OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
XXXXXXXX CORPORATION
AT
$12.25 NET PER SHARE
BY
XXXXXX ACQUISITION, INC.
A WHOLLY-OWNED SUBSIDIARY
OF
XXXXXX ACQUISITION, LLC
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THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON NOVEMBER 20, 1997, UNLESS THE OFFER IS EXTENDED.
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THE OFFER IS BEING MADE IN CONNECTION WITH THE AGREEMENT AND PLAN OF
MERGER DATED OCTOBER 16, 1997 (THE "MERGER AGREEMENT") BY AND BETWEEN XXXXXX
ACQUISITION, INC. ("PURCHASER") AND XXXXXXXX CORPORATION (THE "COMPANY").
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS APPROVED THE MERGER
AGREEMENT, THE OFFER AND THE MERGER, HAS DETERMINED THAT THE OFFER AND MERGER
ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF THE COMPANY,
AND RECOMMENDS ACCEPTANCE OF THE OFFER AND APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT AND THE MERGER BY THE SHAREHOLDERS OF THE COMPANY.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED HEREIN),
A NUMBER OF SHARES OF COMMON STOCK OF THE COMPANY, $1.00 PAR VALUE PER SHARE
(COLLECTIVELY, THE "SHARES"), WHICH , WHEN ADDED TO THE SHARES THEN
BENEFICIALLY OWNED BY PURCHASER OR ITS AFFILIATES, TOGETHER WITH THE SHARES
TENDERED PURSUANT TO THE SHAREHOLDERS AGREEMENT DATED AS OF OCTOBER 16, 1997
BY AND AMONG PURCHASER AND CERTAIN SHAREHOLDERS OF THE COMPANY, CONSTITUTES
AT LEAST TWO-THIRDS OF THE TOTAL NUMBER OF SHARES OUTSTANDING ON A
FULLY-DILUTED BASIS; (II) ALL REQUIRED APPROVALS, IF ANY, BY THE UNITED
STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT ("HUD"); AND (III)
SATISFACTION OF THE OTHER CONDITIONS SPECIFIED IN SECTION 15 HEREOF. SEE
SECTION 15.
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IMPORTANT
Any shareholder desiring to tender all or any portion of such holder's
Shares should either (a) complete and sign the enclosed Letter of Transmittal
(or a facsimile thereof) in accordance with the instructions in the Letter of
Transmittal, have such shareholder's signature guaranteed, if required by
Instruction 1 to the Letter of Transmittal, and mail or deliver it together
with the certificate(s) evidencing the tendered Shares and all other required
documents to the Depositary (as defined herein), or tender such Shares
pursuant to the procedure for book-entry transfer set forth in Section 3 of
this Offer to Purchase or (b) request such shareholder's broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
such shareholder. A shareholder whose Shares are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee must contact
such broker, dealer, commercial bank, trust company or other nominee if such
shareholder desires to tender such Shares.
Any shareholder who desires to tender Shares and whose certificates
evidencing such Shares are not immediately available or who cannot comply
with the procedures for book-entry transfer on a timely basis may tender such
Shares by following the procedures for guaranteed delivery set forth in
Section 3 of this Offer to Purchase.
Questions and requests for assistance and for additional copies of this
Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed
Delivery and other related materials may be directed to the Information Agent
at its addresses and telephone numbers set forth on the back cover of this
Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of
Transmittal, the Notice of Guaranteed Delivery and the other tender offer
materials may also be obtained from brokers, dealers, commercial banks or
trust companies.
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October 23, 1997
TABLE OF CONTENTS
PAGE
-------
INTRODUCTION ............................................................................ 1
1. Terms of the Offer ............................................................. 3
2. Acceptance for Payment; Payment ................................................ 4
3. Procedures for Tendering Shares ................................................ 5
4. Withdrawal Rights .............................................................. 7
5. Certain Tax Considerations ..................................................... 7
6. Price Range of Shares; Dividends ............................................... 9
7. Certain Information Concerning the Company ..................................... 9
8. Certain Information Concerning Purchaser and Parent ............................ 12
9. Sources and Amount of Funds .................................................... 12
10. Background of the Offer; Contacts with the Company ............................. 14
11. The Offer and Merger; Merger Agreement and Related Agreements .................. 16
12. Purpose of the Offer and Merger, Plans for the Company ......................... 27
13. Effect of the Offer on the Market for the Shares; Exchange Act Registration;
Margin Regulations ............................................................. 28
14. Extension of Tender Period; Amendment; Termination ............................. 29
15. Conditions to the Offer ........................................................ 30
16. Certain Legal Matters; Regulatory Approvals .................................... 31
17. Fees and Expenses .............................................................. 33
18. Legal Proceedings............................................................... 34
19. Miscellaneous .................................................................. 34
Directors and Executive Officers of Purchaser ........................................... I-1
Directors and Executive Officers of Parent and Certain Other Persons ................... II-1
Additional Information Required by the New York Security Takeover Disclosure Act ........ III-1
i
SUPPLEMENT, DATED OCTOBER 23, 1997, TO
SECTION 18 -- "LEGAL PROCEEDINGS" OF OFFER TO PURCHASE.
The Company announced today that the Supreme Court of the State of New
York, County of New York, has denied the motion for a preliminary injunction
made yesterday by plaintiff Xxxxxxxx Acquisition, Inc., an affiliate of Xxxxx
Xxxxxxx, which sought, among other relief, to enjoin the transactions with
Purchaser and related parties and to order the Company to consummate a
transaction with plaintiff. Counsel to Xx. Xxxxxxx has informed the Company
that he will not appeal the decision. Unspecified damage claims by Xx.
Xxxxxxx remain outstanding. See Section 12 of the Offer to Purchase, "The
Offer and Merger; Merger Agreement and Related Agreements -- Indemnity
Agreement."
To the Holders of Common Stock of
Xxxxxxxx Corporation
INTRODUCTION
Xxxxxx Acquisition, Inc., a New York corporation ("Purchaser"), hereby
offers to purchase all outstanding shares of common stock, $1.00 par value
per share (the "Company Common Stock" or the "Shares"), of Xxxxxxxx
Corporation, a New York corporation (the "Company"), at $12.25 per Share, net
to the seller in cash (the "Offer Price"), upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which, as amended or supplemented from time to time, together
constitute the "Offer"). The Purchaser is a wholly-owned subsidiary of Xxxxxx
Acquisition, LLC, a Delaware limited liability company ("Parent").
Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares by Purchaser
pursuant to the Offer. However, any tendering shareholder or other payee who
fails to complete and sign the Substitute Form W-9 that is included in the
Letter of Transmittal may be subject to a required backup federal tax
withholding of 31% of the gross proceeds payable to such shareholder or other
payee pursuant to the Offer. See Section 3. Purchaser will pay all charges
and expenses of ChaseMellon Shareholder Services, L.L.C., which is acting as
the Depositary (in such capacity, the "Depositary"), and MacKenzie Partners,
Inc., which is acting as Information Agent (in such capacity, the
"Information Agent"), incurred in connection with the Offer in accordance
with the terms of agreements entered into between Purchaser and such persons.
See Section 17. For purposes of this Offer to Purchase, references to
"Section" are references to a section of this Offer to Purchase, unless the
context otherwise requires.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED HEREIN),
A NUMBER OF SHARES WHICH, WHEN ADDED TO THE SHARES BENEFICIALLY OWNED BY
PURCHASER OR ITS AFFILIATES, TOGETHER WITH THE SHARES TENDERED PURSUANT TO
THE SHAREHOLDERS AGREEMENT DATED OCTOBER 16, 1997 BY AND AMONG PURCHASER AND
CERTAIN SHAREHOLDERS OF THE COMPANY, CONSTITUTES AT LEAST TWO-THIRDS OF THE
TOTAL NUMBER OF SHARES OUTSTANDING ON A FULLY-DILUTED BASIS (THE "MINIMUM
TENDER CONDITION"); (II) ALL REQUIRED APPROVALS, IF ANY, BY THE UNITED STATES
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT ("HUD"); AND (III) SATISFACTION
OF THE OTHER CONDITIONS SPECIFIED IN SECTION 15 HEREOF. SEE SECTION 15.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of October 16, 1997 (the "Merger Agreement"), by and between Purchaser and
the Company. The Merger Agreement provides, among other things, that as
promptly as practicable following the completion of the Offer and the
satisfaction or waiver of certain conditions, including the purchase of
Shares pursuant to the Offer and satisfaction of the Minimum Tender Condition
(sometimes referred to herein as the "consummation" of the Offer) and the
approval and adoption of the Merger Agreement by the shareholders of the
Company, if required by applicable law, Purchaser will be merged with and
into the Company (the "Merger"), with the Company as the surviving
corporation (the "Surviving Corporation") with the result that all the
outstanding Shares will be owned by Parent. In the Merger, each issued and
outstanding Share (other than Dissenting Shares (as hereinafter defined)) not
owned directly or indirectly by the Company will be converted into and
represent the right to receive $12.25 in cash, without interest (the "Merger
Price"); provided, however, that any Shares owned by Parent or Purchaser will
be cancelled and the Merger Price will not be paid in respect of any such
Shares. See Section 11. "Dissenting Shares" means those Shares which are held
by holders of Shares who shall not have voted such Shares in favor of the
Merger or consented thereto in writing, who have filed with the Company a
written notice of election to dissent and who otherwise comply with the
applicable procedures set forth in the Business Corporation Law of the State
of New York (the "BCL").
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD" OR "BOARD OF
DIRECTORS") UNANIMOUSLY HAS 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 SHAREHOLDERS OF THE COMPANY, AND RECOMMENDS ACCEPTANCE OF
THE OFFER AND APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER BY
THE SHAREHOLDERS OF THE COMPANY.
Xxxxxxx, Xxxxx & Co. (the "Company's Financial Advisor"), financial
advisor to the Company, has delivered to the Board a written opinion dated
October 16, 1997 to the effect that the consideration to be received by the
holders of Shares in the Offer and the Merger is fair to such holders from a
financial point of view. A copy of such opinion is to be included with the
Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") and should be read carefully in its entirety for a
description of the assumptions made, matters considered and limitations on
the review undertaken by the Company's Financial Advisor.
The Company's Board of Directors paid a regular quarterly dividend of
$.0625 per Share on October 15, 1997 to shareholders of record on September
30, 1997. Pursuant to the terms of the Merger Agreement, prior to the date on
which a majority of the Company's directors are designees of Purchaser, the
Company is prohibited from declaring any additional dividends (including
regular quarterly dividends) without the consent of Purchaser.
According to the Company, as of October 16, 1997, 6,260,960 Shares were
validly issued and outstanding, of which 10,900 Shares were owned by
affiliates of Purchaser. In addition, there is currently outstanding an
option to purchase 100,000 Shares. See Section 11 "--Employment, Severance
and Related Agreements." Based upon the foregoing information, the Minimum
Tender Condition would be satisfied if 4,229,740 Shares were validly tendered
and not withdrawn. If the option ceases to be outstanding prior to the
expiration of the Offer, the Minimum Tender Condition would be satisfied if
4,163,073 Shares were validly tendered and not withdrawn. Pursuant to the
Shareholders Agreement dated as of October 16, 1997 among Xxxx Xxxxxxxx,
Xxxxx Xxxxxx, Xxxxxx Xxxxxxx and Xxxx Xxxxxx, and certain persons and
entities affiliated with, or related to, them (collectively, the "Principal
Shareholders"), Parent and Purchaser, the Principal Shareholders have agreed
to tender an aggregate of 3,317,211 Shares pursuant to the Offer. See Section
11 "--The Offer and Merger; Merger Agreement and Related Agreements."
The Merger Agreement provides that, promptly upon consummation of the
Offer, Purchaser shall be entitled to designate for election to the Board
such number of persons so that the designees of Purchaser constitute the same
percentage (but in no event less than a majority) of the Board (rounded up to
the next whole number) as the percentage of the outstanding Shares acquired
pursuant to the Offer or otherwise owned by Purchaser and its affiliates.
Upon the consummation of the Offer, the Company will, at the option of
Purchaser, increase the size of the Board or obtain the resignation of such
number of directors as is necessary to enable such number of Purchaser
designees to be so elected. Under the Merger Agreement, the Company and
Purchaser have agreed that, until the Effective Time (as defined herein), the
Board of Directors shall have at least two directors (the "Independent
Directors") who are directors on the date of the Merger Agreement or who are
otherwise not officers, directors or affiliates of Purchaser and are
independent directors under the rules of the American Stock Exchange (the
"AMEX") and that, if the number of Independent Directors shall be reduced
below two for any reason whatsoever, any remaining Independent Directors (or
Independent Director, if there shall be only one remaining) shall be entitled
to designate persons to fill such vacancies who shall be deemed to be
Independent Directors for purposes of the Merger Agreement or, if no
Independent Directors then remain, the other directors shall designate two
persons to fill such vacancies who shall not be officers, shareholders or
affiliates of Purchaser and who are independent directors under the rules of
the AMEX, and such persons shall be deemed to be Independent Directors for
purposes of the Merger Agreement.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY
DECISION IS MADE WITH RESPECT TO THE OFFER.
2
1. TERMS OF THE OFFER
Subject to the terms of the Merger Agreement and the conditions of the
Offer as set forth in Section 15 (each a "Condition," and collectively, the
"Conditions"), Purchaser will, promptly after the Expiration Date (as herein
defined), accept for payment and pay for all Shares validly tendered and not
properly withdrawn in accordance with Section 4 prior to the Expiration Date.
The term "Expiration Date" means 12:00 midnight, New York City time, on
November 20, 1997, unless and until Purchaser shall have extended the period
of time during which the Offer is open, in which event the term "Expiration
Date" shall refer to the latest time and date at which the Offer, as so
extended by Purchaser, shall expire.
Pursuant to the Merger Agreement, and subject to the terms and conditions
of the Offer, if all of the Conditions are not satisfied on the initial
Expiration Date, and the Merger Agreement has not been terminated in
accordance with its terms, Purchaser shall extend (and re-extend) the Offer
(but not for more than ten business days at a time) to provide time to
satisfy such Conditions through the Final Termination Date, unless a
reasonable, well-informed person would conclude that any Condition is
incapable of being satisfied prior to the Final Termination Date. The "Final
Termination Date" is December 31, 1997. Any extension of the Offer beyond the
Final Termination Date would require the mutual agreement of the Company and
Purchaser.
Subject to the terms of the Merger Agreement, Purchaser expressly reserves
the right to modify the terms and conditions of the Offer in any respect by
giving oral or written notice of such amendment to the Depositary, except
that, without the consent of the Company, Purchaser shall not (i) reduce the
number of Shares subject to the Offer, (ii) reduce the price per Share to be
paid pursuant to the Offer, (iii) modify or add to the Conditions, (iv)
except as provided above, extend the Offer, (v) change the form of
consideration payable in the Offer, or (vi) make any other change in the
terms of the Offer adverse to the holders of Shares.
The Offer is subject to: (i) the satisfaction of the Minimum Tender
Condition; (ii) the consents of HUD and The Chase Manhattan Bank; and (iii)
satisfaction of the other conditions specified in Section 15. If any such
Condition is not satisfied prior to the initial Expiration Date, Purchaser
shall extend the Offer and, subject to withdrawal rights as set forth in
Section 4, retain all such Shares until the expiration of the Offer as so
extended unless a reasonable, well-informed person would conclude that such
Condition is incapable of being satisfied prior to the Final Termination
Date, in which case Purchaser may terminate the Offer and return all tendered
Shares to tendering shareholders. Purchaser may also waive such Condition
and, subject to any requirement to extend the period of time during which the
Offer is open, purchase all Shares validly tendered and not withdrawn by the
Expiration Date or until satisfaction or waiver of the Conditions to the
Offer, Purchaser may delay acceptance for payment of (whether or not the
Shares have theretofore been accepted for payment), or payment for, any
Shares tendered and not withdrawn, subject to applicable law. For a
description of Purchaser's right to extend the period of time during which
the Offer is open, and to amend, delay or terminate the Offer, see Section
14. Any extension, amendment or termination will be followed as promptly as
practicable by public announcement thereof, the 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 in
accordance with Rules 14d-4(c), 14d-6(d) and 14e-1(d) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Without limiting the
obligation of Purchaser under such Rules or the manner in which Purchaser may
choose to make any public announcement, Purchaser currently intends to make
announcements by issuing a release to the Reuters News Service.
If Purchaser extends the Offer, or if Purchaser (whether before or after
its acceptance for payment of Shares) is delayed in its purchase of or
payment for Shares or is unable to pay for Shares pursuant to the Offer for
any reason, then, without prejudice to Purchaser's rights under the Offer,
the Depositary may retain tendered Shares on behalf of Purchaser, and such
Shares may not be withdrawn except to the extent tendering shareholders are
entitled to withdrawal rights as described in Section 4. However, the ability
of Purchaser to delay the payment for Shares which Purchaser has accepted for
payment is limited by Rule 14e-1(c) under the Exchange Act, which requires
that a bidder pay the consideration offered or return the securities
deposited by or on behalf of holders of securities promptly after the
termination or withdrawal of such bidder's offer.
