<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
800-JR CIGAR, INC.
AT A PURCHASE PRICE OF
$13.00 PER SHARE
BY
JRC ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
L&LR, INC.
--------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, SEPTEMBER 26, 2000, UNLESS THE OFFER IS EXTENDED.
--------------------------------------------------------------------------------
THIS OFFER IS BEING MADE PURSUANT TO THE AGREEMENT AND PLAN OF MERGER, DATED
AUGUST 28, 2000 (THE "MERGER AGREEMENT"), BY AND AMONG L&LR, INC. (THE
"PARENT"), JRC ACQUISITION CORP. (THE "PURCHASER") AND 800-JR CIGAR, INC. (THE
"COMPANY") AND EACH OF LEWIS I. ROTHMAN, LAVONDA M. ROTHMAN AND THE LEWIS IRVING
ROTHMAN 1998 TRUST #1 U/A/D NOVEMBER 10, 1998 (COLLECTIVELY, THE "PARENT
STOCKHOLDERS").
BASED ON, AMONG OTHER THINGS, THE UNANIMOUS RECOMMENDATION OF A SPECIAL
COMMITTEE OF INDEPENDENT DIRECTORS OF THE COMPANY, THE BOARD OF DIRECTORS, HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE OFFER AND THE MERGER (EACH AS
HEREINAFTER DEFINED) AND HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE
MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY'S STOCKHOLDERS
(OTHER THAN THE PARENT, THE PURCHASER, THE PARENT STOCKHOLDERS AND THE OTHER
ROTHMAN TRUSTS (AS HEREINAFTER DEFINED)) AND UNANIMOUSLY RECOMMENDS THAT SUCH
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, A MAJORITY OF THE OUTSTANDING
SHARES NOT OWNED BY THE PARENT STOCKHOLDERS AND THE OTHER ROTHMAN TRUSTS BEING
PROPERLY TENDERED AND THE PURCHASER HAVING AVAILABLE AT THE EXPIRATION OF THE
OFFER THE FINANCING PURSUANT TO THE BRIDGE CREDIT AGREEMENT (AS HEREINAFTER
DEFINED). THE OFFER ALSO IS CONDITIONED UPON THE SATISFACTION OF OTHER TERMS AND
CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE. SEE "THE OFFER, SECTION
12--CONDITIONS TO THE OFFER."
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE MERITS OR THE FAIRNESS OF SUCH TRANSACTION
NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
------------------------
IMPORTANT
Any stockholder who desires to tender all or any portion of such
stockholder's Shares (as defined herein) should either (i) complete and sign the
Letter of Transmittal (or a facsimile thereof) in accordance with the
instructions in the Letter of Transmittal, have such stockholder's signature
thereon guaranteed if required by Instruction 1 to the Letter of Transmittal,
mail or deliver the Letter of Transmittal (or a facsimile thereof) and any other
required documents to the Depositary and either deliver the certificates
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for such Shares to the Depositary or tender such Shares pursuant to the
procedures for book-entry transfer set forth in "THE OFFER,
Section 3--Procedure for Tendering Shares" or (ii) request such stockholder's
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for such stockholder. Any stockholder 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 to tender such Shares.
Any stockholder who desires to tender 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, or who cannot
deliver all required documents to the Depositary prior to the expiration of the
Offer, may tender such Shares by following the procedures for guaranteed
delivery set forth in "THE OFFER, Section 3--Procedure for Tendering Shares."
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. Requests for additional
copies of this Offer to Purchase, the Letter of Transmittal, the Notice of
Guaranteed Delivery and the Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 may be directed to the Information
Agent or the Dealer Manager. A stockholder 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 or trust company for assistance
concerning the Offer.
------------------------
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO., INC.
------------------
THE DEALER MANAGER FOR THE OFFER IS:
FIRST UNION SECURITIES, INC.
The date of this Offer to Purchase is August 29, 2000
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TABLE OF CONTENTS
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SUMMARY TERM SHEET.......................................... i
INTRODUCTION................................................ 1
SPECIAL FACTORS............................................. 3
1. Background of the Offer and the Merger................... 3
2. Recommendation of the Special Committee and the Board of
Directors of Company........................................ 7
3. Fairness Opinion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................................ 10
4. Position of the Parent Stockholders Regarding Fairness of
the Offer and the Merger.................................... 14
5. Plans for the Company.................................... 16
6. Purpose and Structure of the Offer and the Merger........ 16
7. The Merger Agreement..................................... 17
8. Dissenters' Rights....................................... 22
THE OFFER................................................... 25
1. Terms of the Offer....................................... 25
2. Acceptance for Payment................................... 27
3. Procedure for Tendering Shares........................... 28
4. Withdrawal Rights........................................ 30
5. Certain Federal Income Tax Consequences.................. 31
6. Price Range of the Shares; Dividends on the Shares....... 33
7. Effect of the Offer on the Market for the Shares; Stock
Listing; Exchange Act Registration....................... 33
8. Certain Information Concerning the Company............... 34
9. Certain Information Concerning the Parent Stockholders,
the Parent and the Purchaser................................ 37
10. Source and Amount of Funds.............................. 38
11. Dividends and Distributions............................. 38
12. Conditions to the Offer................................. 39
13. Certain Legal Matters................................... 40
14. Fees and Expenses....................................... 40
15. Miscellaneous........................................... 41
ANNEX A
AGREEMENT AND PLAN OF MERGER, DATED AS OF AUGUST 28,
2000, BY AND AMONG THE PURCHASER, THE PARENT, THE
PARENT STOCKHOLDERS (FOR PURPOSES OF 6.10 THEREOF ONLY)
AND THE COMPANY........................................ A-1
ANNEX B
EXCERPTS FROM THE GENERAL CORPORATION LAW OF THE STATE
OF DELAWARE RELATING TO THE RIGHTS OF DISSENTING
STOCKHOLDERS PURSUANT TO SECTION 262................... B-1
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SUMMARY TERM SHEET
JRC Acquisition Corp. is offering to purchase all shares of common stock of
800-JR CIGAR, Inc. not already owned by Lewis I. Rothman, LaVonda M. Rothman and
the Lewis Irving Rothman 1998 Trust #1 u/a/d November 10, 1998, whom we refer to
collectively as the "Parent Stockholders" in this summary term sheet, for $13.00
per share in cash. The following are some of the questions you may have, as a
stockholder of 800-JR CIGAR, Inc., followed by answers to those questions. We
urge you to carefully read the remainder of this offer to purchase and the
accompanying letter of transmittal because the information in this summary term
sheet is not complete. Additional information is contained in the remainder of
this offer to purchase and the accompanying letter of transmittal.
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WHO IS OFFERING TO PURCHASE MY
SHARES OF COMMON STOCK?......... This offer is being made by JRC Acquisition Corp., a
newly formed Delaware corporation. JRC was formed by
L&LR, Inc., a Delaware corporation owned by the Parent
Stockholders. The Parent Stockholders currently own
approximately 74% of the outstanding shares of common
stock of 800-JR CIGAR, Inc., and certain trusts of which
Lewis I. Rothman and LaVonda M. Rothman are trustees own
approximately 4.4% of the outstanding shares of common
stock of 800-JR CIGAR. We refer to these trusts as the
"Other Rothman Trusts" in this summary term sheet. See
Introduction.
HOW MUCH IS JRC OFFERING TO PAY
AND WHAT IS THE FORM OF
PAYMENT?........................ JRC is offering to pay $13.00 in cash for each share of
common stock that it is offering to purchase. See "THE
OFFER, Section 1--Terms of the Offer."
HOW MANY SHARES OF COMMON STOCK IS
JRC OFFERING TO PURCHASE?....... JRC is offering to purchase up to 3,086,459 shares of
common stock, including the shares owned by the Other
Rothman Trusts, or approximately 26% of the outstanding
shares of common stock of 800-JR CIGAR in the tender
offer. The Other Rothman Trusts have represented that
they do not intend to tender their shares of common
stock to JRC in the tender offer. See "THE OFFER,
Section 1--Terms of the Offer."
HOW WILL JRC PAY FOR THE SHARES OF
COMMON STOCK?................... JRC intends to finance the tender offer with funds
obtained from a bridge loan from a group of lenders
comprised of The Chase Manhattan Bank, Fleet Bank, N.A.
and European American Bank. The offer is conditioned on
JRC obtaining this bridge loan. See "THE OFFER, Section
10--Source and Amount of Funds."
HOW LONG DO I HAVE TO TENDER MY
SHARES OF COMMON STOCK?......... You may tender your shares of common stock until the
tender offer expires on Tuesday, September 26, 2000, at
12:00 Midnight, New York City time, unless the offer is
otherwise extended pursuant to the Merger Agreement. See
"THE OFFER, Section 1--Terms of the Offer."
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HOW WILL I BE NOTIFIED IF JRC
EXTENDS THE TENDER OFFER?....... If JRC decides to extend the tender offer, JRC will
issue a press release by 9:00 a.m., New York City time,
on the business day after the previously scheduled
expiration date. See "THE OFFER, Section 1--Terms of the
Offer."
ARE THERE ANY CONDITIONS TO THE
TENDER OFFER?................... The tender offer is subject to conditions such as:
- a majority of the outstanding shares of common stock
not currently owned by the Parent Stockholders and the
Other Rothman Trusts, consisting of 1,281,150 shares
of common stock, shall have been validly tendered and
not withdrawn by the stockholders of 800-JR CIGAR
prior to the expiration of the tender offer;
- JRC shall have available at the expiration of the
tender offer the financing pursuant to a credit
agreement dated August 28, 2000, by and among L&LR,
JRC and a group of lenders comprised of Chase, Fleet
and European American Bank; and
- the Board of Directors of 800-JR CIGAR and its Special
Committee shall not have withdrawn or modified, in a
manner adverse to JRC, its approval of the tender
offer and its recommendation that the stockholders of
800-JR CIGAR tender their shares of common stock
pursuant to the tender offer.
In addition, the tender offer is subject to the absence
of any materially adverse change in the condition of
800-JR CIGAR's business and any judicial or governmental
action prohibiting the offer, and other terms and
conditions. See "THE OFFER, Section 12--Conditions to
the Offer."
HOW DO I TENDER MY SHARES OF
COMMON STOCK?................... To tender your shares of common stock, before the tender
offer expires:
- If your broker holds your shares of common stock in
"street name," you must inform your broker of your
decision to sell your shares of 800-JR CIGAR so that
American Stock Transfer & Trust Company receives a
confirmation of receipt of your shares of common stock
by book-entry transfer.
- If you hold physical share certificates (meaning you
hold stock certificates issued in your name), you must
deliver your share certificate(s) and a properly
completed and duly executed letter of transmittal to
American Stock Transfer & Trust Company at the address
appearing on the back cover of this document.
- You or your broker must comply with the guaranteed
delivery procedure.
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- In any case, American Stock Transfer & Trust Company
must receive all required documents prior to 12:00
Midnight, New York City time, on Tuesday, September
26, 2000, or, if the tender offer is extended, the
date and time to which the offer is extended.
If you have any questions, you should contact the
information agent or your broker for assistance. See
"THE OFFER, Section 3--Procedure for Tendering Shares"
and the instructions to the letter of transmittal.
ONCE I HAVE TENDERED SHARES OF
COMMON STOCK IN THE OFFER, CAN I
WITHDRAW MY TENDER?............. You (or your broker if your shares of common stock are
held in "street name") may withdraw any shares of common
stock you have tendered at any time before 12:00
Midnight, New York City time, on Tuesday, September 26,
2000, or, if the tender offer is extended, the date to
which the offer is extended. Unless the shares of common
stock you have tendered have been previously purchased
by JRC, you may also withdraw your shares of common
stock after 12:00 Midnight, New York City time, on
Friday, October 27, 2000. See "THE OFFER, Section 4--
Withdrawal Rights."
IS THIS TENDER OFFER THE FIRST
STEP IN A GOING PRIVATE
TRANSACTION?.................... Yes. The tender offer by JRC is the first step in a
going private transaction. Prior to the close of the
tender offer, the Parent Stockholders will contribute
their shares of 800-JR CIGAR to L&LR, which in turn will
contribute the shares to JRC. Following the close of the
tender offer, JRC will seek to merge with and into
800-JR CIGAR. If JRC owns more than 90% of the
outstanding shares of 800-JR CIGAR following the close
of the tender offer, JRC will be able to effect this
merger without obtaining the approval of the
stockholders of 800-JR CIGAR. If JRC owns less than 90%
of the outstanding shares of 800-JR CIGAR following the
close of the tender offer, JRC will seek stockholder
approval for such a merger. However, because JRC will
own a majority of the outstanding shares of 800-JR
CIGAR, JRC will be able to effect the merger by voting
the shares it will hold without the affirmative vote of
any other stockholder. If the merger takes place, L&LR,
the parent of JRC, will own all of the shares of common
stock of 800-JR CIGAR and all remaining stockholders of
800-JR CIGAR will receive $13.00 per share. See "SPECIAL
FACTORS, Section 7--The Merger Agreement; Section
5--Plans for the Company."
If the merger takes place, L&LR will seek to delist the
shares of common stock of 800-JR CIGAR from the Nasdaq
National Market and terminate registration of the shares
of common stock under the Securities Exchange Act of
1934. See "THE OFFER, Section 7--Effect of the Offer on
the Market for the Shares; Stock Listing; Exchange Act
Registration."
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WHAT WILL JRC DO IF IT DOES NOT
SUCCEED IN ACQUIRING ALL OF THE
OUTSTANDING SHARES OF COMMON
STOCK OF 800-JR CIGAR IN THE
TENDER OFFER?................... If JRC owns 90% or more of the outstanding shares of
common stock of 800-JR CIGAR following the close of the
tender offer, JRC may effect a short-form merger with
and into 800-JR CIGAR without obtaining the approval of
the stockholders of 800-JR CIGAR. Stockholders not
tendering their shares in the tender offer will receive
the same amount of cash per share which they would have
received had they tendered their shares in the tender
offer. Each share then outstanding (other than shares
held by 800-JR CIGAR, JRC and shares held by
stockholders who properly perfect their dissenters'
rights under the Delaware General Corporation Law) will
be canceled and extinguished and converted into the
right to receive $13.00 in cash, without interest.
If JRC owns less than 90% of the outstanding shares of
common stock of 800-JR CIGAR following the close of the
tender offer, JRC may:
- seek to obtain the affirmative vote of the holders of
a majority of the outstanding Shares in favor of a
merger of JRC with and into 800-JR CIGAR; or
- seek to purchase additional shares in the open market
or otherwise in order to reach the 90% threshold and
employ a short-form merger. The per share
consideration paid for any shares so acquired may be
greater or less than the tender offer price of $13.00
per share.
Even if JRC seeks stockholder approval for the merger,
it will be able to effect the merger without the support
of any other stockholder because it will already own a
majority of the outstanding shares of 800-JR CIGAR. If
the merger takes place, 800-JR CIGAR no longer will be
publicly owned. Even if the merger does not take place,
if JRC purchases all of the tendered shares, there may
be so few remaining stockholders and publicly held
shares that 800-JR CIGAR common stock will no longer be
eligible to be quoted on the Nasdaq National Market or
on a securities exchange, there may not be a public
trading market for 800-JR CIGAR stock, and 800-JR CIGAR
may cease making filings with the Securities and
Exchange Commission or otherwise cease being required to
comply with the SEC rules relating to publicly held
companies. See "SPECIAL FACTORS, Section 7--The Merger
Agreement; Section 5--Plans for the Company."
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HAS THE BOARD OF DIRECTORS OF
800-JR CIGAR ADOPTED A POSITION
ON THE TENDER OFFER AND THE
MERGER?......................... The Board of Directors, including a special committee of
independent directors, has unanimously approved the
merger agreement, the tender offer and the proposed
merger of JRC with and into 800-JR CIGAR with 800-JR
CIGAR as the surviving corporation, and has determined
that the merger agreement, the tender offer and the
merger are fair to, and in the best interests of, the
stockholders of 800-JR CIGAR (other than L&LR, JRC, the
Parent Stockholders and the Other Rothman Trusts).
WHEN WILL JRC PAY FOR THE SHARES
OF COMMON STOCK I TENDER?....... JRC will pay the purchase price for the shares it
purchases promptly after the expiration of the tender
offer, or any extension of it. See "THE OFFER, Section
2--Acceptance for Payment."
WHAT IS THE MARKET VALUE OF SHARES
AS OF A RECENT DATE?............ On August 25, 2000, the last full trading day prior to
the public announcement of the tender offer, the
reported closing price of the common stock on the Nasdaq
National Market was $10.75 per share (Symbol: JRJR). On
August 28, 2000, the last full trading day for which
prices were available before the commencement of the
tender offer, the reported closing price of the common
stock on the Nasdaq National Market was $12.88 per
share. You should obtain a recent market quotation for
your shares in deciding whether to tender them. See "THE
OFFER, Section 6--Price Range of the Shares; Dividends
on Shares."
WHO IS RESPONSIBLE FOR PAYMENT OF
TAXES AND BROKERAGE FEES?....... Stockholders of record who tender shares directly to
American Stock Transfer & Trust Company 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 the
shares by JRC pursuant to the tender offer. However, any
tendering stockholder or other payee who fails to
complete and sign the Substitute Form W-9 included in
the Letter of Transmittal may be subject to backup
federal income tax withholding of 31% of the gross
proceeds payable to such stockholder or other payee
under this tender offer. See "THE OFFER, Section
2--Acceptance for Payment."
IF I OBJECT TO THE PRICE BEING
OFFERED, WILL I HAVE APPRAISAL
RIGHTS?......................... You will not have appraisal rights in the tender offer,
but you will have appraisal rights in the subsequent
merger. To perfect your available appraisal rights and
have the "fair value" of your shares determined and paid
to you following the completion of the appraisal process
in the Delaware courts, you must not tender your shares
in the tender offer, not vote in favor of the merger and
otherwise comply with the requirements of Delaware law.
See "SPECIAL FACTORS. Section 8--Dissenters' Rights."
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WHO CAN I TALK TO IF I HAVE
QUESTIONS? Our information agent, D.F. King & Co., Inc., and our
dealer manager, First Union Securities, Inc., can help
answer your questions regarding this tender offer. You
may call our information agent toll free at (800)
269-6427. Banks and brokerage firms should call our
information agent collect at (212) 269-5550 with any
questions. Alternatively, you may choose to call our
dealer manager at (804) 782-3411.
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<PAGE>
To the Holders of Shares of Common Stock
of 800-JR CIGAR, Inc.:
INTRODUCTION
JRC Acquisition Corp., a Delaware corporation (the "PURCHASER") and a wholly
owned subsidiary of L&LR, Inc. (the "PARENT"), hereby offers to purchase all of
the outstanding shares of common stock, par value $0.01 per share (the
"SHARES"), of 800-JR CIGAR, Inc., a Delaware corporation (the "COMPANY" or
"800-JR CIGAR"), not already owned by Lewis I. Rothman and LaVonda M. Rothman
(collectively, the "ROTHMANS") and the Lewis Irving Rothman 1998 Trust #1 u/a/d
November 10, 1998 (the "1998 TRUST"), at a price of $13.00 per Share (the "OFFER
PRICE"), net to the seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the related
Letter of Transmittal (which, together with any amendments or supplements hereto
or thereto, collectively constitute the "OFFER"). As used herein, the term
"PARENT STOCKHOLDERS" shall mean the Rothmans and the 1998 Trust.
Tendering stockholders who have Shares registered in their own name and who
tender directly to the Depositary (as defined below) will not be obligated to
pay brokerage fees or commissions or, except as set forth in Instruction 6 of
the Letter of Transmittal, transfer taxes on the sale of Shares pursuant to the
Offer. The Purchaser will pay all fees and expenses of D.F. King & Co., Inc.,
which is acting as the Information Agent (the "INFORMATION AGENT"), American
Stock Transfer & Trust Company, which is acting as the Depositary (the
"DEPOSITARY"), and First Union Securities, Inc., which is acting as Dealer
Manager ("FIRST UNION"), incurred in connection with the Offer. See "THE OFFER,
Section 14--Fees and Expenses."
The Offer is conditioned upon, among other things, a majority of the
outstanding Shares (the "MINIMUM SHARES") not currently owned by the Parent
Stockholders and certain other trusts of which the Rothmans are trustees (the
"OTHER ROTHMAN TRUSTS") on the date Shares are accepted for payment having been
validly tendered and not withdrawn prior to the expiration of the Offer (the
"MINIMUM CONDITION"). See "THE OFFER, Section 12--Conditions to the Offer." The
Company has informed the Purchaser that, as of August 4, 2000, there were
2,562,299 Shares issued and outstanding not currently owned by the Parent
Stockholders or the Other Rothman Trusts. Based on the foregoing, the Purchaser
believes that the Minimum Condition will be satisfied if 1,281,150 Shares are
validly tendered and not withdrawn prior to the expiration of the Offer.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of August 28, 2000 (the "MERGER AGREEMENT"), by and among the Parent, the
Purchaser, the Parent Stockholders (for purposes of Section 6.10 thereof only)
and the Company, pursuant to which after the completion of the Offer and
satisfaction or waiver of all conditions to the Merger (as defined below), the
Purchaser will be merged with and into the Company and the separate corporate
existence of the Purchaser will thereupon cease. The merger, as effected
pursuant to the immediately preceding sentence, is referred to herein as the
"MERGER," and the Company as the surviving corporation of the Merger is
sometimes herein referred to as the "SURVIVING CORPORATION." At the effective
time of the Merger (the "EFFECTIVE TIME"), each Share then outstanding (other
than Shares held by the Company, the Purchaser and Shares held by stockholders
who properly perfect their dissenters' rights under Section 262 of the Delaware
General Corporation Law ("DGCL")), will be canceled and extinguished and
converted into the right to receive $13.00 in cash or any higher price per Share
paid in the Offer (the "MERGER CONSIDERATION"), without interest. See "SPECIAL
FACTORS, Section 8--Dissenters' Rights." The Merger Agreement is more fully
described in "SPECIAL FACTORS, Section 7--The Merger Agreement."
Consummation of the Merger is conditioned upon, among other things, the
approval and adoption by the requisite vote of stockholders of the Company of
the Merger Agreement, if required by applicable law in order to consummate the
Merger. See "THE OFFER, Section 12--Conditions to the Offer." Under the DGCL and
pursuant to the Company's certificate of incorporation, the affirmative vote of
the holders of a
1
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majority of the outstanding Shares is the only vote of any class or series of
the Company's capital stock that is necessary to approve the Merger Agreement
and the Merger.
Under Section 253 of the DGCL, if a corporation owns at least 90% of the
outstanding shares of each class of a subsidiary corporation entitled to vote,
the corporation holding such stock may merge such subsidiary into itself, or
itself into such subsidiary, without any action or vote on the part of the board
of directors or the stockholders of such other corporation (a "SHORT-FORM
MERGER"). In the event that the Purchaser acquires in the aggregate at least 90%
of the outstanding Shares pursuant to the Offer or otherwise, then, at the
election of the Purchaser, a short-form merger could be effected without any
further approval of the Board of Directors of the Company or the stockholders of
the Company, subject to compliance with the provisions of Section 253 of the
DGCL. Even if the Purchaser does not own 90% of the outstanding Shares following
consummation of the Offer, the Purchaser could seek to purchase additional
shares in the open market or otherwise in order to reach the 90% threshold and
employ a short-form merger. The per share consideration paid for any Shares so
acquired may be greater or less than the Offer Price. The Purchaser presently
intends to effect a short-form merger, if permitted to do so under the DGCL. If,
however, after consummation of the Offer, the Purchaser owns less than 90% of
the then outstanding Shares, and a vote of 800-JR CIGAR's stockholders is
required under the DGCL to approve the Merger, a significantly longer period of
time will be required to effect the Merger. The Parent Stockholders currently
own an aggregate of 8,775,840 Shares, representing approximately 74% of the
outstanding Shares. Because these Shares will be contributed to the Purchaser
prior to the Expiration Date, the Purchaser will be able to effect the Merger by
voting the Shares it will hold without the affirmative vote of any other
stockholder.
THE BOARD OF DIRECTORS OF THE COMPANY, INCLUDING THE SPECIAL COMMITTEE OF
THE BOARD OF DIRECTORS, HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND HAS
DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE
BEST INTERESTS OF, THE HOLDERS OF SHARES (OTHER THAN THE PARENT, THE PURCHASER,
THE PARENT STOCKHOLDERS AND THE OTHER ROTHMAN TRUSTS) AND UNANIMOUSLY RECOMMENDS
THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES
PURSUANT TO THE OFFER.
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MERRILL LYNCH") has
delivered to the Special Committee (the "SPECIAL COMMITTEE") of the Board of
Directors of the Company its opinion, dated August 28, 2000 (the "FAIRNESS
OPINION"), to the effect that, as of such date and based upon the assumptions
made, matters considered and limitations on review set forth therein, the
consideration to be received by the holders of Shares pursuant to the Offer and
the Merger is fair from a financial point of view to such holders, other than
the Parent, the Purchaser, the Parent Stockholders and the Other Rothman Trusts.
The full text of the Fairness Opinion, which sets forth the assumptions made,
matters considered and limitations on the review undertaken, is attached as an
exhibit to the Company's Solicitation/Recommendation Statement on
Schedule 14D-9 (the "SCHEDULE 14D-9"), which has been filed by the Company with
the Securities and Exchange Commission (the "COMMISSION") in connection with the
Offer and which is being mailed to holders of Shares herewith. Holders of Shares
are urged to, and should, read the Fairness Opinion carefully in its entirety.
The Fairness Opinion is directed only to the fairness of the consideration to be
received by the holders of Shares (other than the Parent, the Purchaser, the
Parent Stockholders and the Other Rothman Trusts) from a financial point of view
and does not address any other aspect of the Merger Agreement. The Fairness
Opinion does not constitute a recommendation to any holder of Shares as to
whether such holder should tender Shares pursuant to the Offer or how such
holder should vote with respect to the Merger.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE YOU MAKE ANY DECISION
WITH RESPECT TO THE OFFER.
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SPECIAL FACTORS
1. BACKGROUND OF THE OFFER AND THE MERGER.
The Purchaser is a newly formed Delaware corporation organized in connection
with the Offer and the Merger and has not carried on any activities other than
in connection with the Offer and the Merger. The Purchaser is a wholly owned
subsidiary of the Parent, a Delaware corporation formed by the Rothmans on
July 21, 2000. The outstanding shares of capital stock of the Parent are owned
38.6% by Lewis I. Rothman, 38.6% by LaVonda M. Rothman and 22.8% by the 1998
Trust. Lewis I. Rothman and LaVonda M. Rothman each own 3,387,920 Shares and the
1998 Trust owns 2,000,000 Shares of the Company. Immediately prior to the
Expiration Date, the Parent Stockholders will contribute an aggregate of
8,775,840 Shares (the "PARENT STOCKHOLDER SHARES") to the Parent, and the Parent
in turn will contribute the Parent Stockholder Shares to the Purchaser (the
"CONTRIBUTION"). The Shares held by the Other Rothman Trusts will not be
contributed to either the Parent or the Purchaser. As a result of the
Contribution, the Purchaser will own 8,775,840 Shares, or approximately 74% of
the outstanding Shares. Lewis I. Rothman is the Chief Executive Officer,
President and Chairman of the Board of the Company. LaVonda M. Rothman is the
Executive Vice President and Secretary of the Company. See "THE OFFER,
Section 9--Certain Information Concerning the Parent Stockholders, the Parent
and the Purchaser."
