EXHIBIT (a)(1)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
GENERAL NUTRITION COMPANIES, INC.
AT
$25.00 NET PER SHARE
BY
NUMICO INVESTMENT CORP.
AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF
KONINKLIJKE NUMICO N.V.
(ROYAL NUMICO)
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, AUGUST 5, 1999, UNLESS THE OFFER IS EXTENDED.
THE BOARD OF DIRECTORS OF GENERAL NUTRITION COMPANIES, INC. (THE "COMPANY")
HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE OFFER AND THE MERGER (EACH AS
DEFINED HEREIN), DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN
THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY AND RECOMMENDS THAT
STOCKHOLDERS TENDER THEIR SHARES (AS DEFINED HEREIN) PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES OF COMMON STOCK, PAR VALUE $0.01 PER SHARE (THE "SHARES"), OF THE COMPANY
EQUIVALENT TO A MAJORITY OF THE TOTAL ISSUED AND OUTSTANDING SHARES ON A FULLY
DILUTED BASIS AS OF THE DATE SUCH SHARES ARE PURCHASED PURSUANT TO THE OFFER
(THE "MINIMUM CONDITION"). THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS
DESCRIBED IN SECTION 12 OF THIS OFFER TO PURCHASE.
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IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should: (1) complete and sign the Letter of Transmittal (or a facsimile
thereof) in accordance with the instructions in the Letter of Transmittal,
including any required signature guarantees, and (A) mail or deliver the Letter
of Transmittal (or such facsimile) with such stockholder's certificate(s) for
the tendered Shares and any other required documents to the Depositary (as
defined herein), or (B) follow the procedure for book-entry transfer of Shares
set forth in Section 3 of this Offer to Purchase or (2) request such
stockholder's broker, dealer, commercial bank, trust company or other nominee to
effect the transaction for such stockholder. Stockholders having Shares
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee must contact such broker, dealer, commercial bank, trust company
or other nominee if they desire to tender Shares so registered.
A stockholder who desires to tender Shares and whose certificates for such
Shares are not immediately available, or who cannot comply with the procedure
for book-entry transfer on a timely basis, may tender such Shares by following
the procedures for guaranteed delivery set forth in Section 3 of this Offer to
Purchase.
Questions and requests for assistance may be directed to X.X. Xxxxxx
Securities Inc., which is acting as the Dealer Manager, or MacKenzie Partners,
Inc., which is acting as the Information Agent, at their respective addresses
and telephone numbers set forth on the back cover of this Offer to Purchase.
Requests for additional copies of this Offer to Purchase and the Letter of
Transmittal may be directed to the Information Agent, the Dealer Manager or to
brokers, dealers, commercial banks or trust companies.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE FAIRNESS OR MERITS OF THIS TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF
THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
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THE DEALER MANAGER FOR THE OFFER IS:
[LOGO]
July 9, 1999
TABLE OF CONTENTS
SECTION PAGE
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Introduction......................................................................................... 1
1. Terms of the Offer................................................................................... 3
2. Acceptance for Payment and Payment for Shares........................................................ 4
3. Procedure for Tendering Shares....................................................................... 5
4. Rights of Withdrawal................................................................................. 8
5. Certain Federal Income Tax Consequences.............................................................. 9
6. Price Range of the Shares; Dividends................................................................. 10
7. Effect of the Offer on the Market for the Shares; Stock Quotation; Exchange Act Registration; Margin
Regulations........................................................................................ 10
8. Certain Information Concerning the Company........................................................... 11
9. Certain Information Concerning the Purchaser and Numico.............................................. 14
10. Background of the Offer; Contacts with the Company................................................... 15
11. Purpose of the Offer; Plans for the Company; the Merger Agreement; Other Agreements.................. 17
12. Certain Conditions to the Offer...................................................................... 30
13. Source and Amount of Funds........................................................................... 31
14. Dividends and Distributions.......................................................................... 32
15. Certain Legal Matters................................................................................ 33
16. Fees and Expenses.................................................................................... 34
17. Miscellaneous........................................................................................ 35
SCHEDULE A--Directors and Executive Officers of Numico, the Purchaser and Numico LP............................. A-1
TO THE HOLDERS OF SHARES OF
GENERAL NUTRITION COMPANIES, INC.:
INTRODUCTION
Numico Investment Corp., a Delaware corporation (the "Purchaser") and an
indirect wholly-owned subsidiary of Koninklijke Numico N.V., a company organized
under the laws of The Netherlands ("Numico"), hereby offers to purchase all
outstanding shares of common stock, par value $0.01 per share (the "Shares"), of
General Nutrition Companies, Inc., a Delaware corporation (the "Company"), at
$25.00 per Share, net to the seller in cash, without interest thereon, upon the
terms and subject to the conditions set forth in this Offer to Purchase and in
the related Letter of Transmittal (which, together with any amendments or
supplements hereto or thereto, collectively constitute the "Offer").
Tendering stockholders who have Shares registered in their name and who
tender directly to the Depositary will not be charged brokerage fees or
commissions or, subject to Instruction 6 of the Letter of Transmittal, transfer
taxes on the purchase of Shares by the Purchaser pursuant to the Offer.
Stockholders who hold their Shares through their broker, dealer, commercial bank
or trust company should consult with such institution as to whether there are
any fees applicable to a tender of Shares. The Purchaser will pay all charges
and expenses of IBJ Whitehall Bank & Trust Company, as the depositary (the
"Depositary"), X.X. Xxxxxx Securities Inc., as the dealer manager (the "Dealer
Manager"), and MacKenzie Partners, Inc., as the information agent (the
"Information Agent"), incurred in connection with the Offer. See Section 16.
THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER (THE
"MERGER AGREEMENT") DATED AS OF JULY 5, 1999, BY AND AMONG THE COMPANY, NUMICO
AND THE PURCHASER. PURSUANT TO THE MERGER AGREEMENT, AFTER COMPLETION OF THE
OFFER AND SUBJECT TO THE SATISFACTION OR WAIVER OF ALL CONDITIONS TO THE MERGER,
THE PURCHASER WILL BE MERGED WITH AND INTO THE COMPANY (THE "MERGER"). THE BOARD
OF DIRECTORS OF THE COMPANY (THE "BOARD") HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT, THE OFFER AND THE MERGER, DETERMINED THAT THE OFFER AND THE MERGER
ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY AND
RECOMMENDS THAT STOCKHOLDERS TENDER THEIR SHARES PURSUANT TO THE OFFER.
For a discussion of the Board's recommendation, see "Item 4. The
Solicitation or Recommendation" set forth in the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"),
which is being mailed to stockholders with this Offer to Purchase.
Xxxxxx Xxxxxxx & Co. Incorporated ("Xxxxxx Xxxxxxx") has delivered to the
Board its written opinion that, as of July 3, 1999, and based upon and subject
to the matters set forth therein, the consideration to be paid in the Offer and
the Merger to the stockholders of the Company in the Offer and the Merger is
fair to such stockholders from a financial point of view. A copy of the opinion
of Xxxxxx Xxxxxxx is contained in the Schedule 14D-9.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES EQUIVALENT TO A MAJORITY OF THE TOTAL ISSUED AND OUTSTANDING SHARES ON A
FULLY DILUTED BASIS AS OF THE DATE SUCH SHARES ARE PURCHASED PURSUANT TO THE
OFFER (THE "MINIMUM CONDITION"). THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER
CONDITIONS DESCRIBED IN SECTION 12.
Pursuant to the Merger Agreement, each issued and outstanding Share (other
than Shares owned by the Company, Numico or the Purchaser or Shares that are
held by stockholders exercising dissenters' rights under Delaware law
("Dissenting Stockholders")) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into and represent the
right to receive an amount in cash, without interest, equal to the price paid
for each Share pursuant to the Offer (the "Merger Consideration"). The Merger
Agreement is more fully described in Section 11.
The consummation of the Merger is subject to the satisfaction or waiver of a
number of conditions, including the approval of the Merger by the requisite vote
of the stockholders of the Company. Under Delaware law, the stockholder vote
necessary to approve the Merger will be the affirmative vote of at least a
majority of the outstanding Shares, including Shares held by the Purchaser and
its affiliates. Accordingly, if the Purchaser acquires a majority of the
outstanding Shares, the Purchaser will have the voting power required to approve
the Merger without the affirmative vote of any other stockholders of the
Company. In the event the Purchaser obtains 90% or more of the outstanding
Shares pursuant to the Offer or otherwise, the Purchaser will effect the Merger
pursuant to the short-form merger provisions of the Delaware
General Corporation Law ("DGCL"), without notice to, or any action by, any other
stockholder of the Company.
Certain stockholders of the Company owning in the aggregate 742,799 Shares,
or approximately 1.0% of the Shares issued and outstanding on June 30, 1999, on
a fully diluted basis, have entered into a Tender Agreement dated July 5, 1999,
with Numico and the Purchaser (the "Tender Agreement") whereby such stockholders
have agreed to tender all of their Shares pursuant to the Offer. This agreement
is more fully described in Section 11.
Based on the representations and warranties of the Company contained in the
Merger Agreement, as of June 30, 1999: (i) 67,997,138 Shares were issued and
outstanding and (ii) 7,224,939 Shares were reserved for issuance upon exercise
of outstanding stock options, warrants or other rights to acquire Shares. Based
on the foregoing, the Minimum Condition will be satisfied if 37,611,040 Shares
are validly tendered and not withdrawn prior to the Expiration Date (as defined
herein). The number of Shares required to be validly tendered and not withdrawn
in order to satisfy the Minimum Condition will increase to the extent additional
Shares are deemed to be outstanding on a fully diluted basis under the Merger
Agreement.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION THAT SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
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THE TENDER OFFER
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions set forth in the Offer
(including the terms and conditions set forth in Section 12 (the "Offer
Conditions"), and if the Offer is extended or amended, the terms and conditions
of such extension or amendment), the Purchaser will accept for payment, and pay
for, all Shares validly tendered on or prior to the Expiration Date and not
otherwise withdrawn as permitted by Section 4. The term "Expiration Date" shall
mean 12:00 Midnight, New York City time, on Thursday, August 5, 1999, or any
later time and date at which the Offer, as so extended by the Purchaser, shall
expire.
The Offer is conditioned upon, among other things, satisfaction of the
Minimum Condition and the obtaining of any Required Regulatory Approvals (as
defined in the Merger Agreement), including the expiration or termination of any
waiting period under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended, and the regulations thereunder (the "HSR Act"). The Offer is also
conditioned upon the satisfaction of each of the other conditions described in
Section 12. If any of these conditions is not satisfied prior to the Expiration
Date (as extended by the Purchaser pursuant to the Merger Agreement), the
Purchaser may terminate the Offer and return all tendered Shares to tendering
stockholders. The Purchaser reserves the right (but shall not be obligated),
subject to the provisions of the Merger Agreement, to waive any or all of such
conditions, except the Minimum Condition.
Subject to the applicable rules and regulations of the Securities and
Exchange Commission (the "SEC") and the terms of the Merger Agreement (see
Section 11), the Purchaser expressly reserves the right, in its sole discretion,
at any time or from time to time, to extend the period of time during which the
Offer is open by giving oral or written notice of such extension to the
Depositary. Any such extension will be followed as promptly as possible by a
public announcement thereof. During any such extension, all Shares previously
tendered and not withdrawn will remain subject to the Offer, subject to the
right of a tendering stockholder to withdraw such stockholder's Shares. See
Section 4. Subject to the terms of the Merger Agreement and the applicable rules
and regulations of the SEC, the Purchaser also expressly reserves the right, in
its sole discretion, at any time or from time to time, (i) to delay acceptance
for payment of or (regardless of whether such Shares were already accepted for
payment) payment for, any tendered Shares, or to terminate or amend the Offer as
to any Shares not then paid for, upon the occurrence of any of the conditions
specified in Section 12 and (ii) to waive any condition and to set forth or
change any other term and condition of the Offer, by giving oral or written
notice of such delay, termination or amendment to the Depositary and by making a
public announcement thereof; provided that pursuant to the Merger Agreement, the
Purchaser will not, without the prior written consent of the Company (such
consent to be authorized by the Board), (i) waive the Minimum Condition, (ii)
decrease the amount or change the form of consideration payable in the Offer,
(iii) decrease the number of Shares sought in the Offer, (iv) impose additional
conditions to the Offer, (v) change any of the Offer Conditions or amend any
other term of the Offer if any such change or amendment would be adverse in any
respect to the holders of Shares (other than Numico or the Purchaser) or (vi)
except as provided below, extend the Offer if all the Offer Conditions have been
satisfied.
Notwithstanding the foregoing, pursuant to the Merger Agreement, the
Purchaser may, without the consent of the Company, (a) extend the Offer, if at
the scheduled Expiration Date, any of the Offer Conditions have not been
satisfied or waived, on one or more occasions for an additional period(s) of up
to ten business days at a time until such conditions are satisfied or waived,
(b) extend the Offer for such period as may be required by any rule, regulation,
interpretation of position of the SEC or the staff thereof applicable to the
Offer or (c) extend the Offer for one or more periods (each such period to be
for not more than three business days, and such extensions to be for an
aggregate period of not more than ten business days beyond the latest Expiration
Date that would otherwise be permitted under clause (a) or (b) of this sentence)
if on the date of such extensions the Offer Conditions have been satisfied or
waived but more than 90% of the outstanding Shares have not been tendered.
Pursuant to the Merger Agreement, if all of the Offer Conditions are not
satisfied on any Expiration Date of the Offer, the Purchaser will, upon the
Company's request, extend the Offer for one or more periods of not more than ten
business days each;
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provided, that the Purchaser will not be required to extend the Offer beyond (i)
October 5, 1999 (the "Outside Date") (or November 5, 1999, if all Required
Regulatory Approvals are not obtained by such date) or (ii), if earlier, the
termination of the Merger Agreement in accordance with its terms.
If the Purchaser accepts any Shares for payment pursuant to the terms of the
Offer, it will accept for payment all Shares validly tendered and not withdrawn
prior to the Expiration Date, and, subject to the terms and conditions of the
Offer, including but not limited to the Offer Conditions, it will accept for
payment and promptly pay for all Shares so accepted for payment. The Purchaser
confirms that its reservation of the right to delay payment for Shares that it
has accepted for payment is limited by Rule 14e-1(c) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), which requires that a
tender offeror pay the consideration offered or return the tendered securities
promptly after the termination or withdrawal of a tender offer.
Any extension, delay, 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 no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
Subject to applicable law (including Rules 14d-4(c), 14d-6(d) and 14e-1 under
the Exchange Act, which require that any material change in the information
published, sent or given to stockholders in connection with the Offer be
promptly disseminated to stockholders in a manner reasonably designed to inform
stockholders of such change) and without limiting the manner in which the
Purchaser may choose to make any public announcement, the Purchaser shall have
no obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a press release or other announcement.
The Purchaser confirms that if it 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, the Purchaser will extend the Offer to the extent
required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act.
If, prior to the Expiration Date, the Purchaser (with the previous approval
of the Company in writing) shall decrease the percentage of Shares being sought
or the consideration offered to holders of Shares, such decrease shall be
applicable to all holders whose Shares are accepted for payment pursuant to the
Offer and, if at the time notice of any increase or decrease is first published,
sent or given to holders of Shares, the Offer is scheduled to expire at any time
earlier than the tenth business day from and including the date that such notice
is first so published, sent or given, the Offer will be extended until the
expiration of such ten business day period. For purposes of the Offer, a
"business day" means any day other than a Saturday, Sunday or federal holiday
and consists of the time period from 12:01 a.m. through 12:00 Midnight, New York
City time.
The Company provided the Purchaser with a list of the record holders of the
Shares and their addresses, as well as mailing labels for such record holders,
any non-objecting beneficial owner lists and security position listings for the
purpose of disseminating the Offer to holders of Shares. This Offer to Purchase,
the Letter of Transmittal and other relevant materials will be mailed to record
holders of Shares whose names appear on the Company's stockholder list and will
be furnished to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the Company's
stockholder list or who are listed as participants in a clearing agency's
security position listing for subsequent transmittal to beneficial owners of
Shares by the Purchaser.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including the
Offer Conditions and, if the Offer is extended or amended, the terms and
conditions of any such extension or amendment), the Purchaser will accept for
payment, and will pay for, all Shares validly tendered and not withdrawn as
promptly as practicable after the Expiration Date, if the Offer Conditions have
been satisfied or waived.
In addition, subject to applicable rules of the SEC, the Purchaser expressly
reserves the right to delay acceptance for payment of or payment for Shares in
order to comply, in whole or in part, with any applicable law. See Section 12.
