasons for the issuance of such negative opinion), during which time
Saw Mill has had an opportunity to address or cure the Company Financial
Advisor's concerns regarding the changed Surviving Corporation Capital
Structure. If this Agreement is terminated pursuant to Section 9.01(b),
Section 9.01(c) or Section 9.01(f) and a potential Third Party Transaction
has been publicly disclosed prior to such termination, then if within nine
months after such termination a Third Party Transaction with the party or
parties or any of their respective affiliates which proposed such Third
Party Transaction
29
106
is consummated, on the date of the consummation of such Third Party
Transaction, the Company shall pay the Termination Fee to Saw Mill (or at
Saw Mill's direction, such other person as Saw Mill may designate in
writing) by wire transfer of immediately available funds to an account
specified by Saw Mill.
SECTION 9.04 Amendment. This Agreement may be amended by the parties hereto
at any time prior to the Effective Time; provided, that after the approval and
adoption of this Agreement by the shareholders of the Company, no amendment may
be made which would (a) change the amount or the type of Merger Consideration to
be received by the shareholders of the Company pursuant to the Merger, (b)
change any other term or condition of the Agreement if such change would
materially and adversely affect the Company or the holders of shares of Company
Common Stock or (c) without the vote of the shareholders entitled to vote on the
matter, change any term of the Articles of Incorporation of the Company. This
Agreement may not be amended nor may any provision of this Agreement be waived
except by an instrument in writing signed by the parties hereto.
SECTION 9.05 Waiver. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any obligation or other
act of any other party hereto, (b) waive any inaccuracy in the representations
and warranties of the other party contained herein or in any document,
certificate or writing delivered by the other party pursuant hereto and (c)
waive compliance with any agreement or condition to its obligations (other than
the conditions set forth in Sections 8.01(a) and (b)) contained herein. Any such
extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01 Non-Survival of Representations and Warranties. The
representations and warranties in this Agreement and any certificate delivered
pursuant hereto by any person shall terminate at the Effective Time or upon the
termination of this Agreement pursuant to Section 9.01.
SECTION 10.02 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by facsimile
or by registered or certified mail (postage prepaid, return receipt requested)
or by a nationally recognized overnight courier service to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 10.02):
if to Merger Sub, Parent or Saw Mill:
c/o Saw Mill Capital LLC
00 Xxx Xxxx Xxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx Xxxxx
Xxxxx Xxxxxx
with copies to:
Xxxxxxxx & Xxxxx
Citicorp Center
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxxxx Xxxxx, Esq.
W. Xxxxx Xxxxxxx, Esq.
30
107
if to the Company:
Xxxxx Incorporated
000 X. Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxx Xxxxx
with copies to:
Xxxxxxx Xxxx & Friedrich LLP
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: K. Xxxx Xxxxxxxx, Esq.
and
Xxxxxxxx Xxxxxxx Van Deuren Xxxxxx & Xxxxxxxxxx
0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
if to any Shareholder:
c/o Xxxxx Incorporated
000 X. Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx and Xxxx Train
with a copy to:
Xxxxx & Lardner
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000-0000
Telecopy No.: (000) 000-0000
Attention: Xxx Xxxxx
SECTION 10.03 Certain Definitions. For purposes of this Agreement, the
term:
(a) "Acquisition" means the Merger and the other transactions
contemplated by this Agreement (other than the Pre-Merger Contributions and
the Debt and Preferred Equity Financing);
(b) "affiliate" of a specified person means a person who directly or
indirectly through one or more intermediaries controls, is controlled by,
or is under common control with, such specified person;
(c) "beneficial owner" with respect to any shares means a person who
shall be deemed to be the beneficial owner of such shares (i) which such
person or any of its affiliates or associates (as such term is defined in
Rule 12b-2 promulgated under the Exchange Act) beneficially owns, directly
or indirectly, (ii) which such person or any of its affiliates or
associates has, directly or indirectly, (A) the right to acquire (whether
such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of consideration rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement, arrangement
or understanding or (iii) which are beneficially owned, directly or
indirectly, by any other persons with whom such person or any of its
affiliates or associates or any person with whom such person or any of its
affiliates or associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any such
shares;
31
108
(d) "business day" means any day on which the principal offices of the
SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized to close in the City of Milwaukee, Wisconsin;
(e) "Code" means the Internal Revenue Code of 1986, as amended;
(f) "Control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of
voting securities, as trustee or executor, by contract or credit
arrangement or otherwise;
(g) "Governmental Authority" means any United States (federal, state
or local), foreign or supra-national Government, or governmental,
regulatory or administrative authority, agency or commission;
(h) "Intellectual Property Rights" means all patents, patent
applications and patent disclosures; all inventions (whether or not
patentable and whether or not reduced to practice); all trademarks, service
marks, trade dress, trade names and corporate names and all the goodwill
associated therewith; all mask works; all registered and unregistered
statutory and common law copyrights; all registrations, applications and
renewals for any of the foregoing; and all trade secrets, confidential
information, ideas, formulae, compositions, know-how, manufacturing and
production processes and techniques, research information, drawings,
specifications, designs, plans, improvements, proposals, technical and
computer data, documentation and software, financial business and marketing
plans, customer and supplier lists and related information, marketing
materials and all other proprietary rights;
(i) "Knowledge" means the actual knowledge of any of the Company's
Chairman, Chief Executive Officer or Chief Financial Officer.