ALTERNATIVE TRANSACTIONS. The Company is one of the largest distributors
and retailers of brand name premium cigars in the United States. The Company's
primary products consist of premium cigars, mass market cigars and cigarettes,
which are distributed to retail and wholesale customers. Over the last several
years, the Company and the Rothmans have considered various alternatives to
increase stockholder value while at the same time enhancing the strategic
position of the Company, its business prospects, operations and results.
On April 7, 2000, representatives of the Company met with its financial
advisor, First Union Securities, Inc. ("FIRST UNION"), to discuss various
strategic alternatives to maximize stockholder value, including a potential sale
of the Company and a going private transaction. At the meeting, the Company
authorized First Union to conduct a solicitation of third party interest to
determine the interest of potential strategic buyers in acquiring the Company.
First Union contacted certain parties deemed by it to have a potential interest
in acquiring the Company. Based on conversations with these parties and the fact
that such parties declined to pursue an acquisition of the Company, First Union
concluded that no strategic buyers would be interested in acquiring the Company.
First Union further concluded that no financial buyers would be interested in
acquiring the Company because of the Company's limited growth prospects, the
inability to leverage the Company's operations and the difficult business
environment for tobacco product distributors.
GOING PRIVATE TRANSACTION. While considering a potential sale of the
Company, due to the difficult business environment for tobacco product
distributors and the limited liquidity provided by the relatively small public
float of the Shares, the Rothmans and the Company concluded that they should
also investigate the possibility of the Company going private. Such a going
private transaction could potentially create value for the public stockholders
of the Company through a premium purchase price. On May 18, 2000, First Union
met with members of management to update them on the results of their market
check and to discuss the possibility of a going private transaction. First Union
explained that the Company was not currently benefiting from remaining public
given the waning interest of investors in the tobacco industry and the lack of
research analyst coverage of the Company. Representatives of First Union
expressed their belief that it was unlikely the Company would benefit from
significant share price expansion in the future due to the Company's limited
growth prospects. At the end of this meeting, the Rothmans expressed their
belief that a going private transaction would be in the best interests of the
Company's stockholders.
On June 5, 2000, the Board of Directors of the Company met to discuss a
proposal by the Rothmans to acquire all of the outstanding Shares of the Company
not currently owned by the Parent Stockholders
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and the Other Rothman Trusts. Representatives of First Union and Morgan,
Lewis & Bockius LLP ("MORGAN LEWIS"), legal counsel to the Rothmans, attended
the meeting. At the meeting, First Union provided examples to the Board of a
growing trend toward consolidation in the tobacco industry generally, citing the
fact that most of the publicly-held domestic manufacturers or distributors of
cigars had either been acquired or taken private during the past two years.
Representatives of First Union then presented an overview of the Rothmans'
reasons for wanting to take the Company private. They also described their
unsuccessful efforts to sell the Company to logical strategic buyers. Following
this introduction, First Union described the terms of the Rothmans' proposal to
acquire the Shares of the Company not held by the Parent Stockholders and the
Other Rothman Trusts for a price per Share of $12.00. In determining this price,
First Union performed various financial and valuation analyses on behalf of the
Rothmans. These analyses included a comparable companies trading analysis, a
comparable transaction analysis, a discounted cash flow analysis, a leveraged
buyout model and an analysis of the average premiums paid in comparable
transactions. First Union explained to the Board of Directors of the Company how
the results of all these analyses impacted the decision by the Rothmans to offer
a price of $12.00 per share. A discussion then ensued among the Board members,
First Union and Morgan Lewis regarding the proposed form of the transaction and
the anticipated means of financing such transaction. A copy of First Union's
written presentation to the Board of Directors of the Company is attached as
Exhibit (c)(3) to the Tender Offer Statement on Schedule TO (the "SCHEDULE TO")
filed by the Purchaser, the Parent and the Rothmans with the Commission and will
be available for inspection and copying at the principal executive offices of
the Company during its regular business hours by any interested holder of Shares
or representative thereof who has been designated in writing by such holder.
Following this discussion, the Board of Directors resolved to appoint a
Special Committee consisting of the Board's three outside members, John F.
Barry, Jr., John Oliva, Sr. and Bernard Rosenblum, to evaluate the Rothmans'
proposal and to make a recommendation to the Board of Directors of the Company
regarding the proposal. The Board of Directors of the Company authorized the
Special Committee to retain independent legal and financial advisors to assist
it in evaluating the transaction. At the conclusion of the meeting, First Union
indicated that, in light of the appointment of the Special Committee, it would
cease representing the Company at that time and thereafter would act as
financial advisor to the Rothmans in connection with the proposed transaction.
On June 8, 2000, the Special Committee retained Dewey Ballantine LLP ("DEWEY
BALLANTINE") to act as legal counsel to the Special Committee and the Company.
Dewey Ballantine then reviewed with the Special Committee the purpose and
function of the Special Committee and the fiduciary duties of the members of the
Special Committee to the stockholders of the Company.
During the weeks of June 12 and 19, the Special Committee and Dewey
Ballantine contacted a number of investment banking firms to solicit their
interest in acting as financial advisor to the Special Committee. On June 21,
2000, the Special Committee interviewed and received presentations from two of
those investment banking firms, including Merrill Lynch. Following a discussion
of these presentations, the Special Committee resolved that it would retain
Merrill Lynch and later formally engaged Merrill Lynch to act as the Special
Committee's financial advisor pursuant to a letter agreement dated July 10,
2000.
Beginning the week of July 10, Merrill Lynch conducted a due diligence
investigation of the Company.
On July 11, 2000, Morgan Lewis distributed drafts of the tender offer
documents, including the Offer to Purchase and Merger Agreement, to Dewey
Ballantine and Merrill Lynch for their review and comment. Representatives of
Dewey Ballantine informed representatives of Morgan Lewis that they would review
the draft Merger Agreement to determine if significant issues, in addition to
price, were raised which would preclude agreement on a transaction.
On July 21, 2000, the Rothmans directed Morgan Lewis to form the Parent and
the Purchaser in Delaware.
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On July 27, 2000, the Special Committee met with its legal and financial
advisors to review the proposed $12.00 per Share offer and the proposed
transaction structure. During the course of the meeting, Merrill Lynch reviewed
with the Special Committee various trends in the cigar industry and the
historical financial and public market performance of the Company and discussed
its preliminary evaluation of the proposed transaction. Dewey Ballantine then
reviewed with the Special Committee the proposed draft Merger Agreement,
including that the proposed transaction contemplated a tender offer followed by
a merger and that the Purchaser could waive, in its sole discretion, the Minimum
Condition. The Special Committee discussed with its advisors the respective
advantages and disadvantages of a merger, on the one hand, and a tender offer
followed by a merger, on the other hand. After full discussion, the Special
Committee determined (i) that it was not prepared at that time to agree to a
$12.00 per Share offer and to attempt to negotiate a per Share price higher than
$12.00 and (ii) that a waivable Minimum Condition was unacceptable. The Special
Committee authorized Merrill Lynch to contact First Union to negotiate a higher
per Share price and indicate that a waivable Minimum Condition was not
acceptable.
On July 29, 2000, Merrill Lynch conveyed to First Union the Special
Committee's position that the Special Committee was not prepared to conclude a
transaction at $12.00 per Share and that a waivable Minimum Condition was
unacceptable. First Union responded that the Rothmans were not prepared to
increase their offer at that time but might consider a counteroffer from the
Special Committee. Merrill Lynch also indicated that it was not authorized to
propose a counteroffer.
Representatives of First Union, Morgan Lewis and the Purchaser communicated
with each other during the day on July 29, 2000 and agreed that the Purchaser
would not react to the Special Committee until a specific counteroffer was
presented to the Purchaser either verbally or in writing by the Special
Committee or its advisors.
Later that day, Morgan Lewis and Dewey Ballantine discussed whether the
transaction should be structured as a merger or a tender offer and the relative
advantages and disadvantages of each structure.
On July 31, 2000, Merrill Lynch advised the Special Committee and its legal
advisor that the Rothmans would not revise their $12.00 per Share offer but
might consider a counteroffer. The Special Committee discussed various
strategies for negotiating a higher price and, after consultation with its
advisors, requested that Merrill Lynch review its analyses with respect to the
Offer and assist the Special Committee in determining an appropriate
counteroffer.
On August 1, 2000, the Special Committee met following a brief meeting of
the Board of Directors of the Company. At this meeting, the members of the
Special Committee discussed the offer price and other issues to be raised with
the Purchaser regarding the Offer and the Merger.
On August 2, 2000, the Special Committee met with its advisors to review the
analyses prepared by Merrill Lynch and to discuss negotiating a higher price for
the Company's stockholders. After full discussion and analysis, the Special
Committee authorized Merrill Lynch to make a counteroffer of $14.00 per Share.
During the morning of August 3, 2000, Merrill Lynch advised First Union that
the Special Committee had carefully considered its request for a counteroffer
and had determined to make a counteroffer of $14.00 per Share.
Later that day, First Union presented the Special Committee's counteroffer
to representatives of the Purchaser. The Purchaser indicated that although it
was willing to revise its offer to $13.00 per Share, it would not be willing to
offer a price above such amount and that $13.00 per Share was its best and final
offer. After consulting with Morgan Lewis, the Purchaser concluded that, in the
interest of time, it would require that the transaction be structured as a
tender offer, but it would agree to the Special Committee's conditions that the
Purchaser not waive the Minimum Condition and, if requested by the Special
Committee, it would extend the offer period.
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Following its meeting with the Purchaser, First Union informed Merrill Lynch
via telephone of the terms of the revised offer, including the increased offer
price of $13.00 per Share and the agreement not to waive the Minimum Condition.
During the call, First Union also indicated that the Purchaser believed the
proposal would provide liquidity to the stockholders that otherwise was
unavailable in the marketplace and would not offer a price per Share in excess
of $13.00.
At a meeting of the Special Committee on August 4, 2000, Merrill Lynch
reported to the Special Committee and its legal advisors the terms of the
revised Offer and the fact that First Union had indicated that the Offer of
$13.00 per Share was the Purchaser's best and final offer. Merrill Lynch then
reviewed with the Special Committee its analyses based upon the $13.00 per Share
offer. The Special Committee discussed at length whether Mr. Rothman's $13.00
offer was, in fact, his best and final offer. After further discussion, the
Special Committee determined that a member of the Special Committee, Mr. Oliva,
should contact Mr. Rothman and attempt to negotiate an increased offer price.
Later that day, Mr. Oliva, on behalf of the Special Committee, contacted
Mr. Rothman and attempted to negotiate an increase in the offer price.
Mr. Rothman, however, made clear that $13.00 per Share was his best and final
offer. Mr. Oliva indicated to Mr. Rothman that he would need to discuss the
situation further with the other members of the Special Committee and its
advisors.
On August 7, 2000, the Special Committee met with its advisors to discuss
the $13.00 per Share offer and that, if the Special Committee was not prepared
to accept $13.00, Mr. Rothman would withdraw his proposed offer and continue to
operate the Company as a public company. Mr. Oliva reported on his discussion
with Mr. Rothman. After full discussion, including a review of Merrill Lynch's
analyses, the Special Committee determined that it was prepared to recommend
acceptance of the $13.00 per Share offer to the full Board of Directors, subject
to negotiation of a definitive merger agreement and receipt of Merrill Lynch's
financial analysis and opinion regarding the $13.00 per Share offer.
From August 7 through August 28, 2000, the representatives of the Purchaser
and the Company and their respective legal advisors negotiated and finalized the
Merger Agreement. During the week of August 21, 2000 revised drafts of the
proposed Merger Agreement and tender offer documents were distributed to the
Special Committee.
At a meeting of the Special Committee on August 22, 2000, Merrill Lynch
reviewed with the Special Committee its evaluation of the Offer, and Dewey
Ballantine reviewed with the Special Committee the terms and conditions of the
proposed Merger Agreement. The Special Committee adjourned and Dewey Ballantine
contacted Morgan Lewis to discuss (i) the status of the Purchaser's negotiations
with its lenders and (ii) certain additional issues regarding the proposed
Merger Agreement. The Special Committee reconvened and Dewey Ballantine reported
on its discussions with Morgan Lewis. The Special Committee determined to
adjourn and reconvene when the Purchaser's financing arrangements were
negotiated and final terms of the Merger Agreement could be considered by the
Special Committee.
From August 22 to August 25, 2000, Morgan Lewis finalized definitive
financing documentation relating to the Offer and the Merger with bank counsel.
On August 26, 2000 revised drafts of the proposed Merger Agreement and tender
offer documents were distributed to the Special Committee.
The Special Committee met during the morning on August 28, 2000, to review
the Offer and the terms of the Merger Agreement with its legal and financial
advisors. Merrill Lynch delivered to the Special Committee its oral opinion,
which was subsequently confirmed in writing, to the effect that, as of that date
and based on the assumptions made, matters considered and limitations on review
set forth therein, the consideration to be received by the holders of Shares
pursuant to the Offer and the Merger is fair from a financial point of view to
such holders, other than the Parent, the Purchaser, the Parent Stockholders and
the Other Rothman Trusts. A copy of the Fairness Opinion is attached as
Schedule I to the Schedule 14D-9. A copy of Merrill Lynch's written presentation
to the Special Committee has been filed with the Commission as Exhibit (c)(2) to
the Purchaser's Tender Offer Statement on Schedule TO filed with the Commission
(the "SCHEDULE TO"), and will be available for inspection and copying at the
principal
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executive offices of the Company during its regular business hours by any
interested holder of Shares or representative thereof who has been designated in
writing by such holder. See "SPECIAL FACTORS, Section 3--Fairness Opinion of
Merrill Lynch." Dewey Ballantine reviewed with the Special Committee the terms
and conditions of the Merger Agreement. After a full discussion, the Special
Committee unanimously determined (i) that the Offer and the Merger are fair to
and in the best interests of the stockholders of the Company (other than the
Parent, the Purchaser, the Parent Stockholders and the Other Rothman Trusts) and
(ii) to recommend that the Board of Directors (a) approve the Offer, the Merger
and the Merger Agreement and the transactions contemplated thereby and
(b) recommend acceptance of the Offer and, if required by applicable law,
adoption of the Merger Agreement by the stockholders of the Company.
Later that morning, the Board of Directors, including the members of the
Special Committee and its legal advisor, met to consider the recommendation of
the Special Committee. After a full discussion, the Board of Directors
unanimously determined (i) that the Offer and the Merger are fair to and in the
best interests of the stockholders of the Company (other than the Parent, the
Purchaser, the Parent Stockholders and the Other Rothman Trusts), (ii) to
approve the Offer, the Merger and the Merger Agreement and the transactions
contemplated thereby and (iii) to recommend acceptance of the Offer and, if
required by applicable law, adoption of the Merger Agreement by the stockholders
of the Company.
Following the meeting of the Board of Directors, the Merger Agreement was
executed and delivered by the Purchaser, the Parent, the Company and the Parent
Stockholders.
In a press release issued by the Company on August 28, 2000, the Company
announced that the Board of Directors had approved the Offer and the Merger and
signed the Merger Agreement.
On August 29, 2000, the Purchaser commenced the Offer.
2. RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE BOARD OF DIRECTORS OF THE
COMPANY.
RECOMMENDATION OF THE SPECIAL COMMITTEE. As described below, the members of
the Special Committee, consisting of Messrs. Barry, Oliva and Rosenblum,
(i) unanimously recommended that the Board of Directors approve the Merger
Agreement, the Offer and the Merger, (ii) determined that the terms of the Offer
and the Merger are fair to, and in the best interests of, the Company's
stockholders (other than the Parent, the Purchaser, the Parent Stockholders and
the Other Rothman Trusts) and (iii) determined to recommend to the Board of
Directors of the Company that the Company should recommend that such
stockholders accept the Offer and tender their Shares pursuant to the Offer.
The Special Committee considered the following material factors, among
others, in connection with making their conclusions and recommendation:
- The Fairness Opinion of Merrill Lynch to the effect that, as of the date
of such opinion and based upon the assumptions made, matters considered
and limitations on review set forth therein, the consideration to be
received by the holders of Shares pursuant to the Offer and the Merger is
fair from a financial point of view to such holders, other than the
Parent, the Purchaser, the Parent Stockholders and the Other Rothman
Trusts. STOCKHOLDERS ARE URGED TO READ MERRILL LYNCH'S FAIRNESS OPINION IN
ITS ENTIRETY, WHICH FAIRNESS OPINION IS ATTACHED AS SCHEDULE I TO THE
SCHEDULE 14D-9.
- The presentations of Merrill Lynch that included various valuation
analyses of the Company, described below under "SPECIAL FACTORS--Fairness
Opinion of Merrill Lynch."
- The views of the Special Committee regarding, among other things: (a) the
financial condition, results of operations, cash flows, business and
prospects of the Company, including the prospects of, and uncertainties
facing, the Company if it remains independent; (b) the likelihood of
achieving maximum long-term value as a public company; (c) the strategic
alternatives available to the Company and the associated advantages and
disadvantages of such alternatives; and (d) the
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likelihood that any other party would propose an acquisition or strategic
business combination that would be more favorable to the Company and its
stockholders than the Offer and the Merger.
- The current and historical market prices for the Shares and the fact that
the purchase price represents a premium of approximately 20.9% over the
per share closing price of the Shares on August 25, 2000, the last trading
day prior to the public announcement of the Offer and approximately 26.5%
over the average price of the Shares over the 30 trading days prior to
August 25, 2000. The historical market prices of the Shares during the
time Shares have been traded are deemed relevant because they indicate the
arms'-length trading prices of the Shares for that period as determined in
the open market.
- The relatively low trading volume of the Shares and the fact that the
public float for the Shares held by the stockholders consists of only
approximately 22% of the outstanding Shares. Because of the limited float
and relatively low trading volume in the Shares, the Special Committee
believed that attempts to sell significant portions of the Shares would
cause substantial downward pressure on market prices for the Shares, and
therefore believed that an offer by the Rothman's represents an
opportunity for public stockholders to realize a higher price for their
Shares than might be realized in significant market transactions.
- The relatively thin trading market and the lack of liquidity on the Shares
and the lack of success, due to the relatively small market
capitalization, in attracting institutional investors to invest in, or
research analysts to report on, the Company.
- Ownership by the Parent Stockholders and the Other Rothman Trusts of
approximately 78% of the currently outstanding common stock of the Company
and the effects of such ownership on the alternatives available to the
Company.
- The recent and historical results of operations and financial condition of
the Company and the business strategy, projections and prospects of the
Company, including increased competition. Recent and historical adverse
economic and other developments in the tobacco industry.
- Trends in the cigar industry, including the fact that the decline in
premium cigar demand coupled with the proliferation of lower margin
products have caused earnings growth to decline.
- The fact that consummation of the Offer and the Merger will preclude the
stockholders of the Company, other than the Parent Stockholders, from
participating in any future growth of the Company. In the view of the
Special Committee, however, this loss of opportunity was adequately
reflected in the Offer Price of $13.00.
- The fact that neither the Special Committee nor the Company are aware of
any current offer from any person regarding the acquisition of the Company
or any significant portion of its assets or securities.
- The history of the negotiations between the Special Committee (none of
whose members were employed by the Company or affiliated with the Parent,
the Purchaser, the Parent Stockholders or the Other Rothman Trusts) and
its representatives and the Parent and its representatives, including that
(i) the consideration of $13.00 per Share was the result of arms-length
negotiations, (ii) the negotiations resulted in an increase in the price
at which the Parent and the Purchaser were prepared to acquire the Shares
from $12.00 to $13.00 and (iii) the Special Committee's belief that
neither the Parent nor any other third party would offer more than $13.00
per Share.
- The Company's prior unsuccessful efforts to solicit bids for the Company
from strategic and financial buyers.
- The fact that the consideration to be paid is all cash.
- The terms and conditions of the Merger Agreement, which were determined
through arm's-length negotiations, including that (i) the Purchaser may
not reduce the purchase price, impose additional
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conditions to the Offer or amend or modify any other term of the Offer in
a manner adverse to the holders of the Shares; (ii) the Minimum Condition
requires that a majority of the outstanding Shares (other than Shares
owned by the Parent Stockholders and the Other Rothman Trusts) be tendered
pursuant to the Offer and such condition may not be waived except with the
Special Committee's prior written consent; (iii) the recommendation of the
Special Committee may be withdrawn, modified or amended to the extent the
Special Committee believes it necessary to do so in the exercise of its
fiduciary duties, and (iv) in the event that the Company should receive a
proposal from a third party, the terms of the Merger Agreement permit the
Special Committee to provide information to and negotiate with such party
and to modify or withdraw its recommendation to the stockholders if the
Special Committee determines that its failure to take such action would be
inconsistent with its fiduciary duties under applicable law.
- The fact that the Offer and the Merger have been structured to include a
first-step cash tender offer for all outstanding Shares, thereby enabling
stockholders who tender their Shares to promptly receive $13.00 per Share
in cash, and the fact that any stockholders who do not tender their Shares
will receive the same price per Share in the subsequent Merger.
- The availability of judicial appraisal rights under Section 262 of the
DGCL to stockholders of the Company who dissent from the Merger.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF THE COMPANY. Based upon their
review of the Fairness Opinion and the foregoing analysis of the Special
Committee, the Board of Directors of the Company also determined that the terms
of the Offer and the Merger are fair to, and in the best interests of, the
Company's stockholders (other than the Parent, the Purchaser, the Parent
Stockholders and the Other Rothman Trusts) and resolved at its meeting on
August 28, 2000 to (i) approve the Merger Agreement, the Offer and the Merger
and (ii) recommend that such stockholders accept the Offer and tender their
Shares in response to the Offer.
The Board of Directors, including the Special Committee, also believes that
the Offer and the Merger are procedurally fair because, among other things:
(i) the Special Committee consists of all of the directors of the Company who
are not affiliated with the Parent Stockholders, the Other Rothman Trusts, the
Parent or the Purchaser; (ii) the Special Committee retained and received advice
from independent legal counsel; (iii) the Special Committee retained Merrill
Lynch, which provided an opinion as to the fairness of the consideration to be
received by the holders of Shares (other than the Parent, the Purchaser, the
Parent Stockholders and the Other Rothman Trusts) pursuant to the Offer and the
Merger; and (iv) the consideration to be received by stockholders in the Offer
and the Merger and the terms and conditions of the Offer and the Merger were the
result of arms'-length negotiations between representatives of the Special
Committee on the one hand, and the Parent and the Purchaser, on the other hand,
and their respective advisors.
The members of the Board of Directors, including the members of the Special
Committee, evaluated the Offer and the Merger in light of their knowledge of the
business, financial condition and prospects of the Company, and based upon the
advice of financial and legal advisors.
The Board of Directors and the Special Committee recognized that the Merger
is not structured to require the approval of a majority of the stockholders of
the Company (other than the Parent, the Purchaser, the Parent Stockholders and
the Other Rothman Trusts), and that the Purchaser will have sufficient voting
power to approve the Merger without the affirmative vote of any other
stockholder of the Company.
Neither the Board of Directors nor the Special Committee considered the
liquidation of the Company's assets to be a viable course of action. Therefore,
no appraisal of liquidation values was sought for purposes of evaluating the
Offer and the Merger.
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The foregoing discussion of the information and factors considered by the
Special Committee and the Board of Directors as a whole is not meant to be
exhaustive, but includes the material factors considered by them in reaching
their conclusions and recommendations. In view of the variety of factors
considered in their reaching a determination, the Board of Directors, including
the members of the Special Committee, did not find it practicable to, and did
not, quantify or otherwise assign relative weights to the specific factors
considered in reaching their conclusions and recommendations. In addition, each
member of the Board of Directors, including each member of the Special
Committee, may have given different weights to different factors. The Board of
Directors and the Special Committee viewed their positions and recommendations
as being based upon the totality of the information presented to and considered
by them.
3. FAIRNESS OPINION OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED.
OVERVIEW.
Pursuant to an engagement letter dated July 10, 2000 (the "Engagement
Letter"), the Special Committee retained Merrill Lynch to act as its exclusive
financial advisor in connection with assisting the Company in respect to a
possible sale of the Company and the Offer and the Merger. The Special Committee
retained Merrill Lynch to act as its exclusive financial advisor in connection
with the Offer and the Merger because Merrill Lynch is a leading investment
banking and financial advisory firm with experience in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwriting, secondary distributions of securities, private
placements and valuations for corporate purposes. Merrill Lynch has had no prior
investment advisory or corporate finance relationship with the Company.
On August 28, 2000, Merrill Lynch delivered its oral opinion to the Special
Committee, subsequently confirmed in writing, that as of such date and based
upon the assumptions made, matters considered and limitations on the review set
forth therein, the Consideration to be received by holders of Shares pursuant to
the Transaction is fair from a financial point of view to such holders, other
than the Parent, the Purchaser, the Parent Stockholders and the Other Rothman
Trusts.
THE FULL TEXT OF MERRILL LYNCH'S OPINION, WHICH SETS FORTH THE ASSUMPTIONS
MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW SET FORTH THEREIN, IS
ATTACHED AS SCHEDULE I TO THE 14D-9 AND IS INCORPORATED BY REFERENCE HEREIN. THE
DESCRIPTION OF MERRILL LYNCH'S OPINION BELOW SETS FORTH THE MATERIAL TERMS OF
THE OPINION. HOLDERS OF SHARES ARE URGED TO, AND SHOULD READ CAREFULLY SUCH
OPINION IN ITS ENTIRETY. THE FOLLOWING SUMMARY OF MERRILL LYNCH'S OPINION IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION.
Merrill Lynch's opinion is addressed to the Special Committee and addresses
only the fairness from a financial point of view of the consideration to be
received by holders of Shares, other than the Parent, the Purchaser, the Parent
Stockholders and the Other Rothman Trusts, pursuant to the Transaction. The
opinion does not address the merits of the Company's underlying decision to
engage in the Transaction. The opinion does not constitute, nor should it be
construed as, a recommendation to any stockholder as to whether he or she should
tender their shares pursuant to the Offer or as to how such holders should vote
with respect to the Merger.
In connection with the preparation of the opinion, Merrill Lynch, among
other things:
(a) Reviewed certain publicly available business and financial information
relating to the Company that it deemed to be relevant;
(b) Reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets, liabilities and prospects of
the Company, furnished to it by the Company;
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(c) Conducted discussions with members of senior management and
representatives of the Company and the Parent concerning the matters
described clauses (a) and (b) immediately above;
(d) Reviewed the market prices and valuation multiples for the Shares and
compared them with those of certain publicly traded companies that it
deemed to be relevant;
(e) Reviewed historical market prices and trading activity for the Shares;
(f) Reviewed the results of operations of the Company and compared them with
those of certain publicly traded companies that it deemed to be relevant;
(g) Compared the proposed financial terms of the Transaction with the
financial terms of certain other transactions that it deemed to be
relevant;
(h) Participated in certain discussions and negotiations among
representatives of the Special Committee, the Company and the Parent and
their financial and legal advisors;
(i) Conducted discussions with representatives of the Company and the Parent
concerning their solicitation of offers from third parties to acquire the
Company and the results thereof;
(j) Reviewed the Merger Agreement and certain related documents; and
(k) Reviewed such other financial studies and analyses and took into account
such other matters as it deemed necessary, including its assessment of
general economic, market and monetary conditions.