Notwithstanding the foregoing, the Purchaser reserves the right, in its sole
4
discretion, to extend the Offer notwithstanding the prior satisfaction of the
Offer Conditions if more than 90% of the outstanding Shares have not been
tendered in the Offer (in which case the Purchaser may extend the expiration
date on one or more occasions for up to ten business days in the aggregate
beyond the time it would otherwise be required to accept validly tendered Shares
for payment). See Sections 1, 12 and 15.
Numico filed a Notification and Report Form under the HSR Act on July 6,
1999, and, accordingly, unless earlier terminated or extended by a request for
additional information, the waiting period under the HSR Act is scheduled to
expire at 11:59 p.m., New York City time, on July 21, 1999. See Section 15.
Payment for Shares tendered and accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of certificates for
such Shares (or a confirmation of a book-entry transfer of such Shares (a
"Book-Entry Confirmation") into the Depositary's account at The Depository Trust
Company (the "Book-Entry Transfer Facility")), a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) and any other required
documents.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment Shares validly tendered and not withdrawn as, if and when the Purchaser
gives oral or written notice to the Depositary of its acceptance for payment of
such Shares pursuant to the Offer. Payment for Shares accepted for payment
pursuant to the Offer will be made by deposit of the purchase price therefor
with the Depositary, which will act as agent for the tendering stockholders for
the purpose of receiving payments from the Purchaser and transmitting such
payments to the tendering stockholders. UNDER NO CIRCUMSTANCES WILL INTEREST ON
THE PURCHASE PRICE FOR SHARES BE PAID, REGARDLESS OF ANY EXTENSION OF THE OFFER
OR ANY DELAY IN MAKING SUCH PAYMENT.
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 Shares will be
returned, without expense to the tendering stockholder (or, in the case of
Shares tendered by book-entry transfer of such Shares into the Depositary's
account at the Book-Entry Transfer Facility pursuant to the procedures set forth
in Section 3, such Shares will be credited to an account maintained with the
Book-Entry Transfer Facility), as soon as practicable following expiration or
termination of the Offer.
If the Purchaser increases the consideration to be paid for Shares pursuant
to the Offer, the Purchaser will pay such increased consideration for all Shares
purchased pursuant to the Offer.
The Purchaser reserves the right to transfer or assign, in whole or in part,
to one or more direct or indirect subsidiaries of Numico the right to purchase
all or any portion of the Shares tendered pursuant to the Offer, but any such
transfer or assignment will not relieve the Purchaser of its obligations under
the Offer and will in no way prejudice the rights of tendering stockholders to
receive payment for Shares validly tendered and accepted for payment pursuant to
the Offer.
3. PROCEDURE FOR TENDERING SHARES.
VALID TENDER. To tender Shares pursuant to the Offer, (a) a properly
completed and duly executed Letter of Transmittal (or a facsimile thereof) in
accordance with the instructions of the Letter of Transmittal, with any required
signature guarantees, certificates for Shares to be tendered and any other
documents required by the Letter of Transmittal, 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, (b) such Shares must be delivered
pursuant to the procedures for book-entry transfer described below (and a Book-
Entry Confirmation of such delivery, including an Agent's Message (as defined
below), must be received by the Depositary if the tendering stockholder has not
delivered a Letter of Transmittal) prior to the Expiration Date or (c) the
tendering stockholder must comply with the guaranteed delivery procedures set
forth below. The term "Agent's Message" means a message transmitted by the
Book-Entry Transfer Facility to, and received by, the Depositary and forming a
part of a Book-Entry Confirmation, which states that the Book-Entry Transfer
Facility has received an express acknowledgment from the participant in the
Book-Entry Transfer Facility tendering the Shares that are subject to the
Book-Entry Confirmation, that such
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participant has received and agrees to be bound by the terms of the Letter of
Transmittal and that the Purchaser may enforce such agreement against the
participant.
BOOK-ENTRY DELIVERY. The Depositary will establish accounts 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 the Book-Entry Transfer Facility's systems
may make book-entry delivery of Shares by causing the Book-Entry Transfer
Facility to transfer such Shares into the Depositary's account in accordance
with the Book-Entry Transfer Facility's procedures for such transfer. However,
although delivery of Shares may be effected through book-entry transfer, either
the Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, with any required signature guarantees, or an Agent's Message in lieu
of a Letter of Transmittal, and any other required documents, must, in any case,
be transmitted to, and received by, the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase prior to the Expiration Date,
or the tendering stockholder must comply with the guaranteed delivery procedures
described below. The confirmation of a book-entry transfer of Shares into the
Depositary's account at the Book-Entry Transfer Facility as described above is
referred to herein as a "Book-Entry Confirmation." DELIVERY OF DOCUMENTS TO THE
BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER
FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
SIGNATURE GUARANTEES. Except as otherwise provided below, all signatures on
a Letter of Transmittal must be guaranteed by a financial institution (including
most commercial banks, savings and loan associations and brokerage houses) that
is a participant in the Securities Transfer Agents Medallion Program, the New
York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange
Medallion Program (each, an "Eligible Institution"). No signature guarantee is
required on the Letter of Transmittal (a) if the Letter of Transmittal is signed
by the registered holder(s) (which term, for purposes of this Section 3,
includes any participant in any of the Book-Entry Transfer Facility's systems
whose name appears on a security position listing as the owner of the Shares) of
Shares tendered therewith and such registered holder has not completed either
the box entitled "Special Delivery Instructions" or the box entitled "Special
Payment Instructions" on the Letter of Transmittal or (b) if such Shares are
tendered for the account of an Eligible Institution. See Instructions 1 and 5 to
the Letter of Transmittal. If the certificates for Shares are registered in the
name of a person other than the signer of the Letter of Transmittal, or if
payment is to be made or certificates for Shares not tendered or not accepted
for payment are to be returned to a person other than the registered holder of
the certificates surrendered, the tendered certificates for such Shares must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered holders or owners appear on the
certificates, with the signatures on the certificates or stock powers guaranteed
in the manner described above. See Instructions 1 and 5 to the Letter of
Transmittal.
GUARANTEED DELIVERY. A stockholder desiring to tender Shares pursuant to
the Offer and whose certificates for Shares are not immediately available or who
cannot comply with the procedures for book-entry transfer on a timely basis or
who cannot deliver all required documents to the Depositary prior to the
Expiration Date, may tender such Shares by following all of the procedures set
forth below:
(i) such 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 Purchaser, is received
by the Depositary, as provided below, prior to the Expiration Date; and
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(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation with respect to all such Shares),
together with a properly completed and duly executed Letter of Transmittal
(or a facsimile thereof), with any required signature guarantees (or, in the
case of a book-entry transfer, an Agent's Message in lieu of a Letter of
Transmittal), and any other required documents are received by the
Depositary within three trading days after the date of execution of such
Notice of Guaranteed Delivery. A "trading day" is any day on which the
Nasdaq National Market operated by the National Association of Securities
Dealers, Inc. (the "NASD") is open for business.
The Notice of Guaranteed Delivery may be delivered by hand or overnight
courier to the Depositary or transmitted by telegram, telex or facsimile or mail
to the Depositary and must include a guarantee by an Eligible Institution in the
form set forth in such Notice of Guaranteed Delivery.
OTHER REQUIREMENTS. Notwithstanding any other provision hereof, payment for
Shares accepted for payment pursuant to the Offer will in all cases be made only
after timely receipt by the Depositary of (a) certificates for (or a timely
Book-Entry Confirmation with respect to) such Shares, (b) a Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed, with
any required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message in lieu of a Letter of Transmittal) and (c) any other documents
required by the Letter of Transmittal. Accordingly, tendering stockholders may
be paid at different times depending upon when certificates for Shares or
Book-Entry Confirmations with respect to such Shares are actually received by
the Depositary. UNDER NO CIRCUMSTANCES WILL ANY INTEREST BE PAID ON THE PURCHASE
PRICE OF THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN
MAKING SUCH PAYMENT.
TENDER CONSTITUTES AN AGREEMENT. The valid tender of Shares pursuant to one
of the procedures described above will constitute a binding agreement between
the tendering stockholder and the Purchaser upon the terms and subject to the
conditions of the Offer.
APPOINTMENT. By executing a Letter of Transmittal as set forth above
(including through delivery of an Agent's Message), the tendering stockholder
irrevocably appoints designees of the Purchaser as such stockholder's
attorneys-in-fact and proxies in the manner set forth in the Letter of
Transmittal, each with full power of substitution, to the full extent of such
stockholder's rights with respect to the Shares tendered by such stockholder and
accepted for payment by the Purchaser and with respect to any and all other
Shares or other securities or rights issued or issuable in respect of such
Shares on or after July 5, 1999. All such proxies will be considered coupled
with an interest in the tendered Shares. Such appointment will be effective
when, and only to the extent that, the Purchaser accepts for payment and pays
for the Shares tendered by such stockholder as provided herein. Upon such
appointment, all prior powers of attorney, proxies and consents given by such
stockholder with respect to such Shares or other securities or rights will,
without further action, be revoked and no subsequent powers of attorney,
proxies, consents or revocations may be given (and, if given, will be deemed not
effective). The designees of the Purchaser will thereby be empowered to exercise
all voting and other rights with respect to such Shares and other securities or
rights in respect of any annual, special or adjourned meeting of the Company's
stockholders, actions by written consent in lieu of any such meeting or
otherwise, as they in their sole discretion deem proper. The Purchaser reserves
the right to require that, in order for Shares to be deemed validly tendered,
immediately upon the Purchaser's acceptance for payment of and payment for such
Shares, the Purchaser must be able to exercise full voting and other rights with
respect to such Shares, including voting at any meeting of stockholders then
scheduled.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by the Purchaser in its sole discretion, which determination
will be final and binding. The Purchaser reserves the absolute right to reject
any or all tenders determined by it not to be in proper form or the acceptance
for payment of or payment for which may, in the opinion of the Purchaser's
counsel, be unlawful. The Purchaser also reserves the absolute right to waive
any defect or irregularity in the tender of any Shares of any particular
stockholder whether or not similar defects or irregularities are waived in the
case of other stockholders. No tender of Shares will be deemed to have been
validly made until all defects or irregularities relating thereto have been
cured or
7
waived. None of the Purchaser, Numico, the Depositary, the Information Agent,
the Dealer Manager or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any liability
for failure to give any such notification. The Purchaser's interpretation of the
terms and conditions of the Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding.
BACKUP WITHHOLDING. In order to avoid "backup withholding" of U.S. Federal
income tax on payments of cash pursuant to the Offer, a U.S. Holder (as defined
herein) surrendering Shares in the Offer must, unless an exemption applies,
provide the Depositary with such U.S. Holder's correct taxpayer identification
number ("TIN") on a Substitute Form W-9 and certify under penalties of perjury
that such TIN is correct and that such U.S. Holder is not subject to backup
withholding. If a U.S. Holder does not provide a correct TIN or fails to provide
the certifications described above, the Internal Revenue Service (the "IRS") may
impose a penalty on such U.S. Holder and payment of cash to such stockholder
pursuant to the Offer may be subject to backup withholding of 31%. All U.S.
Holders surrendering Shares pursuant to the Offer should complete and sign the
Substitute Form W-9 included as part of the Letter of Transmittal to provide the
information and certification necessary to avoid backup withholding (unless an
applicable exemption exists and is proved in a manner satisfactory to the
Purchaser and the Depositary). Certain stockholders (including, among others,
certain domestic corporations and certain foreign individuals and entities) are
not subject to backup withholding. Noncorporate foreign stockholders should
complete and sign a Form W-8, Certificate of Foreign Status, a copy of which may
be obtained from the Depositary, in order to avoid backup withholding. See
Instruction 9 to the Letter of Transmittal.
4. RIGHTS OF WITHDRAWAL.
Tenders of Shares made pursuant to the Offer are irrevocable except that
Shares tendered pursuant to the Offer may be withdrawn pursuant to the
procedures set forth below at any time prior to the Expiration Date and, unless
theretofore accepted for payment and paid for by the Purchaser pursuant to the
Offer, may also be withdrawn at any time after September 6, 1999.
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 and
must specify the name of the person having tendered the Shares to be withdrawn,
the number of Shares to be withdrawn and the name of the registered holder of
the Shares to be withdrawn, if different from the name of the person who
tendered the Shares. If certificates for Shares have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
certificates, the serial numbers shown on such certificates must be submitted to
the Depositary and, unless such Shares have been tendered by an Eligible
Institution, the signatures on the notice of withdrawal must be guaranteed by an
Eligible Institution. If Shares have been delivered pursuant to the procedure
for book-entry transfer as set forth in Section 3, any notice of withdrawal must
also specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn Shares and otherwise comply with the
Book-Entry Transfer Facility's procedures.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser in its sole
discretion, which determination will be final and binding. None of the
Purchaser, Numico, the Depositary, the Information Agent, the Dealer Manager or
any other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
Withdrawals of tenders of Shares may not be rescinded, and any Shares
properly withdrawn will thereafter be deemed not validly tendered for purposes
of the Offer. However, withdrawn Shares may be retendered by again following one
of the procedures described in Section 3 at any time prior to the Expiration
Date.
If the Purchaser extends the Offer, is delayed in its acceptance for payment
of Shares, or is unable to accept for payment Shares pursuant to the Offer, for
any reason, then, without prejudice to the Purchaser's rights under the Offer,
the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered
8
Shares, and such Shares may not be withdrawn except to the extent that tendering
stockholders are entitled to withdrawal rights as set forth in this Section 4.
5. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES.
The following is a general discussion of certain U.S. Federal income tax
consequences of the receipt of cash by a holder of Shares pursuant to the Offer
or the Merger. Except as specifically noted, this discussion applies only to a
U.S. Holder.
A "U.S. Holder" means a holder of Shares that is (i) a citizen or resident
of the United States, (ii) a corporation or other entity taxable as a
corporation created or organized in or under the laws of the United States or
any political subdivision thereof or therein, (iii) an estate the income of
which is subject to United States Federal income taxation regardless of its
source, or (iv) a trust if (x) a court within the United States is able to
exercise primary supervision over the administration of the trust and (y) one or
more United States persons have the authority to control all substantial
decisions of the trust. In the case of a partnership that holds Shares, any
partner described in any of (i) through (iv), above, generally is also a U.S.
Holder. A "Non-U.S. Holder" is a holder of Shares, generally including any
partner in a partnership that holds Shares, that is not a U.S. Holder.
The transfer of Shares pursuant to the Offer or the Merger will be a taxable
transaction for U.S. Federal income tax purposes under the Internal Revenue Code
of 1986, as amended (the "Code"), and may also be a taxable transaction under
applicable state, local or foreign income or other tax laws. Generally, for U.S.
Federal income tax purposes, a U.S. Holder will recognize gain or loss equal to
the difference between the amount of cash received by the U.S. Holder pursuant
to the Offer or the Merger and the aggregate tax basis in the Shares transferred
by such U.S. Holder pursuant to the Offer (or canceled pursuant to the Merger).
Gain or loss will be calculated separately for each block of Shares tendered and
purchased pursuant to the Offer (or canceled pursuant to the Merger).
Gain (or loss) will be capital gain (or loss), assuming that such Shares are
held as a capital asset. Capital gains of individuals, estates and trusts
generally are subject to preferential U.S. Federal income tax rates if, at the
time the Company accepts the Shares for payment, the stockholder held the Shares
for more than one year. Capital gains of corporations generally are taxed at the
same Federal income tax rates applicable to corporate ordinary income. In
addition, under present law, the ability to use capital losses to offset
ordinary income is limited.
A U.S. Holder that tenders Shares pursuant to the Offer or surrenders Shares
pursuant to the Merger may be subject to 31% backup withholding unless the U.S.
Holder provides its taxpayer identification number ("TIN") and certifies that
such number is correct or properly certifies that it is awaiting a TIN, or
unless an exemption applies. A stockholder that does not furnish its TIN may be
subject to a penalty imposed by the IRS. See "--Backup Withholding" under
Section 3 herein.
If backup withholding applies to a stockholder, the Depositary is required
to withhold 31% from payments to such stockholder. Backup withholding is not an
additional tax. Rather, the amount of the backup withholding can be credited
against the U.S. Federal income tax liability of the person subject to the
backup withholding, provided that the required information is given to the IRS.