3
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
subject to the Merger Agreement, Purchaser will disseminate additional tender
offer materials and extend the Offer if and to the extent required by Rules
14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period
during which the Offer must remain open following material changes in the
terms of the Offer or information concerning the Offer, other than a change
in price or a change in percentage of securities sought, will depend upon the
facts and circumstances, including the relative materiality of the changes or
information. With respect to a change in price or a change in percentage of
securities sought, a minimum period of ten business days is required to allow
for adequate dissemination to shareholders and investor response. If, prior
to the Expiration Date, Purchaser should decide to increase the price per
Share being offered in the Offer, such increase will be applicable to all
shareholders whose Shares are accepted for payment pursuant to the Offer. As
used in this Offer to Purchase, "business day" means any day other than a
Saturday, Sunday or a federal holiday and consists of the time period from
12:01 a.m. through 12:00 midnight New York City time, as computed in
accordance with Rule 14d-1 under the Exchange Act.
The Company has provided Purchaser with the Company's shareholder list and
security position listing for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of
Transmittal will be mailed to record holders of Shares and will be furnished
to brokers, banks and similar persons whose names, or the names of whose
nominees, appear on the Company's shareholder list (or, if applicable, who
are listed as participants in a clearing agency's security position listing)
for subsequent transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT; PAYMENT
Subject to the terms of the Merger Agreement and the Conditions of the
Offer set forth in Section 15, Purchaser will, promptly after the Expiration
Date, accept for payment and pay for all Shares validly tendered and not
properly withdrawn in accordance with Section 4 prior to the Expiration Date.
For a description of Purchaser's right to terminate the Offer and not accept
for payment or pay for Shares or to delay acceptance for payment or payment
for Shares, see Section 14.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment tendered Shares if, as and when Purchaser gives oral or written
notice to the Depositary of its acceptance of the tenders of such Shares.
Payment for Shares purchased pursuant to the Offer will be made by deposit of
the purchase price with the Depositary, which will act as agent for tendering
shareholders for the purpose of receiving payment from Purchaser and
transmitting payments to tendering shareholders. In all cases, payment for
Shares accepted for payment pursuant to the Offer will be made only after
timely receipt by the Depositary of (i) certificates evidencing such Shares
("Stock Certificates") or confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Shares into the Depositary's account at
one of the Book-Entry Transfer Facilities (as defined in Section 3), (ii) a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), or in the case of a book-entry transfer, an Agent's Message (as
defined in Section 3), and (iii) any other required documents. For a
description of the procedure for tendering Shares pursuant to the Offer, see
Section 3. Accordingly, payment may be made to tendering shareholders at
different times if delivery of the Shares and other required documents occur
at different times. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID BY PURCHASER
ON THE CONSIDERATION PAID FOR SHARES PURSUANT TO THE OFFER, REGARDLESS OF ANY
EXTENSION OF THE OFFER OR DELAY IN MAKING SUCH PAYMENT.
If Purchaser increases the consideration to be paid for Shares pursuant to
the Offer, Purchaser will pay such increased consideration for all Shares
purchased pursuant to the Offer.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if Stock Certificates are submitted for more Shares than are
tendered, Stock Certificates for Shares not purchased or tendered will be
returned (or, in the case of Shares tendered by book-entry transfer, such
Shares will be credited to an account maintained at one of the Book-Entry
Transfer Facilities), without expense to the tendering shareholder, as
promptly as practicable after the expiration or termination of the Offer.
4
3. PROCEDURES FOR TENDERING SHARES
VALID TENDER. To tender Shares pursuant to the Offer, either (a) a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees, or an Agent's Message (in
the case of any book-entry transfer), 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 and either (i) the Stock Certificates evidencing such Shares
to be tendered must be received by the Depositary along with the Letter of
Transmittal or (ii) such Shares must be delivered to the Depositary pursuant
to the procedures for book-entry transfer described below and a Book-Entry
Confirmation must be received by the Depositary including an Agent's Message,
in each case prior to the Expiration Date, or (b) the tendering shareholder
must comply with the guaranteed delivery procedures described below. The term
"Agent's Message" means a message transmitted by a Book-Entry Transfer
Facility to and received by the Depositary and forming a part of a Book-Entry
Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares which are the subject of such
Book-Entry Confirmation, that such participant has received and agrees to be
bound by the terms of the Letter of Transmittal and that Purchaser may
enforce such agreement against such participant.
BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect
to the Shares at each of The Depository Trust Company and the Philadelphia
Depository Trust Company (collectively referred to as the "Book-Entry
Transfer Facilities") for purposes of the Offer within two business days
after the date of this Offer to Purchase, and any financial institution that
is a participant in the system of any Book-Entry Transfer Facility may make
book-entry delivery of Shares by causing a Book-Entry Transfer Facility to
transfer such Shares into the Depositary's account at a Book-Entry Transfer
Facility in accordance with the procedures of such Book-Entry Transfer
Facility. However, although delivery of Shares may be effected through
book-entry transfer, an Agent's Message or the Letter of Transmittal (or
facsimile thereof) properly completed and duly executed, together with any
required signature guarantees and any other required documents, must, in any
case, be received by the Depositary at one of its addresses set forth on the
back cover of this Offer to Purchase prior to the Expiration Date, or the
guaranteed delivery procedures described below must be complied with.
DELIVERY OF THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS TO A
BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
SIGNATURE GUARANTEES. Except as set forth below, signatures on all Letters
of Transmittal must be guaranteed by a recognized member of a Medallion
Signature Guarantee Program or by any other "eligible guarantor institution"
as defined in Rule 17Ad-15 under the Exchange Act (each of the foregoing, an
"Eligible Institution"). Signatures on a Letter of Transmittal need not be
guaranteed (a) if the Letter of Transmittal is signed by the registered
holder of the Shares tendered therewith and such holder has not completed the
box entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" on the Letter of Transmittal or (b) if such Shares are
tendered for the account of an Eligible Institution.
If a Stock Certificate is registered in the name of a person other than
the signer of the Letter of Transmittal, or if payment is to be made, or a
Stock Certificate not accepted for payment or not tendered is to be returned,
to a person other than the registered holder(s), then the Stock Certificate
must be endorsed or accompanied by appropriate stock powers, in either case
signed exactly as the name(s) of the registered holder(s) appear on the Stock
Certificate, with the signature(s) on the endorsement of such Stock
Certificate or stock powers guaranteed as described above with respect to the
Letter of Transmittal. See Instructions 1 and 5 of the Letter of Transmittal.
GUARANTEED DELIVERY. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's Stock Certificates are not immediately
available or time will not permit all required documents to reach the
Depositary on or prior to the Expiration Date or the procedure for book-entry
transfer cannot be completed on a timely basis, such Shares may nevertheless
be tendered if all the following conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
5
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser, is received by
the Depositary prior to the Expiration Date as provided below; and
(iii) the Stock Certificates for such Shares, in proper form for transfer
(or a Book-Entry Confirmation), together with a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees (or in the case of a book-entry transfer, an
Agent's Message) and any other documents required by the Letter of
Transmittal, are received by the Depositary within three trading days
after the date of execution of the Notice of Guaranteed Delivery. A
"trading day" is any day on which the AMEX is open for business.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile transmission or mailed to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ANY OTHER
REQUIRED DOCUMENTS, INCLUDING THROUGH BOOK-ENTRY TRANSFER FACILITIES, IS AT
THE OPTION AND RISK OF THE TENDERING SHAREHOLDER AND DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED.
BACK-UP FEDERAL INCOME TAX WITHHOLDING. Under the federal income tax laws,
the Depositary will be required to withhold 31% of the amount of any payments
made to certain shareholders pursuant to the Offer. In order to avoid such
backup withholding, each tendering shareholder must provide the Depositary
with such shareholder's correct taxpayer identification number and certify
that such shareholder is not subject to back-up federal income tax
withholding by completing the Substitute Form W-9 included in the Letter of
Transmittal (see Instruction 10 of the Letter of Transmittal) or by filing a
Form W-9 with the Depositary prior to any such payments. If the shareholder
is a nonresident alien or foreign entity not subject to backup withholding,
the shareholder must give the Depositary a completed Form W-8 Certificate of
Foreign Status prior to receipt of any payments.
OTHER REQUIREMENTS. By executing a Letter of Transmittal as set forth
above, a tendering shareholder irrevocably appoints designees of Purchaser as
the shareholder'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 the shareholder's rights with respect to the Shares tendered by the
shareholder and accepted for payment by Purchaser (and, except as provided in
Section 6, any and all other Shares or other securities or property issued or
issuable in respect of such Shares on or after the date of the Merger
Agreement). All such proxies and powers of attorney shall be irrevocable and
coupled with an interest in the tendered Shares. Such appointment is
effective only upon acceptance for payment of the Shares by Purchaser. Upon
such acceptance for payment, all prior proxies and consents given by the
shareholder with respect to such Shares and other securities will, without
further action, be revoked, and no subsequent proxies may be given nor any
subsequent written consent executed by such shareholder (and, if given or
executed, will not be deemed to be effective) with respect thereto. The
designees of Purchaser will, with respect to the Shares and other securities,
be empowered to exercise all voting and other rights of such shareholder as
they in their sole discretion may deem proper at any annual, special or
adjourned meeting of the Company's shareholders, by written consent or
otherwise. Purchaser reserves the right to require that, in order for Shares
to be deemed validly tendered, immediately upon Purchaser's acceptance for
payment of such Shares, Purchaser is able to exercise full voting and other
rights with respect to such Shares (including voting at any meeting of
shareholders then scheduled or acting by written consent without a meeting).
A tender of Shares pursuant to any one of the procedures described above
will constitute the tendering shareholder's acceptance of the terms and
conditions of the Offer, as well as the tendering shareholder's
representation and warranty that such shareholder has the full power and
authority to tender and assign the Shares tendered, as specified in the
Letter of Transmittal. Purchaser's acceptance for payment of Shares tendered
pursuant to the Offer will constitute a binding agreement between the
tendering shareholder and Purchaser upon the terms and subject to the
conditions of the Offer.
6
DETERMINATION OF VALIDITY. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for
payment of any tendered Shares will be determined by Purchaser in its sole
discretion, which determination shall be final and binding. Purchaser
reserves the absolute right to reject any or all tenders of any Shares
determined by it not to be in proper form or the acceptance for payment of or
payment for which may, in the opinion of Purchaser's counsel, be unlawful.
Purchaser also reserves the absolute right to waive any defect or
irregularity in any tender of Shares. No tender of Shares will be deemed to
have been properly made until all defects and irregularities relating thereto
have been cured or waived. Purchaser's interpretation of the terms and
conditions of the Offer in this regard (including the Letter of Transmittal
and the Instructions thereto) will be final and binding. None of Purchaser,
Parent, the Depositary, the Information Agent or any other person will be
under any duty to give notification of any defects or irregularities in
tenders or will incur any liability for failure to give any such
notification.
4. WITHDRAWAL RIGHTS
Tenders of Shares made pursuant to the Offer may be withdrawn at any time
prior to the Expiration Date only pursuant to the procedures set forth below.
Thereafter, such tenders are irrevocable, except that they may be withdrawn
at any time after December 21, 1997 if they have not previously been accepted
for payment as provided in this Offer to Purchase.
To be effective, a written, telegraphic or facsimile transmission notice
of withdrawal must be timely received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase. Any such
notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and the name of
the registered holder, if different from that of the person who tendered such
Shares. If Stock Certificates evidencing Shares to be withdrawn have been
delivered to the Depositary, a signed notice of withdrawal with signatures
guaranteed by an Eligible Institution (except in the case of Shares tendered
by an Eligible Institution) must be submitted prior to the release of such
Shares. In addition, such notice must specify, in the case of Shares tendered
by delivery of Stock Certificates, the name of the registered holder (if
different from that of the tendering shareholder) and the serial numbers
shown on the particular Stock Certificates evidencing the Shares to be
withdrawn, or, in the case of Shares tendered by book-entry transfer, the
name and number of the account at one of the Book-Entry Transfer Facilities
to be credited with the withdrawn Shares.
Withdrawals may not be rescinded, and Shares withdrawn will thereafter be
deemed not validly tendered for purposes of the Offer. However, withdrawn
Shares may be tendered by again following one of the procedures described in
Section 3 at any time prior to the Expiration Date.
All questions as to the form and validity (including of receipt) of
notices of withdrawal will be determined by Purchaser, in its sole
discretion, whose determination will be final and binding. None of Purchaser,
Parent, the Depositary, the Information Agent 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.
5. CERTAIN TAX CONSIDERATIONS
The following summary addresses the material federal income tax
consequences to holders of Shares who sell their Shares in the Offer or whose
Shares are converted to cash pursuant to the Merger. The summary does not
address all aspects of federal income taxation that may be relevant to
particular holders of Shares and thus, for example, may not be applicable to
holders of Shares who are not citizens or residents of the United States, who
are employees of the Company and who acquired their Shares pursuant to the
exercise of compensatory stock options, or who are entities that are
otherwise subject to special tax treatment under the Internal Revenue Code of
1986, as amended (the "Code") (such as insurance companies, tax-exempt
entities, broker-dealers, and regulated investment companies); nor does this
summary address the effect of any applicable foreign, state, local or other
tax laws. The discussion assumes that each holder of Shares holds such Shares
as a capital asset within the meaning of Section 1221 of the Code. The
federal income tax discussion set forth below is included for general
information only
7
and is based upon present law. The precise tax consequences of the Offer (or
the Merger) will depend on the particular circumstances of the holder.
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC
FEDERAL, STATE, LOCAL FOREIGN AND OTHER TAX CONSEQUENCES TO THEM OF THE OFFER
AND THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF THE ALTERNATE
MINIMUM TAX.
The receipt of cash for Shares pursuant to the Offer or the Merger will be
a taxable transaction for federal income tax purposes and may also be a
taxable transaction under applicable state, local or foreign tax laws. In
general, a shareholder who receives cash for Shares pursuant to the Offer or
the Merger will recognize gain or loss for federal income tax purposes equal
to the difference between the amount of cash received in exchange for the
Shares sold (without reduction for any backup withholding discussed below)
and such shareholder's adjusted tax basis in such Shares. Such gain or loss
will generally be capital gain or loss. Gain or loss will be calculated
separately for each block of Shares (i.e., Shares which were purchased at the
same time and price) tendered pursuant to the Offer or the Merger. Under the
recently enacted Taxpayer Relief Act of 1997, net capital gain (i.e.,
generally, capital gain in excess of capital loss) recognized by an
individual upon the sale or exchange of a capital asset that has been held
for more than 18 months will generally be subject to tax at a rate not to
exceed 20%. Net capital gain recognized by an individual from the sale or
exchange of a capital asset that has been held for more than 12 months but
not for more than 18 months will continue to be subject to tax at a rate not
to exceed 28%, and net capital gain recognized from the sale or exchange of a
capital asset that has been held for 12 months or less will continue to be
subject to tax at ordinary tax rates. In addition, net capital gain
recognized by a corporate taxpayer will continue to be subject to tax at the
ordinary income tax rates applicable to corporations. Ordinary income
recognized by an individual (including dividends and short-term capital gains
recognized by individuals) is subject to Federal income tax at a maximum rate
of 39.6%. The maximum federal tax rate applicable to all capital gains and
ordinary income recognized by a corporation is 35%.
WITHHOLDING. Unless a shareholder complies with certain reporting and/or
certification procedures, or is an exempt recipient under applicable
provisions of the Code (and regulations promulgated thereunder), such
shareholder may be subject to a "backup" withholding tax of 31% with respect
to any payments received in the Offer, the Merger or as a result of the
exercise of the holder's dissenters' rights. Shareholders should contact
their brokers to ensure compliance with such procedures. Foreign shareholders
should consult with their tax advisors regarding U.S. withholding taxes in
general. Those tendering their Shares in the Offer may prevent backup
withholding by completing the substitute form W-9 included in the Letter of
Transmittal.
DISSENTERS. A shareholder who does not tender Shares in the Offer or vote
in favor of the Merger and who otherwise exercises and perfects such
shareholder's rights under the BCL to demand fair value for such Shares will
recognize capital gain or loss (and may recognize an amount of interest
income) attributable to any payment received pursuant to the exercise of such
rights based upon the principles described above. See Section 16.
8
6. PRICE RANGE OF SHARES; DIVIDENDS
The Shares are traded under the symbol "SHO" on the AMEX. The following
table sets forth, for the fiscal quarters indicated, the high and low sales
prices per Share on the AMEX.