In preparing its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to it,
discussed with or reviewed by it, or publicly available. Merrill Lynch did not
assume any responsibility for independently verifying such information or
undertaking an independent evaluation or appraisal of the assets or liabilities
of the Company nor was it furnished with any such independent evaluation or
appraisal. In addition, Merrill Lynch has not assumed any obligation to conduct,
nor did it conduct, any physical inspection of the properties or facilities of
the Company. With respect to the financial forecast information furnished to or
discussed with Merrill Lynch by the Company, Merrill Lynch has assumed that they
have been reasonably prepared and reflect the best currently available estimates
and judgment of the Company's management as to the expected future financial
performance of the Company. Merrill Lynch expresses no opinion as to such
financial forecast information or the assumptions on which they were based. In
connection with the preparation of its opinion, Merrill Lynch was not authorized
by the Company, the Special Committee of the Board of Directors or the Board of
Directors to solicit, nor has Merrill Lynch solicited, third-party indications
of interest for the acquisition of all or any part of the Company.
Merrill Lynch's opinion is necessarily based upon market, economic and other
conditions as they exist and can be evaluated, and on the information made
available to Merrill Lynch as of, the date of the opinion.
In accordance with customary investment banking practice, Merrill Lynch
employed generally accepted valuation methods in reaching its Opinion. The
following is a summary of the material analyses utilized by Merrill Lynch in
connection with the Fairness Opinion.
VALUATION OF THE COMPANY.
SELECTED COMPARABLE PUBLICLY TRADED COMPANIES ANALYSIS. Merrill Lynch
compared certain financial and operating ratios for the Company with the
corresponding financial and operating ratios for a group of publicly traded
companies engaged primarily in the specialty retail and direct mail retail
industries, that Merrill Lynch deemed to be comparable to the Company. For the
purpose of its analyses, the following companies in the specialty retail
industry were used as companies comparable to the Company: Sunglass Hut
International, Inc., Cole National Corporation, PETsMART, Inc., Jo-Ann
Stores, Inc., and Holt's Cigar Holdings, Inc. (collectively the "Specialty
Retail Comparable Companies"). Also, for the purpose of
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its analysis, the following companies in the direct mail retail industry were
used as companies comparable to the Company: J. Jill Group, Inc., Coldwater
Creek, Inc., Sharper Image Corporation, Lillian Vernon Corporation,
Spiegel, Inc. and Blair Corporation (collectively, the "Direct Mail Retail
Comparable Companies", and together with the Specialty Retail Comparable
Companies, the "Comparable Companies").
For each of the Comparable Companies, Merrill Lynch calculated stock price
as a multiple of estimated earnings per share ("EPS") for the calendar year
ended 2001. This analysis resulted in the following relevant ranges for the
Specialty Retail Comparable Companies as of August 25, 2000: a range of stock
price as a multiple of estimated 2001 EPS of 5.7x to 9.3x with a mean of 8.0x
(as compared to the Offer at 11.5x, Holt Cigar Holdings, Inc. was excluded from
the analysis) and a range of enterprise value as a multiple of latest twelve
months ("LTM") earnings before interest, taxes, depreciation and amortization
(otherwise known as "EBITDA") of 3.2x to 6.1x with a mean of 5.0x (as compared
to the Offer at 6.5x). This analysis resulted in the following relevant ranges
for the Direct Mail Retail Comparable Companies as of August 25, 2000: a range
of stock price as a multiple of 2001 EPS of 6.8x to 15.6x with a mean of 12.3x
(as compared to the Offer at 11.5x, Blair Corporation was excluded from the
analysis) and a range of enterprise value as a multiple of LTM EBITDA analysis
of 4.0x to 9.6x with a mean of 6.5x (as compared to the Offer at 6.5x, J. Jill
Group, Inc. was excluded from the analysis). Based on the foregoing, Merrill
Lynch determined a reference multiple range for LTM EBITDA for the Company of
4.0x to 6.0x and a reference multiple range for the estimated 2001 EPS for the
Company of 7.0x and 10.0x, resulting in a reference range for an implied value
per Share of $8.00 to $12.00.
To calculate the trading multiples utilized in the Analysis of Selected
Comparable Publicly Traded Companies, Merrill Lynch used publicly available
information concerning the historical and projected financial performance of the
Comparable Companies, including public historical financial information,
consensus analysts' earnings estimates and Merrill Lynch Equity Research.
None of the Comparable Companies is, of course, identical to the Company.
Accordingly, a complete analysis of the results of the foregoing calculations
cannot be limited to a quantitative review of such results and involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the Comparable Companies and other factors that could affect
the public trading volume of the Comparable Companies, as well as that of the
Company. In addition, the multiples of stock price to estimated 2001 earnings
multiples for the Comparable Companies is based on projections prepared by
research analysts using only publicly available information. Accordingly, such
estimates may or may not prove to be accurate.
SELECTED COMPARABLE TRANSACTIONS ANALYSIS. Using publicly available
information, Merrill Lynch considered selected transactions in the cigar
industry that Merrill Lynch deemed to be relevant. Specifically, Merrill Lynch
reviewed the following transactions: Swedish Match AB's offer for General Cigar
Holdings, Inc., Altadis SA's offer for Corporacio Habanos, Austria Tabak AG's
offer for Swedish Match AB's Cigarette Operations, Swisher International's offer
for its outstanding public shares (the "Swisher Transaction"), Seita SA's offer
for Consolidated Cigar Holdings, Inc., Tabacalera Cigars International SA's
offer for Havatampa Inc.'s Cigar Division and General Cigar Holding, Inc.'s
offer for Villazon & Co. (collectively, the "Comparable Transactions"). Merrill
Lynch noted that nearly all of the Comparable Transactions represent the
acquisition of control of the target company which may not be directly
comparable to the acquisition of a minority stake of a target company, as in the
Offer and the Merger. Merrill Lynch also noted that the Swisher Transaction
represents the most comparable transaction to the Offer due to the majority
ownership position of the acquiror at the time of the announcement of the
transaction.
Using publicly available information, concerning historical financial
performance, Merrill Lynch calculated the transaction values for the target
companies as a multiple of LTM EBITDA for the Comparable Transactions for the
latest twelve months immediately preceding the announcement of each of the
respective transactions. Based on the foregoing, Merrill Lynch determined a
reference multiple range
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LTM EBITDA for the Company of 6.0x to 7.5x, resulting in a reference range for
an implied value per Share of $12.00 to $15.50. The Swisher Transaction
represents 6.2x LTM EBITDA or $12.00 per share.
No company utilized in the Selected Comparable Transaction Analysis is
identical to the Company nor is any transaction identical to the contemplated
transaction between the Company and the Purchaser. An analysis of the results
therefore requires complex considerations and judgments regarding the financial
and operating characteristics of the Company and the companies involved in the
Comparable Transactions, as well as other facts that could affect their
publicly-traded and/or transaction value. The numerical results are not in
themselves meaningful in analyzing the contemplated transaction as compared to
Comparable Transactions.
DISCOUNTED CASH FLOW ANALYSIS. Merrill Lynch performed a discounted cash
flow analyses (i.e., analyses of the present value of the projected unlevered
after-tax cash flows ) for the Company for the fiscal years ended 2001 through
2004, inclusive, using discount rates (determined through the use of the capital
asset pricing model) ranging from 13.0% to 15.0% and terminal value multiples of
year 2004 EBITDA ranging from 4.0x to 6.0x, based on the Comparable Companies
and current trading levels of the Company. Based upon the foregoing, Merrill
Lynch determined a reference range for an implied value per Share of $9.50 to
$12.75.
IMPLIED SHARE PRICE BASED ON PROJECTED EARNINGS PER SHARE ANALYSIS. Merrill
Lynch used projections provided by the Company's management or adjusted through
discussions with the Company's management for the years 2001 through 2004,
inclusive, and additionally assumed that excess cash flow during the projection
period would be used to repurchase some of the outstanding Shares to calculate a
pro forma EPS for 2001 to 2004. Merrill Lynch applied a forward price to the EPS
multiple range of 8.0x to 10.0x (based on historical trading ranges for the
Company) to the pro forma EPS to calculate the projected share price for the
Company. Using discount rates reflecting a equity cost of capital of 16.0%,
Merrill Lynch determined a reference range for an implied value per Share of
$8.50 to $11.00.
PREMIUMS PAID ANALYSIS. Merrill Lynch performed a premiums paid analysis
for the Company based upon the review and analysis of the range of premiums paid
in similar acquisitions of minority ownership positions for the period between
January 1, 1998 through August 25, 2000. For the period selected, Merrill Lynch
reviewed 26 selected transactions that Merrill Lynch deemed relevant where the
ownership of the acquiror in the target at the time of the announcement of the
transaction was greater than 75%. Using information obtained from Thomson
Financial Securities Data and other publicly available information, Merrill
Lynch obtained the premium of the offer price per share relative to the target
company's stock price one day, one week and four weeks prior to the date of
announcement of the transaction (the "Announcement") as well as the 52-week high
of the respective transactions. The mean and median range of premiums paid to
the target company's stock price one day, one week, and one month prior to
Announcement, as well as its 52-week high, were 19.9% and 15.4%, 21.7% and
17.3%, 37.0% and 42.2%, (12.6%) and (4.1%), respectively. Merrill Lynch applied
a premium range of 10% to 25% to the Company's stock price of $10.00 per share
on August 4, 2000 (one trading day prior to the day that the Purchaser made an
offer price of $13.00 per Share). Based on the foregoing, Merrill Lynch
determined a reference range for an implied value per Share $11.00 to $12.50.
FINANCIAL SPONSOR INTERNAL RATE OF RETURN ANALYSIS. Using financial
projections provided by the Company's management or adjusted through discussions
with the Company's management for the years 2001 through 2004 inclusive, Merrill
Lynch performed a financial sponsor internal rate of return valuation for the
Company. To determine the financial sponsor internal rate of return, Merrill
Lynch calculated the rate of return on an equity investment made on January 1,
2001 compared to the equity value of the Company on December 31, 2004.
Acquisition prices were calculated to yield an investment return to the
financial sponsor of approximately 25.0% to 35.0%. Based upon the foregoing
analysis, Merrill Lynch determined an implied value per share of $9.00 to
$10.00.
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The summary set forth above does not purport to be a complete description of
the analysis presented by Merrill Lynch. The preparation of a fairness opinion
is a complex process and is not necessarily susceptible to partial analysis or
summary description. Merrill Lynch believes that selecting any portion of its
analysis or of the summary set forth above, without considering the analyses as
a whole, would create an incomplete view of the process underlying Merrill
Lynch's opinion. In arriving at its opinion, Merrill Lynch considered the
results of all such analyses. The analyses performed by Merrill Lynch are not
necessarily indicative of actual values or actual future results, which may be
significantly more or less favorable than those suggested by such analyses. The
analyses do not purport to be appraisals or to reflect the prices at which the
Company might actually be sold or the prices at which the Shares may trade at
any time in the future. Such analyses were prepared solely for the purposes of
Merrill Lynch providing its opinion to the Special Committee as to the fairness,
from a financial point of view, of the Consideration to be received by holders
of Shares pursuant to the Offer and the Merger, other than the Parent, the
Purchaser, the Parent Stockholders and the Other Rothman Trusts. Analyses based
upon forecasts or future results are not necessarily indicative of actual values
or future results, which may be significantly more or less favorable than
suggested by such analyses. Because such analyses are inherently subject to
uncertainty, being based upon numerous factors and events, including, without
limitation, factors related to general economic and competitive conditions
beyond the control of the parties or their respective advisors, none of Merrill
Lynch, the Company, the Purchaser or any other person assumes responsibility if
future results or actual values are materially different from those forecast.
The foregoing summary does not purport to be a complete description of the
analysis performed by Merrill Lynch and is qualified by reference to the written
opinion dated as of August 28, 2000 of Merrill Lynch as attached as an exhibit
to the Schedule 14D-9.
Pursuant to the terms of the Engagement Letter, the Company will pay a fee
of $1,000,000 to Merrill Lynch for its services and for the rendering of its
opinion as to whether the Consideration to be received by holders of Shares
pursuant to the Offer and the Merger is fair from a financial point of view to
such holders, other than the Parent, the Purchaser, the Parent Stockholders and
the Other Rothman Trusts. In addition to any fees payable to Merrill Lynch
pursuant to the Engagement Letter, the Company has agreed to reimburse Merrill
Lynch for its reasonable out-of-pocket expenses in connection with its services
and for the rendering of its opinion. The Company has also agreed to indemnify
Merrill Lynch, its affiliates and each of its directors, officers, agents,
employees and controlling persons against certain liabilities, including
liabilities under U.S. federal securities laws. In addition, in the ordinary
course of business, Merrill Lynch may trade the securities of the Company for
its customers, and accordingly may hold long or short positions in such
securities.
4. POSITION OF THE PARENT STOCKHOLDERS REGARDING FAIRNESS OF THE OFFER AND THE
MERGER.
The Parent Stockholders have considered the analyses and findings of the
Special Committee and the Board of Directors and believe that the consideration
to be received by the stockholders pursuant to the Offer and the Merger is fair.
The Parent Stockholders base their belief on the following facts:
- The fact that the Special Committee concluded that the terms of the Offer
and the Merger are fair to, and in the best interests of, the stockholders
of the Company (other than the Parent, the Purchaser, the Parent
Stockholders and the Other Rothman Trusts).
- The belief of First Union that the consideration to be received by the
stockholders of the Company (other than the Parent, the Purchaser, the
Parent Stockholders and the Other Rothman Trusts) in the Offer and the
Merger is fair from a financial point of view to such holders.
- Notwithstanding the fact that the Fairness Opinion of Merrill Lynch was
provided solely for the information and assistance of the Special
Committee and the Company's Board of Directors, and that the Parent
Stockholders, the Purchaser and the Parent are not entitled to rely upon
such opinion, the fact that the Special Committee received a Fairness
Opinion from Merrill Lynch to the effect that, as of the date of such
opinion and based upon the assumptions made, matters
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considered and limitations on review set forth therein the consideration
to be received by the holders of Shares pursuant to the Offer and the
Merger is fair from a financial point of view to such holders, other than
the Parent, the Purchaser, the Parent Stockholders and the Other Rothman
Trusts.
- The current and historical market prices for the Shares and the fact that
the purchase price represents a premium of approximately 20.9% over the
per share closing price of the Shares on August 25, 2000, the last trading
day prior to the public announcement of the Offer and approximately 26.5%
over the average price of the Shares over the 30 trading days prior to
August 25, 2000. The historical market prices of the Shares during the
time Shares have been traded are deemed relevant because they indicate the
arms'-length trading prices of the Shares for that period as determined in
the open market.
- The relatively thin trading market and the lack of liquidity on the Shares
and the lack of success, due to the relatively small market
capitalization, in attracting institutional investors to invest in, or
research analysts to report on, the Company.
- The recent and historical results of operations and financial condition of
the Company and the business strategy, publicly available analyst
estimates and prospects of the Company, including increased competition.
Recent and historical adverse economic and other developments in the
tobacco industry.
- Trends in the cigar industry, including the fact that the decline in
premium cigar demand coupled with the proliferation of lower margin
products have caused earnings growth to decline.
- The fact that the Parent Stockholders are not aware of any current offer
from any person regarding the acquisition of the Company or any
significant portion of its assets or securities.
- The history of the negotiations between the Special Committee (none of
whose members were employed by the Company or affiliated with the Parent,
the Purchaser, the Parent Stockholders or the Other Rothman Trusts) and
its representatives and the Parent and its representatives, including that
(i) the consideration of $13.00 per Share was the result of arms-length
negotiations, (ii) the negotiations resulted in an increase in the price
at which the Parent and the Purchaser were prepared to acquire the Shares
from $12.00 to $13.00 and (iii) the Special Committee's belief that
neither the Parent nor any other third party would offer more than $13.00
per Share.
- The Company's prior unsuccessful efforts to solicit bids for the Company
from strategic and financial buyers.
- The fact that the consideration to be paid is all cash.
- The terms and conditions of the Merger Agreement, which were determined
through arm's-length negotiations, including that (i) the Purchaser may
not reduce the purchase price, impose additional conditions to the Offer
or amend or modify any other term of the Offer in a manner adverse to the
holders of the Shares; (ii) the Minimum Condition requires that a majority
of the outstanding Shares (other than Shares owned by the Parent
Stockholders and the Other Rothman Trusts) be tendered pursuant to the
Offer and such condition may not be waived except with the Special
Committee's prior written consent; (iii) the recommendation of the Special
Committee may be withdrawn, modified or amended to the extent the Special
Committee believes it necessary to do so in the exercise of its fiduciary
duties, and (iv) in the event that the Company should receive a proposal
from a third party, the terms of the Merger Agreement permit the Special
Committee to provide information to and negotiate with such party and to
modify or withdraw its recommendation to the stockholders if the Special
Committee determines that its failure to take such action would be
inconsistent with its fiduciary duties under applicable law.
- The fact that the Offer and the Merger have been structured to include a
first-step cash tender offer for all outstanding Shares, thereby enabling
stockholders who tender their Shares to promptly receive $13.00 per Share
in cash, and the fact that any public stockholders who do not tender their
Shares will receive the same price per Share in the subsequent Merger.
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- The availability of judicial appraisal rights under Section 262 of the
DGCL to stockholders of the Company who dissent from the Merger.
The Parent Stockholders did not find it practicable to assign, nor did they
assign, relative weights to the individual factors considered in reaching its
conclusion as to the fairness of the Offer and the Merger.
5. PLANS FOR THE COMPANY.
THE MERGER. Pursuant to the Merger Agreement, upon completion of the Offer,
the Purchaser intends to effect the Merger in accordance with the Merger
Agreement and, upon consummation of the Merger, the Company will become a
privately-held corporation. See "SPECIAL FACTORS, Section 7--The Merger
Agreement."
Except as otherwise described in this Offer to Purchase, the Parent
Stockholders have no current plans or proposals or negotiations in which they
are engaged that relate to or would result in: (i) other than the Merger, an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation involving the Company; (ii) any purchase, sale or transfer of a
material amount of assets of the Company; (iii) any change in the management of
the Company or any change in any material term of the employment contract of any
executive officer; or (iv) any other material change in the Company's corporate
structure or business.
MANAGEMENT. The Merger Agreement provides that the directors of the
Purchaser and the officers of the Company at the Effective Time of the Merger
will, from and after the Effective Time, be the initial directors and officers,
respectively, of the Surviving Corporation.
DELISTING AND TERMINATION OF REGISTRATION. The Parent Stockholders shall
cause the Company to seek delisting of the Shares from the Nasdaq National
Market and the termination of the registration of the Shares under the Exchange
Act as soon after the completion of the Offer as the requirements for such
delisting and termination are met. See "THE OFFER--Section 7--Effect of the
Offer on the Market for the Shares; Stock Listing; Exchange Act Registration."
6. PURPOSE AND STRUCTURE OF THE OFFER AND THE MERGER.
PURPOSE. The purpose of the Offer, the Merger and the Merger Agreement is
to provide the public stockholders a fair price for their Shares and to enable
the Parent Stockholders to acquire control of, and the entire equity interest
in, the Company. Over the last few years, a variety of alternatives have been
considered by the Rothmans and other members of the Company's management to
increase stockholder value, while at the same time enhancing the operations,
results and business prospects of the Company. After consideration of various
alternatives, the limited public float of Shares and various other financial and
economic factors, the Rothmans concluded that it is unlikely that any meaningful
improvement in share value or liquidity of the Company will occur in the
foreseeable future. The Rothmans concluded that, as a private company, 800-JR
CIGAR would have greater flexibility to invest in its future and allow senior
management of the Company to focus on the long-term interests of the Company
without concern for the impact that any action might have on operating results
or share price of the Company. The Rothmans see the Offer as an opportunity to
create value for the stockholders of the Company through a premium purchase
price.
If the Merger is consummated, the Parent Stockholders' common equity
interest in the Company would increase to 100% and the Parent Stockholders would
be entitled to all benefits resulting from that interest. These benefits include
control over management of the Company's business and any increase in its value.
Similarly, the Parent Stockholders will also bear the risk of any losses
incurred in the operation of the Company and any decrease in the value of the
Company.
Stockholders of the Company who sell their Shares in the Offer will cease to
have any equity interest in the Company or to participate in its earnings and
any future growth of the Company. If the Merger is
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consummated, the Company's stockholders will no longer have an equity interest
in the Company and instead will have only the right to receive cash
consideration pursuant to the Merger Agreement. Similarly, the stockholders of
the Company will not bear the risk of any decrease in the value of the Company
after selling their Shares in the Offer or the subsequent Merger.
The acquisition of the public equity interest in 800-JR CIGAR has been
structured as a cash tender offer followed by a cash merger in order, as
promptly as possible, to provide the stockholders of 800-JR CIGAR with cash for
all of their Shares and to transfer all equity interests of 800-JR CIGAR to the
Purchaser.
STOCKHOLDER APPROVAL. Under the DGCL, the approval of the Board of
Directors of the Company and the affirmative vote of the holders of a majority
of the outstanding Shares are required to adopt and approve the Merger Agreement
and the transactions contemplated thereby. The Company has represented in the
Merger Agreement that the execution and delivery of the Merger Agreement by the
Company and the consummation by the Company of the transactions contemplated by
the Merger Agreement have been duly authorized by all necessary corporate action
on the part of the Company, subject to the approval of the Merger by the
Company's stockholders in accordance with the DGCL. In addition, the Company has
represented that the affirmative vote of the holders of a majority of the
outstanding Shares is the only vote of the holders of any class or series of the
Company's capital stock which is necessary to approve the Merger Agreement and
the transactions contemplated thereby, including the Merger. Therefore, unless
the Merger is consummated pursuant to the short-form merger provisions under the
DGCL described below (in which case no further corporate action by the
stockholders of the Company will be required to complete the Merger), the only
remaining required corporate action of the Company will be the approval of the
Merger Agreement and the transactions contemplated thereby by the affirmative
vote of the holders of a majority of the Shares. The Purchaser intends to vote
the Shares that it owns following the close of the Offer in favor of the Merger.
SHORT-FORM MERGER. Section 253 of the DGCL provides that if a corporation
owns at least 90% of the outstanding shares of each class of another corporation
the corporation holding such stock may merge itself into such corporation
without any action or vote on the part of the board of directors or the
stockholders of such other corporation (a "SHORT-FORM MERGER"). In the event
that the Purchaser acquires, in the aggregate, at least 90% of the outstanding
Shares, pursuant to the Offer or otherwise, then, at the election of the
Purchaser (subject to compliance with the provisions of Section 253 of the
DGCL), a short-form merger could be effected without any approval of the Board
of Directors of the Company or the stockholders of the Company. Even if the
Purchaser does not own 90% of the outstanding Shares following consummation of
the Offer, the Purchaser could seek to purchase additional Shares in the open
market or otherwise in order to reach the 90% threshold and effect a short-form
merger. The per share consideration paid for any Shares so acquired on the open
market may be greater or less than that paid in the Offer. The Purchaser
presently intends to effect a short-form merger following the closing of the
Offer if permitted to do so under the DGCL.
7. THE MERGER AGREEMENT.
THE FOLLOWING IS A SUMMARY OF CERTAIN PROVISIONS OF THE MERGER AGREEMENT.
THE SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT
WHICH IS INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ATTACHED HERETO
AS ANNEX A.
THE OFFER. Pursuant to the Merger Agreement, the Purchaser is obligated to
commence the Offer as promptly as practicable after the date of the Merger
Agreement. On the terms and subject to the conditions of the Offer and the
Merger Agreement, the Purchaser will accept for payment and pay for all Shares
validly tendered and not withdrawn pursuant to the Offer prior to the expiration
of the Offer, or any extension of it. The obligations of the Purchaser to accept
for payment, and pay for, the Shares are
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subject to the conditions specified in "THE OFFER, Section 12--Conditions to the
Offer." The Purchaser expressly reserves the right to waive any condition to the
Offer or modify the terms of the Offer except that, without the consent of the
Special Committee, the Purchaser may not (i) waive the Minimum Condition,
(ii) reduce the price per Share or change the form of consideration to be paid
pursuant to the Offer, (iii) decrease the number of Shares sought pursuant to
the Offer, (iv) add to the conditions set forth in "THE OFFER,
Section 12--Conditions to the Offer" or modify any such condition in any manner
adverse to the holders of Shares or (v) otherwise amend the Offer in any manner
adverse to the holders of Shares. Notwithstanding the foregoing, the Purchaser
may, without the consent of the Company, (x) extend the Offer for any period
required by any rule, regulation, interpretation or position of the SEC or the
staff thereof applicable to the Offer and (y) make available a "subsequent
offering period," in accordance with Rule 14d-11 of the SEC, of not less than
three nor greater than 20 business days, provided that the Purchaser shall
extend the Offer following its initial expiration upon the prior written request
of the Special Committee for such number of days as is necessary to satisfy the
conditions to the Offer set forth in "THE OFFER, Section 12--Conditions to the
Offer" but in no event shall the Purchaser be required to extend the Offer later
than October 31, 2000.
THE MERGER. The Merger Agreement provides that, on the terms and subject to
the conditions set forth therein, following the expiration of the Offer, the
Purchaser will be merged with and into the Company in accordance with the
applicable provisions of the DGCL. Following the Merger, the separate corporate
existence of the Purchaser shall cease and the Company will continue as the
surviving corporation.
At the Effective Time, by virtue of the Merger and without any action on the
part of the holder of any Shares,
- each issued and outstanding share of capital stock of the Purchaser will
be converted into and become one fully paid and nonassessable share of
common stock of the Surviving Corporation and will constitute the only
outstanding shares of capital stock of the Surviving Corporation; and
- each issued and outstanding Share immediately prior to the Effective Time
(other than Shares owned by the Parent, the Purchaser or any other direct
or indirect subsidiary of the Parent) shall be converted into the right to
receive $13.00 in cash, or any higher price per Share paid pursuant to the
Offer in cash (without interest).
For a discussion of appraisal rights under the DGCL, see "SPECIAL FACTORS,
Section 8--Dissenters' Rights."
STOCK PLANS. Pursuant to the Merger Agreement, prior to the Effective Time,
the Company must use its reasonable efforts to take all actions necessary to
provide for the cancellation, effective at the Effective Time, of all of the
outstanding stock options ("OPTIONS") to purchase Shares granted under any stock
option plan of the Company (the "STOCK PLANS"). Immediately prior to the
Effective Time, the Company must use its reasonable efforts to ensure that each
Option, whether or not then vested or exercisable, is no longer exercisable for
the purchase of Shares but will instead entitle the holder of an Option, in
cancellation and settlement of the Option, to a payment in cash (subject to any
applicable withholding taxes), at the Effective Time, equal to the product of
(i) the total number of Shares subject to such Option whether or not then vested
or exercisable and (ii) the excess of the Offer Price over the exercise price
per Share subject to such Option. The Company must use its reasonable efforts to
ensure that the Stock Plans will terminate as of the Effective Time and the
provisions of any employee benefit plan providing for the issuance or grant of
Shares will be deleted as of the Effective Time. The Company must take all
reasonable steps to ensure that neither the Company nor any of its subsidiaries
will be bound, as of the Effective Time, by any Options, other options,
warrants, rights or agreements which would entitle any person, other than Parent
or its affiliates, to own or purchase any capital stock of the Surviving
Corporation or any of its subsidiaries. The Company must use its reasonable
efforts to obtain any necessary consents to ensure that, after the Effective
Time, the only rights of the holders of Options to purchase Shares in respect of
such
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Options will be to receive a cash payment described above in cancellation and
settlement thereof. Prior to the Effective Time, the Board of Directors of the
Company (or, if appropriate, any committee thereof) shall adopt appropriate
resolutions and use its reasonable efforts to take all other actions necessary
to provide for termination of the Company's Employee Stock Purchase Plan, and
for the return of all employee contributions accumulated thereunder.
REPRESENTATIONS AND WARRANTIES. In the Merger Agreement, the Company has
made customary representations and warranties to the Parent and the Purchaser
with respect to authority to enter into the Merger Agreement and receipt of the
Fairness Opinion.
