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OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
VARITRONIC SYSTEMS, INC.
AT
$17.50 NET PER SHARE
BY
VSI ACQUISITION CO.
AN INDIRECT WHOLLY-OWNED SUBSIDIARY
OF
X. X. XXXXX CO.
--------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
MILWAUKEE TIME (CENTRAL TIME), ON THURSDAY, MARCH 28, 1996,
UNLESS EXTENDED.
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THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED BY THE EXPIRATION DATE AND NOT WITHDRAWN THAT NUMBER OF SHARES OF
COMMON STOCK OF VARITRONIC SYSTEMS, INC. WHICH, WHEN ADDED TO THE NUMBER OF
SHARES OF COMMON STOCK THEN OWNED BY X. X. XXXXX CO. AND ITS AFFILIATES, WILL
REPRESENT AT LEAST TWO-THIRDS OF THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS
(EXCLUDING ANY UNEXERCISED PORTION OF THE OPTION ISSUED TO X.X. XXXXX CO.). THE
OFFER IS ALSO SUBJECT TO CERTAIN OTHER TERMS AND CONDITIONS. SEE SECTION 15.
THE OFFER IS BEING MADE IN CONNECTION WITH THE AGREEMENT AND PLAN OF
MERGER, DATED AS FEBRUARY 27, 1996, AMONG X. X. XXXXX CO., XXXXX USA, INC., VSI
ACQUISITION CO., AND VARITRONIC SYSTEMS, INC. THE BOARD OF DIRECTORS OF
VARITRONIC SYSTEMS, INC. HAS APPROVED THE OFFER, THE MERGER AND THE MERGER
AGREEMENT; HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO
AND IN THE BEST INTERESTS OF THE VARITRONIC SYSTEMS, INC. SHAREHOLDERS; AND
RECOMMENDS THAT THE HOLDERS OF COMMON STOCK ACCEPT THE OFFER AND TENDER ALL OF
THEIR SHARES IN THE OFFER.
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IMPORTANT
Any shareholder desiring to tender Shares should either (i) complete and
sign the Letter of Transmittal or a facsimile thereof in accordance with the
instructions in the Letter of Transmittal and deliver the Letter of Transmittal
with the Shares and all other required documents to the Depositary of this
Offer, Firstar Trust Company, or follow the procedure for book-entry transfer
set forth in Section 3 herein or (ii) request his or her broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
the shareholder. A shareholder having Shares registered in the name of a broker,
dealer, commercial bank, trust company or other nominee must contact such person
if he or she desires to tender the Shares.
Any shareholder who desires to tender Shares and cannot deliver such Shares
and all other required documents to the Depositary by the expiration of the
Offer must tender such Shares pursuant to the guaranteed delivery procedure set
forth in Section 3 herein.
Questions and requests for assistance or additional copies of this Offer to
Purchase and the Letter of Transmittal may be directed to Xxxxxx X. Xxxxx & Co.
Incorporated, the Dealer Manager for this Offer, or Xxxxxxxxx & Company Inc.,
the Information Agent, at their respective addresses and telephone numbers set
forth on the back cover of this Offer to Purchase.
-------------------------
The Dealer Manager for the Offer is:
XXXXXX X. XXXXX & CO.
INCORPORATED
February 29, 1996
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TABLE OF CONTENTS
PAGE
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INTRODUCTION............................................................................. 1
1. Terms of the Offer................................................................ 2
2. Acceptance for Payment and Payment for Shares..................................... 4
3. Procedure for Tendering Shares.................................................... 5
4. Withdrawal Rights................................................................. 7
5. Certain Federal Income Tax Consequences........................................... 7
6. Price Range of Shares; Dividends.................................................. 8
7. Effect of the Offer on Market for Shares, Nasdaq Listing and Registration Under
the
Exchange Act...................................................................... 8
8. Certain Information Concerning the Company........................................ 9
9. Certain Information Concerning the Parent, BUSA and the Offeror................... 11
10. Source and Amount of Funds........................................................ 12
11. Background of the Offer........................................................... 13
12. Purpose of the Offer and the Merger; Plans for the Company........................ 14
13. The Merger Agreement.............................................................. 14
14. Dividends and Distributions....................................................... 19
15. Certain Conditions to Offeror's Obligations....................................... 20
16. Certain Regulatory and Legal Matters.............................................. 21
17. Fees and Expenses................................................................. 22
18. Miscellaneous..................................................................... 23
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF THE PARENT, BUSA, AND THE
OFFEROR........................................................................... I-1
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To The Holders of Common Stock
of Varitronic Systems, Inc.
INTRODUCTION
VSI Acquisition Co., a Minnesota corporation (the "Offeror") and an
indirect wholly-owned subsidiary of X.X. Xxxxx Co., a Wisconsin corporation (the
"Parent"), hereby offers to purchase all outstanding shares of Common Stock, par
value $.01 per share (the "Shares"), of Varitronic Systems, Inc., a Minnesota
corporation (the "Company"), at a purchase price of $17.50 per Share, net to the
seller in cash, without interest, upon the terms and subject to the conditions
set forth in this Offer to Purchase and in the related Letter of Transmittal
(which together constitute the "Offer").
Those shareholders who tender shares will not be obligated to pay brokerage
fees or commissions or, except as set forth in the Letter of Transmittal,
transfer taxes on the purchase of Shares by the Offeror pursuant to the Offer.
The Offeror will pay all charges and expenses of Xxxxxx X. Xxxxx & Co.
Incorporated (the "Dealer Manager"), Firstar Trust Company (the "Depositary")
and Xxxxxxxxx & Company Inc. (the "Information Agent") in connection with the
Offer.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER, THE MERGER
(AS HEREINAFTER DEFINED) AND THE MERGER AGREEMENT (AS HEREINAFTER DEFINED); HAS
DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO AND IN THE
BEST INTERESTS OF THE COMPANY'S SHAREHOLDERS; AND RECOMMENDS THAT THE HOLDERS OF
SHARES ACCEPT THE OFFER AND TENDER ALL OF THEIR SHARES IN THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE HAVING BEEN
VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT
NUMBER OF SHARES WHICH, WHEN ADDED TO THE NUMBER OF SHARES THEN OWNED BY THE
PARENT AND ITS AFFILIATES, INCLUDING ANY SHARES ACQUIRED PURSUANT TO THE OPTION
DESCRIBED BELOW, WILL REPRESENT NOT LESS THAN TWO-THIRDS OF THE SHARES
OUTSTANDING ON A FULLY DILUTED BASIS, EXCLUDING ANY UNEXERCISED PORTION OF THE
OPTION ISSUED TO THE PARENT (THE "MINIMUM CONDITION"). THE OFFER IS ALSO SUBJECT
TO OTHER TERMS AND CONDITIONS. SEE SECTION 15 OF THIS OFFER TO PURCHASE.
Xxxxx, Xxxxxxx, Lang & Co., L.P., the Company's financial advisor, has
delivered to the Company's Board of Directors its written opinion that, as of
the date of such opinion, the consideration to be received by the holders of the
Shares pursuant to the Offer and the Merger is fair to such holders from a
financial point of view. A copy of such opinion is contained in the Company's
Statement on Schedule 14D-9 which is also being distributed to the Company's
shareholders.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of February 27, 1996 (the "Merger Agreement"), among the Offeror, Xxxxx USA,
Inc., a Wisconsin corporation ("BUSA") of which the Offeror is a wholly-owned
subsidiary, the Parent, of which BUSA is a wholly-owned subsidiary, and the
Company. The Merger Agreement provides that, among other things, as soon as
practicable after the purchase of Shares pursuant to the Offer and the
satisfaction of the other conditions set forth in the Merger Agreement, all in
accordance with the relevant provisions of the Minnesota Business Corporation
Act ("MBCA"), the Offeror will be merged with and into the Company (the
"Merger"). See Section 12 herein. Following consummation of the Merger, the
Company will continue as the surviving corporation (the "Surviving Corporation")
and will be an indirect wholly-owned subsidiary of the Parent. At the effective
time of the Merger (the "Effective Time"), each issued and outstanding Share
(other than Shares owned by the Company, the Parent, or any subsidiary of
either, including the Offeror and BUSA, or Shares with respect to which
appraisal rights are properly exercised under the MBCA ("Dissenting Shares")),
will be converted into and represent the right to receive $17.50 (or any higher
price that may be paid for each Share pursuant to the Offer) in cash, without
interest thereon (the "Offer Price"). See Section 5 herein for a description of
certain tax consequences of the Offer and the Merger.
The Merger Agreement provides that, promptly upon the purchase of Shares
pursuant to the Offer, the Parent will be entitled to designate for election to
the Board of Directors of the Company a number of directors (rounded up to the
next whole number) that will give the Parent representation on such Board equal
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to the product of (i) the total number of directors on such Board and (ii) the
percentage that the aggregate number of Shares beneficially owned by the Parent
bears to the total number of outstanding Shares. The Company has agreed, upon
the request by the Parent, to promptly increase the size of the Board of
Directors of the Company and/or use its reasonable best efforts to secure the
resignations of such number of directors as is necessary to enable the Parent's
designees to be elected to the Board and to cause the Parent's designees to be
so elected.
The Company has advised the Offeror that as of February 26, 1996, there
were (i) 2,319,495 Shares issued and outstanding, (ii) outstanding employee
stock options to purchase an aggregate of 193,500 Shares, all of which had
exercise prices of less than $17.50 per Share and (iii) an option granted to the
Parent, pursuant to the Merger Agreement, to purchase a number of newly issued
shares equal to 19.9% of the common stock outstanding as of the date of the
Merger Agreement (the "Option"). See Section 13. As of the date hereof, neither
the Offeror nor the Parent beneficially owns any Shares, exclusive of the
Option. If the Offeror acquires at least 1,675,330 Shares in the Offer (assuming
no exercise of the Option), it will own two-thirds of the outstanding Shares on
a fully diluted basis (excluding the Option). Accordingly, the Minimum Condition
would be satisfied and the Offeror would have sufficient voting power to approve
the Merger without the affirmative vote of any other shareholder. In the event
the Offeror acquires at least 90% of the then outstanding Shares through the
Offer or otherwise, the Offeror would be able to effect the Merger pursuant to
the short form merger provisions of the MBCA, without prior notice to, or any
action by, any other holder of Shares.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any extension or
amendment), the Offeror will accept for payment and pay for all Shares validly
tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 4 herein. The term "Expiration Date" means 12:00
Midnight, Milwaukee time (Central Time), on Thursday, March 28, 1996, unless the
Offeror shall have extended the period of time that the Offer is open, in which
event the term "Expiration Date" shall mean the latest time and date at which
the Offer, as so extended by the Offeror, shall expire.
If the Offeror shall decide, in its sole discretion, to increase the
consideration offered in the Offer to holders of Shares and if, at the time that
notice of such increase is first published, sent or given to holders of Shares
in the manner specified below, the Offer is scheduled to expire at any time
earlier than the expiration of a period ending on the tenth business day from,
and including, the date that such notice is first so published, sent or given,
then the Offer will be extended until the expiration of such period of ten
business days. For purposes of the Offer, a "business day" means any day other
than a Saturday, Sunday or a federal holiday, and consists of the time period
from 12:01 a.m. through 12:00 Midnight, Milwaukee time (Central Time).