HIGH LOW
------ -----
Fiscal Year Ended December 31, 1995:
Quarter ended March 31, 1995 $ 8 $ 6 5/8
Quarter ended June 30, 1995 $10 5/8 $ 7 7/8
Quarter ended September 30, 1995 $10 1/2 $ 8 3/8
Quarter ended December 31, 1995 $ 8 7/8 $ 7
Fiscal Year Ended December 31, 1996:
Quarter ended March 31, 1996 $15 1/4 $ 8
Quarter ended June 30, 1996 $12 5/8 $ 9 9/16
Quarter ended September 30, 1996 $14 $10
Quarter ended December 31, 1996 $13 1/8 $10
Fiscal Year Ended December 31, 1997:
Quarter ended March 31, 1997 $11 1/4 $ 9 3/4
Quarter ended June 30, 1997 $11 1/2 $ 8 3/4
Quarter ended September 30, 1997 $11 3/4 $ 9 5/8
Quarter ending December 31, 1997
(through October 22, 1997) $11 7/8 $10 5/8
On October 16, 1997, the last full trading day prior to the announcement
of the execution of the Merger Agreement, the last reported sales price per
Share on the AMEX was $11. On October 22, 1997, the last full trading day
prior to the commencement of the Offer, the last reported sales price per
Share on the AMEX was $11 13/16. SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT
MARKET QUOTATION FOR THE SHARES.
The Company has paid regular cash dividends on its Shares for
approximately the past three years and presently pays quarterly dividends at
the annual rate of $0.25 per Share. The Company's Board of Directors paid a
regular quarterly dividend of $.0625 per Share which was paid on October 15,
1997 to shareholders of record on September 30, 1997.
Pursuant to the Merger Agreement the Company has agreed that, without the
prior consent of Parent, it will not (i) declare, set aside or pay any
dividend or make any other distribution or payment with respect to any Shares
other than the regular quarterly cash dividend of $0.0625 per Share payable
to shareholders of record at September 30, 1997, or (ii) redeem, purchase or
otherwise acquire any Shares.
7. CERTAIN INFORMATION CONCERNING THE COMPANY
The following information concerning the Company has been taken from or
based upon publicly available documents on file with the Securities and
Exchange Commission (the "SEC" or the "Commission"), other publicly available
information and information provided by the Company. Although neither
Purchaser nor Parent has any knowledge that would indicate that such
information is untrue, neither Purchaser nor Parent takes any responsibility
for, or makes any representation with respect to, 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 but which are unknown to Purchaser or
Parent.
GENERAL. The Company is a New York corporation with its principal offices
located at Xxx Xxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000. The
Company's operations consist of (i) the development, management and ownership
of real estate properties; (ii) the single-family home and garden apartment
development and electronic home security surveillance business conducted
through a Subsidiary in Florida and Puerto Rico; (iii) the mortgage credit
business conducted through a Subsidiary in Puerto Rico and Florida; and (iv)
the supplying of construction services through a Subsidiary. The
9
Company groups its business into these four segments. As used herein,
"Subsidiary" or "Subsidiaries" means each corporation, partnership or other
organization, whether incorporated or unincorporated, which is consolidated
with the Company for financial reporting purposes.
Over the years the Company and its Subsidiaries have constructed a wide
range of office, industrial, public and institutional buildings, among the
most notable being the Empire State Building, the Rockefeller Research
Laboratories at Memorial Sloan Kettering Cancer Center, Whitney Museum,
Citicorp Center and Chase Bank World Headquarters, and many well-known
residential communities and developments, including Xxxxxxxx at Spring Creek,
Manhattan Park at Roosevelt Island, Xxxxx Tower and the Xxxxx International
Hotel in New York City. The Company is actively engaged in all fields of
construction, development, management and technical services.
CERTAIN FINANCIAL INFORMATION FOR THE COMPANY. The following table sets
forth certain summary consolidated financial information with respect to the
Company and its Subsidiaries excerpted or derived from the audited financial
statements contained in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 (the "Company 10-K") and the unaudited
financial information from the Company for the six months ended June 30, 1996
and 1997 contained in the Company's Quarterly Report on From 10-Q for the
quarter ended June 30, 1997. More comprehensive financial information is
included in such reports and other documents filed by the Company with the
SEC, and the following summary is qualified in its entirety by reference to
such documents (which may be inspected and obtained as described below),
including the financial statements and related notes contained therein.
Neither Parent nor Purchaser assumes any responsibility for the accuracy of
the financial information set forth below.
10
XXXXXXXX CORPORATION AND SUBSIDIARIES
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS, ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------------- ---------------------
INCOME STATEMENT DATA 1996 1995 1994 1993 1992 1997 1996
------------------------------- ---------- ---------- ---------- ---------- ---------- --------- ----------
Revenues ....................... $167,282 $138,947 $141,335 $122,182 $111,855 $94,505 $72,896
Income before income taxes .... 10,201 12,377 10,306 4,588 1,045 1,550 4,530
Income before extraordinary
item and cumulative effect of
accounting change ............. 4,355 7,365 6,159 2,140 284 1,500 4,530
Extraordinary item ............. 824
Cumulative effect of accounting
change ........................ 1,287
Net income ..................... 4,355 7,365 6,159 2,140 2,395 863 2,534
Earnings per share:
Income before extraordinary
item and cumulative effect of
accounting change ............ .70 1.18 .98 .34 .04 .14 .40
Extraordinary item ............ .13
Cumulative effect of
accounting change ............ .20
Net income .................... .70 1.18 .98 .34 .37 .14 .40
AT DECEMBER 31, AT JUNE 30,
--------------------------------------------------- --------------------
BALANCE SHEET DATA 1996 1995 1994 1993 1992 1997 1996
---------------------------- --------- --------- --------- --------- --------- --------- ---------
Total assets ................ 166,972 126,209 116,267 120,284 136,738 191,263 154,627
Long-term obligations ....... 53,030 34,459 36,066 41,033 32,603 60,526 48,330
Common shareholders' equity.. 55,194 52,138 47,117 41,819 41,139 55,272 53,889
Cash dividends (per share) .. .25 .25 .125 None .25 .125 .125
AVAILABLE INFORMATION. The Company is subject to the information
requirements of the Exchange Act, and is required to file reports and other
information with the SEC relating to its business, financial condition and
other matters. Information, as of particular dates, concerning the Company's
directors and executive officers, their remuneration, options granted to
them, the principal holders of the Company's securities and any material
interest of such persons in transactions with the Company, is required to be
described in periodic statements distributed to the Company's shareholders
and filed with the SEC. These reports, proxy statements, and other
information, including the Company 10-K, the Company's Quarterly Reports on
Form 10-Q for the quarters ended March 31, 1997, June 30, 1997 and September
30, 1997 (which will be filed on or before November 14, 1997) are available
for inspection at the public reference facilities maintained by the SEC at
Room 0000, 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000, and at the
regional offices of the SEC located at Seven World Trade Center, Suite 1300,
New York, New York 10048 and Citicorp Center, 000 Xxxx Xxxxxxx Xxxxxx, Xxxxx
0000, Xxxxxxx, Xxxxxxxx 00000. Copies of this material may also be obtained
by mail, upon payment of the prescribed rates, from the SEC's public
reference facilities in Washington, D.C. Such material is also available for
inspection at the offices of the AMEX, 00 Xxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000. The SEC also maintains an Internet site on the World Wide Web at
xxxx://xxx.xxx.xxx that contains reports and other information regarding
registrants that file electronically with the SEC.
A copy of this Offer to Purchase, along with certain of the agreements
referred to herein, is attached to Purchaser's Tender Offer Statement on
Schedule 14D-1, dated October 23, 1997 (the "Schedule 14D-1"), which has been
filed with the SEC. The Schedule 14D-1 and the exhibits thereto, along with
such other documents as may be filed by Purchaser with the SEC, may be
examined and copied from the offices of the SEC in the manner set forth
above.
11
8. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT
GENERAL. Purchaser is a newly-formed New York corporation and a
wholly-owned subsidiary of Parent. Parent is a newly-formed Delaware limited
liability company. To date, neither Purchaser nor Parent has conducted any
business other than in connection with the Offer. Until immediately prior to
the time Purchaser purchases Shares pursuant to the Offer, it is not
anticipated that Purchaser or Parent will have any significant assets or
liabilities or engage in activities other than those incident to the
formation and capitalization of such entities and the transactions
contemplated by the Offer. Because Purchaser is a newly-formed corporation
and Parent is a newly-formed limited liability company and each has minimal
assets and capitalization, no meaningful financial information regarding
Purchaser or Parent is available.
The principal executive offices of Parent and Purchaser are located at c/o
Xxxxxxxx Xxxxx Company, Inc., 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
The name, citizenship, principal occupation, business address and material
positions held during the past five years of each of the directors and
executive officers of the Purchaser, Parent and certain other persons is set
forth on Schedule I and II attached hereto. In addition, the beneficial
ownership by certain affiliates of Parent of 10,900 shares is described on
Schedule II.
As described in more detail below under Section 11, "The Offer and Merger;
Merger Agreement and Related Agreements--Shareholders Agreement," the
Principal Shareholders have agreed, provided that Purchaser is not then in
material breach of the Merger Agreement and an injunction has not been issued
which would prohibit such Principal Shareholders from tendering their
respective Shares, to validly tender (and not to withdraw), pursuant to the
Offer, the Shares beneficially owned by the Principal Shareholders. By virtue
of such agreement, Purchaser, Parent and the persons who control Purchaser
and Parent (who are set forth on Schedules I and II) may be deemed to share,
with each other and with the Principal Shareholders, beneficial ownership of
the 3,317,211 Shares subject to the agreement. Each of Purchaser, Parent and
the persons who control Purchaser and Parent disclaim such beneficial
ownership.
Except as set forth in this Offer to Purchase: (i) none of Purchaser,
Parent or, to the best of their knowledge, any of the persons listed on
Schedules I or II or any subsidiary of the Purchaser or Parent, beneficially
owns or has a right to acquire any Shares; (ii) none of the Purchaser, Parent
or, to the best of their knowledge, any of the persons listed on Schedules I
or II, hereto, has any contract, arrangement, understanding or relationship
with any other persons with respect to any securities of the Company,
including, but not limited to, any contract, arrangement, understanding or
relationship concerning the transfer or voting of any such securities, joint
ventures, loan or option arrangements, puts or calls, guarantees of loans,
guarantees against loss or the giving or withholding of proxies; (iii) none
of the Purchaser, Parent or, to the best of their knowledge, any of the
persons listed on Schedules I or II, since January 1, 1994, has had any
transactions 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; and (iv) since January 1, 1994, there have
been no contacts, negotiations or transactions between Parent or Purchaser,
or their respective subsidiaries or, to the best knowledge of any of Parent
or Purchaser, any of the persons listed on Schedule I or II on the one hand,
and the Company or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, tender offer or other acquisition of
securities, election of directors or a sale or other transfer of a material
amount of assets of the Company.
9. SOURCES AND AMOUNTS OF FUNDS
The total amount of funds required by Purchaser to purchase all currently
outstanding Shares and satisfy its obligations under the Merger Agreement is
expected to be approximately $76.7 million. Purchaser will also require
approximately $6.3 million to pay fees, expenses and other costs expected to
be incurred in connection with the successful completion of the Offer and the
Merger (excluding fees and expenses that may be incurred in connection with
the financing required to complete the Offer and the Merger).
12
Purchaser plans to obtain all funds needed for the Offer and the Merger
through (i) $66 million of financing to be provided by Credit Suisse First
Boston Mortgage Capital LLC (the "Lender" or "CSFB"); and (ii) approximately
$17,000,000 of funds to be contributed to Parent by its members, including up
to $2,000,000 of funds which may be borrowed by one member of Parent pursuant
to arrangements that have not as yet been determined. All of such funds to be
contributed by Parent and all required amounts to be provided by CSFB will be
made available to Purchaser at the time Shares tendered pursuant to the Offer
are accepted for payment.
The sources and uses of the financing are expected to be as follows:
Sources of Funds:
Parent member cash.............. $17,000,000
Bank loans ..................... $66,000,000
Total sources of funds........ $83,000,000
Use of Funds:
Payment for Shares.............. $76,696,760
Fees, expenses and other costs 6,303,240
Total use of funds............ $83,000,000
FINANCING COMMITMENT. Parent has secured a commitment letter (the
"Financing Commitment") from the Lender. The following is a summary of the
Financing Commitment, a copy of which is attached to the Schedule 14D-1 as
Exhibit (b) and is incorporated by reference hereto. All references to and
summaries of the Financing Commitment herein are qualified in their entirety
by reference to the Financing Commitment. The Financing Commitment provides
that the Lender will provide up to $66 million financing (the "Loan") to
Purchaser upon the consummation of the Offer to fund Purchaser's obligation
to purchase the Shares. The Financing Commitment provides that the terms of
the Loan will be as follows:
Purchaser will be the borrower prior to the Merger, and the Surviving
Corporation will be the borrower from and after the Merger (sometimes
referred to as the "Borrower"). The Loan will be guaranteed by all
subsidiaries of the Surviving Corporation, other than those subsidiaries
identified to and approved by the Lender which for regulatory reasons cannot
guarantee the Loan.
Pursuant to the Financing Commitment, the Lender will lend to the Borrower
an amount equal to the lesser of $66 million or 79.5% of the total
acquisition cost of the Offer and the Merger, including expenses and working
capital. The Borrower is required to invest 100% of its equity before the
Lender advances any sums. The Financing Commitment provides that the Loan
will have a term of five years.
The Financing Commitment provides that the Loan will be secured by a first
priority security interest in all of the shares of the common and any
preferred stock of the Surviving Corporation and a first priority security
interest in (or, to the extent subject to a prior security interest, a second
priority interest in) all of the shares of the capital stock or other equity
interests of all of the Surviving Corporation, present and future, direct and
indirect subsidiaries, other than those subsidiaries identified to and
approved by the Lender, the stock or other equity interests of which for
regulatory reasons cannot be pledged to secure the Loan. Stock and equity
interests not pledged will be subject to a negative pledge in favor of the
Lender. The Financing Commitment provides that the Loan will be non-recourse
to the principals of Purchaser, Parent and its members, except for customary
exclusions and exceptions.
The Financing Commitment provides that the interest rate for the loan will
be one month LIBOR on amounts outstanding, plus 350 basis points, payable
monthly in arrears, based on the actual number of days elapsed and a 360 day
year. The Loan shall be prepayable in whole or in part at any time, provided
that any partial prepayments shall be in increments of $1,000,000, exclusive
of mandatory prepayments. Certain mandatory prepayments of the Loan will be
required based on the cash flow of the Surviving Corporation. It is the
present intention of Purchaser that the Loan will be repaid using the cash
flow of the Surviving Corporation.
13
The closing of the Loan will be conditioned upon, among other things, (i)
the delivery, negotiation and execution of loan documents satisfactory to the
Lender and its counsel, (ii) the Lender's final review and approval of all
documentation relating to the Offer and the Merger and (iii) payment of fees
and expenses as set forth in the Financing Commitment. The Financing
Commitment also provides that the Purchaser and the Surviving Corporation
will be subject to certain covenants and events of default customary for such
financings.
The Financing Commitment provides that after giving effect to the Merger
and the Loan, the Lender shall have a 10% participation in the equity of the
the Surviving Corporation. Lender and the Surviving Corporation shall
negotiate mutually acceptable options whereby (i) the Lender shall have the
right to put its equity participation to the the Surviving Corporation and
(ii) the the Surviving Corporation shall have the right to call Xxxxxx's
equity participation.
Pursuant to the Financing Commitment, the Lender will receive a
structuring advisory fee of 2.0% of the Loan amount, $330,000 of which was
paid at signing of the Financing Commitment and is non-refundable, with the
balance payable at the earlier of (i) the closing of the Loan or (ii)
December 31, 1997. In addition, the Financing Commitment provides that the
Lender will receive an exit fee of 1% of the original Loan amount (net of any
exit fees previously paid), payable upon any prepayment (voluntary or
mandatory) or maturity.
Upon execution of the Financing Commitment, the Borrower paid to the
Lender a good faith deposit in the amount of $200,000, which, less the
Lender's due diligence expenses, including, without limitation, fees and
expenses of the Lender's counsel and other consultants, was applied towards
payment of the balance of the structuring advisory fee.
Pursuant to the Financing Commitment, Xxxxxx acknowledged on behalf of
itself and on behalf of its affiliates, Purchaser, and the Company, that they
are working solely with the Lender to procure the Loan and agreed not to, and
to cause their affiliates not to, obtain or attempt to arrange any
acquisition financing for the Merger prior to the closing of the Loan. The
Financing Commitment also provides that should any of them or their
affiliates breach or violate the preceding sentence or should the Borrower
fail to execute the loan documents after the Lender has negotiated in good
faith on terms substantially in conformance with the Financing Commitment,
the Lender will be entitled to a break-up fee.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY
To the extent any of the following information describes events to which
none of Parent, Purchaser or their advisors were a party, it is based on
information furnished by the Company. Neither Purchaser nor Parent has
independently verified, or assumes responsibility for the accuracy of, any
such information.
During the period through June 1997, the Company provided certain
information regarding the Company to a number of parties who signed
confidentiality agreements with the Company, certain of whom submitted
written indications of interest or proposed letters of intent concerning a
possible significant transaction involving the Company. In January 1997,
certain of the Principal Shareholders signed a letter of intent to sell
approximately 52% of the Company's outstanding Shares at a purchase price of
$12.00 per Share, but such letter of intent expired without agreement upon a
definitive agreement, and none of the discussions or negotiations involving a
significant transaction with the Company resulted in a definitive agreement
for such a transaction.