(j) "Lien" shall mean, with respect to any property or asset, any
mortgage, pledge, security interest, lien (statutory or other), charge,
encumbrance or other similar restrictions or limitations of any kind or
nature whatsoever on or with respect to such property or asset;
(k) "Owned Shares" means the aggregate shares of Company Common Stock
owned beneficially and of record by the Shareholders as of the date hereof
as set forth on Exhibit C hereof (as such number may be reduced as a result
of the consummation of the transactions contemplated by the Contribution
Agreement);
(l) "person" means an individual, corporation, limited liability
company, partnership, limited partnership, syndicate, person (including,
without limitation, a "person" as defined in Section 13(d)(3) of the
Exchange Act), trust, association or entity or government, political
subdivision, agency or instrumentality of a government;
(m) "subsidiary" or "subsidiaries" of any person means any
corporation, partnership, joint venture or other legal entity of which such
person (either above or through or together with any other subsidiary),
owns, directly or indirectly, 50% or more of the stock or other equity
interests, the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such
corporation or other legal entity;
(n) "Tax" or "Taxes" means federal, state, county, local, foreign or
other income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications,
real or personal property, capital stock, license, payroll, wage or other
withholding, employment, social security, severance, stamp, occupation,
alternative or add-on minimum, estimated and other taxes of any kind
whatsoever (including deficiencies, penalties, additions to tax, and
interest attributable thereto) whether disputed or not;
(o) "Tax Return" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including
any amendment thereof;
(p) "Transactions" means the Acquisition and the Debt and Preferred
Equity Financing; and
32
109
(q) "Voting Agreement" means that certain Voting Agreement, dated as
of the date hereof, by and among Merger Sub and the Shareholders and the
other shareholders of the Company named therein.
SECTION 10.04 Accounting Terms. All accounting terms used herein which are
not expressly defined in this Agreement shall have the respective meanings given
to them in accordance with GAAP.
SECTION 10.05 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Merger is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that the
Merger be consummated as originally contemplated to the fullest extent possible.
SECTION 10.06 Entire Agreement; Assignment. This Agreement (including the
Exhibits, and the Company Disclosure Schedule, which are hereby incorporated
herein and made a part hereof for all purposes as if fully set forth herein)
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and undertakings, both written
and oral, among the parties, or any of them, with respect to the subject matter
hereof. This Agreement shall not be assigned by operation of law or otherwise
without the prior written consent of the other parties, except that Parent,
Merger Sub and the Company may assign their respective rights and obligations
hereunder as collateral security to any person providing financing to Parent,
Merger Sub and/or the Company; provided, that no such assignment shall change
the amount or nature of the Merger Consideration or relieve the assigning party
of its obligations hereunder if such assignee does not perform such obligations.
SECTION 10.07 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, other than Section 7.06 (which is intended to be for the benefit of
the persons covered thereby and may be enforced by such persons).
SECTION 10.08 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to specific performance of the terms hereof, in addition to any other remedy
at law or in equity.
SECTION 10.09 Governing Law. The provisions of this Agreement shall be
governed by and construed in accordance with the laws of the State of Wisconsin
(excluding any conflict of law rule or principle that would refer to the laws of
another jurisdiction). EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, TRIAL BY
JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING HEREUNDER.
SECTION 10.10 Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 10.11 Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
SECTION 10.12 Construction. This Agreement and any documents or instruments
delivered pursuant hereto or in connection herewith shall be construed without
regard to the identity of the person who drafted the various provisions of the
same. Each and every provision of this Agreement and such other documents and
instruments shall be construed as though all of the parties participated equally
in the drafting of the same. Consequently, the parties acknowledge and agree
that any rule of construction that a document is to be
33
110
construed against the drafting party shall not be applicable either to this
Agreement or such other documents and instruments.
SECTION 10.13 Recitals. The Recitals to this Agreement are a part of this
Agreement and are hereby incorporated by reference.
SECTION 10.14 Knowledge of Saw Mill, Parent and Merger Sub. For all
purposes of this Agreement, the phrases "to Saw Mill's Knowledge", "to Parent's
Knowledge", "to Merger Sub's Knowledge" and "known by Merger Sub" shall mean as
of the applicable date, the actual knowledge of Xxxxxx Xxxxx, Xxxxx Xxxxxx or
Xxxxxxx Xxxxxxxx.
* * * * *
34
111
IN WITNESS WHEREOF, Saw Mill, Parent, Merger Sub, Shareholders and the
Company have caused this Agreement and Plan of Merger to be executed as of the
date first written above by their respective officers thereunto duly authorized.
SAW MILL CAPITAL FUND II, L.P.
