<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
PURSUANT TO SECTION 14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 3) *
TSI INCORPORATED
(Name of Subject Company [Issuer])
JOHN J. FAUTH, JJF GROUP, INC. AND JJF ACQUISITION, INC.
(Bidder)
COMMON STOCK $.10 PAR VALUE
(Title of Class of Securities)
872876107
(CUSIP Number of Class of Securities)
--------------------------
JOHN J. FAUTH
3100 METROPOLITAN CENTRE
333 SOUTH 7TH STREET
MINNEAPOLIS, MINNESOTA 55402
(612) 673-6700
(Name, Address and Telephone numbers of Person Authorized
to Receive Notices and Communications on Behalf of Bidder)
COPIES TO:
RICHARD D. MCNEIL, ESQ.
RICHARD A. PRIMUTH, ESQ.
LINDQUIST & VENNUM P.L.L.P.
4200 IDS CENTER
MINNEAPOLIS, MINNESOTA 55402
(612) 371-3211
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
TRANSACTION VALUATION AMOUNT OF FILING FEE(2)
<S> <C>
$154,476,140(1) $30,895.23
</TABLE>
(1) Estimated for purposes of calculating the filing fee only. The calculation
is based on the purchase of an aggregate of 11,034,000 shares of TSI
Incorporated, which (i) includes 11,232,816 shares of currently outstanding
shares of TSI common stock as of June 16, 1999 as disclosed in TSI's Form
10-K for the fiscal year ended March 31, 1999; (ii) includes 810,194 shares
of TSI's common stock subject to outstanding options as of March 31, 1999 as
disclosed in TSI's Form 10-K; and (iii) excludes 1,009,000 shares of common
stock owned by the bidder.
(2) Calculated based upon 1/50 of 1% of the transaction valuation.
(*) This statement is also being filed to satisfy the reporting requirements of
Section 13(d) of the Securities and Exchange Act of 1934, as amended, and
shall constitute Amendment No. 3 to the Statement of Schedule 13(D), filed
with the Securities and Exchange Commission on June 2, 1999 by John J. Fauth
as amended.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
<TABLE>
<S> <C> <C> <C>
Amount Previously Paid: Not applicable. Filing Party: Not applicable.
Form or Registration No.: Not applicable. Date Filed: Not applicable.
</TABLE>
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- --------------------------------------------------------------------------------
(CONTINUED ON FOLLOWING PAGE(S))
(Page 1 of 9 Pages)
<PAGE>
SCHEDULE 14D-1
(CUSIP NO. OF CLASS OF SECURITIES) 872876107 Page 2 of 9 Pages
- --------------------------------------------------------------------------------
(1) Names of reporting person John J. Fauth
I.R.S. Identification Nos. of above persons (entities only)
- --------------------------------------------------------------------------------
(2) Check the appropriate box if a member of a group (see instructions).
(a) / /
(b) / /
- --------------------------------------------------------------------------------
(3) SEC use only
- --------------------------------------------------------------------------------
(4) Source of funds (see instructions)
PF, 00
- --------------------------------------------------------------------------------
(5) Check if disclosure of legal proceedings is required pursuant to Items 2(e)
or 2(f).
/ /
- --------------------------------------------------------------------------------
(6) Citizenship or place of organization
United States
- --------------------------------------------------------------------------------
(7) Aggregate amount beneficially owned by each reporting person.
1,009,000
- --------------------------------------------------------------------------------
(8) Check if the aggregate amount in Row (7) excludes certain shares (see
instructions).
/ /
- --------------------------------------------------------------------------------
(9) Percent of class represented by amount in Row (7)
9.0%
- --------------------------------------------------------------------------------
(10) Type of reporting person (see instructions)
IN
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 14D-1
(CUSIP NO. OF CLASS OF SECURITIES) 872876107 Page 3 of 9 Pages
- --------------------------------------------------------------------------------
(1) Name of reporting person JJF Group, Inc.
I.R.S. Identification Nos. of above persons (entities only)
- --------------------------------------------------------------------------------
(2) Check the appropriate box if a member of a group (see instructions).
(a) / /
(b) / /
- --------------------------------------------------------------------------------
(3) SEC use only
- --------------------------------------------------------------------------------
(4) Source of funds (see instructions)
OO
- --------------------------------------------------------------------------------
(5) Check if disclosure of legal proceedings is required pursuant to Items 2(e)
or 2(f)
/ /
- --------------------------------------------------------------------------------
(6) Citizenship or place of organization
United States
- --------------------------------------------------------------------------------
(7) Aggregate amount beneficially owned by each reporting person
1,009,000
- --------------------------------------------------------------------------------
(8) Check if the aggregate amount in Row (7) excludes certain shares (see
instructions).
/ /
- --------------------------------------------------------------------------------
(9) Percent of class represented by amount in Row (7)
9.0%
- --------------------------------------------------------------------------------
(10) Type of reporting person (see instructions)
CO
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<PAGE>
SCHEDULE 14D-1
(CUSIP NO. OF CLASS OF SECURITIES) 872876107 Page 4 of 9 Pages
- --------------------------------------------------------------------------------
(1) Name of reporting person JJF Acquisition, Inc.
I.R.S. Identification Nos. of above persons (entities only)
- --------------------------------------------------------------------------------
(2) Check the appropriate box if a member of a group (see instructions).
(a) / /
(b) / /
- --------------------------------------------------------------------------------
(3) SEC use only
- --------------------------------------------------------------------------------
(4) Source of funds (see instructions)
OO
- --------------------------------------------------------------------------------
(5) Check if disclosure of legal proceedings is required pursuant to Items 2(e)
or 2(f)
/ /
- --------------------------------------------------------------------------------
(6) Citizenship or place of organization
United States
- --------------------------------------------------------------------------------
(7) Aggregate amount beneficially owned by each reporting person
1,009,000
- --------------------------------------------------------------------------------
(8) Check if the aggregate amount in Row (7) excludes certain shares (see
instructions).
/ /
- --------------------------------------------------------------------------------
(9) Percent of class represented by amount in Row (7)
9.0%
- --------------------------------------------------------------------------------
(10) Type of reporting person (see instructions)
CO
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1: SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is TSI Incorporated, a Minnesota
corporation (the "Company"), and the address of its principal executive offices
is 500 Cardigan Road, Shoreview, Minnesota 55126.
(b) This Statement on Schedule 14D-1 relates to the offer by JJF
Acquisition, Inc., a Minnesota corporation (the "Purchaser"), to purchase all
outstanding shares of Common Stock, par value $.10 per share, (the "Shares"), of
the Company at $14.00 per share, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase (the "Offer to
Purchase") and in the related Letter of Transmittal, copies of which are
attached hereto as Exhibits (a)(1) and (a)(2) (which, together with any
amendments or supplements thereto, collectively constitute the "Offer"). The
information set forth in the Introduction to the Offer to Purchase (the
"Introduction") is incorporated herein by reference.
(c) The information set forth in Section 6 ("Price Range of the Shares;
Dividends") of the Offer to Purchase is incorporated herein by reference.
ITEM 2: IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Statement on Schedule 14D-1 is filed by JJF
Acquisition, Inc., a Minnesota corporation (the "Purchaser"), JJF Group, Inc., a
Minnesota corporation and the parent company of the Purchaser, ("JJF Group") and
John J. Fauth ("Mr. Fauth"), the sole shareholder of JJF Group. The Purchaser
and JJF Group are each Minnesota corporations, and Mr. Fauth is an individual.
The Purchaser's, JJF Group's and Mr. Fauth's business address is 3100
Metropolitan Centre, 333 South 7(th) Street, Minneapolis, Minnesota 55402.
Information concerning the principal business of Mr. Fauth, the Purchaser and
JJF Group is set forth in Section 9 ("Certain Information Concerning the
Purchaser, JJF Group and Mr. Fauth") of the Offer to Purchase, and is
incorporated herein by reference. The names, business addresses, present
principal occupations or employments, material occupations, positions, offices
or employment during the last five years and citizenship of the directors and
executive officers of JJF Group and the Purchaser are set forth in Schedule I to
the Offer to Purchase and are incorporated herein by reference.
(e) and (f) The Purchaser, JJF Group, Mr. Fauth or, to the best knowledge
of any of them, any of the persons listed on Schedule I to the Offer of
Purchase, has not during the last five years: (i) been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors); or (ii) been
a party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting activities
subject to, Federal or state securities laws or finding any violation of such
laws.
ITEM 3: PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) and (b) The information set forth in the Introduction, Section 9
("Certain Information Concerning the Purchaser, JJF Group and Mr. Fauth"),
Section 10 ("Background of the Offer; Contacts with the Company") and Schedule
II to the Offer to Purchase, is incorporated herein by reference.
ITEM 4: SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) and (b) The information set forth in Section 12 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable
ITEM 5: PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the Introduction and Section 11
("Purpose of the Offer and Plans for the Company") of the Offer to Purchase is
incorporated herein by reference.
Page 5 of 9
<PAGE>
(f) and (g) The information set forth in Section 7 ("Possible Effects of
the Offer on the Market for the Shares; Stock Exchange Listing; Exchange Act
Registration; Margin Regulations") of the Offer to Purchase is incorporated
herein by reference.
ITEM 6: INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth in Section 9 ("Certain Information
Concerning the Purchaser and Mr. Fauth") and Schedule II of the Offer to
Purchase is incorporated herein by reference.
ITEM 7: CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction, Section 9 ("Certain
Information Concerning the Purchaser, JJF Group and Mr. Fauth"), Section 10
("Background of the Offer; Contacts with the Company") and Section 11 ("Purpose
of the Offer and Plans for the Company") of the Offer to Purchase is
incorporated herein by reference.
ITEM 8: PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in Section 16 ("Certain Fees and Expenses") of the
Offer to Purchase is incorporated herein by reference.
ITEM 9: FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
Not applicable. The Purchaser was formed on July 2, 1999 solely for
acquiring and holding shares of the Company, and its sole shareholder is JJF
Group which is wholly-owned by Mr. Fauth. The Purchaser has conducted no
operations. The Purchaser's assets consist solely of $10,000 cash. The Purchaser
expects to receive a contribution from Mr. Fauth of 1,009,000 shares of the
Company if the tender offer is consummated. The Purchaser has no liabilities.
The Purchaser's only source of income is interest earned on the cash and
dividends paid on the Shares transferred to it. The information set forth in
Section 12 ("Source and Amount of Funds") of the Offer to Purchase is
incorporated herein by reference.
ITEM 10: ADDITIONAL INFORMATION.
(a) The information set forth in Section 11 ("Purpose of the Offer, Plans
for the Company") of the Offer to Purchase is incorporated herein by reference.
(b)-(d) The information set forth in Section 15 ("Certain Legal Matters;
Required Regulatory Approvals") of the Offer to Purchase is incorporated herein
by reference.
(e) The information set forth in the Introduction and Section 10
("Background of the Offer; Contacts with the Company") of the Offer to Purchase
is incorporated herein by reference.
(f) The information set forth in (i) the Offer to Purchase, and (ii) the
Letter of Transmittal is incorporated herein by reference.
ITEM 11: MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase dated July 12, 1999.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
Page 6 of 9
<PAGE>
(a)(5) Form of Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(a)(6) Text of press release issued by the Purchaser dated July 9, 1999.
(a)(7) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(8) Form of summary advertisement dated June 13, 1999.
(a)(9) Definitive Proxy Materials filed July 2, 1999 with the Securities
and Exchange Commission by John J. Fauth and JJF Group, Inc. for the Annual
Meeting of Shareholders of TSI Incorporation (SEC File No. 000-02958),
incorporated herein by reference.
(a)(10) Supplement of July 12, 1999 to Proxy Statement of John J. Fauth and
JJF Group, Inc.
(b)(1) Highly Confident Letter from BNY Capital Markets, Inc. dated July 9,
1999.
(b)(2) Form of Margin Loan Agreement (incorporated herein by reference from
the Statement of Schedule 13(D), filed with the Securities and Exchange
Commission on June 2, 1999 by John J. Fauth.
(c) None.
(d) None.
(e) Not applicable.
(f) None.
Page 7 of 9
<PAGE>
SIGNATURE
After due inquiry and to the best of the undersigned's knowledge and belief,
the undersigned certifies that the information set forth in this statement is
true, complete and correct.
<TABLE>
<S> <C> <C>
Dated: July 12, 1999 JJF ACQUISITION, INC.
By: /s/ JOHN J. FAUTH
--------------------------------------
Name: John J. Fauth,
Title: President
JJF GROUP, INC.
By: /s/ JOHN J. FAUTH
--------------------------------------
Name: John J. Fauth,
Title: President
/s/ JOHN J. FAUTH
--------------------------------------
John J. Fauth
</TABLE>
Page 8 of 9
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NAME
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
(a)(1) Offer to Purchase dated July 12, 1999.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
(a)(5) Form of Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees.
(a)(6) Text of press release issued by the Purchaser dated July 9, 1999.
(a)(7) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
(a)(8) Form of summary advertisement dated July 13, 1999.
(a)(9) Definitive Proxy Materials filed July 2, 1999 with the Securities and Exchange Commission by John J.
Fauth and JJF Group, Inc. for the Annual Meeting of Shareholders of TSI Incorporation (SEC File No.
000-02958), incorporated herein by reference.
(a)(10) Supplement of July 12, 1999 to Proxy Statement of John J. Fauth and JJF Group, Inc.
(b)(1) Highly Confident Letter from BNY Capital Markets, Inc. dated July 9, 1999.
(b)(2) Form of Margin Loan Agreement (incorporated herein by reference from the Statement of Schedule 13(D),
filed with the Securities and Exchange Commission on June 2, 1999 by John J. Fauth.
(c) None.
(d) None.
(e) Not applicable.
(f) None.
</TABLE>
Page 9 of 9
<PAGE>
EXHIBIT (a)(1)
OFFER TO PURCHASE
FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK
OF
TSI INCORPORATED
AT
$14.00 NET PER SHARE IN CASH
BY
JJF ACQUISITION, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN TIME,
ON WEDNESDAY, AUGUST 11, 1999, UNLESS THE OFFER IS EXTENDED TO A LATER DATE AND
TIME (THE "EXPIRATION DATE"). SHARES THAT ARE TENDERED PURSUANT TO THE OFFER MAY
BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE THAT NUMBER OF SHARES,
WHICH, WHEN ADDED TO THE NUMBER OF SHARES BENEFICIALLY OWNED BY JJF ACQUISITION,
INC. (THE "PURCHASER") AND ITS AFFILIATES, REPRESENTS A MAJORITY OF THE TOTAL
NUMBER OF OUTSTANDING SHARES OF TSI INCORPORATED (THE "COMPANY") ON A FULLY
DILUTED BASIS (THE "MINIMUM TENDER CONDITION"), (2) THE PURCHASER BEING
SATISFIED, IN ITS SOLE DISCRETION, THAT THE COMPANY'S SHAREHOLDERS HAVE AMENDED
THE COMPANY'S BYLAWS TO OPT OUT OF THE MINNESOTA CONTROL SHARE ACQUISITION ACT
AND THAT THE PURCHASER HAS VOTING RIGHTS FOR ALL SHARES ACQUIRED PURSUANT TO THE
OFFER (THE "CONTROL SHARE CONDITION"), (3) THE PURCHASER BEING SATISFIED, IN ITS
SOLE DISCRETION, THAT THE COMPANY HAS TAKEN APPROPRIATE MEASURES SUCH THAT THE
OFFER IS APPROVED IN ACCORDANCE WITH THE MINNESOTA BUSINESS COMBINATION ACT (THE
"BUSINESS COMBINATION CONDITION"), (4) THE ELECTION BY SHAREHOLDER VOTE OF THE
PURCHASER'S DIRECTOR NOMINEES AT THE 1999 ANNUAL MEETING OF SHAREHOLDERS (THE
"ELECTION CONDITION"), (5) THE PURCHASER BEING SATISFIED, IN ITS SOLE
DISCRETION, THAT THE COMPANY'S SHAREHOLDERS AT THEIR JULY 22, 1999 ANNUAL
MEETING HAVE ADOPTED FIVE PROPOSALS TO AMEND THE COMPANY'S ARTICLES OF
INCORPORATION AND BYLAWS WHICH ARE DESIGNED TO LIMIT THE COMPANY'S ABILITY TO
TAKE VARIOUS DEFENSIVE MEASURES TO HINDER OR PREVENT THE COMPANY'S SHAREHOLDERS
FROM CONSIDERING THIS OR OTHER ACQUISITION OFFERS AND (6) THE PURCHASER BEING
SATISFIED, IN ITS SOLE DISCRETION, THAT IT HAS OBTAINED SUFFICIENT FINANCING TO
ENABLE IT TO CONSUMMATE THE OFFER (THE "FINANCING CONDITION").
THERE ARE PROCEDURES AVAILABLE TO THE COMPANY'S BOARD OF DIRECTORS IN THE
COMPANY'S BYLAWS AND THE MINNESOTA BUSINESS CORPORATION ACT PURSUANT TO WHICH IT
CAN ACT PROMPTLY TO SATISFY THE BUSINESS COMBINATION CONDITION.
THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS. SEE THE
INTRODUCTION AND SECTIONS 14 AND 15 OF THE OFFER.
WE URGE THE BOARD TO COOPERATE WITH OUR EFFORTS TO CONSUMMATE THE OFFER
PROMPTLY.
------------------------
THE DEALER MANAGER FOR THE OFFER IS:
R.J. STEICHEN & CO.
<PAGE>
July 12, 1999
<PAGE>
IMPORTANT
Any shareholder desiring to tender all or any portion of such shareholder's
Shares (as defined herein), should either: (a) complete and sign the Letter of
Transmittal (or a facsimile thereof) in accordance with the instructions in the
Letter of Transmittal and mail or deliver it together with the certificate(s)
representing tendered Shares and any other required documents, to the Depositary
(as defined herein) or tender such Shares pursuant to the procedures for
book-entry transfer set forth in Section 3; or (b) request such shareholder's
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for him. 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 he
desires to tender such Shares.
A shareholder who desires to tender his Shares and whose certificates
representing 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.
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective 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 other related materials may be obtained from the Information Agent or from
brokers, dealers, commercial banks and trust companies.
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<C> <S> <C>
INTRODUCTION................................................................................................. 2
THE TENDER OFFER............................................................................................. 8
1. TERMS OF THE OFFER................................................................................ 8
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR THE SHARES................................................. 9
3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES........................................... 10
4. WITHDRAWAL RIGHTS................................................................................. 13
5. CERTAIN UNITED STATES TAX CONSEQUENCES............................................................ 14
6. PRICE RANGE OF THE SHARES; DIVIDENDS.............................................................. 15
7. POSSIBLE EFFECTS OF THE OFFER ON THE MARKET FOR THE SHARES; NASDAQ LISTING; EXCHANGE ACT
REGISTRATION; MARGIN REGULATIONS................................................................ 16
8. CERTAIN INFORMATION CONCERNING THE COMPANY........................................................ 17
9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND MR. FAUTH........................................ 29
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY................................................ 30
11. PURPOSE OF THE OFFER; THE MERGER; PLANS FOR THE COMPANY........................................... 32
12. SOURCE AND AMOUNT OF FUNDS........................................................................ 34
13. DIVIDENDS AND DISTRIBUTIONS....................................................................... 35
14. CERTAIN CONDITIONS OF THE OFFER................................................................... 35
15. CERTAIN LEGAL MATTERS; REQUIRED REGULATORY APPROVALS.............................................. 39
16. CERTAIN FEES AND EXPENSES......................................................................... 42
17. MISCELLANEOUS..................................................................................... 42
SCHEDULE I................................................................................................... I-1
SCHEDULE II.................................................................................................. II-1
</TABLE>
1
<PAGE>
TO THE HOLDERS OF SHARES OF COMMON STOCK OF TSI INCORPORATED:
INTRODUCTION
JJF Acquisition, Inc. (the "Purchaser") hereby offers to purchase all
outstanding shares of Common Stock, par value $.10 per share (the "Shares"), of
TSI Incorporated, a Minnesota corporation (the "Company" or "TSI"), at a
purchase price of $14.00 per share, net to the seller in cash, without interest
thereon, in each case upon the terms and subject to the conditions set forth in
this Offer to Purchase and in the related Letter of Transmittal (which, together
with any amendments or supplements hereto or thereto, collectively constitute
the "Offer").
Tendering 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 the 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 income tax
withholding of 31% of the gross proceeds payable to such shareholder or other
payee pursuant to the Offer. See Section 3. The Purchaser will pay all charges
and expenses of R.J. Steichen & Co., as Dealer Manager (the "Dealer Manager"),
Firstar Bank of Minnesota, N.A., which is serving as Depositary (the
"Depositary"), and Beacon Hill Partners, Inc., which is serving as Information
Agent (the "Information Agent"), incurred in connection with the Offer. See
Section 16.
The purpose of the Offer is to enable the Purchaser to acquire control of,
and the entire equity interest in, the Company. The Offer, as the first step in
the acquisition of the Company, is intended to facilitate the acquisition of all
the Shares. The Purchaser currently intends, as soon as practicable following
consummation of the Offer, to seek to have the Company consummate a merger or
similar business combination (the "Merger") with the Purchaser, pursuant to
which each then outstanding Share (other than Shares owned by the Purchaser or
its affiliates) would be converted into the right to receive in cash in the same
amount as is received in the Offer, and the Company would become a wholly-owned
subsidiary of JJF Group, Inc., a Minnesota corporation and the parent company of
the Purchaser ("JJF Group").
JJF Group and Mr. Fauth have filed definitive proxy materials with the
Securities and Exchange Commission (the "Commission") to solicit (the
"Solicitation") holders of Shares at the Company's 1999 Annual Meeting of
Shareholders scheduled to be held on July 22, 1999 (the "1999 Annual Meeting")
to adopt or facilitate the adoption of the Proposals (as defined below). The
Proposals are designed to (1) elect three directors to the Company's Board who
are committed, subject to their fiduciary duties to the Company, to removing any
impediments to the ability of holders of Shares to choose freely whether to
accept the Offer, (2) prevent the application the Minnesota Control Share
Acquisition Act to the Company and the Offer, (3) require the unanimous approval
of the Board of Directors before the Company can adopt a defensive action whose
primary purpose is to prevent a change in control of the Company, (4) require
the Company to hold its fiscal year 2000 annual meeting not later than July 20,
2000 and to publicly announce the meeting date by June 20, 2000, (5) repeal any
Bylaws adopted by the Board during the period from May 29, 1999 through the date
of the 1999 Annual Meeting, (6) prohibit the Board from repealing or amending
any Bylaws adopted by the shareholders and (7) during the period from the 1999
Annual Meeting until December 31, 2000, prohibit the Company from adopting a
shareholder rights plan or issuing new securities which could increase the
number of outstanding shares to more than 11,500,000 shares of common stock
without the unanimous approval of the Board (collectively, the "Proposals"). The
Solicitation will be made only pursuant to separate solicitation materials,
definitive copies of which were filed with the Securities and Exchange
Commission (the "Commission") on July 2, 1999, which comply with the
requirements of Section 14(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the rules and regulations promulgated thereunder.
The Purchaser, JJF Group and Mr. Fauth intend to continue to seek to
negotiate with the Company with respect to the acquisition of the Company. The
Purchaser reserves the right to amend or withdraw the
2
<PAGE>
Offer upon entry into an acquisition agreement or other agreement regarding a
business combination with the Company or otherwise or to negotiate an
acquisition agreement or other agreement regarding a business combination with
the Company not involving a tender offer. See Section 14.
THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF A PROXY, CONSENT OR
AUTHORIZATION FOR OR WITH RESPECT TO THE 1999 ANNUAL MEETING OR ANY SPECIAL
MEETING OF THE COMPANY'S SHAREHOLDERS. ANY SUCH SOLICITATION WHICH THE
PURCHASER, JJF GROUP OR MR. FAUTH MAY MAKE WILL BE MADE ONLY PURSUANT TO
SEPARATE SOLICITATION MATERIALS COMPLYING WITH ALL APPLICABLE REQUIREMENTS OF
SECTION 14(a) OF THE EXCHANGE ACT AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER.
The Purchaser reserves the right to assign its right to purchase Shares
tendered pursuant to the Offer and its other rights under the Offer to one or
more of its affiliates. Any such assignment shall not relieve the Purchaser of
its obligations under the Offer and shall in no way prejudice the rights of
tendering shareholders to receive payment for Shares duly tendered.
CERTAIN CONDITIONS TO THE OFFER
The Offer is subject to the fulfillment of certain conditions, including the
following:
MINIMUM TENDER CONDITION. CONSUMMATION OF THE OFFER IS CONDITIONED (THE
"MINIMUM TENDER CONDITION") UPON THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN
PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION 1) THAT NUMBER OF SHARES,
WHICH WHEN ADDED TO THE NUMBER OF SHARES OWNED BY THE PURCHASER AND ITS
AFFILIATES, REPRESENTS A MAJORITY OF THE TOTAL NUMBER OF OUTSTANDING SHARES ON A
FULLY DILUTED BASIS ON THE DATE OF PURCHASE.
According to the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1999, at June 16, 1999 (the "1999 10-K"), 11,232,816 Shares were
issued and outstanding. According to the 1999 10-K, at March 31, 1999, options
covering a total of 810,194 Shares were outstanding under the Company's various
stock option plans. The Purchaser currently beneficially owns 1,009,000 Shares.
Based on the foregoing and assuming that no options were granted after March 31,
1999, and no options have been exercised or have expired and no Shares have
otherwise been issued or repurchased by the Company, there would be 12,043,010
Shares outstanding on a fully diluted basis and the Minimum Tender Condition
would be satisfied if 5,012,506 Shares are validly tendered pursuant to the
Offer and not properly withdrawn. However, the actual number of Shares that must
be validly tendered pursuant to the Offer and not properly withdrawn in order to
satisfy the Minimum Tender Condition will depend on the facts as they exist on
the date of purchase.
THE CONTROL SHARE CONDITION. THE OFFER IS CONDITIONED UPON THE PURCHASER
HAVING DETERMINED IN ITS SOLE DISCRETION THAT THE MINNESOTA CONTROL SHARE
ACQUISITION ACT IS INAPPLICABLE TO THE OFFER OR THAT IT OTHERWISE WILL NOT HAVE
THE EFFECT OF DENYING VOTING RIGHTS TO THE SHARES ACQUIRED BY THE PURCHASER IN
THE OFFER (THE "CONTROL SHARE CONDITION").
The Company is currently subject to Section 302A.671 of the Minnesota
Business Corporation Act (the "Control Share Acquisition Act"). The Control
Share Acquisition Act provides that a party which acquires more than 20% of the
Company will not have any voting power with respect to the Shares acquired over
the 20% threshold, unless the acquirer provides an "information statement" to
the shareholders of the Company and obtains approval to restore those rights
from (i) the affirmative vote of the holders of a majority of all outstanding
Share entitled to vote, and (ii) the affirmative vote of a majority of all
outstanding Shares entitled to vote, excluding holders of "interested shares"
(generally, Shares held by the acquirer, by officers of the company and by any
employee-directors of the company). Consequently,
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this statute makes it highly undesirable for the Purchaser or any other acquirer
to pass the 20% ownership threshold and therefore, impossible to conduct the
Offer for the Shares. A Minnesota corporation may opt out of the Control Share
Acquisition Act by adopting an amendment to its bylaws which is approved by the
shareholders of the corporation.
The Control Share Condition will be satisfied if (1) the Bylaws of the
Company are amended by the Company's shareholders prior to the consummation of
the Offer to provide that the Control Share Acquisition Act shall be
inapplicable to control share acquisitions of the Company's common stock, (2)
the shareholders vote in accordance with the Control Share Acquisition Act to
confer full voting rights to Shares acquired by the Purchaser pursuant to the
Offer or (3) the Purchaser in its sole discretion is otherwise satisfied that
the Control Share Acquisition Act is inapplicable to the Purchaser's acquisition
of Shares in the Offer.
THE BUSINESS COMBINATION CONDITION. CONSUMMATION OF THE OFFER IS
CONDITIONED UPON THE PURCHASER BEING SATISFIED, IN ITS SOLE DISCRETION, THAT A
COMMITTEE OF DISINTERESTED DIRECTORS HAS APPROVED THE OFFER IN ACCORDANCE WITH
SECTION 402A.673 OF MINNESOTA STATUTES (THE "MINNESOTA BUSINESS COMBINATION
ACT") (THE "BUSINESS COMBINATION CONDITION").