If backup withholding results in an overpayment of tax, a refund can be obtained
by the stockholder upon filing a U.S. Federal income tax return.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE WITH RESPECT TO SHARES
RECEIVED PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS
COMPENSATION OR WITH RESPECT TO HOLDERS OF SHARES WHO ARE SUBJECT TO SPECIAL TAX
TREATMENT UNDER THE CODE, SUCH AS NON-U.S. HOLDERS, LIFE INSURANCE COMPANIES,
TAX-EXEMPT ORGANIZATIONS, FINANCIAL INSTITUTIONS, DEALERS IN SECURITIES OR
CURRENCIES, PERSONS WHO HOLD SHARES AS A POSITION IN A "STRADDLE" OR AS PART OF
A "HEDGING" OR "CONVERSION" TRANSACTION AND PERSONS THAT HAVE A FUNCTIONAL
CURRENCY OTHER THAN THE U.S. DOLLAR. THE DISCUSSION MAY NOT APPLY TO A HOLDER OF
SHARES IN LIGHT OF SUCH XXXXXX'S INDIVIDUAL CIRCUMSTANCES AND MAY NOT DISCUSS
EVERY ASPECT OF U.S. FEDERAL TAX LAW THAT MAY BE RELEVANT TO HOLDERS (INCLUDING
THE APPLICABILITY OF ANY ESTATE OR GIFT TAX LAWS). STOCKHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO
THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME
AND OTHER TAX LAWS) OF THE OFFER AND THE MERGER.
9
6. PRICE RANGE OF THE SHARES; DIVIDENDS.
The Shares are included for trading on the Nasdaq National Market under the
symbol "GNCI". The following table sets forth, for each of the fiscal quarters
of the Company indicated, the high and low bid quotations for the Shares on the
Nasdaq National Market based upon published financial sources.
BID QUOTATIONS
------------------------
FISCAL YEAR HIGH LOW
------------------------------------------------------------------------------- ----------- -----------
1997
First quarter................................................................ $ 231/2 $ 173/8
Second quarter............................................................... 285/8 201/8
Third quarter................................................................ 301/2 251/4
Fourth quarter............................................................... 365/8 277/8
1998
First quarter................................................................ 411/4 333/8
Second quarter............................................................... 371/4 277/8
Third quarter................................................................ 321/2 9
Fourth quarter............................................................... 21 95/8
1999
First quarter................................................................ 169/16 11
Second quarter (through July 8, 1999)........................................ 245/8 165/16
On July 2, 1999, the last full trading day before the first public
announcement of the execution of the Merger Agreement, the last reported bid
price of the Shares on the Nasdaq National Market was $22 7/8 per Share. On July
8, 1999, the last full trading day before the commencement of the Offer, the
last reported bid price of the Shares on the Nasdaq National Market was $24 9/16
per Share. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE
SHARES.
The Purchaser has been advised by the Company that the Company has never
paid any cash dividends on the Shares. The Merger Agreement prohibits the
Company from declaring or paying any dividends until the effectiveness of the
Merger.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK QUOTATION; EXCHANGE
ACT REGISTRATION; MARGIN REGULATIONS.
MARKET FOR THE SHARES. The purchase of Shares by the Purchaser pursuant to
the Offer will reduce the number of Shares that might otherwise trade publicly
and may reduce the number of holders of Shares, which could adversely affect the
liquidity and market value of the remaining Shares held by the public.
STOCK QUOTATION. Depending upon the number of Shares purchased pursuant to
the Offer, the Shares may no longer meet the requirements of the National
Association of Securities Dealers, Inc. ("NASD") for continued inclusion in the
Nasdaq National Market, which among other things require that an issuer have
either (i) at least 750,000 publicly held shares, held by at least 400
stockholders of round lots, with an aggregate market value of at least
$5,000,000 and net tangible assets of at least $4,000,000 and at least two
registered and active market makers for the shares or (ii) at least 1,100,000
publicly held shares, held by at least 400 stockholders of round lots, with an
aggregate market value of at least $15,000,000, and either (x) a market
capitalization of at least $50,000,000 or (y) total assets and total revenue of
at least $50,000,000 each for the most recently completed fiscal year or two of
the last three most recently completed fiscal years and at least four registered
and active market markers. Shares held directly or indirectly by directors,
officers or beneficial owners of more than 10% of the Shares are not considered
as being publicly held for this purpose. According to information provided by
the Company, as of July 7, 1999, there were 1,281 stockholders of record.
If the Shares were to cease to be quoted on the Nasdaq National Market, the
market for the Shares could be adversely affected. It is possible that the
Shares would be traded or quoted on other securities
10
exchanges or in the over-the-counter market and the price quotations would be
reported by such exchange or through Nasdaq or other sources. The extent of the
public market for the Shares and the availability of such quotations would,
however, depend upon the number of stockholders and/or the aggregate market
value of the Shares remaining at such time, the interest in maintaining a market
in the Shares on the part of securities firms, the possible termination of
registration of the Shares under the Exchange Act and other factors.
EXCHANGE ACT REGISTRATION. The Shares are currently registered under the
Exchange Act. Such registration may be terminated by the Company upon
application to the SEC if the outstanding Shares are not listed on a national
securities exchange and there are fewer than 300 holders of record of the
Shares. Termination of registration of the Shares under the Exchange Act would
substantially reduce the information required to be furnished by the Company to
its stockholders and to the SEC and would make certain provisions of the
Exchange Act no longer applicable to the Company, such as the short-swing profit
recovery provisions of Section 16(b), the requirement of furnishing a proxy
statement pursuant to Section 14(a) in connection with stockholders' meetings
and the related requirement of furnishing an annual report to stockholders.
Furthermore, the ability of "affiliates" of the Company and persons holding
"restricted securities" of the Company to dispose of such securities pursuant to
Rule 144 under the Securities Act of 1933, as amended (the "Securities Act"),
may be impaired or eliminated. If registration of the Shares under the Exchange
Act was terminated, the Shares would no longer be eligible for Nasdaq National
Market reporting or for continued inclusion on the list of "margin securities"
of the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"). The Purchaser intends to seek to cause the Company to apply for
termination of registration of the Shares under the Exchange Act as soon as
possible after the completion of the Offer if the requirements for such
termination are met.
MARGIN REGULATIONS. The Shares are currently "margin securities" under the
regulations of 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. In any event, the Shares will cease to be "margin
securities" if registration of the Shares under the Exchange Act is terminated.
INCREASED INTEREST IN NET BOOK VALUE AND NET EARNINGS OF THE COMPANY. If
the Offer is consummated, the direct and indirect interest of Numico in the
Company's net book value and net earnings will increase in proportion to the
number of Shares acquired in the Offer. Following consummation of the Merger,
Numico's direct and indirect interest in such items will increase to 100%, and
the Company will be a wholly-owned indirect subsidiary of Numico. Accordingly,
Numico and its subsidiaries will be entitled to all benefits resulting from that
interest, including all income generated by the Company's operations, any future
increase in the Company's value and the right to elect all members of the Board.
Similarly, Numico will also bear the risk of losses generated by the Company's
operations and any decrease in the value of the Company after the Merger.
Furthermore, after the Merger, pre-Merger shareholders will not have the
opportunity to participate directly in the earnings and growth of the Company
and will not face the risk of losses generated by the Company's operations or
decline in the value of the Company.
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
The Company is a Delaware corporation with its principal executive office at
000 Xxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxxxxxx 00000. The Company is a nationwide
specialty retailer of vitamin and mineral supplements, sports nutrition products
and herbs, and is also a leading provider of personal care and other
health-related products.
SELECTED FINANCIAL INFORMATION. The selected financial information of the
Company and its consolidated subsidiaries set forth below has been excerpted and
derived from the Company's Annual Report on Form 10-K for the fiscal year ended
February 6, 1999 (the "Form 10-K") and its Quarterly Report on Form 10-Q for the
twelve weeks ended May 1, 1999, and its Quarterly Report on Form 10-Q for the
twelve weeks ended April 25, 1998. More comprehensive financial and other
information is included in such reports
11
(including management's discussion and analysis of results of operations and
financial position) and in other reports and documents filed by the Company with
the SEC. The financial information set forth below is qualified in its entirety
by reference to such reports and documents filed with the SEC and all of the
financial statements and related notes contained therein. These reports and
other documents may be examined and copies thereof may be obtained from the SEC
in the manner set forth below under "--Available Information."
GENERAL NUTRITION COMPANIES, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS)
TWELVE WEEKS ENDED FISCAL YEAR ENDED
--------------------------- --------------------------------
APRIL 25, FEBRUARY 6, JANUARY 31,
MAY 1, 1999 1998 1999 1998
------------ ------------- --------------- ---------------
INCOME STATEMENT DATA:
Net revenue...................................... $ 336,357 $ 327,617 $ 1,417,746 $ 1,193,485
Cost of sales.................................... 222,088 195,852 896,539 726,016
Selling, general and administrative.............. 75,844 77,572 337,594 272,215
Compensation expense--non-cash................... -- -- 276 4,083
Operating earnings............................... 38,425 54,193 183,337 191,171
Interest expense................................. 11,802 5,259 36,608 22,926
Income taxes..................................... 9,851 18,696 55,752 64,880
Net earnings..................................... 16,772 30,238 90,977 103,365
BALANCE SHEET DATA:
Working capital.................................. 197,353 161,652 211,142 141,361
Total assets..................................... 1,116,952 1,012,011 1,127,986 933,938
Total outstanding indebtedness................... 994,363 689,609 1,023,070 583,226
Stockholders' equity............................. 122,589 322,402 104,916 350,712
Except as otherwise stated in this Offer to Purchase, the information
concerning the Company contained herein has been taken from or based upon
publicly available documents on file with the SEC and other publicly available
information. Although the Purchaser, Numico, the Information Agent and the
Dealer Manager do not have any knowledge that any such information is untrue,
none of the Purchaser, Numico, the Information Agent and the Dealer Manager
takes any responsibility for the accuracy or completeness of such information or
for any failure by the Company to disclose events that may have occurred and may
affect the significance or accuracy of any such information.
CERTAIN FINANCIAL PROJECTIONS. The Company does not, as a matter of course,
make public forecasts or projections as to its future financial performance.
However, in connection with the negotiations between Numico and the Company, the
Company made available to representatives of Numico certain non-public
information (the "Projections") regarding the Company's projected operating
performance. The Projections indicated that for the fiscal years ended February
5, 2000, February 3, 2001 and February 2, 2002, the
12
Company's net revenue, earnings before interest and income taxes ("EBIT"),
earnings before interest, income taxes, depreciation and amortization ("EBITDA")
and net earnings are as follows:
GENERAL NUTRITION COMPANIES, INC.
CERTAIN PROJECTIONS OF FUTURE OPERATING RESULTS
(IN MILLIONS)
FISCAL YEAR ENDED
-------------------------------------------------
FEBRUARY 5, FEBRUARY 3, FEBRUARY 2,
2000 2001 2002
--------------- --------------- ---------------
Net revenue.................................................. $ 1,529.1 $ 1,724.8 $ 1,976.9
EBIT......................................................... 192.1 222.0 266.5
EBITDA....................................................... 256.7 295.5 343.6
Net earnings................................................. 90.6 112.3 143.9
The Projections reflect the Company's forecast of its consolidated net
revenue, EBIT, EBITDA and net earnings on a stand-alone basis and without
reflecting any potential synergies from the consummation of the Offer and the
Merger.
THE PROJECTIONS WERE PREPARED SOLELY FOR INTERNAL USE AND NOT WITH A VIEW TO
PUBLIC DISCLOSURE OR COMPLIANCE WITH THE PUBLISHED GUIDELINES OF THE SEC OR THE
AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS AND
WERE NOT PREPARED WITH THE ASSISTANCE OF, OR REVIEWED BY, INDEPENDENT
ACCOUNTANTS. THE PROJECTIONS ARE INCLUDED IN THIS OFFER TO PURCHASE SOLELY
BECAUSE SUCH INFORMATION WAS FURNISHED TO NUMICO AND THE PURCHASER BY THE
COMPANY. NONE OF NUMICO, THE PURCHASER, THE COMPANY, THE DEALER MANAGER OR ANY
OTHER PERSON PROVIDES ANY ASSURANCE AS TO THE VALIDITY OR ACCURACY OF THE
PROJECTED OUTCOMES OR COMPLETENESS OF THE PROJECTIONS, AND THE INCLUSION OF SUCH
PROJECTED INFORMATION IN THIS OFFER TO PURCHASE SHOULD NOT BE REGARDED AS AN
INDICATION THAT ANY SUCH PERSONS CONSIDER SUCH PROJECTED OUTCOMES TO BE ACCURATE
OR RELIABLE. THE PROJECTIONS WERE NOT PREPARED IN ACCORDANCE WITH GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES AND WERE NOT AUDITED OR REVIEWED BY ANY
INDEPENDENT ACCOUNTING FIRM, NOR DID ANY SUCH FIRM PERFORM ANY OTHER SERVICES
WITH RESPECT THERETO. THE PROJECTIONS ARE BASED ON A VARIETY OF ASSUMPTIONS
RELATING TO THE BUSINESSES OF THE COMPANY, INDUSTRY PERFORMANCE, GENERAL
BUSINESS AND ECONOMIC CONDITIONS AND OTHER MATTERS, WHICH ARE INHERENTLY SUBJECT
TO SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND THE
COMPANY'S CONTROL. THESE ASSUMPTIONS INVOLVE JUDGMENTS WITH RESPECT TO, AMONG
OTHER THINGS, FUTURE ECONOMIC AND COMPETITIVE CONDITIONS, INFLATION RATES AND
FUTURE BUSINESS CONDITIONS. THEREFORE, THE PROJECTIONS ARE INHERENTLY IMPRECISE
AND THERE CAN BE NO ASSURANCE THAT THEY WILL PROVE TO BE RELIABLE. ALSO, ACTUAL
FUTURE RESULTS MAY VARY MATERIALLY FROM THOSE SHOWN IN THE PROJECTIONS. NONE OF
NUMICO, THE PURCHASER, THE COMPANY OR THE DEALER MANAGER IS UNDER ANY OBLIGATION
TO OR HAS ANY INTENTION TO UPDATE THE PROJECTIONS AT ANY FUTURE TIME.
AVAILABLE INFORMATION. The Company is subject to the informational
requirements of the Exchange Act and, in accordance therewith, is required to
file reports relating to its business, financial condition and other matters.
Information as of particular dates concerning the Company's directors and
officers, their remuneration, stock options and other matters, the principal
holders of the Company's securities and any material interest of such persons in
transactions with the Company is required to be disclosed in proxy statements
distributed to the Company's stockholders and filed with the SEC. Such reports,
proxy statements and other information should be available for inspection at the
public reference facilities of the SEC at 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx,
X.X. 00000, at the regional offices of the SEC located at Seven World Trade
Center, 13th Floor, New York, NY 10048 and at Citicorp Center, 000 Xxxx Xxxxxxx
Xxxxxx (Xxxxx 0000), Xxxxxxx, XX 00000. Copies of such information should be
obtainable, by mail, upon payment of the SEC's customary charges, by writing to
the SEC's principal office at 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000.
The SEC maintains a web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the SEC. Such reports, proxy and information statements and other
information may be found on the SEC's web site address, xxxx://xxx.xxx.xxx.
Although neither Numico nor the Purchaser has any knowledge that any such
information is untrue, Numico and the Purchaser take no responsibility for the
accuracy or completeness of
13
information contained in this Offer to Purchase with respect to the Company 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.
9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND NUMICO.
The Purchaser is a Delaware corporation and, to date, has engaged in no
activities other than those incident to its formation and the commencement of
the Offer. The Purchaser is an indirect wholly-owned subsidiary of Numico. The
principal executive office of the Purchaser is located at 0000 Xxxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxx 00000. All outstanding shares of common stock of Purchaser
are owned by Numico US, LP, a Delaware limited partnership ("Numico LP").
Numico LP is a holding company established solely to hold the common stock
of the Purchaser and has not engaged in any activities other than those incident
to its formation and the formation of the Puchaser. Numico LP is an indirect
wholly-owned subsidiary of Numico. The principal executive office of Numico LP
is located at 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000.
Numico is a company incorporated under the laws of The Netherlands. The
principal executive office of Numico is located at Xxxxxxxxxxxxxx 00, 0000 XX
Xxxxxxxxxx, X.X. Box 1, 2700 MA Zoetermeer, The Netherlands. Numico is a
multinational company concentrating on the development, manufacture and sales of
specialized nutrition products based upon medical scientific concepts with a
high added value.
Numico is not subject to the informational reporting requirements of the
Exchange Act and as such is not required to file reports, proxy statements or
other information with the SEC.
Set forth below is certain summary consolidated financial information of
Numico.