THE OFFER IS CONDITIONED UPON SATISFACTION OF THE MINIMUM CONDITION. THE
OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS. SEE SECTION 15 HEREIN. The
Offeror reserves the right (but shall not be obligated), in accordance with
applicable rules and regulations of the United States Securities and Exchange
Commission (the "Commission"), subject to the limitations set forth in the
Merger Agreement and described below, to waive any condition to the Offer,
provided that the Minimum Condition may be reduced or waived only with the
consent of the Company. Shares issued to the Parent upon the exercise of the
Option may be counted toward satisfaction of the Minimum Condition. If the
Minimum Condition or any of the other conditions set forth in Section 15 have
not been satisfied by 12:00 Midnight, Milwaukee time (Central Time), on
Thursday, March 28, 1996 (or any other time then set as the Expiration Date),
the Offeror may, subject to the terms of the Merger Agreement as described
below, elect to (i) extend the Offer and, subject to applicable withdrawal
rights, retain all tendered Shares until the expiration of the Offer, as
extended, (ii) subject to complying with applicable rules and regulations of the
Commission, accept for payment all Shares so tendered and not extend the Offer
or (iii) terminate the Offer and not accept for payment any Shares and return
all tendered Shares to
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tendering shareholders. Under the terms of the Merger Agreement, the Offeror
reserves the right to waive any condition to the Offer, to increase the price
per Share payable in the Offer, and to make any other changes in the terms and
conditions of the Offer; provided, however, that the Offeror may not change the
form of consideration to be paid in the Offer, decrease the price per Share
payable in the Offer, reduce the maximum number of Shares to be purchased in the
Offer or impose any condition to the Offer in addition to those set forth in the
Merger Agreement or amend any other term of the Offer in a manner materially
adverse to the holders of Shares; and provided further that the Offeror may not
unilaterally waive the Minimum Condition or the condition relating to the
waiting period under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976
(the "HSR Act"), each of which conditions may be waived by the Offeror only with
the prior written consent of the Company. Notwithstanding the foregoing, the
Offeror may, without the consent of the Company, extend the Offer (i) if, at the
then scheduled Expiration Date of the Offer any of the conditions to the Offer
shall not have been satisfied or waived, until such conditions are satisfied or
waived, (ii) for any period required by any rule, regulation, interpretation or
position of the Commission or the Commission staff applicable to the Offer and
(iii) for any reason on one or more occasions for an aggregate period of not
more than 20 business days (for all such extensions) beyond the latest
expiration date that would otherwise be permitted under clause (i) or (ii) of
this sentence if, as of the initial (or any subsequent) expiration date, there
shall not have been tendered and not withdrawn at least 90% of the fully diluted
outstanding Shares (excluding the unexercised portion of the Option).
Subject to the limitations set forth in the Merger Agreement and described
above, the Offeror reserves the right (but will not be obligated), at any time
or from time to time in its sole discretion, to extend the period during which
the Offer is open by giving oral or written notice of such extension to the
Depositary and by making a public announcement of such extension. There can be
no assurance that the Offeror will exercise its right to extend the Offer.
Subject to the applicable rules and regulations of the Commission and
subject to the limitations set forth in the Merger Agreement, the Offeror also
expressly reserves the right, at any time and from time to time, in its sole
discretion, (i) to delay payment for any Shares regardless of whether such
Shares were theretofore accepted for payment, or to terminate the Offer and not
to accept for payment or pay for any Shares not theretofore accepted for payment
or paid for, upon the occurrence of any of the events described in the
conditions set forth in Section 15, by giving oral or written notice of such
delay or termination to the Depositary and (ii) at any time or from time to
time, to amend the Offer in any respect. The Offeror's right to delay payment
for any Shares or not to pay for any Shares theretofore accepted for payment is
subject to the applicable rules and regulations of the Commission, including
Rule 14e-1(c) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), relating to the Offeror's obligation to pay for or return
tendered Shares promptly after the termination or withdrawal of the Offer.
Any extension of the period during which the Offer is open, delay in
acceptance for payment or payment, termination or amendment of the Offer will be
followed, as promptly as practicable, by public announcement thereof, such
announcement in the case of an extension to be issued not later than 10:00 a.m.,
Eastern time, on the next business day after the previous scheduled Expiration
Date in accordance with the public announcement requirements of Rules 14d-4(c)
and 14e-1(d) under the Exchange Act. Without limiting the obligation of the
Offeror under such rules or the manner in which the Offeror may choose to make
any public announcement, the Offeror currently intends to make announcements by
issuing a press release to the Dow Xxxxx News Service and making any appropriate
filing with the Commission.
If the Offeror makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer (including a reduction of the Minimum Condition), the Offeror will
disseminate additional tender offer materials and extend the Offer if, and to
the extent, required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange
Act or otherwise. The minimum period during which a tender offer must remain
open following material changes in the terms of the Offer or the information
concerning the Offer, other than a change in price or a change in percentage of
securities sought, will depend upon the facts and circumstances, including the
relative materiality of the terms or information changes. With respect to a
change in price or a change in percentage of securities sought, a minimum ten
business day period is generally required to allow for adequate dissemination to
shareholders and for investor response.
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The Company has provided the Offeror with the Company's list of
shareholders and security position listings for the purpose of disseminating the
Offer to holders of Shares. This Offer to Purchase and the Letter of Transmittal
are being mailed to record holders of the Shares and furnished to brokers,
dealers, commercial banks, trust companies and similar persons whose names, or
the names of whose nominees, appear on the list of shareholders or, if
applicable, who are listed as participants in a clearing agency's security
position listing for subsequent transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Offeror will accept for payment and will pay for all Shares
validly tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 4 promptly after the later to occur of (i) the
Expiration Date and (ii) subject to compliance with Rule 14e-1(c) under the
Exchange Act, the satisfaction or waiver of the conditions set forth in Section
15 herein. Subject to compliance with Rule 14e-1(c) under the Exchange Act, the
Offeror expressly reserves the right to delay payment for Shares in order to
comply in whole or in part with any applicable law. See Sections 1, 16 and 18
herein. In all cases, payment for Shares accepted for payment pursuant to the
Offer will be made only after timely receipt by the Depositary of (i)
certificates for such Shares or timely confirmation (a "Book-Entry
Confirmation") of a book-entry transfer of such Shares into the Depositary's
account at The Depository Trust Company (the "Book-Entry Transfer Facilities"),
pursuant to the procedures set forth in Section 3, (ii) a properly completed and
duly executed Letter of Transmittal (or a manually signed facsimile thereof)
with all required signature guarantees or, in the case of a book-entry transfer,
an Agent's Message (as defined below) and (iii) any other documents required by
the Letter of Transmittal.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgement from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Offeror may enforce such agreement against the participant.
For purposes of the Offer, the Offeror will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn as, if
and when the Offeror gives oral or written notice to the Depositary of the
Offeror's acceptance of such Shares for payment. In all cases, payment for
Shares purchased pursuant to the Offer will be made by deposit of the purchase
price with the Depositary, which will act as agent for tendering shareholders
for the purpose of receiving payment from the Offeror and transmitting such
payment to tendering shareholders. If, for any reason whatsoever, acceptance for
payment of any Shares tendered pursuant to the Offer is delayed, or the Offeror
is unable to accept for payment Shares tendered pursuant to the Offer, then,
without prejudice to the Offeror's rights under Section 1, the Depositary may,
nevertheless, on behalf of the Offeror, retain tendered Shares, and such Shares
may not be withdrawn except to the extent that the tendering shareholders are
entitled to withdrawal rights as described in Section 4 below and as otherwise
required by Rule 14e-1(c) under the Exchange Act. Under no circumstances will
interest be paid by the Offeror because of any delay in making such payment.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates are submitted for
more Shares than are tendered, certificates for such unpurchased or untendered
Shares will be returned, without expense to the tendering shareholder (or, in
the case of Shares delivered by book-entry transfer to a Book-Entry Transfer
Facility, such Shares will be credited to an account maintained within such
Book-Entry Transfer Facility), as promptly as practicable after the expiration,
termination or withdrawal of the Offer.
If, prior to the Expiration Date, the Offeror increases the price being
paid for Shares accepted for payment pursuant to the Offer, such increased
consideration will be paid to all shareholders whose Shares are purchased
pursuant to the Offer.
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3. PROCEDURE FOR TENDERING SHARES.
Valid Tenders. For Shares to be validly tendered pursuant to the Offer, a
properly completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof), with any required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message, and any other required documents, must
be received by the Depositary at one of its addresses set forth on the back
cover of this Offer to Purchase prior to the Expiration Date, or the tendering
shareholder must comply with the guaranteed delivery procedures set forth below.
In addition, either (i) certificates representing such Shares must be received
by the Depositary or such Shares must be tendered pursuant to the procedure for
book-entry transfer set forth below, and a Book-Entry Confirmation must be
received by the Depositary, in each case prior to the Expiration Date or (ii)
the guaranteed delivery procedures set forth below must be complied with. No
alternative, conditional or contingent tenders will be accepted. DELIVERY OF
DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY
TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO A DEPOSITARY FOR
THIS OFFER.
Book-Entry Transfer. The Depositary will make a request to establish an
account with respect to the Shares at the Book-Entry Transfer Facility for
purposes of the Offer within two business days after the date of this Offer to
Purchase. Any financial institution that is a participant in a Book-Entry
Transfer Facility's system may make book-entry delivery of Shares by causing a
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at a Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for transfer. Although delivery of Shares may be
effected through book-entry at a Book-Entry Transfer Facility prior to the
Expiration Date, (i) the Letter of Transmittal (or a manually signed facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message in connection with a book-entry transfer, and
any other required documents, must, in any case, be transmitted to and received
by the Depositary at one of its addresses set forth on the back cover of this
Offer to Purchase or (ii) the guaranteed delivery procedures described below
must be complied with.
Signature Guarantee. Signatures on the Letter of Transmittal must be
guaranteed by a member in good standing of the Securities Transfer Agents
Medallion Program, or by any other bank, broker, dealer, credit union, savings
association or other entity which is an "eligible guarantor institution," as
such term is defined in Rule 17Ad-15 under the Exchange Act (each of the
foregoing being referred to as an "Eligible Institution" and, collectively, as
"Eligible Institutions"), unless the Shares tendered thereby are tendered (i) by
a registered holder of Shares who has not completed either the box labeled
"Special Delivery Instructions" or the box labeled "Special Payment
Instructions" on the Letter of Transmittal or (ii) for the account of any
Eligible Institution. If the certificates evidencing Shares are registered in
the name of a person or persons other than the signer of the Letter of
Transmittal, or if payment is to be made, or delivered to, or certificates for
unpurchased Shares are to be issued or returned to, a person other than the
registered owner or owners, then the certificates for the tendered Shares must
be endorsed or accompanied by duly executed stock powers, in either case signed
exactly as the name or names of the registered owner or owners appear on the
certificates, with the signatures on the certificates or stock powers guaranteed
by an Eligible Institution as provided in the Letter of Transmittal. See
Instructions 1 and 5 of the Letter of Transmittal.
Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's certificates for Shares are not immediately
available or time will not permit all required documents to reach the Depositary
prior to the Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, such Shares may nevertheless be tendered if all of
the following guaranteed delivery procedures are duly complied with:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Offeror herewith, is
received by the Depositary, as provided below, prior to the Expiration
Date; and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation), together with a properly completed
and duly executed Letter of Transmittal (or a
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manually signed facsimile thereof), and any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message, and any other
documents required by the Letter of Transmittal are received by the
Depositary within three (3) Nasdaq National Market trading days after the
date of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile transmission or mail to the Depositary and must include a guarantee
by an Eligible Institution in the form set forth in the Notice of Guaranteed
Delivery.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY,
IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases by made only after timely
receipt by the Depositary of (i) certificates for such Shares or a Book-Entry
Confirmation, (ii) a properly completed and duly executed Letter of Transmittal
(or a manually signed facsimile thereof), with all required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message and
(iii) any other documents required by the Letter of Transmittal.
BACKUP FEDERAL INCOME TAX WITHHOLDING. TO PREVENT BACKUP FEDERAL INCOME TAX
WITHHOLDING WITH RESPECT TO PAYMENT OF THE PURCHASE PRICE FOR SHARES PURCHASED
PURSUANT TO THE OFFER, EACH SHAREHOLDER MUST PROVIDE THE DEPOSITARY WITH HIS OR
HER CORRECT TAX IDENTIFICATION NUMBER ("TIN") AND CERTIFY THAT HE OR SHE IS NOT
SUBJECT TO BACKUP FEDERAL WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9
INCLUDED IN THE LETTER OF TRANSMITTAL. SEE THE INSTRUCTIONS SET FORTH IN THE
LETTER OF TRANSMITTAL.
Determination of Validity. All questions as to the form of documents and
the validity, eligibility (including timeliness and receipt) and acceptance for
payment of any tender of Shares will be determined by the Offeror, in its sole
discretion, and its determination will be final and binding on all parties. The
Offeror reserves the absolute right to reject any or all tenders of any Shares
that are determined by it not to be in proper form or the acceptance of or
payment for which may, in the opinion of the Offeror, be unlawful. The Offeror
also reserves the absolute right to waive any of the conditions of the Offer,
subject to the limitations set forth in the Merger Agreement, or any defect or
irregularity in the tender of any Shares. The Offeror's interpretation of the
terms and conditions of the Offer (including the Letter of Transmittal and the
Instructions to the Letter of Transmittal) will be final and binding on all
parties. No tender of Shares will be deemed to have been validly made until all
defects and irregularities have been cured or waived. The Offeror, BUSA, the
Parent, the Dealer Manager, the Information Agent, the Depositary or any other
person will not be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification.
Other Requirements. By executing the Letter of Transmittal as set forth
above, a tendering shareholder irrevocably appoints designees of the Offeror as
such shareholder's proxies, each with full power of substitution, in the manner
set forth in the Letter of Transmittal, to the full extent of such shareholder's
rights with respect to the Shares tendered by such shareholder and accepted for
payment by the Offeror (and any and all other Shares or other securities or
rights issued or issuable in respect of such Shares on or after February 27,
1996). All such proxies shall be considered coupled with an interest in the
tendered Shares. This appointment is effective when, and only to the extent
that, the Offeror accepts for payment the Shares deposited with the Depositary.
Upon acceptance for payment, all prior proxies given by the shareholder with
respect to such Shares or other securities or rights will, without further
action, be revoked and no subsequent proxies may be given or written consent
executed (and, if given or executed, will not be deemed effective). The
designees of the Offeror will, with respect to the Shares and other securities
or rights, be empowered to exercise all voting and other rights of such
shareholder as they in their sole judgment deem proper in respect of any annual
or special meeting of the Company's shareholders, or any adjournment or
postponement thereof. The Offeror reserves the right to require that, in order
for Shares to be deemed validly tendered, immediately upon the Offeror's payment
for such Shares, the Offeror must be able to exercise full voting and other
rights with respect to such Shares and the other securities or rights issued or
issuable in respect of such Shares, including voting at any meeting of
shareholders (whether annual or special and whether or not adjourned) in respect
of such Shares.
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4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Shares made
pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may
be withdrawn at any time prior to the Expiration Date and, unless theretofore
accepted for payment pursuant to the Offer, may also be withdrawn at any time
after April 25, 1996. If the purchase of or payment for Shares is delayed for
any reason or if the Offeror is unable to purchase or pay for Shares for any
reason, then, without prejudice to the Offeror's rights under the Offer,
tendered Shares may be retained by the Depositary on behalf of the Offeror and
may not be withdrawn except to the extent that tendering shareholders are
entitled to withdrawal rights as set forth in this Section 4, subject to Rule
14e-1(c) under the Exchange Act, which provides that no person who makes a
tender offer shall fail to pay the consideration offered or return the
securities deposited by or on behalf of security holders promptly after the
termination or withdrawal of the Offer.
For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase. Any notice of withdrawal must specify the name of the person who
tendered the Shares to be withdrawn, the number of Shares to be withdrawn and
the name in which the certificates representing such Shares are registered, if
different from that of the person who tendered the Shares. If certificates for
Shares to be withdrawn have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such certificates, the serial
numbers shown on such certificates must be submitted to the Depositary and,
unless such Shares have been tendered by an Eligible Institution, the signatures
on the notice of withdrawal must be guaranteed by an Eligible Institution. If
Shares have been tendered pursuant to the procedure for book-entry transfer set
forth in Section 3, any notice of withdrawal must also specify the name and
number of the account at the Book-Entry Transfer Facility to be credited with
the withdrawn Shares. All questions as to the form and validity (including
timeliness and receipt) of notices of withdrawal will be determined by the
Offeror, in its sole discretion, and its determination will be final and binding
on all parties. The Offeror, BUSA, the Parent, the Dealer Manager, the
Depositary, the Information Agent or any other person will not be under any duty
to give notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification.
Any Shares properly withdrawn will be deemed not validly tendered for
purposes of the Offer, but may be retendered at any subsequent time prior to the
Expiration Date by following any of the procedures described in Section 3
herein.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following is a summary of the principal federal income tax consequences
of the Offer and the Merger to holders whose Shares are purchased pursuant to
the Offer or whose Shares are converted to the right to receive cash in the
Merger (including pursuant to the exercise of appraisal rights). The discussion
applies only to holders of Shares in whose hands Shares are capital assets and
may not apply to Shares received pursuant to the exercise of employee stock
options or otherwise as compensation, or to holders of Shares who are in special
tax situations (such as insurance companies, tax-exempt organizations or
non-U.S. persons).
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE INCLUDED FOR
GENERAL INFORMATIONAL PURPOSES ONLY AND ARE BASED UPON CURRENT LAW. BECAUSE
INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF SHARES SHOULD CONSULT SUCH
HOLDER'S OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED
BELOW TO SUCH SHAREHOLDER AND THE PARTICULAR TAX EFFECTS OF THE OFFER AND THE
MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER INCOME
TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger
(including pursuant to the exercise of appraisal rights) will be a taxable
transaction for federal income tax purposes (and also may be a taxable
transaction under applicable state, local and other income tax laws). In
general, for federal income tax purposes, a holder of Shares will recognize gain
or loss equal to the difference between the holder's adjusted tax basis in the
Shares sold pursuant to the Offer or converted into the right to receive cash in
the Merger and the amount of cash received therefor. Gain or loss must be
determined separately for Shares acquired in different transactions which are
sold pursuant to the Offer or are converted into the right to receive cash in
the
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Merger. Such gain or loss will be capital gain or loss (other than, with respect
to the exercise of appraisal rights, amounts, if any, which are or are deemed to
be interest for federal income tax purposes, which amounts will be taxed as
ordinary income) and will be long-term gain or loss if, on the date of sale (or,
if applicable, the date of the Merger), the Shares were held for more than one
year.
Payments in connection with the Offer or the Merger may be subject to
"backup withholding" at a rate of 31%. Backup withholding generally applies if
the shareholder (i) fails to furnish his or her TIN, (ii) furnishes an incorrect
TIN, (iii) fails to properly include a reportable interest or dividend payment
on his or her federal income tax return or (iv) under certain circumstances,
fails to provide a certified statement, signed under penalty of perjury, that
the TIN provided is his or her correct number and that he or she is not subject
to backup withholding. Backup withholding is not an additional tax, but merely
an advance payment, which may be refunded to the extent it results in an
overpayment of tax. Certain persons generally are entitled to exemption from
backup withholding, including corporations and financial institutions. Certain
penalties apply for failure to furnish correct information and for failure to
include reportable payments in income. Each shareholder should consult with his
or her own tax advisor as to his or her qualification for exemption from backup
withholding and the procedure for obtaining such exemption. Tendering
shareholders may be able to prevent backup withholding by completing the
Substitute Form W-9 included in the Letter of Transmittal. See Section 3.
6. PRICE RANGE OF SHARES; DIVIDENDS.
The Shares are principally traded on the Nasdaq National Market. The Shares
are traded under the symbol "VRSY". The following table sets forth for the
periods indicated the high and low sales prices per Share as furnished by the
Nasdaq National Market. These prices reflect prices between dealers, without
retail markups, markdowns or commissions, and may not necessarily represent
actual transactions.
HIGH LOW
------- -------
FISCAL YEAR ENDED JULY 31, 1994
First Quarter.......................................... $13.750 $ 8.250
Second Quarter......................................... 15.000 9.750
Third Quarter.......................................... 10.750 8.000
Fourth Quarter......................................... 10.000 7.484
FISCAL YEAR ENDED JULY 31, 1995
First Quarter.......................................... $ 9.000 $ 7.750
Second Quarter......................................... 9.500 7.750
Third Quarter.......................................... 13.500 9.000
Fourth Quarter......................................... 13.000 8.750
FISCAL YEAR ENDED JULY 31, 1996
First Quarter.......................................... $ 9.500 $ 8.250
Second Quarter......................................... 12.750 8.750
Third Quarter (Through February 27, 1996).............. 16.500 12.750
On February 27, 1996, the last full day of trading prior to the
commencement of the Offer, the closing price per Share as furnished by the
Nasdaq National Market was $16.500. Holders of Shares are urged to obtain
current market quotations for the Shares.
The Company has not paid dividends on the Shares. Under the terms of the
Merger Agreement, the Company is prohibited from paying any dividends on its
capital stock, including the Shares.
7. EFFECT OF THE OFFER ON MARKET FOR SHARES, NASDAQ LISTING AND REGISTRATION
UNDER THE EXCHANGE ACT.
The purchase of the Shares by the Offeror pursuant to the Offer will reduce
the number of Shares that might otherwise trade publicly and will reduce the
number of holders of Shares, which will adversely affect the liquidity and
market value of the remaining Shares held by shareholders other than the
Offeror.
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Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the standards for continued inclusion in the Nasdaq
National Market. If the Shares no longer meet such standards, the Nasdaq
National Market might cease to provide quotations, but quotations might still be
available from other sources. The Offeror cannot predict whether the Nasdaq
National Market standards will be met after the Offer.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application by the Company to the Commission
if there are fewer than 300 record holders of Shares. It is the intention of the
Offeror to seek to cause an application for such termination to be made as soon
after consummation of the Offer as the requirements for termination of
registration of the Shares are met. If such registration were terminated, the
Company would no longer legally be required to disclose publicly in proxy
materials distributed to shareholders the information which it now must provide
under the Exchange Act or to make public disclosure of financial and other
information in annual, quarterly and other reports required to be filed with the
Commission under the Exchange Act; and the officers, directors and 10% or more
shareholders of the Company would no longer be subject to the "short-swing"
xxxxxxx xxxxxxx reporting and profit recovery provisions of the Exchange Act.