The Minnesota Business Combination Act prohibits any "business combination"
including any merger, for a period of four years following the date that a
person or entity first acquires beneficial ownership, directly or indirectly, of
10% or more of the outstanding Shares if the person or entity does not receive
approval of a special committee composed of all of the disinterested members of
the Company's Board of Directors prior to such acquisition. Thus, absent
compliance with the Minnesota Business Combination Act, the Purchaser would be
prohibited from consummating the Merger after the Purchaser acquired 10% of the
Shares pursuant to the Offer.
The Business Combination Condition will be satisfied if a committee of the
Company's disinterested directors approves the Purchaser's acquisition of Shares
prior to the Purchaser acquiring beneficial ownership, directly or indirectly of
at least 10% of the Company's outstanding Shares in accordance with the
Minnesota Business Combination Act. The Purchaser expects that if the Election
Condition, as described below, is satisfied, a committee formed under the
Minnesota Business Combination Act to consider the Offer would consist of
Messrs. Fauth, Kohler and Haun (who are nominees of the Purchaser) and Messrs.
Levesque, Roering, Sullivan and Whalen (who are current members of the Board of
Directors).
THE ELECTION CONDITION. CONSUMMATION OF THE OFFER IS CONDITIONED UPON THE
ELECTION BY SHAREHOLDER VOTE, OF MR. FAUTH'S AND JJF GROUP'S DIRECTOR NOMINEES
AT THE 1999 ANNUAL MEETING OF SHAREHOLDERS (THE "ELECTION CONDITION").
The Company is expected to hold the 1999 Annual Meeting on July 22, 1999, at
which time, the shareholders are expected to elect three directors to serve
three-year terms ending at the 2002 annual meeting. Mr. Fauth and JJF Group
intend to nominate John J. Fauth, Joseph G. Kohler and G. Richard Haun, Jr. for
election as directors for these terms. A condition of the Offer is that these
director nominees be elected by the shareholders at the 1999 Annual Meeting.
THE DEFENSIVE ACTION CONDITION. CONSUMMATION OF THE OFFER IS CONDITIONED
UPON THE ADOPTION OF AN AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION AT
THE 1999 ANNUAL MEETING PROHIBITING THE BOARD FROM ADOPTING DEFENSIVE ACTIONS
WHOSE PRIMARY PURPOSE IS TO PREVENT A CHANGE IN CONTROL OF THE COMPANY, UNLESS
THE DEFENSIVE ACTION IS APPROVED BY THE UNANIMOUS VOTE OF THE BOARD OF DIRECTORS
(THE "DEFENSIVE ACTION CONDITION").
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The purpose of the Defensive Action Condition is to prevent the Company's
Board of Directors from adopting or implementing any measures intended to thwart
or impede a change in control of the Company without unanimous Board approval,
thereby giving shareholders an improved ability to consider the Offer. Defensive
action is defined to mean any action by the Board with the primary purpose or
effect of impeding a change in control of the Company, or increasing the Board's
power to impede such a change in control in the future. However, if an offer is
made to acquire the Company or all of the Company's shares, and the Board
determines by a majority to vote that such offer will maximize the Company's
value at a sale of the shareholders' benefit, no action taken by the Board by a
majority vote to facilitate such offer shall be deemed a defensive action. The
Defensive Action Condition will be satisfied if the Company's shareholders adopt
an amendment to the Articles of Incorporation which would require unanimous
Board approval to adopt a "Defensive Action."
THE MEETING DATE CONDITION. CONSUMMATION OF THE OFFER IS CONDITIONED UPON
THE ADOPTION OF AN AMENDMENT TO THE COMPANY'S BYLAWS AT THE 1999 ANNUAL MEETING
PROVIDING THAT THE ANNUAL MEETING OF THE COMPANY'S SHAREHOLDERS FOR THE YEAR
2000 SHALL BE HELD NOT LATER THAN JULY 20, 2000 AND THE BOARD OF DIRECTORS SHALL
GIVE NOTICE OF THE MEETING ON OR BEFORE JUNE 20, 2000 (THE "MEETING DATE
CONDITION").
The purpose of the Meeting Date Condition is to prevent the Board from
delaying the year 2000 annual meeting of shareholders past July 20, 1999, and
thereby creating an impediment to a change in control of the Company. The
Meeting Date Condition will be satisfied if the Company's shareholders adopt at
the 1999 Annual Meeting an amendment to the Company's Bylaws providing that the
annual meeting of the Company's shareholders shall be held not later than July
20, 2000 and that the Board of Directors shall give notice of the meeting on or
before June 20, 2000.
THE BYLAW REPEAL CONDITION. CONSUMMATION OF THE OFFER IS CONDITIONED UPON
THE ADOPTION OF AN AMENDMENT TO THE COMPANY'S BYLAWS AT THE 1999 ANNUAL MEETING
PROVIDING THAT ANY BYLAWS ADOPTED BY THE BOARD BETWEEN MAY 29, 1999 AND THE DATE
OF THE ADOPTION OF THAT BYLAW AMENDMENT ARE REPEALED (THE "BYLAW REPEAL
CONDITION").
The purpose of the Bylaw Repeal Condition is to prevent the Board from
adopting new Bylaws that might foreclose or block shareholders' consideration of
the Offer, or otherwise impede an acquisition or change in control of the
Company, including pursuant to the Offer. The Bylaw Repeal Condition will be
satisfied if the Company's shareholders adopt at the 1999 Annual Meeting an
amendment to the Company's Bylaws providing that any Bylaws adopted by the Board
of Directors between May 29, 1999 and the date of the adoption of this amendment
to the Bylaws are repealed.
THE BYLAW AMENDMENT PROTECTION CONDITION. CONSUMMATION OF THE OFFER IS
CONDITIONED UPON THE ADOPTION OF AN AMENDMENT TO THE COMPANY'S BYLAWS AT THE
1999 ANNUAL MEETING PROHIBITING THE BOARD FROM AMENDING OR REPEALING ANY BYLAWS
ADOPTED BY THE COMPANY'S SHAREHOLDERS (THE "BYLAW AMENDMENT PROTECTION
CONDITION").
The purpose of the Bylaw Amendment Protection Condition is to prevent the
Board from interfering with the implementation of any proposals voted upon and
approved by the Company's shareholders. The Bylaw Amendment Protection Condition
will be satisfied if the Company's shareholders adopt at the 1999 Annual Meeting
an amendment to the Company's Bylaws providing that any Bylaws adopted by
shareholders may not be amended or repealed by the Board.
THE ANTI-POISON PILL/DILUTION CONDITION. CONSUMMATION OF THE OFFER IS
CONDITIONED UPON THE ADOPTION OF AN AMENDMENT TO THE COMPANY'S ARTICLES OF
INCORPORATION AT THE 1999 ANNUAL MEETING PROHIBITING, DURING THE PERIOD FROM THE
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1999 ANNUAL MEETING UNTIL DECEMBER 31, 2000, THE ADOPTION OF A SHAREHOLDER
RIGHTS PLAN (ALSO KNOWN AS A "POISON PILL") OR THE ISSUANCE OF COMPANY
SECURITIES WHICH COULD INCREASE THE NUMBER OF OUTSTANDING SHARES OF CAPITAL
STOCK TO MORE THAN 11,500,000 SHARES OF COMMON STOCK, WITHOUT UNANIMOUS BOARD
APPROVAL (THE "ANTI-POISON PILL/DILUTION CONDITION").
The Anti-Poison Pill/Dilution Condition seeks to prevent the Board from
adopting a "poison pill" or to issue additional securities in order to impede
the ability of the Company's shareholders to consider the Offer. The Anti-Poison
Pill/Dilution Condition will be satisfied if the Company's shareholders adopt at
the 1999 Annual Meeting an amendment to the Company's Articles of Incorporation
providing that the Board is prohibited, during the period from the 1999 Annual
Meeting until December 31, 2000, from adopting a poison pill or issuing new
securities which could increase the number of outstanding shares of capital
stock to more than 11,500,000 shares of common stock, without unanimous Board
approval.
THE FINANCING CONDITION. CONSUMMATION OF THE OFFER IS CONDITIONED UPON THE
PURCHASER BEING SATISFIED, IN ITS SOLE DISCRETION, THAT IT HAS OBTAINED
SUFFICIENT FINANCING TO CONSUMMATE THE OFFER (THE "FINANCING CONDITION").
There were 11,232,816 Shares outstanding as of June 16, 1999, of which
1,009,000 Shares are currently owned by the Purchaser or Mr. Fauth. Including
outstanding options for 810,194 Shares as of March 31, 1999, there are
potentially 12,043,010 Shares outstanding on a fully diluted basis. In order to
satisfy the Minimum Offer Condition, approximately 5,012,000 Shares (the
"Purchased Shares") would need to be tendered and purchased, together with the
Shares currently owned by Mr. Fauth. The total purchase price of these Purchased
Shares would be $70,175,084. If all Shares other than those owned by the
Purchaser or Mr. Fauth were tendered, the total purchase price would be
$154,476,140.
The Purchaser's total equity will be $44,126,000, comprised of $30 million
in cash and the contribution of Mr. Fauth's 1,009,000 Shares, which would be
valued at $14,126,000 at $14.00 per share. The cash will be contributed to the
Purchaser by its parent, JJF Group, Inc., which will have borrowed the $30
million from Churchill Industries, Inc., an industrial holding company that is
wholly owned by Mr. Fauth. The loan is expected to be unsecured and guaranteed
by Mr. Fauth, to bear an interest rate of 3.25% over the London Interbank
Offered Rate ("LIBOR") and to have a term of five years.
In addition to the aforementioned equity, the Purchaser has also received a
"highly confident letter" dated July 9, 1999 from BNY Capital Markets, Inc.(
"BNY") indicating that as of that date, BNY was highly confident that it could
obtain commitments from lenders for a senior secured credit facility (the
"Tender Offer Facility") to be made available to the Purchaser in an amount
sufficient to finance a portion of the payment obligations under the Tender
Offer required to purchase the tendered Shares. The Tender Offer Facility would
be secured by the Purchased Shares and the Contributed Shares, and would not
exceed approximately 43% of their respective collateral values as determined
under Federal Reserve Regulation U. The Tender Offer Facility is expected to
have an effective interest rate of 3% over LIBOR or 1.75% over the prime rate
and a maximum term of 18 months.
The balance of the funds necessary to consummate the Offer would be
approximately $4 million if the minimum Shares were tendered, and approximately
$52 million if all Shares not already owned by the Purchaser or Mr. Fauth were
tendered. The Purchaser expects that such amounts would be financed by
additional equity contributions to the Purchaser or additional borrowings by the
Purchaser. The Purchaser believes that such amounts can be obtained on a timely
basis, but currently no specific arrangements have been made to obtain that
additional financing. The Purchaser's belief that such financing to purchase the
Shares will be available is based in part on the BNY highly confident letter
referred to above, which in addition to the financing referred to above for the
purchase of Shares, states that as of the date of that letter BNY was highly
confident that up to $140 million in financing would be available upon a merger
of the Purchaser and the Company to refinance debt incurred in connection with
the purchase of the Shares and for general corporate purposes. The Purchaser
expects that such replacement financing would consist
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of up to $40 million of senior debt secured by the Company's assets and up to
$110 million of senior subordinated notes issued by the merged Company in the
public debt market. To date no binding arrangements have been made for such
replacement financing.
The BNY highly confident letter states that BNY's ability to provide
financing is subject to satisfaction or waiver of customary conditions,
including (a) there having been in BNY's sole judgment no material adverse
change in the financial condition, results of operations, business or prospects
of the Company, the Purchaser or Churchill Industries, Inc. and its subsidiaries
("Churchill") since March 31, 1999; (b) there not having been any material
adverse change in the market for high yield securities or capital markets in
general, in the opinion of BNY; (c) consolidated pro forma capitalization of the
Company following the Merger, assuming consummation of the Offer and related
permanent financings being acceptable to BNY; (d) audited and unaudited
historical financial statements (including unaudited pro forma financial
statements) of the Company and its subsidiaries acceptable to BNY conforming to
the requirements of the Commission; (e) BNY not having discovered or otherwise
becoming aware of any information not previously disclosed to Lender that it
believes is inconsistent in a material and adverse manner with BNY's
understanding, concerning the business, operations, property, condition
(financial or otherwise) or prospects of the Company, the Purchaser or
Churchill; (f) terms, structure and arrangements regarding the financing and
other financing for the transaction being on terms satisfactory to BNY; (g) the
consolidated pro forma capitalization of the Purchaser, assuming consummation of
the Offer, being acceptable to BNY; (h) execution and delivery of definitive
documentation relating to and encompassing the transaction which is acceptable
to BNY; (i) receipt of all appropriate regulatory approvals; and (j) there
having been no change or proposed change in laws that could be expected to
adversely affect the economic consequences of the transaction.
CERTAIN OTHER CONDITIONS TO THE CONSUMMATION OF THE OFFER ARE DESCRIBED IN
SECTION 14. THE PURCHASER EXPRESSLY RESERVES THE RIGHT, IN ITS SOLE DISCRETION,
TO WAIVE ANY ONE OR MORE OF THE CONDITIONS TO THE OFFER. SEE SECTIONS 14 AND 15.
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
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THE TENDER OFFER
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Purchaser will accept for payment and thereby purchase all
Shares validly tendered and not withdrawn in accordance with the procedures set
forth in Section 4 on or prior to the Expiration Date. The term "Expiration
Date" means 12:00 Midnight, New York City time, on Wednesday, August 11, 1999,
unless and until the Purchaser, in its sole discretion, shall have extended the
period of time for which the Offer is open, in which event the term "Expiration
Date" shall mean the time and date at which the Offer, as so extended by the
Purchaser, shall expire.
The Purchaser expressly reserves the right, in its sole discretion, at any
time and from time to time, to extend the period during which the Offer is open
for any reason, including the occurrence of any of the events specified in
Section 14, by giving oral or written notice of such extension to the
Depositary. During any such extension, all Shares previously tendered and not
withdrawn will remain subject to the Offer and subject to the right of a
tendering shareholder to withdraw such shareholder's Shares. See Section 4.
Subject to the applicable regulations of the Commission, the Purchaser also
expressly reserves the right, in its sole discretion, at any time or from time
to time, to: (i) delay acceptance for payment of or, regardless of whether such
Shares were theretofore accepted for payment, payment for any Shares pending
receipt of any regulatory or governmental approvals specified in Section 15;
(ii) terminate the Offer (whether or not any Shares have theretofore been
accepted for payment) if any condition referred to in Section 14 has not been
satisfied or upon the occurrence of any event specified in Section 14; and (iii)
waive any condition or otherwise amend the Offer in any respect, in each case,
by giving oral or written notice of such delay, termination, waiver or amendment
to the Depositary and, other than in the case of any such waiver, by making a
public announcement thereof. The Purchaser acknowledges that: (i) Rule 14e-1(c)
under the Exchange Act requires the Purchaser to pay the consideration offered
or return the Shares tendered promptly after the termination or withdrawal of
the Offer; and (ii) the Purchaser may not delay acceptance for payment of, or
payment for (except as provided in clause (i) of the preceding sentence), any
Shares upon the occurrence of any event specified in Section 14 without
extending the period of time during which the Offer is open.
The rights reserved by the Purchaser in the preceding paragraph are in
addition to the Purchaser's rights pursuant to Section 14. Any such extension,
delay, termination or amendment will be followed as promptly as practicable by
public announcement thereof, and such announcement in the case of an extension
will be made no later than 9:00 a.m., New York City time, on the next business
day after the previously scheduled Expiration Date. Without limiting the manner
in which the Purchaser may choose to make any public announcement, subject to
applicable law (including Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange
Act, which require that material changes be promptly disseminated to holders of
Shares), the Purchaser shall have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by issuing a press
release or other public announcement.
If the Purchaser makes a material change in the terms of the Offer, or if it
waives a material condition to the Offer, the Purchaser will extend the Offer
and disseminate additional tender offer materials to the extent required by
Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period
during which an offer must remain open following material changes in the terms
of the offer, other than a change in price or a change in percentage of
securities sought or a change in any dealer's soliciting fee, will depend upon
the facts and circumstances, including the relative materiality, of the changes.
With respect to a change in price or a change in the percentage of securities
sought, a minimum period of 10 business days is generally required to allow for
adequate dissemination and investor response. For purposes of the Offer, a
"business day" means any day other than a Saturday, Sunday or a federal holiday
and consists of the time period from 12:01 a.m. through 12:00 Midnight, New York
City time.
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THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE SATISFACTION OF THE
MINIMUM TENDER CONDITION, THE CONTROL SHARE CONDITION, THE BUSINESS COMBINATION
CONDITION, THE ELECTION CONDITION, THE PURCHASER BEING SATISFIED, IN ITS SOLE
DISCRETION, THAT THE COMPANY'S SHAREHOLDERS AT THEIR JULY 22, 1999 ANNUAL
MEETING HAVE ADOPTED FIVE PROPOSALS TO AMEND THE COMPANY'S ARTICLES OF
INCORPORATION AND BYLAWS WHICH ARE DESIGNED TO PRECLUDE THE COMPANY'S BOARD FROM
TAKING VARIOUS DEFENSIVE MEASURES TO HINDER OR PREVENT THE COMPANY'S
SHAREHOLDERS FROM CONSIDERING THIS OR OTHER ACQUISITION OFFERS, THE FINANCING
CONDITION AND THE EXPIRATION OR TERMINATION OF ALL WAITING PERIODS IMPOSED BY
THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE
REGULATIONS THEREUNDER (THE "HSR ACT"), AND THE SATISFACTION OF THE OTHER
CONDITIONS SET FORTH IN SECTION 14.
The Purchaser reserves the right (but shall not be obligated), in accordance
with applicable rules and regulations of the Commission, to waive any or all of
such conditions. If, by the Expiration Date, any or all of such conditions have
not been satisfied, the Purchaser may, in its sole discretion, elect to (i)
extend the Offer and, subject to applicable withdrawal rights, retain all
tendered Shares until the expiration of the Offer, as extended, subject to the
terms of the Offer, (ii) waive all of the unsatisfied conditions and, subject to
complying with applicable rules and regulations of the Commission, accept for
payment all Shares so tendered and not extend the Offer or (iii) terminate the
Offer and not accept for payment any Shares and return all tendered Shares to
tendering shareholders. In the event that the Purchaser waives any condition set
forth in Section 14, the Commission may, if the waiver is deemed to constitute a
material change to the information previously provided to the shareholders,
require that the Offer remain open for an additional period of time and/or that
the Purchaser disseminate information concerning such waiver.
A request has been made to the Company pursuant to Section 302A.461 of the
Minnesota Business Corporation Act for the use of the Company's shareholder
lists and security position listings for the purpose of communicating with other
shareholders of the Company and soliciting their proxies and related activities.
This Offer and the related Letter of Transmittal and other relevant materials
will be mailed by the Purchaser to brokers, dealers, commercial banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on the shareholder list or who are listed as participants in a clearing
agency's security position listing for subsequent transmittal to beneficial
owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR THE SHARES.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of the Offer as so
extended or amended), the Purchaser will purchase, by accepting for payment, and
will pay for, all Shares validly tendered and not withdrawn (as permitted by
Section 4) prior to the Expiration Date promptly after the later to occur of (i)
the Expiration Date and (ii) the satisfaction or waiver of the conditions to the
Offer set forth in Section 14. In addition, subject to applicable rules of the
Commission, the Purchaser expressly reserves the right to delay acceptance for
payment of, or payment for, Shares pending receipt of any regulatory or
governmental approvals specified in Section 15.
FOR INFORMATION WITH RESPECT TO APPROVALS REQUIRED TO BE OBTAINED PRIOR TO
THE CONSUMMATION OF THE OFFER, INCLUDING UNDER THE HSR ACT, SEE SECTION 15.
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) certificates evidencing
such Shares ("Share Certificates") or timely confirmation (a "Book-Entry
Confirmation") of the book-entry transfer of such Shares into the Depositary's
account at The Depository Trust Company (the "Book-Entry Transfer Facility")
pursuant to the procedures set forth in Section 3, (ii) the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed,
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with any required signature guarantees, or an Agent's Message (as defined below)
in connection with a book-entry transfer and (iii) any other documents required
by the Letter of Transmittal.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares 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 the Purchaser may enforce such
agreement against such participant.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn as, if
and when the Purchaser gives oral or written notice to the Depositary of the
Purchaser's acceptance of such Shares for payment pursuant to the Offer. In all
cases, upon the terms and subject to the conditions of the Offer, payment for
Shares purchased pursuant to the Offer will be made by deposit of the purchase
price therefor with the Depositary, which will act as agent for tendering
shareholders for the purpose of receiving payment from the Purchaser and
transmitting payment to validly tendering shareholders. UNDER NO CIRCUMSTANCES
WILL INTEREST ON THE PURCHASE PRICE FOR SHARES BE PAID BY THE PURCHASER. If, for
any reason whatsoever, acceptance for payment of or payment for any Shares
tendered pursuant to the Offer is delayed, or the Purchaser is unable to accept
for payment or pay for Shares tendered pursuant to the Offer, then, without
prejudice to the Purchaser's rights set forth herein, the Depositary may,
nevertheless, on behalf of the Purchaser and subject to Rule 14e-1(c) under the
Exchange Act, retain tendered Shares and such Shares may not be withdrawn except
to the extent that the tendering shareholder is entitled to and duly exercises
withdrawal rights as described in Section 4.
If any tendered Shares are not accepted for payment for any reason or if
Share Certificates are submitted representing more Shares than are tendered,
Share Certificates representing unpurchased or untendered Shares will be
returned, without expense to the tendering shareholder (or, in the case of
Shares delivered by book-entry transfer into the Depositary's account at the
Book-Entry Transfer Facility pursuant to the procedures set forth in Section 3,
such Shares will be credited to an account maintained within the Book-Entry
Transfer Facility) as promptly as practicable following the expiration,
termination or withdrawal of the Offer.
IF, PRIOR TO THE EXPIRATION DATE, THE PURCHASER SHALL INCREASE THE
CONSIDERATION OFFERED TO HOLDERS OF SHARES PURSUANT TO THE OFFER, SUCH INCREASED
CONSIDERATION SHALL BE PAID TO ALL HOLDERS OF SHARES THAT ARE PURCHASED PURSUANT
TO THE OFFER, WHETHER OR NOT SUCH SHARES WERE TENDERED PRIOR TO SUCH INCREASE IN
CONSIDERATION.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to one or more of the Purchaser's subsidiaries or
affiliates the right to purchase all or any portion of the Shares tendered
pursuant to the Offer, but any such transfer or assignment will not relieve the
Purchaser of its obligations under the Offer or prejudice the rights of
tendering shareholders to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES.
VALID TENDER OF SHARES. Except as set forth below, in order for Shares to
be validly tendered pursuant to the Offer, the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, together with any
required signature guarantees, or an Agent's Message in connection with a
book-entry delivery of Shares, 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, on or prior to the Expiration Date,
and either (i) Share Certificates representing tendered Shares must be received
by the Depositary, or such Shares must be tendered pursuant to the procedure for
book-entry transfer set forth
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below and Book-Entry Confirmation must be received by the Depositary, in each
case on or prior to the Expiration Date, or (ii) the guaranteed delivery
procedures set forth below must be complied with.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
SHAREHOLDER, AND THE 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. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
BOOK-ENTRY TRANSFER. The Depositary will make a request to establish
accounts with respect to the Shares at the Book-Entry Transfer Facility for
purposes of the Offer within two business days after the date of this Offer to
Purchase. Any financial institution that is a participant in the system of the
Book-Entry Transfer Facility may make Book-Entry delivery of Shares by causing
the Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at the Book-Entry Transfer Facility in accordance with the Book-Entry
Transfer Facility's procedures for such transfer. However, although delivery of
Shares may be effected through book-entry transfer into the Depositary's account
at the Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message in connection with a book-entry transfer, and
any other required documents must, in any case, be transmitted to and received
by the Depositary at one of its addresses set forth on the back cover of this
Offer to Purchase on or prior to the Expiration Date, or the guaranteed delivery
procedure set forth below must be complied with.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH
THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO
THE DEPOSITARY.
SIGNATURE GUARANTEES. Signatures on all Letters of Transmittal must be
guaranteed by a firm that is a bank, broker, dealer, credit union, savings
association or other entity which is a member in good standing of the Securities
Transfer Agents Medallion Program (an "Eligible Institution"), unless the Shares
tendered thereby are tendered (i) by a registered holder of Shares who has not
completed either the box labeled "Special Payment Instructions" or the box
labeled "Special Delivery Instructions" on the Letter of Transmittal, or (ii)
for the account of an Eligible Institution. See Instruction 1 of the Letter of
Transmittal.
If the Share Certificates are registered in the name of a person other than
the signer of the Letter of Transmittal, or if payment is to be made to, or
Share Certificates for unpurchased Shares are to be issued or returned to, a
person other than the registered holder, then the tendered certificates must be
endorsed or accompanied by appropriate stock powers, signed exactly as the name
or names of the registered holder or holders appear on such certificates, with
the signatures on the certificates or stock powers guaranteed by an Eligible
Institution as provided in the appropriate Letter of Transmittal. See
Instructions 1 and 5 of the Letter of Transmittal.
If the Share Certificates are forwarded separately to the Depositary, a
properly completed and duly executed appropriate Letter of Transmittal (or
facsimile thereof) must accompany each such delivery.
GUARANTEED DELIVERY. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's Share 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, in the case of Shares, the procedures
for book-entry transfer cannot be completed on a timely basis, such Shares may
nevertheless be tendered if all of the following guaranteed delivery procedures
are duly complied with:
(i) such tender is made by or through an Eligible Institution;
11
<PAGE>
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by the Purchaser, is
received by the Depositary, as provided below, on or prior to the Expiration
Date; and
(iii) the Share Certificates (or a Book-Entry Confirmation) representing
all tendered Shares, in proper form for transfer 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 New York Stock
Exchange, Inc. ("NYSE") trading days after the date of execution of such
Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by facsimile transmission to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in such Notice of
Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of Share Certificates for, or of Book-Entry
Confirmation with respect to, such Shares and a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), together 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.
Accordingly, payment might not be made to all tendering shareholders at the same
time, and will depend upon when Share Certificates are received by the
Depositary or Book-Entry Confirmations of the Shares are received into the
Depositary's account at the Book-Entry Transfer Facility.
BACKUP FEDERAL INCOME TAX WITHHOLDING. Under the backup federal income tax
withholding applicable to certain shareholders (other than certain exempt
shareholders, including, among others, all corporations and certain foreign
individuals), the Depositary may be required to withhold 31% of the amount of
any payments made to such shareholders pursuant to the Offer. To prevent backup
federal income tax withholding, each such shareholder must provide the
Depositary with such shareholder's correct taxpayer identification number and
certify that such shareholder is not subject to backup federal income tax
withholding by completing the substitute Form W-9 included in the Letter of
Transmittal. See Instruction 9 of the Letter of Transmittal.
APPOINTMENT AS PROXY. By executing the Letter of Transmittal, a tendering
shareholder will also irrevocably appoint designees of the Purchaser, and each
of them, as such shareholder's attorneys-in-fact and proxies, with full power of
substitution, in the manner set forth in the Letter of Transmittal, to the full
extent of such shareholder's rights with respect to the Shares tendered by such
shareholder and accepted for payment by the Purchaser and with respect to any
and all other Shares and other securities or rights issued or issuable in
respect of such Shares on or after the date of this Offer to Purchase. All such
powers of attorney and proxies shall be considered irrevocable and coupled with
an interest in the tendered Shares. Such appointment will be effective upon the
acceptance for payment of such Shares by the Purchaser in accordance with the
terms of the Offer. Upon such acceptance for payment, all other powers of
attorney and proxies given by such shareholder with respect to such Shares, and
such other securities or rights prior to such payment will be revoked, without
further action, and no subsequent powers of attorney and proxies may be given by
such shareholder (and, if given, will not be deemed effective). The designees of
the Purchaser will, with respect to the Shares and such other securities and
rights for which such appointment is effective, be empowered to exercise all
voting and other rights of such shareholder as they in their sole discretion may
deem proper at any annual or special meeting of the Company's shareholders, or
any adjournment or postponement thereof, or by consent in lieu of any such
meeting or otherwise. In order for Shares to be deemed validly tendered,
immediately upon the acceptance for payment of such Shares, the Purchaser or its
designee must be able to exercise full voting rights with respect to such
Shares, and other securities, including voting at any meeting of shareholders.