NUMICO
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE DATA)
FISCAL YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1996 1997 1998 1998(1)
NLG NLG NLG US$
------------- ------------- ------------- -------------
OPERATING DATA:
(Dutch GAAP)
Sales............................................. 2,911 3,202 3,476 1,839
Gross margin...................................... 1,782 2,018 2,187 1,157
Profit before income taxes........................ 306 391 463 245
Net profit........................................ 232 288 339 179
Earnings per share................................ 1.92 2.29 2.63 1.39
Number of shares outstanding...................... 120,930,354 125,650,142 128,828,626 128,828,626
Earnings per share (fully diluted)................ 1.82 2.20 2.55 1.35
Number of shares outstanding (fully diluted)...... 133,269,665 134,389,871 135,621,780 135,621,780
FINANCIAL POSITION:
(Dutch GAAP)
Total assets...................................... 1,772 1,906 1,924 1,018
Total current liabilities......................... 589 729 777 411
Provisions and long-term debt..................... 783 667 629 333
Equalization fund investment grants and minority
interests....................................... 23 27 29 15
Stockholders' equity.............................. 377 483 489 259
------------------------
(1) Dutch Guilders (NLG) are translated into U.S. Dollars ($) at a rate of 1.89
NLG = $1.00, the Noon Mid-Rate of the ABN AMRO Bank in Amsterdam on December
31, 1998. The presentation of the U.S. Dollar amounts should not be
construed as a representation that the Dutch Guilder amounts could be so
converted into U.S. Dollars at the rate indicated or at any other rate.
14
Numico's financial statements are prepared in accordance with generally
accepted accounting principles in The Netherlands ("Dutch GAAP"), which differ
in certain significant respects from generally accepted accounting principles in
the U.S. ("US GAAP"). Numico, however, believes that the differences between
Dutch GAAP and US GAAP are not material to a decision by holders of Shares
whether to sell, tender or hold the Shares.
Statements which Numico and the Purchaser may publish, including those in
this Offer to Purchase, that are not strictly historical are "forward-looking"
statements. Although Numico and Purchaser believe the expectations reflected in
such forward-looking statements are based on reasonable assumptions, they can
give no assurance that their expectations will be realized. Forward-looking
statements involve known and unknown risks which may cause the actual results
and corporate developments of Numico and the Purchaser to differ materially from
those expected. There are a number of factors that could cause actual results
and developments to differ materially from those expressed or implied by these
forward-looking statements. These factors include, but are not limited to,
levels of consumer and business spending in major economies, changes in consumer
tastes and preferences, the levels of marketing and promotional expenditures by
Numico and its competitors, raw materials and employee costs, changes in future
exchange and interest rates, changes in tax rates and future business
combinations, acquisitions or dispositions, and the rate of technical changes.
The name, citizenship, business address, present principal occupation or
employment and five-year employment history of each of the directors and
executive officers of Numico, the Purchaser and Numico LP are set forth in
Schedule A hereto.
Except as described in Section 10 herein, none of Numico, the Purchaser or
Numico LP, or, to the best of their knowledge, any of the persons listed in
Schedule A, nor any associate or majority-owned subsidiary of any of the
foregoing, beneficially owns or has any right to acquire, directly or
indirectly, any equity security of the Company. Except as set forth in Section
10 herein, none of Numico, the Purchaser or Numico LP, or, to the best of their
knowledge, any of the other persons referred to above, nor any of their
respective directors, executive officers or subsidiaries has effected any
transaction in any equity security of the Company during the past 60 days.
Except as set forth in Sections 10 and 11 herein, none of Numico, the
Purchaser or Numico LP, or, to the best of their knowledge, any of the persons
listed in Schedule A hereto, has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Company, including, but not limited to, any contract, arrangement, understanding
or relationship concerning the transfer or the voting of any such securities,
joint ventures, loan or option arrangements, puts or calls, guaranties of loans,
guaranties against loss or the giving or withholding of proxies.
Except as set forth in Sections 10 and 11 herein, there have been no
contacts, negotiations or transactions since February 6, 1999 between Numico,
the Purchaser or Numico LP, or, to the best of their knowledge, any of the
persons listed in Schedule A hereto, on the one hand, and the Company or its
affiliates, on the other hand, concerning a merger, consolidation or
acquisition, a tender offer or other acquisition of securities, an election of
directors, or a sale or other transfer of a material amount of assets. Except as
described in Sections 10 and 11 herein, none of Numico, the Purchaser or Numico
LP, or, to the best of their knowledge, any of the persons listed in Schedule A
hereto, has since February 6, 1999, had any business relationship or transaction
with the Company or any of its executive officers, directors or affiliates that
would require disclosure under the rules and regulations of the SEC applicable
to the Offer.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY.
In early April 1999, a consulting firm contacted a representative of Numico
and inquired as to Numico's possible interest in acquiring the Company or
discussing other strategic arrangements between Numico and the Company.
Thereafter, a series of calls took place among representatives of Numico and the
Company to determine whether a meeting of senior executives of the companies
could be arranged.
On April 28, 1999, a representative of Numico and Xxxxxxx X. Xxxxx,
President and Chief Executive Officer of the Company, met in Pittsburgh,
Pennsylvania, to discuss the businesses of Numico and the Company, to exchange
information on the market for nutrition products and began preliminary
discussions
15
regarding the possibility of a strategic transaction between Numico and the
Company. It was determined at the meeting that the companies should continue
discussions. Discussions regarding Xxxxxx's interest in
consummating an acquisition transaction with the Company continued thereafter
from time to time between various representatives of Numico and the Company.
As of May 26, 1999, confidentiality agreements were signed providing for the
confidential exchange of information.
A meeting between Xx. Xxxxx and Xxxxxxxx X. X. xxx xxx Xxxxxx, Chief
Executive Officer of Numico, was held on May 27, 1999, at Numico's headquarters
in The Netherlands. Several senior members of Numico's management also attended
the meeting. On May 28, 1999, Xx. Xxxxx was given a tour of Numico's research
laboratories and other facilities in The Netherlands. That evening, Xx. Xxxxx,
Mr. xxx xxx Xxxxxx and others from Numico met for additional discussions.
During the first week of June 1999, Mr. xxx xxx Xxxxxx and Xx. Xxxxx held
several telephone conversations concerning a potential transaction and discussed
the principal terms of the transaction and how to pursue such a transaction.
Numico representatives traveled to New York for a presentation by the
Company and its advisors on June 9, 1999. Representatives from X.X. Xxxxxx and
its affiliate, X.X. Xxxxxx Securities Ltd., Numico's financial advisor, and
Vedder, Xxxxx, Xxxxxxx & Kammholz, Numico's legal counsel in the United States,
also were present. Xx. Xxxxx and other senior management members from the
Company attended. Xxxxxx Xxxxxxx, the Company's financial advisor, was also
represented. At the meeting, the Company's management made presentations to
Numico regarding the Company's business and operations.
The following morning, on June 10, 1999, Numico representatives visited the
Company's stores in New York. Later in the day, Numico and the Company and their
advisors met once again to review financial information on the Company. Numico
also made presentations to the Company on its research and development
capabilities and nutrition products in Europe.
Beginning on June 10, 1999, Numico, its financial advisors and legal counsel
conducted business, legal and financial due diligence at the Company's legal
counsel's offices in New York. Over the succeeding weeks, Xxxxxx's outside
advisors continued their reviews of the Company and its operations.
On June 14, 1999, Mr. xxx xxx Xxxxxx and Xx. Xxxxx met in the United States
to discuss further details of the transaction between the companies and to visit
the Company's facilities. On June 15, 1999 Mr. xxx xxx Xxxxxx traveled with Xx.
Xxxxx to Greenville, South Carolina to view the Company's manufacturing
facilities. On June 16 and 17, 1999, Company management visited Numico's
research and development laboratories and headquarters in The Netherlands.
On June 23, 1999, Xx. Xxxxx and Xxxxxxx X. Xxxx arrived in The Netherlands
for meetings with Mr. xxx xxx Xxxxxx and Xxxxxx Xxx xxx xxx Xxxxx, Chairman of
the Supervisory Board of Numico. On June 24, 1999, Messrs. Xxxxx and Xxxx made a
presentation to the Supervisory Board of Numico. After the presentation, the
Supervisory Board approved a cash tender offer for all of the outstanding shares
of the Company at $25.00 per share and the subsequent merger of a subsidiary of
Numico with and into the Company, subject to definitive documentation.
Also on June 23, 1999, Xxxxxx's legal counsel distributed to the Company and
the Company's legal counsel, a draft merger agreement setting forth the proposed
terms of the tender offer and second step merger. Over the course of the next
several days, Numico, the Company and their respective legal counsel met on a
number of occasions to negotiate the definitive Merger Agreement and the terms
of the Tender Agreement, Employment Agreements (as defined herein) and a side
letter to the Merger Agreement outlining terms of certain benefits to be
provided by Numico to the Company's employees.
At a meeting held on the afternoon of June 30, 1999, in New York City, the
Board of Directors of the Company met to consider the terms of the proposed
acquisition. At such meeting, the Board of Directors of the Company reviewed and
discussed the latest terms of the proposed acquisition and the applicable
agreements and heard presentations from and asked questions of its management
and its legal and financial advisors. The Board of Directors of the Company met
again in the morning of July 3, 1999 at
16
which time the Company's financial and legal advisors described the final terms
of the proposed acquisition and the applicable agreements and Xxxxxx Xxxxxxx
delivered its opinion, dated July 3, 1999, that, as of such date, the
consideration to be received by the Company's stockholders in the Offer and the
Merger was fair, from a financial point of view to such stockholders. At such
meeting, the Board of Directors of the Company unanimously approved the Merger
Agreement, the Offer and the Merger, determined that the Offer and the Merger
are fair to, and in the best interests of, the stockholders of the Company and
voted to recommend to holders of Shares that they tender their Shares pursuant
to the Offer and adopt the Merger Agreement.
On July 5, 1999, the Merger Agreement, the Tender Agreement and the
Employment Agreements were executed by Numico, the Purchaser and the Company.
11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY; THE MERGER AGREEMENT; OTHER
AGREEMENTS.
PURPOSE.
The purpose of the Offer is to acquire for cash as many outstanding Shares
as possible as a first step in acquiring the entire equity interest in the
Company.
If the Purchaser acquires a majority of the total issued and outstanding
Shares pursuant to the Offer, it will have the votes necessary under the DGCL to
approve the Merger of the Purchaser with and into the Company. Therefore, based
on information provided by the Company, if at least approximately 37,611,040
Shares are acquired pursuant to the Offer or otherwise, the Purchaser will be
able to and intends to effect the Merger without the vote of any person other
than the Purchaser. In addition, under the DGCL, Numico may cause the Purchaser
to merge with and into the Company without a vote of the Company's stockholders
if the Purchaser owns at least 90% of the outstanding Shares. If over 90% of the
outstanding Shares are tendered in the Offer, Numico intends to effect the
merger of the Purchaser into the Company.
PLANS FOR THE COMPANY.
Numico intends to conduct a detailed review of the Company and its assets,
corporate structure, dividend policy, capitalization, operations, properties,
policies, management and personnel and to consider, subject to the terms of the
Merger Agreement, what, if any, changes would be desirable in light of the
circumstances then existing following the acquisition of Shares pursuant to the
Offer and reserves the right to take such actions or effect such changes as it
deems desirable.
Except as otherwise described in this Offer to Purchase, neither Numico nor
the Purchaser have any current plans or proposals that would relate to, or
result in, any extraordinary corporate transaction involving the Company or any
of its subsidiaries, such as a merger, reorganization or liquidation involving
the Company, a sale or transfer of a material amount of assets of the Company or
any of its subsidiaries, any change in the Company's capitalization or dividend
policy or any other material change in the Company's business, corporate
structure or personnel.
THE MERGER AGREEMENT.
The following is a summary of the material terms of the Merger Agreement.
This summary is not a complete description of the terms and conditions thereof
and is qualified in its entirety by reference to the full text thereof, which is
incorporated herein by reference and a copy of which has been filed with the SEC
as an exhibit to Schedule 14D-1. The Merger Agreement may be examined, and
copies thereof may be obtained, as set forth in Section 8 above.
THE OFFER. The Merger Agreement provides for the commencement of the Offer
as described in Section 1 hereof.
THE MERGER. The Merger Agreement provides that upon the closing of the
Merger, the Company and the Purchaser will file a Certificate of Merger with the
Secretary of State of the State of Delaware. The Merger will become effective at
such time as the Certificate of Xxxxxx is duly filed with the Delaware Secretary
of State or at such later time as is specified in the Certificate of Merger (the
time the Merger
17
becomes effective being the "Effective Time"). The Merger Agreement provides
that, upon the terms and subject to the conditions set forth in the Merger
Agreement, and in accordance with the DGCL, at the Effective Time, the Purchaser
will be merged with and into the Company. Following the Merger, the separate
corporate existence of the Purchaser shall cease, the Company will be the
surviving corporation in the Merger (hereinafter sometimes called the "Surviving
Corporation") and, in accordance with the DGCL, continue to be governed by the
laws of the State of Delaware.
Pursuant to the Merger Agreement, as of the Effective Time, by virtue of the
Merger and without any action on the part of Numico, the Purchaser, the Company
or the holder of any Shares or any shares of capital stock of the Purchaser: (i)
each Share issued and outstanding at the Effective Time (other than any Shares
owned by the Company, Numico or the Purchaser or Shares which are held by
Dissenting Stockholders) will be converted into the right to receive $25.00 in
cash, or such greater amount paid pursuant to the Offer, without interest (the
"Merger Consideration") and (ii) each share of capital stock of the Purchaser
issued and outstanding at the Effective Time will be converted into and become
one fully paid and nonassessable share of common stock, par value $0.01 per
share, of the Surviving Corporation.
COMPANY ACTIONS. The Company's Board of Directors unanimously (x) approved
the Merger Agreement, the Offer and the Merger, (y) determined that the Offer
and the Merger are fair to, and in the best interests of, the stockholders of
the Company and (z) recommends that the stockholders of the Company accept the
Offer, tender their Shares and adopt the Merger Agreement. Xxxxxx Xxxxxxx, the
Company's financial advisor, has rendered to the Board its opinion that, as of
July 3, 1999, the consideration to be paid in the Offer and the Merger is fair
to holders of the Shares from a financial point of view.
Concurrently with the filing of this Offer to Purchase, the Company is
filing with the SEC and causing to be disseminated to stockholders of the
Company, a Schedule 14D-9 with respect to the Offer (together with any
amendments or supplements thereto, the "Schedule 14D-9") which includes the
recommendation described in the preceding paragraph. Subject to the provisions
of the Merger Agreement described under "Termination" below, such recommendation
may be withdrawn, modified or amended to the extent that the Board deems it
necessary to do so in the exercise of its fiduciary duty.
STOCKHOLDER APPROVAL. Pursuant to the Merger Agreement, the Company shall,
if required, as soon as practicable following the acquisition by the Purchaser
of the Shares pursuant to the Offer, duly call, give notice of, convene and hold
a meeting of its stockholders (the "Company Stockholders Meeting") for the
purpose of obtaining the requisite number of votes to adopt the Merger
Agreement. In addition, the Company shall, through the Board, recommend to its
stockholders that they vote in favor of the adoption of the Merger Agreement;
provided, however, that the Board may withdraw, modify or change such
recommendation to the extent that the Board determines to do so in exercise of
its fiduciary duties or in accordance with the provisions of the Merger
Agreement described under "--Acquisition Proposals" below. The Merger Agreement
provides that Numico shall vote or cause to be voted all Shares owned of record
by Xxxxxx, the Purchaser or any of its other subsidiaries in favor of the
adoption of the Merger Agreement.
Notwithstanding the preceding paragraph or any other provision of the Merger
Agreement, the Merger Agreement provides that in the event that Numico, the
Purchaser, or any other subsidiary of Numico shall beneficially own in the
aggregate at least 90% of the outstanding Shares, the Company shall not be
required to call the Company Stockholders Meeting or to file or mail a proxy
statement, and the parties to the Merger Agreement shall, subject to the
provisions of Section 12 herein, at the request of Numico, take all necessary
and appropriate action to cause the Merger to become effective as soon as
practicable after the acceptance for payment of and payment for Shares by the
Purchaser pursuant to the Offer without a meeting of stockholders of the
Company.
The Merger Agreement provides that, if required by applicable law, as soon
as practicable following Numico's request, the Company and Numico shall prepare
and file with the SEC the proxy statement relating to the Company Stockholders
Meeting (the "Proxy Statement"). Each of the Company and Numico shall use its
reasonable best efforts to cause the Proxy Statement to be mailed to the
Company's stockholders, as promptly as practicable.