In the Merger Agreement, each of the Parent and the Purchaser has made
customary representations and warranties to the Company with respect to, among
other things, corporate organization and qualification, organizational
documents, authority to enter into the Merger Agreement, required filings and
consents, no conflicts between the Merger Agreement and any applicable laws and
any agreements to which either the Parent or the Purchaser or either of their
assets may be bound, disclosures in tender offer documents, and availability of
funds to consummate the Offer and brokers' fees.
CONDITIONS TO THE MERGER. The respective obligations of the Parent and the
Purchaser, on the one hand, and the Company, on the other hand, to effect the
Merger are subject to the satisfaction of each of the following conditions:
(i) the Purchaser shall have commenced the Offer and shall have purchased,
pursuant to the terms and conditions of the Offer, the Minimum Shares; (ii) if
required by law in order to consummate the Merger, the Company shall have
obtained the necessary stockholder approval (as described below); (iii) all
material consents, waivers, approvals, authorizations or orders of third parties
to the consummation of the Merger shall have been obtained; and (iv) no statute,
rule, regulation, executive order, decree, ruling, temporary restraining order,
preliminary or permanent injunction or other order shall have been enacted,
entered, promulgated, enforced or issued by any court or governmental authority
of competent jurisdiction or shall otherwise be in effect which prohibits,
restrains, enjoins or restricts the consummation of the Merger, provided that in
the case of a decree, injunction or other order, each of the parties shall have
used reasonable efforts to prevent the entry of any such injunction or other
order and to appeal as promptly as possible any decree, injunction or other
order that may be entered.
STOCKHOLDERS' MEETING; PROXY STATEMENT. If required by applicable law in
order to consummate the Merger, the Company will (i) duly call, give notice of,
convene and hold a special meeting of its stockholders as promptly as
practicable following the acceptance for payment and purchase of the Minimum
Shares by the Purchaser pursuant to the Offer for the purpose of considering and
taking action upon the approval of the Merger and the adoption of the Merger
Agreement and (ii) prepare and file with the Commission, subject to the prior
approval of the Purchaser (which approval shall not be unreasonably withheld),
preliminary and final versions of a proxy statement (the "PROXY STATEMENT") and
proxy and other filings relating to such stockholders' meeting as required by
the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"). Subject to
the terms of the Merger Agreement, the Company has agreed to include in the
Proxy Statement the recommendation of the Board of Directors of the Company
(based on the recommendation of the Special Committee) that stockholders of the
Company vote in favor of the approval of the Merger and the adoption of the
Merger Agreement. Notwithstanding the foregoing, the Purchaser may at its
election execute a written consent approving the Merger and the Company shall
notify stockholders of such action by the Purchaser in lieu of holding a
stockholders meeting in accordance with the by-laws of the Company and
Section 228 of the DGCL and the Company shall prepare and file with the
Commission, subject to the prior approval of the Purchaser (which approval shall
not be unreasonably withheld), preliminary and final versions of an information
statement as required by the Exchange Act.
INDEMNIFICATION. The Merger Agreement provides that, from and after the
Effective Time, in addition to any indemnification available to any officer or
director by the Company, the Surviving Corporation shall to the fullest extent
permitted under applicable law, indemnify and hold harmless, each present and
former director, officer or employee of the Company or any of its subsidiaries
(collectively, the
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"INDEMNIFIED PARTIES") against any costs or expenses (including reasonable
attorneys' fees and disbursements), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal, administrative or
investigative, (i) arising out of or pertaining to the Merger Agreement or the
transactions contemplated thereby or (ii) otherwise with respect to any acts or
omissions occurring at or prior to the Effective Time, to the same extent as
provided in the Company's Certificate of Incorporation or By-Laws or any
applicable contract or agreement (including, without limitation, indemnification
agreements with the Company's directors and officers) as in effect on the date
of the Merger Agreement, in each case through the later of (x) six years from
the date of the Merger Agreement and (y) the expiration of any statute of
limitations applicable to such claim, action, suit or proceeding. In the event
of any such claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Time),
- any counsel retained by the Indemnified Parties for any period after the
Effective Time shall be reasonably satisfactory to the Surviving
Corporation,
- after the Effective Time, the Surviving Corporation shall pay the
reasonable fees and expenses of such counsel, promptly after statements
therefor are received, and
- the Surviving Corporation will cooperate in the defense of any such
matter; PROVIDED, HOWEVER, that the Surviving Corporation shall not be
liable for any settlement effected without its written consent (which
consent shall not be unreasonably withheld); and PROVIDED, FURTHER, that,
in the event that any claim or claims for indemnification are asserted or
made within such six-year period, all rights to indemnification in respect
of any such claim or claims shall continue until the disposition of any
and all such claims.
The Indemnified Parties as a group may retain only one law firm to represent
them with respect to any single action unless an Indemnified Party, based on
advice of counsel, reasonably believes that there may be, under applicable
standards of professional conduct, a conflict of interest between the positions
of any two or more Indemnified Parties.
The Surviving Corporation has also agreed to honor and fulfill in all
respects the obligations of the Company pursuant to indemnification agreements
with the Company's directors and officers existing at or before the Effective
Time, and the Parent has agreed to guarantee the obligations of the Surviving
Corporation in connection therewith. In addition, for a period of six years
after the Effective Time, the Surviving Corporation shall maintain in effect
directors' and officers' liability insurance covering those persons who are
currently covered by the Company's directors' and officers' liability insurance
policy on terms no less advantageous to such persons than those now applicable
to directors and officers of the Company.
CONTRIBUTION. Pursuant to the Merger Agreement, the Parent Stockholders
have agreed that on or prior to the Expiration Date or any extension thereof, as
the case may be, (i) the Parent Stockholders shall contribute the Parent
Stockholder Shares and shall cause the Parent to contribute the Parent
Stockholder Shares to the Purchaser, and (ii) the Parent Stockholders shall not
take any action, or omit to take any action which they could reasonably be
expected to take, if the taking of, or the omission to take, such action could
reasonably be expected to adversely affect the ability of the Purchaser to
consummate the Offer and the Merger. However, the Parent Stockholders shall only
be required to make the Contribution if all of the conditions to the Offer set
forth in "THE OFFER, Section 12--Conditions to the Offer" are satisfied unless
the failure to satisfy such conditions is a result of the Parent Stockholders
knowingly taking any action, or knowingly omitting to take any action which they
could reasonably be expected to take, if the taking of, or the omission to take,
such action could reasonably be expected to adversely affect the ability of the
Purchaser to consummate the transactions contemplated by the Merger Agreement.
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TERMINATION. The Merger Agreement may be terminated and the transactions
contemplated therein abandoned at any time prior to the Effective Time, whether
before or after approval of the stockholders of the Company,
- by mutual written consent of the Parent, the Purchaser and the Special
Committee on behalf of the Company; or
- by either the Parent or the Special Committee on behalf of the Company:
(i) if the purchase of the Shares pursuant to the Offer is not consummated
on or before October 31, 2000, unless the failure to consummate the
Offer is the result of a breach of the Merger Agreement by the party
seeking to terminate the Merger Agreement; or
(ii) if any governmental entity issues an order, decree or ruling or takes
any other action permanently enjoining, restraining or otherwise
prohibiting the Merger and such order, decree, ruling or other action
shall have become final and nonappealable; or
- by the Parent or the Special Committee if the Special Committee determines
in good faith that the Special Committee's fiduciary obligations under
applicable law require the Special Committee to withdraw its
recommendation of the Merger Agreement and the transactions contemplated
thereby; or
- by the Special Committee on behalf of the Company if (i) the Parent fails
to commence the Offer, (ii) the Parent shall have terminated the Offer or
permitted the Offer to expire without the purchase of Shares; or
(iii) the Parent fails to purchase validly tendered Shares in violation of
the terms of the Offer and the Merger Agreement; or
- by either the Parent or the Special Committee if the Merger shall not have
been consummated by January 31, 2001, provided that a party may not invoke
this right if its failure to fulfill any obligation under the Merger
Agreement results in the failure of the Merger to occur on or before such
date; or
- by the Special Committee, if there has been a material misrepresentation
or breach of warranty in the representations and warranties made by the
Parent or the Purchaser that cannot be cured at or prior to the Effective
Time; or
- by the Parent, if there has been a material misrepresentation or breach of
warranty in the representations and warranties made by the Company that
cannot be cured at or prior to the Effective Time; or
- by the Parent or the Special Committee, if (i) the Special Committee shall
have recommended to the stockholders of the Company (x) a transaction or
series of transactions pursuant to which any person (or group of persons)
other than the Purchaser or any affiliate of any thereof acquires or would
acquire more than 35% of the outstanding Shares, whether from the Company
or pursuant to a tender offer or exchange offer or otherwise, (y) any
acquisition or proposed acquisition of the Company or any of its
subsidiaries by a merger or other business combination (including any
so-called "merger of equals" and whether or not the Company or any of its
subsidiaries is the entity surviving any such merger or business
combination) or (z) any other transaction pursuant to which any third
party acquires or would acquire control of assets (including for this
purpose the outstanding equity securities of subsidiaries of the Company
and any entity surviving any merger or business combination including any
of them) of the Company or any of its subsidiaries having a fair market
value equal to more than 35% of the fair market value of all the assets of
the Company and its subsidiaries, taken as a whole, immediately prior to
such transaction (any of x, y and z above, referred to hereinafter as an
"ALTERNATIVE TRANSACTION"); or (ii) a tender offer or exchange offer for
35% or more of the outstanding Shares is commenced (other than by the
Purchaser or an affiliate of the Purchaser) and recommends that the
stockholders of the Company tender their shares in such tender offer or
exchange offer.
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In the event of such termination, except as described below, the Merger
Agreement will become void and have no effect, without any liability or
obligation on the part of the Parent, the Purchaser or the Company.
8. DISSENTERS' RIGHTS.
APPRAISAL RIGHTS CANNOT BE EXERCISED AT THIS TIME. THE INFORMATION SET FORTH
BELOW IS FOR INFORMATIONAL PURPOSES ONLY WITH RESPECT TO ALTERNATIVES AVAILABLE
TO STOCKHOLDERS IF THE MERGER IS CONSUMMATED. STOCKHOLDERS WHO WILL BE ENTITLED
TO APPRAISAL RIGHTS IN CONNECTION WITH THE MERGER WILL RECEIVE ADDITIONAL
INFORMATION CONCERNING APPRAISAL RIGHTS AND THE PROCEDURES TO BE FOLLOWED IN
CONNECTION THEREWITH BEFORE SUCH STOCKHOLDERS HAVE TO TAKE ANY ACTION RELATING
THERETO.
STOCKHOLDERS WHO SELL SHARES IN THE OFFER WILL NOT BE ENTITLED TO EXERCISE
APPRAISAL RIGHTS WITH RESPECT THERETO BUT, RATHER, WILL RECEIVE THE PRICE PAID
IN THE OFFER THEREFOR.
Under Section 262 of the DGCL, any holder of Shares at the Effective Time (a
"REMAINING STOCKHOLDER") who does not wish to accept the Merger Consideration
pursuant to the Merger will have the right to seek an appraisal and be paid the
"fair value" of its Shares as of the Effective Time (exclusive of any element of
value arising from the accomplishment or expectation of the Merger) judicially
determined and paid to it in cash provided that such holder complies with the
provisions of such Section 262 of the DGCL.
The following is a brief summary of the statutory procedures to be followed
by a Remaining Stockholder in order to perfect appraisal rights under Delaware
law. This summary is not intended to be complete and is qualified in its
entirety by reference to Section 262 of the DGCL, the text of which is set forth
in ANNEX B hereto. Any Remaining Stockholder considering demanding appraisal is
advised to consult legal counsel. Appraisal rights will not be available unless
and until the Merger (or a similar merger) is consummated.
Remaining Stockholders of record who desire to exercise their appraisal
rights must fully satisfy all of the following conditions. A written demand for
appraisal of Shares must be delivered to the Secretary of the Company
(i) before the taking of the vote on the adoption of the Merger Agreement, if
the Merger is not being effected as a short-form merger but rather is being
consummated following a vote thereon at a meeting of the Company's stockholders
(a "LONG-FORM MERGER"), and in such case such Remaining Stockholder must not
vote in favor of adoption of the Merger Agreement, or (ii) within 20 days after
the date that the Surviving Corporation mails to the Remaining Stockholders a
notice (the "NOTICE OF MERGER") to the effect that the Merger is effective and
that appraisal rights are available (and includes in such notice a copy of
Section 262 of the DGCL and any other information required thereby), if the
Merger is being effected as a short-form merger without a vote or meeting of the
Company's stockholders. If the Merger is effected as a long-form merger, a
written demand for appraisal of Shares must be made in addition to and separate
from any proxy abstaining from voting or any vote against adoption of the Merger
Agreement, and neither voting against, abstaining from voting, nor failing to
vote on the Merger Agreement will constitute a demand for appraisal within the
meaning of Section 262 of the DGCL.
In the case of a long-form merger, any stockholder seeking appraisal rights
must (i) hold the Shares for which appraisal is sought on the date the demand is
made, (ii) continuously hold such Shares through the Effective Time, and
(iii) otherwise comply with the provisions of Section 262 of the DGCL. In the
case of both a short-form merger and a long-form merger, a demand for appraisal
must be executed by or for the stockholder of record, fully and correctly, as
such stockholder's name appears on the stock certificates. If shares are owned
of record in a fiduciary capacity, such as by a trustee, guardian or custodian,
such demand must be executed by the fiduciary. If Shares are owned of record by
more than one person, as in a
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joint tenancy or tenancy in common, such demand must be executed by all joint
owners. An authorized agent, including an agent for two or more joint owners,
may execute the demand for appraisal for a stockholder of record; however, the
agent must identify the record owner and expressly disclose the fact that, in
exercising the demand, he is acting as agent for the record owner.
A record owner, such as a broker, who holds Shares as a nominee for others,
may exercise appraisal rights with respect to the Shares held for all or less
than all beneficial owners of Shares as to which the holder is the record owner.
In such case the written demand must set forth the number of Shares covered by
such demand. Where the number of Shares is not expressly stated, the demand will
be presumed to cover all Shares outstanding in the name of such record owner.
Beneficial owners who are not record owners and who intend to exercise appraisal
rights should instruct the record owner to comply strictly with the statutory
requirements with respect to the exercise of appraisal rights before the date of
any meeting of stockholders of the Company called to approve the Merger in the
case of a long-form merger and within 20 days following the mailing of the
Notice of Merger in the case of a short-form merger.
Remaining Stockholders who elect to exercise appraisal rights must mail or
deliver their written demands to: 800-JR CIGAR, Inc., 301 Route 10 East,
Whippany, New York, 07981, Attn: Mr. Michael E. Colleton, General Counsel. The
written demand for appraisal should specify the stockholder's name and mailing
address, the number of Shares covered by the demand and that the stockholder is
thereby demanding appraisal of such Shares.
In the case of a long-form merger, the Company must, within ten days after
the Effective Time, provide notice of the Effective Time to all stockholders who
have demanded appraisal and complied with Section 262 of the DGCL and have not
voted for adoption of the Merger Agreement. In the case of a long-form merger,
Remaining Stockholders electing to exercise their appraisal rights under
Section 262 must not vote for the adoption of the Merger Agreement or consent
thereto in writing. Voting in favor of the adoption of the Merger Agreement, or
delivering a proxy in connection with the stockholders meeting called to adopt
the Merger Agreement (unless the proxy votes against, or expressly abstains from
the vote on, the adoption of the Merger Agreement), will constitute a waiver of
the stockholder's right of appraisal and will nullify any written demand for
appraisal submitted by the stockholder.
Regardless of whether the Merger is effected as a long-form merger or a
short-form merger, within 120 days after the Effective Time, either the Company
or any stockholder who has demanded appraisal and complied with the required
conditions of Section 262 and who is otherwise entitled to appraisal rights may
file a petition in the Delaware Court of Chancery demanding a determination of
the fair value of the Shares of the dissenting stockholders. If a petition for
an appraisal is timely filed, after a hearing on such petition, the Delaware
Court of Chancery will determine which stockholders are entitled to appraisal
rights and thereafter will appraise the Shares owned by such stockholders,
determining the fair value of such Shares, exclusive of any element of value
arising from the accomplishment or expectation of the Merger, together with a
fair rate of interest to be paid, if any, upon the amount determined to be the
fair value. In determining fair value, the Delaware Court of Chancery is to take
into account all relevant factors. In WEINBERGER V. UOP, INC., ET AL., the
Delaware Supreme Court discussed the factors that could be considered in
determining fair value in an appraisal proceeding, stating that "proof of value
by any techniques or methods which are generally considered acceptable in the
financial community and otherwise admissible in court" should be considered and
that "[f]air price obviously requires consideration of all relevant factors
involving the value of a company." The Delaware Supreme Court stated that in
making this determination of fair value the court must consider "market value,
asset value, dividends, earnings prospects, the nature of the enterprise and any
other facts which were known or which could be ascertained as of the date of
merger which throw any light on future prospects of the merged corporation." The
Delaware Supreme Court has construed Section 262 of the DGCL to mean that
"elements of future value, including the nature of the enterprise, which are
known or susceptible of proof as of the date of the merger and not the product
of speculation, may be considered." However, the court noted that Section 262
provides that fair
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value is to be determined "exclusive of any element of value arising from the
accomplishment or expectation of the merger."
Remaining Stockholders who in the future consider seeking appraisal should
have in mind that the fair value of their Shares determined under Section 262
could be more than, the same as, or less than the Merger Consideration if they
do seek appraisal of their Shares, and that opinions of investment banking firms
as to fairness from a financial point of view are not necessarily opinions as to
fair value under Section 262 of the DGCL.
The cost of the appraisal proceeding may be determined by the Delaware Court
of Chancery and taxed upon the parties as the Delaware Court of Chancery deems
equitable under the circumstances. Upon application of a dissenting stockholder,
the Delaware Court of Chancery may order that all or a portion of the expenses
incurred by any dissenting stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts, be charged pro rata against the value of all
Shares entitled to appraisal. In the absence of such a determination or
assessment, each party bears its own expenses.
Any Remaining Stockholder who has duly demanded appraisal in compliance with
Section 262 of the DGCL will not, after the Effective Time, be entitled to vote
the Shares for any purpose, subject to such demand, or to receive payment of
dividends or other distributions on such Shares, except for dividends or other
distributions payable to stockholders of record at a date prior to the Effective
Time.
At any time within 60 days after the Effective Time, any former holder of
Shares shall have the right to withdraw his or her demand for appraisal and to
accept the Merger Consideration. After this period, such holder may withdraw his
or her demand for appraisal only with the consent of the Company as the
Surviving Corporation. If no petition for appraisal is filed with the Delaware
Court of Chancery within 120 days after the Effective Time, stockholders' rights
to appraisal shall cease and all stockholders shall be entitled to receive the
Merger Consideration. Inasmuch as the Company has no obligation to file such a
petition, and Parent has no present intention to cause or permit the Surviving
Corporation to do so, any stockholder who desires such a petition to be filed is
advised to file such petition on a timely basis. No petition timely filed in the
Delaware Court of Chancery demanding appraisal shall be dismissed as to any
stockholder without the approval of the Delaware Court of Chancery, and such
approval may be conditioned upon such terms as the Delaware Court of Chancery
deems just.
Failure to take any required step in connection with the exercise of
appraisal rights may result in the termination or waiver of such rights. The
Purchaser and the Parent do not intend to grant unaffiliated stockholders of the
Company access to its corporate files or obtain and pay for counsel or appraisal
services on the behalf of such holders.
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THE OFFER
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer, the Purchaser
will accept for payment and pay for all Shares validly tendered, and not
withdrawn, promptly after the Expiration Date. The term "Expiration Date" shall
mean 12:00 Midnight, New York City time, on Tuesday, September 26, 2000, unless
and until the Purchaser, in accordance with the terms of the Merger Agreement,
shall have extended the period of time for which the Offer is open (but not
including any Subsequent Offering Period as defined below), 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.
The Offer is subject to the satisfaction of certain conditions, including,
among others, the satisfaction of the Minimum Condition. See "THE OFFER,
Section 12--Conditions to the Offer," which sets forth in full the conditions to
the Offer. If the Minimum Condition is not satisfied or any of the other events
set forth in Section 12 shall have occurred or shall be determined by the
Purchaser to have occurred prior to the Expiration Date, the Purchaser reserves
the right (but shall not be obligated), subject to the terms of the Merger
Agreement and subject to complying with applicable rules and regulations of the
Commission, to (i) decline to purchase any of the Shares tendered in the Offer,
terminate the Offer and return all tendered Shares to the tendering
stockholders, (ii) waive any or all conditions to the Offer and, to the extent
permitted by applicable law, purchase all Shares validly tendered, (iii) extend
the Offer and, subject to the right of stockholders to withdraw Shares until the
Expiration Date, retain the Shares that have been tendered during the period or
periods for which the Offer is extended or (iv) amend the Offer.
However, under the Merger Agreement, Purchaser has agreed that, without the
prior written consent of the Special Committee, it will not (i) waive the
Minimum Condition, (ii) reduce the price per Share or change the form of
consideration to be paid pursuant to the Offer, (iii) decrease the number of
shares sought pursuant to the Offer, (iv) add to the conditions set forth in the
Merger Agreement or modify any condition set forth in the Merger Agreement in
any manner adverse to the holders of Shares or (v) otherwise amend the Offer in
any manner adverse to the holders of Shares.
Pursuant to the Merger Agreement, Purchaser may, without the consent of the
Company, extend the Offer for any period required by any rule or regulation of
the Commission applicable to the Offer.
Under the terms of the Merger Agreement, the Purchaser must, upon the prior
written request of the Special Committee, extend the expiration date of the
Offer for such number of days as is necessary to satisfy the conditions to the
Offer set forth in Section 12 but in no event shall the Purchaser be required to
extend the Offer later than October 31, 2000.
Any extension, amendment or termination of the Offer will be followed, as
promptly as practicable, by public announcement thereof. The announcement in the
case of an extension will be issued no later than 9:00 a.m., New York City time,
on the next business day after the previously scheduled Expiration Date in
accordance with the public announcement requirements of Rule 14d-4(d) under the
Exchange Act. Without limiting the obligation of the Purchaser under such Rule
or the manner in which the Purchaser may choose to make any public announcement,
the Purchaser currently intends to make any such announcements by issuing a
press release to the Dow Jones News Service or as otherwise may be required by
applicable law.
Pursuant to, but subject to certain conditions in the Merger Agreement, the
Purchaser has agreed to accept for payment all Shares validly tendered and not
withdrawn pursuant to the Offer as soon as permitted under applicable law and
pay for such Shares promptly thereafter.
If, subject to the Merger Agreement, the Purchaser makes a material change
to the terms of the Offer or the information concerning the Offer or waives a
material condition of the Offer, the Purchaser will
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disseminate additional tender offer materials and extend the Offer to the extent
required by Rules 14d-4(d), 14d-6(c) and 14e-1 under the Exchange Act. The
minimum period during which the Offer must remain open following material
changes in the terms of the Offer or information concerning the Offer, other
than a change in price or a change in percentage of securities sought, will
depend upon the facts and circumstances then existing, including the relative
materiality of the changed terms or information. In the Commission's view, an
offer must remain open for a minimum period of time following a material change
to the terms of the Offer and that waiver of a material condition is a material
change to the terms of the Offer. The Commission has stated that an offer should
remain open for a minimum of five (5) business days from the date a material
change is first published, or sent or given to security holders and that, if
material changes are made with respect to information not materially less
significant than the offer price and the number of shares being sought, a
minimum of ten (10) business days may be required to allow adequate
dissemination and investor response. The requirement to extend the Offer will
not apply to the extent that the number of business days remaining between the
occurrence of the change and the then-scheduled Expiration Date equals or
exceeds the minimum extension period that would be required because of such
amendment.
Pursuant to Rule 14d-11 under the Exchange Act, the Purchaser may, subject
to certain conditions, provide a subsequent offering period of from three
business days to twenty business days in length following the purchase of Shares
on the Expiration Date (the "SUBSEQUENT OFFERING PERIOD"). The Purchaser does
not currently intend to provide a Subsequent Offering Period, but it reserves
the right to do so in its discretion. The Subsequent Offering Period, if
applicable, will be at least three days and, if the Parent and the Purchaser own
less than 90% of the outstanding Shares following expiration of the initial
offering period and the purchase of all Shares tendered pursuant to the Offer
during that period and the first three days of the subsequent Offering Period,
the Purchaser will extend the Subsequent Offering Period until the earlier of
(i) twenty business days from the Expiration Date and (ii) the time at which the
Parent and the Purchaser become the owner of at least 90% of the outstanding
Shares so that a short-form merger can be effected. A Subsequent Offering Period
is an additional period of time, following the expiration of the Offer and the
purchase of Shares in the Offer, during which stockholders may tender Shares
that had not been purchased in the Offer. A Subsequent Offering Period is not an
extension of the Offer which already will have been completed.
During a Subsequent Offering Period, if applicable, tendering stockholders
will not have withdrawal rights and Purchaser will promptly purchase and pay for
any Shares tendered at the same price paid in the Offer. Rule 14d-11 provides
that the Purchaser may provide a Subsequent Offering Period so long as, among
other things, (i) the initial twenty business days period of the Offer has
expired; (ii) the Purchaser offers the same form and amount of consideration for
Shares in the Subsequent Offering Period as in the Offer; (iii) the Purchaser
accepts and promptly pays for all Shares tendered pursuant to the Offer prior to
the Expiration Date; (iv) the Purchaser announces the results of the Offer,
including the approximate number and percentage of Shares deposited in the
Offer, no later than 9:00 a.m. Eastern time on the next business day after the
Expiration Date and immediately begins the Subsequent Offering Period; and
(v) the Purchaser immediately accepts and promptly pays for Shares as they are
tendered during the Subsequent Offering Period. In the event the Purchaser
elects to extend the Subsequent Offering Period, it will notify stockholders of
the Company consistent with the requirements of the Commission.
The Company has provided the Purchaser with the Company's stockholder lists
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of Transmittal
will be mailed by the Purchaser to record holders of Shares and will be
furnished by the Purchaser to brokers, dealers, banks and similar persons whose
names, or the names of whose nominees, appear on the stockholder 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.
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2. ACCEPTANCE FOR PAYMENT.
Upon the terms and subject to the conditions to the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment, and during the Subsequent Offering Period, if applicable), the
Purchaser will accept for payment and will pay, promptly after the Expiration
Date, and during the Subsequent Offering Period, if applicable, promptly after
tender, for all Shares validly tendered prior to the Expiration Date and not
properly withdrawn in accordance with Section 4. All determinations concerning
the satisfaction of such terms and conditions will be within the Purchaser's
sole discretion, which determinations will be final and binding. The Purchaser
expressly reserves the right, in its sole discretion, to delay acceptance for
payment of, or subject to the applicable rules of the Commission, payment for,
Shares in order to comply in whole or in part with any applicable law. See "THE
OFFER, Section 1--Terms of the Offer and Section 12--Conditions to the Offer."
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) certificates for
such Shares (or a timely Book-Entry Confirmation (as defined below) with respect
thereto), (ii) a Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees, or, in the
case of a book-entry transfer, an Agent's Message (as defined below), and
(iii) any other documents required by the Letter of Transmittal. The per share
consideration paid to any holder of Shares pursuant to the Offer will be the
highest per share consideration paid to any other holder of such Shares pursuant
to the Offer.