12
<PAGE>
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 tender of Shares will be determined by the Purchaser, in its sole
discretion, whose determination shall be final and binding on all parties. The
Purchaser reserves the absolute right to reject any or all tenders determined by
it not to be in proper form or the acceptance of or payment for which may, in
the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves
the absolute right, in its sole discretion, to waive any of the conditions of
the Offer or any defect or irregularity in any tender of Shares of any
particular shareholder whether or not similar defects or irregularities are
waived in the case of other shareholders.
The Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be final
and binding. No tender of Shares will be deemed to have been validly made until
all defects and irregularities with respect to such tender have been cured or
waived by the Purchaser. None of the Purchaser or any of its affiliates or
assigns, the Dealer Manager, the Depositary, the Information Agent or any other
person or entity will be under any duty to give any notification of any defects
or irregularities in tenders or incur any liability for failure to give any such
notification.
The Purchaser's acceptance for payment of Shares tendered pursuant to any of
the procedures described above will constitute a binding agreement between the
tendering shareholder and the Purchaser upon the terms and subject to the
conditions of the Offer.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Shares made
pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may
be withdrawn at any time on or prior to the Expiration Date and, unless
theretofore accepted for payment as provided herein, may also be withdrawn at
any time after Monday, September 13, 1999 (or such later date as may apply in
case the Offer is extended).
If, for any reason whatsoever, acceptance for payment of any Shares tendered
pursuant to the Offer is delayed, or the Purchaser is unable to accept for
payment or pay for Shares tendered pursuant to the Offer, then, without
prejudice to the Purchaser's rights set forth herein, the Depositary may,
nevertheless, on behalf of the Purchaser and subject to Rule 14e-1(c) under the
Exchange Act, retain tendered Shares and such Shares may not be withdrawn except
to the extent that the tendering shareholder is entitled to and duly exercises
withdrawal rights as described in this Section 4. Any such delay will be by an
extension of the Offer to the extent required by law.
For a withdrawal to be effective, a written 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 (if Share Certificates have
been tendered) the name of the registered holder of the Shares as set forth in
the Share Certificate, if different from that of the person who tendered such
Shares. If Share Certificates have been delivered or otherwise identified to the
Depositary, then prior to the physical release of such Certificates, the
tendering shareholder must submit the serial numbers shown on the particular
Certificates evidencing the Shares to be withdrawn and the signature on the
notice of withdrawal must be guaranteed by an Eligible Institution, except in
the case of Shares tendered for the account of an Eligible Institution. If
Shares have been tendered pursuant to the procedures for book-entry transfer set
forth in Section 3, the notice of withdrawal must specify the name and number of
the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Shares, in which case a notice of withdrawal will be effective if
delivered to the Depositary by any method of delivery described in the first
sentence of this paragraph. Withdrawals of Shares may not be rescinded. Any
Shares properly withdrawn will be deemed not validly tendered for purposes of
the Offer, but may be retendered
13
<PAGE>
at any subsequent time prior to the Expiration Date by following any of the
procedures described in Section 3.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination shall be final and binding. None of the
Purchaser or any of its affiliates or assigns, the Dealer Manager, the
Depositary, the Information Agent or any other person or entity will be under
any duty to give any notification of any defects or irregularities in any notice
of withdrawal or incur any liability for failure to give any such notification.
5. CERTAIN UNITED STATES TAX CONSEQUENCES.
The receipt of cash for Shares pursuant to the Offer will be a taxable
transaction for federal income tax purposes and may also be a taxable
transaction under applicable state, local, foreign and other tax laws. For
federal income tax purposes, each selling shareholder would generally recognize
gain or loss equal to the difference between the amount of cash received and
such shareholder's adjusted tax basis for the sold Shares. Such gain or loss
will be capital gain or loss (assuming the Shares are held as a capital asset)
and any such capital gain or loss will be long term if, as of the date of sale,
the Shares were held for more than one year or will be short term if, as of such
date, the Shares were held for one year or less.
The foregoing discussion may not be applicable to certain shareholders of
the Company, including persons who acquired Shares pursuant to the exercise of
employee stock options or otherwise as compensation, individuals who are not
citizens or residents of the United States and foreign corporations, persons
holding Shares in a straddle, hedging, or conversion transaction, and entities
that are otherwise subject to special tax treatment (such as broker-dealers,
insurance companies, tax-exempt organizations, financial institutions and
passthrough entities).
Unless a shareholder complies with certain reporting and/or certification
procedures or is an exempt recipient under applicable provisions of the Internal
Revenue Code and applicable Treasury regulations, such shareholder may be
subject to withholding tax of 31% with respect to any cash payments received
pursuant to the Offer. Shareholders should consult their brokers or the
Depositary to ensure compliance with such procedures. Foreign shareholders
should consult with their own tax advisors regarding withholding taxes in
general.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND IS BASED ON THE CODE AND TREASURY REGULATIONS
CURRENTLY IN FORCE WHICH MAY BE AMENDED AT ANY TIME, POSSIBLY WITH RETROACTIVE
EFFECT. EACH SHAREHOLDER IS URGED TO CONSULT SUCH SHAREHOLDER'S TAX ADVISOR WITH
RESPECT TO THE TAX CONSEQUENCES TO SUCH SHAREHOLDER OF THE OFFER AND PROPOSED
MERGER, INCLUDING FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES.
14
<PAGE>
6. PRICE RANGE OF THE SHARES; DIVIDENDS.
The Shares are listed and traded on the Nasdaq National Market Tier under
the symbol "TSII." The following table sets forth, according to the Company's
1999 10-K, for the periods indicated, the reported high and low sales prices for
the Shares on the Nasdaq.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED HIGH LOW
- ------------------------------------------------------------------------ --------- ---------
<S> <C> <C>
March 31, 1998
First Quarter......................................................... $ 10.375 $ 8.75
Second Quarter........................................................ $ 11 $ 8.75
Third Quarter......................................................... $ 10.875 $ 9
Fourth Quarter........................................................ $ 10.375 $ 7.625
March 31, 1999
First Quarter......................................................... $ 9 $ 7.3125
Second Quarter........................................................ $ 9.25 $ 6.875
Third Quarter......................................................... $ 9.125 $ 6.625
Fourth Quarter........................................................ $ 9.125 $ 7.5
March 31, 2000
First Quarter......................................................... $ 12.00 $ 7.50
</TABLE>
On November 24, 1998, the last trading day prior to the date on which Mr.
Fauth met with two members of the Company's Board to discuss his interest in the
Company, the last reported sale price on the Nasdaq for the Shares was $7.875.
On July 9, 1999, the last trading day prior to the commencement of the Offer on
July 12, 1999, the last reported sale price on the Nasdaq for the Shares was
$12.75. The Offer represents a 9.8% premium over the closing price per share on
July 9, 1999; a 78% premium over the closing price of $7.875 per share on
November 30, 1998, which was the day on which Mr. Fauth first purchased the
Company's Common Stock; and a 69% permium over the average daily closing price
of $8.27 for the one year period ended November 30, 1998. SHAREHOLDERS ARE URGED
TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
According to the Company's 1999 10-K, the Company has declared and paid the
following cash dividends on the Shares during fiscal 1998, 1999 and 2000.
<TABLE>
<CAPTION>
DIVIDEND PAYMENT
FISCAL YEAR ENDED PER SHARE
- ---------------------------------------------------------------------------- -----------------
<S> <C>
March 31, 1998
May 1997................................................................ $.025
August 1997............................................................. $.025
November 1997........................................................... $.03
February 1998........................................................... $.03
March 31, 1999
May 1998................................................................ $.03
August 1998............................................................. $.03
November 1998........................................................... $.03
February 1999........................................................... $.03
<CAPTION>
FISCAL YEAR ENDING MARCH 31, 2000
- ----------------------------------------------------------------------------
<S> <C>
May 1999................................................................. $.03
</TABLE>
15
<PAGE>
7. POSSIBLE EFFECTS OF THE OFFER ON THE MARKET FOR THE SHARES; NASDAQ LISTING;
EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS.
POSSIBLE EFFECTS OF THE OFFER ON THE MARKET FOR THE SHARES. The purchase of
Shares pursuant to the Offer will reduce the number of Shares that might
otherwise trade publicly and could adversely affect the liquidity and market
value of the remaining Shares held by the public. The purchase of Shares
pursuant to the Offer can also be expected to reduce the number of holders of
Shares. The 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
therefor.
NASDAQ LISTING. The Shares are currently listed and traded in the Nasdaq
National Market, which constitutes the principal trading market for the Shares.
Depending upon the aggregate market value and the number of Shares not purchased
pursuant to the Offer, the Shares may no longer meet the quantitative
maintenance criteria of the National Association of Securities Dealers, Inc.
(the "NASD") for continued listing on the Nasdaq National Market and may cease
to be authorized for quotation on such markets. The Nasdaq National Market's
published guidelines require that an issuer have at least 200,000 publicly held
shares (exclusive of holdings of officers, directors or beneficial owners of
more than 10%), held either by at least 400 beneficial shareholders or 300
beneficial shareholders of round lots, with a market value of at least $1
million and must have net tangible assets of at least either $1 million, $2
million or $4 million depending on profitability levels during the issuer's four
most recent fiscal years. If these standards are not met, shares of an issuer
might nevertheless continue to be included in the Nasdaq Stock Market with
quotations published in the Nasdaq Stock Market's "additional list" or in one of
the local lists, but if the number of beneficial owners were to fall below 300,
or if the number of publicly held shares were to fall below 100,000 or there
were not at least two registered and active market makers for the Shares, the
NASD's rules provide that such shares would no longer be "qualified for
reporting" by the Nasdaq Stock Market.
It cannot be presently determined if consummation of the Offer will result
in a reduction of the Company's publicly held shares below the required minimum
amount. However, it is possible that the number of beneficial holders of the
Shares may significantly decrease if the Purchaser acquires a majority of the
Shares pursuant to the Offer. According to the Company's 1999 10-K, as of May
27, 1999, there were approximately 633 holders of record of Shares, not
including an additional about 2,960 shareholders whose shares were held in
street name. If as a result of the purchase of Shares pursuant to the Offer or
otherwise, the Shares no longer meet the requirements of the NASD for continued
inclusion in the Nasdaq National Market or in any other tier or the Nasdaq Stock
Market, the market for the Shares could be adversely affected. In the event that
the Shares no longer meet the requirements of the NASD for continued inclusion
in any tier of the Nasdaq Stock Market, it is possible that Shares would
continue to trade in the over-the-counter market and that price quotations would
be reported by other sources. The extent of the public market for the Shares and
the availability of such quotations would, however, depend upon the number of
holders of Shares remaining at such time, the interest in maintaining a market
in Shares on the part of securities firms, the possible termination of
registration of the Shares under the Exchange Act, as described below, and other
factors.
EXCHANGE ACT REGISTRATION. The Shares are currently registered under the
Exchange Act. The purchase of Shares pursuant to the Offer is likely to result
in the Shares becoming eligible for deregistration under the Exchange Act.
Registration of the Shares may be terminated upon application by the Company to
the Commission if the Shares are not listed on a "national securities exchange"
and there are fewer than 300 record holders of Shares. Termination of
registration of the Shares under the Exchange Act would substantially reduce the
information required to be furnished by the Company to its shareholders and the
Commission and would make certain provisions of the Exchange Act, such as the
short-swing profit recovery provisions of Section 16(b) and the requirements of
furnishing a proxy statement in connection with shareholders' meetings pursuant
to Section 14(a) or 14(c) and the related requirement of
16
<PAGE>
an annual report, no longer applicable to the Company. If the Shares are no
longer registered under the Exchange Act, the requirements of Rule 13e-3 under
the Exchange Act with respect to "going private" transactions would no longer be
applicable to the Company. 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 of
1933 may be impaired or, with respect to certain persons, eliminated. If
registration of the Shares under the Exchange Act were terminated, the Shares
would no longer be "margin securities" or eligible for stock exchange listing or
Nasdaq reporting. The Purchaser intends to seek to cause the Company to
terminate the registration of the Shares as soon after the consummation of the
Offer as the requirements for termination of registration are met.
MARGIN REGULATIONS. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System, which has
the effect, among other things, of allowing brokers to extend credit on the
collateral of such 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.
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
The Company is a Minnesota corporation with its principal executive offices
located at 500 Cardigan Road, Shoreview, Minnesota 55126. The following
description of the Company's business has been quoted from the 1999 10-K. The
Purchaser expects the Company to file a 10-Q for the quarter ending June 30,
1999 on or before August 16, 1999, which may contain additional information
concerning the Company not
contained in the 1999 10-K:
"The Company was founded in 1961 as a manufacturer of scientific measuring
instruments for research applications. In 1968, the Company went public under
the name Thermo-Systems, Inc. and in 1976 became TSI Incorporated. In recent
years, the Company has applied its research instrumentation technology to
industrial applications and has acquired or developed additional technologies to
address the needs of several markets in order to become a diversified, precision
instrumentation company.
In May 1999, the Company acquired Environmental Systems Corporation of
Knoxville, Tennessee, a leading supplier of ambient air quality and continuous
emissions monitoring systems--including sensors, data loggers, software and
system integration--to environmentally concerned companies, public utilities and
government agencies. For the year ended December 31, 1998, Environmental Systems
Corporation posted net sales of $23 million and $1.9 million in net income after
taxes. A Form 8-K was filed on June 10, 1999 with an explanation of the
transaction and corresponding historical and pro forma financial statements.
This addition gives the Company stronger presence in the outdoor environmental
monitoring market which offers excellent potential for the future.
In October 1998, the Company acquired Amherst Process Instruments, Inc. of
Amherst, Massachusetts, a manufacturer of powder flow and sizing instruments
primarily for the bulk powders and pharmaceuticals markets. It had sales of
approximately $2.5 million in the twelve months prior to
acquisition. This addition enhances the capabilities of the Company by adding
products to its particle research instrumentation line.
In December 1998, the Company entered into a license agreement with the
University of California at Riverside for a new technology and product for the
chemical analysis of environmental pollutants. This new technology allows the
analysis to take place directly without the typical contamination of particles
during the collection process.
The Company develops, manufactures and markets measuring and/or control
instruments for a variety of market applications. The Company's business is
referred to as precision instrumentation for industry and research. This
business is characterized by many "niche" markets, where one of the Company's
many basic measuring technologies fits the measurement needs in different
industrial and research applications.
17
<PAGE>
The applications for the Company's products can best be described by
considering two segments. These are the Safety, Comfort and Health of People
(the working environment) and Productivity and Quality Improvement (industrial
processes). Both of these cross numerous industries."
The following selected financial information of the Company and its
consolidated subsidiaries set forth below has been excerpted and derived from
the 1999 10-K and the Company's current report on Form 8-K filed on June 10,
1999. More comprehensive financial and other information is included in such
reports (including the Company's audited financial statements for the fiscal
year ended March 31, 1999, as well as management's discussion and analysis of
results of operations and financial position for fiscal 1999) and in other
reports and documents filed by the Company with the Commission, and the
financial information set forth below is qualified in its entirety by reference
to such reports and documents filed with the Commission and all of the financial
statements and related notes contained therein. These reports and other
documents may be examined and copies thereof may be obtained in the manner set
forth below.
FIVE-YEAR SUMMARY OF SELECTED FINANCIAL INFORMATION OF THE COMPANY(1)
(in thousands except per share amounts)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
OPERATIONS
Net Sales.................................................. $ 85,352 $ 81,012 $ 80,240 $ 69,233 $ 48,903
Gross Profit............................................... 48,194 45,085 44,971 38,491 28,566
% of Sales............................................... 56.5 55.7 56.0 55.6 58.4
Research and Development................................... 11,154 11,554 10,939 8,993 7,196
% of Sales............................................... 13.1 14.3 13.6 13.0 14.7
SG&A....................................................... 25,861 24,116 23,307 21,362 16,657
% of Sales............................................... 30.3 29.8 29.0 30.9 34.1
Operating income........................................... 11,179 9,415 10,725 8,136 4,714
% of Sales............................................... 13.1 11.6 13.4 11.8 9.6
Net Earnings............................................... 7,782 6,826 7,213 5,482 3,432
% of Sales............................................... 9.1 8.4 9.0 7.9 7.0
Earnings Per Share
Basic...................................................... .69 .59 .64 .51 .33
Diluted.................................................... .68 .58 .62 .49 .32
FINANCIAL POSITION
Current Ratio.............................................. 3.8 4.0 3.7 3.1 3.9
Working Capital............................................ $ 32,172 $ 31,243 $ 26,006 $ 18,498 $ 16,855
Total Assets............................................... 60,968 57,834 50,878 42,512 32,167
Long-Term Debt............................................. 0 0 0 0 0
Shareholder's Equity....................................... 49,394 47,443 41,320 33,598 26,342
Shareholder's Equity Per Share............................. 4.43 4.06 3.59 3.00 2.53
OTHER DATA
Additions to Property, Plant and Equipment(2).............. $ 1,436 $ 1,526 $ 2,293 $ 3,931 $ 3,124
Depreciation and Amortization.............................. 2,158 2,192 2,096 1,739 1,282
Backlog of Orders.......................................... 19,388 22,408 25,112 30,007 11,364
Return on Average Shareholders' Equity (%)................. 16.1 15.4 19.3 18.3 14.0
Return on Average Total Assets (%)......................... 13.1 12.6 15.4 15.0 11.3
</TABLE>
- ------------------------
(1) Data are based on results from continuing operations where applicable.
Applicable earnings, stock and dividends declared per share data for all
years shown above have been retroactively adjusted to
18
<PAGE>
reflect the two-for-one stock split effective August 16, 1996 and the
three-for-two splits effective August 17, 1994 and May 28, 1991.
(2) In fiscal 1996 and 1995, a major plant expansion and remodeling project
accounted for $2.5 million and $1.7 million, respectively, as part of
Additions to Property, Plant and Equipment.
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations has been taken from the 1999 10-K:
NET SALES
Following is a sales breakdown:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
-------------------------------------------
<S> <C> <C> <C>
1999 1998 1997
------------- ------------- -------------
Safety, Comfort and Health...................... $ 64,416,000 $ 54,954,000 $ 57,753,000
Productivity and Quality Improvement............ 20,936,000 26,058,000 22,487,000
------------- ------------- -------------
Total......................................... $ 85,352,000 $ 81,012,000 $ 80,240,000
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The percentage increase (decrease) from the prior year is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
MARCH 31,
---------------------
1999 1998
------- -------
<S> <C> <C>
Safety, Comfort and Health.................................. 17% (5)%
Productivity and Quality Improvement........................ (20)% 16%
Total..................................................... 5% 1%
</TABLE>
COMPARISON OF FISCAL 1999 AND 1998
The increase in fiscal 1999 sales was due to strong demand for our safety,
comfort and health instruments, particularly the PORTACOUNT(R) respirator fit
tester, which benefitted from recent changes in OSHA regulations. The year also
saw significant sales of biodetection equipment used for rapid detection of
airborne bacteria to the U.S. Army and strong sales activity for our
meteorological instrumentation.
Increases in safety, comfort and health instruments have been substantially
offset by slower sales in productivity and quality improvement instruments. The
Company experienced a decline in sales of research instruments sold into this
market as well as a decline in sales of industrial process control products,
particularly those sold to the wire and cable industry and those directed to
Pacific Rim markets. In response to the slow sales of research instruments, the
operations of Aerometrics, a California subsidiary, were transferred to TSI's
Minnesota headquarters and consolidated with an existing research product line
selling to the same market. The Company took a $.03 per share charge to cover
the costs associated with this consolidation.
International sales declined $1,331,000, or 5 percent, for fiscal 1999
compared with fiscal 1998. The decline is attributable to slow sales of both our
process controls and research instruments for productivity and quality
improvement.
COMPARISON OF FISCAL 1998 AND 1997
Sales of safety, comfort and health instruments declined 5 percent in fiscal
1998 compared to fiscal 1997. The decrease was due to:
- Lower PORTACOUNT respirator and gas mask fit tester sales for military
applications.
19
<PAGE>
- A slowdown in sales of meteorologic and hydrologic instruments for outdoor
monitoring due to delays in obtaining certain contracts.
- Continued reduction in R&D contracts supporting electrochemical sensor
development.
- Sales of products for productivity and quality improvement increased 16
percent in fiscal 1998 from 1997. The increase came from:
- LaserSpeed(R) speed and length instruments for the wire and cable
industry.
- Diameter and flaw detection gauges for the wire and cable industry,
products obtained in the Target Systems acquisition in July 1997.
- Research instruments that experienced a decline in fiscal 1997.
International sales declined $3,192,000, or 11 percent, for fiscal 1998
compared with fiscal 1997. In fiscal 1997, the Company shipped a substantial
number of PORTACOUNTs to the German Army. There was not a similar order in
fiscal 1998.
GOVERNMENT SALES
Sales to U.S. and state government agencies, including defense, as a percent
of total sales, were 21 percent for both fiscal 1999 and 1998 and 22 percent in
fiscal 1997. While the government percentage of total sales is high, the Company
sells many different products to a very diverse range of government agencies.
Consequently, government sales during the past several years have been quite
stable as a percentage of total sales. We consider the current percentages to be
within the normal range.
GROSS PROFIT
Gross profit was 56.5 percent for fiscal 1999 and has ranged between 55.7
and 56.5 percent over the last three fiscal years. Our gross profit percentage
varies slightly depending on the product mix. While fiscal 1999 is higher than
previous years, it falls within what is considered to be a normal range for
TSI's products. We do not believe the higher gross margin percentage represents
a trend.
OPERATING EXPENSES
Research and product development expenses were 13.1 percent of net sales in
fiscal 1999, compared to 14.3 percent for fiscal 1998 and 13.6 percent in fiscal
1997. The Company's strong commitment to long-term growth through research and
product development has continued to generate new products and enhance product
lines in key market niches. This is expected to result in sales growth in future
years. For the past 10 years, the Company's research and product development
expenses have ranged from 12 to 15 percent of net sales. Fiscal 2000 research
and development expenses are expected to be at the lower end of this range.
Selling expenses were 22.8 percent of net sales in fiscal 1999, 22.4 percent
in fiscal 1998, and 21.7 percent in fiscal 1997. Selling expenses vary slightly
depending on the product mix and sales volume. For fiscal 2000, we expect
selling expenses to be within or near the historical range.
Administrative expenses were 7.5 percent of sales in fiscal 1999 and 7.4
percent in both fiscal 1998 and 1997. The Company expects administrative costs
to continue in a normal range of 7 to 9 percent for fiscal 2000.
OTHER INCOME
Other income totaled $435,000 in fiscal 1999, compared with $798,000 in
fiscal 1998 and $372,000 in fiscal 1997. In fiscal 1999, investment income was
offset by foreign currency transaction losses and a loss on disposal of fixed
assets related to the consolidation of the Aerometrics subsidiary. Other income
rose in fiscal 1998, mainly due to higher investment income from larger cash
balances and foreign currency
20
<PAGE>
transaction gains. Other income varies year to year depending on foreign
currency fluctuations, interest rates and invested cash balances.
PROVISION FOR INCOME TAXES
The provision for income taxes was $3,832,000, or 33 percent of pretax
earnings, in fiscal 1999. This compares to provisions of $3,387,000, or 33
percent of pretax earnings, in fiscal 1998, and $3,884,000, or 35 percent of
pretax earnings, in fiscal 1997. The fiscal 1999 effective tax rate is expected
to again be in the range of 33 to 35 percent of pretax earnings, assuming no
significant changes in the tax laws. See Note G on page 22 for additional
information.
EURO CURRENCY
On January 1, 1999, certain members of the European Union established fixed
conversion rates between existing ("legacy currencies") and one common
currency--the Euro. The Euro is now traded on currency exchanges and can be used
in business transactions. Beginning in January 2002, new Euro-denominated bills
and coins will be issued, and legacy currencies will be withdrawn from
circulation.
The Company has a significant number of customers as well as operations
located in European Union countries participating in the Euro conversion. While
TSI has not yet experienced a significant impact, the Euro conversion may have
competitive implications on our pricing and marketing strategies, which could be
material in nature. However, any such impact is not known at this time. The
Company has begun to analyze its internal systems (such as payroll, accounting
and financial reporting) to determine what modifications may be required to deal
with the Euro conversion. To date, the systems have not required material
modification and the Company does not expect the cost of any future
modifications to have a material impact on the Company's results of operations
or financial condition.
<TABLE>
<CAPTION>
GROSS PROFIT MARGIN R&D EXPENDITURES
(PERCENT OF SALES) (PERCENT OF SALES)
- -------------------------------------------- --------------------------------------------
<C> <S> <C> <C>
1995 58.4% 1995 14.7%
1996 55.6% 1996 13.0%
1997 56.0% 1997 13.6%
1998 55.7% 1998 14.3%
1999 56.5% 1999 13.1%
</TABLE>
<TABLE>
<CAPTION>
SELLING & ADMINISTRATIVE
EXPENDITURES OPERATING INCOME
(PERCENT OF SALES) (IN MILLIONS)
- -------------------------------------------- ------------------------------------------
<C> <S> <C> <C>
1995 34.1% 1995 $ 4.71
1996 30.9% 1996 8.14
1997 29.0% 1997 10.7
1998 29.8% 1998 9.4
1999 30.3% 1999 11.2
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
CASH AND CASH EQUIVALENTS
Cash and cash equivalents increased by $4,052,000 during fiscal 1999 to
$13,437,000 at March 31, 1999. Net cash provided by operating activities totaled
$13,491,000 in fiscal 1999, compared with $5,080,000 in fiscal 1998 and
$10,008,000 in fiscal 1997. The major factor in the cash increase at March 31,
1999 was net earnings of $7,782,000. Other significant contributions from
operating activities were a reduction in receivables and lower inventories. Cash
used for additions to property, plant and equipment was $1,436,000, and
$2,030,000 was used for an acquisition. Dividend payments increased by $86,000
to $1,361,000. The Company also used $4,935,000 to repurchase common stock.
21
<PAGE>
The relatively low amount of cash provided by operating activities in fiscal
1998 was primarily a result of:
- Higher fourth quarter net sales resulting in increased receivables.
- Increased inventory due to the timing of purchases for new product
introductions and the addition of the diameter and flaw detection gauges
for the wire and cable industry obtained in the Target Systems acquisition
in July 1997.
With the acquisition of Environmental Systems Corporation (see Subsequent
Events Section) in May 1999, TSI increased its bank credit available to $20
million. Management believes internally generated funds and the additional
credit facility will provide adequate resources to support operations through
fiscal 2001.
STOCK REPURCHASE
As of March 31, 1999, the Company has authority to repurchase a total of
742,000 shares under plans approved by its Board of Directors. TSI repurchased
618,000 and 100,000 shares during the fiscal years ended March 31, 1999 and
1998, respectively. The Company has no present plans to acquire all the
authorized shares or to repurchase shares at any prescribed rate over time.
YEAR 2000 CONVERSION
The Company has reviewed and modified critical information technology (IT)
business systems and believes these systems are Year 2000 compliant. We are
currently testing these systems to insure they do comply. We expect that testing
and any additional modifications of these systems will be completed by August
1999.
TSI has also identified all non-IT systems and tested those considered to be
critical to the business. Certain of these systems require updating, and the
Company has a schedule to make substantially all the updates by September 1999.
An initial list of critical third-party providers has been made and direct
discussions have been held in order to determine their Year 2000 readiness. Most
of these vendors have indicated they will be Year 2000 compliant at various
points during calendar 1999 and we will not have a stoppage in the flow of
critical goods or services. More recently, the Company expanded the vendor list
to insure all vendors significant to our business are contacted. We believe
alternative suppliers can be identified if our current suppliers fail to become
Year 2000 compliant.
A committee has been formed to assess current product lines to determine if
hardware and software are Year 2000 compliant. We are using both internal staff
and external consultants to conduct reviews which include Year 2000
instrumentation testing, critical vendor correspondence, facility tours and a
questionnaire which assesses each operation's readiness. These reviews will be
completed by July 1999.
TSI's products fall into the following categories:
Year 2000 Compliant--The Company has identified several products and made
them Year 2000 compliant. We have responded to customer requests to provide
these upgrades and, in some cases, customers can download updated software from
our Internet web site to make the products Year 2000 compliant.