Furthermore, if such registration were terminated, persons holding "restricted
securities" of the Company may be deprived of their ability to dispose of such
securities under Rule 144 promulgated under the Securities Act of 1933, as
amended, and the Shares would no longer meet the standards for continued
inclusion in Nasdaq National Market.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend credit
on the collateral of the Shares. Depending upon factors similar to those
described above regarding listing and market quotations, it is possible that,
following the Offer, the Shares would no longer constitute "margin securities"
for the purposes of the margin regulations of the Federal Reserve Board and
therefore could no longer be used as collateral for loans made by brokers. If
registration of Shares under the Exchange Act were terminated, the Shares would
no longer be "margin securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
The Company is a Minnesota corporation with its principal executive offices
located at 000 Xxxxxxxxxxx Xxxxx, 000 Xxxxxxx 000 Xxxxx, Xxxxxxxxxxx, Xxxxxxxxx,
00000. Except as otherwise set forth herein, the information concerning the
Company contained in this Offer to Purchase, including financial information,
has been furnished by the Company or has been taken from or based upon publicly
available documents and records on file with the Commission and other public
sources. Although neither the Offeror nor the Parent nor BUSA has any knowledge
that would indicate that statements contained herein based upon such documents
are untrue, neither the Offeror, BUSA, the Parent nor the Dealer Manager or
Information Agent assumes any responsibility for the accuracy or completeness of
the information concerning the Company, furnished by the Company, or contained
in such documents and records or for any failure by the Company to disclose
events which may have occurred or may affect the significance or accuracy of any
such information but which are unknown to the Offeror, BUSA and the Parent.
The Company develops, manufacturers and markets consumer lettering,
labeling, signage and presentation systems which enhance the quality,
professionalism and effectiveness of a wide range of communications. The
lettering and labeling systems generate professional quality type-on-tape in a
variety of colors and in sizes ranging from one-half to four inches. The
PosterPrinter machine, targeted for the presentation market, enlarges
standard-sized originals to poster or banner-sized documents. In addition, a
PosterPrinter machine sold with a computer interface allows the end user to
print computer generated originals from a personal computer using specific
application software. The Company recently introduced VintageColor(TM), a wide-
format, graphics printing system which produces output in 24 or 36 inch widths
up to 100 feet long. The Company also offers a broad line of consumable supplies
and accessories which are used with all of its products. The Company has
manufacturing facilities located in the Minneapolis, Minnesota metropolitan
area.
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Set forth below is certain summary consolidated financial data with respect
to the Company excerpted or derived from financial information contained in the
Company's Annual Report on Form 10-K for the year ended July 31, 1995, and the
Company's Quarterly Report on Form 10-Q for the quarter ended October 31, 1995.
More comprehensive financial information is included in such reports and other
documents filed by the Company with the Commission, and the following summary is
qualified in its entirety by reference to such reports and such other documents
and all the financial information (including any related notes) contained
therein. Such reports and other documents should be available for inspection and
copies thereof should be obtainable in the manner set forth below.
VARITRONIC SYSTEMS, INC.
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED
OCTOBER 31, YEAR ENDED JULY 31,
------------------ -----------------------------
1995 1994 1995 1994 1993
------- ------- ------- ------- -------
(UNAUDITED)
INCOME STATEMENT DATA:
Net sales.................................... $13,256 $11,858 $49,525 $44,819 $45,423
Gross profit................................. 4,518 4,420 16,068 17,461 17,874
Income from operations....................... 1,001 919 931 2,580 3,612
Net income................................... 635 574 543 1,690 2,621
Net income per Share......................... $.27 $.25 $.23 $.65 $.94
JULY 31,
------------------
1995 1994
OCTOBER 31, ------- -------
1995
-----------
(UNAUDITED)
BALANCE SHEET DATA:
Working Capital.............................................. $17,862 $17,366 $14,466
Property and Equipment....................................... 4,339 4,514 4,264
Total Assets................................................. 26,207 27,565 25,940
Long-Term Debt............................................... 3,050 3,300 --
Shareholders Equity.......................................... 19,150 18,580 18,731
On February 20, 1996, the Company issued a press release reporting the
following unaudited results of operations for the quarter and six months ended
January 31, 1996 and containing information for the comparable prior periods:
THREE MONTHS ENDED SIX MONTHS ENDED
JANUARY 31, JANUARY 31,
------------------ ------------------
1996 1995 1996 1995
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net sales............................................... $12,248 $12,128 $25,504 $23,986
Net income.............................................. 866 702 1,501 1,275
Net income per Share.................................... $.37 $.30 $.65 $.55
In connection with the February 7, 1996 meeting of representatives of the
Parent and the Company, described at Section 11 herein, and for the purposes of
supporting the Company's belief that an offer of more than $14.00 per share was
appropriate, representatives of the Company submitted summary Company forecasts
and financial projections for fiscal years 1996 through 2000. These summary
financial forecasts reflect an increase in sales from $51.5 million for fiscal
year 1995 to $75.6 million for fiscal year 2000, and an increase in net income
from $1.5 million to $8.0 million. The assumptions, if any, underlying the
forecasts were not disclosed.
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The Company has advised the Offeror that it does not as a matter of course
disclose its internal forecasts. The forecasts were not prepared with a view to
public disclosure or compliance with published guidelines of the Commission or
the American Institute of Certified Public Accountants for prospective financial
information. Certain information from the forecasts is included herein solely
because the forecasts were furnished to Parent by representatives of the
Company. Accordingly, the inclusion of such information in this Offer should not
be regarded as an indication that the Parent, the Offeror, BUSA, the Company or
their respective financial advisors or their respective officers and directors
consider such information to be accurate or reliable, and none of such persons
assumes any responsibility for the accuracy therefor. The forecasts cover a
period of five fiscal years. The forecasted sales and earnings for the Company
are far greater than the Company's historical rate of growth during the five
preceding fiscal years, during which the Company's sales increased from $39.2
million to $49.5 million and net income decreased from $2.9 million to $0.5
million. Moreover, any forecasts as to future sales and earnings are inherently
subject to numerous risks and uncertainties, including general economic
conditions, competition, technological advances, costs of raw materials and
products, availability of continued sources of supply and availability of key
management.
The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files periodic reports, proxy statements and
other information with the Commission relating to its business, financial
condition and other matters. The Company is required to disclose in such proxy
statements certain information, as of particular dates, concerning the Company's
directors and officers, their remuneration, stock options granted to them, the
principal holders of the Company's securities and any material interests of such
persons in transactions with the Company. Such reports, proxy statements and
other information may be inspected at the public reference facilities maintained
by the Commission at Room 1024, 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000,
and at the following Regional Offices of the Commission: Northeast Regional
Office, Seven World Trade Center, 13th Floor, New York, New York 10048 and
Midwest Regional Office, Citicorp Center, 000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxxxxx 00000.
9. CERTAIN INFORMATION CONCERNING THE PARENT, BUSA AND THE OFFEROR.
The Offeror is a newly incorporated Minnesota corporation and a
wholly-owned subsidiary of BUSA, which is a wholly-owned subsidiary of the
Parent, which is a Wisconsin corporation. To date, the Offeror has not conducted
any business other than that incident to its formation, the execution and
delivery of the Merger Agreement and the commencement of the Offer. Accordingly,
no meaningful financial information with respect to the Offeror is available.
BUSA is a Wisconsin corporation and a wholly-owned subsidiary of the
Parent. BUSA, which is a Wisconsin corporation, was incorporated in 1991 to act
as the domestic arm of the Parent's operations. Financial information on BUSA is
included in the summary consolidated financial data of the Parent set forth
below.
The principal executive offices of the Offeror, BUSA and the Parent are
located at 0000 Xxxx Xxxx Xxxx Xxxx, Xxxxxxxxx, Xxxxxxxxx 00000. The Parent
develops, manufactures and sells a broad range of stock and customized products
employing its knowledge of surface chemistry, principally in adhesives, coatings
and graphics technologies. The Parent's products include over 20,000 stock items
and a wide variety of custom items, which are used primarily to identify, inform
or instruct, including pressure-sensitive identification, labeling and marking
systems for electrical wires and pipes; self-bonding nameplates, safety and
instructional signs and specialized tapes used in audio, video and computer
applications. The Parent's products are sold by direct sales force and mail
order sales, and are used in a variety of industrial, commercial, governmental,
public utility, medical equipment, computer and consumer product markets,
including original equipment manufacturers. The Parent and its subsidiaries
operate 12 manufacturing facilities in the United States and six foreign
countries. Domestic and international operations are conducted through its
Identification Systems and Specialty Tapes Group, Signmark Group and Seton
Group. Domestic operations are located in Connecticut and Wisconsin.
International operations are located in Australia, Belgium, Canada, England,
France, Germany, Hong Kong, Italy, Japan, Korea, New Zealand, Singapore, Spain
and Sweden.
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The Parent and its subsidiaries purchased approximately $12,270,000,
$8,311,000 and $8,039,000 in products from the Company for the fiscal years
ended July 31, 1995, July 31, 1994 and July 31, 1993, respectively.
Set forth below is certain summary consolidated financial data with respect
to the Parent excerpted or derived from financial information contained in the
Parent's Annual Report on Form 10-K for the fiscal year ended July 31, 1995, and
the Parent's Quarterly Report on Form 10-Q for the quarter ended January 31,
1996 (which are incorporated by reference herein). More comprehensive financial
information is included in such reports and other documents filed with the
Commission and the following summary is qualified in its entirety by reference
to such reports and such other documents and all financial information
(including any related notes) contained therein. Such reports and other
documents should be available for inspection and copies thereof should be
obtainable in the manner set forth below.
X. X. XXXXX CO.
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SIX MONTHS ENDED
JANUARY 31, YEAR ENDED JULY 31,
-------------------- -----------------------------------
1996 1995 1995 1994 1993
-------- -------- ----------- -------- --------
(UNAUDITED)
INCOME STATEMENT DATA:
Net revenues............................ $167,043 $147,896 $ 314,362 $255,841 $242,970
Income from operations.................. 16,304 17,523 40,585 29,475 25,324
Net income.............................. 12,210 11,033 27,911 18,540 16,856
Net income per Share, Class A
Nonvoting............................ $.55 $.50 $3.83 $2.55 $2.33
JANUARY 31, JULY 31,
1996 1995 1994
----------- -------- --------
(UNAUDITED)
BALANCE SHEET DATA:
Working capital................................................ $ 126,554 $129,938 $100,023
Total assets................................................... 242,132 230,005 202,509
Long-term debt................................................. 1,944 1,903 1,855
Total shareholders' equity..................................... 176,825 170,823 145,129
The Parent is subject to the informational requirements of the Exchange Act
and in accordance therewith files periodic reports and other information with
the Commission relating to its business, financial condition and other matters.
Such reports and other information are available for inspection and copying at
the offices of the Commission in the same manner as set forth with respect to
the Company in Section 8.