By: Saw Mill Investments II, LLC,
Its General Partner
By: /s/ XXXXXX XXXXX
---------------------------------
Name: Xxxxxx Xxxxx
Title: President
CALENDAR HOLDINGS, INC.
By: /s/ XXXXXX XXXXX
------------------------------------
Name: Xxxxxx Xxxxx
Title: President
CALENDAR ACQUISITION CORP.
By: /s/ XXXXXX XXXXX
------------------------------------
Name: Xxxxxx Xxxxx
Title: President
XXXXX INCORPORATED
By: /s/ XXXX TRAIN
------------------------------------
Name: Xxxx Train
Title: Chief Executive Officer
/s/ XXXXXXX X. XXXXXX
--------------------------------------
XXXXXXX X. XXXXXX
/s/ XXXX TRAIN
--------------------------------------
XXXX TRAIN
112
AMENDMENT NO. 1 TO
AGREEMENT AND PLAN OF MERGER
This Amendment No. 1 dated as of March 13, 2000, to that Agreement and Plan
of Merger ("Merger Agreement") dated as of January 30, 2000, among Saw Mill
Capital Fund II, L.P., a Delaware limited partnership ("Saw Mill"), Calendar
Holdings, Inc., a Delaware corporation and a wholly-owned subsidiary of Saw Mill
("Parent"), Calendar Acquisition Corp., a Wisconsin corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), Xxxxx Incorporated, a
Wisconsin corporation (the "Company"), Xxxxxxx X. Xxxxxx ("Chairman") and Xxxx
Train ("Chief Executive Officer" and together with the Chairman, the
"Shareholders"). Capitalized terms used herein and not defined shall have the
meaning given them in the Merger Agreement.
WHEREAS, Section 7.02(a) of the Merger Agreement requires the Company to
file the Proxy Statement with the SEC no later than March 15, 2000;
WHEREAS, the parties agree that it is in the best interests of the parties
to delay filing the Proxy Statement with the SEC by up to nine days.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained and intending to be legally bound hereby, the
parties hereby agree as follows:
1. The parties hereby agree that the proviso relating to filing of the
Proxy Statement with the SEC contained in Section 7.02(a) of the Merger
Agreement is hereby amended to read as follows:
"provided that subject to Saw Mill's, Parent's and Merger Sub's
compliance with the immediately-preceding sentence, in no event shall the
Company file the Proxy Statement with the SEC any later than the date 54
days after the date hereof."
2. All other terms and provisions of the Merger Agreement shall remain
unchanged and in full force and effect.
[Signatures on Following Page]
113
IN WITNESS WHEREOF, Saw Mill, Parent, Merger Sub, Shareholders and the
Company have caused this Amendment No. 1 to the Agreement and Plan of Merger to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
SAW MILL CAPITAL FUND II, L.P.
By: Saw Mill Investments II, LLC,
Its General Partner
By: /s/ XXXXXX XXXXX
------------------------------------
Name: Xxxxxx Xxxxx
Title: President
CALENDAR HOLDINGS, INC.
By: /s/ XXXXXX XXXXX
------------------------------------
Name: Xxxxxx Xxxxx
Title: President
CALENDAR ACQUISITION CORP.
By: /s/ XXXXXX XXXXX
------------------------------------
Name: Xxxxxx Xxxxx
Title: President
XXXXX INCORPORATED
By: /s/ XXXX TRAIN
------------------------------------
Name: Xxxx Train
Title: Chief Executive Officer
/s/ XXXXXXX X. XXXXXX
------------------------------------
Xxxxxxx X. Xxxxxx
/s/ XXXX TRAIN
------------------------------------
Xxxx Train
114
AMENDMENT NO. 2 TO
AGREEMENT AND PLAN OF MERGER
This Amendment No. 2 dated as of May 8, 2000, to that Agreement and Plan of
Merger dated as of January 30, 2000 (as amended, the "Merger Agreement"), among
Saw Mill Capital Fund II, L.P., a Delaware limited partnership ("Saw Mill"),
Calendar Holdings, Inc., a Delaware corporation and a wholly-owned subsidiary of
Saw Mill ("Parent"), Calendar Acquisition Corp., a Wisconsin corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), Xxxxx Incorporated, a
Wisconsin corporation (the "Company"), Xxxxxxx X. Xxxxxx ("Chairman") and Xxxx
Train ("Chief Executive Officer" and together with the Chairman, the
"Shareholders"). Capitalized terms used herein and not defined shall have the
meaning given them in the Merger Agreement.
WHEREAS, the parties wish to amend the Merger Agreement to reduce the
number of shares of Company Common Stock to be contributed by the Shareholders.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained and intending to be legally bound hereby, the
parties hereby agree as follows:
1. The fifth "Whereas" clause of the Merger Agreement is hereby amended by
deleting the reference to "2,552,817" contained therein and replacing it with
"2,437,262".
2. EXHIBIT A to the Merger Agreement is hereby amended and restated in its
entirety as set forth on EXHIBIT A attached hereto.
3. All other terms and provisions of the Merger Agreement shall remain
unchanged and in full force and effect.