Non-compliant instruments or instruments not relying on date
information--TSI has identified several instruments that do not rely on any
internal or external date coding. It is anticipated that no modifications to
these instruments will be required. In addition, the Company has in the past
produced several instruments that use date information TSI does not intend to
make Year 2000 compliant. The
22
<PAGE>
Company is responding to specific customer requests on these instruments as well
as providing information on our Internet web site.
Other--There are still several products where the Year 2000 review has not
been completed. It is expected that reviews will be completed during the second
quarter of fiscal 2000, ending September 30, 1999. Based on the anticipated
results from these reviews, certain products will not be made Year 2000
compliant. However, we do not feel this will deter customers from purchasing
these instruments because only the dating information is affected and not the
performance. There can be no assurance regarding the customer response to any
Year 2000 issues we have yet to identify.
Internal staff is carrying out our Year 2000 compliance program without
significant additional outside expenditures. However, Year 2000 issues have
accelerated approximately 10 to 15 percent of our capital purchases by one to
two years. During the third quarter, the Company replaced the main IBM AS400
computer system at corporate headquarters with one that meets the requirements
of Year 2000. The Company made similar replacements at its domestic subsidiaries
during the fourth quarter of fiscal 1999. Foreign subsidiary systems comprise a
small portion of the overall system and they are currently under review. We
expect this review to be completed by September 1999. The Company estimates that
historical and future costs associated with its Year 2000 program will not
exceed $200,000 annually for fiscal years 1998 through 2000. Such costs are
expensed as incurred. Management does not believe the focus on Year 2000
compliance has caused us to ignore other upgrades to any critical systems.
Failure to complete upgrades to existing systems, or third-party providers
being unable to supply us with inventory, could result in the Company being
unable to ship certain products. However, management believes the remaining
system changes required can be readily implemented well before January 1, 2000
and, therefore, will not subject TSI to significant business risks.
The Company has developed a corporate contingency plan to mitigate possible
disruptions in services or business operations. Additional contingency plans
will be developed within the operating divisions during the remainder of
calendar 1999 and the Company will monitor the need for implementing such plans.
TSI acquired Environmental Systems Corporation on May 26, 1999. In the
course of conducting due diligence, the Company endeavored to ascertain whether
or not their products or services, or those of critical suppliers, are Year 2000
ready, and whether or not such suppliers and key customers will be adversely
affected by the Year 2000 issue. While Environmental Systems Corporation has
provided information and made representations and warranties regarding Year 2000
readiness, TSI will need to apply its Year 2000 program steps to fully assess
Environmental System Corporation Year 2000 readiness.
SUBSEQUENT EVENT
The Company announced on May 26, 1999, that it acquired the stock of
Environmental Systems Corporation (ESC) for $25 million in an all-cash
transaction. To finance the acquisition, the Company used its existing cash
along with bank financing of approximately $15,000,000 (see Notes B and K). For
the year ended December 31, 1998, ESC posted net sales of $23 million, with net
earnings of $1.9 million, or 8.3 percent of sales. TSI expects the acquisition
to have a positive effect on sales and earnings for TSI's fiscal 2000, ending
March 31, 2000.
Environmental Systems Corporation specializes in technology-based products
and services related to outdoor environmental monitoring. ESC is internationally
recognized as a leading supplier of ambient air quality and continuous emissions
monitoring systems. ESC offers a comprehensive line of products and services to
a wide variety of environmentally concerned companies, public utilities and
government agencies. Although not directly competitive with any current TSI
activities, ESC operates in markets where a number of our technologies are
potentially synergistic. TSI is already involved in some facets of outdoor
23
<PAGE>
environmental measurement and monitoring, and we feel this is an excellent
opportunity to expand our presence with existing and new products.
MARKET RISK
The Company is exposed to certain market risks related to the debt it
obtained subsequent to March 31, 1999, to finance the acquisition of
Environmental Systems Corporation. This debt is described in Notes B and K. TSI
does not invest in any derivative financial instruments. The Company is also
exposed to certain market risks related to fluctuations in foreign exchange
rates because some sales transactions, and the assets and liabilities of its
foreign subsidiaries, are denominated in foreign currency.
------------------------
The Management's Discussion and Analysis of Financial Condition and Results
of Operation (the "MD&A") set forth above is quoted from the Company's 1999
10-K. Neither the Purchaser nor any of its affiliates have conducted any
independent verification of the statements made therein or of the Company's
financial information contained in this Section. The Purchaser would like to
remind the offerees that the MD&A contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, that are subject to
certain risks and uncertainties. As set forth in the Company's 1999 10-K:
Forward-looking statements represent TSI's expectations or beliefs concerning
future events, including the following: any statements regarding future sales
and gross profit percentages; any statements regarding the continuation of
historical trends; any statements regarding the sufficiency of the Company's
cash balances and cash generated from operating and financing activities for the
Company's future liquidity and capital resource needs; any statements regarding
the effect of regulatory changes, the success of development and enhancement of
the Company's products, the adequacy of TSI's facilities, potential
acquisitions; and any statements regarding the future of the instrumentation
industry and the various parts of the instrumentation markets in which the
Company conducts business. TSI cautions that any forward-looking statements in
this report or in other announcements made by the Company are further qualified
by important factors that could cause actual results to differ materially from
those in the forward-looking statements, including, without limitations, the
factors set forth on Exhibit 99 to the Company's report on Form 10K for the
fiscal year ended March 31, 1999.
24
<PAGE>
On June 10, 1999, the Company filed a Form 8-K in connection with the
Company's acquisition of Environmental Systems, Corporation. The Form 8-K
included the following unaudited pro forma financial information:
PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
TWELVE MONTHS ENDED MARCH 31, 1999
(UNAUDITED)
The following unaudited pro forma condensed combined statements of earnings
represents the results of operations of TSI Incorporated and Subsidiaries as if
ESC had been acquired April 1, 1998, on a purchase accounting basis. This
information should be read in conjunction with the financial statements of the
Registrant and ESC and the related notes incorporated herein and incorporated by
reference.
The unaudited pro forma financial information is based on the Company's
preliminary review and does not give effect to all adjustments required to
allocate the purchase price. The pro forma financial information is not intended
to reflect actual results of operations had the purchase of ESC been effective
on the date indicated, and is not intended to be indicative of future results.
<TABLE>
<CAPTION>
HISTORICAL
----------------
TSI ESC PRO FORMA PRO FORMA
------- ------- ------------ ---------
(ALL AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales.................................... $85,352 $23,942 $109,294
Cost of sales................................ 37,158 13,131 50,289
Operating expenses........................... 37,015 7,946 636(a) 45,597
------- ------- ------------ ---------
Operating income............................. 11,179 2,865 (636) 13,408
------- ------- ------------ ---------
Other income (expenses)...................... 435 128 (1,310)(b) (747)
------- ------- ------------ ---------
Earnings before income taxes................. 11,614 2,993 (1,946) 12,661
Provision for income taxes................... 3,832 1,051 705(c) 4,178
------- ------- ------------ ---------
Net earnings................................. $ 7,782 $ 1,942 $(1,241) $ 8,483
Basic earnings per share..................... $ 0.69 $ 0.75
Diluted earnings per share................... $ 0.68 $ 0.74
Weighted average number of shares for
computation of basic earnings per share.... 11,317 11,317
Weighted average number of shares for
computation of dilutive earnings per
share...................................... 11,482 11,482
</TABLE>
25
<PAGE>
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
(UNAUDITED)
The following describe the adjustments to the historical information of the
Registrant and ESC to give pro forma effect to the purchase of ESC.
(a) Reflects the following:
<TABLE>
<S> <C>
(1) Increased amortization of goodwill over 20 years on a straight line
basis.................................................................. 703
(2) Increased amortization of other intangibles for periods between 10 and
15 years, straight line................................................ 133
(3) Increased depreciation resulting from the step-up of property, plant and
equipment, depreciated on a straight line basis over 20 years.......... 50
(4) Contractual reduction in salary expense (250) Total..................... $ 636
</TABLE>
(b) Reflects a decrease in the Registrant's interest income estimated at
$350, and an increase in expense of approximately $960 resulting from the
debt incurred to finance the acquisition. The Interest rate on the new
debt of $15 million is assumed to be 6.4%. A change of 1/8% in the
interest rate would result in a change in interest expense and net income
of $19 and $13 before and after taxes, respectively.
(c) Adjusts the effective income tax rate of the combined entity to the
Registrant's effective income tax Rate. Registrant expects its effective
tax rate to be higher in the future because a significant portion of the
purchase price (goodwill) will be nondeductible for tax purposes.
26
<PAGE>
PRO FORMA CONDENSED BALANCE SHEET
MARCH 31, 1999
(UNAUDITED)
(All amounts in thousands)
<TABLE>
<CAPTION>
HISTORICAL
----------------------
<S> <C> <C> <C> <C>
TSI PRO FORMA PRO FORMA
INCORPORATED ESC ADJUSTMENTS COMBINED
------------ ------- ------------- ---------
Assets
Cash and cash equivalents............... $13,437 $ 3,360 $(10,851)(a) $ 5,946
Accounts receivable, net................ 14,462 5,503 19,965
Prepaid expense......................... 308 141 449
Inventories............................. 15,539 1,175 16,714
Income taxes receivable................. 0 0 2,210(b) 2,210
Intangibles and other assets............ 9,201 1,867 14,659(c) 25,727
Property, plant & equipment, net........ 8,021 4,823 1,000(c) 13,844
------------ ---------
Total assets............................ $60,968 $84,855
------------ ---------
------------ ---------
Liabilities and Shareholders' Equity.... 5,338 6,461 11,799
Accounts payable and accrued expenses... 4,412 185 4,597
Employee compensation................... 473 473
Taxes,other than income taxes........... 1,350 1,350
Long term debt and other liabilities.... 0 2,241 15,000(d) 17,241
------------ ---------
Total liabilities....................... $11,573 $35,460
------------ ---------
Shareholders' Equity
Common shares........................... 1,115 1,115
Additional paid in capital.............. 11,409 11,409
Retained earnings....................... 37,094 37,094
Equity adjustment from translation...... (223) (223)
------------ ---------
Total shareholders' equity.............. $49,395 $49,395
------------ ---------
Total liabilities and shareholder's
equity................................ $60,968 $84,855
------------ ---------
------------ ---------
</TABLE>
27
<PAGE>
NOTES TO PRO FORMA BALANCE SHEET
(DOLLARS IN THOUSANDS)
(UNAUDITED)
The accompanying unaudited pro forma financial information is based on the
Company's preliminary review and does not give effect to all adjustments
ultimately required to allocate the purchase price.
The following describe the adjustments to the historical information of the
Registrant and ESC to give pro forma effect to the purchase of ESC.
(a) Reflects the following transactions:
<TABLE>
<S> <C>
Purchase price paid with existing cash........................................ $ (10,000)
Bonuses paid to employees and directors that exercised options, net of cash
received from such exercise.................................................. (851)
---------
Total......................................................................... $ (10,851)
---------
---------
</TABLE>
(b) Reflects the estimated income tax due from the exercise of ESC stock options
prior to the acquisition.
(c) To reflect the excess of acquisition cost over the estimated fair value of
net assets acquired (goodwill). The purchase price, purchase price
allocation, and financing of the transaction are summarized as follows:
<TABLE>
<S> <C>
Purchase paid as:
Cash........................................................................ $ 10,000
Proceeds from debt.......................................................... 15,000
---------
Total purchase consideration................................................ $ 25,000
---------
---------
Allocated to:
Historical book value of ESC's assets and liabilities
At March 31, 1999......................................................... $ 7,982
Pro forma adjustment due to options exercised:
Effect on cash............................................................ (851)
Income tax refund......................................................... 2,210
---------
Total allocated to ESC historical assets & liabilities...................... $ 9,341
Step up of property, plant and equipment.................................... 1,000
Other intangible assets..................................................... 1,500
Deferred taxes.............................................................. (900)
Goodwill.................................................................... 14,059
---------
Total allocation............................................................ $ 25,000
---------
---------
</TABLE>
(d) Reflects the increased debt incurred to finance the acquisition.
28
<PAGE>
OTHER INFORMATION. The Company is subject to the information and reporting
requirements of the Exchange Act and in accordance therewith is required to file
periodic reports, proxy statements and other information with the Commission
relating to its business, financial condition and other matters. Certain
information, as of particular dates, concerning the Company's business,
principal physical properties, capital structure, material pending legal
proceedings, operating results, financial condition, directors and officers
(including their remuneration and the stock options granted to them), the
principal holders of the Company's securities, any material interests of such
persons in transactions with the Company and certain other matters is required
to be disclosed in proxy statements and annual reports distributed to the
Company's shareholders and filed with the Commission. Such reports, proxy
statements and other information may be inspected and copied at the Commission's
public reference facilities at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and should also be available for inspection at the
following regional offices of the Commission: 7 World Trade Center, New York,
New York 10048; and 500 West Madison Street, Chicago, Illinois 60661-2511; and
copies may be obtained by mail at prescribed rates from the principal office of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
maintains a Website on the Internet that contains reports, proxy statements and
other information (http://www.sec.gov).
Although the Purchaser has no knowledge that any such information is untrue,
the Purchaser takes no responsibility for the accuracy or completeness of
information contained in this Offer to Purchase with respect to the Company or
any of its subsidiaries or affiliates or for any failure by the Company to
disclose events which may have occurred or may affect the significance or
accuracy of any such information.
9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND MR. FAUTH.
The Purchaser and JJF Group are Minnesota corporations. Their principal
executive offices are located at 3100 Metropolitan Centre, 333 South 7th Street,
Minneapolis, Minnesota 55402, and their telephone number is (612) 673-6700. The
Purchaser and JJF Group were formed for the sole purpose of acquiring and
holding shares of the Company's Common Stock. The Purchaser or JJF Group have
not conducted any unrelated activities since their organization on July 2, 1999
and June 14, 1999, respectively. The Purchaser's sole shareholder is JJF Group
and the sole member of its board of directors is Mr. Fauth. JJF Group's sole
shareholder and director is Mr. Fauth. The officers of the Purchaser and JJF
Group are Mr. Fauth (President and Chief Executive Officer), John C. Kopchik
(Vice President), G. Richard Haun, Jr. (Chief Financial Officer and Treasurer)
and Joseph G. Kohler (Secretary). Schedule I hereto sets forth additional
background information relating to the directors and executive officers of the
Purchaser and JJF Group.
On July 7, 1999, Mr. Fauth purchased 357,000 Shares for $4,819,500, or
$13.50 per share from First American Asset Management, a division of U.S. Bank
National Association pursuant to a Stock Purchase Agreement. Under the terms of
the Stock Purchase Agreement, Mr. Fauth also received voting rights with respect
to these Shares at the 1999 Annual Meeting.
As of the date of the Offer, the Purchaser and JJF Group and Mr. Fauth
together beneficially own 1,009,000 Shares, representing approximately 9.0% of
the Shares outstanding as of June 16, 1999 as reported in the 1999 10-K. Mr.
Fauth, as the sole owner of JJF Group, may be deemed to be the beneficial owner
of the Shares held by the Purchaser and JJF Group. All such Shares were acquired
in open market transactions on the Nasdaq National Market.
Schedule II hereto sets forth transactions in the Shares effected during the
past three fiscal years by the Purchaser, JJF Group and Mr. Fauth. Except as set
forth in this Offer and Schedule II hereto, none of the Purchaser or JJF Group,
their executive officers and directors, nor to the best knowledge of the
Purchaser or JJF Group, any associate or majority owned subsidiary of such
persons beneficially owns any equity security of the Company, and none of the
Purchaser or JJF Group nor, to the best knowledge of the Purchaser or JJF Group,
any other persons referred to above, or any of the respective directors,
executive
29
<PAGE>
officers or subsidiaries of any of the foregoing has effected any transaction in
any equity security of the Company during the past 60 days.
Except as set forth in this Offer, the Purchaser or JJF Group does not: (a)
have any contract, arrangement, understanding or relationship with any other
person with respect to any securities of the Company, including, but not limited
to, any contract, arrangement, understanding or relationship concerning the
transfer or the voting of any securities of the Company, joint ventures, loan or
option arrangements, puts or calls, guarantees of loans, guarantees against
loss, or the giving or withholding of proxies; (b) has not been engaged in
contracts, negotiations or transactions with the Company or its affiliates
concerning a merger, consolidation, acquisition, tender offer or other
acquisitions of securities, election of directors or a sale or other transfer of
a material amount of assets; or (c) has not had any other transaction with the
Company or any of its executive officers, directors or affiliates that would
require disclosure under the rules and regulations of the Commission applicable
to the Offer.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY.
On November 25, 1998 Mr. Fauth met with two members of the Company's Board
of Directors to discuss his interest in the Company and on March 1, 1999 he met
with James Doubles, the Company's President, to make his acquaintance and
discuss Mr. Fauth's interest in acquiring the Company.
On March 11, 1999, Mr. Fauth wrote to the Board of Directors of the Company.
In his letter he discussed his disappointment that TSI's stock price did not
reflect its past results and future prospects and that this was not likely to
change in the near future. In his letter Mr. Fauth stated his "strong interest
in forming with TSI's current management a private company to acquire TSI by
means of a cash merger" so that, among other things, TSI's stockholders could
obtain liquidity at an attractive price. Mr. Fauth proposed promptly entering
into negotiations with Board representatives with the objective of signing a
definitive merger agreement. Although the letter did not state a price, Mr.
Fauth indicated that the cash offer would represent a significant premium over
the $8.00 per share average price of TSI common stock over the 52 previous
weeks. The letter also requested a meeting with the Company's Board and stated
that Mr. Fauth would consider a price higher than a 30% premium in the event
that he was permitted to conduct a due diligence review of the Company which
demonstrated that a higher price was warranted. The letter also discussed that
after a merger agreement was signed, TSI would be entitled to consider offers
from others
The Company responded to Mr. Fauth's March 11, 1999 letter on April 27,
1999, stating that the Board of Directors of the Company had concluded that the
Company should continue as an independent, publicly held entity and did not want
to pursue acquisition discussions.
On May 13, 1999, attorneys representing Mr. Fauth met with Company counsel.
Mr. Fauth's attorneys advised Company counsel that Mr. Fauth was not deterred by
the decision communicated in the April 27, 1999 letter and that Mr. Fauth
intended to aggressively pursue his efforts to acquire the Company.
On May 21, 1999, Mr. Fauth requested a shareholder list and other related
information from the Company to enable him to communicate with other
shareholders. In response, on June 1, 1999, the Company provided some, but not
all of the shareholder information which was requested.
Upon accumulating 652,000 Shares, on June 2, 1999, Mr. Fauth filed a
statement on Schedule 13D with the Securities and Exchange Commission.
On June 2, 1999, in response to a request by the Company's counsel, Mr.
Fauth wrote to the Company, advising the Board of the Company regarding his
"track record" of purchasing companies. He discussed his purchase of two public
companies, DICKEY-john Corporation, a manufacturer of electronics and sensing
devices for agricultural and heavy equipment OEMs, and Sterner Lighting Systems,
Inc., a manufacturer of lighting solutions, both in friendly transactions. In
addition to the purchases of public companies, he discussed his acquisition of
numerous privately-held companies.
30
<PAGE>
On June 14, 1999, Mr. Fauth delivered a letter to the Company proposing to
acquire the Company in a merger where the Company's shareholders would receive
$12.50 per share, subject to the negotiation and execution of a definitive
merger agreement containing provisions which are customary in transactions of
this nature and approval by the Company's Board and shareholders. In his letter
Mr. Fauth discussed that the proposed $12.50 per share price represented a
significant premium over the Company's closing stock price of $10.00 per share
on June 11, 1999, the last trading day prior to the offer and a 56% premium over
the $8 per share stock price which prevailed before Mr. Fauth started
accumulating a significant number of shares in the spring of 1999. The letter
requested a meeting with the Board of Directors of the Company to discuss the
proposal and also summarized proposals the JJF Group intended to present to the
Company's shareholders at their next annual meeting. The Company's Board of
Directors refused to meet with Mr. Fauth to discuss his June 14, 1999 proposal.
On June 16, 1999, JJF Group and Mr. Fauth filed preliminary copies of proxy
materials with the Commission with respect to the 1999 Annual Meeting. The
preliminary proxy materials proposed the election of three individuals
designated by Mr. Fauth and JJF Group to the Company's eight-person Board and
also contained the preliminary versions of proposals to amend the Company's
bylaws and Articles of Incorporation which were designed to preserve and enhance
the shareholders' corporate governance rights.
On June 17, 1999, the Company announced that its Board of Directors had
rejected Mr. Fauth's proposal for the merger described in Mr. Fauth's June 14,
1999 letter.
On June 18, 1999, Mr. Fauth requested updated shareholder information. On
June 28, 1999, the Company provided some, but not all of the shareholder
information requested.
On June 18, 1999, the Company sent a letter to Mr. Fauth rejecting his offer
to purchase the Company at a price of $12.50 per share and stating that it
intended to "vigorously resist" Mr. Fauth's efforts to acquire the Company.
On July 2, 1999, JJF Group and Mr. Fauth filed definitive proxy materials
with the Commission with respect to the 1999 Annual Meeting. The definitive
proxy materials proposed the election of three individuals designated by the
Purchaser to Company's eight-person Board. The definitive proxy materials also
contained the six proposals described under the heading "Introduction" to this
Offer.
On July 9, 1999, JJF Group filed a Complaint against the Company in the
District Court for Ramsey County, Minnesota. The Complaint seeks a declaration
by the Court that the Company is incorrect in its assertion in its proxy
statement that its articles of incorporation require the affirmative vote of 75%
of the Company's outstanding shares in order to adopt three of the JJF Group's
proposals. These three proposals concern the Company taking defensive actions, a
deadline for the 2000 Annual Meeting and the adoption of a poison pill or
issuance of certain new securities. JJF Group has asked the Court to declare
that a majority of the Shares voting in person or by proxy at the Annual Meeting
is required to carry these proposals. JJF Group has moved the Court for an
expedited determination of these issues. That motion is pending before the Court
and is currently scheduled to be heard on July 19, 1999.
On July 9, 1999 the Purchaser announced its intention to commence this
tender offer.
Except for the foregoing, there have been no material contacts or
negotiations between the Purchaser or JJF group or their affiliates, on the one
hand, and the Company and its affiliates, on the other hand, concerning a
merger, consolidation or acquisition, tender offer or other acquisition of
Shares or other securities of the Company, an election of directors, or a sale
or other transfer of a material amount of the Company's assets.
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11. PURPOSE OF THE OFFER; THE MERGER; PLANS FOR THE COMPANY.
PURPOSE OF THE OFFER. The purpose of the Offer and the Merger, as described
in the Introduction, is to enable the Purchaser to acquire control of, and the
entire equity interest in, the Company. If the Offer is consummated, then, as
soon as practicable thereafter, the Purchaser will seek to consummate the
Merger.
THE MERGER. The purpose of the Merger is to acquire all Shares not tendered
and purchased pursuant to the Offer or otherwise. If the Merger is consummated
within two years of the consummation of the Offer, each then outstanding Share
(other than Shares owned by the Purchaser or its affiliates) would be converted
into the right to receive cash in the same amount as is received in the Offer,
and the Company would become a wholly-owned subsidiary of JJF Group. The Offer,
as the first step in the acquisition of the Company, is intended to facilitate
the acquisition of all of the Shares. The timing of consummation of the Offer
and Merger will depend upon on a variety of factors and legal requirements, the
actions of the Company's Board, the number of Shares (if any) acquired by the
Purchaser pursuant to the Offer, and whether the conditions to the Offer have
been satisfied.
Except in the case of a "short-form" merger as described below, under
Minnesota law the approval of the Company's Board of Directors and the
affirmative vote of holders of a majority of the outstanding Shares (including
Shares owned by the Purchaser, JJF Group and Mr. Fauth) would be required to
approve the Merger. If the Purchaser acquired through the Offer or otherwise
voting power with respect to at least a majority of the outstanding Shares,
which would be the case if the Minimum Tender Condition, the Control Share
Condition and Business Combination Condition were satisfied and the Purchaser
were to accept for payment Shares tendered pursuant to the Offer, it would have
sufficient voting power to effect the Merger without the vote of any other
shareholder of the Company. If following consummation of the Offer, the current
members of the Board of Directors of the Company do not resign or approve the
Merger, then the Purchaser intends to call a special meeting of shareholders to
seek to remove members of the Board and to cause nominees of the Purchaser to be
elected to fill the resulting vacancies who, subject to the fiduciary duties
they would have as directors of the Company, intend to approve the Merger and
take any other action to permit the Merger to be consummated.
Minnesota law provides that if a parent company owns at least 90% of each
class of stock of a subsidiary, the parent can effect a "short-form" merger with
that subsidiary without a shareholder vote. Accordingly, if as a result of the
Offer or otherwise, the Purchaser acquired or controls the voting power of at
least 90% of the outstanding Shares, the Purchaser could, and intends to, effect
the Merger without prior notice to, or any action by, any other shareholder of
the Company.
If the Merger has not been consummated, the Purchaser or an affiliate may,
either immediately following consummation or termination of the Offer (whether
or not the Purchaser purchases Shares pursuant to the Offer) or from time to
time thereafter, seek to acquire additional Shares through open market
purchases, privately negotiated transactions, a tender offer or exchange offer
or otherwise, upon such terms and at such prices as it may determine, which may
be more or less than the price to be paid pursuant to the Offer. Alternatively,
the Purchaser and its affiliates reserve the right to sell or otherwise dispose
of any or all of the Shares acquired by them pursuant to the Offer or otherwise,
upon such terms and at such prices as they shall determine.
The precise timing and other details of any merger or other business
combination transaction will depend on a variety of factors such as general
economic conditions and prospects, the future prospects, asset value and
earnings of the Company, the number of Shares acquired by the Purchaser pursuant
to the Offer or otherwise and the statutory requirements described above. The
Purchaser can give no assurance that a merger or other business combination will
be proposed or that, if it is proposed, it will not be delayed or abandoned. The
Purchaser expressly reserves the right not to propose any merger or similar
business combination on terms other than those set forth herein, and its
ultimate decision could be affected by information hereafter obtained by the
Purchaser, changes in economic or market conditions or in the business of the
Company or other factors.
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The making of the Offer will enable the Purchaser to commence the process of
seeking regulatory approvals for its acquisition of the Company. See Section 15.
In addition, by tendering Shares pursuant to the Offer, the Company's
shareholders effectively will be given the opportunity to express to the
Company's Board that they wish to be able to accept the Offer.
THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF A PROXY, CONSENT OR
AUTHORIZATION FOR OR WITH RESPECT TO THE 1999 ANNUAL MEETING OR ANY SPECIAL
MEETING OF THE COMPANY'S SHAREHOLDERS. ANY SUCH SOLICITATION WHICH THE PURCHASER
MAY MAKE WILL BE MADE ONLY PURSUANT TO SEPARATE SOLICITATION MATERIALS COMPLYING
WITH ALL APPLICABLE REQUIREMENTS OF SECTION 14(a) OF THE EXCHANGE ACT AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER.
PLANS FOR THE COMPANY. Upon consummation of the Offer, the Purchaser
expects that it will maintain the current structure of the Company's
organization. However, the Purchaser, or its affiliates, intend to conduct a
review of the Company and its assets, corporate structure, dividend policy,
capitalization, operations, properties and policies and to consider what, if
any, changes would be desirable in light of the circumstances then existing, and
reserves the right to take such actions or effect such changes as it deems
desirable. See Section 10.
Except as described in this Offer to Purchase, the Purchaser has no present
plans or proposals that would relate to or would result in (i) an extraordinary
corporate transaction, such as a merger, reorganization or liquidation,
involving the Company or any of its subsidiaries, (ii) a sale or transfer of a
material amount of assets of the Company or any of its subsidiaries, (iii) any
change in the present Board of Directors or management of the Company, (iv) any
material changes in the present capitalization or dividend policy of the
Company, (v) any other material change in the Company's corporate structure or
business, (vi) causing a class of securities of the Company to be delisted from
a national securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association or
(vii) a class of equity securities of the Company becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Exchange Act.
DISSENTER'S RIGHTS AND GOING PRIVATE TRANSACTIONS. Under the Minnesota
Business Corporation Act, the Purchaser has been advised that shareholders will
have the right to dissent from the Merger, and receive in lieu of the Merger
consideration, assuming compliance with appropriate statutory procedures, the
per share amount determined in accordance with Sections 302A.471 and 473 of the
Minnesota Business Corporation Act.