18
CONDUCT OF BUSINESS. In the Merger Agreement, the Company has covenanted
and agreed as to itself and its subsidiaries that, among other things and
subject to certain exceptions, during the period from the date of the Merger
Agreement to the Effective Time:
(a) the Company and its subsidiaries shall carry on their respective
businesses in the usual, regular and ordinary course in all respects, consistent
with past practice and shall use their respective reasonable best efforts to
preserve intact their present business organizations and preserve their existing
relationships with customers, suppliers, employees, Governmental Entities (as
defined in the Merger Agreement) and others having business dealings with them,
and shall not enter into any material joint venture or other similar
arrangement;
(b) the Company shall not, and shall not propose to, (i) declare or pay any
dividends on or make other distributions in respect of any of its capital stock,
(ii) split, combine or reclassify any of its capital stock or issue or authorize
or propose the issuance of any other securities in respect of, in lieu of or in
substitution for, shares of its capital stock, (iii) repurchase, redeem or
otherwise acquire any shares of its capital stock or any securities convertible
into or exercisable for any shares of its capital stock except as otherwise
permitted with respect to the payment of the option exercise price or tax
withholding under certain option agreements in effect on the date of the Merger
Agreement under the Company Equity Plans (as defined in the Merger Agreement),
or (iv) effect any reorganization or recapitalization;
(c) the Company shall not and shall cause its subsidiaries not to issue,
pledge, dispose of or encumber, deliver or sell, or authorize or propose the
issuance, disposition, encumbrance, pledge, delivery or sale of, any shares of
its capital stock of any class, any Company Voting Debt (as defined in the
Merger Agreement) or any securities convertible into or exercisable for, or any
rights, warrants or options to acquire, any such shares or Company Voting Debt,
or enter into any agreement with respect to any of the foregoing, other than the
issuance of Shares upon the exercise of stock options or rights to purchase
Shares outstanding on the date of the Merger Agreement in accordance with the
terms of the Company Equity Plans as in effect on the date of the Merger
Agreement and other than upon the exercise of the Warrants (as defined in the
Merger Agreement);
(d) except to the extent required to comply with their respective
obligations under the Merger Agreement or required by law, the Company and its
subsidiaries will not amend or propose to amend their respective Certificate of
Incorporation, Bylaws or other similar governing documents;
(e) the Company shall not (i) incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or warrants
or rights to acquire any debt securities of the Company or guarantee any debt
securities of other persons other than indebtedness (including short term
borrowings) of the Company or its subsidiaries to the Company or its
subsidiaries and other than in the ordinary course of business, (ii) make any
loans, advances or capital contributions to, or investments in, any other
person, other than by the Company or its subsidiaries to or in the Company or
its subsidiaries or (iii) pay, discharge, modify or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than in the case of clauses (ii) and (iii),
loans, advances, capital contributions, investments, payments, discharges or
satisfactions incurred or committed to in the ordinary course of business
consistent with past practice;
(f) the Company shall not, and shall not permit its subsidiaries to (i)
increase the compensation payable or to become payable to any of its executive
officers or employees or (ii) take an action with respect to the grant of any
severance or termination pay, or stay, bonus or other incentive arrangement
(other than as required by applicable law or the terms of any collective
bargaining agreement or as required pursuant to benefit plans and policies in
effect on the date of the Merger Agreement), except any such increases or grants
made in the ordinary course of business consistent with past practice, pursuant
to agreements, plans or policies existing on the date of the Merger Agreement or
as otherwise provided under the Merger Agreement; provided, however that in no
event shall the Company grant, or permit to be granted, any options or other
awards under any Company Equity Plan after the date of the Merger Agreement;
19
(g) the Company shall not, and shall not permit its subsidiaries to, make
any tax election or change any method of accounting for tax purposes in a manner
that is reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect (as defined below) on the Company;
(h) the Company shall not, and shall not permit its subsidiaries to, release
or otherwise terminate the employment of any employee or hire any new employees,
except in the ordinary course of business;
(i) the Company shall not, and shall not permit is subsidiaries to,
establish, adopt or enter into any new employee benefit plans or agreements
(including pension, profit sharing, bonus, incentive compensation, director and
officer compensation, severance, medical, disability, life or other insurance
plans, and employment agreements) or amend or modify any existing Company
Benefit Plans (as defined in the Merger Agreement), or extend coverage of the
Company Benefit Plans, except as required by applicable law, or the terms of any
collective bargaining agreement;
(j) subject to certain exceptions, no officer or employee shall be entitled
to purchase any additional Shares under any Company Equity Plan (other than
pursuant to currently outstanding stock options and stock purchase periods) and
no stock options or other awards shall be granted under any Company Equity Plan
after the date of the Merger Agreement;
(k) the Company shall not, and shall not permit its subsidiaries to, take
any action that is reasonably likely to result in any of the Offer Conditions
not being satisfied; and
(l) the Company shall not, and shall not permit its subsidiaries to, (i)
transfer, lease, license, guarantee, sell, mortgage, pledge, dispose of or
encumber any assets except in the ordinary course of business consistent with
past practice; (ii) authorize capital expenditures in any manner not reflected
in the capital budget of the Company as currently in effect or make any
acquisition of, or investment in, any business or stock of any other person or
entity except in the ordinary course of business consistent with past practice;
(iii) settle or compromise any material claims or litigation or, except in the
ordinary course of business consistent with past practice, modify, amend or
terminate any of the Company Material Contracts (as defined in the Merger
Agreement) or waive, release or assign any material rights or claims except, in
each case, as is not reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect on the Company; (iv) permit any material
insurance policy naming it as a beneficiary or a loss payable payee to be
canceled or terminated without the prior written approval of Numico, except in
the ordinary course of business consistent with past practice; or (v) terminate
the employment of any employee who is covered by a change in control,
employment, termination or similar agreement, except for Cause (as defined in
such agreements) or permit circumstances to exist that would allow such employee
to terminate employment and be entitled to severance or other payments
thereunder.
Pursuant to the Merger Agreement and subject to certain terms therein, from
the date of the Merger Agreement until the earlier of the termination of the
Merger Agreement or the Effective Time, the Company has agreed to, upon
reasonable notice, afford Numico's officers, employees, counsel, accountants,
financial advisors and other representatives reasonable access to all of its and
its subsidiaries' properties, books, contracts, commitments and records and its
officers, management, employees and representatives and, during such period,
will promptly furnish all information concerning its business, properties and
personnel as may be reasonably requested.
Under the Merger Agreement, before issuing any press release or otherwise
making any public statements with respect to the Merger and other transactions
contemplated by the Merger Agreement, Numico and the Company will use reasonable
best efforts to consult with each other.
DIRECTOR AND OFFICER LIABILITY. Under the Merger Agreement, subject to
certain terms therein, Numico shall (i) cause to be maintained in effect the
current provisions regarding indemnification of current or former officers and
directors contained in the Organizational Documents (as defined in the Merger
Agreement) of the Company and its subsidiaries and any indemnification
agreements between the Company and its current or former officers and directors
that may be in effect; and (ii) maintain, for a period of six years, the
Company's existing directors' and officers' liability insurance policy and
fiduciary liability insurance (provided that Numico or the Surviving Corporation
may substitute therefor policies of substantially similar coverage and amounts
containing terms which are no less advantageous); provided,
20
however, that Numico is not obligated to make annual premium payments for such
insurance to the extent such premiums exceed 150% of the premiums paid as of the
date of the Merger Agreement by the Company for such insurance.
REASONABLE BEST EFFORTS. The Merger Agreement further provides that each of
Numico, the Purchaser and the Company shall cooperate with the other and shall
use its respective reasonable best efforts to consummate and make effective the
Offer, the Merger and the other transactions contemplated by the Merger
Agreement, including, among other things, obtaining all Required Regulatory
Approvals (as defined below).
ACQUISITION PROPOSALS. Pursuant to the Merger Agreement, none of the
Company, its subsidiaries, or any of the respective officers and directors of
the Company or its subsidiaries, shall, and the Company shall direct and use its
best efforts to cause its employees, agents and representatives (including any
investment banker, attorney or accountant retained by the Company or any of its
subsidiaries) not to, take or cause, directly or indirectly, any of the
following actions with any party other than Numico, the Purchaser or their
respective designees: (i) directly or indirectly solicit, encourage, initiate,
participate in or otherwise facilitate (including by way of furnishing
information) any negotiations, inquiries or discussions with respect to any
offer, indication or proposal to acquire all or more than 15% of the Company's
business, assets or capital shares whether by merger, consolidation, other
business combination, purchase of assets, reorganization, tender or exchange
offer or otherwise (each of the foregoing, an "Acquisition Proposal") or (ii)
disclose, in connection with an Acquisition Proposal, any information or provide
access to its properties, books or records. The Company also agreed that it will
immediately cease and cause to be terminated any previously existing activities,
discussions or negotiations with any parties with respect to any of the
foregoing. The Company agreed that it will take the necessary steps to promptly
inform the individuals or entities referred to in the first sentence of this
paragraph of such obligations that it has undertaken. The Company also agreed to
promptly request any person which may have executed a confidentiality agreement
in connection with its consideration of acquiring the Company and/or any of its
subsidiaries to return or destroy all confidential information furnished to such
person by or on behalf of the Company.
Notwithstanding anything to the contrary referred to in the previous
paragraph, the Merger Agreement provides that prior to the consummation of the
Offer the Company may participate in discussions or negotiations with, and
furnish non-public information and afford access to the properties, books,
records, officers, employees and representatives of the Company to, any person,
entity or group if such person, entity or group has delivered to the Company,
prior to the consummation of the Offer, and in writing, an Acquisition Proposal
which is not subject to any financing contingency and which the Board in its
good faith judgment (after consultation with its independent financial advisor)
determines if consummated would be more favorable, from a financial point of
view, to the Company's stockholders than the transactions contemplated by the
Merger Agreement and with respect to which the Board receives advice of its
outside legal counsel that the Board would breach its fiduciary duties if it did
not accept the Acquisition Proposal (a "Superior Proposal"). Pursuant to the
Merger Agreement, in the event the Company receives a Superior Proposal the
Board could execute and enter into an agreement relating to such Superior
Proposal and recommend such Superior Proposal to its stockholders, if the Board
determines (after consultation with its independent financial advisor and
outside legal counsel) that its fiduciary duties require it to do so; in such
case, the Board may withdraw, modify or refrain from making its recommendation
of the Offer and the Merger; provided, however, that the Company (i) shall have
promptly notified Numico, and in any event within 24 hours, of receipt of any
Acquisition Proposal, request for any such information, or initiation or
recommencement of any such negotiations or discussions with, the Company or any
of its subsidiaries, indicating, in connection with such notice, the name of
such person making the Acquisition Proposal or taking such action and, in
reasonable detail, the significant terms of any such Acquisition Proposal and
including with such notice any documentation relating to such Acquisition
Proposal, (ii) shall provide Numico at least 48 hours prior written notice of
the Company's intention to execute or enter into an agreement relating to such
Superior Proposal and (iii) may only terminate the Merger Agreement by written
notice to Numico provided no sooner than 48 hours after
21
Numico's receipt of a copy of such Superior Proposal (or a detailed description
of the significant terms and conditions thereof).
COMPANY STOCK OPTIONS AND STOCK PURCHASE LOANS. Under the terms of the
Merger Agreement, the Company's Compensation Committee acted pursuant to each
Company Option Plan (as defined in the Merger Agreement) to provide that each
option outstanding thereunder at the Effective Time will be canceled in exchange
for the right to receive a cash payment equal to the product of (x) the excess,
if any, of the Merger Consideration per share over the exercise price per share
subject to the option, multiplied by (y) the number of Shares covered by such
option. The amounts payable will be subject to any required withholding of taxes
and will be paid without interest.
In accordance with the provisions of the Company's 1996 Management and
Director Stock Purchase Plan, officers, key employees and directors of the
Company have received matching stock purchase loans with which such individuals
have periodically purchased Shares. Pursuant to the plan, the loans are subject
to forgiveness based upon market price appreciation of the Shares and are
forgiven in full upon a change in control of the Company. As of the date of the
Merger Agreement, loans aggregating approximately $4,500,000 were owed by 54
individuals, including approximately $200,000 by Xxxxx X. Xxxx, Chairman of the
Board, $700,000 by Xx. Xxxxx, President and Chief Executive Officer, and
balances ranging from $22,000 to $27,500 by each of Directors Beimfohr,
Wellford, Xxxxxxxx, Xxxxxxxx and Xxxxx. The transactions contemplated by the
Merger Agreement will constitute a change in control under the plan and,
accordingly, all of the loans will be forgiven at the time the Offer is
consummated.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains certain
representations and warranties by the Company, including, among other things,
representations and warranties concerning: (i) the organization, good standing
and qualification of the Company and its subsidiaries; (ii) the capital
structure of the Company; (iii) the authority of the Company relative to the
execution and delivery of and consummation of the transactions contemplated by
the Merger Agreement; (iv) the absence of any Violations (as defined in the
Merger Agreement) of the corporate documents and certain instruments of the
Company or its subsidiaries or of any statute, rule, regulation, order or
decree, subject to certain exceptions; (v) the accuracy and timeliness of
filings of reports and documents filed with the SEC; (vi) the absence since
February 6, 1999 of any undisclosed liabilities or obligations; (vii) compliance
with all applicable laws; (viii) the absence of any litigation, investigation or
proceeding; (ix) certain tax matters; (x) absence of certain changes or events
since February 6, 1999; (xi) validity and enforceability of the Company's
contracts; (xii) certain employee benefit and labor matters; (xiii) absence of
brokers or finders entitled to a fee in connection with the Offer and the
Merger, except Xxxxxx Xxxxxxx; (xiv) absence of product liability claims against
the Company; (xv) its properties; (xvi) year 2000 compliance; (xvii) certain
environmental matters; (xviii) status of business relationships with customers
and suppliers; and (xix) the validity and enforceability of the Company's
franchise agreements and related franchise matters. A substantial number of the
representations and warranties of the Company contained in the Merger Agreement
will only be deemed to be inaccurate if such inaccuracy is reasonably likely to
have a Material Adverse Effect on the Company.
The Merger Agreement also contains certain representations and warranties by
Numico and the Purchaser, including (i) the standing and power of Numico and the
Purchaser to carry on their respective businesses and to consummate the
transactions contemplated by the Merger Agreement; (ii) the absence of any
Violations of corporate documents and instruments; (iii) the absence of brokers
or finders entitled to a fee in connection with the Offer and the Merger, except
X.X. Xxxxxx; (iv) the lack of ownership of common stock of the Company by Numico
or its subsidiaries; (v) the absence of litigation that is reasonably likely to
have a Material Adverse Effect on Numico; and (vi) that Numico has available,
and will make available to the Purchaser, sufficient funds to consummate the
Offer and the Merger and the transactions contemplated thereby.
The Merger Agreement defines the term "Material Adverse Effect" to mean,
with respect to any person, any adverse change, circumstance, event or effect
that, individually or in the aggregate with all other adverse changes,
circumstances, events and effects, is or is reasonably likely to be materially
adverse to the business, operations, financial condition or results of
operations of such entity and its subsidiaries
22
taken as a whole, other than any change or effect to the extent attributable to
(i) the economy in general and (ii) the announcement or other proper disclosure
of the Merger Agreement or the transactions contemplated thereby.
CONDITIONS TO THE MERGER. The conditions to the Offer are set forth in
Section 12 hereto. The Company's, Xxxxxx's and the Purchaser's obligations to
effectuate the Merger are subject to the satisfaction or waiver on or prior to
the Effective Time of the following conditions:
(a) STOCKHOLDER APPROVAL. The Company shall have obtained all
approvals of holders of Shares necessary to approve the Merger Agreement and
all the transactions contemplated thereby (including the Merger) to the
extent required by law.
(b) NO INJUNCTION OR RESTRAINTS; ILLEGALITY. No temporary restraining
order, preliminary or permanent injunction or other order issued by a court
or other Governmental Entity of competent jurisdiction shall be in effect
and have the effect of making the Merger illegal or otherwise prohibiting
the consummation of the Merger.
(c) REQUIRED REGULATORY APPROVALS. All Required Regulatory Approvals
shall have been obtained and shall be in full force and effect.
(d) COMPLETION OF THE OFFER. The Purchaser shall have (i) commenced
the Offer pursuant to the Merger Agreement and (ii) purchased, pursuant to
the terms and conditions of such Offer, all Shares duly tendered and not
withdrawn; provided, however, that neither Numico nor the Purchaser shall be
entitled to rely on the condition in clause (ii) above if either of them
shall have failed to purchase Shares pursuant to the Offer in breach of
their obligations under the Merger Agreement.