[Signatures on Following Page]
115
IN WITNESS WHEREOF, Saw Mill, Parent, Merger Sub, Shareholders and the
Company have caused this Amendment No. 2 to the Agreement and Plan of Merger to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
SAW MILL CAPITAL FUND II, L.P.
By: Saw Mill Investments II, LLC,
Its General Partner
By: /s/ XXXXXX XXXXX
------------------------------------
Name: Xxxxxx Xxxxx
Title: President
CALENDAR HOLDINGS, INC.
By: /s/ XXXXXX XXXXX
------------------------------------
Name: Xxxxxx Xxxxx
Title: President
CALENDAR ACQUISITION CORP.
By: /s/ XXXXXX XXXXX
------------------------------------
Name: Xxxxxx Xxxxx
Title: President
XXXXX INCORPORATED
By: /s/ XXXX TRAIN
------------------------------------
Name: Xxxx Train
Title: Chief Executive Officer
/s/ XXXXXXX X. XXXXXX
------------------------------------
Xxxxxxx X. Xxxxxx
/s/ XXXX TRAIN
------------------------------------
Xxxx Train
116
ANNEX B
January 29, 2000
Special Committee of the Board of Directors
Xxxxx Incorporated
000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000
Members of the Special Committee of the Board of Directors:
We understand that Xxxxx Incorporated (the "Company"), Saw Mill Capital
Fund II, L.P. (collectively with its affiliates, "SMC" or the "Purchaser") and
the Management Stockholders (as defined below), intend to enter into an
Agreement and Plan of Merger (the "Agreement") pursuant to which a newly-formed
subsidiary of the Purchaser will merge with and into the Company (the "Merger")
and, upon effectiveness of the Merger, each issued and outstanding share of the
Company's common stock (other than shares held by the Chairman, Xxxxxxx Xxxxxx,
and the Chief Executive Officer, Xxxx Train, (the "Management Stockholders") and
the Purchaser) will be converted into the right to receive $11.25 in cash (the
"Proposed Transaction"). The terms and conditions of the Proposed Transaction
are set forth in more detail in the Agreement dated January 30, 2000 among
Calendar Holdings, Inc., Calendar Acquisition Corp., the Company and the
Management Stockholders.
We have been requested by the Special Committee of the Board of Directors
of the Company (the "Special Committee") to render our opinion with respect to
the fairness, from a financial point of view, to the stockholders of the Company
other than the Management Stockholders and the Purchaser (the "Public
Stockholders"), of the consideration to be received by the Public Stockholders
in the Proposed Transaction. We have not been requested to opine as to, and our
opinion does not in any manner address, the Company's underlying business
decision to proceed with or effect the Proposed Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Agreement and
the specific terms of the Proposed Transaction, (2) the annual report of the
Company for the fiscal year ended December 25, 1998 filed on Form 10-K, the
quarterly reports of the Company for the fiscal quarters ended March 26, 1999,
June 25, 1999 and September 24, 1999 filed on Form 10-Q, and such other publicly
available information concerning the Company as we believe to be relevant to our
analysis, (3) financial and operating information with respect to the business,
operations and prospects of the Company furnished to us by the Company, (4) a
trading history of the Company's common stock from June 16, 1987 to the present
and a comparison of that trading history with those of other companies that we
deemed relevant, (5) a comparison of the historical financial results and
present financial condition of the Company with those of other companies that we
deemed relevant and (6) a comparison of the financial terms of the Proposed
Transaction with the financial terms of certain other transactions that we
deemed relevant. In addition, we have had discussions with the management of the
Company concerning the industries in which it operates, businesses, operations,
assets, liabilities, financial condition and prospects and have undertaken such
other studies, analyses and investigations as we deemed appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of the financial and other information used by us without
assuming any responsibility for independent verification of such information and
have further relied upon the assurances of management of the Company that they
are not aware of any facts or circumstances that would make such information
inaccurate or misleading. With respect to the financial projections of the
Company, upon advice of the Company, we have assumed that such projections have
been reasonably prepared on a basis reflecting the best currently available
estimates and judgments of the management of the Company as to the future
financial performance of the Company and that the Company will perform
substantially in accordance with such projections. In arriving at our opinion,
we have not conducted a physical inspection of the properties and facilities of
the Company and have not
117
January 29, 2000
Page 2
made or obtained any evaluations or appraisals of the assets or liabilities of
the Company. In addition, you have not authorized us to solicit, and we have not
solicited any indications of interest from any third party with respect to the
purchase of all or a part of the Company's business. Our opinion necessarily is
based upon market, economic and other conditions as they exist on, and can be
evaluated as of, the date of this letter.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the consideration to be
received by the Public Stockholders in the Proposed Transaction is fair to the
Public Stockholders.
We have acted as financial advisor to the Special Committee in connection
with the Proposed Transaction and will receive a fee for our services which is
contingent in part upon the consummation of the Proposed Transaction. In
addition, the Company has agreed to indemnify us for certain liabilities that
may arise out of the rendering of this opinion. In the ordinary course of our
business, we may trade in the equity securities of the Company for our own
account and for the accounts of our customers and, accordingly, may at any time
hold a long or short position in such securities.