The SEC has adopted Rule 13e-3 under the Exchange Act, which is applicable
to certain "going private" transactions and which may under certain
circumstances be applicable to the Merger. However, Rule 13e-3 would not be
applicable to the Merger if: (a) the Shares are deregistered under the Exchange
Act prior to the Merger; or (b) the Merger is consummated within one year after
the purchase of the Shares pursuant to the Offer and the Merger provided for
shareholders to receive cash for their Shares in an amount at least equal to the
amount paid per Share in the Offer. However, in the event that the Purchaser is
deemed to have acquired control of the Company pursuant to the Offer and if the
Merger is consummated more than one year after completion of the Offer or an
alternative acquisition transaction is effected whereby shareholders of the
Company receive consideration less than that paid pursuant to the Offer, in
either case at a time when the Shares are still registered under the Exchange
Act, the Purchaser may be required to comply with Rule 13e-3 under the Exchange
Act. If applicable, Rule 13e-3 requires, among other things, that certain
financial information concerning the fairness of the proposed transaction be
filed with the SEC and disclosed to shareholders prior to the consummation of
the transaction. The purchase of a substantial number of Shares pursuant to the
Offer may result in the Company being able to terminate its Exchange Act
registration.
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12. SOURCE AND AMOUNT OF FUNDS.
There were 11,232,816 Shares outstanding as of June 16, 1999, of which
1,009,000 Shares are currently owned by the Purchaser or Mr. Fauth. Including
outstanding options for 810,194 Shares as of March 31, 1999, there are
potentially 12,043,010 Shares outstanding on a fully diluted basis. In order to
satisfy the Minimum Offer Condition, approximately 5,012,000 Shares (the
"Purchased Shares") would need to be tendered and purchased, together with the
Shares currently owned by Mr. Fauth. The total purchase price of these Purchased
Shares would be $70,175,084. If all Shares other than those owned by the
Purchaser or Mr. Fauth were tendered, the total purchase price would be
$154,476,140.
The Purchaser's total equity will be $44,126,000, comprised of $30 million
in cash and the contribution of Mr. Fauth's 1,009,000 Shares, which would be
valued at $14,126,000 at $14.00 per share. The cash will be contributed to the
Purchaser by its parent, JJF Group, Inc., which will have borrowed the $30
million from Churchill Industries, Inc., an industrial holding company that is
wholly owned by Mr. Fauth. The loan is expected to be unsecured and guaranteed
by Mr. Fauth, to bear an interest rate of 3.25% over the London Interbank
Offered Rate ("LIBOR") and to have a term of five years.
In addition to the aforementioned equity, the Purchaser has also received a
"highly confident letter" dated July 9, 1999 from BNY Capital Markets, Inc.(
"BNY") indicating that as of that date, BNY was highly confident that it could
obtain commitments from lenders for a senior secured credit facility (the
"Tender Offer Facility") to be made available to the Purchaser in an amount
sufficient to finance a portion of the payment obligations under the Tender
Offer required to purchase the tendered Shares. The Tender Offer Facility would
be secured by the Purchased Shares and the Contributed Shares, and would not
exceed approximately 43% of their respective collateral values as determined
under Federal Reserve Regulation U. The Tender Offer Facility is expected to
have an effective interest rate of 3% over LIBOR or 1.75% over the prime rate
and a maximum term of 18 months.
The balance of the funds necessary to consummate the Offer would be
approximately $4 million if the minimum Shares were tendered, and approximately
$52 million if all Shares not already owned by the Purchaser or Mr. Fauth were
tendered. The Purchaser expects that such amounts would be financed by
additional equity contributions to the Purchaser or additional borrowings by the
Purchaser. The Purchaser believes that such amounts can be obtained on a timely
basis, but currently no specific arrangements have been made to obtain that
additional financing. The Purchaser's belief that such financing to purchase the
Shares will be available is based in part on the BNY highly confident letter
referred to above, which in addition to the financing referred to above for the
purchase of Shares, states that as of the date of that letter BNY was highly
confident that up to $140 million in financing would be available upon a merger
of the Purchaser and the Company to refinance debt incurred in connection with
the purchase of the Shares and for general corporate purposes. The Purchaser
expects that such replacement financing would consist of up to $40 million of
senior debt secured by the Company's assets and up to $110 million of senior
subordinated notes issued by the merged Company in the public debt market. To
date no binding arrangements have been made for such replacement financing.
The BNY highly confident letter states that BNY's ability to provide
financing is subject to satisfaction or waiver of customary conditions,
including (a) there having been in BNY's sole judgment no material adverse
change in the financial condition, results of operations, business or prospects
of the Company, the Purchaser or Churchill Industries, Inc. and its subsidiaries
("Churchill") since March 31, 1999; (b) there not having been any material
adverse change in the market for high yield securities or capital markets in
general, in the opinion of BNY; (c) consolidated pro forma capitalization of the
Company following the Merger, assuming consummation of the Offer and related
permanent financings being acceptable to BNY; (d) audited and unaudited
historical financial statements (including unaudited pro forma financial
statements) of the Company and its subsidiaries acceptable to BNY conforming to
the requirements of the Commission; (e) BNY not having discovered or otherwise
becoming aware of any information not previously disclosed to Lender that it
believes is inconsistent in a material and adverse manner with BNY's
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understanding, concerning the business, operations, property, condition
(financial or otherwise) or prospects of the Company, the Purchaser or
Churchill; (f) terms, structure and arrangements regarding the financing and
other financing for the transaction being on terms satisfactory to BNY; (g) the
consolidated pro forma capitalization of the Purchaser, assuming consummation of
the Offer, being acceptable to BNY; (h) execution and delivery of definitive
documentation relating to and encompassing the transaction which is acceptable
to BNY; (i) receipt of all appropriate regulatory approvals; and (j) there
having been no change or proposed change in laws that could be expected to
adversely affect the economic consequences of the transaction.
The foregoing summary of the source and amount of funds is qualified in its
entirety by reference to the text of the highly confident letter, a copy of
which is filed as an exhibit to the Schedule 14D-1 of the Purchaser, JJF Group
and Mr Fauth filed with the Commission in connection with the Offer (the
"Schedule 14D-1") and is incorporated in this Offer to Purchase by reference and
may be inspected in the same manner as set forth with respect to the Company in
Section 8. If and when definitive agreements with respect to the financing
arrangements are executed, copies will be filed as exhibits to amendments to the
Schedule 14D-1.
13. DIVIDENDS AND DISTRIBUTIONS.
If, on or after June 16, 1999, the Company should (a) split, combine or
otherwise change the Shares or its capitalization, (b) acquire or otherwise
cause a reduction in the number of outstanding Shares or other securities or (c)
issue or sell additional Shares (other than the issuance of Shares under option
prior to March 31, 1999, in accordance with the terms of such options as
publicly disclosed prior to June 16, 1999), shares of any other class of capital
stock, other voting securities or any securities convertible into, or rights,
warrants or options, conditional or otherwise, to acquire, any of the foregoing,
then, subject to the provisions of Section 14, the Purchaser, in its sole
discretion, may make such adjustments as it deems appropriate in the purchase
price and other terms of the Offer, including, without limitation, the number or
type of securities offered to be purchased or the number of securities required
to satisfy the Minimum Tender Condition.
If, on or after June 16, 1999, the Company should declare or pay any cash
dividend on the Shares or other distribution on the Shares, or issue with
respect to the Shares any additional Shares, shares of any other class of
capital stock, other voting securities or any securities convertible into, or
rights, warrants or options, conditional or otherwise, to acquire, any of the
foregoing, payable or distributable to shareholders of record on a record date
prior to the transfer of the Shares purchased pursuant to the Offer to the
Purchaser or its nominee or transferee on the Company's stock transfer records,
then, subject to the provisions of Section 14, (a) the purchase price of the
Offer may, in the sole discretion of the Purchaser, be reduced by the amount of
any such cash dividend or cash distribution and (b) the whole of any such
noncash dividend, distribution or issuance to be received by the tendering
shareholders will (i) be received and held by the tendering shareholders for the
account of the Purchaser and will be required to be promptly remitted and
transferred by each tendering shareholder to the Depositary for the account of
the Purchaser, accompanied by appropriate documentation of transfer, or (ii) at
the direction of the Purchaser, be exercised for the benefit of the Purchaser,
in which case the proceeds of such exercise will promptly be remitted to the
Purchaser. Pending such remittance and subject to applicable law, the Purchaser
will be entitled to all rights and privileges as owner of any such noncash
dividend, distribution, issuance or proceeds and may withhold the entire
purchase price or deduct from the purchase price the amount or value thereof, as
determined by the Purchaser in its sole discretion.
14. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other term or provision of the Offer, the Purchaser will
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 a bidder's obligation to pay for or return tendered securities
promptly
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after the termination or withdrawal of such bidder's offer), to pay for any
Shares not theretofore accepted for payment or paid for unless the following
conditions have been satisfied, among others, (1) Minimum Tender Condition, (2)
the Control Share Condition, (3) the Business Combination Condition, (4) the
Election Condition, (5) the Purchaser being satisfied, in its sole discretion,
that the Company's shareholders at their July 22, 1999 Annual Meeting have
adopted five proposals to amend the Company's Articles of Incorporation and
Bylaws which are designed to limit the Company's ability to take various
defensive measures to hinder or prevent the Company's shareholders from
considering this or other acquisition offers, (6) the Financing Condition, and
(7) any waiting period under the HSR Act applicable to the purchase of Shares
pursuant to the Offer shall have expired or been terminated. Furthermore,
notwithstanding any other term or provision of the Offer, the Purchaser will 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 terminate or
amend the Offer if, at any time on or after July 12, 1999, and before the
acceptance of such Shares for payment or the payment therefor, any of the
following events or facts shall have occurred:
(a) there shall be threatened, instituted or pending any action,
proceeding, application or counterclaim by any government or governmental,
regulatory or administrative authority or agency, domestic, foreign or
supranational (each, a "Governmental Entity"), or by any other person,
domestic or foreign, before any court or Governmental Entity, (i) (A)
challenging or seeking to, or which is reasonably likely to, make illegal,
delay or otherwise directly or indirectly restrain or prohibit, or seeking
to or which is reasonably likely to, impose voting, procedural, price or
other requirements in connection with, the making of the Offer, the
acceptance for payment of, or payment for, some of or all the Shares by the
Purchaser, or any other affiliate of the Purchaser or the consummation by
the Purchaser, or any other affiliate of the Purchaser of a merger or other
similar business combination with the Company, (B) seeking to obtain
material damages, or (C) otherwise directly or indirectly relating to the
transactions contemplated by the Offer or any merger or business combination
between the Purchaser or its affiliates on the one hand and the Company and
its affiliates on the other hand, (ii) seeking to prohibit the ownership or
operation by the Purchaser or any other affiliate of the Purchaser of all or
any portion of the business or assets of the Company and its subsidiaries or
of the Purchaser or any other affiliate of the Purchaser or to compel the
Purchaser or any other affiliate of the Purchaser or the Company or any
subsidiary thereof to dispose of or hold separate all or any portion of the
business or assets of the Company or any of its subsidiaries or of the
Purchaser or any other affiliate of the Purchaser or the Company or any
subsidiary thereof or seeking to impose any limitations on the ability of
the Purchaser or any other affiliate of the Purchaser to conduct such
business or own such assets, (iii) seeking to impose or confirm limitation
on the ability of the Purchaser or any other affiliate of the Purchaser
effectively to exercise full rights of ownership of the Shares, including,
without limitation, the right to vote any Shares acquired or owned by the
Purchaser or any other affiliate of the Purchaser on all matters properly
presented to the Company's shareholders, (iv) seeking to require divestiture
by the Purchaser or any other affiliate of the Purchaser of any Shares, (v)
seeking any material diminution in the benefits expected to be derived by
the Purchaser or any other affiliate of the Purchaser as a result of the
transactions contemplated by the Offer or any merger or other similar
business combination with the Company, (vi) otherwise directly or indirectly
relating to the Offer or which otherwise, in the sole judgment of the
Purchaser, might materially adversely affect the Company or any of its
subsidiaries or the Purchaser or any other affiliate of the Purchaser or the
value of the Shares, or (vii) in the sole judgment of the Purchaser,
materially adversely affecting the business, properties, assets,
liabilities, capitalization, shareholders' equity, condition (financial or
otherwise), operations, licenses or franchises, results of operations or
prospects of the Company or any of its subsidiaries;
(b) there shall be any action taken or any statute, rule, regulation,
legislation, interpretation, judgment, order or injunction proposed,
enacted, enforced, promulgated, amended, issued or deemed applicable to (i)
the Purchaser or any other affiliate of the Purchaser or the Company or any
of its subsidiaries or (ii) the Offer or any merger or other similar
business combination by the Purchaser or
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any other affiliate of the Purchaser with the Company, by any government,
legislative body or court, domestic, foreign or supranational, or
Governmental Entity, other than the routine application of the waiting
period provisions of the HSR Act to the Offer, that, in the sole judgment of
the Purchaser, might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (vii) of paragraph (a)
above;
(c) any change shall have occurred or been threatened (or any condition,
event or development shall have occurred or been threatened involving a
prospective change) in the business, properties, assets, liabilities,
capitalization, shareholders' equity, condition (financial or otherwise),
operations, licenses or franchises, results of operations or prospects of
the Company or any of its subsidiaries that, in the sole judgment of the
Purchaser, is or may be materially adverse to the Company or any of its
subsidiaries, or the Purchaser shall have become aware of any facts that, in
the sole judgment of the Purchaser, have or may have material adverse
significance with respect to either the value of the Company or any of its
subsidiaries or the value of the Shares to the Purchaser or any other
affiliate of the Purchaser;
(d) there shall have occurred or been threatened (i) any general
suspension of trading in, or limitation on prices for, securities on any
national securities exchange or in the over-the-counter market in the United
States, (ii) any extraordinary or material adverse change in the financial
markets or major stock exchange indices in the United States or abroad or in
the market price of Shares, (iii) any change in the general political,
market, economic or financial conditions in the United States or abroad that
could, in the sole judgment of the Purchaser, have a material adverse effect
upon the business, properties, assets, liabilities, capitalization,
shareholders' equity, condition (financial or otherwise), operations,
licenses or franchises, results of operations or prospects of the Company or
any of its subsidiaries or the trading in, or value of, the Shares, (iv) any
material change in United States currency exchange rates or any other
currency exchange rates or a suspension of, or limitation on, the markets
therefor, (v) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States, (vi) any limitation
(whether or not mandatory) by any government, domestic, foreign or
supranational, or Governmental Entity on, or other event that, in the sole
judgment of the Purchaser, might affect, the extension of credit by banks or
other lending institutions, (vii) a commencement of a war or armed
hostilities or other national or international calamity directly or
indirectly involving the United States or (viii) in the case of any of the
foregoing existing at the time of the commencement of the Offer, a material
acceleration or worsening thereof;
(e) the Company or any of its subsidiaries shall have (i) split,
combined or otherwise changed, or authorized or proposed a split,
combination or other change of, the Shares or its capitalization, (ii)
acquired or otherwise caused a reduction in the number of, or authorized or
proposed the acquisition or other reduction in the number of, outstanding
Shares or other securities (other than as aforesaid), (iii) issued or sold,
or authorized or proposed the issuance, distribution or sale of, additional
Shares (other than the issuance of Shares under option prior to March 31,
1999, in accordance with the terms of such options as publicly disclosed
prior to June 16, 1999) other class of capital stock, other voting
securities or any securities convertible into, or rights, warrants or
options, conditional or otherwise, to acquire, any of the foregoing, (iv)
declared or paid, or proposed to declare or pay, any dividend or other
distribution, whether payable in cash, securities or other property, on or
with respect to any shares of capital stock of the Company, (v) altered or
proposed to alter any material term of any outstanding security other than
to grant voting rights to the Purchaser pursuant to the Control Share
Condition or to satisfy the Business Combination Condition with respect to
the Purchaser as described herein, (vi) incurred any debt other than in the
ordinary course of business or any debt containing burdensome covenants,
(vii) authorized, recommended, proposed or entered into an agreement with
respect to any merger, consolidation, liquidation, dissolution, business
combination, acquisition of assets, disposition of assets, release or
relinquishment of any material contractual or other right of the Company or
any of its subsidiaries or any comparable event not in the ordinary
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course of business, (viii) authorized, recommended, proposed or entered
into, or announced its intention to authorize, recommend, propose or enter
into, any agreement or arrangement with any person or group that in the sole
judgment of the Purchaser could adversely affect either the value of the
Company or any of its subsidiaries or the value of the Shares to the
Purchaser or any other affiliate of the Purchaser, (ix) entered into any
employment, severance or similar agreement, arrangement or plan with or for
the benefit of any of its employees other than in the ordinary course of
business or entered into or amended any agreements, arrangements or plans so
as to provide for increased or accelerated benefits to the employees as a
result of or in connection with the transactions contemplated by the Offer,
(x) except as may be required by law, taken any action to terminate or amend
any employee benefit plan (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended) of the Company or any of
its subsidiaries, or the Purchaser shall have become aware of any such
action that was not disclosed in publicly available filings prior to July
12, 1999, or (xi) amended, or authorized or proposed any amendment to, its
certificate of incorporation or its by-laws (other than any amendment
effected as a result of the adoption of the Proposals), or the Purchaser
shall become aware that the Company or any of its subsidiaries shall have
proposed or adopted any such amendment that was not disclosed in publicly
available filings prior to July 12, 1999;
(f) a tender or exchange offer for any Shares shall have been made or
publicly proposed to be made by any other person (including the Company or
any of its subsidiaries or affiliates), or it shall have been publicly
disclosed or the Purchaser shall have otherwise learned that (i) any person,
entity (including the Company or any of its subsidiaries) or "group" (within
the meaning of Section 13(d)(3) of the Exchange Act) shall have acquired or
proposed to acquire beneficial ownership of more than 5% of any class or
series of capital stock of the Company (including the Shares), through the
acquisition of stock, the formation of a group or otherwise, or shall have
been granted any right, option or warrant, conditional or otherwise, to
acquire beneficial ownership of more than 5% of any class or series of
capital stock of the Company (including the Shares), other than acquisitions
for bona fide arbitrage purposes only and other than as disclosed in a
Schedule 13G on file with the Commission prior to July 12, 1999, (ii) any
such person, entity or group that prior to July 12, 1999, had filed such a
Schedule with the Commission has acquired or proposes to acquire, through
the acquisition of stock, the formation of a group or otherwise, beneficial
ownership of 1% or more of any class or series of capital stock of the
Company (including the Shares), or shall have been granted any right, option
or warrant, conditional or otherwise, to acquire beneficial ownership of 1%
or more of any class or series of capital stock of the Company (including
the Shares), (iii) any person or group shall have entered into a definitive
agreement or an agreement in principle or made a proposal with respect to a
tender offer or exchange offer or a merger, consolidation or other business
combination with or involving the Company or (iv) any person shall have
filed a Notification and Report Form under the HSR Act (or amended a prior
filing to increase the applicable filing threshold set forth therein) or
made a public announcement reflecting an intent to acquire the Company or
any assets or subsidiaries of the Company;
(g) any approval, permit, authorization, favorable review or consent of
any Governmental Entity (including those described or referred to in Section
15) shall not have been obtained on terms satisfactory to the Purchaser in
its sole discretion;
(h) the Purchaser shall become aware (i) that any material contractual
right of the Company or any of its subsidiaries shall be impaired or
otherwise adversely affected as a result of the transactions contemplated by
the Offer, or (ii) of any covenant, term or condition in any of the
Company's or any of its subsidiaries' instruments or agreements that are or
may be materially adverse to the value of the Shares in the hands of the
Purchaser or any other affiliate of the Purchaser (including, without
limitation, any event of default that may ensue as a result of the
consummation of the Offer, or any other business combination or the
acquisition of control of the Company); or
38
<PAGE>
(i) the Purchaser shall have reached an agreement or understanding with
the Company providing for termination of the Offer, or the Purchaser or any
other affiliate of the Purchaser shall have entered into a definitive
agreement or announced an agreement in principle with the Company providing
for a merger or other business combination with the Company or the purchase
of stock or assets of the Company; which, in the sole judgment of the
Purchaser in any such case, and regardless of the circumstances (including
any action or inaction by the Purchaser or any other affiliate of the
Purchaser) giving rise to any such condition, makes it inadvisable to
proceed with the Offer and/or with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of the Purchaser and may
be asserted by the Purchaser regardless of the circumstances giving rise to any
such condition or may be waived by the Purchaser in whole or in part at any time
and from time to time in its sole discretion. The failure by the Purchaser at
any time to exercise any of the foregoing rights will not be deemed a waiver of
any such right, the waiver of any such right with respect to particular facts
and circumstances will not be deemed a waiver with respect to any other facts
and circumstances and each such right will be deemed an ongoing right that may
be asserted at any time and from time to time. Any determination by the
Purchaser concerning the events described in this Section 14 will be final and
binding upon all parties.
A public announcement may be made of a material change in, or waiver of,
such conditions and the Offer may, in certain circumstances, be extended in
connection with any such change or waiver.
The Purchaser acknowledges that the Commission believes that (a) if the
Purchaser is delayed in accepting the Shares it must either extend the Offer or
terminate the Offer and promptly return the Shares and (b) the circumstances in
which a delay in payment is permitted are limited and do not include unsatisfied
conditions of the Offer, except with respect to any approval required under the
HSR Act and most other regulatory approvals.
15. CERTAIN LEGAL MATTERS; REQUIRED REGULATORY APPROVALS.
GENERAL. Except as disclosed herein, based upon review of publicly
available filings by the Company, the Purchaser is not aware of any license or
regulatory permit that appears to be material to the business of the Company and
that might be adversely affected by the Purchaser's acquisition of Shares
pursuant to the Offer, or of any approval or other action by any governmental,
administrative or regulatory agency or authority, domestic or foreign, that
would be required for the acquisition or ownership of Shares by the Purchaser
pursuant to the Offer. Should any such approval or other action be required, it
is presently contemplated that such approval or action would be sought. While
the Purchaser does not currently intend to delay 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 or other action, if required,
would be obtained without substantial conditions or that adverse consequences
would not result to the business of the Company or the Purchaser in the event
that such approvals were not obtained or such other actions were not taken or in
order to obtain any such approval or other action. The Purchaser's obligation to
purchase and pay for Shares is subject to certain conditions, including
conditions with respect to litigation and governmental actions. See the
Introduction and Section 14 for a description thereof.
STATE TAKEOVER LAWS. The Company and certain of its subsidiaries conduct
business in a number of states throughout the United States, some of which have
adopted laws and regulations applicable to offers and acquisitions of shares of
corporations that are incorporated or have substantial assets, shareholders or a
principal place of business in such states. In EDGAR V. MITE CORP., the Supreme
Court of the United States held that the Illinois Business Takeover Statute,
which involved state securities laws which made takeover of certain corporations
more difficult, imposed a substantial burden on interstate commerce and was
therefore unconstitutional. In CTS CORP. V. DYNAMICS CORP. OF AMERICA, however,
the Supreme Court held that a state may, as a matter of corporate law and in
particular, those laws concerning corporate
39
<PAGE>
governance, constitutionally disqualify a potential acquiror from voting on the
affairs of a target corporation without prior approval of the remaining
shareholders, provided that such laws were applicable only under certain
conditions.
The Company is incorporated under the laws of the state of Minnesota. The
Minnesota Control Share Act requires, among other things, that in order to vote
shares of an "issuing public corporation" acquired over a 20%, 33% or 50%
threshold, an "Acquiring Person" must receive the approval of the holders of a
majority of all shares entitled to vote and the holders of a majority of shares
entitled to vote excluding all "interested shares" at a meeting to be held no
later than 55 calendar days following delivery of, among other things, an
information statement by the Acquiring Person to the Issuing Public Corporation,
unless the Acquiring Person agrees to a later date. "Interested Shares" are
defined to mean shares beneficially owned by an Acquiring Person, by any officer
of the Issuing Public Corporation and by employee-directors of the Issuing
Public Corporation. An "Acquiring Person" is defined as any person that makes or
proposes to make an acquisition of, directly or indirectly, of beneficial
ownership of shares of an Issuing Public Corporation that would, when added to
all other shares beneficially owned by such person, entitle such person
immediately after such acquisition to exercise or direct the exercise of voting
power over a new range of voting power within any of the ranges referred to
above. In order to obtain the right under the Control Share Act to vote all
Shares that may be acquired by the Purchaser pursuant to the Offer, the
Purchaser would be required to deliver to the Company an Information Statement
containing the information required by the Minnesota Control Share Act and, in
accordance with the Minnesota Control Share Act, request that the Company call a
special meeting of shareholders for the sole purpose of considering the voting
rights to be accorded to all Shares acquired by the Purchaser pursuant to the
Offer.
The above provisions do not apply to a control share acquisition of shares
of an Issuing Public Corporation whose articles of incorporation or bylaws
provide that the Control Share Act does not apply to control share acquisitions
of its shares. The Company's Articles of Incorporation, as amended, and Bylaws,
as amended, currently do not exclude the Company from the restrictions imposed
by the Control Share Act. A CONDITION TO THE OFFER IS THAT THE SHAREHOLDERS OF
THE COMPANY APPROVE AN AMENDMENT TO THE COMPANY'S BYLAWS PROVIDING THAT THE
COMPANY OPTS OUT OF THE MINNESOTA CONTROL SHARE ACT, OR THAT THE PURCHASER IS
OTHERWISE SATISFIED IN ITS SOLE DISCRETION THAT THE MINNESOTA CONTROL SHARE ACT
IS INAPPLICABLE TO THE OFFER.
In addition, Section 302A.673 of the Minnesota Business Corporation Act
would prohibit any "business combination" including any merger, for a period of
four years following the date that the Purchaser first acquires beneficial
ownership, directly or indirectly, of 10% or more of the outstanding Shares if
the Purchaser does not receive approval of a special committee composed of all
of the disinterested members of the Company's Board of Directors prior to such
acquisition. A CONDITION TO THE OFFER IS THAT A COMMITTEE OF THE COMPANY'S
DISINTERESTED DIRECTORS APPROVE THE PURCHASER'S ACQUISITION OF SHARES PRIOR TO
THE PURCHASER ACQUIRING BENEFICIAL OWNERSHIP, DIRECTLY OR INDIRECTLY OF AT LEAST
10% OF THE COMPANY'S OUTSTANDING SHARES IN ACCORDANCE WITH THE MINNESOTA
BUSINESS COMBINATION ACT.
THE MINNESOTA TAKEOVER DISCLOSURE LAW. Minnesota Statutes Ch.80B.01 ET
SEQ., requires certain disclosures and filing of disclosure material with the
Minnesota Commissioner of Commerce (the "Commissioner"). On July 12, 1999 the
Purchaser filed disclosure materials with the Commissioner. Although the
Commissioner does not approve such material, he or she does review it for the
adequacy of such disclosure and is empowered to summarily suspend the Offer in
Minnesota within three days of such filing if the material does not provide full
disclosure. Such summary suspension, if made, would be effective until a hearing
is held (within ten days of the summary suspension) and a determination made
(within three days of such hearing, but no more than sixteen days after the
initial summary suspension) to make any such suspension permanent, subject to
corrective disclosure.
The Purchaser has not determined whether any other state takeover laws and
regulations will by their terms apply to the Offer, and, except as set forth
herein, the Purchaser has not presently sought to comply
40
<PAGE>
with any state takeover statute or regulation. The Purchaser reserves the right
to challenge the applicability or validity of any state law or regulation
purporting to apply to the Offer, and neither anything in this Offer nor any
action taken in connection herewith is intended as a waiver of such right. In
the event it is asserted that one or more state takeover statutes is applicable
to the Offer and an appropriate court does not determine that such statute is
inapplicable or invalid as applied to the Offer, the Purchaser might be required
to file certain information with, or to receive approval from, the relevant
state authorities, and the Purchaser might be unable to accept for payment or
pay for Shares tendered pursuant to the Offer, or be delayed in consummating the
Offer.
ANTITRUST LAWS. Under the HSR Act, and the rules and regulations that have
been promulgated thereunder by the Federal Trade Commission (the "FTC"), certain
acquisition transactions may not be consummated until certain information and
documentary material has been furnished for review by the Antitrust Division of
the Department of Justice (the "Antitrust Division") and the FTC and certain
waiting period requirements have been satisfied. The acquisition of Shares
pursuant to the Offer and the proposed Merger is subject to such requirements.