Except pursuant to the Option and as otherwise described in this Offer to
Purchase, neither of the Offeror, BUSA, the Parent, nor, to the best knowledge
of the Parent and its subsidiaries, any of the persons listed in Schedule I to
this Offer to Purchase owns or has any right to acquire any Shares and none of
them has effected any transaction in the Shares during the past 60 days.
10. SOURCE AND AMOUNT OF FUNDS.
If all Shares outstanding at February 26, 1996 and all Shares covered by
options outstanding at February 26, 1996 (excluding the Option) which were
exercisable at such date or the exercise of which has been accelerated to
immediately prior to the closing of the Offer are tendered pursuant to the
Offer, the aggregate purchase price and estimated fees and expenses will be
approximately $46,000,000. The Offeror will obtain all such funds from the
Parent, which currently has these funds in available cash. This Offer is not
subject to a financing condition.
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11. BACKGROUND OF THE OFFER.
On July 6, 1995, in the course of a meeting between Xxxxx X. Xxxxx, the
Company's Chairman of the Board, President and Chief Executive Officer, and
Xxxxxxxxx X. Xxxxxx, the Parent's President and Chief Executive Officer, the two
discussed potential synergies that would result from the Parent and the Company
combining their operations. The Parent is the largest customer of the Company.
On December 11, 1995, Xxxxxxxxx X. Xxxxxx and Xxxxxx's Vice President, Xxxxxx X.
XxXxxx, met with Xxxxx X. Xxxxx and the Company's Vice President of Finance,
Xxxxxxx X. Xxxxxx, and the Company's Vice President of Corporate Development,
Xxxxxxx X. Xxxxx, and discussed synergies from a combination of the respective
companies. No understandings or agreements were reached during these
discussions.
On December 22, 1995, Xx. Xxxxxx wrote to Mr. Xxxxx requesting the
opportunity to meet with the Company's board of directors during the first week
of January 1996 to discuss a potential business combination of the Parent and
the Company. Although this letter did not extend an offer to the Company, it
expressed the opinion that a price of $13.50 per Share would be fair to the
Company's shareholders. By letter dated December 27, 1995, Mr. Xxxxx advised Xx.
Xxxxxx that her letter would be brought to the attention of the Company's board
of directors after January 3, 1996 and that a response would be forthcoming
during the week of January 8, 1996.
On January 5, 1996, BUSA, in a matter unrelated to the Offer, commenced an
arbitration action against the Company challenging the Company's November 1995
notice of termination of the Company's distributor agreement with BUSA. XXXX
sought both equitable and monetary relief. XXXX also requested interim
injunctive relief in federal court. On January 30, 1996, the Company commenced
separate litigation against BUSA in federal court alleging, among other things,
violations of federal anti-trust law, tortious interference, deceptive trade
practices and business defamation.
On January 12, 1996, the Company informed the Parent that it had retained
the investment banking firm of Brown, Gibbons, Lang & Company, L.P. to explore
methods of maximizing the Company's long and short-term value. Discussions
continued between representatives of the Company and the Parent during January
1996. On January 29, 1996, the Parent addressed a letter to the Company's board
of directors again requesting an opportunity to discuss a potential business
combination at an increased price of $14.00 per Share. The Parent also issued a
January 29, 1996 press release announcing its request for an opportunity to
discuss a potential business combination with the Company. Pursuant to a January
30, 1996, letter from the Company, representatives of the Company and the Parent
met on February 7, 1996, and discussed potential advantages of a business
combination.
On February 9, 1996, the Parent delivered a letter to the Company's board
of directors by which it offered to purchase the Company for $16.00 per Share,
subject to certain conditions. On February 13, 1996, the Company's board of
directors responded that it considered the $16.00 price to be fair, subject to
certain conditions. The Company formed a special committee to consider the
Parent's February 9, 1996 offer. On February 23, 1996, Xxxxx X. Xxxxx announced
that he and a group, including current executive officers of the Company (the
"Drill Group"), intended to submit a competing offer to purchase the Company.
On February 26, 1996, a special committee of the Company's board of
directors met to consider (i) the Drill Group's offer of $17.50 per Share,
subject to certain financing and other conditions and (ii) the Parent's February
9, 1996 offer of $16.00 per Share. On February 26, 1996, after meeting with the
special committee, the Parent offered to purchase the Company for $17.50 per
Share, subject to certain conditions and subject to approval from its board of
directors. On February 26, 1996, a special committee of the Company's board of
directors approved a proposed cash tender offer for the Company's Shares by the
Offeror, BUSA and the Parent in conformance with MBCA Section 302A.671 and
approved the Merger Agreement subject to a successful completion of the Offer.
See Section 13. On February 27, 1996, the Parent's board of directors approved
the $17.50 per Share offer. On February 27, 1996, the Parent and the Company
jointly announced, among other things, that they had entered into the Merger
Agreement and that the Offer would commence within three business days.
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12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY.
The purpose of the Offer, the Merger and the Merger Agreement is to enable
the Parent to acquire control of, and the entire equity interest in, the
Company. Upon consummation of the Merger, the Company will become an indirect,
wholly-owned subsidiary of the Parent. The Offer is being made pursuant to the
Merger Agreement.
Under the Company's Articles, the approval of the Board of Directors of the
Company and the affirmative vote of the holders of two-thirds of the outstanding
Shares are required to approve and adopt the Merger Agreement and the
transactions contemplated thereby, including the Merger. The Board of Directors
of the Company, including a special committee of disinterested directors, has
approved the Offer, the Merger and the Merger Agreement, and, unless the Merger
is consummated pursuant to the short form merger provisions under the MBCA
described below, the only remaining required corporate action of the Company is
the approval and adoption of the Merger Agreement by the affirmative vote of the
holders of at least two-thirds of the Shares. If the Minimum Condition is
satisfied, including satisfaction as a result of the exercise, in whole or in
part, of the Option held by the Parent for a number of newly issued shares equal
to 19.9% of the Company's outstanding common stock, the Offeror will have
sufficient voting power to cause the approval and adoption of the Merger
Agreement and the transactions contemplated thereby without the affirmative vote
of any other shareholder. See Section 13 for a discussion of the Option.
In the Merger Agreement, the Company has agreed to take all action
necessary to convene a meeting of its shareholders as promptly as practicable
after the consummation of the Offer for the purpose of considering and taking
action on the Merger Agreement and the transactions contemplated thereby, if
such action is required by the MBCA. The Parent has agreed that all Shares owned
by the Parent or the Offeror (including any Shares acquired pursuant to the
exercise of the Option) will be voted in favor of the Merger Agreement.
The Parent intends to undertake an operations review of the Company's
operations and to study how operations of the two companies can best be
optimized. The Parent will continue to evaluate the Company's other business and
operations and will take such actions as a result of such review as are
appropriate under the circumstances.
Except as indicated in this Offer to Purchase, the Parent does not have any
present plans or proposals which relate to or would result in an extraordinary
corporate transaction, such as a merger, reorganization or liquidation,
involving the Company or any of its subsidiaries, a sale or transfer of a
material amount of consolidated assets of the Company and its subsidiaries or
any material change in the Company's capitalization or dividend policy or any
other material changes in the Company's corporate structure or business.
13. THE MERGER AGREEMENT.
The following summary of certain provisions of the Merger Agreement, a copy
of which has been filed as an exhibit to the Schedule 14D-1, is qualified in its
entirety by reference to the text of the Merger Agreement.
The Offer. The Offeror commenced the Offer in accordance with the terms of
the Merger Agreement. Pursuant to the terms and conditions of the Merger
Agreement, the Parent, BUSA, the Offeror and the Company are required to use all
reasonable efforts to take all action as may be necessary or appropriate in
order to effectuate the Offer and the Merger as promptly as possible and to
carry out the transactions provided for or contemplated by the Merger Agreement.
Company Actions. Pursuant to the Merger Agreement, the Company has agreed
that, subject to the fiduciary duties of the Board of Directors of the Company
under applicable law as determined by the Board of Directors of the Company in
good faith after consultation with the Company's outside counsel, it will file
with the Commission and mail to its shareholders, a Solicitation/Recommendation
Statement on Schedule 14D-9 containing the recommendation of the Board of
Directors that the Company's shareholders accept the Offer and approve the
Merger and the Merger Agreement.
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The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions of the Merger Agreement, and in accordance with the MBCA, the
Offeror shall be merged with and into the Company at the Effective Time.
Following the Merger, the separate corporate existence of the Offeror shall
cease and the Company shall continue as the Surviving Corporation and shall
succeed to and assume all the rights and obligations of the Offeror in
accordance with the MBCA and the Merger Agreement. The Articles of Incorporation
of the Company shall become the Articles of Incorporation of the Surviving
Corporation, at least a majority of the directors of the Surviving Corporation
shall be nominees of Parent, and the officers of the Company shall be the
officers of the Surviving Corporation, in each case until their successors are
chosen.
Conversion of Securities. At the Effective Time, each Share issued and
outstanding immediately prior thereto shall be canceled and extinguished and
each Share (other than Shares owned by the Company, the Parent, or any
subsidiary of either, including the Offeror, and any Dissenting Shares) shall,
by virtue of the Merger and without any action on the part of the Offeror, the
Company or the holders of the Shares, be converted into and represent the right
to receive an amount equal to the Offer Price. Each share of common stock of the
Offeror issued and outstanding immediately prior to the Effective Time shall, at
the Effective Time, by virtue of the Merger and without any action on the part
of the Offeror, the Company or the holders of Shares, be converted into and
shall thereafter evidence one validly issued and outstanding share of common
stock of the Surviving Corporation.
Dissenting Shares. Shares which are held by holders who have properly
exercised appraisal rights with respect thereto in accordance with Sections
302A.471 and 302A.473 of the MBCA will not be exchangeable for the right to
receive an amount equal to the Offer Price in cash, and instead holders of such
Shares will be entitled to receive payment of the appraised value of such stock,
unless such holders fail to perfect or withdraw or lose their right to appraisal
and payment under the MBCA.
Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to the Offeror, including, but not
limited to, representations and warranties relating to: the Company's
organization, qualification and capitalization; its authority to enter into the
Merger Agreement and carry out related transactions; filings made by the Company
with the Commission under the Securities Act of 1933, as amended or the Exchange
Act (including financial statements included in the documents filed by the
Company under these Acts); required consents and approvals; compliance with
applicable laws, the Company's intellectual property and the absence of certain
changes or events which would have a Material Adverse Effect on the Company.
"Material Adverse Effect" is defined as a material adverse effect on the
operations of the Company and its subsidiaries taken as a whole.
The Offeror, BUSA and the Parent have also made customary representations
and warranties to the Company, including, but not limited to, representations
and warranties relating the Offeror's, BUSA's, and the Parent's organization and
qualification, authority to enter into the Merger Agreement, required consents
and approvals and the availability of sufficient funds to consummate the Offer
and the Merger.