This opinion is for the use and benefit of the Special Committee and the
Board of Directors and is rendered to the Special Committee in connection with
its consideration of the Proposed Transaction. This opinion is not intended to
be and does not constitute a recommendation to any stockholder of the Company as
to how such stockholder should vote with respect to the Proposed Transaction.
Very truly yours,
/s/ Xxxxxx Brothers
XXXXXX BROTHERS
118
ANNEX C
SECTIONS 180.1301 - 180.1331 OF THE WISCONSIN BUSINESS CORPORATION LAW
DISSENTERS' RIGHTS
180.1301. DEFINITIONS
In ss. 180.1301 to 180.1331:
(1) "Beneficial shareholder" means a person who is a beneficial owner of
shares held by a nominee as the shareholder.
(1m) "Business combination" has the meaning given in s. 180.1130(3).
(2) "Corporation" means the issuer corporation or, if the corporate action
giving rise to dissenters' rights under s. 180.1302 is a merger or share
exchange that has been effectuated, the surviving domestic corporation or
foreign corporation of the merger or the acquiring domestic corporation or
foreign corporation of the share exchange.
(3) "Dissenter" means a shareholder or beneficial shareholder who is
entitled to dissent from corporate action under s. 180.1302 and who exercises
that right when and in the manner required by ss. 180.1320 to 180.1328.
(4) "Fair value", with respect to a dissenter's shares other than in a
business combination, means the value of the shares immediately before the
effectuation of the corporate action to which the dissenter objects, excluding
any appreciation or depreciation in anticipation of the corporate action unless
exclusion would be inequitable. "Fair value", with respect to a dissenter's
shares in a business combination, means market value, as defined in s.
180.1130(9)(a) 1 to 4.
(5) "Interest" means interest from the effectuation date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all of the circumstances.
(6) "Issuer corporation" means a domestic corporation that is the issuer of
the shares held by a dissenter before the corporate action.
180.1302. RIGHT TO DISSENT
(1) Except as provided in sub. (4) and s. 180.1008(3), a shareholder or
beneficial shareholder may dissent from, and obtain payment of the fair value of
his or her shares in the event of, any of the following corporate actions:
(a) Consummation of a plan of merger to which the issuer corporation
is a party if any of the following applies:
1. Shareholder approval is required for the merger by s. 180.1103
or by the articles of incorporation.
2. The issuer corporation is a subsidiary that is merged with its
parent under s. 180.1104.
(b) Consummation of a plan of share exchange if the issuer
corporation's shares will be acquired, and the shareholder or the
shareholder holding shares on behalf of the beneficial shareholder is
entitled to vote on the plan.
1
119
(c) Consummation of a sale or exchange of all, or substantially all,
of the property of the issuer corporation other than in the usual and
regular course of business, including a sale in dissolution, but not
including any of the following:
1. A sale pursuant to court order.
2. A sale for cash pursuant to a plan by which all or substantially
all of the net proceeds of the sale will be distributed to the
shareholders within one year after the date of sale.
(d) Except as provided in sub. (2), any other corporate action taken
pursuant to a shareholder vote to the extent that the articles of
incorporation, bylaws or a resolution of the board of directors provides
that the voting or nonvoting shareholder or beneficial shareholder may
dissent and obtain payment for his or her shares.
(2) Except as provided in sub. (4) and s. 180.1008(3), the articles of
incorporation may allow a shareholder or beneficial shareholder to dissent from
an amendment of the articles of incorporation and obtain payment of the fair
value of his or her shares if the amendment materially and adversely affects
rights in respect of a dissenter's shares because it does any of the following:
(a) Alters or abolishes a preferential right of the shares.
(b) Creates, alters or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares.
(c) Alters or abolishes a preemptive right of the holder of shares to
acquire shares or other securities.
(d) Excludes or limits the right of the shares to vote on any matter
or to cumulate votes, other than a limitation by dilution through issuance
of shares or other securities with similar voting rights.
(e) Reduces the number of shares owned by the shareholder or
beneficial shareholder to a fraction of a share if the fractional share so
created is to be acquired for cash under s. 180.0604.
(3) Notwithstanding sub. (1)(a) to (c), if the issuer corporation is a
statutory close corporation under ss. 180.1801 to 180.1837, a shareholder of the
statutory close corporation may dissent from a corporate action and obtain
payment of the fair value of his or her shares, to the extent permitted under
sub. (1)(d) or (2) or s. 180.1803, 180.1813(1)(d) or (2)(b), 180.1815(3) or
180.1829(1)(c).
(4) Except in a business combination or unless the articles of
incorporation provide otherwise, subs. (1) and (2) do not apply to the holders
of shares of any class or series if the shares of the class or series are
registered on a national securities exchange or quoted on the national
association of securities dealers, inc., automated quotations system on the
record date fixed to determine the shareholders entitled to notice of a
shareholders meeting at which shareholders are to vote on the proposed corporate
action.