In July 1997, the Company entered into an agreement and plan of merger
(such agreement as subsequently replaced, the "Frydman Agreement") with
certain entities controlled by Xxxxx Xxxxxxx, providing for cash
consideration to the Company's shareholders of $12.25 per Share. On August
21, 1997, the Company notified Xx. Xxxxxxx that it had terminated the Frydman
Agreement as a consequence of his failure to deliver to the Company a
commitment for Xx. Xxxxxxx'x financing of the transactions contemplated by
the Frydman Agreement reasonably acceptable to the Company and his failure to
deliver a $5,000,000 letter of credit required to be delivered by him. Xx.
Xxxxxxx has commenced legal proceedings against the Company arising out of
the termination of the Frydman Agreement; the Company has disclosed that it
believes that its termination of such agreement was proper and intends to
vigorously contest any such proceedings. See Section 18.
14
On August 21, 1997, the Company publicly announced the termination of the
Frydman Agreement. During the period commencing August 22, 1997, the Company
engaged in discussions and negotiations with a number of parties respecting a
possible significant transaction with the Company. Beginning at the same
time, the Principal Shareholders held discussions with one party respecting
the possible sale of their Shares. On August 27, 1997, members of management
and the Board of Directors held an exploratory meeting with representatives
of affiliates of Purchaser respecting a possible transaction involving the
Company and, on September 11, 1997, affiliates of Purchaser wrote to the
Company confirming its interest in such a transaction.
On September 15, 1997, the Board of Directors of the Company determined to
establish procedures for the possible sale of the Company, including a
request that any party desiring to make a proposal for the acquisition of the
Company present a written proposal to the Board no later than September 19,
1997, specifying the proposed purchase price, confirming such party's
willingness to immediately post a $5 million cash deposit, describing such
party's equity financing and a timetable for confirming such party's debt
financing for the transaction, and, among other things, confirming the
absence of a due diligence or similar condition to closing.
Such procedures were communicated by the Company in a letter dated
September 15, 1997 to a number of parties (including Purchaser) who had
expressed interest in a significant transaction with the Company. On
September 18, 1997, the Company entered into a confidentiality agreement with
Purchaser.
On September 19, 1997, the Company received three proposals from parties
other than Purchaser for the acquisition of all of the Company's outstanding
Shares at prices ranging from $12.00 to $12.50 per Share. On September 23,
1997, the Company engaged the Company's Financial Advisor as its financial
advisor in connection with the possible sale of all or a portion of the
Company. Also on September 23, 1997, affiliates of Purchaser wrote to the
Principal Shareholders expressing their interest in acquiring the Shares held
by the Principal Shareholders at price of $12.10 per Share. On or about
September 24, 1997, the Principal Shareholders informed affiliates of
Purchaser that they were not interested in pursuing a transaction with
Purchaser for less than all of the Company's outstanding Shares.
On September 25, 1997, counsel to the Company wrote to affiliates of
Purchaser and to the three parties which had provided the acquisition
proposals described above, inviting such parties to submit to the Company's
counsel and financial advisors by September 29, 1997 a binding proposal for
the acquisition of all of the Company's Shares accompanied by a mark-up of an
Agreement and Plan of Merger enclosed with such letter which such party would
be willing to sign and a refundable $5 million cash deposit. By October 1,
1997, the Company's counsel and financial advisors had received three
responses to such letter, each accompanied by the $5 million refundable
deposit, two of which proposed a purchase price of $12.25 or $12.30 per Share
and one of which, submitted by Purchaser on September 29, 1997, proposed a
purchase price of $11.00 per Share. On September 30, 1997, the Company
informed Purchaser that it would not consider an offer at $11.00 per Share
and Purchaser replaced its response with one offering $12.50 per Share, which
was subsequently reduced to $12.25 per Share.
On October 1, 1997, a special meeting of the Company's Board of Directors
was held at which the status of various proposals for the purchase of the
Company and related matters were reviewed by the Board, and the Company's
financial advisors were instructed to inform potential purchasers of the
Company that all issues pertaining to the acquisition and definitive
acquisition agreements were required to be resolved by October 8, 1997.
Various meetings and telephone conferences were held between October 1,
1997 and October 9, 1997 between members of management and the Board of
Directions of the Company and Purchaser, as well as among the respective
counsel and advisors of the parties in connection with the negotiation of a
definitive Agreement and Plan of Merger. Simultaneous negotiations took place
between the Company and two other potential bidders for the Company.
At a special meeting of the Company's Board of Directors held on October
9, 1997, the Board reviewed the three proposals which had been made to the
Company and, after consideration of such proposals with the Company's
financial advisors and counsel, authorized management to enter into an
15
agreement with Purchaser whereby neither party would be bound to enter into a
definitive merger agreement with the other party but under which the Company
agreed to negotiate with Purchaser on an exclusive basis through noon on
October 13, 1997 to finalize the terms of the definitive Merger Agreement.
On October 14, 1997, the Board of Directors of the Company held a special
meeting to discuss the sale of the Company. After consideration of the
various bids and upon conclusion of the presentation of the Company's
Financial Advisor regarding the Offer and the Merger, the Board approved the
terms of the Merger Agreement and resolved to recommend that the holders of
the Shares accept the Offer and approve and adopt the Merger Agreement and
the Merger.
11. THE OFFER AND MERGER; MERGER AGREEMENT AND RELATED AGREEMENTS
The following is a summary of the Merger Agreement and certain related
agreements, copies of which are attached to the Schedule 14D-1 as Exhibits
(c)(1) through (c)(7), respectively, and are incorporated by reference
hereto. All references to and summaries of such agreements herein are
qualified in their entirety by reference to the full text of such agreements.
Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to them in the Merger Agreement.
MERGER AGREEMENT
THE OFFER. The Merger Agreement provides for the commencement of the Offer
as promptly as reasonably practicable, but in no event later than five
business days after the public announcement of the execution of the Merger
Agreement, subject to the other provisions of the Merger Agreement. The
obligation of Purchaser to consummate the Offer and accept for payment, and
pay for, Shares tendered pursuant to the Offer is subject to (i) satisfaction
of the Minimum Tender Condition, (ii) expiration or termination of all
waiting periods under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended (the "HSR Act") applicable to the purchase of Shares
pursuant to the Offer if filings under the HSR Act are deemed to be
necessary, (iii) the consents of HUD and The Chase Manhattan Bank, and (iv)
the satisfaction and waiver of the other Conditions. Subject to the terms of
the Merger Agreement, Purchaser expressly reserves the right to modify the
terms and conditions of the Offer, except that, without the consent of the
Company, Purchaser shall not (i) reduce the number of Shares subject to the
Offer, (ii) reduce the price per Share to be paid pursuant to the Offer,
(iii) modify or add to the Conditions, (iv) except as described below, extend
the Offer, (v) change the form of consideration payable in the Offer, or (vi)
make any other change in the terms of the Offer adverse to the holders of
Shares. Purchaser may extend the Offer in accordance with applicable law, but
if the Conditions set forth in Section 15 are satisfied as of the then
scheduled Expiration Date of the Offer, the Offer may be extended only with
the prior written consent of the Company or as required by law. If the
Conditions set forth in Section 15 are not satisfied or waived by the
Expiration Date, Purchaser shall extend the Offer from time to time until the
earlier of the consummation of the Offer or December 31, 1997 (provided that
Purchaser shall not be obligated to make any such extension, if a reasonable,
well-informed person would conclude that any such condition is incapable of
being satisfied by December 31, 1997). Any individual extension of the Offer
shall be for a period of no more than 10 business days. Upon the terms of the
Merger Agreement and subject to the Conditions, Purchaser shall pay for all
Shares validly tendered and not withdrawn pursuant to the Offer after the
expiration of the Offer.
CONDITIONS TO THE OFFER. The Merger Agreement provides that,
notwithstanding any other term of the Offer or the Merger Agreement, and
subject to the Conditions set forth in Section 15, Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) under the Exchange Act
(relating to Purchaser's obligation to pay for or return tendered Shares
after the termination or withdrawal of the Offer), to pay for any Shares
tendered pursuant to the Offer, unless (i) there shall have been validly
tendered and not withdrawn prior to the expiration of the Offer a number of
Shares which, when added to any other Shares owned by Purchaser or its
affiliates, shall equal at least two-thirds of the number of Shares
outstanding on a fully-diluted basis immediately after the termination of the
Offer (the "Minimum Tender Condition"), (ii) all waiting periods under the
HSR Act applicable to the purchase of Shares pursuant to the Offer shall
16
have expired or have been terminated if filings under the HSR Act are deemed
to be necessary, and (iii) the consents of HUD and The Chase Manhattan Bank.
THE MERGER. The Merger Agreement provides that, following consummation of
the Offer, subject to the approval and adoption of the Merger Agreement and
the Merger by the affirmative vote of the holders of two-thirds of the
outstanding shares of Common Stock entitled to vote thereon (if then required
by the BCL), approval by certain regulatory authorities and compliance with
certain other covenants and conditions, Purchaser will be merged with and
into the Company, at which time the separate corporate existence of Purchaser
will cease and the Company will continue as the "Surviving Corporation".
Following consummation of the Merger, the Company, as the Surviving
Corporation, will be a wholly-owned subsidiary of Parent. Hereinafter, the
date on which the Closing of the Merger shall take place is referred to as
the "Closing Date" and the time on the Closing Date when the Closing shall
take place is referred to as the Closing Time. The Merger shall become
effective at such time as a duly prepared and executed certificate of merger
(the "Certificate of Merger"), in form and substance reasonably satisfactory
to Purchaser and Company, providing for the Merger, is filed by the Secretary
of State of the State of New York in accordance with the relevant provisions
of the BCL (the "Effective Time"). The Company and Purchaser have agreed to
use their respective best efforts to cause the Merger to be consummated at
the earliest practicable time after consummation of the Offer, and the
Certificate of Merger shall be filed as soon as practicable after the closing
of the Merger.
CONVERSION OF SHARES. Pursuant to the Merger Agreement, at the Effective
Time, the Shares, immediately prior to the Effective Time (other than the
Dissenting Shares) shall, by reason of the Merger and without any action by
the holders thereof, be converted into the right to receive $12.25 per share
in cash (the "Merger Consideration"), without interest. Each Share which is
held in the treasury of the Company immediately prior to the Effective Time
and any Shares owned by Parent or Purchaser shall, by virtue of the Merger,
cease to be outstanding and shall be canceled and retired without payment of
any consideration therefor. At the Effective Time, the stock transfer books
of the Company shall be closed, and no transfer of Shares shall thereafter be
made. All such Shares, when converted as provided herein, shall no longer be
outstanding and shall automatically be canceled and retired and shall cease
to exist, and each certificate previously evidencing such Shares shall
thereafter represent only the right to receive the Merger Consideration.
Notwithstanding the above, any Dissenting Shares will not be converted
into the right to receive, or be exchangeable for, the Merger Consideration,
but instead such shareholders will be entitled only to the rights granted by
provisions of the BCL, including Sections 623 and 910, which entitles
dissenting shareholders to receive a judicial determination of the fair value
of the Shares and to receive payment of such fair value in cash, together
with a fair rate of interest, if any. Such judicially determined fair value
could be more or less than the price per Share paid in the Merger. See
Sections 5 and 16.
Each share of the capital stock of Purchaser issued and outstanding
immediately prior to the Effective Time shall be converted into one fully
paid and nonassessable share of common stock, par value $1.00 per share, of
the Surviving Corporation.
DIRECTORS AND OFFICERS; GOVERNING DOCUMENTS. At the Effective Time, the
directors and officers of Purchaser immediately prior to the Effective Time,
will become the directors and officers of Surviving Corporation until the
earlier of their death, resignation or removal, in accordance with the
Surviving Corporation's Certificate of Incorporation and Bylaws or until
their respective successors are duly elected or appointed and qualified, as
the case may be. The Certificate of Incorporation and Bylaws of the Company
at the Effective Time will become the Certificate of Incorporation and
Bylaws, respectively, of the Surviving Corporation after the Effective Time;
provided that such Certificate of Incorporation and Bylaws of the Company may
be amended, subject to the provisions in "--Indemnification and Insurance"
below and in accordance with the BCL, in such manner as Purchaser may, in its
sole discretion, determine.
SHAREHOLDERS' APPROVAL. Pursuant to the Merger Agreement, if required by
applicable laws, the Company, acting through the Board, shall, in accordance
with applicable laws and the Company's Certificate of Incorporation, as
amended, its Bylaws and the requirements of the AMEX, duly call, give notice
of and convene and hold a special meeting of its shareholders as soon as
practicable following
17
expiration of the Offer for the purpose of considering and approving the
Merger, the Merger Agreement and the transactions contemplated thereby (the
"Shareholders' Meeting"). The Company's Board of Directors will, subject to
its good faith and fiduciary obligations to the Company's shareholders,
recommend that the Company's shareholders vote in favor of the Merger, the
Merger Agreement and the transactions contemplated thereby and cause the
Company to take all lawful actions to solicit from the Company's shareholders
proxies in favor of such approval. Notwithstanding the foregoing sentence, if
Parent and Purchaser shall collectively own, following consummation of the
Offer, at least 90% of the outstanding Shares, each of Parent, Purchaser and
the Company shall take all necessary and appropriate action to cause the
Merger to become effective as soon as practicable after expiration of the
Offer (but in no event later than ten (10) business days thereafter) without
a meeting of the shareholders of the Company, in accordance with the
"short-form" merger provisions of Section 905 of the BCL. If Parent and
Purchaser shall not collectively own, following consummation of the Offer, at
least 90% of the outstanding shares, the Company shall prepare (and the
Purchaser will assist, where reasonable and appropriate), a proxy statement
relating to the Shareholders' Meeting (the "Proxy Statement") and a form of
proxy for use at the Shareholders' Meeting relating to the vote of the
shareholders with respect to the Merger, the Merger Agreement and the
transactions contemplated thereby. The Company will mail such Proxy Statement
to the Company's shareholders at the earliest practicable date following
consummation of the Offer. The Purchaser will furnish the Company with such
information as may be reasonably requested by the Company for inclusion in
the Proxy Statement as required by law or by the Commission. Purchaser agrees
to cause all Shares purchased pursuant to the Offer and all other Shares
owned by Purchaser or Parent to be voted in favor of approval and adoption of
the Merger, the Merger Agreement and all transactions contemplated thereby.
DESIGNATION OF DIRECTORS. The Merger Agreement provides that, if Purchaser
acquires at least two-thirds of the Shares outstanding pursuant to the Offer,
Parent shall be entitled to designate up to such number of directors, rounded
up to the next whole number, of the Board so that the designees of Parent
constitute the same percentage of the Board (but in no event less than a
majority) as the percentage of Shares acquired pursuant to the Offer, and the
Company shall increase the size of the Board or obtain the resignations of
incumbent directors as is necessary to enable such number of Parent designees
to be elected. The Merger Agreement also provides that, at all times prior to
the Effective Time, at least two of the members of the Board shall be
Independent Directors (as defined below). Successor Independent Directors
will be designated either by any remaining Independent Directors, or by the
other directors, if no Independent Director remains. Subject to applicable
law, the Company will take all action requested by Purchaser necessary to
effect any election of such designee or Independent Director, including
mailing to its shareholders an Information Statement in accordance with
Section 14(f) of the Exchange Act and Rule 14f-1. Following the election or
appointment of Xxxxxx's designees pursuant to the foregoing and prior to the
Effective Time, if requested by a majority of the Independent Directors, such
designees shall abstain from acting upon, and the approval of a majority of
the Independent Directors shall be required, and shall be sufficient, to
authorize any resolution with respect to the termination of the Merger
Agreement by the Company, any amendment of the Merger Agreement requiring
action by the Board of the Company, any extension of time for the performance
of any of the obligations or other acts of Parent or Purchaser under the
Merger Agreement and any waiver of compliance by Purchaser with any provision
under the Merger Agreement for the benefit of the Company or its
shareholders. Under the Merger Agreement, "Independent Director" means any
member of the Board of the Company as of the date of the Merger Agreement or
who is otherwise not an officer, director or affiliate of Purchaser and who
is an independent director under the rules of the AMEX.
ACCESS TO INFORMATION. The Company has agreed to (and to cause each of its
Subsidiaries to) afford, upon reasonable notice, the directors, officers,
employees, lenders, accountants, counsel and other representatives of Parent
and Purchaser, including potential financing sources and their employees,
accountants, counsel and other representatives (collectively, the
"Representatives"), access, during normal business hours during the period
prior to the Closing Date, to all of its properties, accounts, books,
contracts, commitments, tax returns and records as Purchaser shall reasonably
request. The Company and Purchaser have agreed that the Representatives will
be permitted to discuss the business affairs, finances and accounts of the
Company and the Subsidiaries with the officers, directors, executives,
counsel, auditors and actuaries of the Company and its Subsidiaries.