Covenants Relating to the Conduct of Business. The Company has agreed that
it will, and will cause its subsidiaries to, carry on their respective
businesses in, and not enter into any material transaction other than in
accordance with, the usual and ordinary course of business. The Company has
agreed that, except as contemplated by the Merger Agreement or as disclosed by
the Company to the Parent prior to the execution of the Merger Agreement, it
shall not, and shall not permit any of its subsidiaries to, without the prior
consent of the Parent:
(i) issue, sell, pledge or encumber, or authorize or propose the
issuance, sale, pledge or encumbrance of (a) any shares of capital stock of
any class (including the shares of Common Stock), or securities convertible
into any such shares, or any rights, warrants or options to acquire any
such shares or other convertible securities, or grant or accelerate any
right to convert or exchange any securities of the Company or any of its
subsidiaries for such shares, other than shares of Common Stock issuable
upon exercise of currently outstanding options, or (b) any other securities
in respect of, in lieu of or in substitution for shares of Common Stock
outstanding on the date of the Merger Agreement;
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(ii) redeem, purchase or otherwise acquire, or propose to redeem,
purchase or otherwise acquire, any of its outstanding securities (including
the shares of Common Stock);
(iii) split, combine or reclassify any shares of its capital stock or
declare or pay any dividend or distribution on any shares of capital stock
of the Company;
(iv) except pursuant to agreements or arrangements in effect on the
date of the Merger Agreement which have been disclosed to the Offeror,
authorize capital expenditures in excess of $500,000 in the aggregate, make
any acquisition or disposition of a material amount of assets (other than
inventory) or securities, enter into or amend or terminate any contract,
material to the business of the Company and its subsidiaries taken as a
whole, or release or relinquish any contact rights or claims, material to
the business of the Company and its subsidiaries taken as a whole;
(v) pledge or encumber any material assets of the Company except in
the ordinary course of business;
(vi) incur any long-term debt for borrowed money or short-term debt
for borrowed money in an aggregate amount in excess of $100,000 except for
debt incurred in the ordinary course of business (including, without
limitation, to fund working capital needs);
(vii) propose or adopt any amendments to the Articles of Incorporation
or By-Laws of the Company;
(viii) adopt a plan of complete or partial liquidation or resolutions
providing for the complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of
the Company or any of its subsidiaries;
(ix) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the
obligations of any other person, except wholly owned subsidiaries of the
Company in the ordinary course of business and consistent with past
practice;
(x) make any loans, advances or capital contributions to, or
investments in, any other person (other than loans or advances to
subsidiaries and customer loans or advances to employees in accordance with
past practices);
(xi) except as required by applicable laws, adopt or amend any bonus,
profit sharing, compensation, stock option, pension, retirement, deferred
compensation, severance, termination, employment or other employee benefit
plan, agreement, trust, fund, policy or other arrangement for the benefit
or welfare of any employee or director or former employee or director or,
except as required by applicable laws, increase the compensation or fringe
benefits of any employee or pay any employee or pay any benefit not
required by any existing plan, arrangement or agreement;
(xii) make any tax election or settle or compromise any federal,
state, local or foreign income tax liability, except in the ordinary course
of business and consistent with past practice; or
(xiii) agree in writing or otherwise to take any of the foregoing
actions.
No Solicitation. The Merger Agreement provides that neither the Company nor
any of its subsidiaries, nor any of their respective directors, officers,
employees, representatives, agents or affiliates, will directly or indirectly
encourage, solicit, initiate or, except as is required in the exercise of
fiduciary duties of the Company's directors and officers to its shareholders,
upon advice of counsel to the Company, participate in any discussions or
negotiations with, or knowingly provide any information to, any corporation,
partnership, person or other entity or group (other than the Parent, BUSA, or
the Offeror or any affiliate or agents) concerning any merger, sale of
substantial assets or shares of capital stock or similar transactions involving
the Company or any material subsidiary or division of the Company, provided,
however, that nothing contained in the Merger Agreement will prohibit the
Company or its Board of Directors from (i) taking and disclosing to the
Company's shareholders a position with respect to a tender offer by a third
party pursuant to Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act,
(ii) making such disclosure to the Company's shareholders which, in the judgment
of the Board of Directors with the advice of counsel, may be required
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under applicable law or (iii) providing information to, or participating in
discussions or negotiations with, any party that the Board of Directors believes
in good faith would be capable of effecting an acquisition of the Company on
terms that are superior, from a financial point of view, to the Offer and the
Merger. The Merger Agreement requires the Company promptly to communicate to
Offeror if it is furnishing information to or engaging in negotiations with any
third party with respect to the acquisition of the Company or any of its assets
or subsidiaries.
Options. Options to purchase Shares are outstanding under stock option
plans of the Company (the "Company Stock Option Plans") and pursuant to the
Merger Agreement, the Company has granted the Parent the Option (providing for
the purchase of a number of newly issued Shares equal to 19.9% of the
outstanding shares of the Company for $17.50 per share). See below. As of the
date of the Merger Agreement, options for a total of 193,500 Shares (the
"Company Stock Options") were outstanding under the Company Stock Option Plans
and pursuant to an agreement with an officer. The Merger Agreement provides that
at the Effective Time each Company Stock Option shall be canceled for a payment
of $17.50 per Share minus the exercise price thereof.
Indemnification. From and after the Effective Time, the Surviving
Corporation shall indemnify, defend and hold harmless the present and former
officers, directors, employees and agents of the Company, in each case to the
full extent permitted under the MBCA.
Employee Benefits. Under the Merger Agreement, the Offeror agreed to honor
and to cause the Surviving Corporation to honor and perform its obligations
under certain benefit plans, programs, policies and agreements and certain
compensation agreements, but only to the extent consistent with the terms and
conditions in effect on December 1, 1995 of any such plan, program policy or
agreement (or model thereof) provided to the Offeror.
The Merger Agreement provides that if any salaried or non-union hourly
employee of the Company or any of its subsidiaries is or becomes a participant
in any written employee benefit plan or program of the Offeror or any member of
its controlled group within the meaning of the Section 414(b) or (c) of the
Code, such employee shall be credited under such plan or program with all
service prior to the Effective Time with the Company and its subsidiaries (and
any predecessor employer) to the extent credit was given by the Company and its
subsidiaries for purposes of eligibility and vesting under such plan or program.
The Parent, BUSA and the Offeror have acknowledged in the Merger Agreement
that consummation of the Offer will constitute a change of control of the
Company (to the extent such concept is relevant) for purposes of certain
employment, severance or benefit agreements and plans.
The Parent, BUSA and the Offeror have agreed in the Merger Agreement to the
amendment of certain specified compensation and benefit plans and programs to
permit the acceleration of payment thereunder on or after the later of the date
of the acquisition of Shares pursuant to the Offer or five business days after
the participant's termination of employment for any reason (other than his or
her retirement at or after age 65, death or disability); provided however, that
such termination occurs within two years after such acquisition of Shares and
that no payments shall be accelerated or made to the extent they could
constitute non-deductible excess parachute payments within the meaning of
Section 280G(1) and (2)(A) of the Code.
Employee Stock Purchase Plan. The Employee Stock Purchase Plan (the "Plan")
is a payroll deduction plan pursuant to which the deductions of all
participating employees are accumulated for twelve-month periods, at the end of
which the Company issues and sells Shares to the participants. The Company has
advised the Parent that the current twelve-month period began on October 1,
1995. The Merger Agreement provides that at the Effective Time the Plan will
terminate and that each participant will receive an amount equal to the sum of
(a) the balance of the participant's account under the Plan, plus (b)(i) the
excess of $17.50 per Share over the purchase price per Share applicable to
purchases under the Plan, multiplied by (ii) the number of Shares that could
have been purchased from the balance of the participant's account under the
Plan.
Board Representation. The Merger Agreement provides that promptly upon the
purchase of Shares pursuant to the Offer, the Parent shall be entitled to
designate such number of members of the Board of
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Directors of the Company, rounded up to the next whole number but in no event
more than one less than the total number of directors, as will give the Parent,
subject to compliance with the provisions of Section 14(f) of the Exchange Act,
representation on the Board of Directors of the Company equal to the product of
(i) the total number of directors on such Board and (ii) the percentage that the
aggregate number of Shares owned by the Parent bears to the total number of
outstanding Shares. The Company has agreed, upon the request of the Parent and
upon the purchase of Shares pursuant to the Offer, to promptly increase the size
of the Board of Directors of the Company and/or use its reasonable best efforts
to secure the resignations of such number of directors as is necessary to enable
the Parent's designees to be elected the Board of Directors and shall cause the
Parent's designees to be so elected. The Company has agreed to take, at its
expense, all actions required by Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder to effect any such election, including the mailing
to its shareholders the information required to be disclosed pursuant thereto.
The Parent will supply to the Company in writing and be solely responsible for
any information with respect to itself and its nominees, officers, directors and
affiliates required by Section 14(f) and Rule 14f-1.
Following the election of designees of the Parent as described above and
prior to the Effective Time, any amendment to the Merger Agreement or the
Articles of Incorporation or Bylaws of the Company, any termination of the
Merger Agreement, or any action with respect to the various rights granted to
the Company under the Merger Agreement shall require the concurrence of a
majority of the Company's directors then in office who are not designees of
Parent.
Conditions Precedent. The respective obligations of each party to effect
the Merger are subject to the fulfillment at, or prior to, the Effective Time of
the following conditions: (a) if required by applicable law, the Merger
Agreement and the Merger shall have been approved by the requisite vote of the
holders of two-thirds of the outstanding Shares; (b) no governmental entity or
court of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any law, rule, regulation, executive order, decree or
injunction which prohibits or has the effect of prohibiting the consummation of
the Merger; (c) any waiting period applicable to the consummation of the Merger
under the HSR Act having expired or been terminated and (d) the Offeror shall
have accepted and paid for Shares tendered pursuant to the Offer, including
satisfaction of the Minimum Condition.