(5) Except as provided in s. 180.1833, a shareholder or beneficial
shareholder entitled to dissent and obtain payment for his or her shares under
ss. 180.1301 to 180.1331 may not challenge the corporate action creating his or
her entitlement unless the action is unlawful or fraudulent with respect to the
shareholder, beneficial shareholder or issuer corporation.
180.1303. DISSENT BY SHAREHOLDERS AND BENEFICIAL SHAREHOLDERS
(1) A shareholder may assert dissenters' rights as to fewer than all of the
shares registered in his or her name only if the shareholder dissents with
respect to all shares beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person on whose behalf he
or she asserts dissenters' rights. The rights of a shareholder who under this
subsection asserts dissenters' rights as to fewer than all of the shares
registered in his or her name are determined as if the shares as to which he or
she dissents and his or her other shares were registered in the names of
different shareholders.
2
120
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on his or her behalf only if the beneficial shareholder does all of the
following:
(a) Submits to the corporation the shareholder's written consent to
the dissent not later than the time that the beneficial shareholder asserts
dissenters' rights.
(b) Submits the consent under par. (a) with respect to all shares of
which he or she is the beneficial shareholder.
180.1320. NOTICE OF DISSENTERS' RIGHTS
(1) If proposed corporate action creating dissenters' rights under s.
180.1302 is submitted to a vote at a shareholders' meeting, the meeting notice
shall state that shareholders and beneficial shareholders are or may be entitled
to assert dissenters' rights under ss. 180.1301 to 180.1331 and shall be
accompanied by a copy of those sections.
(2) If corporate action creating dissenters' rights under s. 180.1302 is
authorized without a vote of shareholders, the corporation shall notify, in
writing and in accordance with s. 180.0141, all shareholders entitled to assert
dissenters' rights that the action was authorized and send them the dissenters'
notice described in s. 180.1322.
180.1321. NOTICE OF INTENT TO DEMAND PAYMENT
(1) If proposed corporate action creating dissenters' rights under s.
180.1302 is submitted to a vote at a shareholders' meeting, a shareholder or
beneficial shareholder who wishes to assert dissenters' rights shall do all of
the following:
(a) Deliver to the issuer corporation before the vote is taken written
notice that complies with s. 180.0141 of the shareholder's or beneficial
shareholder's intent to demand payment for his or her shares if the
proposed action is effectuated.
(b) Not vote his or her shares in favor of the proposed action.
(2) A shareholder or beneficial shareholder who fails to satisfy sub. (1)
is not entitled to payment for his or her shares under ss. 180.1301 to 180.1331.
180.1322. DISSENTERS' NOTICE
(1) If proposed corporate action creating dissenters' rights under s.
180.1302 is authorized at a shareholders' meeting, the corporation shall deliver
a written dissenters' notice to all shareholders and beneficial shareholders who
satisfied s. 180.1321.
(2) The dissenters' notice shall be sent no later than 10 days after the
corporate action is authorized at a shareholders' meeting or without a vote of
shareholders, whichever is applicable. The dissenters' notice shall comply with
s. 180.0141 and shall include or have attached all of the following:
(a) A statement indicating where the shareholder or beneficial
shareholder must send the payment demand and where and when certificates
for certificated shares must be deposited.
(b) For holders of uncertificated shares, an explanation of the extent
to which transfer of the shares will be restricted after the payment demand
is received.
(c) A form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action and that requires the shareholder or beneficial
shareholder asserting dissenters' rights to certify whether he or she
acquired beneficial ownership of the shares before that date.
(d) A date by which the corporation must receive the payment demand,
which may not be fewer than 30 days nor more than 60 days after the date on
which the dissenters' notice is delivered.
(e) A copy of ss. 180.1301 to 180.1331.
3
121
180.1323. DUTY TO DEMAND PAYMENT
(1) A shareholder or beneficial shareholder who is sent a dissenters'
notice described in s. 180.1322, or a beneficial shareholder whose shares are
held by a nominee who is sent a dissenters' notice described in s. 180.1322,
must demand payment in writing and certify whether he or she acquired beneficial
ownership of the shares before the date specified in the dissenters' notice
under s. 180.1322(2)(c). A shareholder or beneficial shareholder with
certificated shares must also deposit his or her certificates in accordance with
the terms of the notice.
(2) A shareholder or beneficial shareholder with certificated shares who
demands payment and deposits his or her share certificates under sub. (1)
retains all other rights of a shareholder or beneficial shareholder until these
rights are canceled or modified by the effectuation of the corporate action.
(3) A shareholder or beneficial shareholder with certificated or
uncertificated shares who does not demand payment by the date set in the
dissenters' notice, or a shareholder or beneficial shareholder with certificated
shares who does not deposit his or her share certificates where required and by
the date set in the dissenters' notice, is not entitled to payment for his or
her shares under ss. 180.1301 to 180.1331.
180.1324. RESTRICTIONS ON UNCERTIFICATED SHARES
(1) The issuer corporation may restrict the transfer of uncertificated
shares from the date that the demand for payment for those shares is received
until the corporate action is effectuated or the restrictions released under s.