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 such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares properly tendered to the Purchaser and
not withdrawn, if and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance for payment of such Shares. 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 stockholders for the purpose of receiving payment from the Purchaser
and transmitting payment to tendering stockholders. Upon the deposit of funds
with the Depositary for the purpose of making payments to tendering
stockholders, the Purchaser's obligation to make such payment shall be
satisfied, and tendering stockholders must thereafter look solely to the
Depositary for payment of amounts owed to them by reason of the acceptance for
payment of Shares pursuant to the Offer.
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE TO BE
PAID BY THE PURCHASER FOR THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER
OR ANY DELAY IN MAKING SUCH PAYMENT.
If the Purchaser is delayed in its acceptance for payment of, or payment
for, Shares or is unable to accept for payment, or pay for, Shares pursuant to
the Offer for any reason, then, without prejudice to the Purchaser's rights
under the Offer (including such rights as are set forth in Sections 1 and
14) (but subject to compliance with Rule 14e-1(c) under the Exchange Act), the
Depositary may, nevertheless, on behalf of the Purchaser, retain tendered
Shares, and such Shares may not be withdrawn except to the extent tendering
stockholders are entitled to exercise, and duly exercise, withdrawal rights as
described in Section 4.
If any tendered Shares are not accepted for payment pursuant to the Offer
for any reason, or if certificates are submitted representing more Shares than
are tendered, certificates representing Shares not tendered or not accepted for
purchase will be returned to the tendering stockholder, or such other person
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as the tendering stockholder shall specify in the Letter of Transmittal, as
promptly as practicable following the expiration, termination or withdrawal of
the Offer. In the case of Shares delivered by book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility pursuant to the
procedures set forth in Section 3, such Shares will be credited to such account
maintained at a Book-Entry Transfer Facility as the tendering stockholder shall
specify in the Letter of Transmittal, as promptly as practicable following the
expiration, termination or withdrawal of the Offer. If no such instructions are
given with respect to Shares delivered by book-entry transfer, any such Shares
not tendered or not purchased will be returned by crediting the account at the
Book-Entry Transfer Facility designated in the Letter of Transmittal as the
account from which such Shares were delivered.
3. PROCEDURE FOR TENDERING SHARES.
VALID TENDER. Except as set forth below, for Shares to be validly tendered
pursuant to the Offer, either (i) a properly completed and duly executed Letter
of Transmittal (or a facsimile thereof), together with any required signature
guarantees, or in the case of a book-entry transfer, an Agent's Message (as
defined below), and any other required documents, must be received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase prior to the Expiration Date and either certificates for tendered
Shares must be received by the Depositary at one of such addresses or such
Shares must be delivered pursuant to the procedures for book-entry transfer set
forth below (and a Book-Entry Confirmation (as defined below) received by the
Depositary), in each case prior to the Expiration Date, or (ii) the tendering
stockholder must comply with the guaranteed delivery procedures set forth below.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
BOOK-ENTRY TRANSFER. The Depositary will establish accounts with respect to
the Shares at The Depository Trust Company (the "BOOK-ENTRY TRANSFER FACILITY")
for purposes of the Offer within two (2) business days after the date of this
Offer to Purchase. Any financial institution that is a participant in the
Book-Entry Transfer Facility's systems may make book-entry delivery of Shares by
causing the Book-Entry Transfer Facility to transfer such Shares into the
Depositary's account in accordance with the Book-Entry Transfer Facility's
procedure 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 a facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message, and any other required documents must, in any
case, be transmitted to, and received by, the Depositary at one of its addresses
set forth on the back cover of this Offer to Purchase prior to the Expiration
Date, or the tendering stockholder must comply with the guaranteed delivery
procedures described below. The confirmation of a book-entry transfer of Shares
into the Depositary's account at the Book-Entry Transfer Facility as described
above is referred to herein as a "Book-Entry Confirmation." REQUIRED DOCUMENTS
MUST BE TRANSMITTED TO AND RECEIVED BY THE DEPOSITARY AT ONE OF ITS ADDRESSES
SET FORTH ON THE BACK COVER PAGE OF THIS OFFER TO PURCHASE. DELIVERY OF
DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY
TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
SIGNATURE GUARANTEES. No signature guarantee is required on the Letter of
Transmittal (i) if the Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes of this Section, includes any participant in
any of the Book Entry Transfer Facilities' systems whose name appears on a
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<PAGE>
security position listing as the owner of the Shares) of Shares tendered
therewith and such registered holder has not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (ii) if such Shares are tendered
for the account of a financial institution (including most commercial banks,
savings and loan associations and brokerage houses) that is a participant in the
Security Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(each, an "ELIGIBLE INSTITUTION" and, collectively, "ELIGIBLE INSTITUTIONS"). In
all other cases, all signatures on Letters of Transmittal must be guaranteed by
an Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal.
If the certificates for Shares are registered in the name of a person other than
the signer of the Letter of Transmittal, or if payment is to be made, or
certificates for Shares not tendered or not accepted for payment are to be
returned, to a person other than the registered holder of the certificates
surrendered, then the tendered certificates for such Shares must be endorsed or
accompanied by appropriate stock powers, in either case, signed exactly as the
name or names of the registered holders or owners appear on the certificates,
with the signatures on the certificates or stock powers guaranteed as aforesaid.
See Instruction 5 to the Letter of Transmittal.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or the procedures for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such stockholder's tender may be
effected if all the following conditions are met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by the Purchaser, is received by the
Depositary, as provided below, prior to the Expiration Date; and
(iii) the certificates for (or a Book-Entry Confirmation with respect to)
such Shares, together with a properly completed and duly executed
Letter of Transmittal (or a facsimile thereof), with any required
signature guarantees, or, in the case of a book-entry transfer, an
Agent's Message, and any other required documents, are received by the
Depositary within three trading days after the date of execution of
such Notice of Guaranteed Delivery. A "trading day" is any day on which
the Nasdaq National Market, operated by the National Association of
Securities Dealers, Inc., is open for business.
OTHER REQUIREMENTS. The Notice of Guaranteed Delivery may be delivered by
hand to the Depositary or transmitted by telegram, facsimile transmission or
mail to the Depositary and must include a guarantee by an Eligible Institution
in the form set forth in the Notice of Guaranteed Delivery distributed with this
Offer to Purchase.
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 (i) certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares, (ii) a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message, and (iii) any other documents required by the Letter of Transmittal.
Accordingly, tendering stockholders may be paid at different times depending
upon when certificates for Shares or Book-Entry Confirmations with respect to
Shares are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE PURCHASE PRICE TO BE PAID BY THE PURCHASER FOR THE
SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH
PAYMENT.
APPOINTMENT AS PROXY. By executing the Letter of Transmittal as set forth
above (including delivery through an Agent's Message) the tendering stockholder
will irrevocably appoint designees of the Purchaser
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as such stockholder's attorneys-in-fact and proxies, in the manner set forth in
the Letter of Transmittal, each with full power of substitution, to the full
extent of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser, and with respect to any
and all non-cash dividends, distributions, rights, other Shares or other
securities issued or issuable in respect of such Shares on or after August 29,
2000 (collectively, "DISTRIBUTIONS"). All such proxies will be considered
coupled with an interest in the tendered Shares. Such appointment will be
effective if and when, and only to the extent that, the Purchaser accepts for
payment Shares tendered by such stockholder as provided herein. All such powers
of attorney and proxies will be irrevocable and will be deemed granted in
consideration of the acceptance for payment of Shares tendered in accordance
with the terms of the Offer. Upon such appointment, all prior powers of
attorney, proxies and consents given by such stockholder with respect to such
Shares (and any and all Distributions) will, without further action, be revoked
and no subsequent powers of attorney, proxies, consents or revocations may be
given by such stockholder (and, if given, will not be deemed effective). The
designees of the Purchaser will thereby be empowered to exercise all voting and
other rights with respect to such Shares (and any and all Distributions),
including, without limitation, in respect of any annual or special meeting of
the Company's stockholders (and any adjournment or postponement thereof),
actions by written consent in lieu of any such meeting or otherwise, as each
such attorney-in-fact and proxy or his substitute shall in his sole discretion
deem proper. The Purchaser reserves the right to require that, in order for
Shares to be deemed validly tendered, immediately upon the Purchaser's
acceptance for payment of such Shares, the Purchaser must be able to exercise
full voting, consent and other rights with respect to such Shares (and any and
all Distributions), including voting at any meeting of stockholders.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by the Purchaser, in its sole discretion, which determination
will be final and binding. The Purchaser reserves the absolute right to reject
any or all tenders of any Shares determined by it not to be in proper form or
the acceptance for payment of which, 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 the tender of any Shares of any
particular stockholder, whether or not similar defects or irregularities are
waived in the case of other stockholders. No tender of Shares will be deemed to
have been validly made until all defects or irregularities relating thereto have
been cured or waived. None of the Purchaser, the Depositary, the Information
Agent or any other person will be under any duty to give notification of any
defects or irregularities in tenders or incur any liability for failure to give
any such notification. The Purchaser's interpretation of the terms and
conditions of the Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding.
BINDING AGREEMENT. The Purchaser's acceptance for payment of Shares
tendered in response to the Offer will constitute a binding agreement by the
tendering stockholder to sell, and by the Purchaser to purchase, the tendered
Shares on the terms and subject to the conditions of the Offer.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Shares are
irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to
the procedures set forth below at any time prior to the Expiration Date and,
unless theretofore accepted for payment and paid for by the Purchaser pursuant
to the Offer, may also be withdrawn at any time after October 27, 2000.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase and
must specify the name of the person having tendered the Shares to be withdrawn,
the number of Shares to be withdrawn and the name of the registered holder of
the Shares to be withdrawn, if different from the name of the person who
tendered the Shares. If certificates for Shares have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
certificates,
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<PAGE>
the serial numbers shown on such certificates must be submitted to the
Depositary and, unless such Shares have been tendered by an Eligible
Institution, the signatures on the notice of withdrawal must be guaranteed by an
Eligible Institution. If Shares have been delivered pursuant to the procedures
for book-entry transfer as set forth in Section 3, any notice of withdrawal must
also specify the name and number of the account at the appropriate Book-Entry
Transfer Facility to be credited with the withdrawn Shares and otherwise comply
with such Book-Entry Transfer Facility's procedures. Withdrawals of tenders of
Shares may not be rescinded, and any Shares properly withdrawn will thereafter
be deemed not validly tendered for purposes of the Offer. However, withdrawn
Shares may be tendered by again following one of the procedures described in
Section 3 any time prior to the Expiration Date.
If the Purchaser extends the Offer, is delayed in its acceptance of Shares
for payment or is unable to accept Shares for payment for any reason, then,
without prejudice to the Purchaser's rights under the Offer, the Depositary may,
nevertheless, retain tendered Shares on behalf of the Purchaser, and those
Shares not withdrawn except to the extent that tendering stockholders are
entitled to withdraw them as described in this Section 4. Any such delay will be
accompanied by an extension of the Offer to the extent required by law. All
questions as to the form and validity (including time of receipt) of notices of
withdrawal will be determined by the Purchaser, in its sole discretion, which
determination will be final and binding. None of the Purchaser, the Depositary,
the Information Agent, First Union or any other person will be under any duty to
give notification of any defects or irregularities in any notice of withdrawal
or incur any liability for failure to give any such notification.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following is a summary of certain United States federal income tax
consequences of the Offer and the Merger to beneficial holders of Shares whose
Shares are tendered and accepted for payment pursuant to the Offer or whose
Shares are converted to cash in the Merger. The discussion is for general
information only and does not purport to consider all aspects of federal income
taxation that might be relevant to beneficial holders of Shares. The discussion
is based on current provisions of the Internal Revenue Code of 1986, as amended
(the "CODE"), existing, proposed and temporary regulations promulgated
thereunder and administrative and judicial interpretations thereof, all of which
are subject to change. The discussion applies only to beneficial holders of
Shares in whose hands Shares are capital assets within the meaning of
Section 1221 of the Code and may not apply to Shares received pursuant to the
exercise of employee stock options or otherwise as compensation, or to certain
types of beneficial holders of Shares (such as insurance companies, tax-exempt
organizations, holders who hold Shares are part of a straddle or conversion
transaction or other arrangement involving more than one position, holders whose
"functional currency" is not the U.S. dollar, holders who have a principal place
of business or "tax home" outside the United States, financial institutions and
broker-dealers) who may be subject to special rules. This discussion does not
discuss the federal income tax consequences to a beneficial holder of Shares
who, for United States federal income tax purposes, is a non-resident alien
individual, a foreign corporation, a foreign partnership or a foreign estate or
trust, nor does it consider the effect of any foreign, state or local tax laws.
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH BENEFICIAL HOLDER OF SHARES
SHOULD CONSULT WITH SUCH BENEFICIAL HOLDER'S OWN TAX ADVISOR TO DETERMINE THE
APPLICABILITY OF THE RULES DISCUSSED BELOW TO SUCH BENEFICIAL HOLDER AND THE
PARTICULAR TAX EFFECTS TO SUCH BENEFICIAL HOLDER OF THE OFFER AND THE MERGER,
INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger will be a
taxable transaction for United States federal income tax purposes and possibly
for state and local income tax purposes as well. In general, a stockholder who
sells Shares pursuant to the Offer or receives cash in exchange for Shares
pursuant to the Merger will recognize gain or loss for federal income tax
purposes equal to the difference,
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if any, between the amount of cash received and the stockholder's adjusted tax
basis in the Shares sold pursuant to the Offer or surrendered for cash pursuant
to the Merger. Gain or loss will be determined separately for each block of
Shares (I.E., Shares acquired at the same cost in a single transaction) tendered
pursuant to the Offer or surrendered for cash pursuant to the Merger. Such gain
or loss will be capital gain or loss.
Net capital gain recognized by non-corporate taxpayers from the sale of
property held more than one year will generally be taxed at a rate not to exceed
20% for U.S. federal income tax purposes. Net capital gain from property held
for one year or less will be subject to tax at ordinary income tax rates. In
addition, capital gains recognized by a corporate taxpayer will be subject to
tax at the ordinary income tax rates applicable to corporations. In general,
capital losses are deductible only against capital gains and are not available
to offset ordinary income. However, individual taxpayers are allowed to offset a
limited amount of capital losses against ordinary income.
The receipt of cash pursuant to the exercise by a holder of Shares of
appraisal rights, if any, under the DGCL, will be a taxable transaction. We
encourage any holder of Shares considering the exercise of any appraisal rights
to consult a tax advisor to determine the tax consequence of exercising such
appraisal rights.
Certain noncorporate holders of Shares may be subject to backup withholding
at a rate of 31% on cash payments received pursuant to the Offer or the Merger.
Backup withholding will not apply, however, to a holder of Shares who furnishes
a taxpayer identification number ("TIN") and certifies that he or she is not
subject to backup withholding on the substitute Form W-9 included in the
transmittal letter, who provides a certificate of foreign status on Form W-8, or
who is otherwise exempt from backup withholding. A holder of Shares who fails to
provide the correct TIN on Form W-9 may be subject to a $50.00 penalty imposed
by the Internal Revenue Service.
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6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES.
The Shares are quoted on the Nasdaq National Market under the symbol "JRJR".
The following table sets forth, for each of the fiscal quarters indicated, the
high and low reported closing sales price per Share on the Nasdaq National
Market.
<TABLE>
<CAPTION>
COMMON STOCK
------------------------------------------------
HIGH LOW
----------------------- ----------------------
<S> <C> <C>
Fiscal Year Ended December 31, 1997.........................
Second Quarter (commencing June 26, 1997)................. $ 21.50 19.00
Third Quarter............................................. 37.00 20.00
Fourth Quarter............................................ 38.75 20.00
Fiscal Year Ending December 31, 1998
First Quarter............................................. $ 29.25 $ 19.25
Second Quarter............................................ 24.25 17.75
Third Quarter............................................. 22.75 10.25
Fourth Quarter............................................ 23.25 9.44
Fiscal Year Ending December 31, 1999
First Quarter............................................. $ 23.25 $ 7.25
Second Quarter............................................ 12.81 7.44
Third Quarter............................................. 12.75 9.25
Fourth Quarter............................................ 10.63 7.56
Fiscal Year Ending December 31, 2000
First Quarter............................................. $ 10.00 $ 8.25
Second Quarter............................................ 10.69 9.13
Third Quarter (through August 25, 2000)................... 10.94 9.88
</TABLE>
On August 25, 2000, the last trading day prior to the announcement of the
execution of the Merger Agreement, the closing price per Share of the Shares, as
reported by the Nasdaq National Market System was $10.75. On August 28, 2000,
the last full day of trading prior to the commencement of the Offer, the closing
price per Share of the Shares, as reported by the Nasdaq National Market System
was $12.88.
The Company did not declare or pay any cash dividends during any of the
periods indicated in the above table.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK LISTING; EXCHANGE ACT
REGISTRATION.
MARKET FOR THE SHARES. The purchase of Shares by the Purchaser pursuant to
the Offer will reduce the number of Shares that might otherwise trade publicly
and will reduce the number of holders of Shares, which, depending upon the
number of Shares so purchased, could adversely affect the liquidity and market
value of the remaining Shares held by the public. 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.
NASDAQ QUOTATION. Depending upon the number of Shares purchased pursuant to
the Offer, the Shares may no longer meet the requirements for continued
inclusion in the Nasdaq National Market. The published guidelines of the Nasdaq
National Market indicate that the Nasdaq National Market would consider
delisting the Shares if, among other things, (i) there should be fewer than two
registered and active market makers providing quotations for the Shares;
(ii) the net tangible assets of 800-JR CIGAR should fall below $35,000,000, and
the net income of 800-JR CIGAR should fall below $500,000 in the most recently
completed fiscal year and in more than one of the last three most recently
completed fiscal
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years; (iii) the minimum bid price for Shares should fall below $1 per Share;
(iv) in the case of common stock, the number of round lot holders of Shares
should fall below 300; (v) in the case of common stock, the number of publicly
held Shares should fall below 500,000, or the aggregate market value of publicly
held Shares should fall below $1,000,000. If the foregoing standards are not
met, the Shares would no longer be admitted to quotation on the Nasdaq National
Market. Shares held directly or indirectly by directors, officers or beneficial
owners of more than 10% of the Shares are not considered as being publicly held
for this purpose. If the Nasdaq National Market were to cease to publish
quotations for the Shares, it is possible that the Shares would continue to
trade as a Nasdaq SmallCap stock or otherwise in the over-the-counter market and
that prices or other quotations would be reported by other sources. The extent
of the public market for such Shares and the availability of such quotations
would depend, however, upon such factors as the number of stockholders and/or
the aggregate market value of such securities remaining at such time, the
interest in maintaining a market in the Shares on the part of securities firms,
the possible termination of registration under the Exchange Act, as described
below, and other factors.
EXCHANGE ACT REGISTRATION. The Shares are currently registered under the
Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the Commission if the Shares are
not listed on a national securities exchange, the Nasdaq National Market or the
Nasdaq SmallCap Market and are not held by 300 or more holders of record. If
registration is terminated, the Shares would no longer be eligible to be quoted
on the Nasdaq Stock Market. Termination of registration of the Shares under the
Exchange Act, assuming there are no other securities of the Company subject to
registration, would substantially reduce the information required to be
furnished by the Company to its stockholders and to the Commission and would
make certain provisions of the Exchange Act, such as the requirement of filing
an annual report on Form 10-K with the Commission, and the requirements of
Rule 13e-3 under the Exchange Act with respect to "going private" transactions,
no longer 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 or Rule 144A promulgated under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), may be impaired
or eliminated.
The Purchaser shall seek delisting of the Shares from the Nasdaq National
Market and the termination of the registration of the Shares under the Exchange
Act following consummation of the Offer and the Merger.
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
GENERAL. The information concerning the Company contained in this Offer to
Purchase, including that set forth below under the caption "Selected Financial
Information," has been furnished by the Company or has been taken from or based
upon publicly available documents and records on file with the Commission and
other public sources. The Parent and the Purchaser do not assume responsibility
for the accuracy or completeness of the information concerning the Company
contained in such documents and records or for any failure by the Company to
disclose events which may have occurred or may affect the significance or
accuracy of any such information but which are unknown to the Parent and the
Purchaser.
The Company is one of the largest distributors and retailers of brand name
premium cigars in the United States. The Company's primary products consist of
premium cigars, mass market cigars and cigarettes, which are distributed to
retail and wholesale customers. The Company's highest gross margins are
generated from the sale of premium cigars (imported, hand-made and hand-rolled
cigars made with long filler and all natural tobacco leaf) and, because of these
high margins, the Company has targeted premium cigars as its primary growth
vehicle. The Company's premium cigars consist of approximately 150 brands of
which 52 are the Company's proprietary or licensed brands. Among the Company's
proprietary and licensed products are nationally recognized brand names such as
Belinda-Registered Trademark-, Bolivar-Registered Trademark-, Casa
Blanca-Registered Trademark-, El Rey del Mundo-Registered Trademark-, Jose
Marti-TM-, J.R. Alternative-Registered Trademark-, J.R.
Ultimate-Registered Trademark-, La Finca-Registered Trademark-, Romeo y
Julieta-TM-, and Santa Clara-Registered Trademark-. The Company is the largest
customer for each of the world's leading cigar manufacturers,
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including Consolidated Cigar Holdings, Inc., General Cigar Holdings, Inc.,
Swisher International, Inc. and Villazon & Company, Inc.
The Company is a holding company owning 100% of the outstanding capital
stock of each of J.R. Tobacco of America, Inc., Santa Clara, N.A., Inc., J.N.R.
Grocery Corp., J.R. Tobacco NC, Inc., J&R Tobacco (New Jersey) Corp.,
J.R.Tobacco Company of Michigan, Inc., J.R.-46th Street, Inc., J.R. Tobacco
Outlet, Inc., J.R. Statesville, Inc., J R Cigar (DC), Inc., J.R. Tobacco of
Burlington, Inc., Casa Blanca, Inc. and jrcigars.com, Inc.
The Company is well known for its cigar business, principally the sale of
premium cigars, at discounted prices. Associated sales of other discount
products, including cigarettes, general merchandise, fragrances and other
tobacco related products, benefit from this recognition. The principal offices
of the Company are located at 301 Route 10 East, Whippany, New Jersey 07981. The
telephone number of the Company at such location is (973) 884-9555.
HISTORICAL FINANCIAL DATA. Set forth below is the historical financial data
of the Company as of December 31, 1999 and for each of the two years ending
December 31, 1998 and 1999, derived from the audited consolidated financial
statements from the Company's Annual Reports on Form 10-K for the years ended
December 31, 1998 and 1999. The historical financial data of the Company as of
June 30, 2000 and for the fiscal quarter ended June 30, 2000 are unaudited and
have been derived from the unaudited consolidated financial statements from the
Company's Quarterly Report on Form 10-Q filed with the Commission on August 9,
2000. The information contained in these tables should be read in conjunction
with the Consolidated Financial Statements of the Company and the Notes thereto
included in the Company's Annual Report on Form 10-K and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" for
the years ended December 31, 1998 and 1999 and the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 2000. The following summary is
qualified in its entirety by reference to such reports and all of the financial
information contained therein. Such reports may be inspected and copies may be
obtained from the Commission by mail, upon payment of the Commission's customary
charges, by writing to the Commission's principal office at 450 Fifth Street,
N.W., Washington, D.C. 20549. The Commission also maintains a web site at
http://www.sec.gov that contains reports, proxy statements and other information
relating to the Company which have been filed via the EDGAR System.
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, -------------------------
2000 1999 1998
------------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
SUMMARY OF OPERATIONS
Net sales................................................... $150,680 $317,001 $286,512
Gross profit................................................ 25,706 52,295 52,795
Operating income (loss)..................................... 8,408 19,566 22,451
Net income (loss)........................................... 5,295 11,881 13,734
Basic and diluted income (loss) per share................... .44 .96 1.08
BALANCE SHEET DATA
Current assets.............................................. $ 65,925 $ 64,768 $ 76,682
Total assets................................................ 101,838 101,501 104,672
Current liabilities......................................... 18,206 22,195 26,035
Total liabilities........................................... 18,206 22,195 31,002
Stockholders' equity........................................ 83,632 79,306 73,670
</TABLE>
The Company's book value per share was $7.05 at June 30, 2000.
35
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK. The following table sets forth as of
August 28, 2000, the number of Shares beneficially owned by the directors and
executive officers of the Company.
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME OF BENEFICIAL OWNER TITLE AMOUNT OF SHARES OWNERSHIP
------------------------ ------------------------------ ---------------- -------------
<S> <C> <C> <C>
Lewis I. Rothman.............. Chief Executive Officer, 7,400,000(1)(2)(3) 61.9%
President and Chairman of the
Board
LaVonda M. Rothman............ Executive Vice President, 7,400,000(1)(2)(3) 61.9%
Secretary and Director
Michael E. Colleton........... Chief Financial Officer 35,000(4) *
Jane Vargas................... Vice President and Director 35,000(4) *
Maureen A. Colleton........... Director 35,000(4) *
John F. Barry, Jr............. Director 8,000(5) *
John Oliva, Sr................ Director 59,900(5) *
Bernard Rosenblum............. Director 4,000(6) *
All Executive Officers and
Directors as a group
(8 persons)................. 7,576,900 62.7%(7)
</TABLE>
------------------------
* Less than one percent.
(1) Includes 3,387,920 shares owned by Lewis I. Rothman and 3,387,920 shares
owned by LaVonda M. Rothman.
(2) Includes (i)131,040 Shares held by LaVonda M. Rothman and Lewis I. Rothman,
Trustees and Samuel Bornstein as Special Trustee of a trust f/b/o Shane
Rothman created under a trust agreement dated November 1, 1994, Lewis I.
Rothman, Grantor, (ii) 131,040 Shares held by LaVonda M. Rothman and Lewis
I. Rothman, Trustees, and Samuel Bornstein as Special Trustee of a trust
f/b/o Marni Rothman created under a trust agreement dated November 1, 1994,
Lewis I. Rothman, Grantor, (iii) 131,040 Shares held by LaVonda M. Rothman
and Lewis I. Rothman, Trustees and Samuel Bornstein as Special Trustee of
trust f/b/o Samantha Rothman created under a trust agreement dated
November 1, 1994, Lewis I. Rothman, Grantor and (iv) 131,040 Shares held by
LaVonda M. Rothman and Lewis I. Rothman, Trustees and Samuel Bornstein as
Special Trustee of a trust f/b/o Luke Rothman created under a trust
agreement dated November 1, 1994, Lewis I. Rothman, Grantor. Does not
include 2,000,000 Shares owned by the 1998 Trust, Samuel Bornstein, Trustee,
as to which the named person disclaims beneficial ownership.
(3) Includes 50,000 Shares underlying options exercisable as of August 28, 2000
granted to Lewis I. Rothman and 50,000 Shares underlying options exercisable
as of August 28, 2000 granted to LaVonda M. Rothman.
(4) Includes 35,000 Shares underlying options exercisable as of August 28, 2000.
(5) Includes 8,000 Shares underlying options exercisable as of August 28, 2000.
(6) Includes 4,000 Shares underlying options exercisable as of August 28, 2000.
(7) Based upon 11,862,299 Shares issued and outstanding on August 4, 2000 and
assumes the exercise of 225,000 Shares underlying stock options held by
executive officers and directors of the Company.
36
<PAGE>
None of the executive officers and directors of the Company named above has
effected any transaction in the Shares during the past 60 days. Each executive
officer and director of the Company named above (other than the Rothmans)
intends to tender the Shares beneficially owned by such person pursuant to the
Offer. The Rothmans, in their capacity as trustees for the Other Rothman Trusts,
do not intend to tender the Shares that are held by the Other Rothman Trusts.