Termination. The Merger Agreement may be terminated and the Merger
contemplated thereby may be abandoned at any time notwithstanding approval
thereof by the shareholders of the Company, but prior to the Effective Time: (i)
by mutual written consent duly authorized by the Board of Directors of the
Company (excluding any representative of the Offeror or an affiliate of the
Offeror); (ii) by either the Offeror or the Company if the Effective Time shall
not have occurred on or before December 31, 1996; (iii) by either the Offeror or
the Company if any court of competent jurisdiction in the United States or other
United States governmental body shall have issued an order, decree or ruling, or
taken any other action restraining, enjoining, or otherwise prohibiting the
Merger and such order, decree, ruling or other action has become final and
non-appealable; (iv) by the Offeror, if (a) due to an occurrence or circumstance
that would result in a failure to satisfy any of the conditions set forth in
Section 15 of the Offer to Purchase, the Offeror shall have (1) failed to
commence the offer within twenty days following the date of the Merger
Agreement, (2) terminated the Offer or the Offer shall have expired without the
purchase of shares thereunder at any time after the latest date, if any, to
which the offer shall have been extended pursuant to the Merger Agreement or (3)
failed to pay for Shares pursuant to the offer by the fortieth business day
following such commencement, unless such failure to commence, terminate or
failure to pay for Shares shall have been caused by or resulted from the failure
of the Offeror or an affiliate to perform in any material respect its material
covenants and agreements contained in the Merger Agreement; or (b) prior to the
purchase of Shares pursuant to the Offer, the board of directors of the Company
shall have withdrawn or modified in a manner adverse to the Offeror its approval
or recommendation of the Offer, the Merger Agreement or the Merger, or shall
have recommended another Offer, or shall have resolved to do any of the
foregoing; provided, however, that the Offeror shall have no right to terminate
the Merger Agreement and abandon the Merger if the Company withdraws or modifies
its recommendation of the Offer, the Merger Agreement, or the Merger, by reason
of taking and disclosing to the Company's shareholders a position contemplated
by Rule 14e-2(a)(2) or (3) promulgated under the Exchange Act with respect to
another proposal, and if within ten days of taking and disclosing to its
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shareholders the aforementioned position, the Company publicly reconfirms its
recommendation of the Offer, the Merger Agreement or the Merger and takes and
discloses to the Company's shareholders a recommendation to reject such other
proposal as contemplated by Rule 14e-2(a)(1) promulgated under the Exchange Act;
or (v) by the Company, if (a) due to an occurrence or circumstance that would
result in a failure to satisfy any of the conditions set forth in Section 15 of
this Offer to Purchase or otherwise, the Offeror shall have (1) failed to
commence the Offer as provided in the Merger Agreement within twenty days
following the date of the Merger Agreement, (2) terminated the Offer or the
Offer shall have expired without the purchase of Shares thereunder at any time
after the latest date, if any, to which the Offer shall have been extended in
accordance with the terms of the Merger Agreement or (3) failed to pay for
Shares pursuant to the Offer by the fortieth business day following such
announcement, unless such failure to commence, terminate or failure to pay for
Shares shall have been caused by or resulted from the occurrence or existence of
the condition described in paragraph (iv) of Section 15 of this Offer to
Purchase or (b) prior to the purchase of Shares pursuant to the Offer, (1) a
corporation, partnership, person or other entity or group shall have made a bona
fide proposal that the Board of Directors of the Company believes, in good
faith, after consultation with its legal and financial advisors, it is more
favorable to the Company and its shareholders than the Offer and the Merger, (2)
the Offeror does not make, within ten days of the Offeror receiving notice of
such third party proposal containing all of the terms, provisions, and
conditions thereof, an offer which the Board of Directors believes, in good
faith after consultation with its legal and financial advisors, is at least as
favorable to the Company's shareholders as such third party proposal.
Fees and Expenses. The Company has agreed in the Merger Agreement to pay
the Offeror the sum of $1 million and all actual, documented out-of-pocket
expenses relating to the Offer and the Merger in an amount up to $750,000 if the
Merger Agreement or the transactions contemplated thereby are terminated or
abandoned (unless at such time the Parent, BUSA or the Offeror shall be in
breach in any material respect of any of its material obligations or material
representations and warranties thereunder) and prior to or contemporaneously
with such termination or abandonment, any corporation, partnership, person,
other entity or group (as defined in Section 13(d)(3) of the Exchange Act) other
than the Offeror or any of its subsidiaries or affiliates (collectively,
"Person"), shall have acquired or beneficially owns (as defined in Rule 13d-3
promulgated under the Exchange Act) at least 33.34% of the then outstanding
Shares.
Stock Option. The Company has granted the Parent an Option to purchase a
number of newly issued shares of Common Stock equal to 19.9% of its outstanding
shares of Common Stock at a price of $17.50 per share. The Option is intended to
increase the likelihood that the Offer and Merger will be consummated in
accordance with the terms of the Merger Agreement. Consequently, certain aspects
of the Option may have the effect of discouraging persons who might now, or
prior to the Effective Time may, be interested in acquiring all or a significant
interest in, other otherwise effecting a business combination with the Company
or from considering or proposing such a transaction, even if such persons were
prepared to offer to pay consideration which had a higher value than $17.50 per
share. The Option may be exercised, in whole or in part, at any time. The Option
will terminate upon the earlier of (i) the Effective Time or (ii) December 31,
1996. The Company may exercise the Option in order to meet the Minimum
Condition. Notwithstanding the foregoing, the Option cannot be exercised if the
Parent is in material breach of any of its material representations or
warranties or in material breach of its covenants or agreements.
Except as provided in the preceding paragraphs, the Merger Agreement
provides that whether or not the Merger is consummated, each party thereto shall
pay its own expenses incident to preparing for, entering into and carrying out
the Merger Agreement and the consummation of the Offer and the Merger.
14. DIVIDENDS AND DISTRIBUTIONS.
The Merger Agreement provides that neither the Company nor any of its
subsidiaries will, among other things, prior to the Effective Time (i) declare
or pay any dividend (whether in cash, stock or property) or make any other
distribution with respect to any shares of its capital stock, (ii) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or (iii) repurchase or otherwise acquire any
shares of capital stock of the Company; or issue, deliver or sell or authorize
or propose the issuance, delivery or sale of, any shares of its
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capital stock of any class of securities convertible into, or subscriptions,
rights, warrants or options to acquire, or enter into other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities other than the issuance of Shares pursuant to the
exercise of the Option or outstanding under the Company Stock Options.
15. CERTAIN CONDITIONS TO OFFEROR'S OBLIGATIONS.
Notwithstanding any other term of the Offer or of the Merger Agreement, the
Offeror is not required to accept for payment or pay for, subject to any
applicable rules and regulations of the Commission, including Rule 14e-1(c) of
the Exchange Act, any Shares not theretofore accepted for payment or paid for
and may terminate or amend the Offer as to such Shares unless (i) there shall
have been validly tendered and not withdrawn prior to the expiration of the
Offer a number of Shares at least equal to the Minimum Condition and (ii) any
waiting period under the HSR Act applicable to the purchase of the Shares
pursuant to the Offer has expired or been terminated. Furthermore,
notwithstanding any other term of the Offer or the Merger Agreement, the Offeror
is not required to accept for payment or, subject as aforesaid, to pay for any
Shares not theretofore accepted for payment or paid for, and may terminate or
amend the Offer if at any time on or after the date of the Merger Agreement and
before the acceptance of such Shares for payment or the payment therefor, any of
the following conditions exist or shall occur and remain in effect:
(i) there shall have occurred (a) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock Exchange,
(b) a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States, (c) a commencement of a war, armed
hostilities or other national or international calamity directly or
indirectly involving the United States, (d) any material limitation
(whether or not mandatory) by any governmental authority on, or any other
event which might materially and adversely affect, the extension of credit
by lending institutions or (e) in the case of any of the foregoing existing
at the time of the commencement of the Offer, a material acceleration or
worsening thereof; or
(ii) there shall have been any statute, rule or regulation enacted,
promulgated, entered or enforced or deemed applicable, or any decree, order
or injunction entered or enforced by any government or governmental
authority in the United States or by any court in the United States that
(a) restrains or prohibits the making or consummation of the Offer or the
consummation of the Merger, (b) prohibits or restricts the ownership or
operation by the Offeror (or any of its affiliates or subsidiaries) of any
portion of its or the Company's business or assets which is material to the
business of all such entities taken as a whole or (c) imposes material
limitations on the ability of the Offeror effectively to acquire or to hold
or to exercise full rights of ownership of the shares of Common Stock,
including, without limitation, the right to vote the shares of Common Stock
purchased by the Offeror on all matters properly presented to the
shareholders of the Company; provided, however, that the Offeror and the
Parent shall have used their best efforts to have any such decree, order or
injunction vacated or reversed, including, without limitation, by
proffering their willingness to accept an order embodying any arrangement
required to be made by the Offeror or the Parent or BUSA pursuant to the
Merger Agreement (and notwithstanding anything in this subsection (ii) to
the contrary, no terms, conditions or provisions of an order embodying such
an arrangement shall constitute a basis for the Offeror asserting
nonfulfillment of the conditions contained in this subsection (ii)); or
(iii) the Merger Agreement shall have been terminated in accordance
with its terms; or
(iv) the Company shall have breached or failed to perform any of its
covenants or agreements which breach or failure to perform is material to
the obligations of the Company under the Merger Agreement taken as a whole
or any of the representations and warranties of the Company set forth in
the Merger Agreement shall not have been true in any respect which is
material to the Company and its subsidiaries taken as a whole, in each
case, when made or a material adverse change in the financial condition or
results of operations of the Company and its subsidiaries taken as a whole,
provided that the aggregate effect under this condition shall be in excess
of $500,000; or
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(v) the Board of Directors of the Company shall have publicly
withdrawn or modified in any material respect adverse to the Offeror its
recommendation of the Offer; provided, however, the Offeror shall have no
right to terminate the Offer or not accept for payment or pay for any
shares of Common Stock if the Company withdraws or modifies its
recommendation of the Offer and the Merger, by reason of taking and
disclosing to the Company's shareholders a position contemplated by Rule
14e-2(a)(2) or (3) promulgated under the Exchange Act with respect to
another proposal, and if within ten days of taking and disclosing to its
shareholders the aforementioned position, the Company publicly reconfirms
its recommendation of the Offer and Xxxxxx and takes and discloses to the
Company's shareholders a recommendation to reject such other proposal as
contemplated by Rule 14e-2(a)(1) promulgated under the Exchange Act; or
(vi) the Offeror and the Company shall have agreed that the Offeror
shall terminate the Offer.
The foregoing conditions are for the sole benefit of the Parent, BUSA and
the Offeror and may be asserted by the Parent regardless of the circumstances
giving rise to any such condition and may be waived by the Parent, in whole or
in part, at any time and from time to time, in the sole discretion of the
Parent. The failure by the Parent, BUSA, or the Offeror at any time to exercise
any of the foregoing rights will not be deemed a waiver of any right, the waiver
of such right with respect to any particular facts or circumstances shall not be
deemed a waiver with respect to any other facts or circumstances, and each right
will be deemed an ongoing right which may be asserted at any time and from time
to time.
Should the Offer be terminated pursuant to the foregoing provisions, all
tendered Shares not theretofore accepted for payment shall forthwith be returned
by the Depositary to the tendering shareholders.
16. CERTAIN REGULATORY AND LEGAL MATTERS.
Except as set forth in this Section, the Offeror is not aware of any
approval or other action by any governmental or administrative agency which
would be required for the acquisition or ownership of Shares by the Offeror as
contemplated herein. Should any such approval or other action be required, it
will be sought, but the Offeror has no current intention to delay the purchase
of Shares tendered pursuant to the Offer pending the outcome of any such matter,
subject, however, to the Offeror's right to decline to purchase Shares if any of
the conditions specified in Section 15 shall have occurred. There can be no
assurance that any such approval or other action, if needed, would be obtained
or would be obtained without substantial conditions, or that adverse
consequences might not result to the Company's business or that certain parts of
the Company's business might not have to be disposed of if any such approvals
were not obtained or other action taken.
Antitrust. Under the provisions of the HSR Act applicable to the Offer, the
acquisition of Shares under the Offer may be consummated following the
expiration of a 15-day waiting period following the filing by the Parent of a
Notification and Report Form with respect to the Offer, unless the Parent
receives a request for additional information or documentary material from the
Department of Justice, Antitrust Division (the "Antitrust Division") or the
Federal Trade Commission ("FTC") or unless early termination of the waiting
period is granted. The Offeror made such a filing on February 29, 1996 and,
accordingly, the initial waiting period will expire on March 15, 1996. If,
within the initial 15-day waiting period, either the Antitrust Division or the
FTC requests additional information or material from the Parent concerning the
Offer, the waiting period will be extended to the tenth calendar day after the
date of substantial compliance by the Parent with such request. Complying with a
request for additional information or material can take a significant amount of
time.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Offeror's proposed acquisition of
the Company. At any time before or after the Offeror's acquisition of Shares
pursuant to the Offer, the Antitrust Division or the FTC could take such action
under the antitrust laws as either deems necessary or desirable in the public
interest, including seeking to enjoin the purchase of Shares pursuant to the
Offer or the consummation of the Merger or seeking the divestiture of Shares
acquired by the Offeror or the divestiture of substantial assets of the Company
or its subsidiaries or the Parent or its subsidiaries. Private parties may also
bring legal action under the antitrust laws
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under certain circumstances. There can be no assurance that a challenge to the
Offer on antitrust grounds will not be made, or, if such a challenge is made, of
the result thereof.