18
NO SOLICITATION. Pursuant to the Merger Agreement, the Company has agreed
that, prior to the date on which designees of Purchaser constitute a majority
of the directors of the Company, (a) neither the Company nor any of its
Subsidiaries shall, nor shall it or any of its Subsidiaries permit their
respective officers, directors, executive employees, agents and
representatives (including, without limitation, any investment banker,
attorney or accountant retained by it or any of the Subsidiaries) to,
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer (including, without
limitation, any proposal or offer to its shareholders) with respect to a
merger, consolidation or other business combination, sale of a material
amount of assets outside the ordinary course of business or the issuance of
Voting Debt or Options (each as defined below), sale of shares of capital
stock outside of the ordinary course of business or similar transaction
involving the Company or any of the Subsidiaries (any such transaction being
hereinafter referred to as an "Acquisition Transaction") or engage in any
negotiations concerning, or provide any confidential information or data to,
or have any discussions with, any person relating to an Acquisition
Transaction (excluding the Offer and the Merger contemplated by the Merger
Agreement and excluding any matters related to interim operations of the
Company permitted in the Merger Agreement), or otherwise facilitate any
effort or attempt to make or implement an Acquisition Transaction; and (b)
that it will notify Purchaser promptly with all relevant details if any such
inquiries or proposals are received by, any such information is requested
from, or any such negotiations or discussions are sought to be initiated or
continued with, it, and if said inquiry or proposal is in writing it will
deliver to Purchaser a copy of such inquiry or proposal as promptly as is
practicable. However, nothing in the Merger Agreement shall prohibit the
Board of Directors or officers of the Company from furnishing information to,
or entering into discussions or negotiations with, any person or entity that
makes an unsolicited bona fide proposal relating to an Acquisition
Transaction, if, and only to the extent that, (A) the Board of Directors of
the Company, based upon advice of outside counsel, determines in good faith
that such action is required for the Board of Directors to comply with its
fiduciary duties to shareholders under applicable law, (B) prior to
furnishing such information to, or entering into discussions or negotiations
with, such person or entity, the Company provides written notice to Purchaser
to the effect that it is furnishing information to, or entering into
discussions or negotiations with, such person or entity, which notice shall
(to the extent consistent with the fiduciary duties of the Board of Directors
to shareholders under applicable law) include the identity of the person or
entity engaging in such discussions or negotiations, requesting such
information or making such proposal, and the material terms and conditions of
any proposed Acquisition Transaction, and (C) the Company keeps Purchaser
reasonably informed of the status and all material information with respect
to any such discussions or negotiations. Under the Merger Agreement, the
Company agreed that it would immediately cease and cause to be terminated any
existing solicitation, initiation, encouragement, activity, discussion or
negotiation with any parties conducted by the Company or any employee, agent
or representative of any kind with respect to any Acquisition Proposal
existing on the date of the Merger Agreement. "Voting Debt" is defined as
bonds, debentures, notes or other indebtedness of the Company or any of the
Subsidiaries which has the right to vote (or which is convertible into or
exchangeable for other securities having the right to vote) on any matters on
which shareholders of the Company may vote. "Options" are defined as
subscriptions, warrants, options, contracts, rights (preemptive or
otherwise), calls, commitments or demands of any character relating to any
authorized and issued or unissued shares of capital stock of the Company or
any of the Subsidiaries, including, without limitation, Shares, or
outstanding securities, obligations, rights, Voting Debt or other instruments
convertible into or exchangeable for such stock, or which obligate the
Company to seek authorization to issue additional shares of any class of
stock or Voting Debt.
INDEMNIFICATION AND INSURANCE. Pursuant to the Merger Agreement, the
Company shall, to the fullest extent permitted under applicable law and
regardless of whether the Merger becomes effective, indemnify and hold
harmless, and after the Effective Time, the Surviving Corporation shall, to
the fullest extent permitted under applicable law, indemnify and hold
harmless, each present and former director, officer and fiduciary of the
Company or any of the Subsidiaries (collectively, the "Indemnified Parties")
against any fees, costs or expenses (including reasonable attorneys' fees)
and judgments, fines, losses, damages, liabilities and amounts paid in
settlement (collectively, "Losses"), in connection with any pending,
threatened or completed claim, action, suit, proceeding or investigation
arising out of any actions
19
or omissions occurring at or prior to the Effective Time that are in whole or
in part based on or arising out of the fact that such person is or was a
director, officer or fiduciary of the Company or pertaining to any of the
transactions contemplated by the Merger Agreement. In addition, Purchaser
agreed that all rights to indemnification existing as of the date hereof in
favor of the present or former directors, officers, employees, fiduciaries
and agents of the Company or any of the Subsidiaries, as provided in the
Company's certificate of incorporation or by-laws or pursuant to other
agreements, arrangements or the certificate of incorporation, by-laws or
similar documents of any of the Subsidiaries as in effect on the date of the
Merger Agreement, with respect to matters occurring prior to the Effective
Time shall survive the Merger and shall continue in full force and effect
pursuant to the terms thereof.
The Merger Agreement provides that the Surviving Corporation shall cause
to be maintained in effect for not less than six years from the Effective
Time the policies of directors' and officers' liability insurance and the
Company employed lawyers liability insurance maintained by the Company and
its Subsidiaries, each as in effect on the date of the Merger Agreement
(provided that they may substitute therefor policies of at least the same
coverage containing terms and conditions which are no less advantageous),
with respect to matters occurring prior to the Effective Time.
FURTHER ACTION, REASONABLE EFFORTS. In the Merger Agreement and subject to
the terms and conditions thereof, the Company and Purchaser have agreed to
use all reasonable efforts to effectuate the transactions contemplated by,
and fulfill the conditions and obligations of each of the Company and
Purchaser under the Merger Agreement, subject, as applicable, to the
fiduciary duties of the Board of Directors of the Company, including
cooperating fully with the other party, including by providing information
and making all necessary filings in connection with, among other things,
approvals by HUD. The Company will use all reasonable efforts to obtain any
consent from third parties necessary to allow the Company and its
Subsidiaries to continue operating their business as presently conducted as a
result of consummation of the transactions contemplated by the Merger
Agreement. In case at any time after the Effective Time, any further action
is necessary or desirable to carry out the purposes of the Merger Agreement
or to vest the Surviving Corporation with full title to all properties,
assets, rights, approval, immunities and franchises of either the Company or
Purchaser, the proper officers and directors of each of the Company and
Purchaser shall take all such necessary action.
The Company and Purchaser have agreed to give the other party prompt
written notice of (a) the failure of such party to comply with or satisfy in
any material respect any covenant, condition or agreement to be complied with
or satisfied by it under the Merger Agreement and (b) in the case of the
Company, the occurrence of any threat by any executive officer or senior
management employee of the Company or any of its Major Subsidiaries (as
defined below) to resign or otherwise terminate their employment relationship
with the Company or any of its Major Subsidiaries.
CONDUCT OF BUSINESS PENDING THE MERGER. Pursuant to the Merger Agreement,
the Company has agreed that, prior to the date on which a majority of the
Company's directors are designees of Purchaser, unless Purchaser has
consented in writing thereto (which consent shall not be unreasonably
withheld), the Company:
(a) shall, and shall cause its Subsidiaries Grenadier Realty Corporation,
HRH Construction Corporation, Xxxxxx Corporation, or Xxxxxx Homes Puerto
Rico, Incorporated (collectively, the "Major Subsidiaries") to, conduct
their operations in all material respects according to their usual,
regular and ordinary course in substantially the same manner as heretofore
conducted;
(b) shall use its reasonable efforts, and shall cause its Subsidiaries,
other than inactive Subsidiaries, to use its reasonable efforts, to
preserve intact its business organization and goodwill, keep available the
services of its officers and employees and maintain satisfactory
relationships with those persons having business relationships with it
(Purchaser agreeing to reasonably cooperate with the Company in such
efforts);
(c) shall promptly deliver to Purchaser true and correct copies of any
report, statement or schedule filed with the SEC or any other state or
federal Governmental Authority in connection with this Agreement and the
transactions contemplated hereby (as used herein, the term "Governmental
Authority" means any court, administrative agency or commission or other
governmental or regulatory authority, domestic or foreign);
20
(d) shall not, and shall not permit any of the Subsidiaries to, amend its
Certificate of Incorporation or By-laws;
(e) shall not, and shall cause each of the Subsidiaries to not, (w)
issue, transfer, deliver or sell any shares of its capital stock, effect
any stock split or otherwise change its capitalization as it existed on
the date hereof, (x) grant, confer or award any Option, Voting Debt,
conversion right or other right not existing on the date hereof to acquire
any share of its capital stock, or amend the terms of or reprice any
outstanding option, warrant, or conversion right, or grant, confer or
award any bonuses or other forms of cash incentives to any officer,
director or employee except consistent with past practice, (y) increase
any compensation under any employment agreement with any of its present or
future officers, directors or employees, except for normal increases
consistent with past practice, grant any severance or termination pay to,
or, except as permitted by Purchaser, enter into any employment or
severance agreement with, or extend any loan or advance to any officer,
director or employee or amend any such agreement in any material respect
other than severance arrangements which are consistent with past practice
with respect to employees terminated by the Company, or (z) adopt any new
employee benefit plan (including without limitation, any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, any
stock option, stock benefit or stock purchase plan) or amend any existing
employee benefit plan (other than a multiemployer plan) in any material
respect, without Purchaser's written consent, not to be unreasonably
withheld;
(f) shall not (i) declare, set aside or pay any dividend or make any
other distribution or payment with respect to any shares of its capital
stock or other ownership interests other than the regular quarterly cash
dividend of $0.0625 per share payable to shareholders of record at
September 30, 1997, or (ii) directly or indirectly redeem, purchase or
otherwise acquire any shares of its capital stock or capital stock of any
of the Subsidiaries, or make any commitment for any such action;
(g) shall not, and shall not permit any of the Subsidiaries to, acquire,
sell, lease, encumber or otherwise dispose of any assets for its own
account (including, without limitation, capital stock of or other equity
interests in Subsidiaries or other entities) in the aggregate for an
amount exceeding $250,000 except in the ordinary course of business or as
set forth in the schedules to the Merger Agreement;
(h) shall not, and shall not permit any of the Subsidiaries to, incur or
assume any indebtedness for borrowed money, except in the ordinary course
of business consistent with past practice or as set forth in the schedules
to the Merger Agreement, or guarantee any such indebtedness or make any
loans, advances or capital contributions to, or investments in, any other
person other than a wholly-owned Subsidiary, except in compliance with any
partnership agreement or joint venture agreement, to which the Company or
a Subsidiary is a party, or otherwise or sell any debt securities, in the
aggregate exceeding $250,000;
(i) shall not, nor shall it permit any of its Subsidiaries to, (i) merge
or consolidate with, or acquire any equity interest in, any corporation,
partnership, association or other business organization, or enter into an
agreement with respect thereto, or (ii) acquire or agree to acquire any
assets of any corporation, partnership, association or other business
organization or division thereof, except for the purchase of inventory and
supplies in the ordinary course of business;
(j) shall not authorize, recommend, propose or announce an intention to
adopt a plan of complete or partial liquidation or dissolution of the
Company or any of its Subsidiaries;
(k) shall not, nor shall the Company permit any of its Subsidiaries to,
(A) enter into any contracts involving in any individual case, aggregate
annual payments by the Company or any of its subsidiaries in each case for
its own account in excess of $250,000, or (B) modify, rescind, terminate,
waive, release or otherwise amend in any material respect any of the terms
or provisions of any material contract in any manner that is material and
adverse to the Company or the respective Subsidiary of the Company party
thereto;
(l) shall not settle or compromise any claim for appraisal rights in
respect of the Merger without the prior written consent of Purchaser;
21
(m) shall not, and shall not permit any of the Subsidiaries to, authorize
or make capital expenditures in excess of $250,000 in the aggregate,
except for, (l) in the case of Xxxxxx, the purchase and development of
land described in the schedules to the Merger Agreement in the ordinary
course of business, and (2) capital expenditures in an aggregate amount
not exceeding $2,000,000 in connection with moving the Company's corporate
offices;
(n) shall not and shall not permit any of the Subsidiaries to, mortgage
or otherwise encumber or subject to any Lien any properties or assets
except as would not materially adversely affect the business of the
Company or any Major Subsidiary;
(o) shall not make any material change to its accounting (including tax
accounting) methods, principles or practices, except as may be required by
generally accepted accounting principles or by applicable tax laws; and
(p) shall not, and shall not permit any of the Subsidiaries to, do or
agree to do any of the foregoing set forth in clauses (d), (e), (f), (g),
(h), (i), (j), (k), (l), (m), (n) and (o).
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains
representations and warranties of the Company regarding: the due
organization, good standing, qualification and authority to conduct business
and own, lease and operate its properties for each of the Company and its
Subsidiaries; the capitalization of the Company and its Subsidiaries; the
authority of the Company to enter into the Merger Agreement and the other
documents contemplated thereby (collectively, the "Transaction Documents")
and to consummate the transactions contemplated thereby, subject to the
Company Shareholder Approval; the absence of conflict between transactions
contemplated by the Transaction Documents and other agreements, documents and
permits and absence of violations of the Certificate of Incorporation or
Bylaws of the Company or its Subsidiaries; the absence of violations of laws
applicable to the Company; the need for consents and approvals; the accuracy,
truthfulness and adequacy of documents filed with or sent to the SEC or any
other regulatory authority; the holding of good title by the Company and its
Subsidiaries to tangible property and assets; the ownership of property in
fee and the holding of leasehold interests, by the Company and its
Subsidiaries free and clear of all mortgages, pledges, liens, encumbrances
and security interests; compliance with all applicable laws, rules, orders
and regulations; the absence of litigation; certain matters relating to
taxes; insurance coverage; the disclosure of material contracts to which the
Company or any Subsidiary are parties or by which the Company or any
Subsidiary are bound; the full disclosure by the Company of certain
management, employment, consulting or other agreements, contracts or
commitments; the intellectual property and proprietary rights held by the
Company and its Subsidiaries; certain matters relating to ERISA; the conduct
of business in the ordinary course and the absence of certain changes or
events since June 30, 1997; any finder's fees in connection with the Merger
Agreement or the transactions contemplated thereby; the absence of
application of Section 912 of the BCL; certain environmental matters; the
absence of undisclosed material liabilities; the Company's receipt of the
opinion of Xxxxxxx Xxxxx & Co. as to the fairness, from a financial point of
view, of the cash consideration to be received by the shareholders of the
Company in the Offer and the Merger; the shareholder vote required to approve
the Merger Agreement and the Merger; compliance with applicable employment
laws and indemnification of employees; labor matters; the condition of the
tangible property of the Company and its Subsidiaries; the recommendation by
the Board of Directors of the Company of the Merger Agreement, the Offer and
the Merger; the disclosure of certain related party transactions; and the
compliance of the Schedule 14D-9 and the information supplied by the Company
for inclusion in the Transaction Documents or the Schedule 14D-1, and any
amendments thereof or supplements thereto, in all material respects with the
Exchange Act.
The Merger Agreement also includes representations and warranties by
Purchaser regarding: the due organization, good standing and authority to
conduct business and own, lease and operate its properties; the authority of
Purchaser to enter into the Merger Agreement and the other Transaction
Documents to which it is a party; the absence of conflict with other
agreements and documents and the absence of violations of laws applicable to
Purchaser; consents and approvals; the absence of a finder's fee in
connection with the Merger Agreement or the transactions contemplated
thereby; the absence of litigation; absence of disqualifications or sanctions
by the United State Department of Housing and Urban Development or any other
government agency; and the receipt by Purchaser of certain financing
commitments for the Merger.
22
The Company and the Purchaser have each agreed to not knowingly take any
action or knowingly permit any Subsidiary to take any action which if had
been taken prior to the execution of the Merger Agreement, would have caused
or constituted a material breach of any of the representations and warranties
set forth in the Merger Agreement and summarized above in this Section 11.
CONDITIONS TO THE MERGER. Pursuant to the Merger Agreement, the respective
obligations of each party to the Merger Agreement to effect the Merger are
subject to the satisfaction or waiver of the following conditions prior to
the Closing Time: (i) no order, decree or judgment has been issued by a
court, agency or other authority to set aside, restrain, enjoin or prevent
the performance of the Merger or any of the transactions contemplated by the
Merger Agreement, and no statute, rule, regulation, executive order, decree
or injunction shall have after the execution of the Merger Agreement been
enacted, entered, promulgated or enforced by any United States court or
governmental authority of competent jurisdiction which prohibits the
consummation of the Merger, provided that Purchaser shall have used its
commercially reasonable best efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as reasonably possible
any injunction or other order that may be entered, (ii) the Merger, the
Merger Agreement and the transactions contemplated thereby shall have been
approved in a manner required by applicable law and by the applicable
regulations of the AMEX, provided that Purchaser and its affiliates shall
have voted all Shares owned by them in favor of the Merger Agreement and that
each of Purchaser and the Company shall have used its commercially reasonable
efforts to cause such approval to be obtained, and (iii) Purchaser shall have
accepted for purchase and paid for Shares tendered pursuant to the Offer,
provided that this condition will be deemed satisfied if Purchaser shall have
failed to purchase Shares pursuant to the Offer in violation of the terms of
the Offer or the Merger Agreement.