9. CERTAIN INFORMATION CONCERNING THE PARENT STOCKHOLDERS, THE PARENT AND THE
PURCHASER.
The Parent and the Purchaser are Delaware corporations formed by the
Rothmans on July 21, 2000 for the purpose of consummating the Offer and the
Merger. The outstanding shares of capital stock of the Parent are owned 38.6% by
Lewis I. Rothman, 38.6% by LaVonda M. Rothman and 22.8% by the 1998 Trust. Since
their formation, the Purchaser and the Parent have not carried on any activities
other than in connection with the Offer and the Merger. Immediately prior to the
Expiration Date, the Parent Stockholders intend to contribute the Parent
Stockholder Shares to the Parent, and the Parent in turn will contribute the
Parent Stockholder Shares to the Purchaser (the "CONTRIBUTION"). The Shares held
by the Other Rothman Trusts will not be contributed to either the Parent or the
Purchaser. As a result of the Contribution, the Purchaser will own 8,775,840
Shares, or approximately 74% of the outstanding Shares. None of the Parent
Stockholders, the Parent or Purchaser has effected any transaction in Shares
during the past 60 days.
The principal offices of the Parent and the Purchaser are located at 301
Route 10 East, Whippany, New Jersey 07981. The telephone number of the Parent
and the Purchaser at such location is (973) 884-9555 x2110. Neither the Parent
nor the Purchaser is subject to the informational filing requirements of the
Exchange Act.
Lewis I. Rothman has served as the President and LaVonda M. Rothman has
served as the Vice President, Secretary and Treasurer of each of the Parent and
the Purchaser since their formation. The combined net worth of the Rothmans is
in excess of $100 million, which includes an equity interest in the Company
valued at approximately $78.5 million based upon a closing price per Share of
$10.75 on August 25, 2000.
Lewis I. Rothman has been the President, Chief Executive Officer and
Chairman of the Board of the Company since its formation in March 1997 and
President, Chief Executive Officer and a director of each of the Company's
predecessor entities since 1970. LaVonda M. Rothman has been the Executive Vice
President, Secretary and a director of the Company since its formation
March 1997 and the Executive Vice President, Secretary and a director of each of
the Company's predecessor entities since 1970. Lewis I. and LaVonda M. Rothman
are married. The Rothmans are U.S. citizens.
The 1998 Trust was established under the laws of the State of New Jersey on
November 10, 1998. The trustee of the 1998 Trust is Samuel Bornstein. The
address of the 1998 Trust is c/o Mr. Bornstein, East Lake Road, Tuxedo, New York
10987.
During the past five years, none of the Parent Stockholders, the Parent or
the Purchaser or any of their respective executive officers and directors has
been (i) convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or (ii) 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 or mandating activities subject to United States
Federal or state securities laws or finding any violation with respect to such
laws.
Other than the Bridge Credit Agreement and Permanent Credit Agreement (each
as hereinafter defined) for the funding of the purchase of Shares pursuant to
the Offer described in "THE OFFER, Section 10--Source and Amount of Funds," none
of the Parent, the Purchaser or any of their respective executive officers and
directors currently has any contract, arrangement, understanding or relationship
with any other person with respect to any securities of the Company, including,
but not limited to, any
37
<PAGE>
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.
The Rothmans, the Parent and the Purchaser have jointly filed with the
Commission a Schedule TO that contains additional information with respect to
the Offer. The Schedule TO, and any amendments thereto, may be examined and
copies may be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Schedule TO, which has been jointly filed by the Rothmans, the Parent
and the Purchaser with the Commission via the EDGAR System, can also be obtained
by accessing the Commission's web site at http://www.sec.gov.
10. SOURCE AND AMOUNT OF FUNDS.
The Offer is conditioned upon receipt by the Purchaser of a bridge loan in
an amount sufficient to pay the purchase price. Assuming that the Purchaser
purchases 3,086,459 Shares pursuant to the Offer at a purchase price of $13.00
per Share, net to the sellers in cash, the Purchaser expects the maximum
aggregate cost, including all fees and expenses applicable to the Offer and the
Merger, to be approximately $43.5 million.
Subject to the terms and conditions contained therein, the Purchaser will
receive a bank loan in an amount up to $55,000,000 (the "BRIDGE LOAN") from a
group of three lenders comprised of The Chase Manhattan Bank ("CHASE"), Fleet
Bank, N.A. ("FLEET") and European American Bank ("EAB"). Chase will serve as
administrative agent and Fleet will serve as documentation agent in connection
with the Bridge Loan. The terms and conditions of the Bridge Loan are set forth
in that certain Credit Agreement, dated as of August 28, 2000 (the "BRIDGE
CREDIT AGREEMENT"), by and among the Purchaser and the Parent, as co-borrowers,
Chase, Fleet and EAB. In connection with the Bridge Credit Agreement, the
Purchaser will enter into a pledge agreement with Chase and a related account
control agreement with Chase and the Depositary, pursuant to which the Purchaser
granted Chase, as administrative agent, a perfected security interest in all of
the Shares owned or hereafter acquired by the Purchaser. A portion of the funds
borrowed under the Bridge Loan will be paid to the Purchaser on the Expiration
Date and shall be used to pay for the Shares tendered in the Offer and all
related fees and expenses incurred in connection therewith. The remainder of the
funds borrowed under the Bridge Loan will be paid to the Purchaser at the
Effective Time to pay the Merger Consideration and all related fees and expenses
incurred in connection therewith.
The Purchaser will repay the Bridge Loan from the proceeds of a bank loan
(the "PERMANENT LOAN") in the amount of $55,000,000 from a group of lenders
including Chase, Fleet and EAB. A portion of the Permanent Loan will also be
available to meet the future working capital needs of the Company. Chase will
serve as administrative agent in connection with the Permanent Loan. Fleet will
serve as documentation agent in connection with the Permanent Loan. The terms
and conditions of the Permanent Loan are set forth in that certain Credit
Agreement dated as of August 28, 2000, by and among, the Parent, the Company and
various subsidiaries of the Company, as co-borrowers, and Chase, Fleet and EAB
(the "Permanent Credit Agreement"). The Permanent Credit Agreement relating to
the Permanent Loan will be effective upon consummation of the Merger. In
connection with the Permanent Loan (i) the Parent will enter into a pledge
agreement pursuant to which the Parent will grant to Chase as agent a perfected
security interest in all the shares of capital stock of the Company and
(ii) the Company will enter into a pledge agreement pursuant to which the
Company will grant to Chase as agent a perfected security interest in all the
shares of capital stock of the Company's subsidiaries.
11. DIVIDENDS AND DISTRIBUTIONS.
Since inception, the Company has not paid any cash or other dividends on its
Shares. The Company currently requires all cash generated by its activities to
be invested in the operations of its business. The determination of the amount
of future cash dividends, if any, to be declared and paid, however, will
38
<PAGE>
depend upon, among other things, the Company's financial condition, funds
received from operations, the level of its capital expenditures and its future
business prospects. The Company's current policy of not paying dividends is
based on the belief of the Company's Board of Directors that the Company's
earnings are needed to support its current operations. If the Company should
declare or pay any dividend on the Shares or make any other distribution
(including the issuance of additional shares of capital stock pursuant to a
stock dividend or stock split, the issuance of other securities or the issuance
of rights for the purchase of any securities) with respect to the Shares that is
payable or distributable to stockholders of record on a date prior to the
transfer to the name of the Purchaser or its nominee or transferee on the
Company's stock transfer records of the Shares pursuant to the Offer, then,
without prejudice to the Purchaser's rights specified in "THE OFFER,
Section 12--Conditions to the Offer," (i) the purchase price per Share payable
by the Purchaser pursuant to the Offer will be reduced to the extent any such
dividend or distribution is payable in cash and (ii) any non-cash dividend,
distribution or right shall be received and held by the tendering stockholder
for the account of the Purchaser and will be required to be promptly remitted
and transferred by each tendering stockholder to the Depositary for the account
of the Purchaser, accompanied by appropriate documentation of transfer. Pending
such remittance and subject to applicable law, the Purchaser will be entitled to
all the rights and privileges as owner of any such non-cash dividend,
distribution or right 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.
12. CONDITIONS TO THE OFFER.
Notwithstanding any other provisions of the Offer, the Purchaser shall not
be required to accept for payment, purchase or pay for any Shares, and may
postpone the acceptance for payment of or the payment for any tendered Shares,
unless (i) the Minimum Condition is satisfied by 12:00 Midnight on the
Expiration Date or such later date to which the Offer may be extended in
accordance with the terms of the Merger Agreement, and (ii) the Purchaser shall
have available at the Expiration Date the financing pursuant to the Bridge
Credit Agreement.
In addition, the Offer is conditioned upon the following:
- The Board of Directors of the Company and the Special Committee shall not
have withdrawn or modified, in a manner adverse to the Purchaser, its
approval of the Offer and its recommendation that the stockholders of the
Company tender their Shares pursuant to the Offer.
- There shall not have occurred any effect that, individually or in
aggregate, is materially adverse to the condition, business, assets, or
results of operations of the Company.
- The representations and warranties of the Company shall be true and
correct in all material respects.
- No governmental or judicial action shall have been taken which materially
adversely affects the consummation of the Offer.
- Any material consents or authorizations, permits, orders or approvals of
any governmental body required for the consummation of the Offer shall
have been obtained and any filings or registrations required to be made
with any governmental body shall have been made by the closing of the
Offer.
- There shall not have occurred (i) any general suspension for at least
three business days of trading in securities quoted on the Nasdaq National
Market, (ii) the declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States (whether or not
mandatory), (iii) the declaration of war by the Congress of the United
States having had or being reasonably likely to have a material adverse
effect on the condition, business, assets, liabilities or results of
operations of the Company taken as a whole, or (iv) any limitation or
proposed limitation (whether or not mandatory) by any governmental body,
or any other event, that materially adversely affects generally the
extension of credit by banks or other financial institutions in the United
States.
39
<PAGE>
The foregoing conditions are for the sole benefit of the Purchaser, may be
asserted by the Purchaser regardless of the circumstances giving rise to such
condition and may be waived by the Purchaser in whole or in part, except for the
Minimum Condition which may not be waived by the Purchaser without the prior
written consent of the Special Committee. The failure by the Purchaser at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right.
13. CERTAIN LEGAL MATTERS.
Except as otherwise disclosed herein, based on a review of publicly
available information filed by the Company with the Commission, the Purchaser is
not aware of (i) any license or regulatory permit that appears to be material to
the business of the Company and its subsidiaries, taken as a whole, that might
be adversely affected by the acquisition of Shares by the Purchaser pursuant to
the Offer or (ii) 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 as
contemplated herein. Should any such approval or other action be required, the
Purchaser currently contemplates that it would seek such approval or action. The
Purchaser's obligation under the Offer to accept for payment and pay for Shares
is subject to certain conditions. See "THE OFFER, Section 12--Conditions to the
Offer." While the Purchaser does not currently intend to delay the acceptance
for payment of Shares tendered pursuant to the Offer pending the outcome of any
such matter, there can be no assurance that any such approval or action, if
needed, would be obtained or would be obtained without substantial conditions or
that adverse consequences might not result to the business of the Company or the
Purchaser or that certain parts of the businesses of the Company or the
Purchaser might not have to be disposed of in the event that such approvals were
not obtained or any other actions were not taken.
The Offer constitutes a "going private" transaction under Rule 13e-3 of the
Exchange Act. Consequently, the Purchaser, the Parent, the Parent Stockholders
and the Company have signed the Schedule TO, which has been filed with the
Commission, for purposes of certifying the information required by Rule 13e-3 of
the Exchange Act contained therein. Pursuant to Rule 13e-3, this Offer to
Purchase contains information relating to, among other matters, the fairness of
the Offer to 800-JR CIGAR's stockholders (other than the Parent, the Purchaser,
the Parent Stockholders and the Other Rothman Trusts).
The Purchaser, the Parent and the Parent Stockholders are not aware of any
pending or overtly threatened legal proceedings which would affect the Offer or
the Merger. If any such matters were to arise, Purchaser could decline to accept
for payment or pay for any Shares tendered in the Offer. See "THE OFFER,
Section 12--Conditions to the Offer."
14. FEES AND EXPENSES.
The Purchaser has retained First Union to act as dealer manager in
connection with the Offer. As compensation for financial advisory services
provided to the Company, First Union has been paid a nonrefundable cash fee of
$50,000 for financial advisory services. Pursuant to the terms and conditions of
the engagement letter for financial advisory services with the Company and a
Dealer Manager Agreement with the Purchaser, First Union will receive at the
Effective Time a transaction fee equal to 1.15% of the aggregate consideration
paid in the Offer and the Merger. The Purchaser has also agreed, whether or not
the Offer is consummated, to pay First Union for its reasonable out-of-pocket
expenses, including the reasonable fees and expenses of its legal counsel,
incurred in connection with its engagement, and to indemnify First Union against
certain liabilities and expenses in connection with its engagement. First Union
renders various investment banking and other advisory services to the Company,
the Purchaser and their affiliates and is expected to continue to render such
services, for which it has received and will continue to receive customary
compensation from the Company, the Purchaser and their affiliates.
The Purchaser has retained D.F. King & Co., Inc. to act as the Information
Agent and American Stock Transfer & Trust Company to act as the Depositary in
connection with the Offer. The Information
40
<PAGE>
Agent may contact holders of Shares by personal interview, mail, e-mail,
telephone, facsimile transmission, telegraph and other methods of electronic
communication and may request brokers, dealers, commercial banks, trust
companies and other nominees to forward the Offer materials to beneficial
holders. The Information Agent and the Depositary will each receive reasonable
and customary compensation for their services. The Purchaser has also agreed to
reimburse each such firm for certain reasonable out-of-pocket expenses and to
indemnify each such firm against certain liabilities in connection with their
services, including certain liabilities under Federal securities laws.
Except as set forth above, the Purchaser will not pay any fees or
commissions to any broker, dealer or other person for making solicitations or
recommendations in connection with the Offer. Brokers, dealers, banks and trust
companies will be reimbursed by the Purchaser for customary mailing and handling
expenses incurred by them in forwarding the Offer materials to their customers.
15. MISCELLANEOUS.
The Offer is being made to all holders of Shares other than the Parent
Stockholders. The Purchaser is not aware of any jurisdiction in which the making
of the Offer or the tender of Shares in connection therewith would not be in
compliance with the laws of such jurisdiction. In any jurisdiction where the
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on behalf of the
Purchaser by one or more registered brokers or dealers licensed under the laws
of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER NOT CONTAINED HEREIN OR IN THE LETTER
OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
JRC ACQUISITION CORP.
August 29, 2000
41
<PAGE>
ANNEX A
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
L&LR, INC.,
JRC ACQUISITION CORP.,
LEWIS I. ROTHMAN,
LAVONDA M. ROTHMAN,
THE LEWIS IRVING ROTHMAN 1998 TRUST #1
U/A/D NOVEMBER 10, 1998
AND
800-JR CIGAR, INC.
DATED AS OF AUGUST 28, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
THE OFFER......................................................................... A-2
SECTION 1.1 THE OFFER................................................... A-2
SECTION 1.2 COMPANY ACTIONS............................................. A-3
ARTICLE II
THE MERGER........................................................................ A-4
SECTION 2.1 THE MERGER.................................................. A-4
SECTION 2.2 EFFECTIVE TIME.............................................. A-4
SECTION 2.3 CLOSING..................................................... A-4
SECTION 2.4 CERTIFICATE OF INCORPORATION AND BY-LAWS.................... A-4
SECTION 2.5 DIRECTORS AND OFFICERS...................................... A-4
SECTION 2.6 EFFECT ON CAPITAL STOCK..................................... A-5
SECTION 2.7 STOCK OPTION AND OTHER PLANS................................ A-5
SECTION 2.8 EXCHANGE OF CERTIFICATES.................................... A-6
SECTION 2.9 STOCK TRANSFER BOOKS........................................ A-7
SECTION 2.10 LOST, STOLEN OR DESTROYED CERTIFICATES...................... A-7
SECTION 2.11 TAKING OF NECESSARY ACTION; FURTHER ACTION.................. A-8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................... A-8
SECTION 3.1 AUTHORITY RELATIVE TO THIS AGREEMENT........................ A-8
SECTION 3.2 OPINION OF FINANCIAL ADVISOR................................ A-8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB........................... A-8
SECTION 4.1 ORGANIZATION AND QUALIFICATION.............................. A-8
SECTION 4.2 ORGANIZATION DOCUMENTS...................................... A-9
SECTION 4.3 CAPITALIZATION.............................................. A-9
SECTION 4.4 AUTHORITY RELATIVE TO THIS AGREEMENT........................ A-9
SECTION 4.5 NO CONFLICT, REQUIRED FILINGS AND CONSENTS.................. A-9
SECTION 4.6 INFORMATION SUPPLIED........................................ A-10
SECTION 4.7 FINANCING................................................... A-10
SECTION 4.8 BROKERS..................................................... A-10
SECTION 4.9 SALE OF THE COMPANY......................................... A-11
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER............................................ A-11
SECTION 5.1 NO SOLICITATION............................................. A-11
ARTICLE VI
ADDITIONAL AGREEMENTS............................................................. A-12
SECTION 6.1 PREPARATION OF PROXY STATEMENT; STOCKHOLDERS MEETING........ A-12
SECTION 6.2 ACCESS TO INFORMATION....................................... A-12
SECTION 6.3 CONSENTS; APPROVALS......................................... A-13
SECTION 6.4 INDEMNIFICATION AND INSURANCE............................... A-13
SECTION 6.5 NOTIFICATION OF CERTAIN MATTERS............................. A-14
SECTION 6.6 FURTHER ACTION.............................................. A-14
</TABLE>
A-i
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 6.7 PUBLIC ANNOUNCEMENTS........................................ A-14
SECTION 6.8 CONVEYANCE TAXES............................................ A-14
SECTION 6.9 GUARANTEE OF MERGER SUB OBLIGATIONS......................... A-14
SECTION 6.10 CONTRIBUTION OF PARENT STOCKHOLDER SHARES................... A-14
ARTICLE VII
CONDITIONS TO THE MERGER.............................................................. A-15
CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE
SECTION 7.1 MERGER...................................................... A-15
ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER
SECTION 7.2 SUB......................................................... A-15
SECTION 7.3 ADDITIONAL CONDITIONS TO OBLIGATION OF THE COMPANY.......... A-15
ARTICLE VIII
TERMINATION........................................................................... A-16
SECTION 8.1 TERMINATION................................................. A-16
SECTION 8.2 EFFECT OF TERMINATION....................................... A-17
SECTION 8.3 FEES AND EXPENSES........................................... A-17
ARTICLE IX
GENERAL PROVISIONS.................................................................... A-17
EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND
SECTION 9.1 AGREEMENTS.................................................. A-17
SECTION 9.2 ACTIONS OF THE COMPANY...................................... A-17
SECTION 9.3 NOTICES..................................................... A-17
SECTION 9.4 CERTAIN DEFINITIONS......................................... A-18
SECTION 9.5 AMENDMENT................................................... A-19
SECTION 9.6 WAIVER...................................................... A-19
SECTION 9.7 HEADINGS.................................................... A-19
SECTION 9.8 SEVERABILITY................................................ A-19
SECTION 9.9 ENTIRE AGREEMENT............................................ A-19
SECTION 9.10 ASSIGNMENT.................................................. A-20
SECTION 9.11 PARTIES IN INTEREST......................................... A-20
SECTION 9.12 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE....... A-20
SECTION 9.13 GOVERNING LAW............................................... A-20
SECTION 9.14 COUNTERPARTS................................................ A-20
SECTION 9.15 CONSENT TO JURISDICTION..................................... A-20
</TABLE>
A-ii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 28, 2000 (this
"AGREEMENT"), by and among (i) L&LR, INC., a Delaware corporation ("PARENT"),
(ii) JRC ACQUISITION CORP., a Delaware corporation and a wholly owned subsidiary
of Parent ("MERGER SUB"), (iii) LEWIS I. ROTHMAN (for purposes of Section 6.10
only), (iv) LAVONDA M. ROTHMAN (for purposes of Section 6.10 only), (iv) THE
LEWIS IRVING ROTHMAN 1998 TRUST #1 U/A/D NOVEMBER 10, 1998 ("1998 TRUST") (for
purposes of Section 6.10 only) and (v) 800-JR CIGAR, INC., a Delaware
corporation (the "COMPANY").
WITNESSETH:
WHEREAS, Lewis I. Rothman, LaVonda M. Rothman and the 1998 Trust
(collectively, the "PARENT STOCKHOLDERS") own an aggregate of 8,775,840 shares,
or approximately 74% of the outstanding shares (the "PARENT STOCKHOLDER
SHARES"), of common stock, par value $0.01 per share (the "COMPANY COMMON
STOCK"), of the Company; and
WHEREAS, the Parent Stockholders have formed Parent and Parent in turn has
formed Merger Sub for the purpose of making a tender offer to acquire all of the
outstanding shares of Company Common Stock, excluding the Parent Stockholder
Shares at a price per share of $13.00, net to the sellers in cash, on the terms
and subject to the conditions set forth in EXHIBIT A to this Agreement (as such
tender offer may be amended from time to time as permitted under this Agreement,
the "OFFER"); and
WHEREAS, immediately prior to the expiration of the Offer, the Parent
Stockholders intend to contribute the Parent Stockholder Shares (but not the
shares of Company Common Stock owned by certain other trusts of which Lewis I.
Rothman and LaVonda M. Rothman are trustees (the "OTHER ROTHMAN TRUSTS") to
Parent, and Parent in turn will contribute the Parent Stockholder Shares to
Merger Sub; and
WHEREAS, the Board of Directors of the Company (the "COMPANY BOARD"), based
on the unanimous recommendation of a special committee of independent directors
of the Company (the "SPECIAL COMMITTEE"), has (i) determined that each of the
Offer and the merger of Merger Sub with and into the Company, with the Company
as the surviving corporation (the "MERGER"), is fair to and in the best
interests of the stockholders of the Company (other than Parent, Merger Sub, the
Parent Stockholders and the Other Rothman Trusts), (ii) resolved to approve the
Offer, the Merger and this Agreement and the transactions contemplated hereby
and (iii) recommended acceptance of the Offer and, if required under the
applicable provisions of the Delaware General Corporation Law (the "DGCL"),
adoption of this Agreement by the stockholders of the Company, subject to the
terms and conditions set forth herein; and
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and intending to be legally bound hereby,
Parent, Merger Sub and the Company hereby agree as follows:
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ARTICLE I
THE OFFER
SECTION 1.1 THE OFFER.
(a) TERMS OF THE OFFER. As promptly as practicable after the date of
this Agreement, but in no event later than five business days following the
public announcement of the execution of this Agreement, Merger Sub shall
commence the Offer within the meaning of the applicable rules and
regulations of the Securities and Exchange Commission (the "SEC"). The
obligations of Merger Sub to accept for payment, and pay for, any shares of
Company Common Stock tendered pursuant to the Offer are subject only to the
conditions set forth in EXHIBIT A. The initial expiration date of the Offer
shall be the 20th business day following the commencement of the Offer
(determined using Rule 14d-1(g)(3) under the Securities Exchange Act of 1934
(the "EXCHANGE ACT")). Merger Sub expressly reserves the right to waive any
condition to the Offer or modify the terms of the Offer, except that,
without the prior written consent of the Special Committee, Merger Sub shall
not (i) waive the Minimum Condition (as defined in EXHIBIT A hereof),
(ii) reduce the price per share of Company Common Stock or change the form
of consideration to be paid pursuant to the Offer, (iii) decrease the number
of shares sought pursuant to the Offer, (iv) add to the conditions set forth
in EXHIBIT A or modify any condition set forth in EXHIBIT A in any manner
adverse to the holders of Company Common Stock or (v) otherwise amend the
Offer in any manner adverse to the holders of Company Common Stock.
Notwithstanding the foregoing, Merger Sub may, without the consent of the
Company, (i) extend the Offer for any period required by any rule,
regulation, interpretation or position of the SEC or the staff thereof
applicable to the Offer and (ii) make available a "subsequent offering
period," in accordance with Rule 14d-11 of the SEC, of not less than three
nor greater than 20 business days PROVIDED, HOWEVER, that Merger Sub shall
extend the Offer following its initial expiration upon the prior written
request of the Special Committee for such number of days as is necessary to
satisfy the conditions of the Offer set forth in EXHIBIT A but in no event
shall Merger Sub be required to extend the Offer later than October 31,
2000. On the terms and subject only to the conditions of the Offer set forth
in EXHIBIT A, Merger Sub shall pay for all shares of Company Common Stock
validly tendered and not withdrawn pursuant to the Offer that Merger Sub
becomes obligated to purchase pursuant to the Offer promptly after the
expiration of the Offer.
(b) OFFER DOCUMENTS. On the date of commencement of the Offer,
(i) Parent and Merger Sub shall file with the SEC and disseminate to holders
of Company Common Stock a Tender Offer Statement on Schedule TO with respect
to the Offer, which shall contain, among other things, an offer to purchase
and a related letter of transmittal and summary advertisement; and
(ii) Parent, Merger Sub and the Company shall file with the SEC a
Transaction Statement on Schedule 13E-3 with respect to the Offer which
shall be filed as a part of the Schedule TO (such Schedule TO and the
documents included therein pursuant to which the Offer will be made and such
Schedule 13E-3, together with any supplements or amendments to the
foregoing, the "OFFER DOCUMENTS"). The Offer Documents shall comply in all
material respects with the provisions of the Exchange Act. Each of Parent,
Merger Sub and the Company shall promptly correct any information provided
by it for use in the Offer Documents if and to the extent that such
information shall have become false or misleading in any material respect,
and the Parent and Merger Sub shall take all steps necessary to amend or
supplement the Offer Documents and to cause the Offer Documents as so
amended or supplemented to be filed with the SEC and the Offer Documents as
so amended or supplemented to be disseminated to the Company's stockholders,
in each case as and to the extent required by applicable Federal securities
laws. The Company and its counsel shall be given the opportunity to review
the Offer Documents prior to their initial filing with the SEC. Parent and
Merger Sub shall provide the Company and its counsel with a copy of any
written comments or telephonic notification of any oral
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comments Parent, Merger Sub or their counsel may receive from the SEC or its
staff with respect to the Offer Documents promptly after the receipt of such
comments.
(c) ACCEPTANCE FOR PAYMENT. Merger Sub shall provide on a timely basis
the funds necessary to purchase any shares of Company Common Stock that
Merger Sub becomes obligated to purchase pursuant to the Offer.
SECTION 1.2 COMPANY ACTIONS.
(a) APPROVAL OF TRANSACTION. The Company hereby approves of and
consents to the Offer, the Merger and the other transactions contemplated by
this Agreement.