If the Election Condition and the Bylaw and Article Conditions are satisfied
at the Company's 1999 Annual Meeting, the Purchaser intends to file prior to
July 26, 1999 a Premerger Notification and Report Form with the Antitrust
Division and the FTC under the HSR Act in connection with the purchase of Shares
that would include Shares acquired pursuant to the Offer, and the required
waiting period will expire at 11:59 p.m., New York City time, fifteen days after
such filing, unless earlier terminated by the Antitrust Division or the FTC or
the Purchaser receives a request for additional information or documentary
material prior thereto. If, within such 15-calendar-day waiting period, either
the FTC or the Antitrust Division were to request additional information or
documentary material from the Purchaser, the waiting period would be extended
for an additional period of 10 calendar days following the date of substantial
compliance with such request by the Purchaser. Only one extension of the waiting
period pursuant to a request for additional information is authorized by the
rules promulgated under the HSR Act. Thereafter, the waiting period could be
extended only by court order or with the consent of Purchaser. The additional
10-calendar-day waiting period may be terminated sooner by the FTC or the
Antitrust Division. Although the Company is required to file certain information
and documentary material with the Antitrust Division and the FTC in connection
with the Offer, neither the Company's failure to make such filings nor a request
made to the Company from the Antitrust Division or the FTC for additional
information or documentary material will extend the waiting period with respect
to the purchase of Shares pursuant to the Offer.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the acquisition of Shares by the
Purchaser pursuant to the Offer. At any time before or after the Purchaser's
purchase of Shares, the Antitrust Division or the FTC could take such action
under the antitrust laws as either deems necessary or desirable in the public
interest, including seeking to enjoin the purchase of Shares pursuant to the
Offer, the divestiture of Shares purchased pursuant to the Offer or the
divestiture of substantial assets of the Purchaser, the Company or any of their
respective subsidiaries or affiliates. Private parties as well as state
attorneys general may also bring legal actions under the antitrust laws under
certain circumstances.
Based upon an examination of publicly available information relating to the
businesses in which the Company is engaged, the Purchaser believes that the
acquisition of Shares pursuant to the Offer should not violate the applicable
antitrust laws. Nevertheless, there can be no assurance that a challenge to the
Offer on antitrust grounds will not be made, or, if such challenge is made, what
the result will be.
FOREIGN APPROVALS. According to publicly available information, the Company
also owns property and conducts business in a number of other foreign countries
and jurisdictions. In connection with the acquisition of the Shares pursuant to
the Offer, the laws of certain of those foreign countries and jurisdictions may
require the filing of information with, or the obtaining of the approval of,
governmental authorities in such countries and jurisdictions. The governments in
such countries and jurisdictions might
41
<PAGE>
attempt to impose additional conditions on the Company's operations conducted in
such countries and jurisdictions as a result of the acquisition of the Shares
pursuant to the Offer. There can be no assurance that the Purchaser will be able
to cause the Company or its subsidiaries to satisfy or comply with such laws or
that compliance or noncompliance will not have adverse consequences for the
Company or any subsidiary after purchase of the Shares pursuant to the Offer.
MARGIN CREDIT REGULATIONS. Federal Reserve Board Regulations T, U and X
(the "Margin Credit Regulations") restrict the extension or maintenance of
credit for the purpose of buying or carrying margin stock, including the Shares,
if the credit is secured directly or indirectly thereby. The Purchaser will be
required to comply with the Margin Credit Regulations.
16. CERTAIN FEES AND EXPENSES.
R.J. Steichen & Co. ("Steichen") is acting as Dealer Manager in connection
with the Offer. The Purchaser is obligated to pay to Steichen an advisory
retainer fee of up to $100,000, $10,000 per month and an additional fee of
$50,000 if the Purchaser accumulates more than 50% of the Shares or the
Purchaser has obtained majority representation on the Company's Board of
Directors. The Purchaser has agreed to reimburse Steichen for all of its
reasonable expenses, including reasonable fees and disbursements of its counsel,
incurred in rendering its services under its engagement agreement with Steichen
and has agreed to indemnify Steichen against certain liabilities and expenses in
connection with the Offer, including certain liabilities under the federal
securities laws.
In the ordinary course of business, Steichen and its affiliates may actively
trade the securities of the Company for their own account and for the account of
customers and accordingly may, at any time, hold long or short positions in such
securities. As of July 9, 1999, Steichen held for its own account and the
account of its affiliates a net long position of approximately 800 Shares.
Beacon Hill Partners, Inc. has been retained by the Purchasers as
Information Agent in connection with the Offer. The Information Agent may
contact holders of Shares by mail, telephone, telex, telegraph and personal
interview and may request brokers, dealers and other nominee shareholders to
forward material relating to the Offer to beneficial owners of Shares. The
Purchaser will pay the Information Agent reasonable and customary compensation
for all such services in addition to reimbursing the Information Agent for
reasonable out-of-pocket expenses in connection therewith. The Purchaser has
agreed to indemnify the Information Agent against certain liabilities and
expenses in connection with the Offer, including certain liabilities under the
federal securities laws.
In addition, Firstar Bank of Minnesota, N.A. has been retained as the
Depositary. The Purchaser will pay the Depositary reasonable and customary
compensation for its services in connection with the Offer, will reimburse the
Depositary for its reasonable out-of-pocket expenses in connection therewith and
will indemnify the Depositary against certain liabilities and expenses in
connection therewith, including certain liabilities under the federal securities
laws.
Except as set forth above, neither the Purchaser nor any of its officers or
directors will pay any fees or commissions to any broker, dealer or other person
(other than the Information Agent and the Dealer Manager) for soliciting tenders
of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust
companies and other nominees will, upon request, be reimbursed by the Purchaser
for customary clerical and mailing expenses incurred by them in forwarding
offering materials to their customers.
17. MISCELLANEOUS.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares residing in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance with the
securities, blue sky or other laws of such jurisdiction. However, the Purchaser
may, in
42
<PAGE>
its discretion, take such action as it may deem necessary to make the Offer in
any jurisdiction and extend the Offer to holders of Shares in such jurisdiction.
In any jurisdiction where the securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Offer will be deemed to be
made on behalf of the Purchaser by the Dealer Manager or one or more registered
brokers or dealers that are licensed under the laws of such jurisdiction.
Mr. Fauth, the Purchaser and JJF Group have filed with the Commission a
Schedule 14D-1, together with exhibits, pursuant to Rule 14d-3 of the General
Rules and Regulations under the Exchange Act, furnishing certain additional
information with respect to the Offer, and may file amendments thereto. Such
Schedule 14D-1 and any amendments thereto, including exhibits, may be examined
and copies may be obtained from the office of the Commission in the same manner
as described in Section 8 with respect to information concerning the Company,
except that they will not be available at the regional offices of the
Commission.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR MR. FAUTH NOT CONTAINED IN THIS
OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, ANY
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
Neither the delivery of the Offer to Purchase nor any purchase pursuant to
the Offer shall, under any circumstances, create any implication that there has
been no change in the affairs of the Purchaser, the Company or any of their
respective subsidiaries since the date as of which information is furnished or
the date of this Offer to Purchase.
------------------------
JJF ACQUISITION, INC.
July 12, 1999
43
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER AND JJF GROUP
The name, present principal occupation or employment and five-year
employment history of each of the directors and executive officers of the
Purchaser and JJF Group are set forth below. The principal business address of
each director and executive officer is 3100 Metropolitan Centre, 333 South
Seventh Street, Minneapolis, Minnesota 55402. Each such person is a citizen of
the United States.
<TABLE>
<CAPTION>
POSITION WITH THE PURCHASER
NAME PRINCIPAL OCCUPATION OR EMPLOYMENT, 5 YEAR EMPLOYMENT HISTORY
- ------------------------------------------ ---------------------------------------------------------------------
<S> <C>
John J. Fauth (54)........................ Mr. Fauth is President and Chief Executive Officer of the Purchaser
and JJF Group. Mr. Fauth is the sole owner and member of the Board of
Directors of JJF Group and the sole director of the Purchaser. Mr.
Fauth has served as the Chairman, President and Chief Executive
Officer of Churchill Industries, Inc. since he founded it in 1982. He
has also served as the Chairman of Churchill Capital, Inc. (an
investment management firm based in Minneapolis) since 1987. Mr.
Fauth serves on the Board of Directors of Georgetown University in
Washington, D.C. and John G. Kinnard & Co. (a publicly held
investment banking firm based in Minneapolis, Minnesota). From 1994
to 1997, he was a member of the Board of Directors of Children's
Healthcare in Minneapolis and St. Paul, Minnesota.
G. Richard Haun, Jr. (41)................. Mr. Haun is Chief Financial Officer and Treasurer of the Purchaser
and JJF Group. Mr. Haun has served as Managing Director of Churchill
Industries since December 1998. Mr. Haun served as President of
Sterner Holding Company, a company owned by Churchill Industries, and
Chief Executive Officer of Sterner's subsidiaries from August 1995 to
December 1998. From 1991 to 1995, Mr. Haun was the Chief Financial
Officer of Churchill Industries.
John C. Kopchik (40)...................... Mr. Kopchik is Vice President of the Purchaser and JJF Group. Mr.
Kopchik has served as Vice President, Mergers and Acquisitions of
Churchill Industries since 1998. Mr. Kopchik served as Vice President
of Marketing of Northwest Airlines from 1996 to 1998 and Director of
Business Development for General Mills Inc. from 1994 to 1996.
Joseph G. Kohler (52)..................... Mr. Kohler is Secretary of the Purchaser and JJF Group. Mr. Kohler
has served as General Counsel of Churchill Industries since 1995.
Prior to joining Churchill Industries, Mr. Kohler was partner in the
Lindquist & Vennum P.L.L.P. law firm in Minneapolis from 1977 to
1995.
</TABLE>
I-1
<PAGE>
SCHEDULE II
The following table sets forth information concerning transactions in Shares
since the beginning of the third full fiscal year of the Company by Mr.Fauth.
All such transactions were effected in open market purchases on the Nasdaq
National Market.
<TABLE>
<CAPTION>
PRICE PER
PURCHASE DATE QUANTITY SHARE
- ------------------------------------------------------------------ --------- --------------
<S> <C> <C>
11/30/98.......................................................... 3,000 7.9375
12/01/98.......................................................... 6,500 7.9375
12/02/98.......................................................... 1,000 7.9375
12/07/98.......................................................... 4,000 7.9375
12/08/98.......................................................... 1,800 7.9375
12/09/98.......................................................... 1,500 7.9375
12/14/98.......................................................... 5,000 7.9375
12/15/98.......................................................... 6,000 7.9375
12/17/98.......................................................... 16,500 7.9375
12/18/98.......................................................... 3,500 7.9375
12/21/98.......................................................... 600 7.9375
12/22/98.......................................................... 4,000 7.9375
12/29/98.......................................................... 200,000 9.1250
01/20/99.......................................................... 9,800 7.75
02/22/99.......................................................... 5,000 8.00
02/23/99.......................................................... 3,000 8.125
02/24/99.......................................................... 12,000 8.0990
02/25/99.......................................................... 7,500 8.125
02/26/99.......................................................... 23,700 8.5691
03/04/99.......................................................... 2,000 8.500
03/05/99.......................................................... 45,000 9.0556
03/17/99.......................................................... 8,500 7.9191
03/24/99.......................................................... 2,000 8.25
03/26/99.......................................................... 5,000 7.9375
03/29/99.......................................................... 30,000 8.1921
03/30/99.......................................................... 54,000 8.5611
04/01/99.......................................................... 25,000 8.0000
04/05/99.......................................................... 20,000 8.1750
04/06/99.......................................................... 19,100 8.4836
04/16/99.......................................................... 2,500 7.6250
05/24/99.......................................................... 42,000 10.0908
05/26/99.......................................................... 2,500 10.50
05/27/99.......................................................... 80,000 10.9375
07/07/99.......................................................... 357,000 13.50
</TABLE>
- ------------------------
(1) Does not include brokerage commissions.
II-1
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. Letters of Transmittal and certificates for Shares should be sent or
delivered by each shareholder of the Company or his broker, dealer, commercial
bank or trust company to the Depositary at one of its addresses set forth below:
The Depositary for the Offer Is:
FIRSTAR BANK MINNESOTA N.A.
BY MAIL:
101 East Fifth Street
St. Paul, Minnesota 55101
Corporate Trust Department
Attention: Frank Leslie
BY HAND OR OVERNIGHT DELIVERY:
101 East Fifth Street
St. Paul, Minnesota 55101
Corporate Trust Department
Attention: Frank Leslie
BY FACSIMILE (FOR ELIGIBLE INSTITUTIONS ONLY)
(651) 229-6415
CONFIRM FACSIMILE BY TELEPHONE:
(651) 229-2600
ANY QUESTIONS AND REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO THE INFORMATION
AGENT OR THE DEALER MANAGER AT THEIR RESPECTIVE ADDRESSES AND TELEPHONE NUMBERS
SET FORTH BELOW. Additional copies of this Offer to Purchase, the Letter of
Transmittal and other tender offer materials may be obtained from the
Information Agent as set forth below, and will be furnished promptly at the
Purchaser's expense. You may also contact your broker, dealer, commercial bank,
trust company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer Is:
BEACON HILL PARTNERS, INC.
90 Broad Street
20th Floor
New York, New York 10004
(800) 475-9320
or
Collect (212) 843-8500
The Dealer Manager for the Offer Is:
R.J. STEICHEN & CO.
One Financial Plaza
Suite 100
120 South 6th Street
Minneapolis, MN 55402
(800) 328-4836
or
Collect (612) 341-6200
<PAGE>
Exhibit (a)(2)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
TSI INCORPORATED
AT
$14.00 NET PER SHARE IN CASH
PURSUANT TO THE OFFER TO PURCHASE DATED JULY 12, 1999
BY
JJF ACQUISITION, INC.
- ---------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, AUGUST 11, 1999 UNLESS THE OFFER IS EXTENDED TO A LATER
DATE AND TIME (THE "EXPIRATION DATE"). SHARES THAT ARE TENDERED PURSUANT TO
THE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
THE DEPOSITARY FOR THE OFFER IS:
FIRSTAR BANK OF MINNESOTA, N.A.
(651) 229-2600
<TABLE>
<S> <C> <C>
BY FACSIMILE TRANSMISSION BY HAND OR
BY MAIL: (FOR ELIGIBLE INSTITUTIONS ONLY): OVERNIGHT DELIVERY:
101 East Fifth Street (651) 229-6415 101 East Fifth Street
St. Paul, Minnesota 55101 St. Paul, Minnesota 55101
Corporate Trust Department Corporate Trust Department
Confirm Facsimile by Telephone:
(651) 229-2600
</TABLE>
------------------------
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS
SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- ---------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED
HOLDER(S) SHARE CERTIFICATE(S) TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL NUMBER OF
SHARES
REPRESENTED NUMBER
CERTIFICATE BY OF SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
TOTAL SHARES
- ---------------------------------------------------------------------------------------------------
* Need not be completed by shareholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares being delivered to the
Depositary are being tendered. See Instruction 4.
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
The names and addresses of the registered holders should be printed, if not
already printed above, exactly as they appear on the certificates representing
Shares tendered hereby. The certificates and number of Shares that the
undersigned wishes to tender should be indicated in the appropriate boxes.
This Letter of Transmittal is to be used either if certificates evidencing
Shares (as defined below) are to be forwarded herewith or, unless an Agent's
Message (as defined in the Offer to Purchase dated July 12, 1999 (the "Offer to
Purchase")) is utilized, if delivery of Shares is to be made by book-entry
transfer to the account maintained by Firstar Bank of Minnesota, N.A. (the
"Depositary") at The Depository Trust Company (the "Book-Entry Transfer
Facility") pursuant to the procedures set forth in Section 3 of the Offer to
Purchase.
Holders whose certificates for Shares are not immediately available or who
cannot deliver confirmation of the book-entry transfer of their Shares into the
Depositary's account at the Book-Entry Transfer Facility ("Book-Entry
Confirmation") and all other documents required hereby to the Depositary on or
prior to the Expiration Date (as defined in the Offer to Purchase), must tender
their Shares according to the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase. See Instruction 2 of this Letter of
Transmittal. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH ONE OF THE BOOK-ENTRY
TRANSFER FACILITIES AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: ____________________________________________
Account Number ____________________________________________________________
Transaction Code Number ___________________________________________________
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY (AS DEFINED IN THE OFFER TO PURCHASE) PREVIOUSLY SENT
TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s): ___________________________________________
Window Ticket Number (if any): ____________________________________________
Date of Execution of Notice of Guaranteed Delivery: _______________________
Name of Institution that Guaranteed Delivery: _____________________________
If Delivery by Book-Entry Transfer Facility:
Account Number ____________________________________________________________
Transaction Code Number ___________________________________________________
LADIES AND GENTLEMEN:
The undersigned hereby tenders to JJF Acquisition, Inc. (the "Purchaser"),
the above described shares of common stock, par value $0.10 per share (the
"Shares"), of TSI Incorporated, a Minnesota corporation (the "Company"), at a
price of $14.00 per Share, net to the seller in cash, without interest thereon
(the "Offer Price"), upon the terms and subject to the Conditions set forth in
the Offer to Purchase and in this related Letter of Transmittal (which, as
amended from time to time, together constitute the "Offer").
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith in accordance with the terms and subject to the conditions of
the Offer, the undersigned hereby sells, assigns, and transfers to, or upon the
order of, the Purchaser all right, title and interest in and to all the Shares
that are being tendered hereby (and any and all other Shares, rights or other
securities issued or issuable in respect thereof on or after July 12, 1999) and
irrevocably constitutes and appoints the Depositary the true and lawful agent
and attorney-in-fact of the undersigned with respect to such Shares (and any
such other shares, rights or securities) with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest), to (a) deliver certificates for such
<PAGE>
Shares (and any such other shares, rights or securities), or transfer ownership
of such Shares (and any such other shares, rights or securities) on the account
books maintained by one of the Book-Entry Transfer Facilities, together in
either such case with all accompanying evidences of transfer and authenticity
to, or upon the order of, the Purchaser, (b) present such Shares (and any such
other Shares, rights or securities) for transfer on the books of the Company and
(c) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Shares (and any other such shares, rights or securities), all
in accordance with the terms of the Offer.
If, on or after June 16, 1999, the Company should declare or pay any cash
dividend on the Shares or other distribution on the Shares, or issue with
respect to the Shares any additional Shares, shares of any other class of
capital stock, other voting securities or any securities convertible into, or
rights, warrants or options, conditional or otherwise, to acquire, any of the
foregoing, payable or distributable to shareholders of record on a date prior to
the transfer of the Shares purchased pursuant to the Offer to the Purchaser or
its nominee or transferee on the Company's stock transfer records, then, subject
to the provisions of Section 13 of the Offer to Purchase, (a) the Offer Price
may, in the sole discretion of the Purchaser, be reduced by the amount of any
such cash dividend or cash distribution and (b) the whole of any such non-cash
dividend, distribution or issuance to be received by the tendering shareholder
will (i) be received and held by the tendering shareholder for the account of
the Purchaser and shall be required to be promptly remitted and transferred by
each tendering shareholder to the Depositary for the account of the Purchaser,
accompanied by appropriate documentation of transfer, or (ii) at the direction
of the Purchaser, be exercised for the benefit of the Purchaser, in which case
the proceeds of such exercise will promptly be remitted to the Purchaser.
Pending such remittance, the Purchaser will be entitled to all rights and
privileges as owner of any such non-cash dividend, distribution, issuance or
proceeds and may withhold the entire purchase price or deduct from the purchase
price the amount of value thereof, as determined by the Purchaser in its sole
discretion.
The undersigned hereby irrevocably appoints Messrs. John J. Fauth, Joseph G.
Kohler, Richard D. McNeil and Ralph L. Strangis, and each of them with the power
to act alone, the attorneys-in-fact and proxies of the undersigned, each with
full power of substitution to the full extent of such shareholder's rights with
respect to tendered Shares (and any and all other Shares, rights or securities
issued or issuable in respect thereof on or after July 12, 1999), to vote in
such manner as each such attorney and proxy or his substitute shall in his sole
discretion deem proper, and otherwise act with respect to all the Shares
tendered hereby which have been accepted for payment by the Purchaser prior to
the time of such vote which the undersigned is entitled to vote at any meeting
of shareholders (whether annual or special and whether or not an adjourned
meeting) of the Company, or otherwise. This proxy is coupled with an interest in
the Company and in the Shares and is irrevocable and is granted in consideration
of, and is effective when, if and to the extent that the Purchaser accepts such
Shares for payment pursuant to the Offer. Such acceptance for payment shall
revoke, without further action, all prior proxies granted by the undersigned at
any time with respect to such Shares (and any such other Shares or other
securities) and no subsequent proxies will be given (and if given will be deemed
not to be effective) with respect thereto by the undersigned. The undersigned
acknowledges that in order for Shares to be deemed validly tendered, immediately
upon the acceptance for payment of such Shares, the Purchaser or the Purchaser's
designee must be able to exercise full voting and all other rights which inure
to a record and beneficial holder with respect to such Shares.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby (and any and all other Shares or other securities issued or issuable in
respect thereof on or after July 12, 1999), and that, when the same are accepted
for payment by the Purchaser, the Purchaser will acquire good, marketable and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and the same will not be subject to any adverse claim. The
undersigned, upon request, will execute and deliver any additional documents
deemed by the Depositary or the Purchaser to be necessary or desirable to
complete or confirm the sale, assignment and transfer of the Shares tendered
hereby (and any and all such other Shares, rights or other securities).
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall not be affected by, and shall survive, the death or incapacity
of the undersigned, and any obligation of the undersigned hereunder shall be
binding upon the successors, assigns, heirs, executors, administrators, trustees
in bankruptcy, personal and legal representatives of the undersigned. Except as
stated in the Offer to Purchase, this tender is irrevocable, provided that
Shares tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment and paid for by
Purchaser pursuant to the Offer, may also be withdrawn at any time after Monday,
September 13, 1999 or such later time as may apply if the Offer is extended.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and the
instructions hereto will constitute a binding agreement between the undersigned
and the Purchaser upon the terms and subject to the conditions of the Offer. The
undersigned recognizes that under certain circumstances set forth in the Offer
to Purchase, the Purchaser may not be required to accept for payment any of the
Shares tendered hereby.
<PAGE>
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any certificates for
Shares not tendered or accepted for payment in the names(s) of the undersigned.
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the purchase price and/or return any certificates for
Shares not tendered or accepted for payment (and accompanying documents, as
appropriate) to the undersigned at the address shown below the undersigned's
signature. In the event that both the Special Delivery Instructions and the
Special Payment Instructions are completed, please issue the check for the
purchase price and/or return any certificates for Shares not tendered or
accepted for payment in the name of, and deliver such check and/or return such
certificates to the person or persons so indicated. Shareholders delivering
Shares by book-entry transfer may request that any Shares not accepted for
payment be returned by crediting such account maintained at the Book-Entry
Transfer Facility as such shareholder may designate by making an appropriate
entry under "Special Payment Instructions." The undersigned recognizes that the
Purchaser has no obligation pursuant to the Special Payment Instructions to
transfer any Shares from the name of the registered holder thereof if the
Purchaser does not accept for payment any of the Shares so tendered.
- ------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7 OF
THIS LETTER OF TRANSMITTAL)
To be completed ONLY if certificates for Shares not tendered or not
purchased and/or the check for the purchase price of Shares purchased are to
be issued in the name of someone other than the undersigned, or if Shares
delivered by book-entry transfer which are not purchased are to be returned
to credit to an account maintained at the Book-Entry Transfer Facility other
than that designated above.
Issue / / Check and/or / / Certificates to:
Name _______________________________________________________________________
(PLEASE PRINT)
Address ____________________________________________________________________
____________________________________________________________________________
(ZIP CODE)
__________________________________________________________________________
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
/ / Credit unpurchased Shares delivered by book-entry transfer to the
Book-Entry Transfer Facility account set forth below:
____________________________________________________________________________
(ACCOUNT NUMBER)
- ------------------------------------------------------------
- ------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7 OF
THIS LETTER OF TRANSMITTAL)
To be completed ONLY if certificates for Shares not tendered or not
purchased and/or the check for the purchase price of Shares purchased are to
be sent to someone other than the undersigned, or to the undersigned at an
address other than that shown above.
Mail / / Check and/or / / Certificates to:
Name: ______________________________________________________________________
(PLEASE PRINT)
Address ____________________________________________________________________
____________________________________________________________________________
(ZIP CODE)
- -----------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
SIGN HERE
(COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
____________________________________________________________________________
____________________________________________________________________________
(SIGNATURE(S) OF HOLDER(S))
Dated: _______________________________________________________________, 1999
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
stock certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, please provide the
following information. See Instruction 5 of this Letter of Transmittal.)
Name(s) ____________________________________________________________________
____________________________________________________________________________
(PLEASE PRINT)
Capacity (Full title) ______________________________________________________
Address ____________________________________________________________________
____________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number _____________________________________________
Tax Identification or Social Security No. __________________________________
(COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5 OF THIS LETTER OF TRANSMITTAL)
Authorized Signature _______________________________________________________
Name _______________________________________________________________________
(PLEASE PRINT)
Title ______________________________________________________________________
Name of Firm _______________________________________________________________
Address ____________________________________________________________________
____________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number _____________________________________________
Dated: _______________________________________________________________, 1999
- --------------------------------------------------------------------------------
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required (i) if this Letter of Transmittal is signed by the
registered holder of the Shares (which term, for purposes of this document,
shall include any participant in the Book-Entry Transfer Facility whose name
appears on a security position listing as the owner of Shares) tendered
herewith, unless such holder has completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on the
reverse hereof or (ii) if such Shares are tendered for the account of a firm
which is a bank, broker, dealer, credit union, savings association or other
entity that is a member in good standing of the Securities Transfer Agents
Medallion Program (each, an "Eligible Institution"). In all other cases, all
signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instruction 5 of this Letter of Transmittal.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be completed by shareholders either if certificates are to be
forwarded herewith or, unless an Agent's Message is utilized, if delivery of
Shares is to be made by book-entry transfer pursuant to the procedures set forth
in Section 3 of the Offer to Purchase. For a shareholder validly to tender
Shares pursuant to the Offer, either (a) a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), together with any required
signature guarantees or an Agent's Message (in connection with book-entry
transfer) and any other required documents, must be received by the Depositary
at one of its addressees set forth herein prior to the Expiration Date and
either (i) certificates for tendered Shares must be received by the Depositary
at one of such addresses prior to the Expiration Date or (ii) Shares must be
delivered pursuant to the procedures for book-entry transfer set forth herein
and a Book-Entry Confirmation must be received by the Depositary prior to the
Expiration Date or (b) the tendering shareholder must comply with the guaranteed
delivery procedures set forth below and in Section 3 of the Offer to Purchase.
Shareholders whose certificates for Shares are not immediately available or
who cannot deliver their certificates and all other required documents to the
Depositary prior to the Expiration Date or who cannot comply with the book-entry
transfer procedure on a timely basis may tender their Shares by properly
completing and duly executing the Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase.
Pursuant to such procedures, (i) such tender must be made by or through an
Eligible Institution, (ii) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form provided by the Purchaser, must
be received by the Depositary prior to the Expiration Date and (iii) the
certificates for all tendered Shares , in proper form for transfer (or a
Book-Entry Confirmation with respect to all tendered Shares ), 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 required documents are
received by the Depositary within three trading days after the date of execution
of such Notice of Guaranteed Delivery as provided in Section 3 of the Offer to
Purchase. A "trading day" is any day on which the New York Stock Exchange (the
"NYSE") is open for business.
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 the Book-Entry
Transfer Facility tendering the Shares, that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
The signatures on this Letter of Transmittal cover the Shares tendered
hereby.
THE METHOD OF DELIVERY OF THE SHARES, THE LETTER TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. THE SHARES WILL BE
DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN
THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS
BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering shareholders, by execution of
this Letter of Transmittal (or a manually signed facsimile thereof), waive any
right to receive any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
signed schedule attached hereto.