TERMINATION. The Merger Agreement may be terminated at any time prior to
the Effective Time, by action taken or authorized by the Board of Directors of
the terminating party or parties, whether before or after approval of the Merger
Agreement and the matters contemplated therein, including the Merger, by the
stockholders of the Company:
(a) By mutual written consent of Numico and the Company, by action of
their respective Boards of Directors;
(b) By either the Company or Numico if the Offer shall not have been
consummated by the Outside Date; provided that the right to terminate the
Merger Agreement under this clause (b) shall not be available to any party
whose failure to fulfill any obligation or condition under the Merger
Agreement has been the cause of, or resulted in, the failure of the Offer to
be consummated on or before such date; notwithstanding the foregoing, if the
sole reason the Offer shall not have been consummated by the Outside Date is
the failure to have obtained all Required Regulatory Approvals prior to the
date which is three months from the date of the Merger Agreement, the
Outside Date shall be extended for a period of 30 days;
(c) By Numico if any person other than Numico, the Purchaser or any of
their affiliates or any group of which any of them is a member, shall have
entered into a definitive agreement or an agreement in principle with the
Company or any of its subsidiaries with respect to an Acquisition Proposal
or the Board (or any committee thereof) shall have adopted a resolution
approving any of the foregoing;
(d) By either the Company or Numico if any court or other Governmental
Entity shall have issued an order, decree or ruling or taken any other
action (which order, decree, ruling or other action the parties shall have
used their reasonable best efforts to resist, resolve or lift, as
applicable, subject to the provisions of the Merger Agreement) permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by the Merger Agreement, and such order, decree, ruling or
other action shall have become final and nonappealable;
(e) By Numico if (i) the Board (or any committee thereof) shall have
withdrawn or adversely modified (including by amendment of the Schedule
14D-9) its approval or recommendation of the Offer, the Merger or the Merger
Agreement or the Board, upon request by Numico following receipt
23
by the Company of an Acquisition Proposal, shall fail to reaffirm such
approval or recommendation within ten business days after such request, or
shall have resolved to do any of the foregoing; (ii) the Board shall have
recommended to the stockholders of the Company that they approve an
Acquisition Proposal other than transactions contemplated by the Merger
Agreement; or (iii) a tender offer or exchange offer is commenced that, if
successful, would result in any person becoming a "beneficial owner" (as
such term is defined under Regulation 13D under the Exchange Act) of 15% or
more of the outstanding Shares (other than by Numico or an affiliate of
Numico) and the Board recommends that the stockholders of the Company tender
their Shares in such tender or exchange offer;
(f) By the Company, prior to the purchase by the Purchaser of Shares
pursuant to the Offer, if the Board determines to accept a Superior
Proposal, provided that the Company shall not be entitled to terminate the
Merger Agreement pursuant to this clause (f) unless the Company concurrently
enters into an agreement with respect to a Superior Proposal and pays the
Termination Fee (as defined below);
(g) By Numico, prior to the purchase by the Purchaser of Shares pursuant
to the Offer, upon a material breach of any material covenant or agreement
on the part of the Company set forth in the Merger Agreement, or if the
Offer Condition contained in paragraph(c)(i) or (ii) of Section 12 below is
not capable of being satisfied or cured by the earlier of (x) the Outside
Date or (y) within 30 days after an executive officer of the Company becomes
aware of the breach of any representation or warranty resulting in the
failure to satisfy such Offer Condition;
(h) By the Company, upon a material breach of any material covenant or
agreement on the part of Numico or the Purchaser set forth in the Merger
Agreement, or upon the failure of any representation or warranty of Numico
or the Purchaser set forth in the Merger Agreement (i) to the extent such
representation or warranty is qualified by Material Adverse Effect, to be
true and correct and (ii) to the extent such representation or warranty is
not qualified by Material Adverse Effect, to be true and correct, except
that, in the case of this clause (ii), no failure shall be deemed to have
occurred so long as such failure, taken together with all other such
failures, does not have a Material Adverse Effect on Numico in the case of
each of clause (i) and (ii) as of the date of the Merger Agreement and
(except to the extent such representation or warranty speaks as of an
earlier date) as of the consummation of the Offer as though made on and as
of such date, and except that, in the case of each of clause (i) and (ii),
no failure shall be deemed to have occurred so long as such failure is
capable of being satisfied or cured by the earlier of (x) the Outside Date
or (y) within 30 days after any executive officer of Numico becomes aware of
the breach of any representation or warranty resulting in such failure; or
(i) By the Company, if the Purchaser fails to (i) commence the Offer or
keep the Offer open as provided in the Merger Agreement or (ii) purchase
validly tendered Shares in violation of the terms of the Offer or the Merger
Agreement.
In the event that (x) the Merger Agreement is terminated as described in
paragraphs (c), (e) or (f) above or (y)(i) the Offer shall have remained open
for a minimum of at least 20 business days from the date it is commenced and for
such longer period as is required, (ii) after the date of the Merger Agreement
any person other than Numico or the Purchaser or any of their respective
subsidiaries or affiliates shall have become the beneficial owner of 15% or more
of the outstanding Shares or made any Acquisition Proposal, (iii) the Minimum
Condition shall not have been satisfied and the Purchaser shall not have
accepted for payment any Shares pursuant to the Offer, (iv) the Merger Agreement
shall not have been terminated as described in paragraph (h) above, and (v)
within twelve months of the termination, expiration or withdrawal of the Offer,
the Company enters into an agreement providing for the consummation of an
Acquisition Proposal (except that the reference in such definition to 15% shall
be deemed a reference to 40% for purposes of this clause (v) only) or any other
person (other than Numico or any of its affiliates) becomes the beneficial owner
of 40% or more of the outstanding Shares, then the Company shall pay Numico in
cash (A) U.S. $60 million plus (B) up to U.S. $9 million of Numico's documented
Expenses (as defined in the Merger Agreement) incurred in connection with the
Offer and Merger ((A) and (B) together, the "Termination Fee"). The Termination
Fee shall be payable by wire transfer of
24
immediately available funds upon such termination, in the case of clause (x), or
upon the earlier of the Company entering into an agreement for an Acquisition
Proposal or a person becoming the beneficial owner of 40% or more of the
outstanding Shares in the case of clause (y).
AMENDMENT. Subject to applicable law and the terms of the Merger Agreement,
the Merger Agreement may be amended by the parties thereto, by action taken or
authorized by their respective Boards of Directors, at any time before or after
approval of the matters presented in connection with the Merger by the
stockholders of the Company.
BOARD OF DIRECTORS. Pursuant to the Merger Agreement, promptly upon the
acceptance for payment of and payment for any Shares by the Purchaser in
accordance with the Offer for not less than a majority of the outstanding Shares
(on a fully diluted basis), the Purchaser will be entitled to designate members
of the Board such that the Purchaser will have a number of representatives on
the Board, rounded up to the next whole number, equal to the product of (x) the
total number of directors on the Board (giving effect to the directors elected
pursuant to this sentence) multiplied by (y) the percentage of such number of
Shares owned in the aggregate by Numico or the Purchaser bears to the number
that Shares outstanding; provided, however, that until the Effective Time, there
shall be at least two directors (the "Independent Directors") who are neither
officers of Numico nor designees, shareholders or affiliates of Numico or
Numico's affiliates. The Company will, upon request by the Purchaser, on the
date of such request, (i) either increase the size of the Board or use its
reasonable efforts to secure the resignations of such number of its incumbent
directors as is necessary to enable Numico's designees to be elected to the
Board and (ii) cause Numico's designees to be so elected, including mailing to
its stockholders an information statement containing the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, which
information statement is attached as Annex A to the Schedule 14D-9.
Following the election or appointment of the Purchaser's designees and prior
to the Effective Time, except for certain actions which are legally required to
have full Board approval, any action to be taken by the Board with respect to
the Merger Agreement which adversely affects the interests of the Company's
stockholders will require approval by a majority of the Independent Directors.
CHARTER AND BYLAWS. The Merger Agreement provides that, at the Effective
Time and without any further action on the part of the Company and the
Purchaser, the Certificate of Incorporation of the Company shall be amended to
read in its entirety as the Certificate of Incorporation of the Purchaser reads
as in effect immediately prior to the Effective Time until thereafter amended,
provided that such certificate of incorporation shall be amended to reflect
"General Nutrition Companies, Inc." as the name of the Surviving Corporation.
Under the Merger Agreement, the Bylaws of the Purchaser at the Effective
Time shall be the Bylaws of the Company until thereafter changed or amended.
Under the Merger Agreement, subject to applicable law, the directors of the
Purchaser at the Effective Time will be the initial directors of the Surviving
Corporation and will hold office until their respective successors are duly
elected or qualified or until their earlier resignation or removal. Pursuant to
the Merger Agreement, the officers of the Company at the Effective Time will be
the initial officers of the Surviving Corporation and will hold office until
their respective successors are duly elected or qualified or until their earlier
resignation or removal.
OTHER MATTERS.
APPRAISAL RIGHTS. Holders of Shares do not have dissenters' rights as a
result of the Offer. However, if the Merger is consummated, holders of Shares
will have certain rights pursuant to the provisions of Section 262 of the DGCL
to dissent and demand appraisal of, and to receive payment in cash of the fair
value of, their Shares. If the statutory procedures were complied with, such
rights could lead to a judicial determination of the fair value required to be
paid in cash to such dissenting holders for their Shares. Any such judicial
determination of the fair value of Shares could be based upon considerations
other than or in addition to the Offer price or the market value of the Shares,
including asset values and the investment value of the Shares. The fair value so
determined could be more or less than the Offer price or the Merger
Consideration.
25
If any holder of Xxxxxx who demands appraisal under Section 262 of the DGCL
fails to perfect, or effectively withdraws or loses his right to appraisal, as
provided in the DGCL, the Shares of such holder will be converted into the
Merger Consideration in accordance with the Merger Agreement.
The foregoing discussion is not a complete statement of law pertaining to
appraisal rights under the DGCL and is qualified in its entirety by the full
text of Section 262 of the DGCL.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR
PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS.
GOING PRIVATE TRANSACTIONS. The Merger would have to comply with any
applicable Federal law operative at the time of its consummation. Rule 13e-3
under the Exchange Act is applicable to certain "going private" transactions.
The Purchaser does not believe that Rule 13e-3 will be applicable to the Merger
unless the Merger is consummated more than one year after the termination of the
Offer. If applicable, Rule 13e-3 would require, among other things, that certain
financial information concerning the Company and certain information relating to
the fairness of the Merger and the consideration offered to minority
shareholders be filed with the SEC and disclosed to minority shareholders prior
to consummation of the Merger.
EMPLOYMENT AGREEMENTS.
Prior to execution of the Merger Agreement, the Company had entered into an
employment agreement with Xx. Xxxxx and established a change in control
retention bonus program for the benefit of its officers and those of the
Company's subsidiaries. Concurrent with the signing of the Merger Agreement,
Numico and the Company entered into a replacement employment agreement (the
"Xxxxx Employment Agreement") with Xx. Xxxxx and new employment agreements (the
"Employment Agreements") with nine other senior officers (the "Senior
Officers"), in each case with such agreements becoming effective as of the
Effective Time. These agreements replace the existing employment agreement with
Xx. Xxxxx, the retention bonus program with the other Senior Officers, provide
certain assurances with respect to the employment of the Senior Officers,
including severance benefits, and obtain for Numico and the Company
non-competition covenants from the Senior Officers. Copies of the Xxxxx
Employment Agreement and the Employment Agreements with the Senior Officers have
been filed as exhibits to Schedule 14D-1 and are incorporated herein by
reference and the following summary is qualified in its entirety by reference to
such agreements. The Xxxxx Employment Agreement and the Employment Agreements
may be examined, and copies thereof may be obtained, as set forth in Section 8
above.
EMPLOYMENT AGREEMENT WITH XX. XXXXX. Under his current employment agreement
with the Company, Xx. Xxxxx serves as President and Chief Executive Officer at
an annual salary of $954,965 (subject to adjustment for future increases in the
cost of living). As part of his compensation, Xx. Xxxxx is entitled to personal
use of the Company's airplane for up to 100 hours per year, certain other
benefits, reimbursement of expenses and participation in the Company's stock
option plans. Xx. Xxxxx' current agreement provides for employment through
February 1, 2002, severance benefits equal to such compensation through that
date in the event of termination of employment other than for cause or his
resignation due to a material reduction in his duties, and reimbursement of
golden parachute excise taxes. Xx. Xxxxx is obligated to maintain the
confidentiality of Company information for a period of two years following
termination of employment. In addition, Xx. Xxxxx is entitled under his
employment agreement to a change in control retention payment of $2,864,895
(three times his annual salary), 50% payable upon the occurrence of a change in
control and 50% payable one year thereafter if he remains employed with the
Company, or if his employment terminates prior thereto due to death, disability
or an event entitling him to severance benefits.
In order to assure itself of the continued services of Xx. Xxxxx for an
extended period following the Effective Time, Numico and the Company have
entered into the Xxxxx Employment Agreement with Xx. Xxxxx which will replace
his existing employment agreement upon the Effective Time. In general, the Xxxxx
Employment Agreement continues the terms and provisions of Xx. Xxxxx' current
employment agreement, including the change in control retention payment (two
times annual salary in lieu of three times) and severance benefits provided
thereunder, and extends the term to December 31, 2002. Xx. Xxxxx will
26
continue to serve as President and Chief Executive Officer of the Company. The
Xxxxx Employment Agreement also provides that Xx. Xxxxx will be elected to the
Board of Managing Directors of Numico, where he will serve along with Mr. xxx
xxx Xxxxxx at the most senior level of the management of Numico. Xx. Xxxxx will
not be eligible for an annual bonus or incentive compensation, however, he will
receive at least 15% of all stock options to acquire Numico's stock which are
issued to employees of the Company and its subsidiaries in any year during Xx.
Xxxx'x employment term (excluding the initial grant immediately following the
effective time of up to 500,000 options in which he will not be eligible to
participate). The Xxxxx Employment Agreement bars Xx. Xxxxx from using or
disclosing confidential information or trade secrets and from engaging in a
competing business (as defined in the Xxxxx Employment Agreement) prior to
December 31, 2002.
EMPLOYMENT AGREEMENTS WITH SENIOR OFFICERS. In order to assure itself of
the continued service of the Senior Officers and to obtain confidentiality and
non-competition covenants, Numico and the Company have entered into Employment
Agreements with the nine Senior Officers: Xxxxxxx X. Xxxx--Executive Vice
President of Marketing and Business Development and Chief Operating Officer;
Xxxxx X. Xxxxxxxxx--Executive Vice President and Chief Financial Officer; Xxxx
X. XxXxxxx--Senior Vice President, Logistics/Manufacturing; Xxxx X.
Xxxxxx--Executive Vice President and General Manager; Xxxxxxx X. Xxxxxx--Senior
Vice President and General Manager; Xxxxx X. Xxxxxxx--Vice President, Strategic
Planning and Corporate Development; Xxxxxxx Xxxxx--Senior Vice President and
General Manager; Xxxxxx X. Xxxxx--Senior Vice President, Sales; and Xxxxxxxx X.
Xxxxxx--Vice President, International Franchising. The Employment Agreements
will become effective upon the Effective Time and provide for an initial
employment term ending on December 31, 2002, in the case of Messrs. Xxxx,
Xxxxxxxxx, XxXxxxx and Xxxxxx, and December 31, 2001 for the others. Unless
earlier terminated by the Company or the Senior Officer, the Employment
Agreements will renew for additional one-year periods effective each January 1
commencing in 2002 and 2001, respectively.
In general, the Employment Agreements provide for continuation of the Senior
Officer's employment in the same position and at the same base salary, annual
bonus opportunity, and other benefits as in effect as of the date of the Merger
Agreement, and the entitlement to participate in any long-term incentive plans
which may be implemented for the Company's Senior Officers. The Employment
Agreements incorporate the change in control retention bonus program previously
adopted by the Company which will provide each Senior Officer with a payment
equal to one times base salary, 50% payable within 30 days after the Merger and
the remainder on the first anniversary of the Merger if the Senior Officer
remains in the employ of the Company. The Employment Agreements also provide
severance benefits in the event a Senior Officer is terminated without cause or
resigns due to a significant reduction in duties or responsibilities (other than
solely by reason of the Company ceasing to be a public company) or other uncured
breach of the Employment Agreements by the Company, and to reimbursement of any
golden parachute excise taxes. In addition, the Employment Agreements provide a
retention bonus in the event of a future change of control which is identical to
the retention bonus provided under the Xxxxx Employment Agreement. The
Employment Agreements bar the Senior Officers from using or disclosing
confidential information or trade secrets and from engaging in a competing
business (as defined in the Employment Agreement) prior to the scheduled
termination date of their Employment Agreement.
In recognition of the additional duties Xxxxxxx X. Xxxx is expected to
undertake following the Merger, his Employment Agreement provides for a $100,000
increase in base salary to $400,000, with scheduled increases of $50,000 on
January 1, 2001 and January 1, 2002, and an increase in maximum annual bonus
opportunity from $150,000 to $250,000. In addition to his present position, Xx.
Xxxx will also be named a Group Director of Numico and as such will serve as a
senior executive of Numico. Xx. Xxxx'x Employment Agreement provides for a
change in control retention bonus payment of $180,000 in connection with the
transactions contemplated by the Merger Agreement and for a separate non-
competition agreement with a more expansive definition of "competing business"
than that set forth in the Employment Agreements for which Xx. Xxxx will receive
a separate payment of $120,000 following the Merger.