180.1326.
(2) The shareholder or beneficial shareholder who asserts dissenters'
rights as to uncertificated shares retains all of the rights of a shareholder or
beneficial shareholder, other than those restricted under sub. (1), until these
rights are canceled or modified by the effectuation of the corporate action.
180.1325. PAYMENT
(1) Except as provided in s. 180.1327, as soon as the corporate action is
effectuated or upon receipt of a payment demand, whichever is later, the
corporation shall pay each shareholder or beneficial shareholder who has
complied with s. 180.1323 the amount that the corporation estimates to be the
fair value of his or her shares, plus accrued interest.
(2) The payment shall be accompanied by all of the following:
(a) The corporation's latest available financial statements, audited
and including footnote disclosure if available, but including not less than
a balance sheet as of the end of a fiscal year ending not more than 16
months before the date of payment, an income statement for that year, a
statement of changes in shareholders' equity for that year and the latest
available interim financial statements, if any.
(b) A statement of the corporation's estimate of the fair value of the
shares.
(c) An explanation of how the interest was calculated.
(d) A statement of the dissenter's right to demand payment under s.
180.1328 if the dissenter is dissatisfied with the payment.
(e) A copy of ss. 180.1301 to 180.1331.
180.1326. FAILURE TO TAKE ACTION
(1) If an issuer corporation does not effectuate the corporate action
within 60 days after the date set under s. 180.1322 for demanding payment, the
issuer corporation shall return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the issuer corporation effectuates the corporate action, the
corporation shall deliver a new dissenters' notice under s. 180.1322 and repeat
the payment demand procedure.
4
122
180.1327. AFTER-ACQUIRED SHARES
(1) A corporation may elect to withhold payment required by s. 180.1325
from a dissenter unless the dissenter was the beneficial owner of the shares
before the date specified in the dissenters' notice under s. 180.1322(2)(c) as
the date of the first announcement to news media or to shareholders of the terms
of the proposed corporate action.
(2) To the extent that the corporation elects to withhold payment under
sub. (1) after effectuating the corporate action, it shall estimate the fair
value of the shares, plus accrued interest, and shall pay this amount to each
dissenter who agrees to accept it in full satisfaction of his or her demand. The
corporation shall send with its offer a statement of its estimate of the fair
value of the shares, an explanation of how the interest was calculated, and a
statement of the dissenter's right to demand payment under s. 180.1328 if the
dissenter is dissatisfied with the offer.
180.1328. PROCEDURE IF DISSENTER DISSATISFIED WITH PAYMENT OR OFFER
(1) A dissenter may, in the manner provided in sub. (2), notify the
corporation of the dissenter's estimate of the fair value of his or her shares
and amount of interest due, and demand payment of his or her estimate, less any
payment received under s. 180.1325, or reject the offer under s. 180.1327 and
demand payment of the fair value of his or her shares and interest due, if any
of the following applies:
(a) The dissenter believes that the amount paid under s. 180.1325 or
offered under s. 180.1327 is less than the fair value of his or her shares
or that the interest due is incorrectly calculated.
(b) The corporation fails to make payment under s. 180.1325 within 60
days after the date set under s. 180.1322 for demanding payment.
(c) The issuer corporation, having failed to effectuate the corporate
action, does not return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares within 60 days after the date
set under s. 180.1322 for demanding payment.
(2) A dissenter waives his or her right to demand payment under this
section unless the dissenter notifies the corporation of his or her demand under
sub. (1) in writing within 30 days after the corporation made or offered payment
for his or her shares. The notice shall comply with s. 180.0141.
180.1330. COURT ACTION
(1) If a demand for payment under s. 180.1328 remains unsettled, the
corporation shall bring a special proceeding within 60 days after receiving the
payment demand under s. 180.1328 and petition the court to determine the fair
value of the shares and accrued interest. If the corporation does not bring the
special proceeding within the 60-day period, it shall pay each dissenter whose
demand remains unsettled the amount demanded.
(2) The corporation shall bring the special proceeding in the circuit court
for the county where its principal office or, if none in this state, its
registered office is located. If the corporation is a foreign corporation
without a registered office in this state, it shall bring the special proceeding
in the county in this state in which was located the registered office of the
issuer corporation that merged with or whose shares were acquired by the foreign
corporation.
(3) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the special proceeding.
Each party to the special proceeding shall be served with a copy of the petition
as provided in s. 801.14.
(4) The jurisdiction of the court in which the special proceeding is
brought under sub. (2) is plenary and exclusive. The court may appoint one or
more persons as appraisers to receive evidence and recommend decision on the
question of fair value. An appraiser has the power described in the order
appointing him or her or in any amendment to the order. The dissenters are
entitled to the same discovery rights as parties in other civil proceedings.
5
123
(5) Each dissenter made a party to the special proceeding is entitled to
judgment for any of the following:
(a) The amount, if any, by which the court finds the fair value of his
or her shares, plus interest, exceeds the amount paid by the corporation.
(b) The fair value, plus accrued interest, of his or her shares
acquired on or after the date specified in the dissenter's notice under s.