(b) SCHEDULE 14D-9. On the date the Offer Documents are filed with the
SEC, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 with respect to the Offer (such Schedule 14D-9,
as supplemented or amended from time to time, the "SCHEDULE 14D-9")
describing the recommendations of the Company Board. Neither the Company
Board nor any committee thereof shall withdraw or modify, or propose to
withdraw or modify, such recommendations or any related approval, unless
prior to the acceptance for payment of shares of Company Common Stock
pursuant to the Offer, the Board of Directors, based on the recommendation
of the Special Committee, determines in good faith, after consultation with
outside counsel, that it is necessary to do so in order to comply with its
fiduciary duties to the Company's stockholders under any applicable Federal,
foreign, state or provincial law, rule, regulation, order, judgment or
decree (collectively, "LAWS"). The Schedule 14D-9 shall comply in all
material respects with the provisions of the Exchange Act, assuming the
accuracy of the information provided for inclusion therein by Parent and
Merger Sub. Each of the Company, Parent and Merger Sub shall promptly
correct any information provided by them for use in the Schedule 14D-9 if
and to the extent that such information shall have become false or
misleading in any material respect, and the Company shall take all steps
necessary to amend or supplement the Schedule 14D-9 and to cause the
Schedule 14D-9 as so amended or supplemented to be filed with the SEC and
disseminated to the Company's stockholders, in each case as and to the
extent required by applicable Federal securities laws. Parent, Merger Sub
and their counsel shall be given the opportunity to review the
Schedule 14D-9 prior to its initial filing with the SEC. The Company shall
provide Parent, Merger Sub and their counsel with a copy of any written
comments or telephonic notification of any oral comments the Company or its
counsel may receive from the SEC or its staff with respect to the
Schedule 14D-9 promptly after the receipt of such comments.
(c) STOCKHOLDER LISTS. In connection with the Offer, the Company shall
cause its transfer agent to furnish Merger Sub promptly with mailing labels
containing the names and addresses of the record holders of Company Common
Stock as of a recent date and of those persons becoming record holders
subsequent to such date, together with copies of all lists of stockholders,
security position listings and computer files and all other information in
the Company's possession or control regarding the beneficial owners of
Company Common Stock, and shall furnish to Merger Sub such information and
assistance (including updated lists of stockholders, security position
listings and computer files) as Merger Sub may reasonably request in
communicating the Offer to the Company's stockholders. Subject to the
requirements of any applicable Law, and except for such steps as are
necessary to disseminate the Offer Documents and any other documents
necessary to consummate the Merger, Merger Sub and Parent and their agents
shall hold in confidence the information contained in any such labels,
lists, listings and files, and use such information only in connection with
the Offer and the Merger and, if this Agreement shall be terminated, will,
upon request, promptly deliver, and will use their best efforts to cause
their agents promptly to deliver, to the Company all copies of such
information (and all copies of information derived therefrom) then in their
possession or control.
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ARTICLE II
THE MERGER
SECTION 2.1 THE MERGER.
(a) THE MERGER. Subject to and upon the terms and conditions of this
Agreement and the DGCL, at the Effective Time (as defined in Section 2.2),
Merger Sub shall be merged with and into the Company, the separate corporate
existence of Merger Sub shall cease, and the Company shall continue as the
surviving corporation and the separate corporate existence of the Company
with all of its rights, privileges, immunities, powers and franchises shall
continue unaffected by the Merger. The Company as the surviving corporation
after the Merger is hereinafter sometimes referred to as the "SURVIVING
CORPORATION."
(b) EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger and
the applicable provisions of the DGCL. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all the property,
rights, privileges, powers and franchises of the Company and Merger Sub
shall vest in the Surviving Corporation, and all debts, liabilities and
duties of the Company and Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation.
SECTION 2.2 EFFECTIVE TIME. On the date of the Closing, the parties hereto
shall cause the Merger to be consummated by filing a certificate of merger as
contemplated by the DGCL (the "CERTIFICATE OF MERGER"), together with any
required related certificates, with the Secretary of State of the State of
Delaware, in such form as required by, and executed in accordance with the
relevant provisions of, the DGCL (the time of such filing being the "EFFECTIVE
TIME").
SECTION 2.3 CLOSING. Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to
Section 8.1 hereof and subject to the satisfaction or waiver of the conditions
set forth in Article VII, the consummation of the Merger (the "CLOSING") will
take place as promptly as practicable (and in any event not later than two
business days) after satisfaction or waiver of the conditions set forth in
Article VII, at the offices of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New
York, New York, unless another date, time or place is agreed to in writing by
the parties hereto.
SECTION 2.4 CERTIFICATE OF INCORPORATION AND BY-LAWS.
(a) CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
the Company, as in effect immediately prior to the Effective Time, shall be
the Certificate of Incorporation of the Surviving Corporation until
thereafter amended in accordance with the DGCL and such Certificate of
Incorporation.
(b) BY-LAWS. The By-Laws of the Company, as in effect immediately
prior to the Effective Time, shall be the By-Laws of the Surviving
Corporation until thereafter amended in accordance with the DGCL, the
Certificate of Incorporation of the Surviving Corporation and such By-Laws.
SECTION 2.5 DIRECTORS AND OFFICERS. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
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SECTION 2.6 EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Merger Sub, the Company
or the holders of any of the following securities:
(a) CAPITAL STOCK OF MERGER SUB. Each issued and outstanding share of
capital stock of Merger Sub shall be converted into and become one fully
paid and nonassessable share of common stock, par value $0.01 per share, of
the Surviving Corporation and shall constitute the only outstanding shares
of capital stock of the Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK. Each share of Company Common Stock
that is owned (or held in the treasury) by the Company or any wholly owned
subsidiary of the Company shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and no
consideration shall be delivered or deliverable in exchange therefor.
(c) CONVERSION OF COMPANY COMMON STOCK. Subject to Sections 2.6
(b) and (d) and Section 2.7 hereof, each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time (other than
shares of Company Common Stock owned by Merger Sub) shall be converted into
the right to receive the $13.00 in cash, or any higher price per share of
Company Common Stock paid pursuant to the Offer in cash (without interest).
The cash payable upon the conversion of shares of Company Common Stock
pursuant to this Section 2.6 (c) is referred to collectively as the "MERGER
CONSIDERATION." As of the Effective Time, all such shares of Company Common
Stock shall no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each holder of a certificate
representing any such shares of Company Common Stock shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration payable with respect to such shares upon surrender of such
certificate in accordance with Section 2.8, without interest, plus the
amount of any dividends or other distributions with a record date prior to
the Effective Time, if any, remaining unpaid with respect to such shares.
(d) APPRAISAL RIGHTS. Notwithstanding anything in this Agreement to
the contrary, shares ("APPRAISAL SHARES") of Company Common Stock that are
outstanding immediately prior to the Effective Time and that are held by any
person who is entitled to demand, and who properly demands, appraisal of
such Appraisal Shares pursuant to, and who complies in all respects with,
Section 262 of the DGCL ("SECTION 262") shall not be converted into Merger
Consideration as provided in Section 2.6 (c), but rather the holders of
Appraisal Shares shall be entitled to payment of the fair value of such
Appraisal Shares in accordance with Section 262; provided, however, that if
any such holder shall fail to perfect or otherwise shall waive, withdraw or
lose the right to appraisal under Section 262, then the right of such holder
to be paid the fair value of such holder's Appraisal Shares shall cease and
such Appraisal Shares shall be deemed to have been converted as of the
Effective Time into, and to have become exchangeable solely for the right to
receive, the Merger Consideration (but without interest thereon) as provided
in Section 2.6 (c). The Company shall serve prompt notice to Parent of any
demands received by the Company for appraisal of any shares of Company
Common Stock, and Parent shall have the right to participate in and direct
all negotiations and proceedings with respect to such demands. Prior to the
Effective Time, the Company shall not, without the prior written consent of
Parent, make any payment with respect to, or settle or offer to settle, any
such demands, or agree to do any of the foregoing.
SECTION 2.7 STOCK OPTION AND OTHER PLANS. Prior to the Effective Time, the
Company Board (or, if appropriate, any committee thereof) shall adopt
appropriate resolutions and use its reasonable efforts to take all other actions
necessary to provide for the cancellation, effective at the Effective Time, of
all of the outstanding stock options to purchase Common Stock (the "OPTIONS")
heretofore granted under the Company's 1997 Long-Term Incentive Plan and 1997
Non-Employee Directors' Plan (the "COMPANY STOCK OPTION PLANS"). Immediately
prior to the Effective Time, the Company shall use its
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reasonable efforts to ensure that each Option, whether or not then vested or
exercisable, shall no longer be exercisable for the purchase of shares of
Company Common Stock but shall entitle the holder thereof, in cancellation and
settlement therefor, to a payment in cash (subject to any applicable withholding
taxes, the "CASH PAYMENT"), at the Effective Time, equal to the product of
(i) the total number of shares of Company Common Stock subject to such Option
whether or not then vested or exercisable and (ii) the excess of the Merger
Consideration over the exercise price per share of Company Common Stock subject
to such Option, each such Cash Payment to be paid to each holder of an
outstanding Option at the Effective Time. As provided herein, the Company shall
use its reasonable efforts to ensure that the Company Stock Option Plans shall
terminate as of the Effective Time and the provisions of any employee pension
plans (as defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), any material employee welfare plans (as defined
in Section 3(1) of ERISA), or any material bonus, stock option, stock purchase,
incentive, deferred compensation, supplemental retirement, severance or similar
fringe or employee benefit plans, programs or arrangements providing for the
issuance or grant of shares of the capital stock of the Company shall be deleted
as of the Effective Time. The Company will use its reasonable efforts to obtain
any necessary consents to ensure that, after the Effective Time, the only rights
of the holders of Options to purchase shares of Company Common Stock in respect
of such Options will be to receive a Cash Payment in cancellation and settlement
thereof. Prior to the Effective Time, the Company Board (or, if appropriate, any
committee thereof) shall adopt appropriate resolutions and use its reasonable
efforts to take all other actions necessary to provide for termination of the
Employee Stock Purchase Plan, and for the return of all employee contributions
accumulated thereunder.
SECTION 2.8 EXCHANGE OF CERTIFICATES.
(a) PAYING AGENT. Prior to the Effective Time, Parent shall select a
bank or trust company to act as paying agent (the "PAYING AGENT") for the
payment of the Merger Consideration upon surrender of certificates which
immediately prior to the Effective Time represented Company Common Stock.
Immediately prior to the Effective Time, Parent shall deposit or shall cause
to be deposited with or for the account of the Paying Agent, for the benefit
of the holders of shares of Company Common Stock converted into the right to
receive cash, an amount in cash equal to the aggregate Merger Consideration
payable pursuant to Section 2.6(c) (such cash being hereinafter referred to
as the "EXCHANGE FUND"). The Exchange Fund shall not be used for any other
purpose.
(b) EXCHANGE PROCEDURE. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates (the "CERTIFICATES") that immediately prior to
the Effective Time represented outstanding shares of Company Common Stock
whose shares were converted into the right to receive Merger Consideration
pursuant to Section 2.7, (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the
Paying Agent and shall be in such form and have such other provisions as
Parent may reasonably specify) and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for Merger Consideration. Upon
surrender of a Certificate for cancellation to the Paying Agent, together
with such letter of transmittal, duly executed, and such other documents as
may reasonably be required by the Paying Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor the amount of
cash into which the shares of Company Common Stock theretofore represented
by such Certificate shall have been converted pursuant to Section 2.7, and
the Certificate so surrendered shall forthwith be canceled. In the event of
a transfer of ownership of Company Common Stock that is not registered in
the transfer records of the Company, payment may be made to a person other
than the person in whose name the Certificate so surrendered is registered,
if such Certificate shall be properly endorsed or otherwise be in proper
form for transfer and the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to a person other
than the
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registered holder of such Certificate or establish to the satisfaction of
Parent that such tax has been paid or is not applicable. The Merger
Consideration will be delivered by the Paying Agent as promptly as
practicable following the surrender of a Certificate, the related letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Paying Agent. Until surrendered as contemplated by this
Section 2.8, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender
the amount of cash, without interest, into which the shares of Company
Common Stock theretofore represented by such Certificate have been converted
pursuant to Section 2.7. No interest shall be paid or accrue on the cash
payable upon surrender of any Certificate.
(c) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. The Merger
Consideration paid in accordance with the terms of this Article II upon
conversion of any shares of Company Common Stock shall be deemed to have
been paid in full satisfaction of all rights pertaining to such shares of
Company Common Stock, subject, however, to the Surviving Corporation's
obligation to pay any dividends or make any other distributions with a
record date prior to the Effective Time that may have been declared or made
by the Company on such shares of Company Common Stock in accordance with the
terms of this Agreement or prior to the date of this Agreement and which
remain unpaid at the Effective Time.
(d) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
that remains undistributed to the holders of Company Common Stock for one
year after the Effective Time shall be delivered to the Surviving
Corporation, upon demand, and any holder of shares of Company Common Stock
who has not theretofore complied with this Article II shall thereafter look
only to the Surviving Corporation for payment of its claim for Merger
Consideration.
(e) NO LIABILITY. None of Parent, Merger Sub, the Company or the
Paying Agent shall be liable to any person in respect of any cash from the
Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar Law.
(f) INVESTMENT OF EXCHANGE FUND. The Paying Agent shall invest any
cash included in the Exchange Fund, as directed by Parent, on a daily basis.
Any interest and other income resulting from such investments shall be paid
to Parent.
(g) WITHHOLDING RIGHTS. The Surviving Corporation shall be entitled to
deduct and withhold from the consideration otherwise payable to any holder
of Company Common Stock pursuant to this Agreement such amounts as may be
required to be deducted and withheld with respect to the making of such
payment under the United States Internal Revenue Code of 1986, as amended,
or under any provision of state, local or foreign tax Law, and Parent shall
provide, or cause the Paying Agent to provide, to such holders written
notice of the amounts so deducted or withheld.
SECTION 2.9 STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of the Company and after the Effective Time there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of shares of Company Common Stock that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, any Certificates are
presented to the Surviving Corporation or the Paying Agent for any reason, they
shall be canceled and exchanged as provided in this Article II.
SECTION 2.10 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificate evidencing shares of Company Common Stock shall have been lost,
stolen or destroyed, the holder of such lost, stolen or destroyed Certificate
shall execute an affidavit of that fact upon request. The holder of any such
lost, stolen or destroyed Certificate shall also deliver a reasonable indemnity
against any claim that may be made against Parent, Merger Sub, the Surviving
Corporation or the Paying Agent with respect to the Certificate alleged to have
been lost, stolen or destroyed. The affidavit and any indemnity which may be
required
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hereunder shall be delivered to the Paying Agent, who shall be responsible for
making payment for such lost, stolen or destroyed Certificate pursuant to the
terms hereof.
SECTION 2.11 TAKING OF NECESSARY ACTION; FURTHER ACTION. Each of Parent,
Merger Sub and the Company will take all such reasonable and lawful action as
may be necessary or appropriate in order to effectuate the Merger in accordance
with this Agreement as promptly as possible. If, at any time after the Effective
Time, any such further action is necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full right,
title and possession to all assets, property, rights, privileges, powers and
franchises of the Company and Merger Sub, the officers and directors of the
Company and Merger Sub immediately prior to the Effective Time are fully
authorized in the name of their respective corporations or otherwise to take,
and will take, all such lawful and necessary action.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub as
follows:
SECTION 3.1 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has the
requisite corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby have
been duly and validly authorized by the requisite corporate action, and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions so contemplated (other than the
adoption of this Agreement by the holders of at least a majority of the
outstanding shares of Company Common Stock entitled to vote in accordance with
the DGCL and the Company's Certificate of Incorporation and By-Laws). This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by Parent and Merger Sub,
as applicable, constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited or affected by (i) bankruptcy, insolvency,
reorganization, moratorium, liquidation, arrangement, fraudulent transfer,
fraudulent conveyance and other similar laws (including, without limitation,
court decisions) now or hereafter in effect and affecting the rights and
remedies of creditors generally or providing for the relief of debtors,
(ii) the refusal of a particular court to grant equitable remedies, including,
without limitation, specific performance and injunctive relief, and
(iii) general principles of equity (regardless of whether such remedies are
sought in a proceeding in equity or at Law).
SECTION 3.2 OPINION OF FINANCIAL ADVISOR. The Special Committee has
received the opinion of Merrill Lynch, Pierce, Fenner & Smith, Incorporated,
dated as of the date hereof, to the effect that, as of such date, the
consideration to be received by the holders of shares of Company Common Stock
pursuant to the Offer and the Merger is fair from a financial point of view to
such holders, other than Parent, Merger Sub, the Parent Stockholders and the
Other Rothman Trusts.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent and warrant to
the Company as follows:
SECTION 4.1 ORGANIZATION AND QUALIFICATION. Each of Parent and Merger Sub
is duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized.
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SECTION 4.2 ORGANIZATION DOCUMENTS. Each of Parent and Merger Sub has
heretofore furnished to the Company complete and correct copies of its
Certificate of Incorporation and By-Laws, each as most recently restated and
subsequently amended to date.
SECTION 4.3 CAPITALIZATION.
(a) The authorized capital stock of Parent consists of 10,000,000 shares of
common stock, $0.0001 par value per share ("PARENT COMMON STOCK"). As of the
date hereof, (i) 8,775,840 shares of Parent Common Stock were issued and
outstanding, all of which are validly issued, fully paid and nonassessable,
(ii) no shares were held in treasury and (iii) no shares of Parent Common Stock
were held by subsidiaries of Parent. Except as set forth in this Section 4.3 or
Section 4.3 of the written disclosure schedule delivered on or prior to the date
hereof by Parent to the Company that is arranged in paragraphs corresponding to
the numbered and lettered paragraphs contained in this Article IV (the "PARENT
DISCLOSURE SCHEDULE"), there are no options, warrants or other rights,
agreements, arrangements or commitments of any character relating to the issued
or unissued capital stock of Parent or any of its subsidiaries or obligating
Parent or any of its subsidiaries to issue or sell any shares of capital stock
of, or other equity interests in, Parent or any of its subsidiaries. All of the
outstanding shares of capital stock of each of Parent's subsidiaries is duly
authorized, validly issued, fully paid and nonassessable, and all such shares
are owned by Parent free and clear of all security interests, liens, claims,
pledges, agreements, limitations on voting rights, charges or other encumbrances
of any nature whatsoever (collectively, "LIENS").
(b) As of the date hereof, the authorized capital stock of Merger Sub
consists of 3,000 shares of common stock, $0.01 par value per share, of which
100 shares are issued and outstanding. All the outstanding shares of capital
stock of Merger Sub are owned by Parent, free and clear of all Liens.
SECTION 4.4 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and
Merger Sub has the requisite corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Parent and Merger Sub and the consummation by Parent and
Merger Sub of the transactions contemplated hereby have been duly and validly
authorized by the requisite corporate action on the part of Parent and Merger
Sub, and no other corporate proceedings on the part of Parent or Merger Sub are
necessary to authorize this Agreement or to consummate the transactions
contemplated thereby. This Agreement has been duly and validly executed and
delivered by Parent and Merger Sub and, assuming the due authorization,
execution and delivery by the Company, constitutes a legal, valid and binding
obligation of Parent and Merger Sub enforceable against each of them in
accordance with its terms, except as such enforceability may be limited or
affected by (i) bankruptcy, insolvency, reorganization, moratorium, liquidation,
arrangement, fraudulent transfer, fraudulent conveyance and other similar laws
(including, without limitation, court decisions) now or hereafter in effect and
affecting the rights and remedies of creditors generally or providing for the
relief of debtors, (ii) the refusal of a particular court to grant equitable
remedies, including, without limitation, specific performance and injunctive
relief, and (iii) general principles of equity (regardless of whether such
remedies are sought in a proceeding in equity or at law).
SECTION 4.5 NO CONFLICT, REQUIRED FILINGS AND CONSENTS.
(a) Except as set forth in Section 4.5(a) of the Parent Disclosure Schedule,
the execution and delivery of this Agreement by Parent and Merger Sub does not,
and the performance of this Agreement by Parent and Merger Sub and the
consummation by Parent and Merger Sub of the transactions contemplated hereby
will not, (i) conflict with or violate the Certificate of Incorporation or
By-Laws of Parent or Merger Sub, (ii) to the knowledge of Parent, conflict with
or violate any Laws applicable to Parent or any of its subsidiaries or by which
its or any of their respective properties are bound or affected, or (iii) to the
knowledge of Parent, result in any breach of or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or impair Parent's or any of its subsidiaries' rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment,
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acceleration or cancellation of, or result in the creation of a Lien on any of
the properties or assets of Parent or any of its subsidiaries pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Parent or any of its
subsidiaries is a party or by which Parent or any of its subsidiaries or its or
any of their respective properties are bound or affected, except in the case of
clauses (ii) and (iii) for any such conflicts, violations, breaches, defaults or
other occurrences that do not constitute a Material Adverse Effect. When used in
connection with the Parent or any of its subsidiaries, as the case may be, the
term "MATERIAL ADVERSE EFFECT" means any change, effect or circumstance that,
individually or when taken together with all other such changes, effects or
circumstances that have occurred prior to the date of determination of the
occurrence of such change, effect or circumstance, (i) is materially adverse to
the business, assets (including intangible assets), financial condition or
results of operations of the Parent and its subsidiaries taken as a whole, or
(ii) delays or prevents the consummation of the transactions contemplated
hereby.
(b) Except as set forth in Section 4.5(b) of the Parent Disclosure Schedule,
the execution and delivery of this Agreement by Parent and Merger Sub does not,
and the performance of this Agreement by Parent and Merger Sub will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or foreign,
except (i) for applicable requirements, if any, of the Securities Act of 1933,
as amended, the Exchange Act, state securities Laws, the pre-merger notification
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, the legal requirements of any foreign jurisdiction requiring
notification in connection with the Merger and the transactions contemplated
hereby and the filing and recordation of appropriate merger or other documents
as required by the DGCL, and (ii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
(A) would not prevent or materially delay consummation of the Merger or
otherwise prevent or materially delay Parent or Merger Sub from performing their
respective obligations under this Agreement, or (B) do not constitute a Material
Adverse Effect.
SECTION 4.6 INFORMATION SUPPLIED. None of the information supplied or to
be supplied by Parent or Merger Sub for inclusion or incorporation by reference
in (i) the Offer Documents or the Schedule 14D-9 will, at the time such document
is filed with the SEC, at any time it is amended or supplemented or at the time
it is first published, sent or given to the Company's stockholders, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading,
or (ii) the Proxy Statement and any Schedule 13E-3 will, at the date the Proxy
Statement is first mailed to the Company's stockholders or at the time of the
Company Stockholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading.
SECTION 4.7 FINANCING. Merger Sub has received and delivered to the
Company a true and complete executed copy of the Credit Agreement, dated the
date hereof, by and among Parent and Merger Sub, as co-borrowers, the lenders
named therein and The Chase Manhattan Bank, as administrative agent (the "CREDIT
AGREEMENT"), with respect to the transactions contemplated hereby and, Merger
Sub will have available, at the expiration of the Offer and through the
consummation of the Merger, pursuant to the terms and conditions of the Credit
Agreement sufficient funds necessary for Merger Sub to consummate the Offer, the
Merger and the other transactions contemplated hereby and to pay all related
expenses.
SECTION 4.8 BROKERS. Except for First Union Securities, Inc. ("FIRST
UNION"), no broker, finder or investment banker or other party is entitled to
any brokerage, finder's or other similar fee or commission in connection with
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Parent or Merger Sub or any of their subsidiaries or affiliates.
The fees and expenses of First Union will be paid by Parent.
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SECTION 4.9 SALE OF THE COMPANY. Neither Parent or Merger Sub nor any of
their affiliates has any agreement as of the date of this Agreement to sell all
or substantially all of the Company.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1 NO SOLICITATION.
(a) The Company shall not, directly or indirectly, through any officer,
director, employee, representative or agent of the Company or any of its
subsidiaries, (i) solicit or initiate any inquiries or proposals regarding any
merger, sale of substantial assets, sale of more than 35% of the outstanding
shares of capital stock (including without limitation by way of a tender offer)
or similar transactions involving the Company other than the Merger (any of the
foregoing inquiries or proposals being referred to herein as an "ACQUISITION
PROPOSAL"), (ii) engage in negotiations or discussions concerning, or provide
any nonpublic information to any person relating to, any Acquisition Proposal or
(iii) agree to, approve or recommend any Acquisition Proposal. Nothing contained
in this Section 5.1(a) shall prevent the Special Committee from considering,
negotiating, discussing, approving and recommending to the stockholders of the
Company, or providing information to any person in connection with, an
unsolicited Acquisition Proposal or unsolicited request for non-public
information concerning the Company, provided the Special Committee determines in
good faith that it is required to do so in order to discharge properly its
fiduciary duties, or taking any action and making any disclosure which the
Special Committee determines is required to be taken or made under any
applicable Law. Nothing contained in this Section 5.1 shall prohibit the Special
Committee from complying with Rules 14e-2 and 14d-9 promulgated under the
Exchange Act with regard to a tender or exchange offer under any applicable Law.
(b) Unless otherwise required under the applicable fiduciary duties of the
directors of the Company, the Special Committee shall promptly notify Parent
after receipt of any Acquisition Proposal, or any material modification of or
amendment to any Acquisition Proposal. Such notice to Parent shall indicate
whether the Special Committee is providing or intends to provide the person
making the Acquisition Proposal with access to information concerning the
Company as provided in Section 5.1(c).
(c) If the Company Board or the Special Committee receives a request for
nonpublic information by a person who makes, or indicates that it is considering
making, an Acquisition Proposal, and the Special Committee determines in good
faith that it is required to cause the Company to act as provided in this
Section 5.1(c) in order to discharge properly the directors' fiduciary duties,
then, provided such person has executed a confidentiality agreement with the
Company in form and substance satisfactory to the Special Committee, the Special
Committee may provide such person with access to such nonpublic information
regarding the Company.
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ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 PREPARATION OF PROXY STATEMENT; STOCKHOLDERS MEETING. (a) If
the adoption of this Agreement by the Company's stockholders is required by Law
("COMPANY STOCKHOLDER APPROVAL") in order to consummate the Merger, the Company
shall, at Parent's request, as soon as practicable following the expiration of
the Offer, prepare and file with the SEC an information or proxy statement (the
"PROXY STATEMENT") in preliminary form, and each of the Company and Parent shall
use its reasonable best efforts to respond as promptly as practicable to any
comments of the SEC with respect thereto. The Company shall notify Parent
promptly of the receipt of any comments from the SEC or its staff and of any
request by the SEC or its staff for amendments or supplements to the Proxy
Statement or for additional information and shall supply Parent with copies of
all correspondence between the Company or any of its representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement. If at any time prior to receipt of the Company Stockholder Approval
there shall occur any event that is required to be set forth in an amendment or
supplement to the Proxy Statement, the Company shall promptly prepare and mail
to its stockholders such an amendment or supplement. The Company shall not mail
any Proxy Statement, or any amendment or supplement thereto, to which Parent
reasonably objects. The Company shall use its reasonable best efforts to cause
the Proxy Statement to be mailed to the Company's stockholders as promptly as
practicable after filing with the SEC.
(b) If the adoption of this Agreement by the Company's stockholders is
required by Law in order to consummate the Merger, the Company shall, as soon as
practicable following the expiration of the Offer, duly call, give notice of,
convene and hold a meeting of its stockholders (the "COMPANY STOCKHOLDERS
MEETING") for the purpose of seeking the Company Stockholder Approval. The
Company shall, through the Company Board based upon the recommendation of the
Special Committee, recommend to its stockholders that they give the Company
Stockholder Approval and neither the Company Board nor any committee thereof
shall withdraw or modify, or propose to withdraw or modify such recommendation
or related approval, unless the Company Board, based on the recommendation of
the Special Committee, determines in good faith, after consultation with outside
counsel, that it is necessary to do so in order to comply with its fiduciary
duties to the Company's stockholders under applicable Law; PROVIDED, that, if
Merger Sub so elects, Merger Sub shall execute a written consent approving the
Merger and, in lieu of holding a stockholders meeting, the Company shall notify
the stockholders of the Company of such written consent in accordance with the
By-Laws of the Company and Section 228 of the DGCL. Notwithstanding the
foregoing, if Merger Sub shall acquire at least 90% of the outstanding shares of
each class of capital stock of the Company, the parties shall take all necessary
and appropriate action to cause the Merger to become effective as soon as
practicable after the expiration of the Offer without a stockholders meeting in
accordance with Section 253 of the DGCL (a "SHORT-FORM MERGER").