EFFECT ON EMPLOYMENT AGREEMENT WITH XXXXX X. XXXX. Pursuant to the Benefits
Letter, Numico has acknowledged that the employment of Xxxxx X. Xxxx, the
Company's Chairman of the Board, will
27
terminate for reasons other than cause upon the closing of the Merger. Under the
Company's employment agreement with Xx. Xxxx as in effect on the date of the
Merger Agreement, Xx. Xxxx will receive a change in control bonus of $1,000,000
payable within 30 days after the Effective Time. Xx. Xxxx will also be entitled
to continue to receive severance benefits in the form of salary continuation
payments at the annual rate of $200,000 through January 2000 and $150,000
through January 2002, subject to his right under his employment agreement to
receive such payments in a discounted lump sum.
NUMICO EQUITY INCENTIVE PROGRAMS.
In addition to the provisions of the Xxxxx Employment Agreements and the
Employment Agreements described above, the Benefits Letter (as defined below)
also contemplates that Numico will establish certain programs intended to
provide Xx. Xxxxx, the Senior Officers and other key managers and employees of
the Company with a long term incentive program based on shares of Numico.
NUMICO MANAGEMENT STOCK PURCHASE PLAN. Numico plans to establish a Numico
Management Stock Purchase Plan for the benefit of Xx. Xxxxx, the Senior Officers
and other officers and key employees of the Company and its subsidiaries. The
provisions of the plan are similar to those under the Company's existing 1996
Management and Directors Stock Purchase Plan. Pursuant to the proposed plan,
each eligible individual will be entitled to purchase (the "initial purchase")
directly from Numico shares with an aggregate purchase price of up to two times
annual salary in the case of Xx. Xxxxx and the Senior Officers and one and
one-half or one times salary in the case of the other participants. In addition,
each participant who purchases shares will be permitted to borrow (the "loan")
from the Company to purchase additional shares from Numico in an amount up to
two dollars for each dollar of his or her initial purchase. The loan will be
secured by a pledge of the shares purchased with the loan proceeds, as well as
those purchased in the initial purchase, and will be subject to repayment in
full, with interest at 6% per year, on the third anniversary of the Merger, or
earlier in the event of termination of employment. The loan balance and
interest, however, will be subject to forgiveness if the individual remains in
the continuous employ of the Company through the maturity date. In such case,
50% of the loan balance and interest due will be forgiven and the remaining 50%
will be forgiven if the Company has achieved its operating EBIT goals for the
three year period. A portion of the loan will be forgiven in the event of early
termination of employment due to death, disability or termination by the Company
without cause. Xxxxxx purchased under the plan will be held in an account and
may not be sold by the participant until the loan maturity date, or earlier in
the event of termination of employment.
NUMICO STOCK OPTION PROGRAM. Numico has agreed to make available options to
purchase up to 500,000 shares for grant to key employees of the Company and its
subsidiaries following the Merger. In addition, Numico has agreed to make
available options with respect to not less than 250,000 shares annually
following the first, second and third anniversaries of the Merger. The options
with respect to the 500,000 shares will be granted to those key employees
identified by Xx. Xxxxx, which for this purpose will exclude Xx. Xxxxx and the
other Senior Officers, and excludes any other individual eligible to participate
in the Numico Management Stock Purchase Plan unless such individual participates
at the maximum level permitted thereunder. In general, the options will not be
exercisable unless the option holder remains in the continuous employ of the
Company through the third anniversary of the Merger. Partial vesting will occur
in the event of early termination of employment due to death or disability or
termination without cause.
OTHER PROVISIONS. The purchase price to be paid for the shares under the
Numico Management Stock Purchase Plan and for the initial 500,000 options will
be determined by reference to the 15-day average closing price for the Numico
shares on the Amsterdam Stock Exchange immediately prior to the date of the
Merger Agreement. For this purpose and for purposes of these programs "Numico
shares" means the depositary receipts representing ordinary shares of Numico
which are directly traded on the Amsterdam Stock Exchange. Implementation of
these programs is subject to compliance with applicable laws. In the event such
compliance is unduly burdensome, Numico has agreed to establish cash-based
programs which will provide substantially equivalent benefits.
28
EMPLOYEE BENEFITS.
Concurrent with the signing of the Merger Agreement, Numico and the Company
entered into a letter agreement (the "Benefits Letter") relating to certain
employee benefit matters. The Benefits Letter has
been filed as an exhibit to the Schedule 14D-1 and is incorporated herein by
reference and the following summary is qualified in its entirety by reference to
the Benefits Letter. The Benefits Letter may be examined, and copies thereof may
be obtained, as set forth in Section 8 above.
In addition to certain commitments relating to employment agreements and
Numico equity incentive plan matters described above (see "--Company Stock
Options and Stock Purchase Loans" and "--Employment Agreements"), the Benefits
Letter contains certain covenants and agreements from Numico relating to certain
actions to be taken in connection with or following the Merger. Numico has
agreed to cause the Company to continue to honor the Company's employee benefit
plans and agreements in effect as of the date of the Merger, except as
contemplated by the Merger Agreement or the Benefits Letter.
Numico has agreed that, through a period ending no earlier than December 31,
2000, the Company will maintain its employee retirement and welfare benefit
programs at a level which, when taken as a whole, is no less favorable to the
Company employees as those benefits provided immediately prior to the Merger,
except alterations made with the written consent of Xx. Xxxxx. In addition,
Numico has agreed to permit the Company to maintain, through December 31, 2000,
its existing severance policy for any employees terminated due to job
elimination, and to continue its severance policy for officers who are not
parties to employment agreements.
As of the date of the Merger Agreement, the Company had in place annual
incentive bonus arrangements and a performance-based matching contribution
provision under certain employee savings and incentive plans with benefits tied
to earnings-per-share targets for the fiscal year ending in February 2000.
Concurrent with the approval of the Merger Agreement, the Board also approved a
pro rata payout of the annual bonus amounts and the matching contribution based
on attainment of the highest performance level. Pursuant to the Benefits Letter,
Numico has agreed to such action and to cause the Company to make such payments
and contribution.
As of the date of the Merger Agreement, the Company had in place for the
benefit of the vice presidents of the Company and its subsidiaries a change in
control retention bonus program which entitled such officers to a bonus equal to
one times current annual salary, payable 50% upon a change in control and the
other 50% one year later if the officer was still employed by the Company. In
connection with the approval of the Merger Agreement, the Board modified the
program to provide that the first half of the bonus will be paid after the
Merger and the remainder on the first anniversary of the Merger, subject to
continuous employment. The second payment will also be made in the event of
employment termination due to death or disability, termination of employment
without cause or resignation due to a significant reduction in post-Merger
duties or a reduction in base salary. Pursuant to the Benefits Letter, Numico
has agreed to such action and to cause the Company to make such payments.
TENDER AGREEMENT.
The following is a summary of the material terms of the Tender Agreement
dated as of July 5, 1999. This summary is not a complete description of the
terms and conditions thereof and is qualified in its entirety by reference to
the full text thereof, which is incorporated herein by reference and a copy of
which has been filed with the SEC as an exhibit to Schedule 14D-1. The Tender
Agreement may be examined, and copies thereof may be obtained, as set forth in
Section 8 above.
Pursuant to the Tender Agreement, five stockholders who are executive
officers of the Company have agreed to validly tender and sell pursuant to the
Offer all of the Shares beneficially owned by such stockholders, as such Shares
may be adjusted by conversion, dividend, stock split, recapitalization,
exchange, merger or similar transaction of or by the Company, together with
Shares that may be acquired after July 5, 1999 by such stockholder, including
Shares issuable upon the exercise of options, warrants or
29
rights, the conversion or exchange of convertible or exchangeable securities, or
by means of purchase, dividend, distribution, or otherwise.
Each such stockholder severally has agreed, subject to certain exceptions,
that: (a) each stockholder will not (i) sell, transfer, pledge, assign or
otherwise dispose of, or enter into any contract, option, or other arrangement
(including any profit sharing arrangement) with respect to the sale, transfer,
pledge, assignment, or other disposition of, any of the Shares to any person
other than the Purchaser or the Purchaser's designee, (ii) enter into, or commit
to enter into, any voting arrangement with respect to any Shares, or (iii)
solicit, facilitate, initiate, encourage, or take any other action to, and will
direct and use its best efforts to cause any investment banker, attorney or
other advisor or representative of such stockholder not to, facilitate
(including by way of furnishing information) any Acquisition Proposal, other
than the Offer and the Merger unless, in the case of each of clauses (i), (ii)
and (iii) such action is otherwise permitted in connection with a Superior
Proposal under the Merger Agreement; (b) each stockholder will notify the
Purchaser if approached or solicited, directly or indirectly, by any person with
respect to an Acquisition Proposal; (c) at any meeting of stockholders of the
Company called to vote upon the Merger and the Merger Agreement or at any
adjournment thereof or in any other circumstances upon which a vote, consent or
other approval (including by written consent) with respect to the Merger and the
Merger Agreement is sought, such stockholder will (i) vote (or cause to be
voted) such stockholder's shares in favor of the adoption by the Company of the
Merger Agreement and (ii) vote (or cause to be voted) such stockholder's Shares
against any action or agreement which could result in a breach of any
representation, warranty or covenant of the Company in the Merger Agreement or
which could otherwise impede, delay, prevent, interfere with or discourage the
Offer or the Merger, including, without limitation, any Acquisition Proposal.
CONFIDENTIALITY AGREEMENTS.
The following is a summary of the material terms of the Confidentiality
Agreements (as defined below), which are incorporated herein by reference and a
copy of which has been filed with the SEC as an exhibit to Schedule 14D-1.
Pursuant to letter agreements, dated May 26, 1999, between Numico and the
Company (the "Confidentiality Agreements"), the Company and Numico agreed to
keep confidential certain information exchanged between such parties. The
Confidentiality Agreements also contain customary non-solicitation and
standstill provisions. The Merger Agreement provides that the provisions of the
Confidentiality Agreements shall remain binding and in full force and effect
after the termination or Effective Time of the Merger Agreement.
The capitalized terms used but not otherwise defined in this Section 11
shall have the meanings set forth in the Merger Agreement.
12. CERTAIN CONDITIONS TO THE OFFER.
Notwithstanding any other provision of the Offer, and subject to the terms
and conditions of the Merger Agreement, the Purchaser shall not be obligated to
accept for payment any Shares until all authorizations, consents, orders and
approvals of, and declarations and filings with, and all expirations of waiting
periods imposed by, any Governmental Entity which, if not obtained in connection
with the consummation of the transactions contemplated by the Merger Agreement,
is reasonably likely to have a Material Adverse Effect on the Company or
prevents the Company, Numico or Purchaser from consummating the transactions
contemplated by the Merger Agreement (collectively, "Required Regulatory
Approvals") shall have been obtained, made or satisfied, including the
expiration or earlier termination of any waiting periods applicable under the
HSR Act, and the Purchaser shall not be required to accept for payment or,
subject to any applicable rules and regulations of the SEC (including Rule
14e-1(c) under the Exchange Act) pay for, and may delay the acceptance for
payment of or payment for, any Shares tendered in the Offer and (subject to the
terms and conditions of the Merger Agreement, including Section 1.1(b) thereof),
may amend, extend or terminate the Offer if, (i) immediately prior to the
expiration of the Offer (as extended in accordance with the Merger Agreement)
the Minimum Condition shall not have been
30
satisfied or (ii) prior to the time of acceptance of any Shares pursuant to the
Offer, any of the following shall occur:
(a) there shall be threatened or pending any action, litigation or
proceeding (hereinafter, an "Action") by any Governmental Entity: (i)
challenging the acquisition by Numico or the Purchaser of Shares or seeking
to restrain or prohibit the consummation of the Offer or the Merger, (ii)
seeking to prohibit or impose any material limitation (including any hold
separate obligation) on Numico's, the Purchaser's or any of their respective
affiliates' ownership or operation of all or any material portion of the
business or assets of the Company and its subsidiaries taken as a whole or
Numico and its subsidiaries taken as a whole that, in each case referred to
in this clause (ii), individually or in the aggregate, is reasonably likely
to have Material Adverse Effect on the Company or Numico, or (iii) seeking
to impose material limitations on the ability of Numico or the Purchaser
effectively to acquire or hold, or to exercise full rights of ownership of,
the Shares including the right to vote the Shares purchased by them on an
equal basis with all other Shares on all matters properly presented to the
stockholders of the Company; or
(b) any statute, rule, regulation, order or injunction shall be enacted,
promulgated, entered, enforced or deemed to or become applicable to the
Offer or the Merger, or any other action shall have been taken by any court
or other Governmental Entity, that is reasonably likely to result in any of
the effects of, or have any of the consequences sought to be obtained or
achieved in, any Action referred to in clauses (i) through (iii) of
paragraph (a) above; or
(c) (i) the representations and warranties of the Company as set forth
in Section 3.1(b) of the Merger Agreement shall not be true and correct in
all material respects as of the date of the Merger Agreement and (except to
the extent such representations and warranties speak as of an earlier date)
as of the consummation of the Offer as though made on and as of such date;
(ii) the representations and warranties of the Company set forth in the
Merger Agreement (other than those set forth in Section 3.1(b) of the Merger
Agreement), (x) to the extent qualified by Material Adverse Effect shall not
be true and correct and (y) to the extent not qualified by Material Adverse
Effect shall not be true and correct, except that this clause (y) shall be
deemed satisfied so long as any failures of such representations and
warranties to be true and correct, taken together, do not have a Material
Adverse Effect on the Company, in the case of each of clauses (x) and (y) as
of the date of the Merger Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the
consummation of the Offer as though made on and as of such date; (iii) the
Company shall have breached or failed to comply in any material respect with
any of its material obligations, covenants or agreements under the Merger
Agreement; or (iv) any change or event shall have occurred that has, or is
reasonably likely to have, a Material Adverse Effect on the Company; or
(d) the Merger Agreement shall have been terminated in accordance with
its terms.
The conditions set forth in clauses (a) through (d) are for the sole benefit
of Numico and the Purchaser and may be asserted by Numico and the Purchaser
regardless of the circumstances giving rise to such condition and may be waived
by Numico and the Purchaser in whole or in part at any time and from time to
time, by express and specific action to that effect in their sole discretion.
The failure by Numico or the Purchaser at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts and other circumstances shall
not be deemed a waiver with respect to any other facts and circumstances, and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
The capitalized terms used in this Section 12 shall have the meanings set
forth in the Merger Agreement.
13. SOURCE AND AMOUNT OF FUNDS.
The Offer is not conditioned upon obtaining any financing arrangements. The
Purchaser estimates that the total amount of funds required to purchase all of
the outstanding Shares on a fully diluted basis pursuant to the Offer and the
Merger and to pay related fees and expenses of Numico and the Purchaser
31
will be approximately $1,920,000,000 (approximately Euro 1,878,000,000 based on
exchange rate of one Euro=1.0223 U.S. Dollars as of July 6, 1999, as reported by
the WALL STREET JOURNAL). The Purchaser will obtain these funds from Numico,
either directly or indirectly via other subsidiaries of Numico, through loans,
advances or capital contributions. Numico has received a commitment letter,
dated July 3, 1999, for a bridge loan, in an amount sufficient to complete the
Offer and the Merger, from ABN AMRO Bank N.V. ("ABN AMRO") and X.X. Xxxxxx
Securities Ltd. ("JPMS").
The commitment letter for the bridge loan has been filed with the SEC as an
exhibit to the Schedule 14D-1 and is incorporated herein by reference and the
following summary is qualified in its entirety by reference to such commitment
letter. The commitment letter provides for an acquisition credit facility in the
amount of Euro 2,600,000,000. Any borrowings will be unsecured and any
outstanding balance on the loan will be payable at the termination of the
facility. Borrowings can be made in Euros or U.S. Dollars and will bear interest
at a rate equal to LIBOR or EURIBOR plus 1.0% per annum until December 31, 1999,
and thereafter at LIBOR or EURIBOR plus 1.5% per annum except as noted below. It
is expected that the bridge loan will be repaid in part with proceeds of an
offering of Euro 1,050,000,000 of ordinary shares and subordinated convertible
bonds of Numico (with a minimum of Euro 450,000,000 of ordinary shares), with
the balance refinanced at the termination of the loan. If Numico refinances Euro
1,050,000,000 of the outstanding loan balance through the sale of ordinary
shares and subordinated convertible bonds prior to January 1, 2000, the interest
rate payable on borrowings will remain at LIBOR or EURIBOR plus 1.0% per annum.