If any applicable waiting period under the HSR Act has not expired or been
terminated prior to the Expiration Date, the Offeror will not be obligated to
proceed with the Offer or the purchase of any Shares not theretofore purchased
pursuant to the Offer. See Section 15.
State Takeover Laws. Section 302A.671 of the MBCA provides that, unless the
acquisition of certain new percentages of voting control of the Company (in
excess of 20%, 33 1/3% or 50%) by an existing shareholder or other person is
approved by the holders of a majority of the outstanding voting stock other than
shares held by the acquirer (if already a shareholder) and officers and
directors who are also employees of the Company, the shares acquired above any
such new percentage level of voting control will not be entitled to voting
rights. In addition, if the statutory requirements are not satisfied, the
Company may redeem the shares so acquired by the acquirer at their market value.
Section 302A.671 generally does not apply to a cash offer to purchase all shares
of voting stock of the issuing corporation if such offer has been approved by a
majority vote of disinterested directors of the issuing corporation. As set
forth above, the Company's Board and a majority of its disinterested directors
have approved the Offer and Merger. Such approval occurred prior to the time the
Parent, BUSA, or the Offeror became an "interested stockholder." As a result,
the provisions of Section 302A.671 will not be applicable to the Merger.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, shareholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects in such states. In Xxxxx x. MITE Corp., in 1982, the Supreme
Court of the United States (the "U.S. Supreme Court") invalidated on
constitutional grounds the Illinois Business Takeover statute, which, as a
matter of state securities law, made takeovers of corporations meeting certain
requirements more difficult. However, in 1987, in CTS Corp. v. Dynamics Corp. of
America, the U.S. Supreme Court held that the State of Indiana could, as a
matter of corporate law and, in particular, with respect to those aspects of
corporate law concerning corporate governance, constitutionally disqualify a
potential acquirer from voting on the affairs of a target corporation without
the prior approval of the remaining shareholders. The state law before the U.S.
Supreme Court was by its terms applicable only to corporations that had a
substantial number of shareholders in the state and were incorporated there.
The Company, directly or through subsidiaries, conducts business in certain
states of the United States which have enacted takeover laws. The Offeror does
not know whether any of these laws will, by their terms, apply to the Offer or
the Merger and has not complied with any such laws. Should any person seek to
apply any state takeover law, the Offeror will take such action as then appears
desirable, which may include challenging the validity or applicability of any
such statute in appropriate court proceedings. In the event it is asserted that
one or more state takeover laws is applicable to the Offer or the Merger, and an
appropriate court does not determine that it is inapplicable or invalid as
applied to the Offer, the Offeror might be required to file certain information
with, or receive approvals from, the relevant state authorities. In addition, if
enjoined, the Offeror might be unable to accept for payment any Shares tendered
pursuant to the Offer, or be delayed in continuing or consummating the Offer and
the Merger. In such case, the Offeror may not be obligated to accept for payment
any Shares tendered. See Sections 15 and 18 herein.
17. FEES AND EXPENSES.
Neither the Offeror, BUSA nor the Parent, nor any officer, director,
stockholder, agent or other representative of the Offeror, BUSA or the Parent,
will pay any fees or commissions to any broker, dealer or other person (other
than the Dealer Manager) for soliciting tenders of Shares pursuant to the Offer.
Brokers, dealers, commercial banks and trust companies and other nominees will,
upon request, be reimbursed by the Offeror for customary mailing and handling
expenses incurred by them in forwarding materials to their customers.
Xxxxxx X. Xxxxx & Co. Incorporated ("Baird") is acting as Dealer Manager in
connection with the Offer and has provided certain financial advisory services
to the Parent and the Offeror in connection with the
22
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proposed acquisition of the Company. Parent has agreed to pay Baird a
transaction fee of $425,000. The transaction fee to Baird is payable upon the
acquisition of at least two-thirds of the outstanding Shares. In addition, the
Offeror has agreed to reimburse Baird for reasonable out-of-pocket expenses
incurred by Baird in connection with the Offer, including fees of third parties
such as its legal counsel, and to indemnify Baird against certain liabilities
relating to services provided by Baird in connection with the Offer and the
Merger.
The Offeror has retained Firstar Trust Company as Depositary and Xxxxxxxxx
& Company Inc. as Information Agent in connection with the Offer. The
Information Agent and the Depositary will receive reasonable and customary
compensation for its services hereunder and reimbursement for its reasonable
out-of-pocket expenses. The Depositary will also be indemnified by the Offeror
against certain liabilities in connection with the Offer and the Merger.
18. MISCELLANEOUS.
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Shares residing in any jurisdiction in which the making or
acceptance thereof would not be in compliance with the securities, blue sky or
other laws of such jurisdiction. In any jurisdiction where the securities, blue
sky or other laws require the Offer to be made by a licensed broker or dealer,
the Offer shall be deemed to be made on behalf of the Offeror by the Dealer
Manager or one or more registered brokers or dealers licensed under the laws of
such jurisdiction.
No person has been authorized to give any information or make any
representation on behalf of the Offeror other than as contained in this Offer to
Purchase or in the Letter of Transmittal, and, if any such information or
representation is given or made, it should not be relied upon as having been
authorized by the Offeror.
The Offeror, BUSA and the Parent have filed with the Commission the
Schedule 14D-1, pursuant to Section 14(d)(1) of the Exchange Act and Rule 14d-1
promulgated thereunder, furnishing certain information with respect to the
Offer. Such Schedule 14D-1 and any amendments thereto, including exhibits, may
be examined and copies may be obtained at the same places and in the same manner
as set forth with respect to the Company in Section 8 (except that they will not
be available at the regional offices of the Commission).
VSI ACQUISITION CO.
XXXXX USA, INC.
X.X. XXXXX CO.
February 27, 1996
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SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
OF
THE PARENT, BUSA, AND THE OFFEROR
1. Directors and Executive Officers of the Parent. The following table sets
forth the name, business address and present principal occupation or employment
and material occupations, positions, offices or employments for the past five
years of each member of the Board of Directors and each executive officer of the
Parent. Unless otherwise indicated, the business address of each such person is
c/o X.X. Xxxxx Co., Inc., 0000 Xxxx Xxxx Xxxx Xxxx, Xxxxxxxxx, Xxxxxxxxx 00000.
Unless otherwise indicated, each occupation set forth opposite an individual's
name refers to employment with the Parent. Each person listed is a citizen of
the United States.
PRESENT PRINCIPAL OCCUPATION OR
NAME AND BUSINESS ADDRESS OFFICE EMPLOYMENT
------------------------------ ---------------------- ----------------------------------------
Xxxxxxxxx X. Xxxxxx........... President, Chief President, Chief Executive Officer and
Executive Officer and Director of the Company; prior to
Director joining Parent in 1994, she was a Vice
President at Xxxxxxx Kodak Company and
General Manager of its Professional
Printing and Imaging Division
Xxxxxx X. XxXxxx.............. Senior Vice President, Senior Vice President, Treasurer, and
Treasurer, Assistant Assistant Secretary; prior to holding
Secretary and Director his current positions, he served as Vice
President-Finance and Chief Financial
Officer of the Parent
Xxxx X. Xxxxxx................ Vice President Vice President, Research and Development
Xxxxxxx X. Xxxx............... Vice President Vice President, Seton Group
Xxxxx X. Xxxxx................ Vice President Vice President, Signmark Group
Xxxxx X. Xxxxxxxxxxxx......... Secretary and Director Attorney, Partner of Xxxxxxx & Xxxxx,
outside counsel for the Parent, BUSA and
Offeror
Xxxxx X. Xxxxxxxxx............ Vice President Vice President, ISST Group
Xxxxx X. Xxxxx................ Vice President Vice President, Human Resources
Xxxxxxx X. Xxxxx, III......... Director Private Investor
Xxxxxxxxx X. Xxxxx............ Director President, X.X. Xxxxx Foundation
Xxxxxx X. Xxxxxxxx............ Director President and CEO, Fox Valley Company
Xxxxx X. Xxxxxx............... Director President, Valuation Research
Corporation
Xxxxxxx X. Xxxxx.............. Director President and CEO, Xxxxx Manufacturing
Company
Xxxxx X. Xxxxxx............... Director Professor, University of Akron
Xxxx X. Xxx................... Director Chairman, B&B Publishing
2. Directors and Executive Officers of BUSA. The table below identifies
each director and executive officer of BUSA. Information about each person
identified is given in the foregoing table with respect to the Parent.
NAME OFFICE
------------------------------------- ---------------------------------------
Xxxxxxxxx X. Xxxxxx.................. Director and President
Xxxxxx X. XxXxxx..................... Director and Senior Vice President and
Treasurer
Xxxxx X. Xxxxxxxxxxxx................ Director and Secretary
I-1
27
3. Directors and Executive Officers of the Offeror. The table below
identifies each director and executive officer of the Offeror. Information about
each person identified is given in the foregoing table with respect to the
Parent.
NAME OFFICE
------------------------------------- ---------------------------------------
Xxxxxxxxx X. Xxxxxx.................. Director and President
Xxxxxx X. XxXxxx..................... Director and Senior Vice President and
Treasurer
Xxxxx X. Xxxxxxxxxxxx................ Director and Secretary
I-2
28
THE DEPOSITARY FOR THE OFFER IS:
FIRSTAR TRUST COMPANY
By Mail: By Hand: By Overnight Courier:
Firstar Trust Company Firstar Trust Company Firstar Trust Company
Box 0000 000 X. Xxxxxxxx Xx. 000 X. Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000 4th Floor 0xx Xxxxx
Xxxxxxxxx, XX 00000 Xxxxxxxxx, XX 00000
or
Firstar Trust Company
c/o IBJ Xxxxxxxx Bank & Trust Company
Subcellar 0
Xxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile for Eligible Institutions: (000) 000-0000
To confirm fax only: (000) 000-0000
Any questions or requests for assistance or additional copies of the Offer
to Purchase and the Letter of Transmittal and Notice of Guaranteed Delivery may
be directed to the Information Agent or the Dealer Manager at the respective
telephone numbers and locations listed below. Shareholders may also contact
their broker, dealer, commercial bank, trust company or other nominee for
assistance concerning the Offer.
The Information Agent for the Offer is:
(LOGO)Wall Street Plaza
New York, New York 10005
Bankers and Brokers call collect:
(000) 000-0000
All Others Call Toll-Free:
0-000-000-0000
The Dealer Manager for the Offer is:
XXXXXX X. XXXXX & CO.
INCORPORATED
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
(000) 000-0000