ESCROW DEPOSIT. Simultaneously with the execution and delivery of the
Merger Agreement, Purchaser deposited the cash sum of $5 million (the "$5
Million Deposit") under an Escrow Agreement among Purchaser, the Company and
the escrow agent thereunder. Pursuant to such Escrow Agreement and the Merger
Agreement, the $5 Million Deposit shall be paid as prescribed under the
provisions described below under "--Termination Fees and Expenses."
TERMINATION. The Merger Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of the matters presented
in connection with the Merger by the shareholders of the Company or by
Purchaser, subject, in the case of the Company, to the Merger Agreement
provisions described regarding abstention from voting by Xxxxxx's designees
with regard to certain matters above under "--Designation of Directors":
(a) by the mutual consent of Purchaser and the Company;
(b) by Purchaser, if prior to the consummation of the Offer, (i) the
Board of Directors of the Company fails to make, or withdraws or
materially modifies or changes in a manner adverse to Purchaser its
recommendation to the Company's shareholders to accept the Offer, the
Merger or the Merger Agreement and the transactions contemplated thereby,
or resolves to do the foregoing or (ii) the Board of Directors of the
Company shall have recommended that the Company's shareholders accept or
approve an Acquisition Transaction with a person other than Purchaser, or
resolves to do the foregoing or (iii) a tender or exchange offer for any
of the outstanding shares of capital stock of the Company is commenced
(other than by Purchaser or its affiliates) and the Board of Directors of
the Company fails to timely recommend against the Company's shareholders'
rendering their shares into such tender or exchange offer;
(c) by the Company, if in the exercise of its judgment as to its
fiduciary duties to its shareholders, after consultation with outside
counsel, the Board of Directors of the Company determines that such
termination is required by reason of a proposal relating to an Acquisition
Transaction being made;
(d) by the Company, if the Offer shall not have been consummated on or
before November 20, 1997 or such later expiration date for the Offer as
may be expressly permitted under the Merger Agreement (provided that the
conditions to consummation of the Offer have been satisfied on such date);
23
(e) by the Company, if there has been a violation or breach by Purchaser
of any representation, warranty or agreement contained in this Agreement
specifically qualified by materiality, or a material violation or breach
by Purchaser of any material representation, warranty or agreement not so
qualified contained in the Merger Agreement (which breach is not cured by
Purchaser within 30 days after written notice by the Company to Purchaser
reasonably describing such breach);
(f) by Purchaser prior to consummation of the Offer, if there has been a
violation or breach by the Company of any representation, warranty or
agreement contained in the Merger Agreement as though such
representations, warranties and agreements were made without reference to
a Xxxxxxxx Material Adverse Effect (which violation or breach is not cured
by the Company within 30 days after written notice by Purchaser to the
Company reasonably describing such breach), except in all cases where the
failure or failures of such representations and warranties to be so true
and correct or such agreements to be performed or complied with would not
have, singly or in the aggregate, a Xxxxxxxx Material Adverse Effect;
(g) by Purchaser or the Company, if the Offer shall not have been
consummated on or before December 31, 1997, or if prior to such day a
reasonable, well-informed person would conclude that any Condition shall
be incapable of being satisfied by such date (except that a party whose
breach of covenant has caused such failure to consummate shall not be
entitled to so terminate this Agreement), or the Merger has not been
consummated by October 16, 1998; or
(h) by the Company if the Company is not in material breach of this
Agreement and if the Offer has not been timely commenced in accordance
with the Merger Agreement.
TERMINATION FEES AND EXPENSES. The Merger Agreement provides that all
costs and expenses incurred in connection with the Merger Agreement and the
transactions contemplated thereby will be paid by the party incurring such
expenses, except (i) as otherwise described below, and (ii) with respect to
costs of obtaining certain governmental approvals.
The Merger Agreement provides that if the Merger Agreement is terminated
by the Company pursuant to the provisions described in clause (d) above,
clause (e) above, clause (g) above (as a result of a breach of the Merger
Agreement by Purchaser), or clause (h) above, the $5 Million Deposit shall be
forthwith paid to the Company as liquidated damages, which remedy shall
represent the only damages that may be sought by the Company or any Company
shareholder under the Merger Agreement in the event of a termination of the
Merger Agreement as aforesaid or any violation or breach of the Merger
Agreement which gave rise thereto. The Merger Agreement provides that if it
is terminated for any reason other than the provisions referenced in this
paragraph, the $5 Million Deposit shall be returned to Purchaser and no party
shall have any further liability under the Merger Agreement.
If the Merger Agreement is terminated prior to consummation of the Offer
pursuant to the provisions described in clause (b) above, clause (c) above,
or (as a result of the willful breach of covenant or agreement under the
Merger Agreement by the Company, which breach is not cured by the Company
within 30 days after written notice by Purchaser to the Company reasonably
describing such breach) clause (f) above or clause (g) above, the Company
shall pay to Purchaser a fee (the "Fee") equal to $2,500,000 and shall
reimburse Purchaser for its reasonable out-of-pocket expenses up to a maximum
amount of $500,000 incurred in connection with the transactions contemplated
by the Merger Agreement, the payment of such Fee to be made simultaneously
with the termination of the Merger Agreement and the reimbursement of such
expenses to be made promptly upon presentation of invoices therefor.
Moreover, if the Merger Agreement is terminated prior to consummation of the
Offer pursuant to the provisions described in clause (f) above (as a result
of the non-willful breach of representation, warranty, covenant or agreement
under the Merger Agreement by the Company, which breach is not cured by the
Company within 30 days after written notice by Purchaser or Parent to the
Company reasonably describing such breach), the Company shall reimburse
Purchaser for its reasonable out-of-pocket expenses, up to a maximum amount
of $1,000,000, incurred in connection with the transactions contemplated by
the Merger Agreement, the reimbursement of such expenses to be made promptly
upon presentation of invoices therefor. Such expense reimbursement shall
represent liquidated damages and the only damages that may be sought by
Purchaser in the event of a termination of the Merger Agreement
24
as aforesaid or of any violation or breach of the Merger Agreement which gave
rise thereto. In addition, if a More Favorable Transaction (as such term is
defined below) is consummated within one year after the effective date of the
termination of the Merger Agreement as described in this paragraph prior to
consummation of the Offer, the Fee shall be increased to an amount equal to
the excess, if any, of (A) the (i) the aggregate value of the consideration
received by the shareholders of the Company in the More Favorable Transaction
minus the amount of the Original Consideration (as such term is defined
below), multiplied by (ii) 25%, over (B) $2,500,000. The Fee shall represent
liquidated damages and the only damages that may be sought by Purchaser in
the event of a termination of the Merger Agreement as aforesaid or any
violation or breach of the Merger Agreement which gave rise thereto. As used
herein, (i) a "More Favorable Transaction" shall mean any Acquisition
Transaction under which the Company and/or the holders of more than 50% of
the Shares receive consideration equal to a value in excess of $12.25 per
Share and (ii) the "Original Consideration" shall mean the product of $12.25
multiplied by the number of Shares sold or otherwise disposed of by
shareholders of the Company in the More Favorable Transaction and for which
the shareholders of the Company receive consideration in such More Favorable
Transaction.
CONFIDENTIALITY. The Merger Agreement provides that any corporate
information, records, documents, descriptions or other disclosures of
whatsoever nature or kind made or disclosed by either of the parties to the
other party, or to the authorized representatives thereof, or learned or
discovered by such other party or by any representatives thereof in
connection with the transactions contemplated by the Merger Agreement
(whether prior to or after the date of the execution of the Merger Agreement)
and not known by or available to the public at large shall be received in
confidence and neither of the parties nor any such authorized representative
shall disclose or make use of such information or authorize anyone else to
disclose or make use thereof without the written consent of the other party
hereto, except (a) as necessary to consummate the transactions contemplated
hereby or (b) as compelled by judicial or administrative process or by other
requirements of applicable law including any disclosure under federal
securities laws; provided, however, that in the case of any disclosure
contemplated pursuant to this clause (b), the party seeking to disclose such
information shall give the other party reasonable prior written notice
thereof in order to afford such other party reasonable opportunity to seek a
protective order or other limitation under such disclosure.
AMENDMENT TO MERGER AGREEMENT; GOVERNING LAW. The Company and Purchaser
have agreed that the Merger Agreement may be amended in writing by them at
any time before or after shareholder approval of the Merger and related
transactions (as discussed above in "--Shareholders' Approval"), subject in
the case of approval by the Company to the designation of directors (see
"--Designation of Directors"), but, after any such shareholder approval, no
amendment may be made which by law requires further shareholder approval.
The Merger Agreement and any other agreement entered into in connection
with the Merger will be governed by, and construed under and in accordance
with, the laws of the State of New York applicable to contracts made and
wholly to be performed therein by residents thereof, without giving effect to
the conflict of law principles thereof.
EMPLOYMENT, SEVERANCE AND RELATED AGREEMENTS.
In connection with the execution of the Merger Agreement, the Company and
Xxxxx Xxxx, Xx., the Chairman and Chief Executive Officer of HRH Construction
Corporation ("HRH"), one of the Company's Major Xxxxxxxxxxxx, have entered
into an employment agreement (the "Xxxx Employment Agreement"). The Xxxx
Employment Agreement provides for Xx. Xxxx'x continued employment as the
Chairman and Chief Executive Officer of HRH after the Effective Time and
until December 31, 1999. Xx. Xxxx'x compensation under the Xxxx Employment
Agreement will be in the form of a base salary of $300,000 per year, annual
bonus compensation described below, participation in the Company's executive
insurance plans and continued contribution to Xx. Xxxx'x annuity, or, in
certain circumstances, participation in the Company's pension plan. Pursuant
to the Xxxx Employment Agreement, Xx. Xxxx is entitled to bonus compensation
equal to 10% of the first $3,000,000 of pre-tax income of HRH and its
subsidiaries on an annual basis and 5% of the such pre-tax income exceeding
$3,000,000 on an annual basis. Xx. Xxxx
25
may terminate his employment without cause upon 30 days advance written
notice to the Company. The Company may terminate the Xxxx Employment
Agreement "for cause" (as enumerated in the Xxxx Employment Agreement) or
without cause, by written notice to Xx. Xxxx. If the Company terminates the
Xxxx Employment Agreement without cause, Xx. Xxxx is entitled to severance
payments equal to the amount of 12 months of his base salary, less applicable
taxes, payable in 12 monthly installments. Xx. Xxxx would also be entitled to
continued health insurance coverage for 12 months following termination, as
well as his bonus compensation for the year in which the termination took
place. If the Company terminates Xx. Xxxx'x employment pursuant to the Xxxx
Employment Agreement due to illness, accident or disability, Xx. Xxxx would
be entitled to severance payments equal to 50% of his base salary for a
period of 24 months from the date of termination, plus his bonus compensation
for the year during which the termination took place. Xx. Xxxx has agreed
pursuant to the Xxxx Employment Agreement not to compete with the Company in
the construction or real estate development business in the New York City
metropolitan area during the term of his employment and for a period of one
year following termination, and he is subject to certain duties to the
Company, including, without limitation, duties of loyalty and
confidentiality.
In connection with the execution of the Merger Agreement, Purchaser
granted its consent (the "Severance Consent") to the Company's entering into
a severance agreement with Xxxxx Xxxxxxxx, the Executive Vice President,
Chief Financial Officer and Secretary of the Company. The Severance Consent
provides that the Company may enter into a severance agreement with Xx.
Xxxxxxxx on the following terms (and only the following terms): the Company
or the Surviving Corporation terminates Xx. Xxxxxxxx without cause, or
demotes Xx. Xxxxxxxx from a senior executive position, or changes any of the
base salary, bonus or benefits package of Xx. Xxxxxxxx in a manner so that
any of such items is less favorable to him than the base salary, bonus or
benefits package to which he was entitled as of September 30, 1997, Xx.
Xxxxxxxx will be entitled to severance, consisting of twice his annual base
if Xx. Xxxxxxxx is terminated prior to the second anniversary of consummation
of the Offer or his annual base salary if Xx. Xxxxxxxx is terminated (or
terminates his own employment for any reason) thereafter.
As described in more detail above under "--Conduct of Business Pending the
Merger," pursuant to the Merger Agreement, the Company has agreed that prior
to the date on which a majority of the Company's directors are designees of
Purchaser, unless Purchaser has consented in writing thereto (which consent
shall not be unreasonably withheld), the Company shall not enter into any
employment or severance agreement with any officer, director, or employee, or
amend any such agreement in any material respect. As described above,
Purchaser has consented to a severance arrangement with Xx. Xxxxxxxx to the
extent such arrangement is consistent with the Severance Consent.
The Company is a party to an agreement (the "Incentive Agreement") with
Xxxxxx X. Xxxxxxx, the President, Chief Operating Officer and a director of
the Company, dated November 7, 1996. Pursuant to the Incentive Agreement, in
the event that the Company is the target of a tender offer consummated during
1997, Xx. Xxxxxxx will, subject to certain limitations, receive from the
Company a lump sum cash payment of $1,000,000 and a grant of 100,000 Shares.
In connection with the execution of the Merger Agreement, the Company and
Purchaser have agreed that, at the Company's request and prior to the
consummation of the Offer, Purchaser will have provided the Company with
sufficient funds to make the aforesaid cash payment to Xx. Xxxxxxx, unless
other arrangements are entered into by Xxxxxxxxx and Xx. Xxxxxxx.
SHAREHOLDERS AGREEMENT.
In connection with the execution of the Merger Agreement, the Principal
Shareholders entered into a Shareholders Agreement dated October 16, 1997
with Purchaser and Parent, pursuant to which each of the Principal
Shareholders agreed, provided that Purchaser is not then in material breach
of the Merger Agreement and an injunction has not been issued which would
prohibit such Principal Shareholders from tendering their respective shares,
severally and not jointly, to validly tender (and not to withdraw), pursuant
to the Offer, not later than the fifth business day after receipt by the
respective Principal
26
Shareholders of the Offer to Purchase, the Shares beneficially owned by the
Principal Shareholders on the date of the Shareholders Agreement, together
with any Shares acquired by any of the Principal Shareholders after the date
of the Shareholders Agreement and prior to the termination of the Merger
Agreement.
INDEMNITY AGREEMENT.
In connection with the execution of the Merger Agreement, the Principal
Shareholders entered into an Indemnity Agreement dated October 16, 1997 with
Purchaser and Parent (the "Indemnity Agreement"), pursuant to which the
Principal Shareholders agreed to indemnify Parent and Purchaser for Frydman
Claims (as defined therein) arising out of certain arrangements between the
Principal Shareholders, the Company and Xxxxxxxx Acquisition, Inc. and
Stonemerger, Inc., both corporations controlled by Xxxxx Xxxxxxx. The
Indemnity Agreement provides that, after the consummation of the Offer,
Parent and Purchaser jointly and severally (and the Surviving Corporation
after the Merger) will bear the first $1,000,000 of losses and expenses
arising out of any Frydman Claims and that any remaining losses and expenses
will be shared equally by Parent and Purchaser jointly and severally (and,
following the consummation of the Merger, the Surviving Company) on the one
hand and the Principal Shareholders on the other. Each of the Principal
Shareholders are severally liable for their respective proportionate share
(according to their shareholdings) of the losses for which Purchaser and
Parent are indemnified under the Indemnity Agreement, except that Xxxx
Xxxxxxxx and Xxxxxxx Xxxxxxxx shall be jointly and severally liable for all
liabilities under the Indemnity Agreement of the Principal Shareholders.
MANAGEMENT AGREEMENT. In connection with the execution of the Merger
Agreement, subject to certain exceptions, the sole shareholder of Evergreen
Gardens, Inc. ("Evergreen") agreed with Purchaser to extend Evergreen's
management agreement with Grenadier Realty Corp., one of the Company's Major
Subsidiaries, on each of the next four annual renewal expiration dates for
that agreement, for an additional one year term on market-rate terms, insofar
as it is within that shareholder's reasonable control and in accordance with
applicable governmental regulations. Xxxx Xxxxxxxx, Chairman of the Board of
the Company, is the general partner of the sole shareholder of Evergreen.
12. PURPOSE OF THE OFFER AND MERGER, PLANS FOR THE COMPANY
The purpose of the Offer and the Merger is to acquire all the outstanding
Shares and thereby to obtain control of the Company. The Offer, as the first
step in the acquisition of the Company, is intended to facilitate the
acquisition of all the Shares. Consummation of the Offer will provide
Purchaser with at least two-thirds of the equity interests in the Company.