The commitment is subject to certain conditions, including (i) execution of
definitive financing documentation; (ii) the absence, in the opinion of ABN AMRO
and JPMS, of any change in the business condition (financial or otherwise),
operations, performance or prospects of Numico and its subsidiaries taken as a
whole since December 31, 1998, which would have a material adverse effect on the
ability of Numico to perform its financial obligations; (iii) the absence, in
the opinion of ABN AMRO and JPMS, of a material adverse change in the business
condition (financial or otherwise), operations, performance or prospects of the
Company and its subsidiaries taken as a whole since December 31, 1998, where
such change gives Numico or the Purchaser the right to terminate the Merger
Agreement; and (iv) all government approvals and regulatory and/or tax rulings
having been obtained for the Offer.
The commitment terminates on the earlier of (i) the termination of the
Merger Agreement, and (ii) three months from the signing of the Merger Agreement
or, if all Regional Regulatory Approvals have not been obtained, three months
plus a further 30 days from the signing of the Merger Agreement.
The commitment provides that the revolving credit facility will terminate
364 days from the date definitive documents for the facility are executed and
delivered. Final documentation for the facility is expected to include customary
conditions, covenants and events of defaults. Numico has agreed to pay ABN AMRO
and JPMS certain fees in connection with the commitment letter and the bridge
loan that Numico believes to be customary.
14. DIVIDENDS AND DISTRIBUTIONS.
Pursuant to the Merger Agreement, the Company shall not, and shall not
propose to, without the consent of Numico: (i) declare or pay any dividends on
or make other distributions in respect of any of its capital stock, (ii) split,
combine or reclassify any of its capital stock or issue or authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for, shares of its capital stock, (iii) repurchase, redeem or
otherwise acquire any shares of its capital stock or any securities convertible
into or exercisable for any shares of its capital stock except as otherwise
permitted with respect to the payment of the option exercise price or tax
withholding under certain option agreements in effect on the date of the Merger
Agreement under the Company Equity Plans or (iv) effect any reorganization or
recapitalization.
Furthermore, until the Effective Time, the Company shall not, and shall
cause its subsidiaries not to, issue, pledge, dispose of or encumber, deliver or
sell, or authorize or propose the issuance, disposition, encumbrance, pledge,
delivery or sale of, any shares of its capital stock of any class, any Company
Voting Debt or any securities convertible into or exercisable for, or any
rights, warrants or options to acquire, any
32
such shares or Company Voting Debt, or enter into any agreement with respect to
any of the foregoing, other than the issuance of Shares upon the exercise of
stock options or rights to purchase Shares outstanding on the date of the Merger
Agreement in accordance with the terms of the Company Equity Plans as in effect
on the date of the Merger Agreement and other than upon the exercise of the
Warrants.
15. CERTAIN LEGAL MATTERS.
GENERAL. Except as otherwise described herein, based on a review of
publicly available filings made by the Company with the SEC and other publicly
available information concerning the Company, neither Numico nor the Purchaser
is aware of any license or regulatory permit that appears to be material to the
business of the Company and its subsidiaries, taken as a whole, that might be
adversely affected by the Purchaser's acquisition of Shares pursuant to the
Offer or of any approval or other action by any governmental administrative or
regulatory agency or authority that would be required for the acquisition or
ownership of Shares by the Purchaser pursuant to the Offer. Should any such
approval or other action be required, the Purchaser and Numico currently
contemplate that such approval or other action will be sought or taken. There
can be no assurance that any such approval or other action, if needed, would be
obtained or would be obtained without substantial conditions or that failure to
obtain any such approval or other action might not result in consequences
adverse to the Company's or Numico's business or that certain parts of the
Company's or Numico's business might not have to be disposed of in the event
such approvals were not obtained or such other actions were not taken, any of
which could cause the Purchaser to elect to terminate the Offer without the
purchase of Shares thereunder. The Purchaser's obligation under the Offer to
accept for payment and pay for Shares is subject to certain conditions. See
Section 12.
STATE TAKEOVER LAWS. A number of states throughout the United States have
enacted takeover statutes applicable to attempts to acquire securities of
corporations that are incorporated or have assets, stockholders, executive
offices or places of business in such states. Section 203 of the DGCL limits the
ability of a Delaware corporation to engage in business combinations with
"interested stockholders" (defined generally as any beneficial owner of 15% or
more of the outstanding voting stock of the corporation) for a period of three
years from the time such interested stockholders became the holders of 15% or
more of such Shares unless, among other things, the corporation's board of
directors has given its prior approval to either the business combination or the
transaction which resulted in the stockholder becoming an "interested
stockholder." Section 203 of the DGCL is inapplicable to the Merger because the
Company previously adopted a provision in its Certificate of Incorporation which
opts-out of Section 203.
Except as described herein, the Purchaser has not attempted to comply with
any state takeover statutes in connection with the Offer. The Purchaser reserves
the right to challenge the validity or applicability of any state law allegedly
applicable to the Offer and nothing in this Offer to Purchase nor any action
taken in connection with the Offer or the Merger is intended as a waiver of that
right. In the event that any state takeover statute is found applicable to the
Offer or the Merger, the Purchaser might be unable to accept for payment or pay
for Shares tendered pursuant to the Offer or be delayed in continuing or
consummating the Offer or the Merger. In such case, the Purchaser might not be
obligated to accept for payment or pay for any Shares tendered. See Section 12.
ANTITRUST COMPLIANCE. Under the HSR Act and the rules that have been
promulgated thereunder by the Federal Trade Commission ("FTC"), certain
acquisition transactions may not be consummated unless certain information has
been furnished to the Antitrust Division of the Department of Justice (the
"Antitrust Division") and the FTC and certain waiting period requirements have
been satisfied. The acquisition of the Shares by the Purchaser is subject to
these requirements.
Pursuant to the HSR Act, Numico filed a Notification and Report Form with
respect to the acquisition of Shares pursuant to the Offer and the Merger with
the Antitrust Division and the FTC on July 6, 1999. Under the provisions of the
HSR Act applicable to the purchase of Shares pursuant to the Offer, such
purchases may not be made until the expiration of a 15-calendar day waiting
period following on the filing made by Numico. Accordingly, the waiting period
under the HSR Act will expire at 11:59 p.m., New York City time, on July 21,
1999, unless early termination of the waiting period is granted, or Numico
and/or the Company receives a request for additional information or documentary
material
33
prior thereto. If either the FTC or the Antitrust Division were to make such a
request(s) for additional information or documentary material, the waiting
period would expire at 11:59 p.m., New York City time, on the tenth calendar day
after the date of substantial compliance with such request(s), unless the
waiting period is sooner terminated by the FTC or the Antitrust Division.
Thereafter, the waiting period could be extended only by agreement or by court
order. Only one extension of such waiting period pursuant to a request for
additional information is authorized by the rules promulgated under the HSR Act,
except by agreement or by court order. Any such extension of the waiting period
will not give rise to any withdrawal rights not otherwise provided for by
applicable law. See Section 4.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's proposed acquisition
of the Company. At any time before or after the Purchaser's acquisition of
Shares pursuant to the Offer, the Antitrust Division or the FTC could take such
action under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the purchase of Shares pursuant to the
Offer or the consummation of the Merger, or seeking the divestiture of Shares
acquired by the Purchaser, or the divestiture of substantial assets of the
Company or its subsidiaries, or of Numico or its subsidiaries. Private parties
also may bring legal action under the antitrust laws under certain
circumstances. There can be no assurance that a challenge to the Offer or the
Merger on antitrust grounds will not be made or, if such a challenge is made, of
the result thereof.
FOREIGN APPROVALS. The Company and Numico each own property or conduct
business in various foreign countries and jurisdictions. In connection with the
acquisition of the Shares pursuant to the Offer or the Merger, the laws of
certain of those foreign countries and jurisdictions may require the filing of
information with, or obtaining the approval of, governmental authorities in such
countries and jurisdictions. The governments in such countries and jurisdictions
might attempt to impose additional conditions on the Company's operations
conducted in such countries and jurisdictions as a result of the acquisition of
the Shares pursuant to the Offer. There can be no assurance that Numico will be
able to cause the Company or its subsidiaries to satisfy or comply with such
laws, or that compliance or noncompliance with such laws will not have a
material adverse effect on the financial condition, properties, business,
results of operations or prospects of the Company and its subsidiaries taken as
a whole, or will not impair the Company, or any of their respective affiliates,
following consummation of the Offer or the Merger, to conduct any material
business or operations in any jurisdiction where they now are being conducted.
See Section 12 of this Offer to Purchase for certain conditions to the Offer
that could become applicable in the event that any such foreign approvals give
rise to the above-described effects.
16. FEES AND EXPENSES.
X.X. Xxxxxx is acting as Dealer Manager in connection with the Offer and
has, together with its affiliate, X.X. Xxxxxx Securities Ltd., provided certain
financial advisory services to the Purchaser and Numico in connection therewith.
Numico has agreed to pay JPMS fees, the aggregate amount of which shall not be
determinable until completion of the Merger, but which in no circumstance shall
exceed $9 million (excluding amounts paid to JPMS in connection with the bridge
loan). Numico has agreed to reimburse JPMS for its expenses, including the fees
and expenses of its counsel, in connection with the Offer, and has agreed to
indemnify X.X. Xxxxxx and JPMS against certain liabilities and expenses in
connection with the Offer and the Merger, including liabilities under the
federal securities laws.
The Purchaser has also retained MacKenzie Partners, Inc. to act as the
Information Agent in connection with the Offer. The Information Agent may
contact holders of Shares by mail, telephone, telex, facsimile, telegraph and
personal interviews and may request brokers, dealers and other nominee
stockholders to forward materials relating to the Offer to beneficial owners of
Shares. The Information Agent will receive reasonable and customary compensation
for such services, plus reimbursement of out-of-pocket expenses. The Purchaser
will also indemnify the Information Agent against certain liabilities and
expenses in connection with the Offer, including liabilities under the federal
securities laws.
The Purchaser will pay the Depositary reasonable and customary compensation
for its services in connection with the Offer, plus reimbursement for
out-of-pocket expenses, and will indemnify the Depositary against certain
liabilities and expenses in connection therewith, including liabilities under
the
34
federal securities laws. Brokers, dealers, commercial banks and trust companies
will be reimbursed by the Purchaser for customary mailing and handling expenses
incurred by them in forwarding material to their customers.
17. MISCELLANEOUS.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of such
jurisdiction. However, the Purchaser may, in its sole discretion, take such
action as it may deem necessary to make the Offer in any such jurisdiction and
extend the Offer to holders of Shares in such jurisdiction.
Neither the Purchaser nor Numico is aware of any jurisdiction in which the
making of the Offer or the acceptance of Shares in connection therewith would
not be in compliance with the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR NUMICO NOT CONTAINED IN THIS OFFER
TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
The Purchaser and Numico have filed with the SEC a Tender Offer Statement on
Schedule 14D-1 pursuant to Rule 14d-3 under the Exchange Act, together with
exhibits, furnishing certain additional information with respect to the Offer,
and may file amendments thereto. Such Statement and any amendments thereto,
including exhibits, may be examined and copies may be obtained from the
principal office of the SEC in Washington, D.C. in the manner set forth in
Section 8.
NUMICO INVESTMENT CORP.
July 9, 1999
35
SCHEDULE A
DIRECTORS AND EXECUTIVE OFFICERS OF
NUMICO, NUMICO LP AND THE PURCHASER
KONINKLIJKE NUMICO N.V. ("Numico")
The following table sets forth the name, business address, present principal
occupation or employment and five-year employment history of each of the
directors and executive officers of Koninklijke Numico N.V. Each person has a
business address at Xxxxxxxxxxxxxx 00, 0000 XX Xxxxxxxxxx, X.X. Box 1, 2700 MA
Zoetermeer, The Netherlands, and is a citizen of The Netherlands, unless a
different business address and/or citizenship is indicated under his or her
name. Directors are indicated by an asterisk.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND FIVE-YEAR EMPLOYMENT HISTORY
--------------------------------------- -------------------------------------------------------------------------
Xxxxxx Xxx xxx xxx Xxxxx*.............. Chairman of the Supervisory Board since January 1992. Mr. xxx xxx Xxxxx
is also Chairman of the Supervisory Board of Hagemeijer N.V.
Xxxxx Xxxxx Xxxxxxxxxx*................ Member of the Supervisory Board since July 1981. Xxx. Xxxxxxxxxx is also
a member of the Supervisory Board of Rothmans International.
Xxxxxx Xxxxxxxx Xxxxxxxxx Xxxx*........ Member of the Supervisory Board since May 1987. Xx. Xxxx is also a member
of the Supervisory Board of Hagemeijer N.V., VNU N.V., Gamma Holding
N.V., Parcon N.V. and Robeco N.V.
Xxxxx Xxxxx Xxxxxxxxxx*................ Member of the Supervisory Board since May 1996. Xx. Xxxxxxxxxx has also
served as the General and Scientific Manager of Central Blood
Transfusion Laboratories of the Red Cross in Amsterdam for the past
five years.
Xxxxx Xxxxxxx*......................... Member of the Supervisory Board since May 1989. Xx. Xxxxxxx is also
Chairman of the Supervisory Board of Hypotheekbank and the Board of
Stichting Administratiekantoor ING Group, a member of the Supervisory
Board of OWM Zorgverzekeraar VGZ ua and Honorary Counsel of Mexico.
Xxxxxx Xxxxxxxxxxx*.................... Member of the Supervisory Board since May 1994. Xx. Xxxxxxxxxxx served as
a member of the Board of Managing Directors of Koninklijke Ahold N.V.
from 1981 until his retirement in May 1999.
Xxxxxxxxx Xxxxxxxx Xxxxxx*............. Member of the Supervisory Board since May 1999. Xx. Xxxxxx was Chairman
and Chief Executive Officer of Xxxxxxx Xxxxxx from 1991 to May 1999.
Xx. Xxxxxx also holds the following positions: Chairman of the
Executive Board of Wolters Kluwer N.V.; Chairman of the Supervisory
Board of Kappa Packaging Nederland B.V., Bols Royal Distilleries and
Unique International N.V.; member of the Supervisory Board of Maxeres
N.V. and Xxxxxx & Co. N.V.
Xxxxxxxx X. X. xxx xxx Xxxxxx.......... President, Chief Executive Officer of Numico since January 1992 and
member of the Board of Managing Directors since January 1989. Mr. xxx
xxx Xxxxxx is also a member of the Supervisory Boards of Maxeres
Holding N.V., Xxxxx Xxxxxxxx Holding N.V. and Benckiser N.V.. In
addition, he is a member of "Raad van Bestuur" Telindus B.V., a member
of the Advisory Board of ABN AMRO and Chairman of "Stichting
Continuiteit Wolters Kluwer."
A-1
NUMICO INVESTMENT CORP. ("Purchaser") and
NUMICO US, LP ("Numico LP")
The following table sets forth the name, business address, present
occupation or employment and five-year employment history of the sole director
and executive officer of Numico Investment Corp. Such information is also
provided for the sole director and executive officer of Numico, Inc., a Delaware
corporation and general partner of Numico LP. Numico LP is a Delaware limited
partnership and the parent of the Purchaser. The person listed below has a
business address at Xxxxxxxxxxxxxx 00, 0000 XX Xxxxxxxxxx, X.X. Box 1, 2700 MA
Zoetermeer, The Netherlands and is a citizen of The Netherlands.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND FIVE-YEAR EMPLOYMENT HISTORY
--------------------------------------- -------------------------------------------------------------------------
Xxxxxxx xxx xxx Xxx ................... President and director of Numico Investment Corp. since its inception on
July 2, 1999. Mrs. xxx xxx Xxx is also General Counsel for Numico, a
position she has held since July 1989. In addition, she is the sole
director and executive officer of Numico, Inc.
A-2
Manually signed facsimile copies of the Letter of Transmittal, properly
completed and duly signed, will be accepted. The Letter of Transmittal,
certificates for the Shares and any other required documents should be sent or
delivered by each stockholder of the Company or such stockholder's broker,
dealer, commercial bank, trust company or other nominee to the Depositary as
follows:
THE DEPOSITARY FOR THE OFFER IS:
IBJ WHITEHALL BANK & TRUST COMPANY
BY MAIL: FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER:
Reorganization Operations Department (FOR ELIGIBLE INSTITUTIONS Securities Processing Window
P.O. Box 84 ONLY) Subcellar One, (SC-1)
Bowling Green Station (000) 000-0000 Xxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0084 For Confirmation Telephone: New York, New York 10004
(000) 000-0000
Any questions and requests for assistance or additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Information Agent or the Dealer Manager at their respective
telephone numbers and locations listed below. You may also contact your broker,
dealer, commercial bank or trust company or other nominee for assistance
concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO]
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000 (Call Collect)
OR
CALL TOLL-FREE (000) 000-0000
THE DEALER MANAGER FOR THE OFFER IS:
[LOGO]
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Call (000) 000-0000