4. PARTIAL TENDERS. (Not applicable to shareholders who tender by
book-entry transfer.) If fewer than all the Shares evidenced by any certificate
submitted are to be tendered, fill in the number of Shares which are to be
<PAGE>
tendered in the box entitled "Description of Shares to be Tendered." In such
case, new certificate(s) for the remainder of the Shares that were evidenced by
your old certificate(s) will be sent to you, unless otherwise provided in the
appropriate box on this Letter of Transmittal, as soon as practicable after the
Expiration Date. All Shares represented by certificates delivered to the
Depositary will be deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond exactly to the name(s) as
written on the face of the certificate(s) without alteration, enlargement or any
change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal or any certificates or stock powers are signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory to
the Purchaser of such person's authority so to act must be submitted.
When this Letter of Transmittal is signed by the registered owner(s) of the
Shares listed and transmitted hereby, no endorsement of certificates or separate
stock powers is required unless payment or certificates for Shares not tendered
or purchased are to be issued to a person other than the registered owner(s).
Signatures on such certificates or stock powers must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Shares listed, the certificates 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 certificates. Signatures on
such certificates or stock powers must be guaranteed by an Eligible Institution.
6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6 of this
Letter of Transmittal, the Purchaser will pay or cause to be paid any stock
transfer taxes with respect to the transfer and sale of purchased Shares to it
or its order pursuant to the Offer. If payment of the purchase price is to be
made, or if certificates for Shares not tendered or purchased are to be
registered in the name of any person other than the registered holder, or if
tendered certificates are registered in the name of any person other than the
person(s) signing this Letter of Transmittal, the amount of any stock transfer
taxes (whether imposed on the registered holder or such person) payable on
account of the transfer to such person will be deducted from the purchase price
unless satisfactory evidence of the payment of such taxes or exemption therefrom
is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6 OF THIS LETTER OF TRANSMITTAL, IT
WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES
LISTED IN THIS LETTER OF TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check and/or
certificates for unpurchased Shares are to be issued in the name of a person
other than the signer of this Letter of Transmittal or if a check is to be sent
and/or such certificates are to be resumed to someone other than the signer of
this Letter of Transmittal or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed.
Shareholders tendering Shares by book-entry transfer may request that Shares not
purchased be credited to such account maintained at the Book-Entry Transfer
Facility as such shareholder may designate hereon. If no such instructions are
given, such Shares not purchased will be returned by crediting the account at
the Book-Entry Transfer Facility.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance
may be directed to the Dealer Manager or the Information Agent (as such terms
are defined in the Offer to Purchase) at the addresses set forth below.
Additional copies of the Offer to Purchase, this Letter of Transmittal, the
Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 may be obtained from the Dealer
Manager or the Information Agent at the addresses set forth below or from your
broker, dealer, commercial bank or trust company.
9. WAIVER OF CONDITIONS. The conditions of the Offer may be waived, in
whole or in part, by the Purchaser, in its sole discretion, at any time and from
time to time, in the case of any Shares tendered.
10. SUBSTITUTE FORM W-9. Each tendering shareholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on the
Substitute Form W-9, which is provided under "Important Tax Information" below,
and to certify, under penalties of perjury, that such number is correct and that
such shareholder is not subject to backup withholding of federal income tax. If
a tendering shareholder has been notified by the Internal Revenue Service that
such shareholder is subject to backup withholding, such shareholder must cross
out item (2) of the Certification box of the Substitute Form W-9, unless such
shareholder has since been notified by the Internal
<PAGE>
Revenue Service that such shareholder is no longer subject to backup
withholding. Failure to provide the information on the Substitute Form W-9 may
subject the tendering shareholder to 31% federal income tax withholding with
respect to any payments received pursuant to the Offer (as defined in the Offer
to Purchase). If the tendering shareholder has not been issued a TIN and has
applied for one or intends to apply for one in the near future, such shareholder
should write "Applied For" in the space provided for the TIN in Part I of the
Substitute Form W-9, and sign and date the Substitute Form W-9. "If Applied For"
is written in Part I and the Depositary is not provided with a TIN within 60
days, the Depositary will withhold 31% on all payments of the purchase price to
such shareholder until a TIN is provided to the Depositary.
11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s)
representing Shares has been lost, destroyed or stolen, the shareholder should
promptly notify the Depositary. The shareholder will then be instructed as to
the steps that must be taken in order to replace the certificate(s). This Letter
of Transmittal and related documents cannot be processed until the procedures
for replacing lost or destroyed certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), PROPERLY
COMPLETED AND DULY EXECUTED, TOGETHER WITH CERTIFICATES OR CONFIRMATION OF
BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED
DELIVERY, MUST BE RECEIVED BY THE DEPOSITARY AT ONE OF ITS ADDRESSES SET FORTH
HEREIN PRIOR TO THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under United States federal income tax law, a shareholder whose tendered
Shares are accepted for payment is required by law to provide the Depositary
with such shareholder's correct TIN on Substitute Form W-9 below. If such
shareholder is an individual, the TIN is such shareholder's social security
number. If the Depositary is not provided with the correct TIN, the shareholder
may be subject to a $50 penalty imposed by the Internal Revenue Service. In
addition, payments that are made to such shareholder with respect to Shares
purchased pursuant to the Offer may be subject to backup withholding of 31%.
Certain shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit a statement, signed under penalties of
perjury, attesting to such individual's exempt status. Forms of such statements
can be obtained from the Depositary. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies with respect to a shareholder, the Depositary
is required to withhold 31% of any payments made to such shareholder. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be obtained from
the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a shareholder
with respect to Shares purchased pursuant to the Offer, the shareholder is
required to notify the Depositary of such shareholder's correct TIN by
completing the form below certifying (a) that the TIN provided on the Substitute
Form W-9 is correct (or that such shareholder is awaiting a TIN), and (b) that
such shareholder is not subject to backup withholding because (i) such
shareholder is exempt from backup withholding, (ii) such shareholder has not
been notified by the Internal Revenue Service that such shareholder is subject
to backup withholding as a result of a failure to report all interest or
dividends or (iii) such shareholder has been notified by the Internal Revenue
Service that such shareholder is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The shareholder is required to give the Depositary the social security
number or employer identification number of the record owner of the Shares
tendered hereby. If the Shares are in more than one name or are not in the name
of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional guidance on
which number to report. If the tendering shareholder has not been issued a TIN
and has applied for a number or intends to apply for a number in the near
future, the shareholder should write "Applied For" in the space provided for in
the TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For"
is written in Part I and the Depositary is not provided with a TIN within 60
days, the Depositary will withhold 31% of all payments of the purchase price to
such shareholder until a TIN is provided to the Depositary.
<PAGE>
PAYER'S NAME: FIRSTAR BANK MINNESOTA, N.A.
<TABLE>
<C> <S> <C>
- -------------------------------------------------------------------------------------------------
PART I - PLEASE PROVIDE YOUR
TIN IN THE BOX AT RIGHT AND SOCIAL SECURITY NUMBER
CERTIFY BY SIGNING AND DATING OR
BELOW.
EMPLOYER IDENTIFICATION NUMBER
(IF AWAITING TIN WRITE "APPLIED
FOR")
---------------------------------------------------------------
PART II - Payees exempt from backup withholding, see the
enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 and complete as
instructed therein.
SUBSTITUTE CERTIFICATION - Under penalties of perjury, I certify that:
FORM W-9 (1) The number shown on this form is my correct Taxpayer
DEPARTMENT OF THE TREASURY Identification Number (or a Taxpayer Identification Number
INTERNAL REVENUE SERVICE has not been issued to me) and either (a) I have mailed or
PAYER'S REQUEST FOR delivered an application to receive a Taxpayer
TAXPAYER Identification Number to the appropriate Internal Revenue
IDENTIFICATION Service ("IRS") or Social Security Administration office
NUMBER (TIN) or (b) I intend to mail or deliver an application in the
near future. I understand that if I do not provide a
Taxpayer Identification Number within 60 days, 31% of all
reportable payments made to me thereafter will be withheld
until I provide a number, and
(2) I am not subject to backup withholding either because (a)
I am exempt from backup withholding, (b) I have not been
notified by the IRS that I am subject to backup
withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has notified me that
I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS - You must cross out item (2) above
if you have been notified by the IRS that you are subject to
backup withholding because of underreporting interest or
dividends on your tax return. However, if after being notified
by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are no
longer subject to backup withholding, do not cross out item
(2). (Also see instructions in the enclosed Guidelines.)
- -------------------------------------------------------------------------------------------------
SIGNATURE DATE , 1999
- -------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE>
Questions and requests for assistance or additional copies of the Offer to
Purchase, Letter of Transmittal and other tender offer materials may be directed
to the Information Agent or the Dealer Manager as set forth below:
The Information Agent for the Offer is:
BEACON HILL PARTNERS, INC.
90 Broad Street
20th Floor
New York, NY 10004
(Call Collect) (212) 843-8500
or
CALL TOLL-FREE (800) 475-9320
The Dealer Manager for the Offer is:
R.J. STEICHEN & CO.
One Financial Plaza
Suite 100
120 South 6(th) Street
Minneapolis, MN 55402
(Call Collect) (612) 341-6200
or
CALL TOLL-FREE (800) 328-4836
<PAGE>
Exhibit (a)(3)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
TSI INCORPORATED
TO
JJF ACQUISITION, INC.
(Not To Be Used For Signature Guarantees)
This Notice of Guaranteed Delivery, or one substantially in the form hereof,
must be used to tender Shares (as defined below) pursuant to the Offer (as
defined below) if (i) certificates representing shares (the "Shares") of common
stock, par value $0.10 per share (the "Common Stock"), of TSI Incorporated, a
Minnesota corporation (the "Company") are not immediately available; (ii) time
will not permit all required documents to reach Firstar Bank of Minnesota, N.A.,
as Depositary (the "Depositary"), prior to the Expiration Date (as defined in
the Offer to Purchase); or (iii) the procedure for delivery by book-entry
transfer cannot be completed on a timely basis. This Notice of Guaranteed
Delivery may be delivered by hand or mail or transmitted by telegram or
facsimile to the Depositary. See Section 2 of the Offer to Purchase.
THE DEPOSITARY FOR THE OFFER IS:
FIRSTAR BANK OF MINNESOTA, N.A.
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE TRANSMISSION BY HAND OR
(FOR ELIGIBLE OVERNIGHT DELIVERY: INSTITUTIONS OVERNIGHT DELIVERY:
ONLY):
101 East Fifth Street (651) 229-6415 101 East Fifth Street
St. Paul, Minnesota 55101 St. Paul, Minnesota 55101
Corporate Trust Department Corporate Trust Department
Confirm Facsimile by Telephone:
(651) 229-2600
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE>
Ladies And Gentlemen:
The undersigned hereby tenders to JJF Acquisition, Inc. upon the terms and
subject to the conditions set forth in the Offer to Purchase and in the related
Letter of Transmittal (which together constitute the "Offer"), receipt of which
is hereby acknowledged, the number of Shares indicated below pursuant to the
guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase.
Number of Shares: ______________________________________________________________
Name(s) of Record Holder(s): ___________________________________________________
________________________________________________________________________________
PLEASE TYPE OR PRINT
Address(es): ___________________________________________________________________
ZIP CODE
Area Code and Tel. No.: ________________________________________________________
Certificate No(s). (if available) ______________________________________________
________________________________________________________________________________
Check box if Shares will be tendered by book-entry transfer:
/ / The Depository Trust Company
Signature(s): __________________________________________________________________
________________________________________________________________________________
Account Number: ________________________________________________________________
Dated: __________________________________, 1999
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a bank, broker, dealer, credit union,
savings association or other entity that is a member in good standing of the
Securities Transfer Agents Medallion Program, hereby (a) represents that the
tender of Shares effected hereby complies with Rule 14e-4 under the Securities
Exchange Act of 1934, as amended and (b) guarantees delivery to the Depositary,
at one of its addresses set forth above, of certificates representing the Shares
tendered hereby in proper form for transfer, or confirmation of book-entry
transfer of such Shares into the Depositary's accounts at The Depository Trust
Company, with delivery of a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), and any other required documents, within (a)
in the case of Shares, three New York Stock Exchange, Inc. ("NYSE") trading days
after the date hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and the
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible Institution.
Name of Firm: __________________________________________________________________
________________________________________________________________________________
AUTHORIZED SIGNATURE
Address(es): ___________________________________________________________________
ZIP CODE
Area Code and Tel. No.: ________________________________________________________
Name: __________________________________________________________________________
PLEASE TYPE OR PRINT
Title: _________________________________________________________________________
Dated: __________________________________, 1999
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES FOR
SHARES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
Exhibit (a)(4)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
TSI INCORPORATED
BY
JJF ACQUISITION, INC.
AT
$14.00 NET PER SHARE IN CASH
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, AUGUST 11, 1999, UNLESS THE OFFER IS EXTENDED. SHARES WHICH
ARE TENDERED PURSUANT TO THE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE
EXPIRATION DATE.
July 12, 1999
To Brokers, Dealers, Commercial Banks, Trust Companies And Other Nominees:
We have been engaged by JJF Acquisition, Inc. ("Purchaser") to act as Dealer
Manager in connection with the Purchaser's offer to purchase all outstanding
shares of common stock, par value $0.10 per share (the "Shares"), of TSI
Incorporated, a Minnesota corporation (the "Company"), at a price of $14.00 per
Share, net to the seller in cash, without interest thereon (the "Offer Price"),
upon the terms and subject to the conditions set forth in the Offer to Purchase
and in the related Letter of Transmittal (which, together with any amendments or
supplements hereto or thereto, collectively constitute the "Offer").
The Offer is conditioned upon, among, other things, (1) there being validly
tendered and not withdrawn prior to the expiration date that number of shares,
which, when added to the number of shares beneficially owned by the Purchaser
and its affiliates, represents a majority of the total number of outstanding
shares of the Company on a fully diluted basis (the "Minimum Tender Condition"),
(2) the Purchaser being satisfied, in its sole discretion, that the Company's
shareholders have amended the Company's Bylaws to opt out of the Minnesota
Control Share Acquisition Act and that Purchaser has voting rights in all shares
acquired pursuant to the Offer (the "Control Share Condition"), (3) the
Purchaser being satisfied, in its sole discretion, that the Company has taken
appropriate measures such that the Offer is approved in accordance with the
Minnesota Business Combination Act (the "Business Combination Condition"), (4)
the election by shareholder vote, of the Purchaser's director nominees at the
1999 Annual Meeting of Shareholders (the "Election Condition"), (5) the
Purchaser being satisfied, in its sole discretion, that the Company's
shareholders at their July 22, 1999 Annual Meeting have adopted five proposals
to amend the Company's Articles of Incorporation and Bylaws which are designed
to limit the Company's ability to take various defensive measures to hinder or
prevent the Company's shareholders from considering this or other acquisition
offers (the "Bylaw and Article Proposals") and (6) Purchaser being satisfied, in
its sole discretion, that it has obtained sufficient financing to enable it to
consummate the Offer (the "Financing Condition").
The Offer is also subject to other terms and conditions contained in the
Offer to Purchase. See the Introduction and Sections 1, 14 and 15 of the Offer
to Purchase.
<PAGE>
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, we are enclosing
the following documents:
1. Offer to Purchase dated July 12, 1999;
2. Letter of Transmittal for your use and for the information of your
clients, together with Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 providing information relating
to backup federal income tax withholding;
3. Notice of Guaranteed Delivery to be used to accept the offer if
certificates for Shares and all other required documents cannot be delivered
to the Depositary by the Expiration Date (as defined in the Offer to
Purchase) or if the procedure for book-entry transfer cannot be completed on
a timely basis;
4. A form of letter which may sent to your clients for whose accounts
you hold Shares registered in your name or in the name of your nominee, with
space provided for obtaining such clients' instructions with regard to the
Offer; and
5. A return envelope addressed to Firstar Bank of Minnesota, N.A., the
Depositary.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Purchaser will accept for payment and pay for the Shares which
are validly tendered prior to the Expiration Date and not theretofore properly
withdrawn when, as and if the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance of such Shares for payment pursuant to
the Offer. Payment for Shares purchased pursuant to the Offer will in all cases
be made only after timely receipt by the Depositary of certificates for such
Shares, or timely confirmation of a book-entry transfer of such Shares into the
Depositary's account at the Depository Trust Company, pursuant to the procedures
described in Section 3 of the Offer to Purchase, a properly completed and duly
executed Letter of Transmittal (or a properly completed and manually signed
facsimile thereof) or an Agent's Message in connection with a book-entry
transfer, and all other documents required by the Letter of Transmittal.
The Purchaser will not pay any fees or commissions to any broker or dealer
or other person (other than the Dealer Manager and the Information Agent as
described in the Offer to Purchase) for soliciting tenders of Shares pursuant to
the Offer. The Purchaser will, however, upon request, reimburse brokers,
dealers, commercial banks and trust companies for reasonable and necessary costs
and expenses incurred by them in forwarding materials to their customers.
The Purchaser will pay or cause to be paid all stock transfer taxes
applicable to its purchase of Shares pursuant to the Offer, subject to
Instruction 6 of the Letter of Transmittal.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE.
THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, AUGUST 11, 1999, UNLESS THE OFFER IS EXTENDED.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal (of facsimile thereof), with any required
signature guarantees, or an Agent's Message (as defined in the Offer to
Purchase) in connection with a book-entry delivery of Shares, and any other
required documents, should be sent to the Depositary, and certificates
representing the tendered Shares should be delivered or such Shares should be
tendered by book-entry transfer, all in accordance with the Instructions set
forth in the Letter of Transmittal and the Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents or to complete the
procedure for delivery by book-entry transfer prior to the expiration of the
Offer, a tender may be effected by following the guaranteed delivery procedures
2
<PAGE>
specified under Section 3, "Procedure for Accepting the Offer and Tendering
Shares" in the Offer to Purchase.
Any inquiries you may have with respect to the Offer should be addressed to,
and additional copies of the enclosed materials may be obtained from, the
Information Agent or the undersigned at the addresses and telephone numbers set
forth on the back cover of the Offer to Purchase.
Very truly yours,
R.J. STEICHEN & CO.
One Financial Plaza
Suite 100, 120 South 6th Street
Minneapolis, MN 55402
(612) 341-6200
Nothing contained herein or in the enclosed documents shall constitute you
or any other person the Agent of Purchaser, the Dealer Manager, the Information
Agent or the Depositary, or any affiliate of any of the foregoing, or authorize
you or any other person to use any document or make any statement on behalf of
any of them in connection with the Offer other than the documents enclosed
herewith and the statements contained therein.
3
<PAGE>
Exhibit (a)(5)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
TSI INCORPORATED
BY
JJF ACQUISITION, INC.
AT
$14.00 NET PER SHARE IN CASH
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, AUGUST 11, 1999, UNLESS THE OFFER IS EXTENDED. SHARES WHICH
ARE TENDERED PURSUANT TO THE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE
EXPIRATION DATE.
July 12, 1999
To Our Clients:
Enclosed for your consideration is the Offer to Purchase, dated July 12,
1999 (the "Offer to Purchase") and the Letter of Transmittal (which, as amended
from time to time, together constitute the "Offer") relating to an offer by JJF
Acquisition, Inc. ("Purchaser"), to purchase all outstanding shares of common
stock, par value $0.10 per share (the "Shares"), of TSI Incorporated, a
Minnesota corporation (the "Company"), as of the Expiration Date (as defined in
the Offer to Purchase) at a purchase price of $14.00 per Share, net to the
seller in cash, without interest thereon (the "Offer Price") upon the terms and
subject to the conditions set forth in the Offer to Purchase.
If a shareholder desires to tender Shares pursuant to the Offer and such
shareholder's certificates representing Shares are not immediately available or
time will not permit all required documents to reach the Depositary prior to the
Expiration Date or the procedure for book-entry transfer cannot be completed on
a timely basis, such Shares may nevertheless be tendered according to the
guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase.
See Instruction 2 of the Letter of Transmittal. Delivery of documents to the
Book-Entry Transfer Facility (as defined in the Offer to Purchase) in accordance
with the Book-Entry Transfer Facility's procedures does not constitute delivery
to the Depositary.
A tender of such Shares can be made only by us as the holder of record and
pursuant to your instructions. The Letter of Transmittal is furnished to you for
your information only and cannot be used by you to tender shares held by us for
your account. We request instructions as to whether you wish to tender any or
all of such Shares held by us for your account, pursuant to the terms and
conditions set forth in the Offer.
Your attention is directed to the following:
1. The tender price is $14.00 per Share, net to the seller in cash
without interest.
2. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Wednesday, August 11, 1999, unless the Offer is extended
to a later date and time. Shares which are tendered pursuant to the Offer
may be withdrawn at any time prior to the Expiration Date.
3. The Offer is being made for all of the outstanding Shares.
4. The Offer is conditioned upon, among other things, (1) there being
validly tendered and not withdrawn prior to the expiration date that number
of shares, which, when added to the
<PAGE>
number of shares beneficially owned by Purchaser and its affiliates,
represents a majority of the total number of outstanding shares of the
Company on a fully diluted basis (the "Minimum Tender Condition"), (2) the
Purchaser being satisfied, in its sole discretion, that the Company's
shareholders have amended the Company's Bylaws to opt out of the Minnesota
Control Share Acquisition Act and that Purchaser has voting rights in all
shares acquired pursuant to the Offer (the "Control Share Condition"), (3)
the Purchaser being satisfied, in its sole discretion, that the Company has
taken appropriate measures such that the Offer is approved in accordance
with the Minnesota Business Combination Act (the "Business Combination
Condition"), (4) the election by shareholder vote, of Purchaser's director
nominees at the 1999 Annual Meeting of Shareholders (the "Election
Condition"), (5) the Purchaser being satisfied, in its sole discretion, that
the Company's shareholders at their July 22, 1999 Annual Meeting have
adopted five proposals to amend the Company's Articles of Incorporation and
Bylaws which are designed to limit the Company's ability to take various
defensive measures to hinder or prevent the Company's shareholders from
considering this or other acquisition offers (the "Bylaw and Article
Proposals") and (6) Purchaser being satisfied, in its sole discretion, that
it has obtained sufficient financing to enable it to consummate the Offer
(the "Financing Condition").
5. Shareholders who tender Shares will not be obligated to pay
brokerage commissions, solicitation fees or, except as set forth in
Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase
of Shares by the Purchaser pursuant to the Offer.
The Purchaser is not aware of any jurisdiction where the making of the Offer
is prohibited by administrative or judicial action pursuant to any valid state
statute. If the Purchaser becomes aware of any valid state statute prohibiting
the making of the Offer or the acceptance of the Shares pursuant thereto, the
Purchaser will make a good faith effort to comply with such state statute. If,
after such good faith effort, the Purchaser cannot comply with any such state
statute, the Offer will not be made to (nor will tenders be accepted from or on
behalf of) the holders of Shares in such state. In any jurisdiction where the
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on behalf of the
Purchaser by the Dealer Manager (as defined in the Offer to Purchase) or one or
more registered brokers or dealers which are licensed under the laws of such
jurisdiction.
If you wish to have us tender any or all of your Shares please complete,
sign and return to us the form set forth below. An envelope to return your
instructions to us is enclosed. Your instructions to us should be forwarded in
ample time to permit us to submit a tender on your behalf prior to the
expiration of the Offer. If you authorize the tender of your Shares all such
Shares will be tendered unless otherwise specified on the instruction form set
forth below.
INSTRUCTIONS WITH RESPECT TO THE OFFER
TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK
OF
TSI INCORPORATED
The undersigned acknowledge(s) receipt of your letter, the enclosed Offer to
Purchase, dated July 12, 1999, and the Letter of Transmittal (which, together as
amended from time to time constitute the "Offer") relating to the offer by JJF
Acquisition, Inc. (the "Purchaser"), to purchase all outstanding shares of
common stock (the "Shares"), par value $0.10 per share, of TSI Incorporated a
Minnesota corporation (the "Company").
2
<PAGE>
This will instruct you to tender to the Purchaser the number of Shares
indicated below (or if no number is indicated below, all Shares) held by you for
the account of the undersigned, on the terms and subject to the conditions set
forth in the Offer.
<TABLE>
<S> <C>
NUMBER OF SHARES TO BE SIGN HERE
TENDERED:*
--------------------------------------------
SHARES: --------------------------------------------
Signature
Account Number: --------------------------------------------
Dated: , 1999 --------------------------------------------
Please Print Name(s) and address(es) here
--------------------------------------------
Area Code and Telephone Number
--------------------------------------------
Tax Identification or Social Security
Number(s)
</TABLE>
* Unless otherwise indicated, it will be assumed that all of your Shares held by
us for your account are to be tendered.
3
<PAGE>
Exhibit (a)(6)
Contacts:
John Kopchik Ann Barkelew
JJF Acquisition, Inc. Fleishman-Hillard
(612) 673-6700 (612) 337-0354
Richard Grubaugh
Beacon Hill Partners
(212) 843-8500
FOR IMMEDIATE RELEASE
JJF ACQUISITION, INC. ANNOUNCES UNSOLICITED TENDER OFFER FOR TSI
MINNEAPOLIS, July 9, 1999 -- JJF Acquisition, Inc., a Minneapolis-based
firm headed by John J. Fauth, and a subsidiary of JJF Group, Inc. announced
today that it intends to commence a cash tender offer for all shares of the
common stock of TSI Incorporated (TSI) (Nasdaq: TSII) at a price of $14.00 net
per share -- the highest price ever offered for TSI shares on a post-split
basis.
Fauth said his intention is to acquire the entire equity interest in TSI.
The tender offer is subject to specific terms and conditions contained in
documents that are expected to be mailed to TSI shareholders next week, when the
tender offer commences. Beacon Hill Partners, Inc. is the information agent and
RJ Steichen & Co. is the dealer manager for the tender offer.
"I have never before launched a contested proxy or tender campaign. TSI's
board of directors has forced both by being complacent about TSI's financial
performance and by repeatedly refusing to discuss options for enhancing
shareholder value," Fauth said. "TSI's stock performance has lagged far behind
that of major stock indexes over the past three years."
"We believe the stock has only appreciated in recent months after we began
purchasing shares. For the six-month period ended July 8, 1998, 2.53 million
shares traded hands. By contrast, for the most recent six months, 3.97 million
shares were traded. JJF accounted for 756,000 of the 1999 trades and
1.009 million of the shares traded over the previous 12 months," Fauth added.
He also noted that TSI's board has not clearly articulated a plan to grow
the business or achieve an appropriate return for shareholders. "Other than to
retain an investment bank for some vague 'preliminary analysis', TSI's board has
offered no options of their own to enhance the value of shareholders'
investment," he added. "I prepared the tender offer as a way of reaching
<PAGE>
shareholders directly. I also fear that the board's inaction will create the
same outcome that befell Penzoil shareholders, who saw a potential value of $84
per share fall to just $25 per share because the board 'just said NO'," he
added.
Fauth said that his goal is still to achieve a "mutually beneficial"
private sale of TSI. He pointed to TSI's historically low share trading volumes
and lack of coverage by research analysts or market makers as further
indications that TSI is unlikely to achieve, on its own, an adequate valuation
for its shareholders in the public markets. Fauth also noted that TSI's ample
cash and low debt positions suggest that its needs for public equity capital to
fund growth are minimal. Several large TSI shareholders have indicated they
also believe TSI should be a private company, he said.
"Contrary to the assertions of TSI's board, I am not pursuing this matter
to 'make a quick profit', or to 'solely benefit' from some as-yet unarticulated
strategic plan of TSI's management," Fauth continued. He noted that his
investment firms have acquired 19 companies since 1986, including two publicly
held firms, and started another 10 companies. "I have provided resources to
build these organizations and have always maintained our headquarters in
Minnesota. In 20 years in business in Minnesota, I have never sold a business
against the wishes of the management team.
"Our strategic plan for TSI is designed to deliver what TSI's current
leadership has been unable to deliver," Fauth said. "Many aspects of this plan
are similar to the successful strategies we have employed at other companies:
- keep the company in Minnesota,
- enhance the company's team, anchored by existing employees,
- provide clearer focus for product development,
- expand marketing prowess,
- align research and development and marketing strategies, and
- grow the business.
In contrast to the board's recent assessment, my significant investment in TSI
stock makes me intensely interested in realizing full value for all
shareholders."
In June, TSI's board rejected Fauth's offer to purchase TSI shares at
$12.50 per share -- a 56-percent premium over the 18-month average per-share
price prior to the offer date. On July 2, 1999, the JJF Group mailed proxy
materials to TSI shareholders nominating its own slate of three candidates to
stand for election at the TSI annual meeting on July 22, 1999. The JJF Group
proxy also proposed six measure designed by prevent TSI's board from blocking
the sale of the company.