The Merger will allow Purchaser to acquire all Shares not tendered and
purchased pursuant to the Offer or otherwise. Pursuant to the Merger, each
then outstanding Share (other than Shares owned directly or indirectly by the
Company or Parent, Shares held in the treasury of the Company and Shares
owned by shareholders who perfect appraisal rights under the BCL) would be
converted into the right to receive an amount in cash equal to the price per
Share paid by the Purchaser pursuant to the Offer, provided, however, that
any Shares owned by Parent or Purchaser will be canceled and the Merger Price
will not be paid in respect of any such shares. The acquisition of the entire
equity interest in the Company has been structured as a cash tender offer and
a cash merger in order to provide for a prompt and orderly transfer of
ownership of the Company from the public shareholders of the Company to
Parent. The purchase of Shares pursuant to the Offer will increase the
likelihood that the Merger will be consummated.
Except in the case of a "short-form" merger as described below, under the
BCL, the approval of the Company's Board of Directors and the affirmative
vote of holders of two-thirds of the outstanding Shares (including any Shares
owned by the Purchaser) would be required to approve the Merger. Upon
consummation of the Offer, the Purchaser will have obtained voting power with
respect to at least two-thirds of the outstanding Shares, sufficient voting
power to effect the Merger without the vote of any other shareholder of the
Company.
The BCL also provides that if a parent company owns at least 90% of each
class of stock of a subsidiary, the parent company can effect a "short-form"
merger with that subsidiary without a
27
shareholder vote. Accordingly, if, as a result of the Offer or otherwise,
Purchaser acquires or controls the voting power of at least 90% of the
outstanding Shares, Purchaser could, and in the Merger Agreement has agreed
to, effect the Merger without prior notice to, or any action by, any other
shareholder of the Company. Shareholders of the Company will, under certain
circumstances, have the right to dissent and demand appraisal of their shares
in the Merger. See Section 16.
In the event the Purchaser acquires at least two-thirds of the outstanding
Shares pursuant to the Offer, and thereafter obtains control of the Company's
Board of Directors, it expects to cause the Company to cease paying quarterly
dividends on the remaining outstanding Shares. The Merger Agreement provides
that Parent and Purchaser intend that (i) the directors of Purchaser at the
Effective Time will be the initial directors of the Surviving Corporation,
(ii) the officers of the Purchaser at the Effective Time will be the initial
officers of the Surviving Corporation.
In connection with the Offer, Parent has reviewed, and will continue to
review, various possible business strategies that it might consider in the
event that it acquires all or substantially all of the equity interests in
the Company. Prior to making the Offer, Parent reviewed and analyzed the
business of the Company on the basis of publicly-available information and
information provided by the Company. The strategies which Parent might
consider could include, among other things, the disposition of certain assets
or lines of business of the Company. Following the consummation of the Offer,
Parent intends to conduct a detailed review of the Company and its assets,
corporate structure, capitalization, operations, properties, policies,
management and personnel and consider what changes, if any, would be
desirable in light of the circumstances which then exist. To the extent that
Parent or Purchaser causes the Company to dispose of any of its businesses or
assets following the Merger and the proceeds of such dispositions are
distributed to the Company's shareholders, such distributions, to the extent
received by Parent or Purchaser, may be used to reduce indebtedness incurred
by them in connection with the Offer.
Except as described above, in Section 13, or elsewhere in this Offer to
Purchase, Purchaser does not have any present plans or proposals which relate
to or would result in an extraordinary corporate transaction, such as a
merger, reorganization or liquidation involving the Company or any of its
Subsidiaries, a sale or transfer of a material amount of the Company's assets
(or assets of its Subsidiaries), any material change in the Company's present
capitalization, any other material change in the Company's business or
corporate structure, causing a class of securities of the Company to be
delisted from a national securities exchange association, or causing a class
of equity securities of the Company to become eligible for termination of
registration pursuant to the Exchange Act.
13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; EXCHANGE ACT
REGISTRATION; MARGIN REGULATIONS
The purchase of Shares 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 shareholders other than Purchaser.
Purchaser cannot predict whether the reduction in the number of Shares that
might otherwise trade publicly would have an adverse or beneficial effect on
the market price for or marketability of the Shares or whether it would cause
future market prices to be greater or less than the Offer Price.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the requirements of the AMEX for continued listing
and may, therefore, be delisted from such exchange. According to the AMEX's
published guidelines, the AMEX could consider delisting the Shares if, among
other things, the number of publicly-held Shares (excluding Shares held by
officers, directors, their immediate families and concentrated holdings of 5%
or more) were less than 200,000, there were less than 300 public holders of
at least 100 Shares or the aggregate market value of the publicly-held Shares
were less than $1 million. If, as a result of the purchase of Shares pursuant
to the Offer, the Shares no longer meet the requirements of the AMEX for
continued listing and the listing of Shares on such exchanges is
discontinued, the market for the Shares could be adversely affected.
If the AMEX were to delist the Shares, it is possible that the Shares
would trade on another securities exchange or in the over-the-counter market
and that price quotations for the Shares would be reported by such exchange
or through the Nasdaq Stock Market or other sources. The extent of the public
market
28
for the Shares and the availability of such quotations would, however, depend
upon such factors as the number of holders and/or the aggregate market value
of the publicly-held Shares 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.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), which has the effect, among other things, of allowing brokers to
extend credit on the collateral of the Shares. Depending upon factors similar
to those described above regarding listing and market quotations, it is
possible that, following the Offer, the Shares would no longer constitute
"margin securities" for the purposes of the margin regulations of the Federal
Reserve Board and therefore could no longer be used as collateral for loans
made by brokers.
The Shares are currently registered under the Exchange Act. Registration
of the Shares under the Exchange Act may be terminated upon application of
the Company to the SEC if the Shares are neither listed on a national
securities exchange nor held by 300 or more holders of record. Termination of
registration of the Shares under the Exchange Act would substantially reduce
the information required to be furnished by the Company to its shareholders
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) of the Exchange Act, the requirement of
furnishing a proxy statement pursuant to Section 14(a) of the Exchange Act in
connection with shareholders' meetings and the related requirement of
furnishing an annual report to shareholders, and the requirements of Rule
13e-3 under the Exchange Act with respect to "going private" transactions.
Furthermore, the ability of "affiliates" of the Company and persons holding
"restricted securities" of the Company to dispose of such securities pursuant
to Rule 144 promulgated under the Securities Act may be impaired or
eliminated. It is the current intention of Parent to deregister the Shares
after consummation of the Offer if the requirements for termination of
registration are met.
14. EXTENSION OF TENDER PERIOD; AMENDMENT; TERMINATION
Purchaser also reserves the right, in its sole discretion, subject to the
terms of the Merger Agreement, in the event any of the Conditions specified
in Section 15 will not have been satisfied and so long as Shares have not
theretofore been accepted for payment, to delay (except as otherwise required
by applicable law) acceptance for payment of or payment for Shares or to
terminate the Offer and not accept for payment or pay for Shares.
If Purchaser extends the Offer, or if Purchaser (whether before or after
its acceptance for payment of Shares) is delayed in its purchase of or
payment for Shares or is unable to pay for Shares pursuant to the Offer for
any reason, then, without prejudice to Purchaser's rights under the Offer,
the Depositary may retain tendered Shares on behalf of Purchaser, and such
Shares may not be withdrawn except to the extent tendering shareholders are
entitled to withdrawal rights as described in Section 4. However, the ability
of Purchaser to delay the payment for Shares which Purchaser has accepted for
payment is limited by Rule 14e-1(c) under the Exchange Act, which requires
that a bidder pay the consideration offered or return the securities
deposited by or on behalf of holders of securities promptly after the
termination or withdrawal of such bidder's offer.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer (including the Minimum Condition), Purchaser
will disseminate additional tender offer materials and extend the Offer to
the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange
Act. The minimum period during which the Offer must remain open following
material changes in the terms of the Offer or information concerning the
Offer, other than a change in price or a change in percentage of securities
sought, will depend upon the facts and circumstances, including the relative
materiality of the terms or information. With respect to a change in price or
a change in percentage of securities sought, a minimum period of ten business
days is generally required to allow for adequate dissemination to
shareholders and investor response. If prior to the Expiration Date,
Purchaser should decide to increase the price per Share being offered in the
Offer, such increase will be applicable to all shareholders whose Shares are
accepted for payment pursuant to the Offer. See Section 1.
29
15. CONDITIONS TO THE OFFER
Notwithstanding any other term of the Offer, Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) under the Exchange Act
(relating to Purchaser's obligation to pay for or return tendered Shares
after the termination or withdrawal of the Offer), to pay for any Shares
tendered pursuant to the Offer unless (i) the Minimum Tender Condition has
been met, (ii) all waiting periods, if any, under the HSR Act applicable to
the purchase of Shares pursuant to the Offer shall have expired or have been
terminated and (iii) all required approvals, if any, by HUD. Furthermore,
notwithstanding any other term of the Offer, Purchaser shall not be required
to accept for payment or, subject as aforesaid, to pay for any Shares not
theretofore accepted for payment or paid for, and may, subject to the Merger
Agreement, amend the Offer, if upon the expiration date of the Offer, any of
the following conditions exists and shall be continuing:
(a) Representations and Warranties. The representations and warranties of
the Company contained in the Merger Agreement shall not be true and
correct in all respects in each case at and as of such time as though such
representations and warranties were made at and as of such time without
reference to a Xxxxxxxx Material Adverse Effect, except for those
representations and warranties which are expressly made as of a specified
earlier date, in which case such representations and warranties shall be
true and correct as of such specified date in all respects without
reference to a Xxxxxxxx Material Adverse Effect, and except in all cases
where the failure or failures of such representations and warranties to be
so true and correct would not have, singly or in the aggregate, a Xxxxxxxx
Material Adverse Effect. As used herein, "Xxxxxxxx Material Adverse
Effect" means any event, occurrence or condition which has or would be
reasonably likely to (i) have a material adverse effect on the business,
properties, assets, liabilities, results of operations or financial
condition of Xxxxxxxx and its Subsidiaries taken as a whole or (ii)
materially impair the ability of Xxxxxxxx to perform its obligations under
the Merger Agreement or consummate the transactions contemplated therein.
(b) Covenants. The Company shall not have performed and complied with any
agreement or condition on its part required by the Merger Agreement to be
performed or complied with prior to or at such time, which failure of
performance or compliance, singly or in the aggregate, has a Xxxxxxxx
Material Adverse Effect.
(c) Absence of Changes. From the date of the Merger Agreement through
such time, there shall have occurred any event or events, or change or
changes in the financial condition, business or operations of the Company
that, singly or in the aggregate, has a Xxxxxxxx Material Adverse Effect.
(d) Actions or Proceedings. There shall be any action or proceeding by or
before any Governmental Authority which has resulted in the issuance of an
injunction or order which (i) restrains, prohibits or materially delays
the consummation of the Offer, (ii) makes the purchase of, or payment for,
some or all of the Shares pursuant to the Offer or Merger illegal, or
results in a material delay in the ability of Purchaser to accept for
payment or pay for some or all of the Shares, (iii) compels Purchaser to
dispose of or hold separately all or any material portion of the Company's
and its Subsidiaries' business or assets, (iv) makes illegal or otherwise
directly or indirectly restrains or prohibits or imposes material
financial burdens, penalties or fines, or requires the payment of material
damages (other than financial burdens or damages resulting from any claim,
action, suit or proceeding arising from certain agreements and other
documents identified in the Merger Agreement or any circumstances relating
thereto) in connection with the making of the Offer, the acceptance for
payment of, payment for, or ownership, directly or indirectly, of some of
or all the Shares by Purchaser, or the consummation of the Offer or the
Merger, (v) otherwise prevents consummation of the Offer or the Merger, or
(vi) imposes material limitations on the ability of Purchaser effectively
(A) to acquire, hold or operate the business of the Company and its
Subsidiaries taken as a whole or (B) to exercise full rights of ownership
of the Shares acquired by it, including, but not limited to, the right to
vote the Shares purchased by it on all matters properly presented to the
shareholders of the Company, which, in either case, would effect a
material diminution in the value of the Company or the Shares.
30
(e) Injunctions. There shall have been any statute, rule, regulation,
order, decree or injunction enacted, promulgated or entered by any
Governmental Authority or any other action shall have been taken by any
Governmental Authority, in any such case on or after the date of the
Offer, that has resulted in any of the consequences referred to in clauses
(i) through (vi) of the paragraph (d) above.
(f) Force Majeure. There shall have occurred and be continuing (i) any
general suspension of trading in, or general limitation on prices for
securities on the New York Stock Exchange, Inc. or the AMEX (other than
suspensions of not more than one business day), (ii) the declaration of a
banking moratorium or any suspension of payments in respect of banks in
the United States (whether or not mandatory), (iii) the commencement of a
war, armed hostilities or other international or national calamity
involving the United States and having a Xxxxxxxx Material Adverse Effect,
or (iv) any material limitation by any Governmental Authority that
materially adversely affects generally the extension of credit by banks or
other financial institutions.
(g) Consents. The Company shall have failed to obtain the consents of The
Chase Manhattan Bank and HUD set forth in the Merger Agreement.
(h) Shareholders Agreement. The Shareholders Agreement among Purchaser
and the Principal Shareholders shall no longer be in full force and
effect, or any of the Principal Shareholders shall have breached any
material obligation thereunder.
(i) Gateway/Xxxxxxxx City. Either (i) the Second Amended and Restated
Memorandum of Understanding, dated March 29, 1996 by and among the City of
New York, its Department of Housing Preservation and Development, Gateway
Housing Associates and Gateway Estates Housing Development Fund Company,
Inc. with respect to the development of the site known as Spring Creek in
the Fresh Creek Urban Renewal Area of Brooklyn, New York or (ii) the
Managing Agency Agreement, dated July 1, 1979, between Xxxxxxxx City,
Inc., a predecessor-in-interest to Xxxxxxxx City Associates L.P., Xxxxxx
Management Company, predecessor-in-interest to Grenadier Realty Corp.
shall not be in full force and effect.
The foregoing conditions are for the sole benefit of Purchaser and may be
asserted by Purchaser regardless of the circumstances giving rise to any such
condition (other than a breach by Purchaser of the Merger Agreement) and may
be waived by Purchaser in whole or in part, at any time and from time to
time, in the sole discretion of Purchaser. The failure by Purchaser at any
time to exercise any of the foregoing rights will not be deemed a waiver of
any right and each right will be deemed an ongoing right which may be
asserted at any time and from time to time.
16. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS
GENERAL. Except as described in this Section 16, based upon a review of
publicly available filings by the Company with the SEC and other publicly
available information concerning the Company, neither Parent nor 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 acquisition of Shares by Purchaser pursuant to the
Offer, the Merger or otherwise, except as set forth below, or of any approval
or other action by any governmental, administrative or regulatory agency or
authority, domestic or foreign, that would be required prior to the
acquisition of Shares by Purchaser pursuant to the Offer, the Merger or
otherwise. Should any such approval or other action be required, Purchaser
currently contemplates that it would be sought. While Purchaser does not
currently intend to delay the acceptance for payment of Shares tendered
pursuant to the Offer pending the outcome of any such matter, there can be no
assurance that any such approval, other action, if needed, would be obtained
or would be obtained without substantial conditions or that adverse
consequences might not result to the Company's business or that certain parts
of the business of the Company might not have to be disposed of in the event
that such approvals were not obtained or any other actions were not taken.
Purchaser's obligation under the Offer to accept for payment and pay for
Shares is subject to certain conditions, including conditions relating to
certain of the legal matters discussed in this Section 17. See Section 16.
STATE TAKEOVER STATUTES. Section 912 of the BCL prohibits business
combination transactions involving a New York corporation (such as the
Company) and an "interested shareholder" (defined
31
generally as any person that directly or indirectly beneficially owns 20% or
more of the outstanding voting stock of the subject corporation) for three
years following the date such person became an interested shareholder, unless
special requirements are met or certain exceptions apply, including that
prior to such date the board of directors of the subject corporation approved
either the business combination or the transaction which resulted in such
person being an interested shareholder. In the Merger Agreement, the Company
has represented that the Board of Directors has duly and validly approved the
transactions contemplated by the Merger Agreement, including the Offer, the
Merger and the acquisition of Shares pursuant thereto, for purposes of
Section 912, and that such provisions of Section 912 are not applicable to
such transactions.
A number of states, including New York, have adopted "takeover" statutes
that purport to apply to attempts to acquire corporations that are
incorporated in such states, or whose business operations have substantial
economic effects in such states, or which have substantial assets, security
holders, employees, principal executive offices or principal places of
business in such states. The Company conducts business in a number of states
throughout the United States, some of which have enacted "takeover" statutes.
Except as discussed herein, Purchaser does not know whether any of these
statutes will, by their terms, apply to the Offer, and has not complied with
any such statutes. To the extent that certain provisions of these statutes
purport to apply to the Offer, Purchaser believes that there may be
reasonable bases for contesting such statutes. If any person should seek to
apply any state takeover statute, Purchaser would take such action as then
appears desirable, which action may include challenging the validity or
applicability of any such statute in appropriate court proceedings. If it is
asserted that one or more takeover statutes apply to the Offer, and it is not
determined by an appropriate court that such statute or statutes do not apply
or are invalid as applied to the Offer, Purchaser might be required to file
certain information with, or receive approvals from, the relevant state
authorities, and Purchaser might be unable to purchase or pay for Shares
tendered pursuant to the Offer, or be delayed in continuing or consummating
the Offer. In such case, Purchaser may not be obligated to accept for payment
or pay for Shares tendered. See Section 14.