(c) Parent shall cause all shares of Company Common Stock purchased by
Merger Sub pursuant to the Offer and all other shares of Company Common Stock
owned by Merger Sub to be voted in favor of the adoption of this Agreement, if
applicable.
SECTION 6.2 ACCESS TO INFORMATION. Upon reasonable notice, the Company and
Parent shall each (and shall cause each of their respective subsidiaries to)
afford to the officers, employees, accountants, counsel and other
representatives of the other, reasonable access, during the period prior to the
Effective Time, to all its properties, books, contracts, commitments and records
and, during such period, the Company and Parent each shall (and shall cause each
of their respective subsidiaries to) furnish promptly to the other all
information concerning its business, properties and personnel as such other
party may reasonably request, and each shall make available to the other the
appropriate individuals (including attorneys, accountants and other
professionals) for discussion of the other's business, properties and personnel
as either Parent or the Company may reasonably request.
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SECTION 6.3 CONSENTS; APPROVALS. The Company, Parent and Merger Sub shall
each use all reasonable efforts to obtain all consents, waivers, approvals,
authorizations or orders (including, without limitation, all United States and
foreign governmental and regulatory rulings and approvals), and the Company,
Parent and Merger Sub shall make all filings (including, without limitation, all
filings with United States and foreign governmental or regulatory agencies)
required in connection with the authorization, execution and delivery of this
Agreement by each of them and the consummation by them of the transactions
contemplated hereby, in each case as promptly as practicable.
SECTION 6.4 INDEMNIFICATION AND INSURANCE
(a) The By-Laws of the Surviving Corporation shall contain the provisions
with respect to indemnification set forth in the By-Laws of the Company on the
date hereof, which provisions shall not be amended, repealed or otherwise
modified in any manner that would adversely affect the rights thereunder of
individuals who on or prior to the Effective Time were directors, officers,
employees or agents of the Company, unless such modification is required by Law.
(b) The Company shall, to the fullest extent permitted under applicable Law
or under the Company's Certificate of Incorporation or By-Laws and regardless of
whether the Merger becomes effective, indemnify and hold harmless, and, after
the Effective Time, the Surviving Corporation shall, to the fullest extent
permitted under applicable Law or under the Surviving Corporation's Certificate
of Incorporation or By-Laws as in effect at the Effective Time, indemnify and
hold harmless, each present and former director, officer or employee of the
Company or any of its subsidiaries (collectively, the "INDEMNIFIED PARTIES")
against any costs or expenses (including reasonable attorneys' fees and
disbursements), judgments, fines, losses, claims, damages, liabilities and
amounts paid in settlement in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, (x) arising out of or pertaining to this Agreement or the
transactions contemplated by this Agreement or (y) otherwise with respect to any
acts or omissions occurring at or prior to the Effective Time, to the same
extent as provided in the Company's Certificate of Incorporation or By-Laws or
any applicable contract or agreement (including, without limitation,
indemnification agreements with the Company's directors and officers) as in
effect on the date hereof, in each case through the later of (i) six years from
the date hereof and (ii) the expiration of any statute of limitations applicable
to such claim, action, suit or proceeding. In the event of any such claim,
action, suit, proceeding or investigation (whether arising before or after the
Effective Time), (i) any counsel retained by the Indemnified Parties for any
period after the Effective Time shall be reasonably satisfactory to the
Surviving Corporation, (ii) after the Effective Time, the Surviving Corporation
shall pay the reasonable fees and expenses of such counsel, promptly after
statements therefor are received, and (iii) the Surviving Corporation will
cooperate in the defense of any such matter; PROVIDED, HOWEVER, that the
Surviving Corporation shall not be liable for any settlement effected without
its written consent (which consent shall not be unreasonably withheld); and
PROVIDED, FURTHER, that, in the event that any claim or claims for
indemnification are asserted or made within such period, all rights to
indemnification in respect of any such claim or claims shall continue until the
disposition of any and all such claims. The Indemnified Parties as a group may
retain only one law firm to represent them with respect to any single action
unless an Indemnified Party, based on advice of counsel, reasonably believes
that there may be, under applicable standards of professional conduct, a
conflict of interest between the positions of any two or more Indemnified
Parties.
(c) The Surviving Corporation shall honor and fulfill in all respects the
obligations of the Company pursuant to indemnification agreements with the
Company's directors and officers existing at or before the Effective Time, and
Parent shall in turn guarantee the obligations of the Surviving Corporation.
(d) For a period of six years after the Effective Time, the Surviving
Corporation shall maintain in effect directors' and officers' liability
insurance covering those persons who are currently covered by the Company's
directors' and officers' liability insurance policy (a copy of which has been
made available to
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Parent) on terms no less advantageous to such persons than those now applicable
to directors and officers of the Company.
(e) This Section 6.4 shall survive the consummation of the Merger, is
intended to benefit the Company, the Surviving Corporation and the Indemnified
Parties, shall be binding on all successors and assigns the Surviving
Corporation and shall be enforceable by the Indemnified Parties and their
respective heirs or representatives, and is in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise. The Surviving Corporation shall
pay all expenses, including reasonable attorney's fees and disbursements, that
may be incurred by any Indemnified Party in enforcing the provisions of this
Section 6.4.
SECTION 6.5 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of
(i) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence
of which would be likely to cause any representation or warranty contained in
this Agreement to become materially untrue or inaccurate, or (ii) any failure of
the Company, Parent or Merger Sub, as the case may be, materially to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to
this Section 6.5 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice, and PROVIDED FURTHER that failure
to give such notice shall not be treated as a breach of covenant for the
purposes of Section 7.2(b) or 7.3(b) unless the failure to give such notice
results in material prejudice to the other party.
SECTION 6.6 FURTHER ACTION. Upon the terms and subject to the conditions
hereof each of the parties hereto shall use all reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all other things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement, to obtain in a
timely manner all necessary waivers, consents and approvals and to effect all
necessary registrations and filings, and otherwise to satisfy or cause to be
satisfied all conditions precedent to its obligations under this Agreement.
SECTION 6.7 PUBLIC ANNOUNCEMENTS. Parent and Merger Sub, on the one hand,
and the Company, on the other hand, shall consult with each other before
issuing, and provide each other the opportunity to review and comment upon, any
press release or other public statements with respect to the transactions
contemplated by this Agreement, including the Offer and the Merger, and shall
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable Law, court process or the
rules and regulations of the Nasdaq Stock Market.
SECTION 6.8 CONVEYANCE TAXES. Parent and the Company shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees, and any similar taxes (collectively, the
"TRANSFER TAXES") which become payable in connection with the transactions
contemplated hereby that are required or permitted to be filed at or before the
Effective Time. Parent or the Surviving Corporation shall pay all Transfer Taxes
imposed in connection with the transactions contemplated hereby.
SECTION 6.9 GUARANTEE OF MERGER SUB OBLIGATIONS. Parent shall guarantee
the full and punctual performance by Merger Sub of all the obligations hereunder
of Merger Sub.
SECTION 6.10 CONTRIBUTION OF PARENT STOCKHOLDER SHARES. The Parent
Stockholders hereby agree that (i) on or prior to the initial expiration date of
the Offer or any extension thereof, as the case may be, the Parent Stockholders
shall contribute the Parent Stockholder Shares to Parent and shall cause Parent
to contribute the Parent Stockholder Shares to Merger Sub and (ii) the Parent
Stockholders shall not take any action, or omit to take any action which they
could reasonably be expected to take, if the taking of, or the omission to take,
such action could reasonably be expected to adversely affect the ability of the
Purchaser to consummate the transactions contemplated hereby; PROVIDED, HOWEVER,
that the Parent
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Stockholders shall only be required to make the contributions described in
subsection (i) of this Section 6.10 if all of the conditions to the Offer set
forth on EXHIBIT A hereto are satisfied unless the failure to satisfy such
conditions is a result of the Parent Stockholders knowingly taking any action,
or knowingly omitting to take any action which they could reasonably be expected
to take, if the taking of, or omission to take, such action could reasonably be
expected to adversely affect the ability of the Purchaser to consummate the
transactions contemplated hereby.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) CONSUMMATION OF OFFER. Merger Sub shall have commenced the Offer
and shall have purchased, pursuant to the terms and conditions of the Offer,
a majority of the outstanding shares of Company Common Stock not owned by
the Parent Stockholders and the other Rothman Trusts, consisting of
1,281,150 shares of Company Common Stock.
(b) REQUISITE STOCKHOLDER APPROVAL. If required by Law in order to
consummate the Merger, the Company shall have obtained the Company
Stockholder Approval;
(c) REQUIRED CONSENTS AND APPROVALS. All material consents, waivers,
approvals, authorizations or orders of third parties to the consummation of
the Merger shall have been obtained; and
(d) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No statute, rule,
regulation, executive order, decree, ruling, temporary restraining order,
preliminary or permanent injunction or other order shall have been enacted,
entered, promulgated, enforced or issued by any court or governmental
authority of competent jurisdiction or shall otherwise be in effect which
prohibits, restrains, enjoins or restricts the consummation of the Merger;
provided, however, that in the case of a decree, injunction or other order,
each of the parties shall have used reasonable efforts to prevent the entry
of any such injunction or other order and to appeal as promptly as possible
any decree, injunction or other order that may be entered.
SECTION 7.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER
SUB. The obligations of Parent and Merger Sub to effect the Merger are also
subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company contained in this Agreement shall be true and correct in all
respects at and as of the Effective Time as if made at and as of such time,
except for (i) changes contemplated by this Agreement, (ii) those
representations and warranties which address matters only as of a particular
date (which shall have been true and correct as of such date, subject to
clause (iii)), and (iii) where the failure to be true and correct shall not
constitute a Material Adverse Effect, with the same force and effect as if
made at and as of the Effective Time;
(b) AGREEMENTS AND COVENANTS. The Company shall have performed or
complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it at or prior to the
Effective Time;
SECTION 7.3 ADDITIONAL CONDITIONS TO OBLIGATION OF THE COMPANY. The
obligation of the Company to effect the Merger is also subject to the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Parent and Merger Sub contained in this Agreement shall be true and
correct in all respects on and as of the Effective
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Time, except for (i) changes contemplated by this Agreement, (ii) those
representations and warranties which address matters only as of a particular
date (which shall have been true and correct as of such date, subject to
clause (iii)), and (iii) where the failure to be true and correct shall not
constitute a Material Adverse Effect, with the same force and effect as if
made on and as of the Effective Time;
(b) AGREEMENTS AND COVENANTS. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by
them on or prior to the Effective Time;
ARTICLE VIII
TERMINATION
SECTION 8.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, notwithstanding approval thereof by the
stockholders of the Company or Parent:
(a) by mutual written consent of Parent, Merger Sub and the Special
Committee on behalf of the Company; or
(b) by either Parent or the Special Committee on behalf of the Company:
(i) if the purchase of the shares of Company Common Stock pursuant to
the Offer is not consummated on or before October 31, 2000, unless the
failure to consummate the Offer is the result of a breach of this
Agreement by the party seeking to terminate this Agreement; or
(ii) if any governmental entity issues an order, decree or ruling or
takes any other action permanently enjoining, restraining or otherwise
prohibiting the Merger and such order, decree, ruling or other action
shall have become final and nonappealable; or
(c) by Parent or the Special Committee if the Special Committee
determines in good faith that the Special Committee's fiduciary obligations
under applicable law require the Special Committee to withdraw its
recommendation of this Agreement and the transactions contemplated hereby;
or
(d) by the Special Committee on behalf of the Company if (i) Parent
fails to commence the Offer as provided in Section 1.1, (ii) Parent shall
have terminated the Offer or permitted the Offer to expire without the
purchase of shares of Company Common Stock thereunder or (iii) Parent fails
to purchase validly tendered shares of Company Common Stock in violation of
the terms and conditions of the Offer or this Agreement; or
(e) by either Parent or the Special Committee if the Merger shall not
have been consummated by January 31, 2001 (provided that the right to
terminate this Agreement under this Section 8.1(e) shall not be available to
any party whose failure to fulfill any obligation under this Agreement has
been the cause of or resulted in the failure of the Merger to occur on or
before such date); or
(f) by the Special Committee if there has been a material
misrepresentation or breach of warranty in the representations and
warranties made by Parent or Merger Sub that cannot be cured at or prior to
the Effective Time; or
(g) by Parent, if there has been a material misrepresentation or breach
of warranty in the representations and warranties made by the Company that
cannot be cured at or prior to the Effective Time; or
(h) by Parent or the Special Committee, if the Special Committee shall
have (i) recommended to the stockholders of the Company an Alternative
Transaction (as defined below); or (ii) after the commencement of a tender
offer or exchange offer for 35% or more of the outstanding shares of Company
Common Stock (other than by Merger Sub or an affiliate of Merger Sub),
recommended that the stockholders of the Company tender their shares in such
tender or exchange offer.
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As used herein, "Alternative Transaction" means any of (i) a transaction or
series of transactions pursuant to which any person (or group of persons) other
than Parent or any of its subsidiaries or any affiliate of any thereof (a "THIRD
PARTY") acquires or would acquire more than 35% of the outstanding shares of
Common Stock of the Company, whether from the Company or pursuant to a tender
offer or exchange offer or otherwise, (ii) any acquisition or proposed
acquisition of the Company or any of its subsidiaries by a merger or other
business combination (including any so-called "merger of equals" and whether or
not the Company or any of its subsidiaries is the entity surviving any such
merger or business combination) or (iii) any other transaction pursuant to which
any Third Party acquires or would acquire control of assets (including for this
purpose the outstanding equity securities of subsidiaries of the Company and any
entity surviving any merger or business combination including any of them) of
the Company or any of its subsidiaries having a fair market value equal to more
than 35% of the fair market value of all the assets of the Company and its
subsidiaries, taken as a whole, immediately prior to such transaction.
SECTION 8.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 8.1, (i) this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto or any of
its affiliates, directors, officers or stockholders, and (ii) nothing herein
shall relieve any party from liability for any breach hereof occurring prior to
termination.
SECTION 8.3 FEES AND EXPENSES. All fees and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses, whether or not the Merger is
consummated.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
(a) The representations, warranties and agreements in this Agreement shall
terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 8.1, as the case may be, except that the agreements set
forth in Article I, Article II, Sections 6.3 and 6.4 shall survive the Effective
Time indefinitely and those set forth in Section 8.3 shall survive such
termination (whether at the Effective Time or pursuant to Section 8.1)
indefinitely. Nothing in this Section 9.1(a) shall relieve any party for any
breach of any representation, warranty or agreement in this Agreement occurring
prior to termination.
(b) Any disclosure made with reference to one or more Sections of the
Parent Disclosure Schedule shall be deemed disclosed only with respect to such
Section unless such disclosure is made in such a way as to make its relevance to
the information called for by another Section of such schedule readily apparent
in which case, such disclosure shall be deemed to have been included in such
other Section, notwithstanding the omission of a cross reference thereto.
SECTION 9.2 ACTIONS OF THE COMPANY. Prior to the Effective Time, any
action, approval, authorization, waiver or consent of the Company (including the
Company Board) required or permitted by this Agreement shall be deemed to have
been taken or given only if such action, approval, authorization, waiver or
consent shall have received the approval of the Special Committee.
SECTION 9.3 NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made if and when delivered personally or by overnight courier to the parties
at the following addresses or sent by electronic transmission, with
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<PAGE>
confirmation of receipt, to the telecopy numbers specified below (or at such
other address or telecopy number for a party as shall be specified by like
notice):
(a) If to Parent, Merger Sub or the Parent Stockholders:
L&LR, Inc.
301 Route 10 East
Whippany, New Jersey 07981
Telecopier No.: (973) 884-9556
Telephone No.: (973) 884-9555
Attention: Lewis I. Rothman
With a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Telecopier No.: (212) 309-6273
Telephone No.: (212) 309-6000
Attention: Samuel B. Fortenbaugh III, Esq.
(b) If to the Company:
800-JR CIGAR, Inc.
301 Route 10 East
Whippany, New Jersey 07981
Telecopier No.: (973) 884-9556
Telephone No.: (973) 884-9555
Attention: Michael E. Colleton
With a copy to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019-6092
Telecopier No.: (212) 259-6333
Telephone No.: (212) 259-8000
Attention: Morton A. Pierce, Esq.
SECTION 9.4 CERTAIN DEFINITIONS. For purposes of this Agreement, the term:
(a) "affiliate" means a person that, directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person;
(b) "beneficial owner" with respect to any shares of Company Common
Stock means a person who shall be deemed to be the beneficial owner of such
shares (i) which such person or any of its affiliates or associates (as such
term is defined in Rule 12b-2 of the Exchange Act) beneficially owns,
directly or indirectly, (ii) which such person or any of its affiliates or
associates has, directly or indirectly, (A) the right to acquire (whether
such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement, arrangement
or understanding, or (iii) which are beneficially owned, directly or
indirectly, by any other persons with whom such person or any of its
affiliates or associates has any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing of any shares;
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<PAGE>
(c) "business day" means any day other than a day on which banks in the
State of New York are required or authorized to be closed;
(d) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
(e) "generally accepted accounting principles" or "GAAP" shall mean
United States generally accepted accounting principles;
(f) "knowledge" of the Company or Parent, as the case may be, shall
mean the actual knowledge of the executive officers of the Company or the
executive officers of Parent, respectively, as such knowledge has been
obtained in the normal conduct of business;
(g) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d) (3) of the Exchange Act); and
(h) "subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, Parent or any other person means any corporation, partnership,
joint venture or other legal entity of which the Company, the Surviving
Corporation, Parent or such other person, as the case may be (either alone
or through or together with any other subsidiary), owns, directly or
indirectly, more than 50% of the stock or other equity interests the holders
of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity.
SECTION 9.5 AMENDMENT. This Agreement may only be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; PROVIDED, HOWEVER, that, after approval
of the Merger by the stockholders of the Company, no amendment may be made which
by Law requires further approval by such stockholders without such further
approval; and PROVIDED FURTHER, that consent of the Company shall require the
approval of the Special Committee. This Agreement may not be amended except by
an instrument in writing signed by the parties hereto.
SECTION 9.6 WAIVER. At any time prior to the Effective Time, any party
hereto may with respect to any other party hereto (a) extend the time for the
performance of any of the obligations or other acts, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto, or (c) waive compliance with any of the agreements or
conditions contained herein; PROVIDED, HOWEVER, that any such extension or
waiver by the Company shall require the approval of the Special Committee. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party or parties to be bound thereby.
SECTION 9.7 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.8 SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of Law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the fullest extent possible.
SECTION 9.9 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and supersedes all prior agreements and undertakings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof.
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<PAGE>
SECTION 9.10 ASSIGNMENT. This Agreement shall not be assigned by operation
of Law or otherwise, except that Parent and Merger Sub may assign all or any of
their rights hereunder to any direct wholly-owned subsidiary of Parent provided
that no such assignment shall relieve the assigning party of its obligations
hereunder.
SECTION 9.11 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, including, without limitation, by way of subrogation, other than
Section 6.4 (which is intended to be for the benefit of the Indemnified Parties
and may be enforced by such Indemnified Parties).
SECTION 9.12 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude any other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
SECTION 9.13 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York (other than any
conflicts of law rules which might result in the application of the Laws of any
other jurisdiction), except to the extent that the DGCL applies, in which case
such Law shall apply.
SECTION 9.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 9.15 CONSENT TO JURISDICTION. Each of the parties hereto:
(a) consents to submit itself to the personal jurisdiction of (i) the
United States District Court for the Southern District of New York in the
event any dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement to the extent such court would have subject
matter jurisdiction with respect to such dispute and (ii) the Chancery or
other Courts of the State of Delaware otherwise;
(b) agrees that it will not attempt to deny or defeat such personal
jurisdiction or venue by motion or other request for leave from any such
court;
(c) agrees that it will not bring any action relating to this Agreement
or any of the transactions contemplated by this Agreement in any court other
than such courts;
(d) agrees that service of process in any such action or proceeding may
be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to a party at its
address set forth in Section 9.3 or at such other address of which a party
shall have been notified pursuant thereto; and
(e) agrees that nothing herein shall affect the right to effect service
of process in any other manner permitted by Law.
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<PAGE>
IN WITNESS WHEREOF, Parent, Merger Sub, the Company and the Parent
Stockholders have caused this Agreement to be executed as of the date first
written above by their respective officers thereunto duly authorized.
<TABLE>
<S> <C> <C>
L&LR, INC.
By: /s/ LEWIS I. ROTHMAN
-----------------------------------------
Name: Lewis I. Rothman
Title: President
JRC ACQUISITION CORP.
By: /s/ LEWIS I. ROTHMAN
-----------------------------------------
Name: Lewis I. Rothman
Title: President
800-JR CIGAR, INC.
By: /s/ LEWIS I. ROTHMAN
-----------------------------------------
Name: Lewis I. Rothman
Title: Chief Executive Officer
As to Section 6.10 hereof only:
/s/ LEWIS I. ROTHMAN
---------------------------------------------
Lewis I. Rothman
/s/ LAVONDA M. ROTHMAN
---------------------------------------------
LaVonda M. Rothman
LEWIS IRVING ROTHMAN 1998 TRUST #1
u/a/d November 10, 1998
By: /s/ SAMUEL BORNSTEIN
-----------------------------------------
Name: Samuel Bornstein
Title: Trustee
</TABLE>
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<PAGE>
EXHIBIT A
CONDITIONS TO THE OFFER
(1) A majority of the outstanding shares of Company Common Stock not owned
by the Parent Stockholders and the Other Rothman Trusts, consisting of 1,281,150
shares of Company Common Stock, shall have been validly tendered and not
withdrawn prior to the expiration of the Offer (the "Minimum Condition").
(2) Merger Sub shall have available at the expiration of the Offer the
financing pursuant to the Credit Agreement.
(3) The Company Board and the Special Committee shall not have withdrawn or
modified, in a manner adverse to the Merger Sub, its approval of the Offer and
its recommendation that the stockholders of the Company tender their shares of
Company Common Stock pursuant to the Offer.
(4) There shall not have occurred any effect that, individually or in
aggregate, is materially adverse to the condition, business, assets, or results
of the operations of the Company.
(5) The representations and warranties of the Company shall be true and
correct in all material respects.
(6) No governmental or judicial action shall have been taken which
materially adversely affects the consummation of the Offer.
(7) Any material consents or authorizations, permits, orders or approvals of
any governmental body required for the consummation of the Offer shall have
obtained and any filings or registrations required to be made with any
governmental body shall have been made by the closing of the Offer.
(8) There shall not have occurred (i) any general suspension for at least
three business days of trading in securities quoted on the Nasdaq National
Market, (ii) the declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States (whether or not mandatory),
(iii) the declaration of war by the Congress of the United States having had or
being reasonably likely to have a material adverse effect on the condition,
business, assets, liabilities or results of operations of the Company taken as a
whole, or (iv) any limitation or proposed limitation (whether or not mandatory)
by any governmental body, or any other event, that materially adversely affects
generally the extension of credit by banks or other financial institutions in
the United States.
The foregoing conditions are for the sole benefit of Merger Sub, may be
asserted by Merger Sub regardless of the circumstances giving rise to such
condition and may be waived by Merger Sub in whole or in part, except for the
Minimum Condition which may not be waived by Merger Sub without the prior
written consent of the Special Committee. The failure by Merger Sub at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right.
<PAGE>
ANNEX B
EXCERPTS FROM THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE RELATING TO
THE RIGHTS OF DISSENTING STOCKHOLDERS PURSUANT TO SECTION 262
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares; who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec. 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251 (other than a merger effected pursuant to sec.
251(g) of title 8), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or sec. 264
of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to secs. 251,
252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
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<PAGE>
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections
(d) and (e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a meeting
of stockholders, the corporation, not less than 20 days prior to the
meeting, shall notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal rights are
available pursuant to subsection (b) or (c) hereof that appraisal rights are
available for any or all of the shares of the constituent corporations and
shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholder's shares shall deliver
to the corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of such stockholder's shares.
Such demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such stockholder's shares. A proxy or vote against
the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the effective date of such
merger or consolidation, the surviving or resulting corporation shall notify
each stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to sec. 228 or
sec. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval
of the merger or consolidation and that appraisal rights are available for
any or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section;
provided that, if the notice is given on or after the effective date of the
merger or consolidation, such notice shall be given by the surviving or
resulting corporation to all such holders of any class or series of stock of
a constituent corporation that are entitled to appraisal rights. Such notice
may, and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the effective date of
the merger or consolidation. Any stockholder entitled to appraisal rights
may, within twenty days after the date of mailing of such notice, demand in
writing from the surviving or resulting corporation the appraisal of such
holder's shares. such demand will be sufficient if it reasonably informs the
corporation of the identify of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such
notice did not notify stockholders of the effective date of the merger or
consolidation, either
(i) each such constituent corporation shall send a second notice
before the effective date of the merger or consolidation notifying each
of the holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the effective date
of the merger or consolidation or
(ii) the surviving or resulting corporation shall send such a second
notice to all such holders on or within 10 days after such effective
date; provided, however, that if such second notice is sent
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<PAGE>
more than 20 days following the sending of the first notice, such second
notice need only be sent to each stockholder who is entitled to appraisal
rights and who has demanded appraisal of such holder's shares in
accordance with this subsection. An affidavit of the secretary or
assistant secretary or of the transfer agent of the corporation that is
required to give either notice that such notice has been given shall, in
the absence of fraud, be prima facie evidence of the facts stated
therein. For purposes of determining the stockholder entitled to receive
either notice, each constituent corporation may fix, in advance, a record
date that shall be not more than 10 days prior to the date the notice is
given; provided that, if the notice is given on or after the effective
date of the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is given prior
to the effective date, the record date shall be the close of business on
the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within
10 days after such stockholder's written request for such a statement is
received by the surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal under subsection
(d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publication at
least one week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notice by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors,
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<PAGE>
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the Court may, in its
discretion, permit discovery or other pretrial proceedings and may proceed to
trial upon the appraisal prior to the final determination of the stockholder
entitled to an appraisal. Any stockholder whose name appears on the list filed
by the surviving or resulting corporation pursuant to subsection (f) of this
section and who has submitted such stockholder's certificates of stock to the
Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that such stockholder is not entitled
to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each stockholder
of the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary at the address set forth below:
THE DEPOSITARY FOR THE OFFER IS:
AMERICAN STOCK TRANSFER & TRUST COMPANY
------------------
BY MAIL, BY HAND OR OVERNIGHT DELIVERY:
American Stock Transfer & Trust Company
59 Maiden Lane
New York, New York 10007
FOR CONFIRMATION CALL:
(800) 937-5449
------------------------
Any questions or requests for assistance or additional copies of this Offer
to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and
the Guidelines for Certification of Taxpayer Identification on Substitute
Form W-9 may be directed to the Information Agent at the address and telephone
numbers set forth below. Stockholders may also contact their broker, dealer,
commercial bank or trust company for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO., INC.
77 Water Street
New York, N.Y. 10005
Banks and Brokerage Firms, Call Collect:
(212) 269-5550
All Others, Call Toll Free:
(800) 269-6427
------------------------
THE DEALER MANAGER FOR THE OFFER IS:
FIRST UNION SECURITIES, INC.
Riverfront Plaza
901 East Byrd Street
Richmond, Virginia 23219
(804) 782-3411