TSI is a diversified, worldwide leader in providing measuring instruments
for two major market areas: the safety, comfort and health of people; and
productivity and quality improvement. Its common stock is traded on the Nasdaq
National Market under the symbol TSII.
<PAGE>
EXHIBIT (A)(7)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.
Social security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
----------------------------------------------------
<S> <C> <C>
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
<CAPTION>
----------------------------------------------------
<S> <C> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, any one of the
individuals(1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint
funds, either person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the
minor(1)
6. Account in the name of The ward, minor, or
guardian or committee incompetent person(3)
for a designated ward,
minor, or incompetent
person
7. a. The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also
trustee)
b. So-called trust The actual owner(1)
account that is not a
legal or valid trust
under State law
8. Sole proprietorship The owner(4)
account
- ----------------------------------------------------
<CAPTION>
----------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
----------------------------------------------------
<S> <C> <C>
9. A valid trust, estate or The legal entity (Do
pension trust not furnish the
identifying number of
the personal
representative or
trustee unless the
legal entity itself is
not designated in the
account title.)(5)
10. Corporate Account The corporation
11. Religious, charitable, The organization
or educational
organization account
12. Partnership account held The partnership
in the name of the
business
13. Association, in, or The organization
other tax-exempt
organization
14. A broker or registered The broker or nominee
nominee
15. Account with the The public entity
Department of
Agriculture in the name
of a public entity (such
as a State or local
government, school
district, or prison)
that receives
agricultural program
payments
- ----------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
Note: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service (the "IRS") and
apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- - A corporation.
- - A financial institution.
- - An organization exempt from tax under section 501(a), or an individual
retirement plan.
- - The United States or any agency or instrumentality thereof.
- - A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- - A foreign government, a political subdivision of a foreign government, or any
agency or instrumentality thereof.
- - An international organization or any agency, or instrumentality thereof.
- - A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- - A real estate investment trust.
- - A common trust fund operated by a bank under section 584(a).
- - An exempt charitable remainder trust, or a nonexempt trust described in
section 4947(a)(1).
- - An entity registered at all times under the Investment Company Act of 1940.
- - A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding including the following:
- - Payments to nonresident aliens subject to withholding under section 1441.
- - Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one non-resident partner.
- - Payments and patronage dividends where the amount received is not paid in
money.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- - Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payer's trade or business and you have not provided your
correct taxpayer identification number to the payer.
- - Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- - Payments described in section 6049(b)(5) to non-resident aliens.
- - Payments on tax-free covenant bonds under section 1451.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM. Certain payments other than interest, dividends, and
patronage dividends, that are not subject to information reporting are also not
subject to backup withholding. For details, see the regulations under sections
6041, 6041A(a), 6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Beginning January 1, 1984, payers
must generally withhold 20% of taxable interest, dividend, and certain other
payments to a payee who does not furnish a taxpayer identification number to a
payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
under-payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
Exhibit (a)(8)
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares (as defined below). The Offer (as defined below) is made
solely by the Offer to Purchase dated July 12, 1999 and the related Letter of
Transmittal (and any amendments thereto) and is being made to all holders of
Shares. The Purchaser (as defined below) is not aware of any state where the
making of the Offer is prohibited by administrative or judicial action pursuant
to state statute. If the Purchaser becomes aware of any state where the making
of the Offer is prohibited, the Purchaser will make a good faith effort to
comply with any such statute. If, after such good faith effort, the Purchaser
cannot comply with any applicable statute, the Offer will not be made to (nor
will tenders be accepted from or on behalf of) the holders of Shares in such
state. In those jurisdictions where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer shall be
deemed to be made on behalf of the Purchaser by R.J. Steichen & Co. or one or
more registered brokers or dealers licensed under the laws of such
jurisdictions.
NOTICE OF OFFER TO PURCHASE
FOR CASH ALL OUTSTANDING
SHARES OF COMMON STOCK
OF
TSI INCORPORATED
AT
$14.00 NET PER SHARE IN CASH
BY
JJF ACQUISITION, INC.
JJF Acquisition, Inc. (the "Purchaser"), is offering to purchase all
outstanding shares of common stock, par value $.10 per share (the "Shares"), of
TSI Incorporated, a Minnesota corporation (the "Company"), at a purchase price
of $14.00 per Share, net to the seller in cash without interest thereon, upon
the terms and subject to the conditions set forth in the Offer to Purchase dated
July 12, 1999 (the "Offer to Purchase") and in the related Letter of Transmittal
(which, as amended from time to time, together constitute the "Offer").
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME ON WEDNESDAY, AUGUST 11, 1999, UNLESS THE OFFER IS EXTENDED TO A LATER
DATE AND TIME (THE "EXPIRATION DATE"). SHARES THAT ARE TENDERED PURSUANT TO THE
OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
The Offer is conditioned upon, among, other things, (1) there being
validly tendered and not withdrawn prior to the expiration date that number
of shares, which, when added to the number of shares beneficially owned by
Purchaser and its affiliates, represents a majority of the total number of
outstanding shares of the Company on a fully diluted basis (the "Minimum
Tender Condition"), (2) the Purchaser being satisfied, in its sole
discretion, that the Company's shareholders have amended the Company's Bylaws
to opt out of the Minnesota Control Share Acquisition Act and that the
Purchaser has voting rights for all shares acquired
1
<PAGE>
pursuant to the Offer (the "Control Share Condition"), (3) the Purchaser
being satisfied, in its sole discretion, that the Company has taken
appropriate measures such that the Offer is approved in accordance with the
Minnesota Business Combination Act (the "Business Combination Condition"),
(4) the election by shareholder vote of Purchaser's director nominees at the
1999 Annual Meeting of Shareholders (the "Election Condition"), (5) the
Purchaser being satisfied, in its sole discretion, that the Company's
shareholders at their 1999 Annual Meeting have adopted five proposals to
amend the Company's Articles of Incorporation and Bylaws which are designed
to limit the Company's ability to take various defensive measures to
hinder or prevent the Company's shareholders from considering this or other
acquisition offers (the "Bylaw and Article Proposals") and (6) the Purchaser
being satisfied, in its sole discretion, that it has obtained sufficient
financing to enable it to consummate the Offer (the "Financing Condition").
THE PURCHASER URGES THE BOARD TO COOPERATE WITH THE PURCHASER IN SEEKING TO
SATISFY THE CONDITIONS, THEREBY PROVIDING TO THE COMPANY'S SHAREHOLDERS THE
OPPORTUNITY TO DECIDE FOR THEMSELVES WHETHER THEY WISH TO TAKE ADVANTAGE OF THE
OFFER.
The purpose of the Offer is to enable the Purchaser to acquire control of,
and the entire equity interest in, the Company. The Offer, as the first step in
the acquisition of the Company, is intended to facilitate the acquisition of all
the Shares. The Purchaser currently intends, as soon as practicable following
consummation of the Offer, to seek to have the Company consummate a merger or
similar business combination (the "Merger") with the Purchaser, pursuant to
which each then outstanding Share (other than Shares owned by Purchaser or its
affiliates) would be converted into the right to receive cash in the same
amount as is received in the Offer, and the Company would become a wholly-owned
subsidiary of the Purchaser.
THIS NOTICE OF OFFER TO PURCHASE DOES NOT CONSTITUTE A SOLICITATION OF A
PROXY, CONSENT OR AUTHORIZATION FOR OR WITH RESPECT TO THE ANNUAL MEETING OR ANY
SPECIAL MEETING OF THE COMPANY'S SHAREHOLDERS. ANY SUCH SOLICITATION WHICH THE
PURCHASER MAY MAKE WILL BE MADE ONLY PURSUANT TO PROXY SOLICITATION MATERIALS
COMPLYING WITH ALL APPLICABLE REQUIREMENTS OF SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER.
The Purchaser reserves the right to assign its right to purchase Shares
tendered pursuant to the Offer and its other rights under the Offer to one or
more of its affiliates. Any such assignment shall not relieve the Purchaser of
its obligations under the Offer and shall in no way prejudice the rights of
tendering shareholders to receive payment for Shares duly tendered.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when the Purchaser gives oral or written notice to Firstar
Bank of Minnesota, N.A. (the "Depositary") of the Purchaser's acceptance for
payment of such Shares pursuant to the Offer. Upon the terms and subject to the
conditions of the Offer, payment for Shares accepted for payment pursuant to the
Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering shareholders for the purpose
of receiving payments from the Purchaser and transmitting such payments to
shareholders whose Shares have been accepted for payment. Under no
circumstances will interest on the purchase price for Shares be paid by the
Purchaser, regardless of any extension of the Offer or any delay in making such
payment. In all cases, payment for Shares tendered and accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of (i) certificates representing Shares or timely confirmation of a book-entry
transfer of such Shares into the Depositary's account at The Depository Trust
Company (the "Book-Entry Transfer Facility") pursuant to the procedures set
forth in Section 3 of the Offer to Purchase, (ii) the Letter or Transmittal
(or a facsimile thereof), properly completed and duly executed, with any
required signature guarantees,
2
<PAGE>
or an Agent's Message (as defined in Section 3 of the Offer to Purchase) in
connection with a book-entry transfer, and (iii) any other documents required
by the Letter of Transmittal.
The Purchaser reserves the right, in its sole discretion, to extend the
Offer at any time and from time to time, notwithstanding the prior satisfaction
of the conditions to the Offer. Subject to the applicable rules and regulations
of the Securities and Exchange Commission, the Purchaser reserves the right, in
its sole discretion, at any time and from time to time, and regardless of
whether or not any of the events set forth in Section 14 of the Offer to
Purchase shall have occurred, to (i) extend the period of time during which the
Offer is open and thereby delay acceptance for payment of, and the payment for,
any Shares, by giving oral or written notice of such extension to the Depositary
or (ii) amend the Offer in any respect by giving oral or written notice of such
amendment to the Depositary. During any such extension, all Shares previously
tendered and not properly withdrawn will remain subject to the Offer, subject to
the rights of a tendering shareholder to withdraw such shareholder's Shares.
Any extension, delay, termination, waiver or amendment of the Offer will be
followed as promptly as practicable by public announcement thereof, to be made
no later than 9:00 A.M., New York City time, on the next business day after the
previously scheduled Expiration Date (as defined below). The term "Expiration
Date" means 12:00 Midnight, New York City time, on Wednesday, August 11, 1999,
unless and until the Purchaser, in its sole discretion, shall have extended the
period during which the Offer is open, in which event the term "Expiration Date"
shall mean the latest time and date at which the Offer, as so extended by the
Purchaser, shall expire.
Tenders of Shares made pursuant to the Offer are irrevocable, except that
Shares tendered pursuant to the Offer may be withdrawn at any time on or prior
to the Expiration Date and, unless theretofore accepted for payment by the
Purchaser pursuant to the Offer, may also be withdrawn at any time after Monday,
September 13, 1999 (or such later date as may apply in case the Offer is
extended). For a withdrawal to be effective, written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of the Offer to
Purchase. Any notice of withdrawal must specify the name of the person who
tendered such 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 certificates for the Shares have been delivered or
otherwise identified to the Depositary, then prior to the physical release of
such certificates, the serial numbers shown on such certificates must be
submitted to the Depositary and the signatures on the notice of withdrawal must
be guaranteed by an Eligible Institution (as defined in Section 3 of the Offer
to Purchase) unless such Shares have been tendered for the account of an
Eligible Institution. If Shares have been tendered pursuant to the procedure
for book-entry transfer as set forth in Section 3 of the Offer to Purchase, any
notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares, in which
case a notice of withdrawal will be effective if delivered to the Depositary by
any method of delivery described in the second sentence of this paragraph. All
questions as to the form and validity (including time of receipt) of any notice
of withdrawal will be determined by the Purchaser, in its sole discretion, whose
determination will be final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Offer to Purchase and the related Letter of Transmittal and other
relevant materials will be mailed by the Purchaser or by the Company to record
holders of Shares and furnished to brokers, dealers, commercial banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on the shareholder lists or, if applicable, who are listed as
participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of Shares.
The Offer to Purchase and the related Letter of Transmittal contain
important information which should be read carefully before any decision is made
with respect to the Offer.
3
<PAGE>
Questions and requests for assistance may be directed to the Dealer Manager
or the Information Agent as set forth below. Requests for copies of the Offer
to Purchase and the related Letter of Transmittal and all other tender offer
materials may be directed to the Information Agent or the Dealer Manager, and
copies will be furnished promptly at the Purchaser's expense. The Purchaser will
not pay any fees or commissions to any broker or dealer or any other person
(other than the Dealer Manager, the Depositary and the Information Agent) for
soliciting tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
BEACON HILL PARTNERS, INC.
90 Broad Street
20th Floor
New York, New York 10004
Call Collect (212) 843-8500
or CALL TOLL FREE
(800) 755-5001
The Dealer Manager for the Offer is:
R.J. STEICHEN & CO.
One Financial Plaza
Suite 100
120 South 6th Street
Minneapolis, MN 55402
(800) 328-4836
or
Collect (612) 341-6200
July 12, 1999
4
<PAGE>
SOLICITATION OF PROXIES
1999 ANNUAL MEETING OF SHAREHOLDERS
OF
TSI INCORPORATED
----------------
SUPPLEMENT OF JULY 12, 1999 TO PROXY STATEMENT
OF
JJF GROUP, INC.
----------------
This supplements the proxy statement sent to the shareholders of TSI
Incorporated (the "Company"), on July 2, 1999 (the "Proxy Statement"), by JJF
Group, Inc., a Minnesota corporation formed by Mr. John J. Fauth (Mr. Fauth and
JJF Group, Inc. are referred to collectively as the "JJF Group"). The JJF Group
is soliciting proxies from the Company's shareholders to be voted at the annual
meeting of shareholders of the Company, which is expected to be held at 500
Cardigan Road, Shoreview, Minnesota 55126, at 9:30 a.m. (local time) on
Thursday, July 22, 1999, including any adjournments or postponements,
continuations or reschedulings thereof. This Supplement and a GREEN proxy card
are being sent to the Company's shareholders on or about July 12, 1999.
THIS SOLICITATION IS BEING MADE BY THE JJF GROUP AND NOT ON BEHALF OF THE
BOARD OF DIRECTORS OF THE COMPANY. THE ADDRESS OF THE JJF GROUP IS 333 SOUTH
SEVENTH STREET, SUITE 3100, MINNEAPOLIS, MINNESOTA 55402; TELEPHONE (612)
673-6700.
INTRODUCTION
Mr. Fauth is the largest individual shareholder of the Company and the JJF
Group has previously offered to enter into a cash merger with the Company, which
has been rejected by the Board of Directors. The JJF Group is soliciting your
proxies to (i) elect three individuals (John J. Fauth, Joseph G. Kohler and G.
Richard Haun, Jr.) to the eight-person Board, (ii) to ratify the Board's
selection of auditors, and (iii) to amend the Company's bylaws and Articles of
Incorporation to opt-out of the Minnesota Control Share Acquisition Act and
prevent the Board from taking certain actions to block a sale to the JJF Group
or another purchaser.
SUPPLEMENTAL INFORMATION
TENDER OFFER
On July 12, 1999, JJF Acquisition, Inc., a subsidiary of JJF Group, Inc.,
commenced a cash tender offer to acquire all outstanding shares of common stock,
par value $.10 per share of the Company (the "Shares") at a price of $14.00 per
Share, net to the seller in cash, upon the terms and subject to the conditions
set forth in the Offer to Purchase dated the same date (the "Offer to Purchase")
and the related letter of transmittal (the "Letter of Transmittal") (which, as
amended from time to time, together constitute the "Tender Offer"). The Tender
Offer represents a 9.8% premium over the closing price of $12.75 per share on
July 9, 1999; a 78% premium over the closing price of $7.875 per share on
November 30, 1998, which was the day on which Mr. Fauth first purchased the
Company's Common Stock; and a 69% premium over the average daily closing price
of $8.27 for the one year period ended November 30, 1998.
1
<PAGE>
The purpose of the Tender Offer is to enable the JJF Group to acquire the
entire equity interest in the Company. The Tender Offer is currently scheduled
to expire at 12:00 Midnight, New York City time, on August 11, 1999, unless
further extended to a later date and time (the "Expiration Date"). The Tender
Offer is for all of the Shares and is subject to certain conditions and will not
be consummated until those conditions are satisfied or waived. The adoption of
ALL of the JJF Group's Proposals at the Annual Meetings is necessary to satisfy
various conditions to the purchase of Shares tendered pursuant to the Tender
Offer. The JJF Group is seeking the cooperation of the Board of Directors to
facilitate prompt consummation of the Tender Offer. Further information
concerning the Tender Offer is contained in the Offer to Purchase and related
Letter of Transmittal.
THE PROXY STATEMENT (INCLUDING THIS SUPPLEMENT) IS NEITHER A REQUEST FOR THE
TENDER OF SHARES NOR AN OFFER WITH RESPECT THERETO. THE OFFER IS BEING MADE ONLY
BY MEANS OF THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL. IF YOU
HAVE NOT ALREADY RECEIVED THE OFFER TO PURCHASE AND THE RELATED LETTER OF
TRANSMITTAL, PLEASE CALL BEACON HILL PARTNERS, INC. AT (800) 475-9320.
ELECTION OF THE JJF NOMINEES AND THE ADOPTION OF THE JJF PROPOSALS WILL BE
AN IMPORTANT STEP IN REACHING THE GOAL OF MAXIMIZING SHAREHOLDER VALUE. HOWEVER,
YOU MUST TENDER YOUR SHARES PURSUANT TO THE TENDER OFFER IF YOU WISH TO
PARTICIPATE IN THE TENDER OFFER. YOUR VOTE FOR THE JJF PROPOSALS DOES NOT
OBLIGATE YOU TO TENDER YOUR SHARES PURSUANT TO THE TENDER OFFER, AND YOUR
FAILURE TO VOTE FOR THE PROPOSALS DOES NOT PREVENT YOU FROM TENDERING YOUR
SHARES PURSUANT TO THE TENDER OFFER. EVEN IF YOU HAVE ALREADY TENDERED YOUR
SHARES UNDER THE TENDER OFFER, YOU STILL HAVE THE RIGHT TO VOTE YOUR SHARES AND
YOU MUST SUBMIT YOUR GREEN PROXY CARD TO DO SO.
THE TENDER OFFER IS SUBJECT TO CERTAIN CONDITIONS, WHICH ARE DESCRIBED IN
THE OFFER TO PURCHASE.
PURCHASE OF ADDITIONAL SHARES
Since the date of the JJF Group Proxy Statement, Mr. Fauth has acquired
357,000 additional Shares on the open market, including the right to vote those
shares at the Annual Meeting. He currently owns 1,009,000 Shares, which
constitutes 9.0% of the 11,234,982 outstanding Shares of the Company on the
record date for the Annual Meeting.
ADOPTION OF EQUAL VOTING RIGHTS PROPOSAL (PROPOSAL THREE ON THE GREEN PROXY
CARD)
The Minnesota Control Share Acquisition Act, Minn. Stat. 302A.671 (the
"Act") has recently been amended to alter the vote required for shareholders to
opt-out of the Act, as contemplated by Proposal 3. Under this statutory
amendment, adoption of the Equal Voting Rights Proposal to "opt out" of the Act
must be approved by both (1) the affirmative vote of the holders of a majority
of the voting power of all shares entitled to vote, including shares held by an
acquiring party (such as Mr. Fauth or JJF Group), and (2) the affirmative vote
of the holders of a majority of the voting power of all shares entitled to vote,
excluding all "interested shares" (in this case meaning the Shares owned by Mr.
Fauth or JJF Group, by any officer of the Company or by any member of the Board
who is employed of the Company). This means, in effect, that any Shares which
are not present at the Annual Meeting, or which are present but abstain, will be
treated as votes against Proposal 3. The amendment to the Act means that
adoption of the Equal Voting Rights Proposal will require approval of 50.1% of
the outstanding shares of the Company, rather than a majority of the shares
present or represented by proxy at the Annual Meeting.
2
<PAGE>
WHY YOU SHOULD VOTE FOR THE JJF GROUP PROPOSALS
- To elect directors who are committed to maximizing shareholder value
- To adopt amendments to the Company's bylaws and Articles of Incorporation
that will preserve your right as a shareholder to decide the Company's
future
- To prevent the current Board from implementing policies or adopting
strategies that could limit the value of your Shares by creating obstacles
to a sale of the Company
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND MAIL (OR FAX BOTH
SIDES OF) THE ENCLOSED GREEN PROXY CARD TO VOTE FOR THE JJF NOMINEES, FOR THE
APPOINTMENT OF AUDITORS, AND FOR THE BYLAW AND ARTICLE PROPOSALS.
IMPORTANT
Your vote is important. No matter how many Shares you own, please give the
JJF Group your proxy FOR the election of the JJF Nominees, FOR the ratification
of the appointment of independent auditors, and FOR the approval of the Bylaw
and Article Amendment Proposals by taking three steps:
1. SIGNING the enclosed GREEN proxy card,
2. DATING the enclosed GREEN proxy card, and
3. MAILING the enclosed GREEN proxy card TODAY in the envelope provided (no
postage is required if mailed in the United States). Registered holders
may FAX BOTH SIDES of the enclosed GREEN proxy card TODAY to Beacon Hill
Partners, Inc. at the number provided below.
If any of your Shares are held in the name of a brokerage firm, bank, bank
nominee or other institution, only it can vote such Shares and only upon receipt
of your specific instructions. Accordingly, please return the GREEN proxy card
in the envelope provided or contact the person responsible for your account and
instruct that person to execute the GREEN proxy card representing your Shares.
The JJF Group urges you to confirm in writing your instructions to the JJF Group
in care of Beacon Hill Partners, Inc. at the address provided below so that the
JJF Group will be aware of all instructions given and can attempt to ensure that
such instructions are followed.
If you have any questions or require any additional information concerning
this Proxy Statement, please contact, Beacon Hill Partners, Inc. at the address
set forth below.
BEACON HILL PARTNERS, INC.
90 BROAD STREET
20TH FLOOR
NEW YORK, NEW YORK 10004
(212) 843-8500 (CALL COLLECT)
OR
CALL TOLL-FREE (800) 475-9320
FAX: (212) 843-4384
3
<PAGE>
Exhibit b(1)
[Letterhead of BNY Capital Markets, Inc.]
July 9, 1999
Mr. John J. (Hap) Fauth
President & Chief Executive Officer
Churchill Industries, Inc.
3100 Metropolitan Centre
333 South Seventh Street
Minneapolis, MN 55402
Dear Hap:
You have indicated to us that an affiliate of yours, JJF Acquisition, Inc.
(the "Borrower") wishes to seek financing in connection with a possible tender
offer (the "Tender Offer") for, and subsequent merger (the "Merger") with
(collectively, the "Transaction"), TSI, Incorporated, a Minnesota corporation
("TSI"). The Tender Offer would be for all outstanding shares of TSI common
stock, with a minimum required (in order to purchase any of the tendered shares)
of that number of shares of the common stock of TSI which, when aggregated with
shares of such common stock to be contributed to the Borrower (the "Contributed
Shares"), would result in the Borrower owning not less than a majority of the
issued and outstanding shares of common stock of TSI on a fully diluted basis
(the difference between a majority of the issued and outstanding shares of
common stock of TSI on a fully diluted basis and the Contributed Shares being
referred to below as the "Purchased Shares").
Subject to the qualifications and conditions set forth below, BNY Capital
Markets, Inc. ("BNYCMI") is highly confident, as of the date of this letter,
that it could obtain commitments from lenders for a senior secured credit
facility (the "Tender Offer Facility") to be made available to the Borrower, in
an amount sufficient to finance a portion of the payment obligations under the
Tender Offer required to purchase the Purchased Shares. The Tender Offer
Facility would be secured by the Purchased Shares and the Contributed Shares,
and would not exceed in amount approximately 43% of their respective collateral
values as determined under Regulation U.
Subject to the same qualifications and conditions, BNYCMI is also highly
confident, as of the date of this letter, that it could obtain commitments from
lenders for permanent financing which would consist of a senior secured credit
facility of up to $40,000,000 (the "Senior Credit Facility"), and up to
$110,000,000 in the public debt markets through the sale of senior subordinated
<PAGE>
indebtedness (the "Subordinated Indebtedness") to be issued by the Borrower;
PROVIDED that, the combined amount of the Senior Credit Facility and the
Subordinated Indebtedness shall not exceed $140,000,000. The proceeds of the
Senior Credit Facility and the Subordinated Indebtedness, along with
approximately $50,000,000 to be contributed as equity, would be used to repay
the Tender Offer Facility, if any, to finance a portion of the payment
obligation arising out of or in connection with the Merger (the Tender Offer
Facility, the Senior Credit Facility and the Subordinated Indebtedness are
referred to herein collectively as the "Facilities") and to finance general
corporate purposes.
Our expressions of confidence in our ability to consummate placement or
sale of the Facilities is subject to: (i) there having been in our sole
judgment no material adverse change in the financial condition, results of
operations, business or prospects of TSI, the Borrower, or Churchill Industries,
Inc. and its subsidiaries (collectively, "Churchill") since March 31, 1999; (ii)
there not having been in our sole judgment any material adverse change in the
markets for senior debt financings, high yield securities or the capital markets
in general; (iii) our receipt of audited and unaudited historical financial
statements (including unaudited pro forma financial statements) of TSI and its
subsidiaries acceptable to us and conforming to the requirements of the
Securities Act of 1933, as amended, and the rules and regulations promulgated
pursuant thereto for registration statements filed thereunder; (iv) our not
having discovered or otherwise becoming aware of any information not previously
disclosed to us that we believe to be inconsistent in a material and adverse
manner with our understanding, based on the information provided to us prior to
the date hereof, of the business, operations, property, condition (financial or
otherwise) or prospects of Churchill, the Borrower or TSI; (v) the Facilities
being on terms and conditions, including pricing and fees, that in our view are
appropriate for facilities of those sizes, types and purposes and that are
satisfactory to us, and the Tender Offer, in the case of the Tender Offer
Facility, and the Merger, in the case of the Senior Credit Facility and the
Subordinated Indebtedness being on terms and conditions satisfactory to us; (vi)
the Facilities, the Tender Offer and the Merger being provided for and
consummated pursuant to documentation satisfactory to us; (vii) the Borrower
having received the Contributed Shares and, in addition, equity in the form of
cash in an amount and upon terms satisfactory to us, and the consolidated pro
forma capitalization of the Borrower, assuming consummation of the Transaction,
otherwise being acceptable to us; (viii) receipt by Churchill, the Borrower and
TSI of all required regulatory approvals; (ix) no change or proposed change in
federal law or the laws of any jurisdiction in which the Borrower or TSI operate
that could reasonably be expected to adversely affect the Transaction; and (x)
no competing financing for you, any of your affiliates or the Borrower being
offered or arranged other than those that you have disclosed to us prior to the
date hereof.
It should be understood that this letter shall not constitute or give rise
to (i) any commitment or obligation on the part of BNYCMI, including to provide
any of the Facilities, provide any other financing, or provide any advisory or
placement service, or (ii) any commitment or obligation on the part of any of
our affiliates. Any such obligations would arise only after negotiation and
execution of a separate written agreement acceptable to BNYCMI and such
affiliate, in their sole discretions,
<PAGE>
and after consideration and internal approval by BNYCMI and such affiliate,
in their sole discretions, in addition to the above referenced qualifications.
This letter is solely for use by you, and may not be disclosed, except with
our prior written consent, to anyone other than your officers, employees and
advisors, and the officers, employees, attorneys and advisors of TSI, in each
case on a confidential and need-to-know basis. Notwithstanding the foregoing,
this letter may be disclosed by you in the Tender Offer and in filings with the
Securities and Exchange Commission related to the Tender Offer, pursuant to
applicable rules and regulations.
You should be aware that other companies with interests that may conflict
with yours may be or become customers of BNYCMI or its affiliates and BNYCMI or
its affiliates may be providing or in the future may provide financing or other
services to them.
Very truly yours,
BNY CAPITAL MARKETS, INC.
By /s/ Torry Berntsen
--------------------------
Name: Torry Berntsen
Title: Managing Director
By /s/ R. Douglas Carleton
--------------------------
Name: R. Douglas Carleton
Title: Managing Director