New York has also adopted the New York Security Takeover Disclosure Act,
as amended (the "NYSTDA"), which purports to apply to any tender offer to
purchase any equity security of a "target company" (which is defined to mean
a corporation organized under the laws of the State of New York which has its
principal executive offices or significant business operations located within
the State of New York) if, after the tender offer, the offeror would be a
beneficial owner of more than 5% of any class of the issued and outstanding
equity securities of such target company. If applicable, the NYSTDA requires
an offeror to file with the Attorney General of the State of New York and
deliver to the target company a registration statement as soon as practicable
on the date of commencement of the tender offer. The NYSTDA also permits,
among other things, an investigation and public hearing to review the
adequacy of the required disclosure. Without conceding the constitutionality
or applicability of the NYSTDA or otherwise prejudicing their rights to
challenge the constitutionality or applicability of the NYSTDA, Purchaser and
Parent have filed a registration statement pursuant to the NYSTDA with the
New York Attorney General and have included in Schedule III to this Offer to
Purchase certain additional information required by NYSTDA concerning Parent
and Purchaser.
HUD TPA APPROVAL. HUD's Transfer of Physical Assets (TPA) process is the
means by which HUD reviews and approves transfers of ownership or control of
projects with HUD-insured mortgages. A so-called "full TPA review" is
required in cases involving transfer of (i) title of the project; (ii) any
interest in a mortgagor partnership which causes a dissolution of the
partnership under state law; or (iii) the entire beneficial interest in a
passive trust, which results in a change in control of the mortgaged asset.
As part of the TPA full review process, HUD examines whether the project's
physical repair and replacement needs and operating financial needs will be
met and whether the transfer complies with other HUD requirements.
A so-called "modified TPA review" is required in the case of (i) a
transfer in excess of 50% of the interests in a partnership mortgagor that
does not cause dissolution of the partnership; (ii) substitution of one or
more general partners of the mortgagor partnership; or (iii) other
transactions resulting in a change in control of a mortgagor. A modified TPA
review requires the submission of certain documentation to HUD and HUD review
of the physical and financial needs of the project to ascertain whether
additional project support is required.
32
The Purchaser believes that modified TPA approval will be required for the
Lands End One project, and that such approval will be obtained without
requiring additional project support. No assurance can be given, however,
that HUD will not take a view contrary to that of Purchaser with regard to
the applicability or outcome of the TPA process.
HUD 2530 PROCESS. The HUD Previous Participation Certification process is
HUD's centralized review of the past and present performance of principals
applying for participation (or acquiring a qualifying interest in a
participant) in HUD's multifamily housing programs.
The proposed new principal officers and directors of the Company, its
subsidiaries having a general partnership interest or acting as managing
agent of a housing development assisted by HUD or the holders of more than a
10% stock interest in the Company, or a 25% interest in an LLC owning more
than a 10% interest in the Company, or the LLC's operating or managing member
("Covered Principals"), must receive HUD Previous Participation clearance by
filing a HUD Form 2530 Previous Participation Certificate, which requires
detailed disclosure regarding previous participation in government housing
and other government programs, as well as issues of integrity and status. The
involvement of any Covered Principal during the past 10 years in certain
"Investigatory Events," including (i) certain mortgage or other defaults or
contractual non-compliance under housing finance agency projects; (ii)
unresolved findings as a result of HUD or other governmental investigations;
(iii) suspension or termination of payment under certain HUD assistance
contracts; (iv) felony convictions, complaints or indictments; and (v)
suspension or restriction from doing business with government agencies, could
form the basis for denial of HUD clearance.
While Xxxxxxxxx believes that HUD clearance will be obtained with respect
to any Covered Principals of Purchaser, there can be no assurance that this
will be the case.
ANTITRUST. Purchaser and Parent believe that the provisions of the HSR
Act are inapplicable to the acquisition of the Shares by Purchaser. While
private parties and state attorneys general may also bring legal action under
the antitrust laws in certain circumstances, based upon an examination of
publicly available information relating to the business in which Parent and
the Company are engaged, Parent and Purchaser believe that the acquisition of
Shares by Purchaser will not violate the antitrust laws. Nevertheless, there
can be no assurance that a challenge to the Offer or other acquisition of
Shares by Purchaser on antitrust grounds will not be made or, if such
challenge is made, of the result. See Section 15 for certain conditions to
the Offer, including conditions with respect to litigation and certain
governmental actions.
DISSENTERS' RIGHTS. Holders of Shares do not have appraisal rights as a
result of the Offer; however, holders of Shares will have certain rights
pursuant to the provisions of the BCL, including Sections 623 and 910 upon
consummation of the Merger including the right to dissent and demand
appraisal of Dissenting Shares thereof. Under the BCL, dissenting
shareholders who have filed with the Company a written notice of election to
dissent and who otherwise comply with the applicable procedures set forth in
the BCL will be entitled to receive a judicial determination of the fair
value of the Shares and to receive payment of such fair value in cash,
together with a fair rate of interest, if any. Any such judicial
determination of the fair value of the Shares could be based upon factors
other than, or in addition to, the price per Share to be paid in the Merger
or the market value of the Shares. The value so determined could be more or
less than the price per Share paid in the Merger. The foregoing summary does
not purport to be complete and is qualified in its entirety by reference to
the applicable provisions of the BCL.
FEDERAL RESERVE BOARD REGULATIONS. The margin regulations promulgated by
the Federal Reserve Board place restrictions on the amount of credit that may
be extended for the purpose of purchasing margin stock (including the Shares)
if such credit is secured directly or indirectly by margin stock. Xxxxxxxxx
believes that the financing of the acquisition of the Shares as contemplated
by the Financing Commitment will be made in accordance with the margin
regulations.
17. FEES AND EXPENSES
Purchaser and Parent have retained MacKenzie Partners, Inc. to act as the
Information Agent and ChaseMellon Shareholders Services, L.L.C. to serve as
the Depositary in connection with the Offer. The Information Agent and the
Depositary each will receive reasonable and customary compensation for their
33
services, be reimbursed for certain reasonable out-of-pocket expenses and be
indemnified against certain liabilities and expenses in connection therewith,
including certain liabilities and expenses under the federal securities laws.
Neither Purchaser nor Parent will pay any fees or commissions to any
broker or dealer or other person or entity (other than as described in the
preceding paragraph) in connection with the solicitation of tenders of Shares
pursuant to the Offer. Brokers, dealers, banks and trust companies will be
reimbursed by Purchaser upon request for customary mailing and handling
expenses incurred by them in forwarding material to their customers.
18. LEGAL PROCEEDINGS
On October 22, 1997, a complaint (the "Complaint") captioned Xxxxxxxx
Acquisition, Inc. x. Xxxxxxxx Corporation et al., Index No. 605392/97, was
filed in the Supreme Court of the State of New York, County of New York. The
Complaint was brought by Xxxxxxxx Acquisition, Inc., of which Xxxxx Xxxxxxx
is the President. The Company is a named defendant in the Complaint and
certain persons in privity with the Company, which may be intended to
represent Purchaser and related parties, are unnamed defendants. The
Complaint alleges, among other things, that the Company is in breach of
certain contractual obligations to the plaintiff arising out of the Frydman
Agreement and subsequent negotiations. The Complaint seeks specific
performance of the Company's alleged contractual obligations to the
plaintiff, injunctive relief with the respect to the commencement of the
Offer and unspecified damages. The Company believes that the allegations
contained in the Complaint are without merit, and the Company and Purchaser
intend to vigorously contest the action.
19. MISCELLANEOUS
Purchaser is not aware of any jurisdiction in which the making of the
Offer is prohibited by administrative or judicial action pursuant to any
valid state statute. If Purchaser becomes aware of any valid state statute
prohibiting the making of the Offer, Purchaser will make a good faith effort
to comply with such statute. If, after such good faith effort, Purchaser
cannot comply with such state statute, the Offer will not be made to (nor
will tenders be accepted from or on behalf of) holders of Shares in such
state.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER 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.
Purchaser and Parent have filed with the SEC the 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 Schedule 14D-1 and any
amendments thereto, including exhibits, should be available for inspection
and copies should be obtainable in the manner set forth in Section 8 (except
that such material will not be available at the regional offices of the SEC).
Xxxxxx Acquisition, LLC
Xxxxxx Acquisition, Inc.
October 23, 1997
34
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER
The name, business address, present principal occupation or employment and
five-year employment history of each director and executive officer of
Purchaser and certain other information are set forth below. All directors
and executive officers listed below are citizens of the United States. Unless
otherwise indicated, each such person has held his or her position with
Purchaser since its inception, and each such person has held each of the
positions set forth below for the past five years.
DIRECTORS OF PURCHASER
XXXXXXX X. XXXXX
Xx. Xxxxx is Principal of Xxxxxxxx Xxxxx Company, Inc., which is engaged
in the development, investment and management of commercial and residential
real estate. In addition, Xx. Xxxxx shares control of the general partner of
Avenue Investments L.P., which owns 10,900 shares of Common Stock of the
Company, and he thereby beneficially owns such shares. Xx. Xxxxx'x business
address is Xxxxxxxx Xxxxx Company, Inc., 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx
Xxxx, XX 00000.
XXXXXXXX X. XXXXXXX
Since 1996, Xx. Xxxxxxx has been Executive Vice President of Xxxxxxxx
Xxxxx Company, Inc., which is engaged in the development, investment and
management of commercial and residential real estate. Xx. Xxxxxxx was Vice
President and General Counsel of Xxxxxxxx Xxxxx Company, Inc. from 1990 until
he became Executive Vice President in 1996. Xx. Xxxxxxx'x business address is
Xxxxxxxx Xxxxx Company, Inc., 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX
00000.
XXXXXXX X. XXXXXX
Xx. Xxxxxx has been, since August, 1994, the President of Blackacre
Capital Management Corp., the general partner of Blackacre Capital Group,
L.P., the real estate investment affiliate of the Cerberus Partners funds and
other funds under common management. From June 1993 through July 1994, Xx.
Xxxxxx was a Managing Director of Xxxxxxxxxxx & Co., a securities firm,
located at World Financial Plaza, New York, New York. From September 1991
through June 1993, Xx. Xxxxxx was a Vice President of CS First Boston Corp.,
a securities firm, located at that time at 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx
Xxxx. Xx. Xxxxxx'x business address is Blackacre Capital Group, L.P., 000
Xxxx Xxxxxx, 00xx xxxxx, Xxx Xxxx, XX 00000.
XXXXXX X. XXXXXX
Xx. Xxxxxx has been, since July 1996, a Vice President of Blackacre
Capital Management Corp., From September 1994 through July 1996, Xx. Xxxxxx
was a Principal of Apollo Real Estate Advisors, a real estate investment and
financing firm, located at 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx.
From September 1993 through October 1994, Xx. Xxxxxx was a Principal of
Xxxxxxxx International, a real estate investment and financing firm, located
at 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx. From May 1991 through September
1993, Xx. Xxxxxx was a Vice President and the Chief Financial Officer of
Maxxam Property Co., a real estate investment and financing firm, located at
0000 Xxx Xxxxxx Xxxxxxxxx, Xxxxxxx, Xxxxx 00000. Xx. Xxxxxx'x business
address is Blackacre Capital Group, L.P., 000 Xxxx Xxxxxx, 00xx xxxxx, Xxx
Xxxx, XX 00000.
XXXXXX XXXXXX
Xx. Xxxxxx has been the principal of Argent Ventures LLC, a New York
limited liability company which engages in the purchase and sale of real
estate investments, since January 1997. From January 1993 through January
1997, Xx. Xxxxxx was a Managing Director of Amroc Investments, Inc. Xx.
Xxxxxx is a principal of The Xxxxxx Corporation, a real estate management
firm. Xx. Xxxxxx'x business address is Argent Ventures LLC, 000 Xxxxxxx
Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000.
I-1
XXXX XXXXX
Xx. Xxxxx is the founder and a Managing Director of Amroc Investments,
Inc., which is engaged in trading distressed debt. In addition, Xx. Xxxxx
shares control of the general partner of Avenue Investments L.P., which owns
10,900 shares of Common Stock of the Company, and he thereby beneficially
owns such shares. Xx. Xxxxx'x business address is Amroc Investments, Inc.,
000 Xxxxxxx Xxxxxx, Xxx Xxxx, XX 00000.
EXECUTIVE OFFICERS OF PURCHASER
XXXXXXXX X. XXXXXXX
President of Purchaser.
XXXXXX X. XXXXXX
Vice President, Secretary and Treasurer of Purchaser. Xx. Xxxxxx is the
Chief Financial Officer of Xxxxxxxx Xxxxx Company, Inc. Xx. Xxxxxx'x business
address is Xxxxxxxx Xxxxx Company, Inc., 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000.
CONTROLLING PERSON OF PURCHASER
Parent owns all of the issued and outstanding capital stock of Purchaser.
I-2
SCHEDULE II
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND CERTAIN OTHER PERSONS
The name of each director and executive officer of Parent, of Parent's
members and of certain other persons are set forth below. The business
address, present principal occupation or employment and five-year employment
history of such persons are set forth in Schedule I or below. All directors
and executive officers listed below are citizens of the United States.
DIRECTORS OF PARENT
XXXXXXX X. XXXXX
XXXXXXXX X. XXXXXXX
XXXXXXX X. XXXXXX
XXXXXX X. XXXXXX
XXXXXX XXXXXX
XXXX XXXXX
EXECUTIVE OFFICERS OF PARENT
XXXXXXXX X. XXXXXXX
President
XXXXXX X. XXXXXX
Vice President, Secretary and Treasurer
MEMBERS OF PARENT AND CERTAIN OTHER PERSONS
Information with respect to XX XXXXXX, LLC, XX XXXXXX, LLC, AM XXXXXX, LLC
and BA STARRT, LLC, the members of Parent, and certain other persons is set
forth below.
XX XXXXXX, LLC
Executive Officers: Xxxxxxxx X. Xxxxxxx, President; Xxxxxxx X. Xxxxx, Vice
President and Secretary, Xxxxxx X. Xxxxxx, Vice President and Treasurer
Controlling Person: Xxxxxxx X. Xxxxx
XX XXXXXX, LLC
Controlling Person: Xxxxxx Xxxxxx
AM XXXXXX, LLC
Controlling Person: Xxxx Xxxxx
XX XXXXXX, LLC
Controlling Persons: Xxxxxxx X. Xxxxxx is the sole shareholder of Blackacre
Capital Management Corp., which is the general partner of Blackacre Capital
Group, L.P., a Delaware limited partnership, which is the managing member of
XX XXXXXX, LLC.
See below for Executive Officers and Directors of Blackacre Capital
Management Corp.
II-1
SCHEDULE III
ADDITIONAL INFORMATION REQUIRED BY THE
NEW YORK SECURITY TAKEOVER DISCLOSURE ACT
Purchaser was incorporated on September 25, 1997, and Parent was organized
on October 10, 1997. Neither has engaged in any business since its
incorporation or organization other than that incident to its incorporation
or organization and in connection with the Offer and the Merger. Accordingly,
neither Purchaser nor Parent has engaged in any significant community
activities nor has Purchaser or Parent made any significant community
activities or charitable, cultural, educational or civic contributions.
Neither Purchaser or Parent has any employees. Accordingly, neither has
any existing pension plans, profit-sharing plans, savings plans, has not
provided any educational opportunities or relocated adjustments to any
employees, and has had no labor or employment related claims or disputes.
Neither Parent nor Purchaser has any present plans or proposals relating
to material changes in the Company's business, corporate structure,
management, personnel or activities, which would have a substantial impact on
residents of the State of New York.
Except as set forth in this Schedule III, all information regarding
Purchaser, Parent and the Company and the Offer required to be disclosed
pursuant to the NYSTDA is set forth in this Offer to Purchase and is
incorporated by reference in the Registration Statement filed pursuant to the
NYSTDA.
III-1
The Letter of Transmittal, certificates for Shares and any other required
documents should be sent or delivered by each shareholder of the Company or
his broker, dealer, commercial bank or other nominee to the Depositary at one
of its addresses set forth below.
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By Hand: By Overnight Courier: By Mail:
000 Xxxxxxxx -00xx Xxxxx 00 Xxxxxxxxxx Xxxx P.O. Box 3301
New York, NY 00000 Xxxxxxxxxx Xxxx, XX 00000 Xxxxx Xxxxxxxxxx, XX 00000
Attn: Reorganization Department Mail Drop: Attn: Reorganization Department
Reorganization Department
Other information
By Facsimile (for eligible institutions only):
(000) 000-0000
Confirm facsimile by telephone only:
(000) 000-0000
Any questions or 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 at its telephone numbers
and location listed below. You may also contact your broker, dealer,
commercial bank or trust company or nominee for assistance concerning the
Offer.
The Information Agent for the Offer is:
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MACKENZIE PARTNERS, INC.
LOGO
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000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
(000) 000-0000 (call collect)
or
CALL TOLL FREE: (000) 000-0000