180.1322(2)(c), for which the corporation elected to withhold payment under
s. 180.1327.
180.1331. COURT COSTS AND COUNSEL FEES
(1)(a) Notwithstanding ss. 814.01 to 814.04, the court in a special
proceeding brought under s. 180.1330 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court and shall assess the costs against the corporation,
except as provided in par. (b).
(b) Notwithstanding ss. 814.01 and 814.04, the court may assess costs
against all or some of the dissenters, in amounts that the court finds to
be equitable, to the extent that the court finds the dissenters acted
arbitrarily, vexatiously or not in good faith in demanding payment under s.
180.1328.
(2) The parties shall bear their own expenses of the proceeding, except
that, notwithstanding ss. 814.01 to 814.04, the court may also assess the fees
and expenses of counsel and experts for the respective parties, in amounts that
the court finds to be equitable, as follows:
(a) Against the corporation and in favor of any dissenter if the court
finds that the corporation did not substantially comply with ss. 180.1320
to 180.1328.
(b) Against the corporation or against a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously or not in good faith
with respect to the rights provided by this chapter.
(3) Notwithstanding ss. 814.01 to 814.04, if the court finds that the
services of counsel and experts for any dissenter were of substantial benefit to
other dissenters similarly situated, the court may award to these counsel and
experts reasonable fees to be paid out of the amounts awarded the dissenters who
were benefited.
6
124
XXXXX INCORPORATED
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Xxxxxxx Xxxxxx and Xxxx Train, or either of
them, as Proxies, each with full power of substitution for himself, and hereby
authorizes them to represent and to vote, as designated below, all of the shares
of common stock of Xxxxx Incorporated held of record by the undersigned on
May 30, 2000, and which the undersigned is entitled to vote at the Annual
Meeting of Shareholders to be held on June 27, 2000, and any or all adjournments
or postponements thereof, with like effect as if the undersigned were personally
present and voting.
1. PROPOSAL TO APPROVE THE AGREEMENT AND PLAN OF MERGER, DATED AS OF
JANUARY 30, 2000, BY AND AMONG THE SAW MILL CAPITAL FUND II, L.P., A
DELAWARE LIMITED PARTNERSHIP ("SAW MILL"), CALENDAR HOLDINGS, INC., A
DELAWARE CORPORATION AND A WHOLLY OWNED SUBSIDIARY OF SAW MILL
("PARENT"), CALENDAR ACQUISITION CORP., A WISCONSIN CORPORATION AND A
WHOLLY OWNED SUBSIDIARY OF PARENT ("MERGER SUB"), XXXXX INCORPORATED,
XXXXXXX X. XXXXXX AND XXXX TRAIN, AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE RESULTING RIGHT TO RECEIVE $11.25, WITHOUT
INTEREST, FOR EACH SHARE OF THE $0.10 PAR VALUE COMMON STOCK OF THE
COMPANY, OTHER THAN CERTAIN SHARES OWNED BY XXXXXXX X. XXXXXX, XXXX
TRAIN, SAW MILL AND THEIR RESPECTIVE AFFILIATES.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
MERGER AGREEMENT AND THE MERGER.
2. ELECTION OF DIRECTORS:
1-XXXXXXX XXXXXX
2-XXXX TRAIN
3-XXXXX XXXXX
4-XXXXX XXXXXXXXX
5-XXXXX XXXXXX
6-XXXXX XXXXX
[ ] FOR ALL NOMINEES [ ] WITHHOLD AUTHORITY
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE, WRITE
THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED) [ ]
3. TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
PUBLIC ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE ON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
Should the undersigned be present and elect to vote at the Annual Meeting
or at any adjournment or postponement thereof and after notification to the
Secretary of the Company at the Annual Meeting of the Shareholder's decision to
terminate this proxy, then the power of said attorneys and proxies will be
deemed terminated and of no further force and effect.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL OF THE PROPOSALS ABOVE.
-62-
125
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR ALL OF THE PROPOSALS LISTED ABOVE IF NO SPECIFICATION IS MADE. IF
ANY OTHER BUSINESS IS PRESENTED AT THE ANNUAL MEETING, INCLUDING MATTERS
RELATING TO THE CONDUCT OF THE ANNUAL MEETING, THIS PROXY WILL BE VOTED BY THOSE
NAMED IN THIS PROXY IN THEIR BEST JUDGMENT.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and the Proxy Statement furnished therewith dated
June 6, 2000.
XXXXX INCORPORATED 2000 ANNUAL MEETING
Check appropriate box Date
Indicate changes below: _______________________ NO. OF SHARES
Address Change? [ ] Name Change? [ ]
___________________________________
| |
| |
|___________________________________|
SIGNATURE(S) IN BOX Please
sign exactly as your name
appears hereon. When shares
are held by joint tenants,
both should sign. When signing
as attorney, executor,
administrator, trustee or
guardian, please give full
title as such. If a
corporation, please sign in
full corporate name by
President or other authorized
officer. If a partnership,
please sign in partnership
name by an authorized person.
-63-
